The second half of the year looks promising for investors in the pharmaceutical space. Despite the market volatility from the COVID-19 pandemic, there are a few hidden gems left to be captured, which is good news for investors. Some pharmaceutical stocks are set to soar in the next 12 months.

These two small-cap stocks are selling at attractive prices and offer cutting-edge science that could be lucrative over the long term. Both companies are pioneers in their respective spaces and have promising treatments in the late stages of drug development that could be worth considering.

Let's take a closer look.

Older woman on bench looking at prescription bottle

Image source: Getty Images.

Aquestive Therapeutics

Aquestive Therapeutics (NASDAQ:AQST) is a solid pick that seems appealing at its current levels. It is down 19% year to date and nowhere close to its 52-week high of $10. It boasts a price-to-sales ratio of 2.66, which makes it undervalued compared with the sector median of 6.39, and looks poised to run higher.   

The company specializes in the treatment of central nervous system disorders. Aquestive offers a promising pipeline, including one commercial product (Sympazan) and one potential drug candidate (Libervant) for the treatment of epilepsy. Both therapies have the potential to capture a decent portion of the epilepsy market.

Sympazan is an oral form of the drug clobazam, used to treat patients with a rare form of epilepsy known as Lennox-Gastaut syndrome (LGS). This treatment has garnered prescribers for its ease of use and looks poised to capture a significant opportunity in the market. In 2019, combined sales of clobazam totaled $336 million, and in the first quarter of 2020, Sympazan increased its prescriber base by 40% from the previous quarter. Aquestive is using this treatment as a precursor and in preparation for the potential launch of Libervant, which offers a game-changing opportunity, if approved.  

What is exciting about Libervant is that it could present an opportunity to capture a market of under-treated epilepsy patients. It is a non-invasive, easy-to-use, and effective solution that differentiates itself from current treatments on the market. Management believes that this could be the first orally delivered and non-device-driven therapy to manage seizure clusters.

There are 3.4 million people in the United States suffering from epilepsy, and of those, 1.2 million patients have uncontrolled, refractory seizures. ("Refractory" means that medication is not currently managing them.) The global epilepsy market is expected to grow at a compound annual growth rate (CAGR) of 8.2% and be worth $9.5 billion by 2023. Aquestive Therapeutics expects a decision on Libervant from the U.S. Food and Drug Administration (FDA) on its Sept. 27 PDUFA date. An approval could create top-line revenue growth opportunities and drive its stock higher.

Osmotica Pharmaceuticals

Osmotica Pharmaceuticals (NASDAQ:OSMT) is another under-the-radar stock that looks poised to move higher. Down 7% year to date, this biopharma stock boasts a price-to-sales ratio of 1.5, again undervalued compared with the overall sector.

The company is focused on a diverse portfolio of products in neurology, women's health, and generic drugs. Osmotica has a few catalysts in store for the second half of the year that could drive the stock higher. 

One of these is an upcoming PDUFA decision on July 16 regarding Osmotica's potential drug candidate, RVL-1201, for the treatment of acquired blepharoptosis, or droopy eyelid. RVL-1201 has captured the interest of eye care professionals because of its potential to become the first non-invasive treatment for this condition.

Management estimates there are 6.9 million people who may have acquired blepharoptosis in the U.S. An approval would make RVL-1201 a first-in-class and first-line treatment for the condition. This offers a huge market opportunity to treat millions of patients and could drive top-line growth in the future. Osmotica has a commercial plan in place to build its brand awareness and expand its consumer base in the second half of 2020.  

Another exciting area of Osmotica's pipeline is its potential treatment for multiple sclerosis (MS) patients. On June 30, Osmotica submitted an amended New Drug Application (NDA) for Arbaclofen ER, a treatment for spasticity associated with MS. Spasticity is a common and disabling symptom of MS seen in 84% of patients. Clinical studies have shown that treatment with Arbaclofen ER demonstrated an improvement in spasticity symptoms and could provide further treatment options for MS patients, if approved.  

If this treatment is successfully commercialized, the MS market presents a huge opportunity for growth. It is expected to expand at a compound annual growth rate (CAGR) of 6.7% and reach $39.2 billion by 2026. A date for this potential decision is not yet known, but it could certainly help to drive the stock higher over the course of the next 12 months.