3 Promising Stocks in Early Cancer Detection

The liquid biopsy market may expand rapidly in the next five to 10 years, and we think it could significantly change how cancer is treated.

Liquid biopsies are a noninvasive method of analyzing tumors using fluids, such as blood. We think they may allow cancer to be detected sooner, enabling earlier-stage treatments, where survival rates are higher and treatment costs per patient are lower. In general, we see a host of incentives for end users, practitioners, and payers that could lead to the widespread adoption of these tests. We estimate that the liquid biopsy market opportunity for early cancer detection could eventually exceed $70 billion in the U.S. alone, with global demand expanding that opportunity even further.

We cover three potential leaders in liquid biopsies for early cancer detection. First, Illumina ILMN, through its pending acquisition of Grail, could become the first mover and long-term leader in pan-cancer biopsies (for multiple cancers in one test); currently, we view its stock as reasonably priced for its long-term growth opportunities.

Exact Sciences EXAS could challenge Illumina in pan-cancer in about five years. But before then, it will likely face competition from liquid biopsies in its legacy business--a stool-based test for colorectal cancer. That keeps us cautious about the stock.

As the potential first mover in liquid biopsy for colorectal cancer, Guardant Health GH could threaten Exact Sciences and other traditional screening methods, such as colonoscopy. But Guardant's stock appears rich, given the uncertainty around that opportunity and its other liquid biopsies in development.

Senior equity analyst Julie Utterback provided the research behind this segment.