2 Monster Stocks in the Making to Buy Now and Hold for 10 Years

Investing in promising companies before their stock prices soar is an excellent recipe for earning life-changing returns. However, with hundreds of companies vying for investors' attention, separating the wheat from the chaff can be challenging.

Recognizing those corporations with long-term market-beating potential -- especially before they are well-established -- isn't easy, but let's give it a shot anyway. Consider two mid-cap biotechs: Viking Therapeutics (NASDAQ: VKTX) and Madrigal Pharmaceuticals (NASDAQ: MDGL). These two drugmakers could grow in prominence in the next decade and deliver superior returns.

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1. Viking Therapeutics

Viking Therapeutics became famous in the biotech world last year after announcing positive phase 2 results for VK2735, an investigational GLP-1 weight loss candidate. The stock has not performed well since, which we can attribute to several factors.

First, longtime investors took the opportunity to cash in on its big jump. Second, Viking hasn't had any clinical update as significant as that since. Third, like most other corporations, the drugmaker is suffering from marketwide issues.

However, the bullish case for Viking is straightforward. The company could develop successful medicines in areas with unmet or growing needs. VK2735 has produced phase 2 data that rivals almost any other anti-obesity candidate outside those being developed by the leaders in the field, Eli Lilly and Novo Nordisk.

Then there's VK2809, a promising candidate for metabolic dysfunction-associated steatohepatitis (MASH). Because obesity is a major risk factor for MASH, there's a significant need for therapies to address the condition. There is only one medicine approved by the U.S. Food and Drug Administration (FDA) for this disease, so there's room for others. VK2809, like VK2735, should make more progress this year.

Elsewhere, Viking is developing VK0214 to treat X-linked adrenoleukodystrophy (X-ALD), a rare genetic nervous-system disorder. There are ways to manage X-ALD symptoms, but there is no disease-specific FDA-approved treatment. VK0214 has earned the orphan drug designation from the agency, which is reserved for therapies in development that have shown promising clinical evidence in treating rare diseases.

So Viking's pipeline looks promising, and we haven't even mentioned the company's oral version of VK2735. True, the stock is somewhat risky, as are all clinical-stage biotech companies. However, if enough things go Viking's way, it could generate monster returns in the next decade as it earns approval for key products and starts generating strong revenue. In my view, initiating a small position in the stock is worth it.

2. Madrigal Pharmaceuticals

The only FDA-approved medicine for MASH, Rezdiffra, belongs to Madrigal Pharmaceuticals. It earned this honor early last year, although the medicine is under accelerated approval; that means it will have to prove efficacy once and for all in confirmatory studies, or it could be taken off the market.

In the meantime, the drug is performing well. In the first quarter, its sales came in at $137.3 million, ahead of consensus analyst estimates; the medicine has made it a habit to top Wall Street's projections. It also speaks volumes about Madrigal. Plenty of drugmaking giants are looking to develop breakthrough therapies in this field. So far, only Madrigal has succeeded.

Though another company will eventually challenge Madrigal, the future still looks bright. The biotech is already treating 17,000 patients with Rezdiffra, but that's still just about 5% of the 315,000 the company is targeting.

Also, its crown jewel is approved for MASH patients with moderate to advanced liver fibrosis (scarring). Madrigal will seek label expansions in the most advanced form of scarring, cirrhosis. The biotech estimates that this indication could double its target market. And that's before we consider the fact that the number of people with MASH is increasing and, according to some estimates, will continue to do so well beyond the next 10 years.

Even with potential competition on the way, Madrigal Pharmaceuticals has a massive addressable market. That, together with its first-mover advantage and potential clinical progress for Rezdiffra, could allow it to generate superior returns in the next 10 years. The company could be on the way to establishing itself as a biotech leader.

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Prosper Junior Bakiny has positions in Eli Lilly, Novo Nordisk, and Viking Therapeutics. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.