Supernus Pharmaceuticals (SUPN -3.07%), Corcept Therapeutics (CORT -1.11%), and Catalyst Pharmaceuticals (CPRX -2.58%) don't have much in common. But it does so happen that they're all in the healthcare space, trade for less than $26 per share, and have the potential to go much higher if their revenues continue to climb.
If you're an investor seeking outsize returns, you should be looking for equities that are a bit underpriced and attached to businesses with the potential for enormous growth. All three of these companies are already profitable, well-priced, and have already shown strong revenue numbers -- so could they make millionaires out of average investors?
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1. Supernus Pharmaceuticals
Shares of Supernus Pharmaceuticals, which makes therapies to treat central nervous system diseases, are up 66% over the past 12 months. The company has had some setbacks in getting products approved by the FDA, but those issues have created an opportunity for investors. The stock today is underpriced at just slightly less than 11 times earnings, when it was trading around 8 this time one year ago.
Supernus' revenues rose 32% it $520.4 million in 2020, and net income grew 17% to $173.7 million. The anticonvulsant and migraine medication, Trokendi XR, and epilepsy medication, Oxtellar XR, accounted for $418.3 million of that revenue, and the company has another potential major winner on the way.
Supernus is preparing to market attention-deficit/hyperactivity disorder (ADHD) drug SPN-812 (extended-release vioxazine) for pediatric patients in the second quarter, pending the FDA's response to the new drug application it submitted. That decision is due in April.
The company reported positive clinical trial results for SPN-812 in adult ADHD patients in December, and said then that if the drug's pediatric indication is allowed, it would look for the approval of a supplemental NDA for SPN-812 in adults in the second half of the year.
In its fourth-quarter earnings call, Supernus said it expects revenues of $550 million to $580 million this year, including $10 million from the pediatric use of SPN-812. Approval of the drug could have an immediate impact on the stock's price. KemPharm, which got approval for its ADHD drug Azstarys earlier this month, saw its stock rise 90% the day the FDA's decision was announced. There's a good reason for this: The ADHD market is a huge opportunity. It was estimated at $17.5 billion in 2020 and is expected to grow to $27.1 billion by 2025, giving it a compound annual growth rate (CAGR) of 9.09, according to a study by Market Data Forecast.
2. Corcept Therapeutics
The share price of Corcept Therapeutics rose by more than 143% over the past year. That was despite significant headwinds caused by COVID-19, which made conducting clinical trials more difficult and also reduced the number of new patients being diagnosed with Cushing's syndrome, which the company's lead drug, Korlym, treats.
Cushing's syndrome occurs when the body produces too much of the hormone cortisol. High cortisol can lead to a host of other health issues, among them diabetes, high blood pressure, depression, and osteoporosis. It can also hamper the body's ability to fight certain types of cancers. Corcept's sole focus is on developing treatments that control excess cortisol's effect on the body.
In 2020, Corcept's revenue rose 15% to $353.9 million, and the company said in its fourth-quarter report that it forecasts 2021 revenue of between $375 million and $405 million. The company's 2020 net income was $106 million, up 12.5% compared to 2019. Its balance sheet is strong, with $476.9 million in cash and -- rare for a biotech company -- no long-term debt.
Corcept's only marketable drug is Korlym, but there's a promising drug in its pipeline, Relacorilant, which the company sees as a potential replacement for Korlym, because it appears to have fewer adverse side effects. Relacorilant is in phase 3 trials to treat endogenous Cushing's syndrome and hypercortisolism. The drug is also in an early stage trial for a combination treatment with Merck's Keytruda to treat adrenal cancer. Though it is a rare disease, the market opportunity was estimated at $313 million last year and is expected to grow to a $676.2 million market by 2029, giving it a CAGR of 8.9%, according to a study by Prophecy Market Insights.
CPRX Revenue (TTM) data by YCharts
3. Catalyst Pharmaceuticals
Catalyst is a commercial-stage biopharmaceutical company that develops therapies for people with rare chronic neuromuscular and neurological diseases.
Its stock is up more than 58% over the past year, but it still appears to be a steal while trading at a little over 6 times earnings. Catalyst's revenues have risen more than 63% over the past three years, thanks to its leading drug, Firdapse, which is used to treat patients with Lambert-Eaton myasthenic syndrome (LEMS), a rare autoimmune disease that short-circuits the communication between muscles and nerves, making movement difficult. Catalyst's business did well in spite of the pandemic, though management believes that people's general reluctance to visit doctors in 2020 led to fewer people suffering from LEMS being diagnosed. It is a very rare disease, but according to Verified Market Research, the LEMS market was valued at $56.51 million in 2018 and is expected to grow to a $93.28 million market by 2026, sporting a CAGR of 6.43%.
In 2020, the company reported revenue of $119.1 million, up 16% from 2019. The company is in a solid cash position, with $140.3 million and no long-term debt. Thanks to strong margins, the company reported $74.9 million in net income in 2020, an increase of 135% year over year.
Making use of its financial strength, the company plans to expand its research and development efforts to extend its product line beyond Firdapse.
Make your pick
All three of these companies have sound fundamentals with potential for a lot of growth -- all potential millionaire-makers for those who invest and hold on for the long term. But if I had to choose just one of these stocks to buy, I'd say that Supernus is the most likely to be a millionaire-maker, because it is already doing well and could receive a big bump in its share price if SPN-812 is approved by the FDA, as the ADHD market opportunity dwarfs that of LEMS or Cushing's syndrome.
