One of the medical scourges of our era is the increase in cancer cases, not only in the United States, but around the world. One of the most important keys to cancer survival is early detection. One of the traditional diagnostic procedures for detection is a biopsy, but traditional biopsies are difficult, uncomfortable and may therefore miss certain cancers. A new report from the analysts at Cowen makes the case that liquid biopsy techniques, which is a blood test that detects evidence of cancer in the circulation, could replace the older more traditional biopsy methods by the end of the decade. The report also stresses this could be a huge advance.
The Cowen team points out the liquid biopsies are non-invasive, easier to collect and may be able to detect cancers throughout the patient’s body. While the early data is promising, the procedure has many hurdles to overcome, both technical and clinical. However, with huge promise, and as much as a $10 billion dollar revenue potential in the future, the procedure is a must-win scenario for top life science firms. The only liquid biopsy currently approved by the U.S. Food and Drug Administration (FDA) for clinical use is a prognostic survival tool with no potential to guide treatment decisions.
While the Cowen report covers six life science stocks, we focus on the two companies that are rated Outperform at the firm: Illumina Inc. (NASDAQ: ILMN) and Thermo Fisher Scientific Inc. (NYSE: TMO).
Illumina develops, manufactures and markets life science tools and integrated systems for the analysis of genetic variation and function in North America, Europe, Latin America, the Asia-Pacific, the Middle East and South Africa. The company’s products include sequencing platforms that are based on its SBS technology and designed to meet the various demands of a range of sequencing applications, as well as array platforms that consist of HiScan and iScan systems that are array scanners, which support the imaging of array-based genetic analysis products.
Illumina is the dominant early leader in a growing genetic sequencing market that some analysts predict could reach $20 billion annually in the near future. It has a dominant 70% market share in the industry and its development of groundbreaking technologies, such as the $1,000 human genome have been game changing. Illumina’s dominance in the early days of the gene sequencing market has the company poised to ride its innovation to years of success.
The Cowen price target for Illumina is posted at $195. The Thomson/First Call consensus target is even higher at $104.87. Shares closed trading on Monday at $188.27.
Thermo Fisher helps its customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity. Through the company’s four premier brands — Thermo Scientific, Life Technologies, Fisher Scientific and Unity Lab Services — it offers innovative technologies, purchasing convenience and comprehensive support. Thermo Fisher is a world leader in serving science and biopharma, with revenues of $17 billion and 50,000 employees in 50 countries.
Thermo Fisher Scientific shareholders are paid a small 0.5% dividend. Cowen has a $135 price target for the stock, and the consensus figure is higher at $140.53. The stock closed Monday at $116.85.
The Cowen analysts also cover these life science stocks with a rating of Market Perform. They may also be in the race to find liquid biopsy success: Fluidigm Corp. (NASDAQ: FLDM), Genomic Health Inc. (NASDAQ: GHDX), Myriad Genetics Inc. (NASDAQ: MYGN) and Qiagen N.V. (NASDAQ: QGEN).
To date, liquid biopsy diagnostics has generated a lot of excitement in the lab but little in the clinic. While all these market participants may have a shot at finding the holy grail for the best application, it may take time and years more study. The bottom line for investors is that it is a breakthrough with huge revenue potential. For aggressive growth investors, this could be a bonanza for accounts willing to take a position and wait.