2 “Strong Buy” Penny stocks that can make 200% profit (or more).

Investors know that the key to profit is returns – and that means a willingness to take on risk. Risk is of course relative and often goes hand in hand with return potential. Find a stock with huge return potential, and chances are you’ve also found one with a higher risk profile.

The highest returns are usually associated with the lowest stock prices. After all, when a stock is priced at just pennies, even a small gain in the stock price translates into a huge return. That means penny stocks — usually thought of today as those stocks priced below $5 — combine a perfect storm of market attractions: low share price, high return potential, and higher-than-normal risk.

Given the nature of these investments, Wall Street analysts recommend doing some due diligence before pulling the trigger, noting that not all penny stocks are on their way to greatness.

With this in mind, we ourselves started looking for attractive investments that will take off. Using TipRanks’ database, we pulled two penny stocks that garnered enough analyst support to earn a “Strong Buy” consensus rating. Besides the good news, each pick offers more than 200% upside potential.

Lineage cell therapy (LCTX)

The first is Lineage Cell Therapeutics, a clinical stage biotech company working on novel cell therapies to treat serious medical conditions with large unmet needs. Specifically, the company is using a proprietary platform to develop “specialised, terminally differentiated human cells” from a variety of precursors; the end cells can be used to treat disease states by replacing or supporting affected cells and tissues. The company aims to treat or even reverse degenerative diseases or traumatic injuries.

Lineage has based its program on an infinitely reproducible cell line and is developing cell therapies for retinal and photoreceptor disorders, spinal cord damage, auditory neurons and immune disorders. The company has 5 research programs, two in preclinical stages and three in human clinical trials. The main candidates are OpRegen, under development in collaboration with Roche subsidiary Genentech, and the treatment of spinal cord injury OPC1.

OpRegen is currently undergoing phase 2 trials and 24 patients have been treated. The drug candidate is designed for single-dose administration for the treatment of eye disorders, including advanced dry age-related macular degeneration (dry AMD) with geographic atrophy (GA). These are both serious conditions, with large addressable markets. Lineage received a $50 million upfront payment from Genentech earlier this year and will receive up to $670 million in royalties through the partnership.

The second lead candidate, which has been used to treat 30 patients, is OPC1, a new potential treatment for spinal cord injury. OPC1 is designed to treat the loss of function associated with spinal cord injury and is currently undergoing a multicenter Phase 1/2a clinical trial.

Analyst Jack Allen, who covers Lineage for Baird, sees a lot of profit potential for investors here. As he explains, “With an estimated ~2.5 million GA patient in developed markets and no approved treatments for this disease, we believe Roche’s annual sales of this asset could easily exceed $4 billion. This could translate into more than $500 million in annual royalties for Lineage, a dynamic that should see significant improvement over the current market cap of ~$250 million in the long run.

The analyst added: “We are very encouraged by the initial data from the OpRegen program and note that the perceived functional benefit of this treatment is a key differentiator…We are encouraged by Lineage’s ability to deliver fully differentiated , to create pure, allogeneic cell therapies … and note that current programs may represent only the tip of the iceberg in terms of what is possible with these kinds of regenerative drugs.”

Based on OpRegen’s potential and Lineage’s $1.30 share price, Allen thinks now is the time to get started. The analyst rates the stock as outperforming (i.e. buy), and his price target, set at $5, suggests the stock will gain an impressive 281% over the next 12 months. (To view Allen’s track record, click here)

Some stocks just manage to push all the buttons with the analysts, and Lineage succeeded – getting 5 positive ratings from the stock pros. This equates to a Strong Buy consensus rating and the $5.40 average price target implies a 312% incremental gain on the one-year time horizon. (See LCTX Inventory Forecast on TipRanks)

Graphite Bio (GRPH)

The second penny we’ll be looking at is Graphite Bio, a clinical-stage biotech company focused on next-generation gene-editing technology to use in the development of curative therapies for a broad range of serious and/or life-threatening diseases, particularly genetic diseases. The company uses its UltraDRTM gene-editing platform to design precise corrections for each genetic mutation, which can then be precisely inserted into the disease-causing gene, replacing the faulty genes with functional copies.

Graphite Bio’s pipeline contains four tracks, two of which are still in the discovery stage. The third, GPH102, is a potential treatment for the blood disorder beta thalassemia and is in the IND phase. The real excitement in this stockpile comes from the fourth drug candidate, Nulabeglogene autogetem cell or nula cell, which is undergoing human clinical trials as a treatment for the genetic sickle cell disease.

Sickle cell disease, or SCD, is the most common monogenic disease worldwide, affecting more than 100,000 people in the US alone. Nula cell aims to correct the underlying mutation causing the disease by directly inserting functional genes and restoring the expression of healthy hemoglobin proteins. Nula cell is currently in a Phase 1/2 clinical trial, CEDAR, an open label trial designed to evaluate safety, gene correction and hemoglobin expression ahead of larger trials. Proof-of-concept data is expected to be released in the middle of next year.

Cantor analyst Olivia Brayer is impressed with this small-cap company’s prospects going forward, noting, “The team has made continued progress with its ongoing Phase 1 clinical program for its leading clinical asset nula cell. We’re still over 6 months away from a look under the hood with first phase 1 data still on track for mid 2023 but this is a name we’d mark as one worth checking out again as investors position for 2023 in what could be a major lead-up to the readout.

“Safety will be the biggest focus, but we think graphite may show some early signs of direct elimination of the sickle globin, which may demonstrate some early clinical differentiation and represent a major inflection point for the share’s valuation next year,” added the analyst to it. .

To quantify her bullish stance, Brayer rates GRPH stock as Overweight (i.e. Buy), and her $12 price target indicates her confidence in strong 12-month gains of 242%. (To view Brayer’s track record, click here)

Overall, of the 6 analysts who submitted recent ratings on this stock, 5 have come down as Buys and 1 as Hold (i.e. Neutral) – for a Strong Buy consensus rating. The shares have a current trading price of $3.50 and their $13.20 average price target implies a one-year jump of 277%. (See GRPH stock forecast on TipRanks)

To find great ideas for penny stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ stock insights.

disclaimer: The opinions expressed in this article are solely those of the named analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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