Source: Pixabay

The market hasn't been particularly kind to healthcare stocks in general, of late, and biotech stocks in particular are being shunned. But that doesn't mean investors should necessarily follow the market's lead. 

In fact, I think quite the opposite is true. Many healthcare companies are setting up to produce jaw-dropping levels of growth on their top and bottom lines over the next decade, sparked by an unprecedented level of innovation. For instance, Heron Therapeutics (NASDAQ: HRTX), Pacira Pharmaceuticals (NASDAQ: PCRX), and Supernus Pharmaceuticals (NASDAQ: SUPN) are all slated to produce a 5-year annualized EPS growth rate of over 70%, according to S&P Capital IQ.  

So while the market is shrouded in fear and selling off everything in sight, I'm considering buying these three small-cap biopharma stocks. Here's why you may want to do the same. 

A compelling speculative buy
Heron has had an absolutely wild year in terms of its share price:

HRTX Chart

This volatility was caused by positive clinical updates for its late-stage experimental medicine Sustol, indicated for chemotherapy-induced nausea, and its mid-stage post-op pain medicine HTX-011. 

Heron's next catalyst will be the upcoming FDA review of Sustol, which is slated to wrap up on Jan. 17, 2016. If it's approved this time around -- and the strength of the drug's late-stage results suggests it could be -- analysts polled by S&P Capital IQ estimate the company's EPS could grow from a loss of $2.80 per share this year to (positive) $4.48 per share in 2019. Given that the drug's peak sales have been projected  to be in the $400 million to $500 million range, that monstrous EPS growth estimate may be realistic. Even simpler than that, though, Sustol would only need to generate a few hundred million in sales to be a major driver for a company with a sub-billion dollar market cap. 

With Heron on the cusp of hopefully winning its first regulatory approval, and with its clinical pipeline sporting a potential blockbuster in HTX-011, which is showing promise in mid-stage testing, I think this small-cap biotech is definitely worth checking out by investors seeking high growth opportunities.  

Exparel could be the real deal
It's not uncommon for highly touted experimental therapies to flop once they reach the market, or at least seriously underwhelm from a sales perspective. Pacira's post-surgical pain medicine Exparel hasn't done that. In the second quarter, for instance, the drug posted a 27% increase in year-over-year sales to $57 million. Wall Street thinks Exparel could drive Pacira's EPS to soar from $0.02 per share in 2015 to $5.84 in 2019.  

Source: Pacira

That's the good news. The bad news is that the post-operative pain med market could become flooded with new therapies in the not-so-distant future. In addition to Heron's aforementioned HTX-011, several other biopharmas have candidates under development that may eventually compete with Exparel, though they are all at least a few years away from completing their clinical trials.

As Exparel accounts for about 99% of Pacira's revenues at the moment, investors should keep a sharp eye on any looming threats to the drug's blistering sales growth. That said, Pacira's top line should hopefully maintain its upward trajectory over the next few years, based on the drug's strong uptake so far. 


Rocket-like growth at Supernus
Although it took Supernus more than a decade to transform into a commercial operation, the FDA's 2013 approvals for its epilepsy treatments, Oxtellar XR and Trokendi XR, have turned the company into one of today's fastest growing biotechs. Since their commercial launch, the two drugs have fueled impressive top-line growth for Supernus:

Source: Supernus

More importantly, Wall Street doesn't think this growth is going to subside anytime soon: Analysts have Supernus' EPS growing from $0.13 this year to $2.77 in 2019.

While Supernus' current estimated growth rate is certainly nothing to sneeze at, this stock could really take flight if SPN-810, the company's experimental treatment for impulsive aggression associated with attention deficit hyperactivity disorder, succeeds in its ongoing late-stage trial. According to the company, this indication represents a $5.5 billion market opportunity, suggesting that SPN-810 could generate between $800 million to $1.2. billion in peak sales as a result. Unfortunately, SPN-810 is a couple of years away from a top-line data readout, so potential investors should probably stay focused primarily on the continuing commercialization of Oxtellar XR and Trokendi XR. 

Are any of these stocks compelling buys right now?
I think all three stocks could be big winners, but Pacira and Supernus represent the better buys at present, given that they already have products on the market. Heron could soon follow in their footsteps, but it's important to remember that nothing is guaranteed when it comes to the FDA (or, for that matter, commercialization of a drug). So, I'm personally leaning toward adding Pacira and Supernus to my portfolio in meantime, and keeping Heron at the top of my watch list as Sustol's regulatory process unfolds.