3 ASX healthcare growth shares to add to your 2020 watchlist

Here are 3 companies that, while still speculative and risky in nature, have the potential to grow into tomorrow's ASX healthcare blue chips.

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As a sector, healthcare provides some of the strongest returns on the ASX. Over the last year, the S&P/ASX200 Health Care Index (INDEXASX: XHJ) has soared over 60% higher, while the broader S&P/ASX 200 Index (INDEXASX: XJO) has only risen 17%.

The ASX healthcare sector has outperformed by such a wide margin because healthcare stocks are often viewed as having both growth and defensive attributes. Since the products and services these companies offer are often seen to be non-discretionary, they tend to hold up in a downturn. But because healthcare tends to also enjoy wide margins and stiff barriers to entry for new companies, there is significant upside potential once a junior healthcare company has gained a foothold.

Savvy investors are always on the lookout for exciting young healthcare companies because one day they could grow to be the next CSL Limited (ASX: CSL) or Cochlear Limited (ASX: COH).

So, with that in mind, here are three companies that – while still speculative and risky in nature – could easily have the potential to grow into tomorrow's ASX healthcare blue chips.

Opthea Ltd (ASX: OPT)

Opthea delivered some strong clinical trial results towards the backend of 2019 and its share price has responded accordingly, leaping well over 300% since the beginning of August.

The company specialises in the treatment of wet age-related macular degeneration, which is the leading cause of blindness in people over the age of 50 across the developed world.

Opthea's flagship product is designed to be used in conjunction with existing treatments and, according to its phase 2b clinical trial results, has the potential to deliver statistically significant vision benefits for patients.

As it isn't competing with existing treatments, Opthea potentially has an easier pathway to commercialisation. And there is a huge addressable market: existing medications Lucentis and Eylea generated US$3.7 billion and US$6.2 billion, respectively, in 2018.

Medical Developments International Ltd (ASX: MVP)

Medical Developments International is another young healthcare company with momentum on its side. The company's share price is up almost 140% over the last six months, driven higher on the back of a string of positive announcements concerning its flagship non-opioid pain medication Penthrox.

Medical Developments is currently working with the American Food and Drug Administration to launch Penthrox in the US, while at the same time seeking approval with the Russian Ministry of Health to market Penthrox in Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan.

Not only that, but the Chinese National Medical Product Administration has also approved its request to conduct clinical trials of Penthrox on Chinese patients.

All this adds up to a strong pipeline of growth opportunities – no wonder the MVP share price has gone through the roof.

Polynovo Ltd (ASX: PNV)

The third company on this list is PolyNovo. The PolyNovo share price has also been skyrocketing recently, already up over 60% since the beginning of 2020.

The company develops biodegradable polymers which can be used as dressings for trauma and burn sites on the body and aid in tissue repair. The polymer encourages healing and the creation of new skin tissue, before safely biodegrading and being excreted from the body.

This is exciting technology with a broad range of real-world medical applications, and PolyNovo has been racking up wins recently on the back of it.

December 2019 was the first time in the company's history that it generated $2 million in revenues in a single month. Additionally, the company recently announced that its flagship product, NovoSorb BTM, had been used in surgical operations in the UK, Germany and Switzerland, and that orders had also been placed for the product in Austria.

Foolish takeaway

As with both Opthea and Medical Developments International, PolyNovo will need a little luck on its side in order to succeed.

Nonetheless, all three companies have plenty of exciting opportunities in their pipeline. If their growth rates continue to accelerate this year, they will definitely be ones to watch closely and may even warrant a place in your portfolio.

Rhys Brock owns shares of Cochlear Ltd. and Medical Developments International Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., and Medical Developments International Limited. The Motley Fool Australia has recommended Cochlear Ltd. and Medical Developments International 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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