Despite economic challenges, the United States remains as a compelling hotbed of innovation. So many items in everyday use — especially in the field of medicine — got their start here. [In fact, Andy Obermueller recently revealed his favorite game-changing medical picks in the latest issue of Game-Changing Stocks]

The quest is always on to develop devices, drugs and services that help save money and boost the user’s experience. And investors who get in early can be richly rewarded.

Of course, the path from idea to large-scale revenue can be excruciatingly slow at times. And up until now, these three companies were better known for consuming capital. But each of them has hit upon novel, potentially game-changing technologies that may eventually shower investors with riches.

BioLase Technologies (Nasdaq: BLTI)
Nobody likes going to the dentist. Memories of a metal drill boring into our gums linger long, and it’s often a reason why people don’t go to the dentist as often as they should. But Biolase has an alternative: Lasers that can cut dental tissue in a very precise fashion. As you know, the use of a drill usually requires that a patient be injected with Novocain since drilling and grinding can be quite painful. Lasers cause no pain and require no anesthetic. This shortens the amount of time a patient is in the dental chair, allowing dentists to see more patients in any given day. It also leads to much happier patients, making them more likely to maintain regular dental visits.

Yet the set-up can be expensive for dentists, which explains why only a minority have gone the laser route. In the first half of the past decade, sales grew sharply, hitting $67 million by 2007. Sales have since cooled and most recently outright plunged as the company was unable to see its products gain traction with key dental distributors such as Henry Schein (Nasdaq: HSIN). Shares of Biolase, which hit $18 in 2004, have lost 90% of their value.

Despite appearances, laser-based dentistry wasn’t a bust. Instead, the company has been forced to re-think designs, remove costs from the manufacturing process, and alter sales incentive programs with distributors. The outlook for 2011 is perking up, setting the stage for the first year of sales growth since 2006.

Among the positive recent developments: Biolase has recently signed a second major U.S. distributor, Benco, that augments an existing relationship with Henry Schein. In addition, the company is rolling out new portable devices such as the iLase, which is off to an impressive start. The company is also now expanding into Asia.

Needham’s Dalton Chandler sees 2011 sales rebounding more than 50% to $40 million, but even more modest sales growth at half that rate would likely put like put this former hot stock back on investors’ radars. Shares of this microcap trade for around $1.50, but Needham predicts they’ll double in 2011.

Research Frontiers (Nasdaq: REFR)
This company has led many investors to chuckle. Most of its press releases involve yet another round of capital-raising. The company has cracked the $1 million sales mark just once and has never come close to making a profit. But Research Frontiers may have the last laugh in 2011. The company’s specialized glass technology, which automatically adjusts to filter out sunlight at times of high air-conditioning loads, has caught the attention of major construction firms, some of which are expected to use the glass in 2011.

But it’s the auto market that has captured a great deal of recent buzz, pushing shares from $4 to $7 in the last three months. Mercedes apparently intends to use Research Technology’s “Smart Glass” in an upcoming line of cars. Some suggest the technology will be adopted for the whole car line, and the company’s most bullish supporters expect other auto makers to make similar moves in 2011 as well.

The rising stock price implies those rumors may have merit. But the company’s history should give you pause. Research Frontiers has been oh-so-close to success many times before but thus far has been unable to capitalize on the opportunity. How big an opportunity does the company face? The automotive glass industry likely tops $5 billion and the architectural glass biz is similarly-sized. If only a small portion of auto makers and architects utilized the technology and Research Frontiers was able to secure a small percent of royalties, then the company may be looking at tens of millions in revenue, most of which would flow to the bottom line. Not bad for a company valued at just $122 million.

Sooner than later, we’ll know if the Mercedes rumors are true. Several months from now, shares will either be well higher than current levels or they’ll fall all the way back toward the $4 mark.

BSD Medical (Nasdaq: BSDM)
BSD’s systems are used to treat certain tumors with heat (hyperthermia) while increasing the effectiveness of other therapies such as radiation therapy. Cancer cells can be killed at just 108 degrees, a lower temperature than other cells. As the body senses the heat in the treated area, it also moves to generate other benefits such as increased blood flow, which raises oxygen levels, which raises the effectiveness of radiation therapy. The clinical data in support of BSD’s devices have been quite strong.

This is another company that has been long on promise but short on results. Sales cracked $5 million in 2008, but have been falling since. Shares, which hit $7 in late 2007, fell all the way to $1 this past summer before a recent rebound back to almost $5. The rebound comes from rising hopes that BSD’s novel cancer treatment, which has proven to be effective, could soon win more converts as the company signs up a growing roster of distributors.

At this point, BSD must figure out ways to get the many customers that have been testing the system to make a purchase. Or the company needs to partner with — or sell to — a larger medical device firm that is better-equipped to tackle this “missionary” type sales effort. There’s lot of promise here, but investors will need to see better sales traction in 2011.

Action to Take –> These stocks should never constitute core holdings in a portfolio. But if you have some discretionary funds that can be tapped to swing for the fences, these stocks may turn out to be tidy additions. I like the basket approach: A small position in several speculative plays. One home run can more than offset losers elsewhere.

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