Best Early Cancer Detection And Liquid Biopsy Stocks (May 2024)

The Last Great Killer – Cancer

Over the last decades, modern medicine has accomplished miracles. Infectious diseases previously killed more people than any other cause, including old age.  The COVID pandemic taught us that this fight is still not over, but we are getting there with new technologies.  Still, another killer is very much active: Cancer.

The age-adjusted mortality rate for cancer has declined only ~19% since 1990. It is now the leading cause of death for people under the age of 85.

Source: Ark Invest

And because it can hit at any age for no apparent reason, it is a lot more scary and disruptive than diseases like dementia or Alzheimer's. And while some progress has been made, it is still very much deadly.

And treatments are, for the most part, rather crude, involving massive amounts of toxic chemicals or irradiating body parts.

The Uniqueness Of Cancer

Calling cancer a disease obfuscates what it really is. Most diseases are either infectious or caused by a single internal dysfunction. But cancer is more like a thousand different diseases stamped with the same label.

Each cancer starts with one cell of the body going wrong. Its genetic programming “bugs” start to mutate and change rapidly. At some point, all normal functions stop, and it multiplies uncontrollably. If not stopped, it will take over entire organs and cause death.

This means that every cancer is unique. Each can come from a different “bug.” Such errors are usually very discrete until they reach that explosive expansion phase. And then, it might be too late.

So, when we talk of detecting cancer in modern medicine, we are really talking about detecting the thousands of mutations that can make a healthy cell turn cancerous.

The Importance Of Early Detection

Finding cancer early is absolutely vital. For a long time, the only way to find cancer was through direct observation: scanners, MRI, and direct biopsy (cutting off a little part of the organ suspected to harbor cancerous cells).

These methods are either not precise and sensitive enough (scanner, MRI) or too invasive (biopsy) to be done routinely. It mostly worked only for specific risks, like breast cancer and echographic detection.

The detection problem is especially pressing, as oncology visits have declined following COVID-19 and lockdown.

Source: Ark Invest

A new step was the detection of cancer “markers.” It can be an abnormal level of some hormones or other bioproducts. This contributes massively to the little improvement in early detection we have seen over the last few years. Still, it mostly detects cancer only when it has already reached a critical size, enough to move the needle on these bioproducts concentration that it becomes obvious there is a problem.

So, the next step has to be directly detecting the cancer cells at an early stage and very low concentration levels.

Molecular Cancer Detection

In biology jargon, the term molecular is generally equivalent to DNA/RNA. This method specifically detects cancer abnormal genetic sequences, or ctDNA (circulating tumor DNA).

The technology is promising but has been hampered by a few limitations so far:

• Too low of a detection threshold, making tumors smaller than 1-2 cm in diameter hard to detect.
• Better detection is only for direct sampling (biopsy) instead of non-invasive tests.
• Testing only for one possible cancer at a time.
• Some cancers produce little ctDNA, making them hard to detect.

Improvements in technology are bringing hope to change early diagnostic methods radically.

Multi-Cancer Earlier Detection (MCED)

Detecting multiple cancers at once, from a simple blood sample, is the Holy Grail of oncology (this is why the leader in the field is a company called Grail; more on that below).

Such a method is also called “liquid biopsy.” You can read more about MCED on the website of the American Cancer Society and the MCED Consortium.

It already exists but was too expensive to be routinely done on the whole population. With their price falling by an x20-x25 factor in the last 7 years and still going lower, this is untrue. New tests also check for thousands of ctDNA simultaneously, increasing the sensitivity by x10 or more.

Source: Ark Invest

The same method can also be used to assess remission.

Measuring ctDNA allows for reducing the number of patients suffering chemotherapies while getting even slightly less relapse.

Source: Ark Invest

Lastly, some mutations will make the cancer cells more fragile to specific molecules or therapies. So, new detection methods allow for better therapy selection and increased survival rates.

All of this will make for an explosion in the market for molecular diagnosis of cancer. Currently a $5B market (2022), it could grow to $24B by 2030 and still have room to grow, with a total addressable market (TAM) of $95B.

Source: Ark Invest

Top Liquid Biopsy Stocks

1. Grail / Illumina

Thanks to its Galleri cancer detection kit, Grail is the leader of the liquid biopsy technology, with a massive 140,000-participant clinical trial underway in the UK and is already available in the US.

Grail is currently part of Illumina, but this is complicated. Grail has spun off from Illumina in 2016. It then raised more money, improved its technology, and was re-acquired by Illumina in 2021 for $7.1B, a lot more than it was spun off for.

And the story does not stop there. You see, Illumina is the leading manufacturer of genetic sequencers, so it is actually providing the required machinery to ALL of Grail's potential competitors.

So, competition regulators were not happy with Illumina's 2021 purchase of Grail. They wanted to stop it in the US and the EU, and Illumina ignored the criticism.

Most recently, on April 3, 2023, the FTC (Federal Trade Commission) ordered Illumina to divest Grail.

“Finally, the Opinion rejects parties’ claim that this acquisition is likely to yield results that save lives, noting that their efficiency projections were vague, self-serving, and unsupported. Ultimately, the Opinion holds that letting competition spur through innovation among MCED test providers would do more to save lives than allowing a monopolist to vertically integrate and capture the market.

This Opinion and Order will now become final unless Respondents file a petition for review in a federal Court of Appeals within 60 days from the date of the service of this Order.”

Illumina's embattled management has even dealt with the notorious Carl Icahn, the legendary activist investor, who criticized Grail's acquisition.

So, while technically the most advanced, Grail is not the most straightforward option for investors.

Illumina shareholders might receive shares of Grail, but the details of such a deal, with lawsuits and counter-lawsuits with the FTC, could get messy before it is clear what the future corporate structure of Grail will be.

Illumina getting fined some serious money for its contempt of regulators' opinion is also a distinct possibility.

2. Exact Sciences Corporation

Exact Sciences is using both DNA & RNA data to detect early cancer, which “simple” DNA tests might miss.

The company develops solutions for all the stages of cancer detection

Source: Exact Sciences

It is also working on a new MCED test, which checks for 4 different biomarker classes simultaneously (DNA, RNA, proteins, methylation).

The company's R&D efforts paid off, with revenue rising x5 since 2018. It is also worth noticing that the company showed a positive EBITDA for the first time in Q4 2022.

Source: Exact Sciences

Exact Sciences seems like a good option for investors looking at profitable companies in early-stage cancer detection, with an equally good shot at developing an MCED test to compete with Grail. And without all the FTC orders and corporate complexity of Illumina.

3. Natera, Inc.

Natera relies on cell-free DNA testing (cfDNA) for women's health (embryo testing, hereditary cancers), oncology (tumor panel, early detection, residual disease test), and organ testing (kidney, heart, lung).

Source: Natera

The company also sees significant potential for this technology for transplant testing, with only a 10-15% market penetration.

Natera has experienced aggressive growth, with the number of tests growing by 20%-53% every year since 2017, from half a million to 2.1 million tests in 2022.

It is also worth noticing that Natera has been really active in oncology only since 2020. Since 30% of oncologists have ordered their ctDNA residual disease test, Signatera has been an impressive clinical and commercial success.

Natera seems well positioned for Medicare and other public health programs to start pushing for more molecular testing and reimburse them better.

The company plans for 2023 revenue to be 25% higher than 2022's, with stable R&D and operating expenses. This should still not be enough to reach profitability but would reduce the cash burn by $150M, to the $300M-$325M levels.

Investors in the company will need to pay a close eye on the company's ability to reach profitability in 2024-2025. The potential threat of more innovative cancer screening tests, like MCED, should also not be ignored.

4. Guardant Health, Inc.

Guardant has developed a liquid biopsy test relying on ctDNA and methylation detection, Guardant Shield.

It also works on complete genomic testing for advanced cancer, allowing for custom therapies/precision medicine. Guardant 360 Cdx is the first FDA-approved blood test for complete genomic testing.

Lastly, Guardant Reveal uses ctDNA to detect early possible cancer recurrence, the “first liquid-only test to detect minimal residual disease (MRD) in colo-rectal cancer, now available for breast and lung cancers.”

Source: Guardant

The next step for Guardant is unifying all its tests under the Smart Liquid Biopsy platform. Most importantly, it will significantly boost the performance of the Guardant Reveal testing, with the company calling it “a larger blockbuster franchise in its early innings.”

Source: Guardant

It is also working on a multi-cancer test, with hopes to submit it for FDA approval in 2026.

Investors should closely follow the growth of the existing product sales and the multi-cancer test clinical trials. Another close eye should be kept on free cash flow, with still negative FCF forecasted in 2025.

Source: Guardant

Other Companies

Other companies, which are not publicly listed, are equally active in making cancer detection as cheap, non-invasive, and powerful as possible.

Notably, Owlstone Medical developed “Breath Biopsy,” which can detect cancer or other diseases from a breath sample.

And Adela, studying the DNA-methylome for early cancer detection.

All in all, this extremely active sector of liquid biopsy is likely to make cancer a lot more survivable and detecting it a part of our routine health checks.