Biotech stocks are undoubtedly one of the most volatile group of equities in the market today. While extreme volatility can be hard to stomach, the wild price swings associated with small- to mid-cap biotech stocks can also create stellar buying opportunities for investors with a long-term outlook.  

The rare-disease drugmakers BioMarin Pharmaceutical (NASDAQ:BMRN) and Sarepta Therapeutics (NASDAQ:SRPT) are two prime examples. Both of these mid caps have seen their share prices take a big hit over the last 52 weeks. But there's good reason to believe that these two beaten-down equities could be gearing up for a sharp rebound next year.

A paper plane pulling up a red zigzag line upward on a chart.

Image source: Getty Images.

In fact, BioMarin and Sarepta may even have what it takes to transform a relatively modest investment into a small fortune over the next ten to twenty years. Here's why bargain hunters might want to add these two top biotech stocks to their portfolio soon. 

BioMarin: The tide is turning

BioMarin's shares have been trending downward for nearly three long years at this point -- all thanks to a single misstep. The brief rundown is that the biotech paid a hefty sum to acquire the rights to the experimental Duchenne muscular dystrophy (DMD) treatment, Kydrisa, back in 2014. As the drug had actually failed its phase 3 trial, Wall Street and industry insiders alike widely viewed this pricey acquisition as a flat-out boondoggle. Unfortunately, the skeptics were proven correct in their initial assessment, with the Food and Drug Administration rejecting Kydrisa in 2016. 

This ill-advised business development move has been a major overhang on BioMarin's stock price ever since. Underscoring this point, the biotech's shares have lost almost 11% of their value in 2019, despite the recent approval of its phenylketonuria treatment Palynziq in both the U.S. and EU, and an overall strong year for biotech stocks in general. In short, Wall Street clearly hasn't forgiven BioMarin's brain trust for the Kydrisa misadventure.

BioMarin, though, does have an exceptionally strong shot at redemption in 2020. The nuts and bolts of the situation is that the biotech could soon sport two franchise-level rare-disease products. Specifically, BioMarin expects to file regulatory applications in the U.S. and EU for the severe hemophilia A treatment valoctocogene roxaparvovec soon, and it's rapidly marching toward a top-line data readout for the dwarfism treatment vosoritide as well.

Taken together, these high-value product candidates have the potential to transform BioMarin into one of the fastest-growing biotechs in the world over the next decade. BioMarin's stock, in turn, might become a red-hot commodity in the not-so-distant future. 

Sarepta: Take the long view

Sarepta's shares have taken a big step backwards this year in response to the FDA's complete response letter for the experimental DMD therapy Vyondys 53 issued last August. This unexpected turn of events not only delayed Vyondys 53's regulatory pathway (if not halted it altogether), but it forced the company to put off a planned regulatory filing for its third DMD candidate known as casimersen as well.

Pouring salt into the wound, Sarepta's management didn't provide much insight into the future of these two high-value DMD therapies during the company's third-quarter conference call last week, either. So, the long-term fate of the biotech's first-generation of DMD therapies is arguably now in question, especially with Japan's NS Pharma potentially set to enter the field in 2020 with viltolarsen. 

All this bad news, however, masks a deeper truth about Sarepta's underlying value proposition. The fact of the matter is that the biotech's broader pipeline of DMD therapies -- such as the micro-dystrophin gene therapy platform -- makes it the company to beat in the DMD space. Stated simply, Sarepta will almost certainly retain its virtual monopoly over DMD in perpetuity, despite these competitive challenges. 

What does Sarepta's dominance in DMD mean in terms of dollars and sense? Even with just a 50% market share, the company's DMD revenue should easily top $4 billion in the next decade, and there's a realistic chance that this peak revenue figure could exceed $5 billion.

So, while investors might be disappointed that Sarepta may no longer be in line to gobble up 75% to 80% of the entire DMD market following this regulatory setback, the company's market cap arguably comes across as a misprint at a paltry $7.1 billion. After all, Sarepta is also pursuing other high-value rare-disease indications outside of DMD that could push its annual revenue haul to well over $10 billion by 2030. 

Bottom line: Sarepta has the pieces in place to possibly be the next Vertex Pharmaceuticals, an orphan-drug specialist whose stock has appreciated by a whopping 395% over the last decade.