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.
Growth Stock #1: Ovid Therapeutics
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%.
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.
Ovid has received a “Strong Buy” rating on Wall Street because of its rich pipeline of rare disease treatments. The stock may appeal to long-term aggressive investors who are comfortable with volatility and have a strong interest in innovative science. However, I believe investors should wait until Ovid either clears the $1 delisting threshold or proves its clinical strategy with positive results. Analysts have an average target price of $2.88 for the stock, which implies upside potential of 860% from current levels. The Street-high price estimate stands at $4 for OVID stock.
Growth Stock #2: Nuvation Bio
With a market cap of $609 million, Nuvation Bio is a clinical-stage biotech company that develops targeted oncology treatments for challenging cancers with limited treatment options. However, it may soon release a revenue-generating product to the market this year. NUVB stock is down 27.7% YTD, compared to the overall market gain.
Nuvation Bio's pipeline includes programs addressing a variety of oncology targets, including breast, ovarian, and lung cancer. Its pipeline currently consists of four core programs: taletrectinib (ROS1 inhibitor), NUV-1511 (drug-drug conjugate), safusidenib (brain-penetrant IDH1 inhibitor), and NUV-868 (BET inhibitor).
Taletrectinib, Nuvation's lead candidate for the treatment of ROS1+ and advanced non-small cell lung cancer, has already been approved in China and the United States. The company hopes to begin commercializing taletrectinib in mid-2025. In March, the firm secured $250 million in non-dilutive financing from Sagard Healthcare Partners, as well as $150 million in royalty financing and $50 million in debt, subject to approval. Nuvation also has the option to secure an additional $50 million in debt until June 30, 2026 if it completes its first commercial sale in the United States.
Safusidenib is currently in Phase 2 trials, and NUV-1511 is in Phase ½ trials. The company intends to provide updates for both during the second half of 2025. Nuvation ended Q1 with $461.7 million in cash, cash equivalents, and marketable securities. A favorable FDA decision could open up significant market opportunities for the company. Nuvation Bio's late-stage pipeline, strong cash position, and clear commercialization path make it an appealing biotech growth stock to buy right now. However, the company's ability to generate profits after commercialization may take years, making it an appropriate choice for those with a high risk tolerance and a longer investment horizon.
Overall, Wall Street rates NUVB stock a “Strong Buy.” Of the seven analysts covering the stock, six rate Nuvation as a “Strong Buy” while one recommends a “Moderate Buy" rating. The average price target of $7.17 suggests that NUVB stock could rally around 258% over the next 12 months. The high price estimate of $10 suggests a gain of 400% over current levels.
