In this article, we discuss 10 best biotech stocks under $5. If you want to see some more stocks in this selection, click 5 Best Biotech Stocks Under $5.
The biotechnology sector received ample cash flow injections during 2020, when COVID-19 testing, research, and vaccine development was at its peak. However, according to RBC Capital Markets, the SPDR S&P Biotech ETF (NYSE:XBI) fell 21% in 2021, and as of February 17, the ETF is down about 22% this year. The sector has cooled off given drug pricing and regulatory pressures, unsuccessful clinical trials, and slow mergers and acquisitions activity.
RBC recently conducted a survey of investors across the biotech sector, and 66% believe that biotech will outperform the broader market in 2022. 58% of the investors said that they would increase their exposure to the sector, and 64% believe that biotech firms are undervalued.
Innovation in the biotech sector will remain a key driver for growth in 2022, with increased funding after the pandemic which will advance research and development efforts. Interest in cancer, neurology, and rare diseases will keep the biotech sector buzzing in 2022. In addition to mainstream healthcare and pharma companies like AbbVie Inc. (NYSE:ABBV), Bristol-Myers Squibb Company (NYSE:BMY), and Pfizer Inc. (NYSE:PFE), our focus in this article will be biotech stocks priced under $5.
Our Methodology
After an extensive assessment of the biotechnology sector, we picked the stocks that were priced under $5. These companies are working on some ambitious projects that could give a boost to their stock prices in the near future.
Data from 900+ elite hedge funds tracked by Insider Monkey at the end of December 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Best Biotech Stocks Under $5
10. Brickell Biotech, Inc. (NASDAQ:BBI)
Number of Hedge Fund Holders: 5
Share Price as of March 28: $0.2662
Brickell Biotech, Inc. (NASDAQ:BBI) is a clinical stage biotechnology company that is focused on creating therapies for autoimmune, inflammatory, and other dermatological conditions. Brickell Biotech, Inc. (NASDAQ:BBI) was founded in 2009 and is headquartered in Boulder, Colorado.
On March 8, William Blair analyst Tim Lugo initiated coverage of Brickell Biotech, Inc. (NASDAQ:BBI) with an Outperform rating and a $2 fair value estimate. The analyst noted that the company is enhancing its product pipeline with a “differentiated” new drug application for hyperhidrosis and an early-stage pipeline focused on autoimmune and inflammatory diseases. This can potentially propel Brickell Biotech, Inc. (NASDAQ:BBI) from dermatology to autoimmune and inflammatory medical developments. Lugo further observed that the current valuation “holds a strong risk/reward profile” comparable to peers, with a possible “10-fold increase” from current levels.
According to the fourth quarter database of Insider Monkey, 5 hedge funds were bullish on Brickell Biotech, Inc. (NASDAQ:BBI), up from 3 funds in the preceding quarter. The total stakes held in Q4 amounted to $865,000.
In addition to AbbVie Inc. (NYSE:ABBV), Bristol-Myers Squibb Company (NYSE:BMY), and Pfizer Inc. (NYSE:PFE), Brickell Biotech, Inc. (NASDAQ:BBI) is a notable stock to invest in.
9. Progenity, Inc. (NASDAQ:PROG)
Number of Hedge Fund Holders: 6
Share Price as of March 28: $1.6597
Progenity, Inc. (NASDAQ:PROG) was founded in 2010 and is headquartered in San Diego, California. Progenity, Inc. (NASDAQ:PROG) operates as a biotechnology company that develops molecular testing products. The company deals in chromosomal disorders, preimplantation genetic testing, hereditary diseases, and artificial reproductive technologies.
On February 24, Raymond James analyst Andrew Cooper maintained an Outperform rating on Progenity, Inc. (NASDAQ:PROG), but slashed the price target to $42 from $55, in order to account for lower short-term estimates and further multiple compression.
Progenity, Inc. (NASDAQ:PROG) announced on March 10 the commercial updates in its performance study for the Drug Delivery System (DDS) capsule. The study was well received by 10 out of 12 test subjects, and upon completion of clinical trials, it will help to deploy drugs directly to the site of disease in patients suffering from ulcerative colitis. Eventually, the DDS capsule should be applicable for localized delivery of other drugs.
According to Insider Monkey’s Q4 database, 6 hedge funds were bullish on Progenity, Inc. (NASDAQ:PROG), compared to 4 funds in the prior quarter. Hal Mintz’s Sabby Capital is a significant shareholder of the company, with more than 1 million shares worth $2.2 million.
8. Vaxart, Inc. (NASDAQ:VXRT)
Number of Hedge Fund Holders: 6
Share Price as of March 28: $4.99
Vaxart, Inc. (NASDAQ:VXRT) is a California-based biotechnology firm which develops oral vaccines. The company is engaged in research and clinical trials for COVID-19, influenza, norovirus strains, and respiratory syncytial virus vaccines.
The company announced results from its COVID-19 vaccine trials on February 24. Vaxart, Inc. (NASDAQ:VXRT) started its Phase II COVID-19 oral vaccine trials in the United States in October 2021, and final data is expected to be announced in the first half of 2022. The studies show that the vaccine candidate was able to generate antibodies against the original COVID-19 virus strain, as well as the beta, delta, alpha, and gamma variants.
On February 28, Piper Sandler analyst Yasmeen Rahimi reported that Vaxart, Inc. (NASDAQ:VXRT)’s progress in the COVID-19 and norovirus programs continue to impress her, and she believes Q4 will present strong catalysts for the next 12 months. The analyst reiterated an Overweight rating on Vaxart, Inc. (NASDAQ:VXRT) and a price target of $18 on the shares.
Among the hedge funds tracked by Insider Monkey, D E Shaw is the largest shareholder of Vaxart, Inc. (NASDAQ:VXRT), with 2.1 million shares worth $13.3 million. Overall, 6 hedge funds were bullish on Vaxart, Inc. (NASDAQ:VXRT) at the end of December 2021, with collective stakes of $15.2 million.
Here is what Bireme Capital has to say about Vaxart, Inc. (NASDAQ:VXRT) in their Q4 2020 investor letter:
“Vaxart (VXRT) was a biotech penny stock until COVID-19 hit, when it released a series of announcements about the progress of its oral tablet coronavirus vaccine. In late June, VXRT claimed to have been selected for the federal government’s Operation Warp Speed vaccine development program despite having only 15 employees. The stock traded more than 60x higher than where it started the year.
This announcement was profitably timed for insiders. In early June, just weeks before the Operation Warp Speed announcement, the CEO was awarded stock options worth $4m, and a hedge fund renegotiated accelerated warrants. By the end of the month, the CEO’s options were worth $28m and the hedge fund had exercised the warrants and sold the shares for a profit of nearly $200m. Oh, and the claim that VXRT was selected for Operation Warp Speed turned out to be false and misleading. The company is currently under investigation for fraud.
Vaxart, Inc. (NASDAQ:VXRT) is still exhibiting classic pretender signals. In a vaccine progress roundup from January, Science commented that they could find “no updates at all about its clinical progress — just excited talk about its prospects as an investment.” Numerous press releases talked up its partnerships, like a manufacturing agreement with KindredBio — a tiny company with less than $5m in revenue, self described as “focused on saving and improving the lives of pets.”
Since then, VXRT has released their Phase I trial results. The press release is titled “Positive Preliminary Data,” but near the bottom it revealed that no neutralizing antibodies were found. The stock price tumbled.
There are now a handful of vaccines approved, with several more likely to be approved shortly. And there are dozens more in development, all from larger and more sophisticated companies than VXRT. Each incremental vaccine will find it harder and harder to make it through the grueling approval process as competitors cross the finish line first and coronavirus prevalence declines. Even vaccine developers with highly promising candidates may not be able to recruit tens of thousands of Phase 3 trial participants given the increasing supply of approved and highly effective COVID-19 vaccines.
We find it nearly inconceivable that VXRT will develop a commercially successful coronavirus vaccine, which it desperately needs to justify its valuation. VXRT’s Q3 revenues were under $300,000. Nevertheless, it sports a market cap of over $800m, because “vaccines.””
7. Gamida Cell Ltd. (NASDAQ:GMDA)
Number of Hedge Fund Holders: 12
Share Price as of March 28: $4.1265
Headquartered in Jerusalem, Israel, Gamida Cell Ltd. (NASDAQ:GMDA) develops cell therapies for blood cancers, lymphoma, multiple myeloma, and hematologic diseases. It is one of the best cheap biotech stocks to invest in, priced at $4.1265.
On January 19, H.C. Wainwright analyst Vernon Bernardino reiterated a Buy rating on Gamida Cell Ltd. (NASDAQ:GMDA) with a $22 price target. This came in light of the company announcing its successful Type B meeting with the FDA and plans to initiate in the first half of 2022 a rolling Biologics License Application submission for omidubicel, a cell therapy for blood cancer. He calls Gamida Cell Ltd. (NASDAQ:GMDA) a top pick for 2022.
Among the hedge funds tracked by Insider Monkey, 12 funds were bullish on Gamida Cell Ltd. (NASDAQ:GMDA), with combined stakes worth $13.1 million. Rock Springs Capital Management is the biggest shareholder of the company, with 2.15 million shares worth $5.4 million.
6. Compugen Ltd. (NASDAQ:CGEN)
Number of Hedge Fund Holders: 13
Share Price as of March 28: $3.2858
Headquartered in Holon, Israel, Compugen Ltd. (NASDAQ:CGEN) is a biotech company that specializes in clinical-stage immuno-oncology programs. In Q4 2021, 13 hedge funds were bullish on Compugen Ltd. (NASDAQ:CGEN), with combined stakes amounting to $55.2 million, compared to the same number of funds in the prior quarter, with stakes equaling $79.6 million.
SVB Leerink analyst Daina Graybosch maintained an Outperforming rating on Compugen Ltd. (NASDAQ:CGEN) on February 25, but lowered the price target on the shares to $9 from $16 after the Q4 results and updated 2022 outlook.
Among the hedge funds tracked by Insider Monkey, Cathie Wood’s ARK Investment Management is the leading shareholder of Compugen Ltd. (NASDAQ:CGEN), with 9.2 million shares worth close to $40 million.
Compugen Ltd. (NASDAQ:CGEN) is on the radar of elite investors, just like AbbVie Inc. (NYSE:ABBV), Bristol-Myers Squibb Company (NYSE:BMY), and Pfizer Inc. (NYSE:PFE).
Click to continue reading and see 5 Best Biotech Stocks Under $5.
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Disclosure: None. 10 Best Biotech Stocks Under $5 is originally published on Insider Monkey.
