"It was the best of times, it was the worst of times..."
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Charles Dickens wasn't referring to Exact Sciences (NASDAQ: EXAS) and Opko Health (NASDAQ: OPK) when he wrote those words, but they're certainly applicable for the two healthcare stocks. 2017 has been a great year so far for Exact Sciences. Shares of the molecular-diagnostics company have soared nearly 180% year to date. But it's a much different story for Opko Health, with its stock plunging more than 30% so far this year.
But is Exact Sciences still the better pick -- or will the tale of two healthcare stocks end up with Opko on top over the long run? Here's how Exact Sciences and Opko Health compare.
The case for Exact Sciences
If you're looking for a good reason to buy Exact Sciences stock, look no further than Cologuard. The company's DNA screening test for colorectal cancer has arguably experienced the strongest launch of any genetic test in its first three years on the market. Increasingly more providers are prescribing Cologuard, and more payers are loosening their purse strings for reimbursement of the test as well.
The opportunity for future sales growth is significant. There are around 80 million patients who should be tested for colorectal cancer. Many of them don't, however, because of the inconvenience of preparing for and undergoing a colonoscopy. Cologuard's primary draw is that it's easy to use. It's also highly accurate.
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Exact Sciences thinks it will be able to eventually capture 30% of the colorectal cancer screening market thanks to the benefits Cologuard offers. That translates to around $4 billion in potential annual revenue. Exact Sciences is on pace to bring in at least $230 million in 2017, which shows just how much growth could be in store if the company is successful in achieving its goal.
There's more to like about Exact Sciences than just Cologuard, though. The company is also working with the Mayo Clinic to develop liquid biopsy technology to detect multiple types of cancer. Exact Sciences is focusing the heaviest right now on early detection of lung cancer. Its effort to expand beyond colorectal cancer screening presents another great reason to like this stock over the long run.
The case for Opko Health
While things aren't going as well right now for Opko Health, the company also has significant potential. Opko focuses on two primary areas: diagnostics and pharmaceuticals.
Opko's diagnostics business segment generates the most revenue currently. Its BioReference Laboratories ranks as the third-largest clinical laboratory with a core genetic testing business in the U.S. Opko also markets a diagnostic test -- 4Kscore prostate cancer test. The company is also developing an immunoassay platform that allows blood tests to be performed quickly and easily in physicians' offices.
Pharmaceuticals, however, could be Opko's greatest growth opportunity. The company has two FDA-approved products on the market. Rayaldee treats secondary hyperparathyroidism in adults with stage 3 or 4 chronic kidney disease (CKD) and vitamin D insufficiency. Varubi treats chemotherapy-induced nausea and vomiting. Rayaldee is more important to Opko's success, however, because the company licensed Varubi to Tesaro in 2010.
The company also has several pipeline candidates that could be winners down the road, two of which are in late-stage clinical studies. Fermagate is being evaluated in a phase 3 study for treating hyperphosphatemia in CKD patients. Long-acting human growth hormone product hGH-CTP is also being evaluated in a phase 3 study for treating pediatric patients.
I think the better pick between these two stocks is Exact Sciences. Opko has potential, but it also faces plenty of significant risks with its pipeline candidates. That's especially true for hGH-CTP. Opko reported disappointing results from a late-stage study of the growth hormone in adults, although the company is still pursuing a path forward for possible regulatory approval.
Exact Sciences also faces some risks. Cologuard might not be as successful as the company hopes. Others could beat Exact Sciences in the race to develop liquid biopsies for early cancer detection. Still, though, I like the odds for Exact Sciences. The best of times for this stock could be in the future.
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