Peter Marks’s departure from the FDA has left innovators concerned regarding the current state of the review program at the FDA. Marks had impacts on two key areas. First the vaccine approvals and the subsequent resurgence of new vaccines over the past two decades, and then the establishment of the cell and gene therapy field that he’s credited for. He was involved in developing policies aimed at optimizing the process of bringing several innovative products to the market. Following his resignation, a substantial number of other departures are also anticipated, which implies upcoming destabilization at the FDA for its existing expertise and processes.
Stifel head of biotech research Paul Matteis suggests looking for biotech names not dependent on the FDA while this sector uncertainty lasts. On March 31, Paul Matteis appeared on CNBC’s ‘The Exchange’ and noted that biotech investors, particularly those who are focused on developmental-stage companies, are now facing risk. These include scientific, clinical trials, commercial, patent, competition, and regulatory risks. Hence, investors now need to be more selective about their stock selections. Previously, the FDA has been a stabilizing force for the biotech sector and is known for accelerating approvals in areas such as rare diseases and biomarkers. But recent developments have introduced unpredictability.
Matteis highlighted that there could be short-term delays in drug approvals due to personnel changes at the FDA, such as the recent departure of the head of the Center for Drug Evaluation and Research (CEDAR). Investors may even need to reevaluate agreements between companies and the FDA regarding drug approvals. While this doesn’t make biotech investments completely unsustainable, it does shift the focus toward companies with more predictable growth prospects. This could point to specifically commercial-stage firms or those less reliant on FDA consistency. Talking about vaccine stocks particularly, Matteis pointed out that as much as Peter Marks influenced vaccine-related decisions, he also impacted broader areas like gene therapies and oncology. He fostered innovation through programs like breakthrough therapy designations and initiatives that were aimed at streamlining approvals.
Investors are now gravitating toward companies with de-risked profiles that are less dependent on FDA flexibility. Matteis noted that the companies relatively outperforming right now are those that have their success tied to commercial launches rather than regulatory decisions. That being said, we’re here with a list of the 13 best biotech penny stocks to buy according to hedge funds amid this uncertainty.
A biotechnologist in a laboratory wearing a lab coat, preparing samples for a clinical trial.
Our Methodology
We sifted through ETFs, stock screeners, and financial media reports to compile a list of the top biotech penny stocks that were trading below $5 as of April 14. We then selected the 13 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
13 Best Biotech Penny Stocks to Buy According to Hedge Funds
13. Sana Biotechnology Inc. (NASDAQ:SANA)
Share Price as of April 14: $1.76
Number of Hedge Fund Holders: 24
Sana Biotechnology Inc. (NASDAQ:SANA) utilizes engineered cells as medicines and develops ex vivo and in vivo cell engineering platforms for different therapeutic areas, such as type 1 diabetes, B cell-mediated autoimmune diseases, and oncology. It has an option and license agreement with Beam Therapeutics Inc. for the use of Beam’s proprietary CRISPR Cas12b nuclease editing technology.
In Q4 2024, Sana reported positive preliminary 12-week clinical results from its UP421 study. This study involves hypoimmune-modified pancreatic islet cells and demonstrated stable C-peptide production. C-peptide is a biomarker for insulin production. It indicates that the transplanted cells are functioning as intended and don’t require immunosuppression.
Sana is investing in its Type 1 Diabetes program, with a focus on developing SC451. Preclinical data for SC451 has shown 15-month durability of glycemic control in a mouse model, and no observed histologic abnormalities. The goal is for SC451 to be a single-treatment therapy for restoring normal blood glucose levels in patients with type 1 diabetes. Sana Biotechnology Inc.’s (NASDAQ:SANA) anticipates sharing additional data from this program in 2025 and aims to file an IND application as early as 2026.
12. Erasca Inc. (NASDAQ:ERAS)
Share Price as of April 14: $1.24
Number of Hedge Fund Holders: 26
Erasca Inc. (NASDAQ:ERAS) is a clinical-stage precision oncology company that discovers, develops, and commercializes therapies for patients with RAS/MAPK pathway-driven cancers. It has license agreements with Novartis, Katmai Pharmaceuticals Inc., and NiKang Therapeutics Inc. to develop and commercialize several different compounds.
Erasca’s RAS-targeting franchise encompasses two drug candidates that were acquired earlier in May 2024. One of these is the ERAS-0015, which is a potential best-in-class pan-RAS molecular glue for targeting a range of RAS mutations. The other one is ERAS-4001, which is a potential first-in-class pan-KRAS inhibitor designed to inhibit KRAS particularly. KRAS is a frequently mutated protein in cancer.
The potential patient population for ERAS-0015 is ~2.7 million people diagnosed annually worldwide with RAS-mutant tumors. ERAS-4001 could address more than 2.2 million of those with KRAS-mutant tumors. In 2024, Erasca Inc. (NASDAQ:ERAS) recorded $22.5 million in in-process R&D expenses for the upfront payments associated with licensing ERAS-0015 and ERAS-4001. The company anticipates submitting IND applications to regulatory authorities in 2025 to begin clinical trials for both candidates.
11. ORIC Pharmaceuticals Inc. (NASDAQ:ORIC)
Share Price as of April 14: $4.92
Number of Hedge Fund Holders: 26
ORIC Pharmaceuticals Inc. (NASDAQ:ORIC) discovers and develops therapies to counter the resistance mechanisms of cancers in the US. Its clinical-stage product candidates include ORIC-114, which is a brain penetrant orally bioavailable irreversible inhibitor; and ORIC-944, which is an allosteric inhibitor of the polycomb repressive complex 2 for prostate cancer.
ORIC-114 is being developed for the treatment of specific types of Non-Small Cell Lung Cancer (NSCLC). It targets EGFR exon 20, HER2 exon 20, and EGFR atypical mutations. These are particular genetic alterations found in certain NSCLC patients. In its ongoing Phase 1b clinical trial, ORIC Pharmaceuticals Inc. (NASDAQ:ORIC) completed the initial dose escalation phase for ORIC-114 and identified two potential doses for the next stage of testing.
It initiated the enrollment and dosing of patients in three expansion cohorts within this Phase 1b trial. These cohorts are for patients with mutated NSCLC who have either progressed after prior treatment with an EGFR exon 20 inhibitor, have HER2 exon 20 insertion mutations, or have other less common EGFR mutations. Furthermore, ORIC has also started a separate cohort to investigate ORIC-114 as a first-line treatment for patients whose NSCLC has EGFR exon 20 insertion mutations.
10. MannKind Corp. (NASDAQ:MNKD)
Share Price as of April 14: $4.66
Number of Hedge Fund Holders: 29
MannKind Corp. (NASDAQ:MNKD) develops and commercializes therapeutic products and services for endocrine and orphan lung diseases in the US. It primarily offers Afrezza Inhalation Powder, the V-Go wearable insulin delivery device, and Tyvaso DPI. It has a supply and distribution agreement with Biomm S.A. for commercialization in Brazil and with Cipla Ltd. for marketing and distribution in India.
The company’s Afrezza business revolves around its inhaled insulin product for diabetes. In Q4 2024, Afrezza generated $18 million in net revenue, which was up 18% year-over-year. In the full year 2024, Afrezza’s revenue reached $64 million, which was a 17% improvement due to higher demand for the product as well as pricing adjustments
Afrezza’s growth is the pediatric market for children with Type 1 diabetes. MannKind anticipates filing for approval in this indication in H1 2025, with potential approval in early 2026. The company estimates that the US alone has more than 300,000 children with Type 1 diabetes. MannKind Corp. (NASDAQ:MNKD) projects that penetrating the pediatric market could propel Afrezza’s annual sales to over $200 million, which is ~3x its current revenue. MannKind estimates that holding just 10% of the pediatric market could generate ~$150 million in additional annual revenue.
9. Ardelyx Inc. (NASDAQ:ARDX)
Share Price as of April 14: $4.46
Number of Hedge Fund Holders: 30
Ardelyx Inc. (NASDAQ:ARDX) discovers, develops, and commercializes medicines to treat unmet medical needs internationally. It offers IBSRELA, which is a minimally absorbed small molecule therapy for patients with IBS with constipation. It also offers XPHOZAH, which is a phosphate absorption inhibitor for adults with chronic kidney disease on dialysis.
XPHOZAH is a relatively new medication launched in late 2023. It is designed to help dialysis patients manage hyperphosphatemia, which is a condition of high phosphorus levels in the blood. In Q4 2024, XPHOZAH generated $57.2 million in net product sales revenue, which was up 11% sequentially. In 2024, it achieved $160.9 million in net sales in the US market alone. The company projects that XPHOZAH can reach $750 million in annual net sales revenue before its patent expires.
As January began, Medicare Part D coverage for Ardelyx’s XPHOZAH was eliminated as it was included in the End-Stage Renal Disease Prospective Payment System (ESRD PPS) bundle. Despite changes in coverage, Ardelyx is committed to ensuring that patients who need XPHOZAH can still access it. The commercial strategy involves educating healthcare providers about the continued availability of the drug and supporting additionally through the ArdelyxAssist program.
8. Amylyx Pharmaceuticals Inc. (NASDAQ:AMLX)
Share Price as of April 14: $3.65
Number of Hedge Fund Holders: 30
Amylyx Pharmaceuticals Inc. (NASDAQ:AMLX) discovers and develops treatments for neurodegenerative diseases and endocrine conditions. Its lead product candidates include avexitide, which is an investigational, first-in-class glucagon-like peptide-1; and GLP-1 receptor antagonist, which is in phase 3 clinical trial to treat post-bariatric hypoglycemia and congenital hyperinsulinism.
The company is focusing on potentially making avexitide the first approved treatment for post-bariatric hypoglycemia (PBH). Currently, there are no FDA-approved therapies specifically for PBH. This is a significant unmet medical need that impacts ~160,000 individuals in the US alone. These patients suffer from persistent low blood sugar after bariatric surgery. Across five clinical trials in PBH patients, avexitide demonstrated a dose-dependent and statistically significant reduction in hypoglycemic events.
Amylyx Pharmaceuticals Inc. (NASDAQ:AMLX) initiated a Phase III clinical trial called LUCIDITY. This is a 16-week study with ~75 participants with topline results anticipated in H1 2026. For the potential launch of avexitide, the company secured ~$65.5 million in financing. If LUCIDITY yields positive results and regulatory approval is granted, Amylyx expects a commercial launch of avexitide in 2027.
7. Mereo BioPharma Group (NASDAQ:MREO)
Share Price as of April 14: $1.95
Number of Hedge Fund Holders: 30
Mereo BioPharma Group (NASDAQ:MREO) develops and commercializes therapeutics for the treatment of oncology and rare diseases. It develops Etigilimab (MPH-313), which is an antibody T-cell immunoreceptor with Ig and ITIM domains. The company is also developing Navicixizumab (OMP-305B83), Acumapimod (BCT-197), a p38 MAP kinase inhibitor, and Leflutrozole (BGS-649).
Mereo is also focused on setrusumab (UX143), which is an investigational and fully human monoclonal antibody that is being developed for osteogenesis imperfecta (OI). Its action mechanism involves inhibiting sclerostin, which is a protein that negatively regulates bone formation. The intended effect of setrusumab is to increase bone density and reduce fractures in patients with OI.
Mereo’s partner Ultragenyx is conducting two Phase 3 studies: one is Orbit in patients aged 5-25, with a second interim analysis in mid-2025 and a potential final analysis in Q4 2025. The other is Cosmic in patients aged 2 to under 7. Positive results could lead to US and EU regulatory filings. The partnership includes ~$245 million in potential milestone payments and royalties to Mereo on Ultragenyx’s sales. Mereo BioPharma Group (NASDAQ:MREO) is preparing for a potential European launch of setrusumab.
6. Immatics (NASDAQ:IMTX)
Share Price as of April 14: $4.14
Number of Hedge Fund Holders: 33
Immatics (NASDAQ:IMTX) researches and develops potential T cell redirecting immunotherapies for the treatment of cancer. It’s developing targeted immunotherapies with a focus on treating solid tumors through two distinct treatment modalities, such as TCR-engineered autologous or allogeneic adoptive cell therapies (ACT) and antibody-like TCR Bispecifics.
The company’s lead program is IMA203. This is a TCR-T cell therapy that targets PRAME and has shown significant promise in advanced melanoma. A Phase 1b trial achieved a 54% confirmed objective response rate in heavily pretreated patients, with a 12.1-month median duration of response and 6-month median progression-free survival. Because of this and an FDA RMAT designation, IMA203 has advanced to the Phase 3 SUPRAME trial.
This study enrolled its first patient in December 2024 and aims to recruit 360 HLA-A*02:01-positive patients with previously treated metastatic melanoma. An interim data analysis is expected in Q1 2026, with a final analysis in Q4 2026. Immatics (NASDAQ:IMTX) plans to submit a BLA for full approval in Q1 2027, with aims for a commercial launch of IMA203 in Q3 2027.
5. Nuvation Bio Inc. (NYSE:NUVB)
Share Price as of April 14: $1.99
Number of Hedge Fund Holders: 34
Nuvation Bio Inc. (NYSE:NUVB) focuses on unmet needs in oncology by developing differentiated and novel therapeutic candidates. Its lead product candidate is taletrectinib, which is a ROS1 inhibitor specifically designed for the treatment of patients with ROS1+ non-small cell lung cancer. It also offers Safusidenib, NUV-1511, and NUV-868.
The company’s lead program remains taletrectinib, which is a next-generation ROS1 inhibitor for advanced ROS1+ non-small cell lung cancer (NSCLC). The FDA granted Priority Review to its NDA with a PDUFA goal date of 23 June 2025, which indicates a potential US launch in mid-2025. Taletrectinib is already approved in China and is being commercialized by Innovent Biologics. A Marketing Authorization Application (MAA) has been submitted in Japan by Nippon Kayaku as well.
Nuvation Bio Inc. (NYSE:NUVB) also launched a US Expanded Access Program (EAP) in February 2025 for eligible patients. The upcoming FDA decision on taletrectinib will be a key milestone and will unlock funding and establish taletrectinib as Nuvation Bio’s first commercial product in the US. As of 31 December 2024, the company held $502.7 million in cash and marketable securities.
4. Relay Therapeutics Inc. (NASDAQ:RLAY)
Share Price as of April 14: $2.42
Number of Hedge Fund Holders: 37
Relay Therapeutics Inc. (NASDAQ:RLAY) transforms the drug discovery process with a focus on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications. Its lead product candidates include RLY-2608, PI3Ka, and aGal chaperone. It has collaboration and license agreements with D. E. Shaw Research LLC, Elevar Therapeutics Inc., and Pfizer Inc.
RLY-2608 is a candidate for metastatic breast cancer. Interim Phase 1b data for RLY-2608 combined with fulvestrant showed an 11.4-month median progression-free survival (PFS) in second-line patients and a 39% confirmed overall response rate (ORR) in patients with measurable disease. Relay plans to initiate the Phase 3 ReDiscover-2 trial in mid-2025. This study will enroll ~540 patients with the specific breast cancer profile who have previously received CDK4/6 inhibitor treatment.
By the end of 2024, Relay Therapeutics Inc. (NASDAQ:RLAY) had ~$780 million in cash, cash equivalents, and investments. The company is prioritizing these funds to fully support the execution of the ReDiscover-2 Phase 3 trial. Earlier on March 27, Barclays reiterated its Overweight rating on the company and maintained a 12-month stock price target of $17 per share.
3. Cogent Biosciences Inc. (NASDAQ:COGT)
Share Price as of April 14: $4.26
Number of Hedge Fund Holders: 38
Cogent Biosciences Inc. (NASDAQ:COGT) develops precision therapies for genetically defined diseases. Its lead product candidate includes bezuclastinib (CGT9486), which is a selective tyrosine kinase inhibitor that targets mutations within the KIT receptor tyrosine kinase, such as KIT D816V mutation that drives systemic mastocytosis (SM), as well as other mutations in KIT exon 17, which are found in patients with advanced gastrointestinal stromal tumors.
In the SUMMIT trial for nonadvanced SM, patients on 100 mg of bezuclastinib showed a 56% average improvement in symptoms after 24 weeks. 76% of patients achieved more than 50% reduction. Additionally, 89% had a greater than 50% drop in serum tryptase within 4 weeks. For advanced SM patients in the APEX trial, bezuclastinib achieved a 52% overall response rate (ORR) per mIWG criteria. It rose to 83% for those on the 100 mg twice-daily dose.
Cogent expects top-line results from the SUMMIT trial in July 2025 and the APEX trial in H2 2025. It plans to submit the first NDA for bezuclastinib by the end of 2025. With $312 million in cash, which included recent ATM proceeds, the company believes it has sufficient funding into late 2026. It’s also launching Expanded Access Programs (EAP) for SM patients in the US in Q1 2025.
2. Iovance Biotherapeutics Inc. (NASDAQ:IOVA)
Share Price as of April 14: $3.3
Number of Hedge Fund Holders: 44
Iovance Biotherapeutics Inc. (NASDAQ:IOVA) develops and commercializes cell therapies using autologous tumor-infiltrating lymphocytes for the treatment of metastatic melanoma and other solid tumor cancer. It has collaborations and licensing agreements with several companies and institutes such as WuXi Advanced Therapies Inc. and the National Cancer Institute.
Iovance’s main growth engine is Amtagvi, which is the first FDA-approved TIL cell therapy for advanced melanoma post-anti-PD-1 treatment. In 2024, Amtagvi generated $103.6 million in revenue and contributed to the total product revenue of $164.1 million at the company. More than 200 patients were treated in its initial launch phase. Iovance’s manufacturing network can now support more than 1,200 patients annually and is expanding.
It established a network of around 70 authorized treatment centers (ATCs) across 32 US states and provides reimbursement access to over 95% of covered lives. Iovance Biotherapeutics Inc. (NASDAQ:IOVA) projects total product revenue of $450 to $475 million for 2025, which would be fueled by increased Amtagvi utilization and new ATCs.
Earlier last year, Artisan Small Cap Fund stated the following regarding Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) in its first quarter 2024 investor letter:
“Among our top performers in Q1 were Shockwave, Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) and Wingstop. Iovance Biotherapeutics is a biotechnology company focused on innovating, developing and delivering novel polyclonal tumor infiltrating lymphocyte (TIL) cell therapies for cancer patients. Immuno-oncology remains a key area of drug development, and Iovance is the leader in TIL development and manufacturing, having secured the technology through collaborations with the leading academic institutions in TIL reseach. Shares rallied significantly after the company announced that the FDA approved AMTAGVI™ (lifileucel) for advanced melanoma. We added to the position.”
1. Geron Corp. (NASDAQ:GERN)
Share Price as of April 14: $1.38
Number of Hedge Fund Holders: 46
Geron Corp. (NASDAQ:GERN) is a commercial-stage biopharmaceutical company that develops therapeutics products for oncology. It offers RYTELO (imetelstat) which is a telomerase inhibitor for the treatment of adult patients with low to intermediate-1 risk myelodysplastic syndromes with transfusion-dependent anemia.
RYTELO was approved in the US in June 2024 for specific lower-risk MDS patients. In Q4 2024, which was RYTELO’s second full quarter on the market, the candidate generated $47.5 million in net product revenue. Since launch through year-end 2024, revenue reached $76.5 million. Payers covering about 80% of US-insured lives have favorable coverage for RYTELO. The estimated US market for eligible lower-risk MDS patients in 2025 is ~15,400.
RYTELO has received a positive opinion in Europe for certain MDS patients, with a final EU approval decision expected in H1 2025, potentially leading to a 2026 EU launch. Geron Corp. (NASDAQ:GERN)ended 2024 with ~$503 million in cash and expects to reach profitability without further funding based on RYTELO’s sales growth.
ClearBridge Small Cap Growth Strategy stated the following regarding Geron Corporation (NASDAQ:GERN) in its Q1 2025 investor letter:
“We continued to generate a number of compelling new ideas, adding five new investments that we still held at quarter end: Glaukos, Rocket Lab USA, Karman Holdings (through its IPO), Archrock, Hims & Hers and Geron Corporation (NASDAQ:GERN).
Geron is a biotechnology company with a commercialized drug launching to treat blood cancer. Its product is newly entering a sizable market with broad applicability for patients who cycle through a variety of treatments throughout the course of the disease, allowing for a potentially larger revenue opportunity than currently appreciated by the market.”
While we acknowledge the growth potential of Geron Corp. (NASDAQ:GERN), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than GERN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
