Oncology Space Gains Momentum: 3 Stocks in Focus (2024)

One of the deadliest diseases in recent times, cancer accounts for approximately 10 million annual deaths worldwide or every one in six people (as revealed by WHO). This hugely increasing incidence of cancer has fueled the demand for oncology across the globe quite enormously. Per a recent report, the $305.1 billion oncology market is currently undergoing a revolutionary change, driven by unprecedented advances in diagnoses and treatments.

As cancer research progresses and new technologies emerge, investing in oncology-focused companies like Exact Sciences Corporation (EXAS - Free Report) , Laboratory Corporation of America Holdings or Labcorp (LH - Free Report) and Quest Diagnostics (DGX - Free Report) could be attractive for long-term growth.

Oncology Secures Momentum

While conventional cancer treatment methods like chemotherapy and radiation therapy can be effective, they also have known side effects on a patient's physical and psychological health. A deeper understanding of the molecular mechanism of disease progression is giving rise to several novel therapeutic regimes and their successive trials. Targeted drug therapy, immunotherapy and personalized medicines are now widely utilized, which were not common a few years back.

One of the most promising breakthroughs in cancer treatments, immunotherapy harnesses the body's adaptive and innate responses to combat cancer cells. Innovations like inhibitors such as programmed death (PD)-1/L1 checkpoint inhibitors are now used as a frontline treatment for metastatic melanoma, non-small cell lung cancer, renal cell carcinoma and bladder or urothelial cancer. Chimeric antigen receptor-T cells and antibody-drug conjugates are also encouraging therapeutic strategies in oncology.

According to GMI research, the growing awareness of cancer risks and hereditary mutations will contribute to the above 8.5% CAGR growth in the genetic testing market. Estimates from the American Cancer Society suggest that nearly 21.6 million new cancer cases are likely to be recorded by 2030. This will enhance the adoption of cancer genetic testing for confirming diagnosis and help healthcare providers plan treatment. The strides in cancer research are instilling optimism in both investors and cancer patients for further breakthroughs.

3 Stocks in Focus

The cancer diagnostics segment is deemed to be the most opportunistic within the global oncology market, which is projectedto rise at a CAGR of 8.8% through 2032. Continuous product development, growing demand for early cancer diagnosis and advanced laboratory equipment will propel growth in the healthcare and diagnostics sector.

In this context, we explain these three stocks, which are set to maintain their stride in 2024.

Exact Sciences Corporation

The molecular diagnostics company, Exact Sciences’, flagship Cologuard screening test and Oncotype DX are fueling a nearly $2.5 billion business, having generated more than one million test results in the third quarter of 2023. Cologuard has presumably detected pre-cancerous polyps and early-stage cancer in nearly half a million people in the past 10 years. There is still a heap of opportunities, given that Cologuard’s market penetration is only 10% among an average of 60 million Americans who are not up-to-date with their screening.

The company targets to raise the performance bar high in non-invasive screening with what it calls Cologuard 2.0 or the next-generation Cologuard. In precision oncology, Exact Sciences secured reimbursem*nt for the Oncotype DX Breast test in Japan, its potential major market outside the United States. The company will shortly launch its tumor-informed Oncodetect MRD (molecular residual disease) test in colorectal cancer and breast cancer patients by this year.

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Presently carrying a Zacks Rank #3 (Hold), EXAS’ revenues are expected to increase 12.8% in 2024. Over the past year, shares of the company have increased 1.1% against the industry’s fall of 14.1%.

Labcorp

The global life sciences company, Labcorp, is making targeted R&D investments in oncology, one of its primary growth areas. In 2023, the company forged a partnership with ImmunoGen on an immunohistochemistry-sponsored testing program to increase access for patients with ovarian cancer. Labcorp added HER2 low reporting to the IC test, which is the only FDA-approved companion diagnostic of HER2 status for patients with metastatic breast cancer.

From the acquisition of Personal Genome Diagnostics (PGDx) in 2022, the company launched the Labcorp Plasma Focus liquid biopsy test, which is used to match cancer patients with FDA-approved therapies using the patient's circulating tumor DNA taken from a blood draw. Further, the company’s portfolio of kits and solutions from the acquisition of PGDx is gaining momentum with major health systems and academic centers and paving a path for hospitals and health systems as they execute their precision medicine programs.

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The Zacks Rank #3 stock has a historical EPS growth rate of 16.9% compared to the industry’s 8.3%. Over the past year, shares of the company have fallen 11.1% compared to the industry’s rise of 10.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics

A renowned diagnostic information services provider, Quest Diagnostics, strategizes investment in its highly specialized Advanced Diagnostics offerings, such as molecular genomics and oncology tests, to support faster growth across all customer segments. In 2023, the company entered the high-growth area of minimal residual disease or MRD testing with the acquisition of Haystack Oncology. The partnership aims to improve patient outcomes through early, accurate detection of residual or recurring cancer.

The first MRD test is expected to be launched from Quest Diagnostics’ Oncology Center of Excellence in Lewisville, TX, early this year. Quest Diagnostics’ latest collaboration with Ultima Genomics aims to improve patient access, affordability and outcomes by expanding the use of highly accurate, cost-efficient and high-volume whole genome sequencing for fast-growth areas, such as solid-tumor MRD testing.

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Presently carrying a Zacks Rank #3, DGX surpassed the earnings estimates in each of the trailing four quarters, the average being 3.07%. Over the past year, shares of the company have decreased 9.2% against the industry’s rise of 8.7%.