On December 24, Jared Holz of Mizuho joined ‘Power Lunch’ on CNBC to talk about how to play biotech moving into 2026. Holz noted that healthcare has become the top-performing sector over the last 3 months as investors rotate away from high-valuation tech and AI stocks. Despite this recent run, he argued that the sector has room to continue its upward trajectory, pointing out that it was a multi-year laggard, trailing the S&P 500 by 20% in 2023 and roughly 5% in 2024. He described the current rotation as a combination of investors being scared of concentrated tech positions and happy with the valuations found in healthcare. Holz identified the clarity around drug pricing as a major positive catalyst for pharmaceutical and biotech companies. He highlighted biotech as the most interesting sub-sector for 2026, specifically focusing on the XBI (SPDR S&P Biotech ETF) as a proxy for small and mid-cap companies. He observes a historic shift in sentiment and noted that the XBI recently achieved a rare streak of 6 consecutive months of positive returns. He attributed this bullishness to several factors: the evaporation of negative drug-pricing narratives, the potential for lower interest rates to ease funding concerns, and the stabilization of the denominator of biotech stocks, meaning there are no longer an overwhelming number of new speculative assets to analyze. Additionally, he pointed to a surge in M&A activity, citing over 20 deals worth more than $500 million in 2025 alone.
Additionally, on December 19, Julie Biel, chief market strategist at Kayne Anderson Rudnick, appeared on CNBC’s ‘The Exchange’ to discuss where small caps may be headed in 2026. Biel argued that while the small-cap trade has legs for the coming year, the specific leadership within that category is set to change. She suggested that the market will soon shift its focus back to the importance of earnings growth and noted that the recent rally in the Russell index has been led by speculative areas like quantum computing, biotech companies, and firms with high debt, none of which currently produce earnings. Biel explained that while growth will likely accelerate across small caps, she expects the true winners to be high-quality businesses that have managed inflation, labor headwinds, and higher interest rate costs. She also pointed out that roughly 30 percent of trading volume is currently in stocks priced under $5, which she sees as a sign of young investors attempting to get rich quickly on highly speculative names.
That being said, we’re here with a list of the 10 best biotech penny stocks to buy according to analysts.
Our Methodology
We sifted through the Finviz stock screener to compile a list of biotech penny stocks under $5. We then selected 10 penny stocks that had an upside potential of over 65%. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q3 2025, which was sourced from Insider Monkey’s database.
Note: All data was sourced on December 26.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10 Best Biotech Penny Stocks to Buy According to Analysts
10. Rezolute Inc. (NASDAQ:RZLT)
Share Price as of December 26: $2.67
Number of Hedge Fund Holders: 26
Average Upside Potential as of December 26: 68.54%
Rezolute Inc. (NASDAQ:RZLT) is one of the best biotech penny stocks to buy according to analysts. On December 11, Rezolute released topline results from its Phase 3 sunRIZE study evaluating ersodetug in patients with congenital hyperinsulinism/HI. The study, which included 63 participants aged 3 months to 45 years across more than a dozen countries, did not meet its primary or key secondary endpoints.
The primary endpoint of the study focused on the change in average weekly hypoglycemia events measured via self-monitored blood glucose. While the top dose of 10 mg/kg led to a ~45% reduction in these events, the result was not statistically significant compared to the 40% improvement observed in the placebo group. Similarly, the key secondary endpoint, the change in average daily percent time in hypoglycemia, showed a 25% reduction at the 10 mg/kg dose compared to a ~5% increase in the placebo arm, which also failed to reach statistical significance.
Despite missing the efficacy targets, the drug reached target concentrations across all age groups using a dosing regimen of 5 and 10 mg/kg every other week for three doses, followed by monthly administration. Safety observations were described as generally favorable. Two participants experienced serious hypersensitivity reactions that led to early discontinuation, though Rezolute Inc. (NASDAQ:RZLT) noted that the incidence of such reactions remains low compared to other biologic treatments. The most common adverse event was hypertrichosis (excessive hair growth), which was mild and self-limiting.
Rezolute Inc. (NASDAQ:RZLT) is a late-stage rare disease company that improves outcomes for individuals with hypoglycemia caused by hyperinsulinism in the US.
9. Prime Medicine Inc. (NASDAQ:PRME)
Share Price as of December 26: $3.50
Number of Hedge Fund Holders: 30
Average Upside Potential as of December 26: 71.43%
Prime Medicine Inc. (NASDAQ:PRME) is one of the best biotech penny stocks to buy according to analysts. On December 23, LifeSci Capital initiated coverage of Prime Medicine with an Outperform rating and $6 price target. The firm highlighted that Prime Medicine is advancing one-and-done gene editing treatments for conditions with high unmet medical needs, specifically Wilson’s disease, alpha-1 antitrypsin deficiency/AATD, and cystic fibrosis. LifeSci Capital expressed particular optimism regarding the commercial and clinical opportunities Prime Medicine is pursuing within the Wilson’s disease and AATD landscapes.
In other news, on December 7, Prime Medicine Inc. (NASDAQ:PRME) announced the publication of Phase 1/2 clinical data for its investigational therapy, PM359, in the New England Journal of Medicine/NEJM. PM359 is an autologous hematopoietic stem cell product designed to treat p47phox chronic granulomatous disease/CGD. These findings represent the first-in-human demonstration of Prime Editing’s safety and efficacy.
The trial results focused on two patients, one adult and one pediatric, both of whom had a history of CGD-defining complications, such as skin infections and CGD-associated colitis. Following treatment with PM359, both patients achieved rapid neutrophil and platelet engraftment. By Day 30, they reached 69% and 83% dihydrorhodamine-positive/DHR+ neutrophils, respectively. These figures significantly exceed the 20% threshold typically required for clinical benefit. Because the DHR activity remained stable over time, researchers believe the gene correction successfully occurred in the long-term repopulating hematopoietic stem cells within the bone marrow. Clinically, both participants have remained free of new CGD-related complications.
Prime Medicine Inc. (NASDAQ:PRME) is a biotechnology company that delivers genetic therapies to address the spectrum of diseases by deploying gene editing technology in the US.
8. Climb Bio Inc. (NASDAQ:CLYM)
Share Price as of December 26: $4.93
Number of Hedge Fund Holders: 17
Average Upside Potential as of December 26: 102.84%
Climb Bio Inc. (NASDAQ:CLYM) is one of the best biotech penny stocks to buy according to analysts. On December 18, H.C. Wainwright analyst Raghuram Selvaraju raised the firm’s price target on Climb Bio to $11 from $9, while maintaining a Buy rating on the shares. This sentiment was announced as the firm believes that Budoprutug’s progress across clinical tracks will culminate in the release of data readouts during 2026.
The company is currently focused on two primary assets: Budoprutug, which is an anti-CD19 antibody targeting B-cell mediated diseases, and CLYM116, which is an anti-APRIL antibody for IgA nephropathy. Leadership characterized 2026 as a data-rich year, with multiple readouts expected to guide the next phase of development for both programs.
Climb Bio Inc. (NASDAQ:CLYM) initiated the PrisMN Phase 2 trial for Budoprutug in Primary Membranous Nephropathy/pMN in Q3 2025. This open-label, dose-ranging study aims to evaluate safety, pharmacokinetics, and preliminary efficacy, specifically complete and partial remission, to identify a dose for Phase 3. Additionally, a Phase 1 trial for a subcutaneous formulation achieved its first patient in, with enrollment currently ongoing to assess bioavailability and pharmacodynamics. Initial data from this SC formulation trial is expected in the first half of 2026.
The company is also conducting two other major trials for Budoprutug. An open-label Phase 1b/2a trial is enrolling patients with Immune Thrombocytopenia to monitor platelet counts and B-cell depletion. Simultaneously, a Phase 1b trial is evaluating the drug’s activity in Systemic Lupus Erythematosus patients following a single intravenous dose. The company anticipates releasing initial data, including preliminary efficacy results, for both the ITP and SLE programs in H2 2026.
Climb Bio Inc. (NASDAQ:CLYM) is a clinical-stage biotechnology company that develops therapies for immune-mediated diseases.
7. Absci Corporation (NASDAQ:ABSI)
Share Price as of December 26: $3.57
Number of Hedge Fund Holders: 18
Average Upside Potential as of December 26: 152.10%
Absci Corporation (NASDAQ:ABSI) is one of the best biotech penny stocks to buy according to analysts. On December 11, Absci Corporation (NASDAQ:ABSI) unveiled promising preclinical data for ABS-201, which is an AI-designed antibody targeting the prolactin receptor/PRLR to treat androgenetic alopecia/AGA. The data was derived from organ-cultured human scalp skin models. The new research suggests that ABS-201 could offer a radically different approach to hair loss by addressing the root causes of follicle miniaturization, specifically targeting hormonal signaling beyond just androgens.
The study demonstrated that ABS-201 successfully inhibits the PRLR signaling pathway (specifically STAT5 phosphorylation), which triggers several positive biological responses. Most notably, the antibody was shown to prolong anagen (the active growth phase) and block catagen (the regression phase). By stimulating hair matrix keratinocytes and increasing the production of essential growth factors like IGF1 and FGF7, the treatment promotes the synthesis of hair shaft keratin. This multi-pronged activity facilitates the potential reconversion of thin vellus hairs back into thick terminal hair follicles.
A critical discovery in this data is ABS-201’s ability to protect and expand the hair follicle stem cell niche. The antibody inhibits the apoptosis (cell death) of K15+ stem cells and increases their capacity to generate CD34+ progeny. Currently, the ~80 million Americans suffering from AGA rely on minoxidil and finasteride, which often provide limited results. In previous preclinical mouse models, ABS-201 demonstrated statistically significant superior regrowth compared to minoxidil.
Absci Corporation (NASDAQ:ABSI) operates as a data-first GenAI drug creation company in the US. The company combines AI with scalable wet lab technologies to design differentiated antibody therapeutics.
6. Orchestra BioMed Holdings Inc. (NASDAQ:OBIO)
Share Price as of December 26: $4.32
Number of Hedge Fund Holders: 12
Average Upside Potential as of December 26: 212.50%
Orchestra BioMed Holdings Inc. (NASDAQ:OBIO) is one of the best biotech penny stocks to buy according to analysts. On December 10, TD Cowen analyst Joshua Jennings initiated coverage of Orchestra BioMed with a Buy rating and $15 price target. TD Cowen believes that Orchestra BioMed is at the leading edge of cardiovascular device innovation. Its royalty-based model is anchored by two key programs: AVIM for hypertension and Virtue SAB for atherosclerotic disease, both of which target massive market gaps. With blue-chip partners and high-margin potential, the company is approaching critical data and commercialization milestones that could prove transformative.
The company is currently advancing two high-impact pivotal programs. Enrollment officially initiated for the Virtue Trial as of Q3 2025, which is a US registrational study comparing Virtue SAB head-to-head against the commercially available AGENT paclitaxel-coated balloon for treating coronary in-stent restenosis.Orchestra BioMed Holdings Inc. (NASDAQ:OBIO) remains in full operational control of this trial, with enrollment completion targeted for mid-2027. Simultaneously, the company is progressing its BACKBEAT global pivotal study for Atrioventricular Interval Modulation/AVIM Therapy. Recent FDA-approved protocol enhancements have expanded the enrollment criteria for BACKBEAT, increasing the eligible patient pool more than 24-fold, with enrollment completion expected in mid-2026.
Orchestra BioMed Holdings Inc. (NASDAQ:OBIO recently expanded its partnership with Medtronic, establishing a development pathway for AVIM Therapy-enabled leadless pacemakers. While Terumo holds a ROFR for certain transactions, Orchestra BioMed retains all development and distribution rights for Virtue SAB across all indications.
Orchestra BioMed Holdings Inc. (NASDAQ:OBIO) operates as a biomedical company in the US. It collaborates with Medtronic for the development of AVIM therapy for the treatment of HTN in pacemaker-indicated patients, and with Terumo Corporation and Terumo Medical Corporation for developing and commercializing Virtue SAB for the treatment of coronary and peripheral artery disease.
5. C4 Therapeutics Inc. (NASDAQ:CCCC)
Share Price as of December 26: $2.12
Number of Hedge Fund Holders: 21
Average Upside Potential as of December 26: 230.19%
C4 Therapeutics Inc. (NASDAQ:CCCC) is one of the best biotech penny stocks to buy according to analysts. On December 17, Barclays lowered the firm’s price target on C4 Therapeutics to $5 from $10, while maintaining an Overweight rating on the shares. The firm updated its biotechnology price targets as part of its 2026 sector outlook.
On December 2, TD Cowen initiated coverage of C4 Therapeutics with a Buy rating but set no price target on the company’s shares. The firm highlighted that the company distinguishes itself as one of the few biotech firms to achieve clinical validation for both molecular glues and heterobifunctional degraders. TD Cowen specifically identifies cemsigwat/Cemsi as having the potential to evolve into a backbone therapy for the treatment of multiple myeloma.
In Q3 2025, the company’s lead candidate, cemsidomide, showed a potential best-in-class profile in Phase 1 data for multiple myeloma. At the highest dose level of 100 µg, the therapy achieved a 53% overall response rate. The results indicated a differentiated safety and tolerability profile even in a heavily pre-treated patient population. To expand the drug’s reach, C4T entered a clinical trial collaboration and supply agreement with Pfizer to evaluate cemsidomide in combination with elranatamab.
Looking ahead to 2026, C4T is on track to initiate the next phase of development for cemsidomide. C4 Therapeutics Inc. (NASDAQ:CCCC) plans to launch the Phase 2 MOMENTUM trial in combination with dexamethasone in Q1 2026, which holds potential for accelerated approval. Following this, a Phase 1b trial in combination with Pfizer’s elranatamab is scheduled to begin in Q2 2026. These trials aim to solidify cemsidomide’s position in the relapsed/refractory multiple myeloma treatment landscape. Beyond oncology, C4T is leveraging its TORPEDO platform to progress a discovery pipeline targeting non-oncology indications.
C4 Therapeutics Inc. (NASDAQ:CCCC) is a clinical-stage biopharmaceutical company that develops novel therapeutic candidates to degrade disease-causing proteins.
4. Iovance Biotherapeutics Inc. (NASDAQ:IOVA)
Share Price as of December 26: $2.85
Number of Hedge Fund Holders: 27
Average Upside Potential as of December 26: 233.33%
Iovance Biotherapeutics Inc. (NASDAQ:IOVA) is one of the best biotech penny stocks to buy according to analysts. On December 17, Barclays analyst Etzer Darout raised the firm’s price target on Iovance Biotherapeutics to $10 from $9, while keeping an Overweight rating on the shares. This announcement was made as part of the firm’s 2026 projections, where it revised its valuation targets for the biotech industry.
Earlier in Q3 2025, Iovance Biotherapeutics Inc. (NASDAQ:IOVA) highlighted a total product revenue of $68 million, which was a 13% sequential increase. The primary driver was Amtagvi sales, which reached $58 million, while Proleukin contributed ~$10 million. The company also reaffirmed its full-year 2025 revenue guidance of $250 to $300 million. Management remains optimistic about Amtagvi’s growth, projecting peak US sales in advanced melanoma to exceed $1 billion. This growth is supported by an expanding network of 80+ Authorized Treatment Centers across ~40 states.
A major operational shift is planned for early 2026, when Iovance will centralize all Amtagvi and clinical manufacturing at its internal facility, the Iovance Cell Therapy Center/iCTC. This move is designed to eliminate reliance on contract manufacturers, maximize capacity, and further drive gross margins toward a long-term goal of over 70%.
Beyond melanoma, Iovance is aggressively pursuing a significantly larger market in non-small cell lung cancer/NSCLC. Interim data from the IOV-LUN-202 trial showed a best-in-class profile with an objective response rate of 26% and a median duration of response that was not reached at 25 months. Enrollment of ~80 patients is expected to finish in 2026, supporting a potential supplemental BLA and a commercial launch in H2 2027.
Iovance Biotherapeutics Inc. (NASDAQ:IOVA) is a commercial-stage biopharmaceutical company that develops and commercializes cell therapies using autologous tumor-infiltrating lymphocytes for the treatment of metastatic melanoma and other solid tumor cancers in the US.
3. Black Diamond Therapeutics Inc. (NASDAQ:BDTX)
Share Price as of December 26: $2.59
Number of Hedge Fund Holders: 18
Average Upside Potential as of December 26: 247.49%
Black Diamond Therapeutics Inc. (NASDAQ:BDTX) is one of the best biotech penny stocks to buy according to analysts. On December 3, Black Diamond Therapeutics announced significant clinical progress for silevertinib, which is the company’s MasterKey EGFR inhibitor. Preliminary Phase 2 data from 43 frontline/1L non-small cell lung cancer/NSCLC patients revealed a 60% objective response rate.
The study is particularly notable for addressing 35 different non-classical EGFR mutations, a diverse group of alterations that often resist standard therapies. As of the November 3 data cutoff, with a median follow-up of 7.2 months, the therapy also demonstrated a 91% disease control rate. A critical highlight of the trial is silevertinib’s high CNS penetration. Among patients with brain metastases, the drug achieved an 86% CNS response rate. This is a vital metric, as brain metastases are a primary driver of early disease progression in NSCLC patients.
Safety data remained consistent with previous findings; while the majority of patients experienced manageable side effects such as rash, diarrhea, and stomatitis, no new safety signals were observed. Updated results, including Progression-Free Survival and Duration of Response data, are expected in Q2 2026.
Using this strong CNS activity, Black Diamond Therapeutics Inc. (NASDAQ:BDTX) plans to initiate a randomized Phase 2 trial for newly diagnosed glioblastoma/GBM in H1 2026. GBM is a highly aggressive brain cancer where ~50% of the 7,000 annual US cases harbor EGFR alterations.
Black Diamond Therapeutics Inc. (NASDAQ:BDTX) is a clinical-stage oncology company that discovers and develops MasterKey therapies for patients with genetically defined tumors.
2. Fractyl Health Inc. (NASDAQ:GUTS)
Share Price as of December 26: $2.27
Number of Hedge Fund Holders: 26
Average Upside Potential as of December 26: 252.42%
Fractyl Health Inc. (NASDAQ:GUTS) is one of the best biotech penny stocks to buy according to analysts. On December 2, Fractyl Health announced positive six-month results from its open-label REVEAL-1 study. The data showed that a single Revita procedure, a hydrothermal ablation designed to remodel the duodenal lining, successfully maintained stable body weight and glycemic control in patients who had recently discontinued GLP-1 medications.
Participants in the study had previously lost an average of 24% of their total body weight (over 50 lbs.) while on GLP-1 therapy for durations ranging from 5 months to 5 years. The findings are significant when compared to typical outcomes following the withdrawal of GLP-1 drugs. While published third-party studies show a weight regain of ~10% within 6 months of stopping medication, Revita-treated participants showed a mean weight change of only 1.5%.
Furthermore, metabolic stability was mirrored in blood sugar levels; while historical data from the STEP-1 trial indicated a 0.4% increase in HbA1c post-discontinuation, REVEAL-1 participants experienced a minimal change of only 0.04%.
Fractyl Health Inc. (NASDAQ:GUTS) now expects to release midpoint randomized data from its REMAIN-1 study in January 2026, followed by one-year data for REVEAL-1 in Q2. By H2 2026, the company anticipates topline results from the REMAIN-1 Pivotal Cohort and a potential Premarket Approval/PMA filing with the FDA. Revita currently holds an FDA Breakthrough Device designation for weight maintenance in patients discontinuing GLP-1-based drugs.
Fractyl Health Inc. (NASDAQ:GUTS) is a metabolic therapeutics company that develops therapies for the treatment of type 2 diabetes/T2D and obesity.
1. Invivyd Inc. (NASDAQ:IVVD)
Share Price as of December 26: $2.69
Number of Hedge Fund Holders: 20
Average Upside Potential as of December 26: 271.75%
Invivyd Inc. (NASDAQ:IVVD) is one of the best biotech penny stocks to buy according to analysts. On December 22, BTIG analyst Thomas Shrader initiated coverage of Invivyd with a Buy rating and $10 price target. BTIG maintained this stance on Invivyd, citing the company’s established expertise in antibody production. The firm informed investors that VYD2311’s market potential far exceeds that of Pemgarda, which positions the stock for significant growth.
Additionally, on December 23, Invivyd announced two major regulatory and clinical milestones for VYD2311, which is its investigational monoclonal antibody/mAb designed as a vaccine alternative for COVID-19 prevention. The US FDA granted Fast Track designation to VYD2311 for preventing COVID-19 in individuals with underlying risk factors for severe disease.
Simultaneously, Invivyd Inc. (NASDAQ:IVVD) initiated DECLARATION, a pivotal Phase 3, randomized, triple-blind, placebo-controlled clinical trial. This BLA-enabling study will evaluate the safety and efficacy of VYD2311 in preventing symptomatic COVID-19 across a broad population of ~1,770 adults and adolescents. The trial is a key component of Invivyd’s REVOLUTION clinical program, with top-line data expected in mid-2026. Strategically, Invivyd is initiating enrollment during a peak winter infection season to leverage historical trends in COVID-19 attack rates.
Invivyd Inc. (NASDAQ:IVVD) is a biopharmaceutical company that discovers, develops, and commercializes antibody-based solutions for infectious diseases in the US.
While we acknowledge the potential of IVVD to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than IVVD and that has 100x upside potential, check out our report about this cheapest AI stock.
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