Big diagnostic companies saw a surge during the pandemic due to mandated government testing. However, the shift to at-home kits and insurance coverage led to a collapse in COVID-19 testing revenues. Now, the sector's opportunity lies in companies that have reinvented themselves by developing early cancer screening tests.
Exact Sciences (NASDAQ: EXAS) stands out in this arena with its at-home colon cancer screening kit, cologuard. Testing volumes, which dropped during the pandemic, have rebounded, with the company reporting a record 1.0 million screenings in Q2 2024. The expansion into breast, prostate, and colon cancer screenings, along with a move into precision oncology through the acquisition of Thrive Early Detection Corp. for $2.15 billion, positions EXAS as a leader in the diagnostic sector.
Guardant Health Inc. (NASDAQ: GH) offers the first FDA-approved primary screening blood test for colorectal cancer, called Shield. Covered under Medicare, Shield has an 83% sensitivity and 90% specificity for advanced neoplasia. The company has $600 million in trailing revenues and a $4.0 billion market cap, making it a significant player in non-invasive cancer screening tests.
Illumina Inc. (NASDAQ: ILMN) provides genetic testing equipment crucial for large-scale analysis of genetic variations. The company recently spun off its diagnostics business, Grail Inc. (NASDAQ: GRAL), which focuses on early cancer screening through its Galleri test. Funded with a one-time cash payment of $923 million, Galleri tests for 50+ types of cancer using DNA sequencing technology from Illumina platforms, awaiting FDA approval.
Ludwig Enterprises Inc. (OTCMKTS: LUDG) is an emerging disruptor with mRNA testing technology aiming to revolutionize the diagnostic screening industry. The company's Lab Developed Test (LDT) for breast cancer, set to launch in October, boasts a 97% sensitivity rate and uses AI algorithms for a personalized inflammatory index. The test kits, priced at $249, will leverage direct-to-consumer viral marketing strategies.
As the diagnostic sector pivots towards early cancer detection and innovative testing technologies, these four companies represent a diversified investment opportunity, reflecting the industry's potential for significant growth and adaptation in the post-pandemic landscape.
