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A New Frontier in Cancer Screening and Treatment

If liquid biopsy lives up to its potential, a paradigm shift in cancer detection is possible.

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The nascent liquid biopsy market may expand rapidly in the next 5-10 years, and we think one area of expansion--early cancer detection--holds particular promise. We believe liquid biopsies (a noninvasive method of analyzing tumors using fluids such as blood) may induce a paradigm shift in when cancer is detected and then treated, 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 enable the widespread adoption of these tests, and we estimate 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. 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); while the shares recently traded moderately above our fair value estimate, we view them as the most reasonably priced of the three potential liquid biopsy leaders we cover. Exact Sciences (EXAS) could challenge Illumina/Grail in pan-cancer in about five years, but before then, it is likely to 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, in that indication, but its stock appears rich, given the uncertainty around that opportunity and its other liquid biopsies in development.

Julie Utterback does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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