It's been an ugly year in the stock market so far, and both good and bad stocks have been hammered. Now's a great time to go shopping if you have the cash. Our roundtable has three biotech stocks that could be worth significantly more over the next three years than they are right now.
Here's why they like Doximity (DOCS -0.85%), Outset Medical (OM 5.13%) and Pieris Pharmaceuticals (PIRS 2.67%) to wallop the stock market.
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A winner in medical care's internet revolution
Taylor Carmichael (Doximity): Right now, expensive growth stocks are getting whacked, and Doximity is not immune to this. The stock is down about 50% off its highs, and it's beneath its IPO price. Doximity is still pricey, trading at 83 times earnings. (It's P/E ratio was 248 six months ago.) This bear market has crushed the multiple. And in the short term, it might even drop further.
But Doximity is in the sweet spot as the internet revolutionizes medical care. I believe this stock will be one of the major winners over the next decade.
DOCS data by YCharts.
This is an amazing business. Doximity is the internet portal for the healthcare sector. It's where doctors go to find jobs. It's where pharmaceutical companies go to reach doctors. And it's where patients go to have a telehealth visit with their primary care physician.
What's exciting about Doximity is that the company has already achieved profitability, and it's still growing like gangbusters. It has already captured 80% of the medical profession in the U.S., and 90% of medical students. And because of the network effect, no competitor will be able to breach its moat.
Right now, Doximity has three market verticals: pharmaceutical marketing to doctors in the U.S. (a $7.3 billion market opportunity), professional staffing for the healthcare industry (a $6.9 billion opportunity), and telehealth subscribers (a $4.3 billion opportunity). Overall, this is an $18.5 billion opportunity.
Doximity has $300 million in revenue, so it's just scratching the surface. I believe the internet will continue to revolutionize the world economy. And Doximity is in a prime position as the $11 trillion healthcare industry moves more and more of its business online.
A growth story with seasoned management
Patrick Bafuma (Outset Medical): I don't believe the market downturn will affect medical technology company Outset Medical for long. Its Tablo hemodialysis system is simplifying the experience for in-home dialysis patients while cutting costs up to 70% per treatment for hospitals.
And it has plenty of runway ahead. The at-home dialysis pioneer believes it's just starting to crack into an $11.4 billion dialysis market, with $8.9 billion being at-home treatments.
Outset Medical has been firing on all cylinders lately, too. Full-year 2021 revenue was at $102.6 million, an increase of 105% year over year. Its install base for at-home dialysis tripled year over year. The company exited 2021 with over double the backlog of Tablo orders from year-end 2020, providing confidence in the company's financial projections.
The $2 billion med-tech has sales agreements with seven of the eight largest U.S. health systems, and it also has agreements with roughly a third of the 100 largest regional systems. With such a significant backlog of sales, the company could easily blow past its 38% to 46% year-over-year revenue growth guidance for fiscal 2022.
When staring a bear market in the face, I look for battle-tested leadership, too. Leslie Trigg has been the CEO since November 2014, and this isn't her first rodeo. She has served in escalating roles at various growing medical-device companies, many of which went on to be acquired. Having held crucial roles at other small device makers through various financial environments, I trust Trigg will help investors weather the storm, a belief reinforced by the recent earnings call.
With a significant backlog of orders for a massive market that it is just starting to break into, plus seasoned management, I can easily visualize Outset Medical trouncing this bear market.
A novel treatment for uncontrolled asthma
George Budwell (Pieris Pharmaceuticals): Buying risky assets like biotech stocks in a bear market might seem like a bad idea. But the inverse is actually the case.
Biotechs, especially clinical-stage companies, have essentially become value stocks following their historic drawdown over the prior five and a half months. In short, this is the perfect time to go bargain hunting in the beaten-down biotech space.
Which biotech stocks stand out as the most compelling bargains? The small-cap drugmaker Pieris Pharmaceuticals is one name that is definitely worth checking out right now.
Pieris is collaborating with pharma heavyweight AstraZeneca on a novel treatment for uncontrolled asthma. The drug, known as PRS-060/AZD1402, recently passed muster in a small safety and dosing study.
Since then, Astra has advanced the therapy into a second trial to assess the effectiveness of a low- and medium-dose formulation (1 or 3 mg twice daily) in patients with uncontrolled asthma. Separately, the pharma titan is also evaluating a high-dose formulation (10 mg) of PRS-060/AZD1402 in patients with uncontrolled asthma who are receiving the current standard of care. Top-line data from these studies is expected to be released within a matter of months.
What's the big deal? Pieris could be a few short years away from being party to the next big asthma drug. Driving this point home, Astra is one of the best in the game at developing these types of therapies, and PRS-060/AZD1402 has several novel features that might make it the gold standard for patients with uncontrolled forms of the disease. In other words, this forthcoming data release has the potential to spark a major breakout in Pieris' shares later this year.
