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2 biotech picks that could provide big returns for growth investors

While the excitement around the biotechnology industry is not new, it’s certainly increasing.

Scientists and investors alike have made noteworthy comments on this industry that you and I cannot ignore. The Nasdaq CEO, for example, is on record as saying we are entering “the golden age” of biotechnology.

Even politicians are beginning to take notice.

The Australian Health Minister Greg Hunt was quoted in the Australian Financial Review today noting that large US pharmaceuticals companies such as Johnson & Johnson, Pfizer, Merck, AbbVie and Eli Lilly want to invest more in Australian biotech companies.

Mr Hunt said that we are likely to see “significant investment in Australian biotech firms. They are looking at Australia as the next destination in the developed world, the emerging first-world opportunity”.

That wave of investment has already begun.

In February this year, shares in biotechnology company Viralytics Ltd. (ASX: VLA) soared 176% in just one day after major U.S. pharmaceutical company Merck & Company announced an agreement to buy it.

So which medtech and biotech companies have the potential to provide market beating returns?

What are some exciting companies that could follow the footsteps of CSL Limited (ASX: CSL) or Cochlear Limited (ASX: COH) ?

Watch List

Here are two shares I’m keeping an eye out on:

  1. Bionomics Ltd  (ASX: BNO) which is developing treatments for cancer and central nervous system disorders such as anxiety, depression and Alzheimer’s disease.
  1. CogState Limited (ASX: CGS) which is dedicated to measuring cognition to guide decision-making in clinical trials, research, healthcare and brain injury.

They both have healthy balance sheets with enough cash to cover short term liabilities which can be an ‘insurance policy’ – particularly with riskier biotech companies.

Risks

Of course, its not all upside and no risk, particularly with biotech companies. Failed trials or delays in getting drug approvals can set back the company’s share price significantly.

That’s why having a diversified portfolio and staying focused on the company’s performance is really important.

In addition to biotech, this important industry could blow up into a trillion dollar market.

7 of 8 People Are Clueless About This Trillion-Dollar Market

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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