Yet its share price has continued to trade basically sideways for the past six months. An update on testing in the second half could light a fire under the pharma play’s share price again.

Of course, buying drugs developers can be high risk. There’s no guarantee trials will come back positive, in this case neither for the testing of said vaccine later in 2021, nor for its other products used to treat cancer and infectious diseases.

But at the moment, news flow surrounding its Covid-19 battler for one continues moving in the right direction. South Africa signed off for Phase 1 clinical trials to begin late last month.

Packed with potential

I think Scancell could be considered to be a very speculative buy. But if it gets things right, the rewards for investors could be considerable. As for Covid-19, analysts at McKinsey & Company predict the pandemic will drag on for the next few years, at least. And, pleasingly for the likes of Scancell, they anticipate “it is likely that some measures such as booster vaccines are likely to be required indefinitely.”

Scancell’s work in the fast-growing fields of oncology and infectious diseases also offers plenty to be encouraged by. Although it’s worth noting City brokers don’t expect the penny stock to turn a profit for the next few years at least. Drugs R&D is expensive business, and Scancell may well be forced to tap shareholders for cash before too long.

Another exciting penny stock

Powerhouse Energy Group’s (LSE: PHG) another penny stock packed with potential. The escalating climate crisis means legislators are accelerating plans to further their green agendas. And this plays into the hands of this UK energy share.

Powerhouse has developed proprietary technology than turns discarded plastic, tyres and other waste items into clean energy, in this case a hydrogen-rich gas.

Hydrogen is one area of energy in which lawmakers are stepping up investment. In the UK, for instance, the government plans to develop 5 gigawatts of low-carbon hydrogen production capacity by 2030. Analysts at Bank of America think hydrogen will take 25% of global oil demand by 2050.

This doesn’t mean Powerhouse Energy is a slam dunk for those seeking to ride the green revolution, of course. Okay, the penny stock generated its first-ever revenues in 2020, thanks to initial engineering work on the Protos energy recovery facility in Cheshire.

But this line of work is naturally complex and expensive. So any problems with getting its technologies up and running (it’s hoped Protos will be working by 2022) could hammer its sales expectations and force it to ask investors for cash.

Still, like Scancell, I think this penny stock’s still worth serious attention today.

Here I explain why the shares have been dropping, and my next move.

Vaccine hopes

Scancell is primarily a developer of immunotherapies for cancer. But during the pandemic, it has pivoted towards Covid-19. The company has developed a vaccine it hopes is cheap, effective and scaleable. With massive global demand for vaccines to suit all budgets, the market warmed to this new focus by Scancell.

Last month the company announced that  it obtained local regulatory permission for a Phase 1 clinical trial of its COVIDITY vaccines in South Africa. That puts it well behind larger competitors, such as Pfizer and AstraZeneca, that long since completed the equivalent clinical trial phase of their vaccines and have been rolling them out commercially since last year. However, I don’t think that means Scancell is too late. There’s large global demand for vaccines. It could be that Scancell ends up offering a cost or availability advantage that makes its vaccine more appealing to developing countries, for example.

The company took advantage of improved sentiment about its prospects to boost its liquidity last year, issuing £15m of new shares.

Where next for the Scancell share price

I think this year’s pullback in the Scancell share price reflects investor impatience. An initial burst of enthusiasm at the prospect of the vaccine programme has started to ebb away over time.

But I still think the programme could unlock more value in future for the company. If clinical trials are successful, this modestly-sized UK company will have a vaccine in demand by the millions across the world. That could certainly help boost the share price.

But if the vaccine programme turns out to be disappointing, the premium that the Scancell share price has attracted during the pandemic could fall away completely. That isn’t the end of the road, though. Scancell had a long-standing immunotherapy programme before the pandemic. In the short term at least, COVIDITY failure could lead to the Scancell share price plummeting. But the company maintains its cancer immunotherapy programme. Further success in that could help support the price in future, independently of the Covid-19 vaccine workstream.

Some major risks

Clearly, a lot currently rides on the Covid-19 programme. Like many medical development companies, Scancell has been consistently loss-making for many years. That can only go on so long before a company needs to boost its liquidity. It was able to do that last year, but at the cost of diluting existing shareholders. There’s a risk that costly drug development and testing could create a similar need to boost liquidity in future.

My next move on the Scancell share price

With so much riding on the final outcome of the clinical trials, the stock feels highly speculative to me right now. A good result could push the share price to an all-time high. But equally, a disappointing outcome in the South African trial could lead to the share price crashing.

So while I will be following the clinical trials with interest, I won’t be adding Scancell to my portfolio.

The Scancell Holdings (LSE: SCLP) share price has risen strongly after it announced plans to run clinical trials for its COVIDITY vaccine programme. The UK medical share was recently 6% higher from Monday’s close, taking gains over the past 12 months to 303%.

Scancell said it intends to run Phase 1 trials for its novel Covid-19 vaccine during the second half. This follows the release of preclinical data on two of its lead bivalent vaccine candidates: SN15 (also known as SCOV1), and SN17 (known as SCOV2).

The COVIDITY programme is based on the UK healthcare share’s ImmunoBody DNA vaccine platform. It’s hoped its vaccine candidates will offer improved protection against new coronavirus variants of concern. This is “due to the inclusion of the highly conserved nucleocapsid N antigen in addition to the more variable spike (S) protein,” Scancell said.

Trials ready to begin

A regulatory application to begin Phase 1 trials on unvaccinated individuals has been submitted to the South African Health Products Regulatory Authority (SAHPRA). A study isn’t possible in the UK because of the rapid rollout of Covid-19 vaccines here.

Scancell plans to gain approval from the Medicines & Healthcare products Regulatory Agency (MHRA) in the UK should Part 1 of the South African study demonstrate safety. Phase 1 trials here will see the SCOV2 vaccine given to recipients of two doses of an approved vaccine. The South African trials will be used to assess both SCOV1 and SCOV2.

Scancell chief executive Dr Cliff Holloway said: “There is a significant threat from future mutations of the SARS-CoV-2 virus, as we have seen with the rapid transmission of the Delta variant. Our next generation Covid-19 vaccine has the potential to work alongside currently approved vaccines by protecting the population against new variants of SARS-CoV-2.”

Another soaring UK share

The Morses Club (LSE: MCL) share price has also ballooned on Tuesday following the release of fresh trading numbers. It’s currently 8% higher on the day, and up 72% over the past 12 months.

Morses Club said it’s enjoyed “a steady increase in customer demand across all lending products in both its Home Collected Credit and digital divisions.”

Customer numbers at its digital arm ballooned 40% between March and May. And total loan book balances increased 99% versus the end of February. Meanwhile, new credit issued came in 33% above expectations, and collections performance was ahead of budget.

Elsewhere, customer numbers at its Home Collected Credit unit clocked in at 144,000 as of May. This was 7,000 fewer than the UK financial share reported three months earlier. However, collections at the division are more than double the number Morses Club had expected. And total new credit issued was also 16% ahead of company expectations.

Scancell: an overview

In a nutshell, Scancell is an immuno-oncology  company. That’s a fancy way of saying it develops treatments that stimulate the body’s own immune system to treat or prevent cancer.

Scancell isn’t just a company with an idea. It has four types of scientific technology. These include: ImmunoBody, Moditope, AvidiMab and COVIDITY. It’s very early days for the firm, but some of its products are undergoing clinical trials.

Scancell’s lead ImmunoBody cancer vaccine, SCIB1, is being developed for the treatment of patients with metastatic melanoma. That’s skin cancer that has spread to other parts of the body. SCIB 1 has completed Phase 1 trials and will be moving to Phase 2.

I think things look promising for Scancell and would buy the penny stock today.

Coronavirus

While treating and preventing certain types of cancer is Scancell’s bread and butter, I think the real star of the show is its COVIDITY programme.

In April 2020, the company decided to initiate a research programme called, COVIDITY to develop a vaccine for Covid-19. It’s being worked on with scientists at the University of Nottingham.

What I like about Scancell’s version of a vaccine is that it’s intended to be a second-generation jab. That means it could be effective against many of the coronavirus variants. It comes after concerns that the Pfizer and AstraZeneca vaccines may offer limited protection against the mutated versions of the virus.

The science bit

I’ll try and explain the science part.

Most of the current vaccines target the surface spike (S) protein, which allows the virus to infect the cell. Scancell’s vaccine not only targets the S protein but also the nucleocapsid (N) protein, which makes the bulk of the virus particle.

Scancell says that the N-protein is “highly conserved”, which means it’s less likely to mutate. In summary, the fact that Scancell is targeting the N-protein means that it could create long-term immunity against the coronavirus and its variants.

Do we need another vaccine?

I think another Covid-19 vaccine is important. Given the concerns about currently available vaccines, I feel there is always room for improvement. Especially around effectiveness, safety and longevity of response of a vaccine. 

I also like that Scancell’s version is relatively simple to manufacture and doesn’t need to be stored in ultra-low temperatures. This means transportation is likely to be easier.

The risks

Big pharma companies with a lot more resources are also working on jabs to treat coronavirus variants. Scancell is at an early stage and there’s no guarantee its treatments will be successful in testing trials. It’s a pre-revenue, loss-making company. Research and development costs are likely to persist and hit profitability. This penny stock is not for the faint hearted. So I’d only buy what I could afford to lose.

While Scancell has raised the necessary funding to trials its products, any delays or setbacks may require the company to raise additional funds. This could also impact the share price.

But as a long-term investor, I feel the potential rewards outweigh these risks and I’d buy the penny stock in my portfolio.

Edward Sheldon: Calnex Solutions

My top micro-cap stock is Calnex Solutions (LSE: CLX). It’s an under-the-radar technology company that specialises in testing and measurement services for telecommunication networks.

Calnex is benefitting from the rollout of 5G networks and the widespread adoption of cloud computing. The company’s H1 results for the six months to 30 September 2020, for example, showed revenue growth of 37%. Meanwhile, the company recently advised that its revenue for FY2021 would be ahead of market expectations. It also said that it is well positioned to deliver its historical growth rates over the long term.

Like any micro-cap, this stock could be volatile. However, overall, the investment case looks attractive, in my view.

Edward Sheldon owns shares in Calnex Solutions.

Christopher Ruane: Foxtons

Estate agent Foxtons (LSE: FOXT) offers exposure to any rebound in the London property market.

The pandemic had an impact and revenue fell 12% last year. However, the pre-tax loss was sharply reduced from the prior year despite the difficult market. The company moved back into profitability in the second half of last year and says financial performance has continued to improve. Revenue in January and February was well ahead of the prior two years.

Its well-known brand is an asset in the crowded London market. I would consider buying Foxtons at its current price.

Christopher Ruane does not own shares in Foxtons.

Jonathan Smith: McBride 

McBride (LSE: MCB) is a UK-based manufacturing firm that offers private label services as well as producing some own-label products. This is mostly in the household cleaning area. 

The share price is up over 40% over the past year, thanks to increased demand from lockdown for many lines. Fiscal half-year operating profit (H2 of 2020) was up 83.6%, which impressed me.

Going forward, I think the business is well diversified with operations in 12 countries. It also appeals to ESG investors, given that 99% of packaging produced is recyclable.

Jonathan Smith has no position in McBride.

Royston Wild: Michelmersh Brick Holdings 

Continued strength in the UK housebuilding industry leads me to believe that Michelmersh Brick Holdings (LSE: MBH) will release encouraging trading news later this month. The AIM-quoted company is due to unveil full year results on Tuesday, March 30. 

Michelmersh certainly impressed when it last updated the market in November. Then it said that production capacity had returned to pre-coronavirus levels and that trading had remained “resilient” since June. Consequently it said that underlying revenue and profit would beat market estimates for 2020.

Today Michelmersh trades on a price-to-earnings growth (PEG) ratio of just 0.9 for 2021. This suggests that the company is being undervalued by market makers. And it’s a reading so low that I think another positive update in the coming days could prompt a sharp re-rating of the brickmaker’s shares.

Royston Wild does not own shares in Michelmersh Brick Holdings.

Conor Coyle: MacFarlane Group 

MacFarlane Group (LSE:MACF) is a micro-cap stock I think could be set for significant long-term growth. The company designs, manufactures and delivers packaging to businesses throughout the UK. Demand for packaging products has shot up as the number of online deliveries has increased due to the pandemic.

The Glasgow-based company is a well-established business and has continued to post strong profits despite economic uncertainty in the last year. I think its online retail profits will continue to grow, and with key customers in the aerospace industry bouncing back this year I see further growth ahead.

Conor Coyle does not own shares in MacFarlane Group.

Roland Head: UP Global Sourcing

One small-cap stock whose prospects excite me is UP Global Sourcing (LSE: UPGS).

This firm owns and licences a range of consumer goods brands, such as Russell Hobbs, Salter, Beldray and Constellation. Demand for kitchen, laundry and cleaning products has been strong during lockdown, with sales up 11% during the six months to 31 January.

There’s obviously a risk that demand could slow as the UK exits lockdown. But the firm recently upgraded its sales guidance for the year ahead, reporting “strong momentum” in new orders.

UPGS shares are up by 50% from their pre-pandemic levels. I believe they have further to go.

Roland Head owns shares of UP Global Sourcing.

Tom Rodgers: Alumasc

Sustainable building materials producer Alumasc (LSE:ALU) is one of my favourite kinds of stocks. The kind that no-one’s heard of until suddenly everyone’s heard of it.

Established in 1945, the AIM-listed firm’s shares are trading at a three-year high, and it will pay a hefty 5.4% dividend yield next year. It boasts a forward P/E ratio of just 7.8 and a forward PEG of 0.4, making it seriously undervalued in my book. The fact that the company’s £61.7m market cap is well below its annual £80.4m revenue does it no harm at all, either.

Tom Rodgers has no position in Alumasc.

Jabran Khan: Yourgene Health

Yourgene Health (LSE:YGEN) is a genetic testing firm that produces non-invasive products for male fertility and prenatal screening for cystic fibrosis and more. Yourgene joined the Covid-19 products market with a testing solution.

It has established a presence in the UK, Europe, the Middle East, Africa and Asia. YourGene relies on commercial partnerships with larger firms, which I see as a positive.

Trading in the past year has shown progression for the £117m market-cap business. FY results are due soon and are expected to be positive. At just 16p per share, Yourgene could be a micro-cap gem for the long term in my portfolio. 

Jabran Khan has no position in any of the shares mentioned.

Rupert Hargreaves: Belvoir Group

Property franchise group Belvoir (LSE: BLV) offers a range of services from lettings to sales and financial services.

Growth since 2014 has been outstanding. Net income has grown at a compound annual rate of 28%. And Belvoir is expecting to report revenue growth of 12% for 2020.

Despite its historical growth, Belvoir has its risks. If the UK property market should start to struggle, the firm’s income may begin to shrink. Still, I would buy this micro-cap stock considering its potential to grab market share over the next few years.

Rupert Hargreaves does not own shares in Belvoir.

G A Chester: Trans-Siberian Gold 

Trans-Siberian Gold (LSE: TSG) is a low-cost, high-grade producer from its Asacha mine in Far East Russia. It also has exploration and development assets in the region. 

Its strong balance sheet and cash generation enable it to invest for growth, and reward shareholders with dividends and share buybacks. It aims to pay a sustainable base dividend through the commodities cycle, and – as currently – higher payouts when cash flows permit. The running yield is near 8% right now. 

Operational risk is currently concentrated due to TSG’s single producing mine, but it does have ambitions to become a mid-tier, multi-asset gold producer. 

G A Chester has no position in Trans-Siberian Gold.

Andy Ross: Totally 

Shares in healthcare services provider Totally (LSE: TLY) have more or less trebled over the last 12 months. In my opinion, it’s a strong micro-cap business with long-term potential and room for more share price growth.  

I believe that the shares should continue to do well because the group has launched an insourcing business, has a strong relationship with the NHS and has made selective acquisitions that will boost earnings growth. It’s addressing a huge potential market across the UK & Ireland, and in time potentially further afield.  

The group is likely to become profitable shortly, has been growing revenues rapidly year-on-year and already pays a dividend, which is a bonus.  

Andy Ross does not own shares in Totally.

Nadia Yaqub: Scancell

I reckon things look promising for Scancell (LSE: SCLP). It’s an immuno-oncology company. That’s a fancy way of saying it develops treatments that stimulate the body’s own immune system to treat or prevent cancer. Some of Scancell’s products are being tested in clinical trials.

But I reckon the real gem is its second generation Covid-19 vaccine. According to Scancell, its version of the jab could develop long-term immunity to the virus and offer better protection against the variants. It’s still early days, but I think Scancell has bags of potential.

Nadia Yaqub does not own shares in Scancell.

Kevin Godbold: Ramsdens Holdings

Ramsdens Holdings (LSE: RFX) operates from around 157 stores in the UK, offering pawnbroking, financial, retail and foreign currency exchange services. It’s a decent business and the firm sports some impressive quality indicators. City analysts expect earnings to bounce-back by almost 60% in the trading year to September 2022.

With the share price near 172p, the forward-looking earnings multiple is just above 11. And the anticipated dividend yield is around 3.5%. I like the net cash position on the balance sheets and the positive outlook for growth in earnings. That’s why I’d buy this micro-cap stock to hold for March and beyond.

Kevin Godbold does not own shares in Ramsdens Holdings.

Kirsteen Mackay: Trans-Siberian Gold

My top micro-cap stock for March is Trans-Siberian Gold (LSE:TSG). I think gold stocks can help achieve a diversified portfolio. With low interest rates likely to stay low for some time, this provides a favourable environment for gold. And hints of inflation on the rise make me think gold remains a good hedge.

Trans-Siberian Gold operates in Russia and recently reported a significant upgrade to the resources at its flagship gold mine following a successful drilling campaign. Its market cap is £81m and it has a price-to-earnings ratio of 14. The company pays a 7% dividend yield. 

Kirsteen Mackay does not own shares in Trans-Siberian Gold.

Zaven Boyrazian: Tracsis

The UK government recently unveiled its roadmap to ease lockdown restrictions within the UK. As more people head back to the office or go on a long-overdue holiday, the demand for Tracsis’ (LSE:TRCS) services is rising.

Tracsis engages in traffic data analysis, along with railway fault detection systems. Using its software solutions, optimised routes for vehicles can be plotted within pedestrian-rich areas.

The business is far from risk-free. Covid-19 led to a significant rise in operational expenses, and there are numerous competitors to outperform.

But despite these threats, I think the stock is on track to continue delivering long-term growth for my portfolio.

Zaven Boyrazian does not own shares in Tracsis.

Manika Premsingh: McBride

The private label household and personal-care goods’ manufacturer McBride (LSE: MCB) has made share price gains since late 2020. However, its price is still way below its pre-pandemic levels.

I could see it staying there if McBride was Covid-19 hit. But the opposite is the case here.

It has actually seen a rise in revenues for the six months ending December 31, 2020 as the pandemic drove up cleaning products’ demand. It is also profitable and expected its full-year pre-tax profits to be 10% ahead of the consensus estimate at the time it made the statement.

McBride’s profits have fluctuated in past years and its debt is growing. But on balance, I am optimistic about its prospects, making it my top micro-cap stock for the near term.

Manika Premsingh has no position in McBride.

Paul Summers: Ramsdens Holdings

My top micro-cap pick for March is Ramsdens Holdings (LSE: RFX).

Investing in a pawnbroker may not be everyone’s cup of tea but Ramsdens is also a jewellery retailer, precious metals buyer/seller and foreign currency specialist. Although there can be no guarantees, the last of these might recover strongly once UK holidaymakers are allowed to travel again. In addition to this earnings diversity, the company’s finances look strong and it makes great returns on invested capital. 

Shares remain far below the highs hit in early 2020. With lockdown restrictions set to end, I think we might see this gap close over the rest of the year. 

Paul Summers owns shares in Ramsdens Holdings.

This has prompted Scancell to state that it believes SCIB1 has the scope to become the first non-toxic effective treatment for resected melanoma. And, with it being safe and well-tolerated, its prospects for usage appear to be more encouraging.

Share Price

As mentioned, Scancell’s shares are down heavily today and this could be a result of profit taking by investors who have seen the value of their holdings rise by 23% in the last month alone. Of course, the company is still down by 58% in the last five years and, looking ahead, it is likely to remain loss-making in each of the next two years, as it has been during the last four years.

However, this may not be such a vast problem for the business, since it had £4.3m of cash on its balance sheet as at October 2014 and it currently has no debt. As such, and while refinancing may be required over the next couple of years, the impressive progress being made in clinical trials and improving investor sentiment show that attracting fresh capital is unlikely to be a particularly difficult process.

Partnerships

Of course, it appears to be a sensible move to pair up Scancell with profitable, more stable peers that also have bright futures. Two fine examples are Shire (LSE: SHP) (NASDAQ: SHPG.US) and BTG (LSE: BTG), which may not provide quite the same capital gain potential as Scancell, but which have more financial security and more stable track records of profitability. For example, BTG has been profitable in each of the last four years and Shire has achieved the same feat in each of the last five.

Furthermore, Shire and BTG are also providing investors with something to cheer about. For example, Shire is in the midst of a period of strong sales growth, with its top line expected to rise by 11% next year and double by 2020. Meanwhile, BTG is due to post earnings growth of 84% over the next two years, which highlights that there are excellent growth opportunities even among the mid-to-large pharmaceutical companies.

Looking Ahead

Clearly, Scancell has considerable potential, but comes with great risk, too. Not only is it likely to require refinancing, but its clinical trials may not provide the results it is hoping for, and so partnering it up with larger firms such as Shire and BTG seems to be a sensible step. While all three have considerable appeal, their strengths seem to make up for each other’s’ weaknesses, thereby making the three stocks a sound combination.

But which companies are not keeping up with it? Here are three from the FTSE indices that are slipping back today:

Experian

Experian shares lost 21p (1.8%) this morning to 1,178p, despite a decent-looking first-quarter update from the credit-rating agency. Overall revenue for the three months to 30 June rose by 7%, with the Latin America region leading the way with a 10% rise. The firm told us that “For the full year, we continue to expect mid-to-high single-digit organic revenue growth, modestly improved margins (at constant currency) and cash flow conversion of at least 90%“.

Despite today’s small fall, Experian shares are still up around 25% over the past year, with a forecast 7% rise in earnings per share putting the shares on a P/E of over 19.

Centrica

Centrica (LSE: CNA) suffered a minor blip today, dropping 1.4p to 372p, after announcing an acquisition. The firm’s American subsidiary Direct Energy is to buy up Bounce Energy of Texas for $46m. Bounce Energy is a retail supplier of electricity with more than 80,000 residential customers, mainly in its home state.

Today’s fall comes on a mixed day for energy suppliers, with National Grid up a bit and and SSE dipping.

Scancell

Scancell Holdings (LSE: SCLP), the cancer immunotherapy researcher, suffered a setback today after one of three patients taking part in a higher-dose study of its SCIB1 treatment has had to be excluded after a fault in the equipment delivering the drug. The firm will now try to identify a new patient to continue its search for a “maximally tolerated dose” of SCIB1.

Scancell shares had more then trebled in price over the previous 12 months, before the announcement of a new share issue of £6.5m on annual results day on 9 July sent them plunging to a gain of just 50% over the year.

Finally, reliable dividends can more than compensate for the day-to-day ups and downs of share prices. So how about a company that’s offering a 5% yield and which could be set for some nice share price appreciation too?

It’s the subject of our BRAND-NEW report, “The Motley Fool’s Top Income Share For 2013“, which you can get completely free of charge — but it will only be available for a limited period, so click here to get your copy today.

> Alan does not own any shares mentioned in this article.