While you’ve probably never heard of it, BioDelivery Sciences International ( NASDAQ:BDSI ) is an expert at acquiring and commercializing technologies and therapies for severe pain. With a trio of drugs on the market and a patented slow-release biofilm technology for administering them, BDSI is both profitable and growing.

As growth investors everywhere know, that isn’t always enough to drive a stock to triple, so let’s take a closer look at whether this company has what it takes to be worth a $5,000 investment. Image source: Getty Images. Rising market shares and new products

BDSI’s main product is an opioid drug for chronic severe pain called Belbuca. Rather than being in the form of a pill, Belbuca is administered by a small slowly dissolving film that patients keep in their cheek. That’s advantageous, as the formulation provides more consistent pain relief over time. It’s also harder to abuse and thus easier for physicians to prescribe.

So far, Belbuca has been successful in capturing more and more of the market for long-acting opioids, and it currently has a 4.7% share. It’s also BDSI’s biggest moneymaker, bringing in $136.1 million out of its $156.5 million in total revenue during 2020. Still, Belbuca isn’t exactly making the company money hand over fist, as its quarterly revenue only grew by 13.3% year over year as of the second quarter.

While that’s unlikely to change anytime soon, on Sept. 9 of this year, it acquired the rights to Elyxyb, a drug for acute migraine pain, for $15 million. It plans to launch Elyxyb in the first quarter of next year, which will catalyze further revenue growth throughout the rest of 2022 and beyond.

Therefore, even with its somewhat slow pace of revenue growth at the moment, it looks like BioDelivery has enough going on to have a shot at exploding in value. Let’s get down to the specifics. Why this stock might be worth your $5,000

To triple in value over the next four years, BDSI would need to increase its market cap from where it is now, around $408 million, to reach a value of around $1.22 billion. To figure out if that’s a realistic number, let’s assume that the company’s 2021 earnings before interest, taxes, depreciation, and amortization (EBITDA) will hit $50 million, which is at the high end of management’s expectations. That would mean its EBITDA would be growing at roughly 23.5% from 2020, which is on the faster side of a moderate pace.

If we assume that at least the same rate of growth can continue, which is reasonable because BDSI’s gross margin and revenue are both increasing over time, it could be making nearly $100 million in annual EBITDA by 2026. Once we account for interest, taxes, depreciation, and amortization, it works out to be in the ballpark of $63.3 million in earnings. At its current valuation with a trailing price-to-earnings (P/E) ratio of around 13, that’d make its market cap land at around $823 million, which is more than double its worth today.

So, if things largely stay the same with BDSI’s business, it’s on track to be a winner for investors over the next few years, even if it probably won’t triple in value. A note of caution

In my view, BDSI’s stock has a solid chance of at least doubling , but there is an issue that you should be aware of.

For a small biotechnology company, it has disclosed very little about its opportunities for long-term growth stemming from its development pipeline. Belbuca’s exclusivity protections expire in January 2027, and it accounts for a large majority of the business’s total revenue. Though there appear to be a couple of initiatives investigating Elyxyb for general acute pain and pediatric acute migraine pain, it’s unclear what stage these efforts are in, never mind when their projected completion date might be.

Considering that the company spent $0 on research and development (R&D) in 2020 and 2019, investors should probably expect future cash cows to come from purchases of new intellectual property (IP) for immediate commercialization. Still, without some more communication from management, it’s hard to see how BioDelivery will continue to grow once revenue from sales of its current crop of products starts to taper. 10 stocks we like better than BioDelivery Sciences International, Inc.

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