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It’s not often a stock comes along that’s forecast to make gains only previously achieved by Rolls-Royce shares.
But that’s exactly what we’re seeing with Faron Pharmaceuticals (LSE:FARN), a London-listed penny stock that’s attracting a lot of attention.
The biotech company is working on therapies to help the human body’s own immune system fight cancer. Needless to say, the potential demand for such therapies is high.
Despite the shares only trading at 39.5p today, the average 12-month price target is 340p — a massive 762% gain.
But the company isn’t even making a profit yet — its products are still very much in the clinical research stage.
So what prompted such lofty forecasts?
Trial update
On 13 July, Faron released an update regarding its main project, Bexmarilimab, which is testing possible treatments for blood cancers and some solid tumours.
The data showed an overall response rate of 80%, with 70% of patients reaching remission or a very similar response category, and median overall survival of 13.4 months. That survival figure was described as much better than the roughly 4–6 months seen historically.
Stronger response rates and longer durability matter because they suggest the drug may be doing more than just delaying progression – it may be helping reset the disease environment in a meaningful way.
With the treatment appearing to remain well tolerated, the data supports moving ahead with the next, larger trial.
The key question now is whether the next studies can reproduce these results in a larger population and support a path toward registration.
If they’re successful, it would be groundbreaking, which may explain why one analyst has a 996p price target for the stock.
On the flipside, a failed trial could be catastrophic.
Early-stage risks
Early stage clinical trials are often a ‘make-it-or-break-it’ situation. They require exorbitant funding and massive amounts of trust from backers — when they fail, the financial and reputational impact is often unrecoverable.
Faron has recently improved its cash position and reportedly has access to a convertible debt facility. But it’s still loss-making and relies on funding to keep trials moving.
If trials take longer than expected or the company has to raise funds on weak terms, shareholders could be diluted. On top of that, the results need to satisfy regulators and the treatment needs to be approved ahead of competition.
Basically, it’s a long, arduous process littered with potential pitfalls.
The bottom line
Finding a cure for cancer has been a goal for decades. Needless to say, the company that does so will undoubtedly enjoy breakaway success.
If that company is Faron, the current share price could look like an unbelievable bargain in a few years time. If not, it could be trading at pennies for decades.
So is Faron worth considering? As a very small allocation, yes — so long as you’re willing to accept that it may all lead to nothing.
That’s the exciting high risk/high reward game of penny stock investing: it’s not for everyone, but get it right, and it can be life-changing.
Should you invest £5,000 in Faron Pharmaceuticals Oy right now?
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Mark Hartley does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
