Penny stocks might seem like a good investment because you can purchase many shares for a relatively small amount of money. But most of them represent businesses with questionable prospects at best, and owning thousands of shares of a worthless venture means your hard-earned money could vaporize before your eyes. To be blunt, penny stocks aren't worth it.

That's not to say individual investors have to maintain a boring wealth-building strategy. While high-risk, high-reward stocks shouldn't comprise a significant share of your portfolio, the world won't end if you reserve a small amount of your funds for riskier stocks. Why not have a little fun?

If you want to swear off penny stocks but still add some excitement to your portfolio, then consider gene-editing pioneer Precision BioSciences (DTIL -0.97%) and checkpoint-inhibitor developer Deciphera Pharmaceuticals (DCPH 2.01%).

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A novel gene editing platform

Investors must keep up with a growing list of gene editing tools these days. CRISPR Therapeutics, Editas Medicine, and Intellia Therapeutics are developing drug candidates based on first-generation CRISPR tools. Newcomers such as Beam Therapeutics and Prime Medicine are developing platforms based on CRISPR base editing and CRISPR prime editing, respectively. 

Making matters more complicated, all CRISPR-based tools share intellectual property held by just a handful of major research institutions and universities. It might be best to avoid the tangled web of potential conflicts of interest altogether, but that doesn't mean investors have to avoid gene editing. 

Precision BioSciences is developing a gene editing platform based on ARCUS nucleases. This approach has several potential technical advantages over CRISPR-based tools, but it's off to a mixed start. 

The company's lead drug candidate, PBCAR0191, is a chimeric antigen receptor T cell (CAR-T) therapy engineered with ARCUS gene editing to treat advanced blood cancers. In a phase 1/2a clinical trial, the experimental cellular medicine triggered a response in 66% of patients with advanced non-Hodgkin's lymphoma (NHL) and 33% of patients with advanced B-cell precursor acute lymphoblastic leukemia (B-ALL). 

But those objective response rates are based on just six and three patients, respectively, and only represent responses maintained through the first 28 days of treatment. Investors cheered the initial update in the fourth quarter of 2019, only to grow more cautious when expanded results were presented weeks later. 

On the one hand, there were some treatment-related adverse events, and two individuals who initially demonstrated a response to treatment relapsed after 14 days. The individual who achieved the longest response (nearly six months) also relapsed. On the other hand, all individuals enrolled in the study had advanced disease. One individual remained in complete response (no evidence of disease) as of early December. 

Investors appear to be waiting for Precision BioSciences to report the next data update from a third dose cohort, the highest dose studied to date, in the first quarter of 2020. If the results suggest higher doses of PBCAR0191 provide more durable responses and a manageable safety profile, then the gene editing stock could climb higher. If results aren't as clear cut, the stock might be mired in uncertainty for the foreseeable future. 

Given the early stage nature of the ARCUS platform and gene edited cellular medicines, it's not too surprising that researchers are still learning optimal dosing strategies for PBCAR0191. But there will be more shots on goal soon, since Precision BioSciences expects to advance its second drug candidate into clinical trials in 2020. That should help the company's scientists to more quickly determine dosing strategies for its candidates. 

Additionally, because Precision BioSciences owns all of the intellectual property for its platform, it can venture beyond healthcare applications of gene editing. The company's early stage agricultural biotech pipeline is intriguing, even if it doesn't factor into the company's valuation just yet. It could even become a supplier of plant-based proteins in the back half of the 2020s.

Simply put, Precision BioSciences is a risky stock, but one with undeniable potential -- and way better than a penny stock.

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Will this drug set the standard in GIST?

Deciphera Pharmaceuticals is developing five small-molecule inhibitors aimed at solid-tumor cancers, but all eyes are on the company's lead drug candidate, ripretinib. The compound inhibits the KIT and PDGFR-alpha proteins that play a pivotal role in the progression and development of drug resistance in certain cancers. Clinical results collected to date suggest ripretinib is poised to significantly improve treatment for gastrointestinal stromal tumors (GIST).

The drug candidate was pitted against placebo in a phase 3 trial investigating its potential as a fourth-line or greater treatment (meaning individuals have been unsuccessfully treated with at least three prior treatments) for GIST. Individuals who received ripretinib achieved a median progression-free survival (PFS) of 6.3 months and a median overall survival (OS) of 15.1 months, compared with only one month and 6.6 months, respectively, for those who received placebo. The drug candidate drove an 85% reduction of disease progression or death compared with placebo. 

There are currently no approved fourth-line treatment options for GIST, which suggests the drug candidate has a relatively easy path to marketing approval. The Food and Drug Administration is scheduled to make a decision by Aug. 13.  

The impressive results in advanced GIST also suggest ripretinib could significantly improve outcomes in less advanced cases of the cancer. Deciphera Pharmaceuticals is testing the drug candidate as a second- and third-line treatment option, and the early indications are promising. 

In a phase 1 clinical trial, ripretinib achieved a median PFS of 46 weeks as a second-line treatment option for GIST. That compares with a median PFS of 24 weeks achieved by Sutent from Pfizer in the same indication. Deciphera Pharmaceuticals is now conducting a larger phase 3 trial to generate results to support a supplemental new drug application (sNDA). 

Considering analysts expect ripretinib to achieve peak annual sales of over $1 billion in a best-case scenario, investors with a long-term mindset might be willing to give the pharma stock a closer look. But there could be some bumps in the road. Deciphera Pharmaceuticals is valued at $3 billion today, which prices in a decent amount of future success that has yet to be delivered. That could create volatility if market launch or the ramp-up of sales for ripretinib doesn't quite go as planned, or if a competing next-generation GIST treatment from Blueprint Medicines creates any roadblocks.

In other words, the stock is risky because of its early success and market valuation, but it certainly has long-term potential.