As well as the tech sector, one of area of the share market which I think is home to a large number of promising small cap shares is the healthcare sector.
Thanks to technological advancements and the expected growth in demand for healthcare services over the next couple of decades, I feel it is a great place to look for future blue chips.
While not all of them may be ready for investment, three small cap healthcare shares which I think are worth keeping an eye on are listed below. Here’s why I like them:
Bionomics Ltd (ASX: BNO)
Bionomics is an Adelaide-based biotechnology company with a pipeline of promising drugs. The main one, in my opinion, is its BNC210 product. Last month the company announced a Phase 2 trial of the drug for the treatment of agitation in the elderly. Management believes that agitation in elderly patients is a major unmet clinical problem, which occurs both in the acute setting in hospitalised patients and chronically in nursing home residents. Considering current options include benzodiazepines and antipsychotics, which can have severe adverse effects in the elderly including sedation, stroke and sudden death, BNC210 may fill a significant unmet clinical need. It might be a touch too soon to invest, but it is certainly worth keeping on your watchlist.
Cynata Therapeutics Ltd (ASX: CYP)
This stem cell and regenerative medicine company’s shares have been on a tear over the last 12 months and have deservedly risen over 110%. When I recommended Cynata about a year ago, I talked about how impressed I was with its Cymerus technology and the promising CYP-001 mesenchymal stem cell product. Since then there have been positive developments that make CYP-001 even more attractive. These include it being granted Orphan Drug Designation by the U.S. FDA and the release of positive trial data from its Phase 1 clinical trial. I think this makes it one to watch.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a breast imaging analytics and analysis product specialist which has been growing its annual recurring revenue at an impressive rate in FY 2018. The catalyst for this was the company’s market share gains in the United States. According to its most recent update, Volpara’s software now handles 3.2% of all women screened in the United States for breast cancer. With demand for its software growing strongly, management is targeting a 9% share of the market in FY 2019. This could lead to further top line growth. Though it is worth noting that it is a high-risk investment option due to its lofty valuation.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. 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.