On the rise today is Adial Pharmaceuticals (NASDAQ:ADIL), up 2.27% and selling for $3.02 USD on the NASDAQ exchange. Penny stocks in the pharmaceutical industry are often an investor favorite.
There are many reasons as to why this is. There is a host to pick from and often, it takes only one successful trial or drug to see shares skyrocket.
Penny Stocks to Watch
The Virginia, US-based company is a clinical-stage biopharmaceutical company that focuses on treatments for alcohol use disorders. Its lead product is AD04, “a selective serotonin-3 antagonist that has completed Phase IIb clinical trials for the treatment of nausea and emesis.”
Adial Pharmaceuticals fits into a new wave of addiction treatment drug companies in the wake of the US’s nationwide opioid addiction crisis. Similar firms include BioDelivery Sciences International (NASDAQ:BDSI) and Alkermes Plc (NASDAQ:ALKS).
With a market cap of $29.98 million USD and negative earnings, the ADIL penny stock is still a volatile play. It lost 70% of its value in 2018. But then, towards the end of the year, surged off the back of news that suggested its leading drug was making progress. At the time, ADIL stock climbed from $1.32 USD at the end of November, to a high of $8.33 USD by mid-January. They have since corrected.
Pharmaceutical Companies Can Surge
Those are the type of gains synonymous with pharmaceutical penny stocks. Hype over drug progress can draw interest by the bucket-full. Often these gains arrive with no clear reason, and sometimes it is all too clear. This was the case with Axsome Therapeutics (NASDAQ:AXSM) when the company reported positive results from a phase 2 clinical study on its experimental drug AXS-05.
AXS-05 was developed to treat major depressive disorder. The positive news associated with this drug was the reason this former penny stock grew from $2 per share to over $14 in only three months. Now AXSM investors are looking at owning shares in the potential next big pharma company.
Can the same happen here for Adial Pharmaceuticals? This is the question investors must ask themselves. If you are willing to take the risk, it may pay off dividends but only if the company can turn AD04 into a success and begin to turn those negative earnings into positive ones.
What do you think? Do you think pharma penny stocks are worth the risk?
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