How Genetic Testing for Cancer Could Create a $51 Billion U.S. Market
Photo: Dave Cutler
Genetics stocks are pulling out all the stops to stay a step ahead of cancer. Instead of focusing solely on medicine, though, they're rolling out a series of genetic tests for cancer that are now starting to appear in clinics.
Experts say the tests could become a $51 billion market within a few years. The substance they use? Your blood.
Drug companies like Roche (RHHBY), Guardant Health (GH), Exact Sciences (EXAS), and Natera (NTRA) are creating this new market of genetic tests. Some of those tests started hitting the market six years ago.
Traditional testing requires invasive and expensive tissue samples. But researchers say we're nearing a future in which a blood draw will tell us everything we need to know about cancer.
The blood-testing revolution is already underway. Today, it's worth about $6 billion and includes myriad blood tests launched over the last decade for therapy selection. These tests identify the tumor mutations specific to a patient's cancer. Then, physicians can match a patient with a precise therapy.
Genetic Tests For Cancer & a $51 Billion Market
But genetics companies are only scraping the surface of what will likely be a massive $51 billion opportunity, Canaccord Genuity analyst Max Masucci told Investor's Business Daily, citing a Guardant Health presentation.
One blood test available for patients later this year can detect cancerous cells before they group together to form a mass. That test, a Natera product, monitors for recurring colon cancer. Guardant Health hopes to follow with a blood test that monitors for recurring lung, breast, colon, and ovarian cancer.
Natera's test is already being used for clinical research. But when it launches to patients, it will open up another $15 billion annual market in the U.S. That estimate is based on the number of cancer survivors living in the U.S. who could, feasibly, get a genetic test for cancer every year.
Other tests will screen asymptomatic patients for cancer. That market will be worth $30 billion each year in the U.S., Masucci says. He expects that window to open in 2023. ARK Invest analyst Simon Barnett is more bullish and sees screening tests launching in the next 18-24 months.
"The number one goal here is to identify the presence of cancer in its earlier stage," Masucci said. "If you can do that in a less invasive way, that can really improve the patient experience. Identifying cancer at Stage Zero is an important step towards the hypothetical dream of curing cancer and improving patient outcomes."
Stool Tests: A Model for Genetics Stocks?
Exact Sciences provided a model for genetic tests for cancer back in 2014. But it doesn't use blood. The company's colon cancer screening tool uses stool samples.
The product, Cologuard, gained Food and Drug Administration approval in 2014 after roughly 38 months of testing to prove its utility in screening asymptomatic patients for cancer. Today, the at-home colon cancer test is an alternative for patients wary of undergoing a colonoscopy.
Analysts say Cologuard provides a roadmap for blood tests in screening asymptomatic patients. It works by looking for DNA markers associated with colon cancer in the stool.
Other tests look for colon cancer by finding blood in the stool. These are called fecal immunochemical tests.
But Cologuard has proved itself to be more accurate than fecal immunochemical tests, Exact Sciences spokeswoman Faith Salamon told IBD in an email. A notable difference: The so-called FIT tests must be done every year while Cologuard is done every three years.
At-Home Screening Avoids Invasive Test
The American Cancer Society recommends regular colon cancer screening starting at age 45. About 45 million to 50 million Americans fall into that age group who aren't screened, Exact Sciences Chief Executive Kevin Conroy said in an interview.
"Our goal is to make screening inevitable," he said.
Exact is making great progress toward that goal, Masucci says. Annual revenue from Cologuard has grown from under $2 million in 2014 to $810 million in 2019. That's with just 5%-6% penetration into the U.S. Cologuard age group.
"Exact Sciences has set a goal to achieve 40% penetration in its U.S. (total addressable market) for Cologuard and we see that as an achievable goal," he said. "The magnitude of those numbers helps portray how meaningful new disruptive cancer screening has been, and will be in the future."
Early Days for Blood-Based Screening Tests
Meanwhile, the market for blood-based tests that screen asymptomatic patients for cancer is still in its earliest inning, Masucci says. Companies include Guardant Heath as well as privately held Thrive Earlier Detection and Freenome. Guardant and Freenome are starting in colon cancer, while Thrive's test addresses multiple cancer types.
These blood-based tests still face several hurdles before public adoption, he says. They will need to prove their worth in large clinical studies before seeking FDA approval and Medicare coverage. That process took several years for Cologuard, the undisputed grandfather of the screening movement.
If successful, the opportunity for blood-based tests that screen for various cancer types stands at $30 billion annually in the U.S. alone, according to Guardant's presentation.
But the market for blood-based screening tests won't develop overnight, Masucci says. Genetics stocks still have some work to do.
"The screening population is massive and includes people who are asymptomatic," he said. "It includes individuals who have not previously been diagnosed with cancer. But the downstream consequences of having a low-performing test can be very problematic, and it will take continued innovation in (research and development) and large clinical trials to arrive at acceptable levels of sensitivity and specificity."
These genetic tests for cancer likely will become tailored for at-risk patients. That includes people with a family history of certain cancers or lifestyles that can lead to a higher risk of developing cancer.
Genetics Stocks Tackle Relapse
Recurrence monitoring is considered a $15 billion potential market for genetics stocks, Masucci says, citing the Guardant Health presentation.
The financial opportunity assumes that every one of the 15 million living cancer survivors in the U.S. receives one $1,000 test per year. Those estimates could be conservative, Masucci says. The companies involved still have work to do to maximize their opportunity in this market, he says.
The rationale for using blood tests to monitor for cancer recurrence is obvious, says Brian Alexander, chief medical officer at Foundation Medicine, a subsidiary of Roche.
"Some of these (cancers) are getting monitored longitudinally over time," he told Investor's Business Daily. "Getting repeat biopsies — tissue — every time is quite onerous."
This is where Natera and Guardant Health shine, analysts say. Genetics stock Natera makes a diagnostic test called Signatera that monitors the potential for cancer relapse well before a tumor would ever show up on a traditional scan. Guardant makes a test called Lunar-1 for the same purpose.
Both companies sell their products to pharmaceutical companies looking to fill clinical studies. Natera hopes to begin selling to patients who aren't enrolling in clinical tests later this year, Masucci says. Guardant hasn't indicated when it might take that step, he says.
Genetics Tests 'Read' Tumor DNA
Natera's test relies on what is known as whole-exome sequencing. First, the company sequences the genetics of a patient's tumor after a tissue biopsy. Basically, this "reads" the tumor's DNA and finds mutations. Then, it compares that to a genetic "read" of the entire patient's own DNA.
From that, Natera creates an individualized genetic test for cancer. So, instead of getting regular scans for tumor recurrence, patients can simply undergo regular blood tests. The blood tests are less invasive and don't expose patients to excess radiation often associated with scans.
The technical challenge is very difficult, says Solomon Moshkevich, Natera's general manager of oncology. The genetics stock aims to find a single strand of tumor DNA in a vial of a patient's blood.
"That's a very hard thing to do," he said in an interview.
Monitoring tests from Natera and Guardant have a Clinical Laboratory Improvement Amendment, or CLIA, certification. CLIA is a set of standards around lab testing. They belong to a class of products that don't need FDA approval to launch.
Signatera and Lunar-1 launched for clinical research use in 2017 and 2019, respectively.
Genetic Tests for Cancer Recurrence
Natera's genetic tests for cancer are extremely predictive, Moshkevich says.
"If a patient has detectable tumor DNA in the blood and doesn't receive some intervention, they are going to relapse with over 97% probability," he said.
That means if a Natera test finds tumor DNA in the blood, that patient only has a 3% chance he or she won't eventually relapse. The tests can find tumor DNA well before a mass shows up on a CT or PET scan, Moshkevich says. Natera has tested its technology in lung, breast, bladder, and colon cancers.
Moshkevich doesn't see an end to tissue biopsies. But he does see less-invasive blood tests reducing the need to frequently scan cancer patients. Genetic tests for cancer also give physicians insight into whether a patient is responding to a cancer treatment.
Guardant Health also is working in the cancer recurrence arena with its Lunar-1 test.
Chief Executive Helmy Eltoukhy sees this market growing as clinical studies show the utility of liquid biopsies in recurrence monitoring. This will help prod Medicare reimbursement and uptake of this specific use for genetic tests for cancer, he said in an interview.
Choosing the Right Cancer Therapy
For decades, physicians have biopsied most solid tumors, like lung or breast cancer.
Studying a tissue sample can help physicians understand which mutations within the tumor cells might make one drug more effective than another for that patient. But ARK Invest's Barnett says in many cases a so-called liquid biopsy could yield the same information.
"I think the next 12-24 months in liquid biopsy are going to be exciting to watch," he said in an interview. "From a bird's-eye view, liquid biopsies are useful along the entire patient journey of someone undergoing cancer treatment."
Therapy selection is the most developed market for genetic tests for cancer.
If every eligible patient received a test, this market would be worth $6 billion in the U.S. That's split between $4 billion for patients undergoing cancer treatment and $2 billion from pharma companies using these genetic tests to fill clinical studies.
Guardant Health's test called Guardant360 has led the blood-based testing market in therapy selection, Masucci says.
"To use a patient's biological profile and the biology of their unique disease to craft a personalized treatment plan that matches patients to specific drugs that target the unique characteristics of their cancer," he said.
Precision Medicine in Cancer
These genetic tests for cancer coincide with a shift in medical theory. Historically, physicians relied on metaphorical hammers like chemotherapy to kill tumors, regardless of cancer type. Today, medicine is shifting to a more laser-like approach.
As a result, medicines from companies like Merck (MRK), Bristol Myers Squibb (BMY) and Eli Lilly (LLY) have thrived. Some of their drugs work in specific cancer patients based on unique tumor mutations.
"You and I might have the same type of cancer, but based on differences in our biological makeup, including our DNA, proteins, and other biomarkers, you might respond to a therapy and I might not, or you might be at a higher risk of recurring cancer," Canaccord's Masucci said.
This shift toward a more personalized approach to medicine will be a boon for genetics stocks.
In many cases, the original diagnosis and genetic examination still require a tissue biopsy, Foundation Medicine's Alexander says. But he notes that a tissue biopsy sometimes is impossible. Other times, it's needlessly invasive.
"If you're a lung cancer patient, it's actually pretty dangerous to go get a biopsy," Alexander said. "You can get a liquid biopsy in the blood and find the answers you were looking for that you might not otherwise get by a tissue test."