The blast from a Toxic Grenade doesn't do much damage, but the poison splashed on nearby enemies will slowly deplete their health.
It's less powerful in terms of direct damage compared to the frag grenade but more powerful in terms of duration. Once the target or targets are affected, they receive continuous damage for ten seconds.
It's possible to have almost infinite. In Chapter 2, after Rhombus gives you the key to open the door of the Secret Vault, in the area "Los Holdings Pens", Kamikaze ghouls reappear endlessly in various places and almost always drop a Toxic Grenade when they die.