The biotech industry is ripe with opportunities. In this vast sector, Wall Street believes that clinical-stage companies Eledon Pharmaceuticals (ELDN) and Acumen Pharmaceuticals (ABOS) have enormous long-term potential.

Wall Street forecasts around 632% upside for Eledon, while expecting Acumen stock to surge 375% over the next 12 months.  While the targets may appear unrealistic now, history has shown that clinical-stage biotech companies can soar with just one successful product.

In the biopharmaceutical sector, a single breakthrough can transform entire markets. Moderna (MRNA), a biotech company, had no products on the market until 2020, when it launched the coronavirus vaccine. Its stock increased 443% in just one year in 2020. Similarly, one or two successful drugs can turn things around for these two clinical-stage biotech companies. 

Let's find out why Wall Street prefers these two penny stocks.

Penny Stock #1: Eledon Pharmaceuticals

Eledon Pharmaceuticals (ELDN) has a strong pipeline of therapeutic candidates at various stages of development. The company's pipeline aims to create immune-modulating therapies for the prevention and treatment of life-threatening diseases.

Eledon stock has gained 18.3% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of 7.1%. 

Net losses in 2023 totaled $40.3 million. It is not uncommon for a clinical-stage biotech company to report losses. Usually, biotech companies are in the red until they have a successful drug that generates consistent revenue.

Eledon continues to work on expanding its pipeline. In 2023, expenses for research and development (R&D) totaled $30.3 million. Despite the rising expenses, the balance sheet remains strong. It had $51.1 million in cash, cash equivalents, and short-term investments at the end of 2023.

The company’s flagship program is Tegoprubart, an anti-CD40L antibody being studied for organ rejection in kidney transplantation, amyotrophic lateral sclerosis (ALS), and xenotransplantation (transplantation of living cells, tissues, or organs from one species to another). 

In Q2 of 2024, the company intends to present interim clinical data from the ongoing Phase 1b trial of Tegoprubart in kidney transplants. Eledon aims to complete enrolment of candidates in the Phase 2 BESTOW trial of tegoprubart for the prevention of kidney transplant rejection by the end of this year.

According to Statista, the kidney is the most transplanted organ worldwide. Furthermore, NIH data shows rejection rates in kidney transplants are high, ranging from 33% to 69%. Eledon’s candidate, if and when successful, will be a game-changer in organ transplants. 

This is probably why Wall Street analysts are bullish about Eledon stock, rating it a “strong buy” on average. In fact, all six analysts that cover the stock rate a “strong buy.” The average target price of $15.60 implies an upside potential of 632% over the next 12 months. The stock also has a high target price of $39.

Penny Stock #2: Acumen Pharmaceuticals

Acumen Pharmaceuticals (ABOS) is a clinical-stage biotech company focused on the development of new treatments for neurodegenerative diseases, particularly Alzheimer's disease (AD). According to the company, Alzheimer's disease currently affects nearly 32 million people worldwide, and that number is expected to triple by 2050.

Acumen stock has dipped 16% YTD, compared to the broader market's gain. 

Acumen has a strong pipeline of drug candidates that address different stages of Alzheimer's disease progression. The company is developing its first Alzheimer's disease immunotherapy drug candidate, known as Sabirnetug (ACU193). Acumen intends to begin a Phase 2 study of the drug in the first half of 2024. 

This study will aim to examine the “clinical efficacy, safety, and tolerability of Sabirnetug for the treatment of early Alzheimer’s disease.”

In April, Acumen entered into a collaborative agreement with healthcare manufacturing company Lonza to manufacture Sabirnetug whenever it is approved. Acumen did not disclose any financial details about the transaction. 

In 2023, R&D expenses were $42.3 million. The net loss for the year totaled $52.4 million. Furthermore, Acumen's cash, cash equivalents, and marketable securities totaled $306.1 million as of the end of 2023.

Acumen Pharmaceuticals is poised to capitalize on an unmet medical need with its cutting-edge approach to Alzheimer's drug development, as the rate of the disease increases globally.

Overall, Wall Street rates Acumen stock a “strong buy.” All five analysts that cover the stock share this top rating. The average target price of $15.25 implies an upside potential of 375% over the next 12 months. The stock has a high target price of $22.

Conclusion

The biotechnology industry is experiencing an increase in research collaborations, strategic partnerships, and licensing agreements. The rising prevalence of chronic and life-threatening diseases creates numerous opportunities for Eledon and Acumen.
Nonetheless, biotech stocks are inherently risky. Furthermore, neither company's products are currently available on the market. It will take many years to develop a profitable drug. Currently, both stocks are appropriate for investors with patience and the willingness to take high risks who want to capitalize on long-term upside potential.