Big diagnostic companies soared during the COVID-19 pandemic thanks to mandated government testing. However, the introduction of at-home kits and shifting insurance policies led to a collapse in revenues from COVID-19 tests. Companies that relied heavily on pandemic-related revenues faced significant downturns. The opportunity now lies with diagnostic companies that reinvented themselves by developing early cancer screening tests.
The pandemic caused a significant delay in regular cancer screenings, as medical resources were diverted to fight COVID-19. With the pandemic largely behind us, diagnostic companies that adapted are now on the upswing. One such company is Exact Sciences (NASDAQ: EXAS), known for its at-home colon cancer screening kit, Cologuard. Their brand recognition and national audience have helped them recover from the pandemic-induced decline in testing volumes. In Q2 2024, the company achieved a record 1.0 million screenings and expanded its cancer indications to include breast, prostate, and colon cancer. Additionally, Exact Sciences ventured into the blood-based multi-cancer space by acquiring Thrive Early Detection Corp. for $2.15 billion, enhancing their precision oncology capabilities.
Exact Sciences boasts $2.6 billion in trailing revenues and a market cap of $10.3 billion, making it a leader in the diagnostic sector. With strong earnings and a solid balance sheet, the company offers a promising return for risk-averse shareholders.
Guardant Health Inc. (NASDAQ: GH) is another key player, offering the first FDA-approved primary screening blood test for colorectal cancer, known as Shield. Covered under the Medicare reimbursement program, Shield has an 83% sensitivity and 90% specificity for advanced neoplasia. Guardant Health has $600 million in trailing revenues and a market cap of $4.0 billion, positioning it as a significant player in the non-invasive cancer screening market.
Another strategic approach to the diagnostic market is investing in industry suppliers like Illumina Inc. (NASDAQ: ILMN). Illumina provides genetic testing equipment that enables large-scale analysis of genetic variations. Their next-generation sequencing platforms and bioinformatics software are used in genomics research, clinical applications, and molecular diagnostics. Illumina recently spun off its diagnostics business, Grail Inc. (NASDAQ: GRAL), which focuses on early cancer screening for asymptomatic individuals. Grail's leading product, Galleri, is a multi-cancer early detection blood test that screens for over 50 types of cancer. With a one-time cash infusion of $923 million from Illumina, Grail is awaiting FDA approval for Galleri.
For investors seeking higher returns, Ludwig Enterprises Inc. (OTCMKTS: LUDG) presents a compelling opportunity. Specializing in mRNA testing technology, Ludwig Enterprises aims to revolutionize the diagnostic screening industry with less invasive tests. The company's upcoming product launch in October, coinciding with Breast Cancer Awareness Month, is expected to generate significant revenue. Ludwig Enterprises' Lab Developed Test (LDT) will initially target breast cancer screening, utilizing AI algorithms to create personalized inflammatory indexes. With a 97% test sensitivity, the LDTs are processed at the Genetics Institute of America, bypassing the need for FDA approval.
As the diagnostic sector rebounds, these four companies represent a diversified basket of stocks that investors should consider. Each company has demonstrated resilience and innovation, positioning themselves for growth in the post-pandemic landscape.
