Robinhood investors are known for their capricious and sometimes idiosyncratic trading activity, but it would be folly to discount their growing effect on the price of small-cap stocks. Especially for nascent or clinical-stage biotech companies without any products approved for sale, a spurt of growth prompted by a favorable report of preliminary clinical trial data can easily explode into a massive rally once Robinhood traders get wind of it.
Thus, investors interested in profiting from the movement of the Robinhood army should keep an eye on a few key stocks that are already popular on the platform -- if only to put to rest the fear of missing out.
Known for its unique coronavirus vaccine candidate, Vaxart (NASDAQ:VXRT) is a favorite of traders seeking to get rich as a result of its multiple, often wild one-day price movements. Vaxart is also a favorite of biotech speculators willing to hold positions for longer than a few days, with the stock price up nearly 2,000% in the past 52 weeks and more than 3,800% so far this year.
There's just one problem: The company's closely watched coronavirus vaccine is still in preclinical development, and its most advanced pipeline project, a seasonal influenza vaccine, is only in phase 2. In other words, the company is likely years from having reliable revenues, suggesting that at some point its stock may face a reckoning, potentially as a result of skittish traders trying to lock in their profits.
More than 75,000 Robinhood traders hold Corbus Pharmaceuticals (NASDAQ:CRBP) despite its relatively unknown status among the wider public. While it has no products on the market, Corbus is in the process of developing therapeutics targeting the endocannabinoid system with the aim of treating conditions like cystic fibrosis and systemic lupus erythematosus (SLE), and it has a pair of ongoing phase 3 clinical trials. Its primary goal for the remainder of the year will be to work with regulatory authorities at the U.S. Food and Drug Administration (FDA) to prepare for the commercial launch of its chronic inflammation drug, lenabasum.
Given that it's a Robinhood favorite, the company's stock isn't as volatile as you might expect, nor does it have the same rollercoaster reputation as Vaxart. It's up about 11% over the past 12 months.
Unlike the other biotech stocks I've covered so far, Catalyst Pharmaceuticals (NASDAQ:CPRX) is a stock with broad appeal that might be of interest to more risk-averse investors as well as Robinhood traders. Catalyst is both quite profitable and experiencing robust revenue growth, with a profit margin of 36% and year-over-year quarterly revenue growth of 134%. These attributes make the company significantly less speculative than many other potential investments in the biotech industry, and yet it's also held by nearly 110,000 Robinhood traders.
Catalyst develops drugs for rare diseases like Lambert-Eaton Myasthenic Syndrome (LEMS, an autoimmune disorder), and its product Firdapse was approved for sale in the U.S. in 2018 and Japan in 2019. Critically, the company's drug is the only approved treatment for LEMS, meaning that it has no competition within its primary market. To increase its market penetration, Catalyst doubled the size of its sales force during the first quarter of the year, so the company's revenues are likely to continue expanding. Time will tell whether the stock is capable of the rapid growth that attracts speculators.