Top 5 Stocks in the Fight Against Cancer
"Cancer" ranks as one of the most dreaded words in the English language. More than 600,000 Americans die of cancer each year, according to the American Cancer Society. And nearly 1.8 million new cases will be diagnosed this year in the U.S.
There's good news, though. Significant progress is being made in cancer therapy, from developing drugs to treat various types of cancer to detecting it at earlier stages. Investors who buy the stocks of these companies gain an opportunity for tremendous returns over the long term. They also can feel good about the positive impact these companies are making in the lives of many patients across the world.
But which cancer treatment stocks look like solid picks? Here are five top stocks in the fight against cancer that you can buy right now.
What is cancer?
Cancer is a broad term that applies to many different diseases where the body's cells begin dividing without stopping. Over time, these cancer cells can spread from their initial point of origin into other parts of the body.
Cancer is caused by changes to the DNA in cells called genetic mutations. DNA provides instructions to the cell on all of its functions, including how the cell divides into new cells. Genetic mutations in the cells change the instructions in the DNA in such a way that the cell divides and grows much more rapidly and frequently than it normally would.
These genetic mutations can be caused by several factors. Some genetic mutations that cause cancer are inherited, including those that cause certain types of breast cancer. Other genetic mutations are caused by other factors later in life, including smoking tobacco, exposure to radiation, exposure to cancer-causing chemicals (carcinogens), and infection by viruses.
Trends in fighting cancer
Detecting cancer as early as possible has always been important in the effort to fight it. In the past, early detection has been more challenging for many types of cancer that are difficult to identify until they are more advanced.
Considerable progress has been made, though, in analyzing DNA in cells to determine if a person has cancer. A key area of focus right now is on developing blood tests, known as liquid biopsies, to identify biomarkers -- substances in the blood or tissue that point to the presence of cancer.
If these efforts are successful, it could be possible to determine if an individual has nearly any type of cancer simply by performing a blood test. Market researcher Frost & Sullivan thinks that the global market for liquid biopsy could top $100 billion.
Radiation and chemotherapy -- drugs that attempt to stop the growth of and/or kill cancer cells -- have been the mainstays for cancer treatment for decades. However, these methods have problematic side effects. Both can cause damage to healthy cells in addition to fighting cancer. New approaches to treat cancer have been developed, though, that specifically target cancer cells. One promising area of development is in cancer immunotherapies.
Immunotherapies harness immune cells in the body to target and kill cancer cells without attacking other noncancerous cells. Consulting firm McKinsey estimates that more than 40% of cancer drug research and development spending is related to immunotherapy programs.
Chimeric antigen receptor T cell (CAR-T) therapies are an especially hot area of immunotherapy research. CAR-T therapies involve engineering immune cells known as T cells so that they will attack cancer cells. Current CAR-T therapies on the market require a lengthy and costly process where a patient's own T cells are sent off-site for modifications then sent back to the patient's treatment center. However, research is under way to develop "off-the-shelf" CAR-T therapies that use healthy donors' T cells and can be administered quickly and more cost-effectively.
However, immunotherapies aren't the only focus in developing drugs to fight cancer. Companies are also researching and developing drugs that inhibit enzymes and proteins that are involved in tumor growth and finding other approaches to controlling cancer growth.
The cancer treatment industry
Worldwide spending on cancer therapies totaled $133 billion in 2017, compared with $96 billion in 2013, according to a report published by IQVIA. By 2022, the cancer therapy industry could potentially reach $200 billion in annual sales.
That's just part of the overall industry involved in fighting cancer, though. Some companies focus on diagnostics products that detect the disease. The global cancer diagnostics market was valued at more than $144 billion last year and could grow to close to $190 billion by 2022, according to market research company Grand View Research.
The industry includes very large companies that have been around for decades. It also includes small, relatively new companies that are developing cancer diagnostics tests and cancer-fighting drugs. Of more than 700 companies actively developing late-stage cancer therapies, nearly 500 are focused exclusively on cancer.
As you might expect, the industry is also highly regulated. Companies must conduct clinical trials for experimental cancer drugs and diagnostics tests. If these trials are successful, regulatory approval must then be obtained before marketing a new product. In the U.S., the Food and Drug Administration (FDA) is responsible for approving cancer drugs and diagnostics tests. The European Medicines Agency (EMA) performs a similar role in the European Union.
Top stocks in the fight against cancer
The top picks to invest in the fight against cancer include big pharma, diagnostics, gene sequencing, and biotech stocks. But all these stocks have at least a couple of things in common. Each of the companies is developing innovative products that hold tremendous promise for improving cancer diagnosis or treatment. And each stock has great prospects for long-term growth. Five top stocks in the fight against cancer are:
Key Areas of Focus
|bluebird bio (NASDAQ: BLUE)||CAR-T therapies|
|Bristol-Myers Squibb (NYSE: BMY)||Immunotherapies|
|Exelixis (NASDAQ: EXEL)||Tumor growth inhibitors|
|Guardant Health (NASDAQ: GH)||Cancer diagnostics tests|
|Illumina (NASDAQ: ILMN)||Gene sequencing|
This biotech company's two lead products have nothing to do with cancer. In June 2018, bluebird won European approval for gene therapy Zynteglo (formerly known as LentiGlobin) in treating a rare blood disease, transfusion-dependent beta thalassemia (TDT). Gene therapies involve the insertion of a normal gene into cells to correct missing or defective genes. Bluebird is also evaluating its Lenti-D gene therapy in a late-stage study for treating cerebral adrenoleukodystrophy (CALD), a rare genetic brain disease.
But Bluebird's pipeline includes a couple of very promising CAR-T cancer drugs that it's developing in partnership with Celgene (NASDAQ: CELG). Bluebird and Celgene expect to report data from a phase 2 clinical study of ide-cel (also known as bb2121) in treating relapsed and refractory multiple myeloma by the end of 2019. Multiple myeloma is a rare form of cancer that forms in white blood cells called plasma cells. If the results from this study are positive, the two companies plan to file for regulatory approval based on the phase 2 clinical trial.
Bluebird also already has a second-generation successor to ide-cel moving through its pipeline -- bb21217. Like ide-cel, bb21217 is a CAR-T targeting multiple myeloma. However, the drug is engineered for CAR-T cells to fight cancer cells for a longer period than ide-cel. Bluebird expects to announce results from a phase 1 clinical study of bb21217 by the end of 2019.
Zynteglo, Lenti-D, ide-cel, and bb21217 each have the potential to become blockbuster drugs over the next few years. If all four drugs are approved and achieve commercial success, Bluebird should deliver nice gains to long-term investors. The key thing to watch for biotech will be how quickly revenue ramps up for Zynteglo after it's launched. If Bluebird sets a pace for sales of more than $200 million in 2020, it would be a really positive indicator.
Bristol-Myers Squibb (BMS) is a big pharma company with a strong track record in developing and marketing cancer drugs. The company's Sprycel first won FDA approval in 2006 as a chemotherapy in treating leukemia. More recently, BMS has emerged as one of the leaders in immunotherapies.
In 2011, Yervoy became one of the first immunotherapies approved by the FDA. But BMS' big win came in 2014 with the FDA approval of another powerful immunotherapy, Opdivo, in treating advanced melanoma. Opdivo subsequently won FDA approvals either as a monotherapy or in combination with Yervoy for treating 13 other types of cancer.
There are currently more than 750 active clinical studies in progress that include Opdivo. BMS itself is sponsoring dozens of phase 3 studies evaluating its immunotherapy by itself or in combination with other drugs in treating various types of cancer.
Soon BMS will have other solid growth opportunities in fighting cancer. The big drugmaker's acquisition of Celgene will give it two of the three cancer drugs that market research company EvaluatePharma projects will be in the top five best-selling blockbusters in the world by 2024 -- Opdivo and Revlimid. BMS also has another drug that made EvaluatePharma's top five list with anticoagulant Eliquis.
In addition, BMS will gain Celgene's promising pipeline. The most attractive cancer candidates include CAR-T therapy liso-cel, blood cancer drugs luspatercept and CC-486, and ide-cel, the lead candidate in Celgene's partnership with Bluebird. Investors should keep close tabs on FDA approval decisions for these drugs and the incremental sales growth they provide to BMS assuming they're approved.
Exelixis isn't a big pharma like Bristol-Myers Squibb. But unlike Bluebird, it already has successful cancer drugs on the market. Exelixis' drugs, however, don't harness the immune system to fight cancer as immunotherapies do. Instead, they focus on inhibiting the production of enzymes that cause tumors to grow.
The biotech won its first FDA approval in 2012 for Cometriq in treating a rare type of thyroid cancer. Exelixis secured another victory in 2015 with its partner, Roche, gaining FDA approval for Cotellic in combination with Zelboraf in treating advanced melanoma. In 2016, the FDA approved Cabometyx as a treatment for advanced renal cell carcinoma (RCC), the most common form of kidney cancer.
Cabometyx is by far the biggest success story for Exelixis so far. The drug gained FDA approval in late 2017 as a first-line treatment for advanced RCC. It followed up in early 2019 by winning approval in previously treated advanced liver cancer. In 2018, Cabometyx generated sales approaching $600 million.
But there's plenty of room for growth for Cabometyx. It's still in the early stages for the drug as a first-line treatment for kidney cancer and in treating liver cancer. Exelixis also has four late-stage clinical studies in progress evaluating Cabometyx either as a monotherapy or in combination with other drugs in treating several types of cancer. In addition, there are more than 50 phase 1 or phase 2 clinical studies underway that feature Cabometyx.
Thanks to the success of Cabometyx, Exelixis is profitable and building a sizable cash stockpile. CEO Michael Morrissey stated in Exelixis' Q2 2019 conference call in May 2019 that it's looking to add more promising candidates to its pipeline. Investors will probably want to watch Exelixis's cash position: The bigger it gets, the bigger the acquisition the company is likely to make.
Guardant Health is a leader in developing liquid biopsies that can detect cancer. The company already markets two products, Guardant360 and GuardantOMNI, for late-stage cancer screening. Neither liquid biopsy product has received FDA approval yet, but they're able to be sold as "laboratory-developed tests" -- diagnostic tests that are designed, manufactured, and used within a single laboratory.
Obtaining tissue biopsies to detect cancer often requires invasive surgical procedures. Liquid biopsies are noninvasive -- they only require a blood sample. An even bigger advantage for liquid biopsies is that they could be used well before any signs of cancer are manifested, potentially enabling healthcare professionals to detect cancer at a much earlier stage than current methods involving tissue biopsies.
It's probably just a matter of time before FDA approval is secured for Guardant360 and GuardantOMNI, though, which would expand the market for both products. Guardant Health CEO Helmy Eltoukhy said in the company's first-quarter conference call in May that FDA submission for Guardant360 is expected in the third quarter of 2019. No timeline for submission for FDA approval of GuardantOMNI has been provided as of yet.
In the meantime, sales are soaring even without FDA approval. The company thinks that the U.S. market for advanced-stage cancer screening could be in the ballpark of $6 billion annually. That alone presents a huge growth opportunity for Guardant Health.
But Guardant isn't limiting itself to late-stage cancer screening. It has launched the LUNAR blood-based DNA tests for early stage cancer and recurrence monitoring. These tests currently are available only for research use by biopharmaceutical and academic researchers, but it's a significant step for the company. Keep your eyes on the company's updates regarding sales for LUNAR. Guardant projects that the products open the door to a potential U.S. market of around $33 billion.
You might not think of Illumina as a stock related to the fight against cancer. But the company is a pioneer of gene sequencing and a dominant leader in the gene sequencing market. And gene sequencing is critical in developing cancer diagnostics and drugs that target cancers caused by specific genetic mutations.
Illumina offers its TruSight Oncology 500 test, which analyzes hundreds of cancer-related biomarkers. It partnered with Loxo Oncology, now owned by Eli Lilly, to develop and market a diagnostic test for multiple types of cancer. Illumina has also teamed up with several other major drugmakers, including Amgen, AstraZeneca, Johnson & Johnson, and Sanofi, to develop companion diagnostics products for cancer drugs.
Some of Illumina's other products also help in battling cancer. For example, the company's noninvasive prenatal testing (NIPT) has identified the need for additional testing of mothers that led to a cancer diagnosis.
Illumina is poised to benefit from the growth in the liquid biopsy market and the personalized medicine (drugs that are customized to individual patients, especially patients' genetic profiles) market. But those aren't the only growth drivers for the company.
CEO Francis deSouza stated in early 2019 that "the ubiquity and impact of genomics will dwarf everything we've seen to date" in the future. With continued growth in consumer genomics products like those offered by Ancestry and 23andMe, population genomics efforts that compare the DNA of large numbers of people in various countries, and continued research into rare and undiagnosed diseases, along with the advances in cancer testing and treatment, deSouza's prediction seems likely to become reality. The key metric to watch to see if deSouza was right will be Illumina's revenue growth over the next few years.
As promising as these five stocks are, there are still several risks for each of them. One key risk is that products could flop in clinical testing. Even if clinical trials appear to be successful, there's also always a chance that regulatory agencies won't approve the products. These risks impact smaller companies like Bluebird more than they do big ones like Bristol-Myers Squibb.
There's also a significant risk that competitors could develop better products. For example, Guardant Health is a leader for now in the liquid biopsy market, but several other companies are also developing liquid biopsy tests. Bristol-Myers Squibb's Opdivo faces stiff competition from Merck's immunotherapy, Keytruda. Even Illumina, which has a commanding lead in the gene sequencing market, could be disrupted by another technology. Some think that an approach to gene sequencing called nanopore sequencing has the potential to hurt Illumina over the long run.
In addition, each of these companies faces the eventual expiration of key patents for their products. This makes it especially important that the companies continue to innovate so that they can launch new products that can generate revenue growth when their older products lose patent exclusivity and face lower-cost competitors.
The fight continues
Despite these risks, Bluebird, Bristol-Myers Squibb, Exelixis, Guardant Health, and Illumina appear to be good picks for investors wanting to profit from the fight against cancer. Each company is positioned well in its respective market. Each company should deliver solid growth for years to come.
All five of these companies are also developing new products that might not reach the market for several more years. They all keep on innovating, which is exactly what investors and cancer patients want. Even with their significant progress, the fight against cancer continues.
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Keith Speights owns shares of Celgene and Illumina. The Motley Fool owns shares of and recommends Bluebird Bio, Celgene, Exelixis, Guardant Health, and Illumina. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.