Sushree Mohanty
5 min read
In This Article:
Investing in biotech penny stocks is fraught with volatility, regulatory hurdles, and uncertain clinical results. Penny stocks are companies that trade for less than $5 per share. However, for those with a high risk tolerance, these small-cap stocks can provide outsized returns, particularly when scientific breakthroughs or U.S. Food and Drug Administration (FDA) approvals result in explosive gains. With Wall Street analysts issuing “Strong Buy” ratings on these two high-potential plays, let’s dig in to see whether these growth stocks could deliver on their promises.
With a market capitalization of $21 million, Ovid Therapeutics is a small clinical-stage biopharmaceutical company focused on developing treatments for rare neurological disorders. Ovid's business model is centered on central nervous system (CNS) disorders, which are a challenging therapeutic area. Its pipeline includes novel compounds in early- to mid-stage development that target epilepsy and other genetically based neurological disorders. OVID stock has fallen 67.6% year-to-date (YTD), compared to the S&P 500 Index's ($SPX) gain of 1.6%.
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Ovid currently has no FDA-approved products on the market. However, Wall Street analysts have called OVID a "Strong Buy," with all six analysts covering the stock rating it as such. Still, the company has also received a delisting notice from Nasdaq for failing to maintain the minimum bid price of $1.00 per share. Ovid has until Aug. 11, 2025, to regain compliance by maintaining a closing bid price of at least $1.00 for 10 consecutive trading days.
Ovid’s pipeline is small in size but very targeted. The most closely watched candidate is OV329, a highly selective small-molecule inhibitor of GABA aminotransferase (GABA-AT). OV329 is intended to treat epilepsy that has not responded to previous treatments. In preclinical models, the candidate has shown promise in controlling seizures while causing fewer side effects than existing treatments such as vigabatrin. Ovid Therapeutics anticipates Phase 1 trial results in the third quarter of 2025.
The company has a good chance of its stock ticking upwards if the Phase 1 topline results for OV329 turn out positive. Ovid's other candidate is OV350, a next-generation KCC2 modulator that is also being tested in a Phase 1 trial. The company generated $130,000 in revenue from royalty agreements during Q1. At the end of the quarter, its cash, equivalents, and marketable securities totaled $43 million. This gives the company an estimated runway through the second half of 2026.
