The ASX is littered with lots of companies that show potential to become the next market darling. While I mostly invest in the mid-to-large cap space, I do look for small cap ASX shares that could deliver strong returns.
Every company has a story to sell. The trick is to identify value and opportunities. Researching your chosen business is a great start, but it also pays off to look at its rivals and the macro-environment.
Here are my top 2 small cap ASX shares that I think will perform in 2021.
Botanix Pharmaceuticals Ltd (ASX: BOT)
Botanix is a synthetic cannabinoid pharmaceutical company that focuses on dermatology and antimicrobial products.
Pipeline products include the BTX 1801 gel which prevents surgical site infections by killing bacteria during surgery incisions. Currently in a phase 2a study, Botanix aims to combat the growing global antibiotic resistance that affects millions each year.
In April, Botanix received a major boost from the United States Food and Drug Administration (FDA). The company’s flagship BTX 1801 received a Qualified Infectious Disease Product status. The incentivised status grants an additional five-year regulatory exclusivity, meaning generic products cannot enter the market. Furthermore, Botanix is eligible for a priority FDA review, cutting the standard review period to 6 months from the original 12 months. Furthermore, fast-track designation enables Botanix to have more frequent communication with the FDA during the drug development and review process.
At the time of writing, the Botanix share price is trading at 10 cents, up 7.5% for the day. With a market capitalisation of $97 million, if the company can perform to market expectations, its share price will soar.
Botanix could be a game-changer for infection preventative diseases. I would keep an eye on the medical company as a speculative buy.
Osteopore Ltd (ASX: OSX)
A medical technology company based in Australian and Singapore, Osteopore specialises in the production of 3D printed bioresorbable implants. The in-house manufactured product is used in conjunction with surgical procedures to assist with the natural stages of bone healing.
Osteopore recently secured an initial US distribution agreement with Bioplate Inc. that looks to penetrate the world’s largest healthcare market in the second half of 2020. The company also gained approval from the Therapeutics Goods Administration (TGA) for market entry in Australia. Osteopore’s new geographical presence should see incoming revenue streams as it expands manufacturing capabilities.
Allied Market Research estimates the market opportunities for bone graft substitutes will be US$3.9 billion by 2025. Osteopore’s current sales come from the cranial/maxillofacial (CMF) area which represents 20% of the entire market. Other market segments like dental and cosmetic (nasal) are comparable to size with CMF, which Osteopore is now starting to penetrate.
Most significantly, 40% of the bone graft substitute market derives from orthopaedic and spine. This untapped opportunity could be huge from Osteopore should it succeed in its clinical trials.
The Osteopore share price has moved 0.9% higher today to 53 cents at the time of writing. The med tech company is valued at $62 million and has no debt. In light of this, I think the Osteopore share price might surge much higher if it can develop new distribution networks.
I believe this relatively new ASX-listed company (floated in September 2019) could be destined for big things. I would consider snapping up Osteopore as a small cap ASX share in the buy zone today.
Where to invest $1,000 right now
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.