Don’t forget to honor your Mom on Mother’s Day. Moms are great. But let’s face it: Moms (and Dads) pass along hereditary diseases.
While we can research the family tree for these health issues, it’s been difficult to know for sure what could happen — until now. Because of breakthroughs in human genome mapping, we can now get a clear line of sight on what diseases are coming our way — and the insights are only getting better.
This is good information to have, since genes aren’t destiny. Epigenetic research tells us that genetic pre-disposition for disease does not necessarily program our future. Lifestyle choices can derail what looks like genetic destiny, particularly when we know what is in the cards.
When diseases do crop up, knowledge of the human genome helps with diagnosis and treatment. This is also great news, because diagnosis is tricky. The Institute of Medicine says most people will have at least one disease wrongly diagnosed, sometimes with terrible consequences, in a report called “Improving Diagnostic Errors in Medicine.”
Many people with cancer, for example, suffer the devastation of chemotherapy and radiation even though they don’t need to. Others are told to hold off on treatment only to wind up dead from their cancer. Now, genetic testing of tumors offers guidance on the best forms of cancer treatment to use — and avoid.
All of this genomics-based intelligence can save us money, time, and anguish. So, naturally, investing in the companies that give people a customized view of their genomic landscape makes sense.
Here are three leaders in this area, the first two of which I’ve been recommending for years in my stock newsletter:
To find out what Mom and Dad passed along to you in terms of health risks, consider tests offered by InVitae
. This company provides reasonably-priced genetic tests that can tell you if you’ve been dealt a bad hand in cancer, heart disease, and neurological and metabolic disorders. It offers tests that help gauge miscarriage risk. Other tests reveal the genetic risks for diseases in fetuses, as early as 10 weeks into a pregnancy.
With help from the U.S. Supreme Court, which ruled a few years ago that no one can patent human genes, InVitae has driven down the price of genetic tests sharply. Its tests cost a few hundred dollars, depending on how wide a panel you go for, compared to tens of thousands of dollars a few years ago.
People are responding. Test volume and revenue have recently been growing at more than 50% to 100% year-over-year. Sales hit $147.7 million last year, when InVitae did over 300,000 tests. The company expects $220 million in sales this year on over 500,000 tests. Behind the scenes, the company is driving down test costs.
InVitae stock has responded. Even with the sharp decline in the stock this week on an earnings miss, the shares had risen about fourfold during the trailing 12 months, vastly outperforming the S&P 500
, the iShares NASDAQ Biotechnology Index
, SPDR S&P Biotech ETF
, and the Loncar Cancer Immunotherapy ETF
. The sell-off this week is a good opportunity to get into the stock at a discount.
InVitae has partnerships with several well-established biotech and pharma companies, a quality I look for when suggesting early-stage biotech names in my stock letter. They include Merck & Co.
, Takeda Pharmaceutical
, Alnylam Pharmaceuticals
, BioMarin Pharmaceutical
, Jazz Pharmaceuticals
, and MyoKardia
About 18 million people were diagnosed with cancer last year, 1.7 million of them in the U.S. Most faced tough decisions about whether to use chemotherapy, radiation, or some other therapy, or to do nothing because a cancer did not appear aggressive.
Sadly, a lot of the decision-making here is guesswork. Doctors size up treatment options based on a look at tumor biopsies and tumor size, and how far the cancer has spread. Then they make a call — but they aren’t always right. Many patients undergo unnecessary treatment, while others are told they can wait, only to fall victim to the disease.
helps avert these mishaps. Its “Oncotype” tests can determine the effectiveness of treatment options by genetically profiling a tumor. It’s technology amplifies genetic signals from small samples, so that they can be more easily read. For some types of cancers, its test change treatment decisions more than 30% of the time.
Genomic Health offers tests for breast, colon, and prostate cancers. Sales grew 18% last year and the company expects revenue to grow 14% this year. This explains the double in the stock in past year. Genomic Health stock is up 340% since I first suggested it in my stock letter in August 2010 at $15. But there’s still plenty of room for growth here, so I continue to like the shares.
The company is expanding into lung, skin, bladder and kidney cancer tests. It is developing tests that analyze a tumor’s DNA in blood or urine to detect cancers or learn more about them. Sales will continue to grow as more insurers and health-care systems around the world understand the benefits. Genomic Health says it has saved health-care providers $5 billion so far, and has helped more than 1 million people avoid over-treatment or under-treatment.
I’m not suggesting this company in my stock letter because it doesn’t rank high in my system for analyzing biotech and health-care companies. That doesn’t mean the shares can’t do well. Veracyte
is a favorite at ARK Invest, which posts good results in some of its ETFs which invest in innovative companies. ARK holds Veracyte in the ARK Innovation
and the ARK Genomic Revolution Multi-Sector
ETFs. This suggests the stock may continue to do well — especially considering its pipeline potential.
Veracyte offers genomic tests to help improve diagnosis of thyroid cancer, lung cancer, and a lung disease called idiopathic pulmonary fibrosis (IPF), which is often misdiagnosed because it presents vague symptoms. By improving the accuracy of diagnosis, these tests reduce the number of unnecessary surgeries and invasive procedures used in diagnosis.
Veracyte’s estimates that so far its tests have saved more than 40,000 patients from unnecessary surgery and provided more than $800 million in cost savings. Sales grew 28% last year to $92 million, and the company thinks it can produce 25% revenue growth this year.
Veracyte has more genomic tests in the works including a nasal swab for early detection of lung cancer, which it is developing in collaboration with Johnson & Johnson
. The potential market for its three tests is around $2 billion, but the company estimates the potential market size for its pipeline products is $30 billion to $40 billion.
At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush has suggested NVTA and GHDX in his stock newsletter Brush Up on Stocks.
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