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Which ASX healthcare stock could become the next CSL?

CSL Limited (ASX: CSL) will go down as one of the greatest growth stories of all time. The company has been unshakeable in its ability to deliver consistent earnings growth and shareholder value for more than 2 decades. But for many investors, it’s not about buying into CSL today, but finding what will be the next CSL tomorrow.

Here are 2 ASX healthcare shares that could be the next healthcare giant.

1. Nanosonics Ltd (ASX: NAN)

While Nanosonics has already stormed its way to a market capitalisation of $2 billion, it is still very much in its early days of becoming the most widely used tool for ultrasound probe disinfection. The company currently has just 17% global market penetration with a priority on expanding its geographical presence across Europe, Asia and North America.

Nanosonics delivered a very strong and promising FY19 result, with revenues increasing 39% while profit before tax soared 201%. To further fuel its growth, the company is expecting FY20 operating expenses to be approximately $67 million or a 36% increase on FY18. The acceleration in expenses will be used to grow new product development, business development, new product launch readiness and regional and corporate infrastructure expansion.

Business activity in Japan and China will be the headline for Nanosonics in the coming years. In fact, the Asia region in general represents a largely untouched expansion opportunity. As reported in the 2019 Nanosonics Investor Presentation, in early 2019 preliminary clinical studies found that over 90% of Japanese probes were found to be contaminated and that, of the contaminated probes, over 50% were found to harbour potentially pathogenic bacteria. Distribution agreements have been signed with a number of partners in Japan including GE Healthcare Japan.

Nanosonics is undertaking its market assessment in China with visits to large hospitals, the Chinese Centre for Disease control and regulatory authorities. So far, the assessment has shown that a significant opportunity for its trophon may exist in China. I expect exciting news to emerge from both Japan and China in 2020.

2. Paradigm Biopharmaceuticals Ltd (ASX: PAR)

Paradigm represents a much more speculative opportunity and is engaged in developing products in the treatment of osteoarthritis. The company is rapidly approaching the commercialisation of its products, having received FDA approval for the Expanded Access Programme (EAP) to treat its first US patient in December 2019 and pending Therapeutic Goods Administration (TGA) for approval to treat osteoarthritis in Australia. The company could be treating the billion dollar market opportunity in Australia as soon as 2020 and in the US market as soon as 2021. However, investors should acknowledge the risks involved with investing in a pre-sales biotechnology company.

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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. 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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