It is not often that a stock appears on the market for which profits are expected to match only those previously achieved by Rolls-Royce shares.

But this is exactly what we encounter Faron pharmaceutical company (LSE:FARN), a London-listed penny stock that is attracting a lot of attention.

A biotechnology company is working on therapies that will assist the human body’s immune system fight cancer. Needless to say, the potential demand for such therapies is high.

Despite the company’s shares currently trading at just 39.5p, the average 12-month price target is 340p, representing a massive upside of 762%.

But the company isn’t even turning a profit yet — its products are still largely in clinical trials.

So what prompted such lofty predictions?

Trial update

On July 13, Faron published an update on its main project, Bexmarilimab, which is testing possible treatments for blood cancers and some solid tumors.

The data showed an overall response rate of 80%, with 70% of patients achieving remission or a very similar response category, and the median overall survival was 13.4 months. This survival value was described as significantly better than the approximately 4–6 months seen in the past.

The higher response rate and longer durability matter because they suggest the drug may be doing more than just delaying progression – it may assist reset the disease environment in a significant way.

Treatment appears to remain well tolerated, and the data support continuation in another, larger study.

The key question now is whether subsequent studies will be able to replicate these results in a larger population and support the path to registration.

If they succeed, it would be a breakthrough, which may explain why one analyst set a price target for the stock at 996p.

On the other hand, a failed attempt can have disastrous consequences.

Risk at an early stage

Early-stage clinical trials are often a make-or-break situation. They require exorbitant funds and enormous trust from sponsors – when they fail, the financial and reputational consequences are often irrecoverable.

Faron has recently improved its cash position and reportedly has access to a convertible debt facility. However, it remains loss-making and relies on funding to continue its research.

If trials take longer than expected or the company has to raise funds on needy terms, shareholders could be diluted. Moreover, the results must satisfy regulatory authorities and the treatment must be approved before the competition.

Basically, it’s a long and tedious process full of potential pitfalls.

The most crucial thing

Finding a cure for cancer has been a goal for decades. Needless to say, a company that does this will undoubtedly succeed.

If that company were Faron, the current share price may seem like an incredible bargain in a few years. If not, it could sell for pennies for decades.

So is Faron worth considering? Yes, if you are able to accept that all this may lead to nothing, as a very diminutive allocation.

This is the exhilarating high-risk, high-reward game of penny stock investing: It’s not for everyone, but if you do it right, it can be life-changing.

Is it worth investing £5,000 in Faron Pharmaceuticals Oy now?

If investing expert Mark Rogers and his team have stock advice, it can pay to listen. After all, Twelfth Magpie’s flagship Share Advisor newsletter, which it has run for almost a decade, provides thousands of paying members with the best share recommendations from across the UK and US markets.

Mark believes there are 6 standout stocks that investors should consider buying right now. Want to check if Faron Pharmaceuticals Oy is on the list?

Mark Hartley holds no position in the companies mentioned.