2 Growth Stocks That Could Offer 1,000% Returns
JThanks to the innovation revolutions underway in the technology and healthcare sectors, shareholders have enjoyed historic returns on capital over the past decade. For example, the drug specialist for central nervous system disorders Axsome therapeuticsthe cancer specialist Exelixisand the pioneer of the electric car You’re here all provided tenfold returns to investors who bought these names at their low points.
Which stocks could be the next Axsome, Exelixis or Tesla from a growth perspective? The cancer/rare disease specialist Mereo BioPharma Group (NASDAQ: MREO) and the diabetes-focused medical device company Senseonics Holdings (NYSEMKT: SENS) could both be gearing up for a monstrous run higher soon. In fact, these two low-priced health care stocks have a decent chance of generating over 1,000% returns for their shareholders over the next two to three years.
Here is a brief overview of the potential risks and benefits associated with each of these promising growth vectors.
Mereo BioPharma: A bet on the future of immunotherapy
London-based biopharmaceutical Mereo hasn’t exactly set the world on fire since its American Depository Shares (ADS) debuted on the Nasdaq stock exchange. Consistent with this theme, biotech ADSs have lost around 65% of their value since April 2019. This continued downward trend should not scare off aggressive investors, however. Mereo’s share price tumble, after all, has more to do with Mr. Market’s well-known impatience with clinical-stage biotechnology, rather than the company’s underlying value proposition. ‘business.
What’s the scoop? Mereo is a small cap company with six assets in development for cancer and rare diseases. However, the one drug candidate that could undoubtedly skyrocket the company’s stock is the anti-TIGIT therapy known as etigilimab. Several large pharmaceutical companies, such as BeiGene, Bristol Myers Squibb, Merckand rock, have anti-TIGIT therapies in development due to their potential to increase the efficacy and durability of cancer immunotherapy treatments in general. Mereo’s etigilimab is currently undergoing a combined Phase 1/2 study to assess its usefulness as part of a combination treatment, with Opdivo, Bristol’s megablockbuster checkpoint inhibitor, for a variety solid tumors.
As it stands, Mereo’s anti-TIGIT candidate is expected to produce frontline data from this basket trial in approximately 18 months from now. During this long interval, however, the drugmaker is expected to provide several updates on the progress of etigilimab, which could prove to be a series of major catalysts for its stock price in the coming months. Another piece of good news is that Mereo’s cash trail would extend to 2024. This is critical, as it means biotech shouldn’t have to repeatedly tap public markets for capital over the course of the year. next year and a half.
What is the downside risk? Mereo’s management team has been open about its desire to partner with larger biopharmaceutical companies. Etigilimab, for its part, could trigger either a high-dollar licensing deal or a full buyout within the next two years. So a lot relies on this one experimental drug. Unfortunately, early-stage cancer treatments most often fail clinically. As a failure in this case would weigh heavily on the biotech’s stock price, potential investors might want to keep any initial position on the small side.
Senseonic: A rising tide lifts all boats
Shares of Senseonics are worth watching for ultra-aggressive investors because of its franchise of implantable continuous glucose monitoring (CGM) devices known as Eversense. The truth is that the CGM market has increased by more than 10% per year over the past five years, according to a report by Grand View Research. Moreover, this space is expected to grow by at least 10% per year over the next five years. This is certainly a favorable trend for a small cap CGM player like Senseonics.
So far, Senseonics has only captured a small portion of this multi-billion dollar medical device market with its Eversense franchise. But the company hopes to significantly improve its competitive positioning with possible regulatory approval from the Food and Drug Administration (FDA) for its 180-day version of the Eversense CGM system. The medical device company submitted a regulatory submission to the FDA for this proposed product more than a year ago. A decision could therefore be made any day.
Why is this FDA approval important? According to Senseonics internal projections, the company’s revenue will grow at a compound annual growth rate of more than 70% over the next five years following this key regulatory signal. In short, the current 90-day Eversense CGM system is not particularly competitive in the United States against market-leading devices from DexCom and Abbott Laboratories, respectively. But this more durable version of the device could skyrocket sales for years to come.
What is the risk? Senseonics is competing in a crowded space against a number of well-capitalized medical device giants. So there’s a chance that this long-awaited FDA approval won’t trigger a parabolic surge in sales. This isn’t a knock on Senseonics’ CGM system, but rather the harsh reality of competing with vastly superior healthcare companies. Investors should not ignore this potential risk factor.
All told, Senseonics could be on the brink of a game-changing regulatory event that could prove to be a key inflection point for the company’s CGM franchise. If true, the shares of this medical device company should prove to be a real bargain at these levels.
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George Budwell has no position in the stocks mentioned. The Motley Fool owns shares and recommends Axsome Therapeutics, Bristol Myers Squibb and Tesla. The Motley Fool recommends DexCom and Exelixis. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.