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3 exciting small cap ASX healthcare shares to watch

One area of the market that I think is a good place to look for buy and hold options is the small end of the healthcare sector.

I think here you’ll find a number of companies that have the potential to grow significantly in the future thanks to favourable tailwinds and new technologies.

Three small cap healthcare shares I am watching closely are listed below. Here’s why I like them:

Alcidion Group Ltd (ASX: ALC)

Alcidion is a growing informatics solutions company. It provides software that aims to improve the efficacy and cost of delivering services to patients and reduce hospital-acquired complications. Over the last 12 months the company has won a number of key contracts. This includes one with the Dartford and Gravesham National Health Service (NHS) Trust in the United Kingdom. If this is a success, it bodes well for its prospects in the UK. After all, the NHS is currently transitioning to a paperless environment.

Telix Pharmaceuticals Ltd (ASX: TLX)

Telix Pharmaceuticals is a clinical-stage biopharmaceutical company which I think has a lot of potential. It is developing an advanced pipeline of molecularly-targeted radiation (MTR) products. MTR is an exciting approach which chemically links radioactive isotopes to target molecules specific to cancer cells. One key product in its arsenal is TLX591. It is a metastatic prostate cancer radionuclide therapy which management estimates could be worth $2 billion in late-stage disease alone. It is currently in pre-phase 3 development with trials due to start in Australia and the United States in late 2019/early 2020.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is healthcare technology company. It provides software that uses artificial intelligence imaging algorithms to assist with the early detection of breast cancer. It has been a very strong performer in recent years thanks to the growing popularity of its software with radiologists across North America. Due to the quality of the software, recent acquisitions, and its growing North American footprint, I expect the company to deliver further strong growth in FY 2020 and beyond.

Finally, I would suggest investors team up one of those shares with one of these high quality buy-rated growth shares. Each looks well-placed to deliver strong returns for investors over the coming years.

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James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd and VOLPARA FPO NZ. The Motley Fool Australia has recommended Alcidion Group Ltd and 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.

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