Penny stocks often experience a sharp rise. This is what has happened to Futura Medical (LSE:FUM) in the past week. In the past seven days, the Futura Medical share price has risen close to 200%. As a result, I wonder if Futura Medical is a penny stock worth considering for my portfolio. Is the share price going to continue to rise?
Penny stocks often overlooked
I believe penny stocks are often overlooked as risky investments. After all, they are priced low for a reason. However, I believe some penny stocks could lead to some excellent returns.
The Futura Medical share price has risen sharply in the last week. Futura is a pharmaceutical research and development firm with a focus on topical formulations and transdermal delivery. In simpler terms, it is medication that is used by applying it to the skin. To date, its largest achievement is its proprietary DermaSys transdermal technology. As with many smaller firms, it relies on commercial partnerships.
Futura Medical share price
The past seven days have been a whirlwind for Futura. The reason behind it’s share price rise is been a breakthrough in an agreement between itself and the US Food and Drug Administration (FDA). A clinical study into Futura’s erectile dysfunction treatment (known as MED3000) will now be conducted. This is a step closer to the treatment receiving regulatory approval in the US, which could be fruitful.
The Futura Medical share price has also benefited from an approval by an EU body last week too. This could see MED3000 sold over the counter in the region. The good news linked to the EU approval is that fast-track reviews could occur in the Middle East, Africa, and Latin America.
As I write this, shares in Futura are trading for over 50p per share. Last week, it was trading for just 18p per share. A year ago today, it was trading for less than 10p per share. I believe this goes to show how big this latest breakthrough is for Futura.
Is Futura worth the risk?
Futura has other products and technology too, which could boost future performance and share price. It is working on its own anti-inflammatory gel labelled TPR100, which is awaiting regulatory authorisation in the UK. It has also joined the cannabis-based medicines race that has recently attracted a lot of headlines and interest.
Despite the recent breakthrough and optimism there are very real risks involved with Futura as a penny stock. The past two years have seen very little revenue reported. It is currently also loss-making, which is expected for smaller pharma firms at this stage in their journey. Although expected, I am not buoyed by this.
I am not willing to risk my hard-earned cash on the Futura Medical share price just now. I will keep a keen eye on developments, however. Regulatory approvals and distribution could change things. There are plenty of penny stocks that are established and profit making which I much prefer.
Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.