We recently compiled a list of the 10 Most Promising Cancer Stocks According to Hedge Funds. In this article, we are going to take a look at where Guardant Health, Inc. (NASDAQ:GH) stands against the other promising cancer stocks.
According to the World Health Organization (WHO), cancer remains one of the leading causes of death globally, responsible for nearly 10 million deaths in 2020, or about one in six deaths worldwide. Moreover, the World Cancer Research Fund reports that approximately 18.1 million cancer cases were diagnosed that year, with the age-standardized rate, when considering all cancers except non-melanoma skin cancer and combining data for both men and women, came in at 190 cases per 100,000 individuals. This rate was notably higher in men, with 206.9 cases per 100,000, compared to 178.1 per 100,000 in women.
Cancer drugs are usually aimed at slowing cell replication or selectively killing cancer cells at a faster rate than healthy cells. While this approach has been effective for certain cancers, innovative strategies are now emerging. These include modifying immune cells, harnessing mRNA, and improving early detection through simple blood tests. Advancing our understanding, prevention, screening, and treatment of cancer is essential for reducing its global impact, yet it comes with escalating costs—global oncology spending is expected to exceed $250 billion this year.
In response, biotech and pharmaceutical companies are in a competitive race to develop cutting-edge technologies and therapies for major cancers like lung, breast, and prostate. In that vein, targeting tumors directly with radiation is poised to be a significant breakthrough in cancer treatment. Leading pharmaceutical companies have invested around $10 billion in acquisitions and partnerships with radiopharmaceutical developers, often acquiring smaller, innovative companies to access this promising technology. Though still in its early stages, radiopharmaceuticals hold the potential to treat a wide range of cancers. The first such drugs were approved in the early 2000s, but only recently have major pharmaceutical companies shown substantial interest.
Reflecting on this trend, Guggenheim Securities analyst Michael Schmidt remarked, “Any large company that has a business presence in oncology or for whom oncology is an important therapeutic category will probably need exposure in this area one way or another.” Schmidt projects that if radiopharmaceuticals remain focused on treating specific cancers, like prostate and neuroendocrine tumors, the sector could generate at least $5 billion in revenue. However, if proven effective in treating a broader range of cancers, this figure could rise to tens of billions.
Since there is no universal cure for cancer, developing a drug capable of treating multiple cancer types is incredibly lucrative. This dynamic fuels continuous breakthroughs in the oncology market, significantly boosting its growth potential. On that front, the oncology pipeline is expanding rapidly, with over 2,000 products currently in development. Notably, 71% of these are being developed by mid-sized, high-growth biopharmaceutical firms, which have significantly increased their investment in cancer treatment innovations from 51% in 2017.
Over the past two decades, 237 new active substances for cancer have been introduced globally, with approximately 115 launched in the last five years alone. Moreover, the global oncology market was valued at approximately $201.75 billion in 2023 and is projected to exceed $518.25 billion by 2032, growing at a compound annual rate (CAGR) of 11.3% from 2024 to 2032, according to Fortune Business Insights. This expansion is fueled by rising prevalence of the disease, the introduction of new therapies, regulatory approvals, and advancing research in the field.
Our Methodology
To compile our list of the 10 most promising cancer stocks to buy according to hedge funds, we started by evaluating companies in the cancer therapy sector using ETF holdings and media analysis. We then narrowed down the list to notable stocks with an average analyst upside of at least 30% and favorable analyst ratings. From this selection, we identified the top cancer companies with the most hedge fund investors, based on Insider Monkey’s database of 900 hedge funds, as of Q3 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Analysing a blood sample, a technician in a lab coat using precision diagnostic equipment.
Guardant Health, Inc. (NASDAQ:GH)
Average Analyst Upside: 44.9%
Number of Hedge Fund Holders: 28
Guardant Health, Inc. (NASDAQ:GH) is a prominent company in precision oncology, providing advanced cancer-related services like blood tests, data analysis, and global insights.
In the third quarter, Guardant Health, Inc. (NASDAQ:GH) reported $191.5 million in revenue, a 34% year-over-year increase that surpassed expectations of $170.4 million. Precision oncology revenue surged by over 35%, while development services grew by 34%. The company also raised its full-year revenue forecast to a range of $720 million to $725 million, reflecting a nearly 4% increase at the midpoint from its previous guidance. Looking ahead to next year, Guardant Health, Inc. (NASDAQ:GH) anticipates a 20% growth in clinical test volume, driven by Shield and a pivotal growth phase for Guardant Reveal.
On November 7, Leerink Partners raised its price target for Guardant Health, Inc. (NASDAQ:GH) to $60 from $50, maintaining its Outperform rating. This update followed Guardant’s strong quarterly performance mentioned above, which addressed investor concerns around potential slowing in the core G360 business and the outlook for the Shield LBx CRC screening assay. The G360 segment showed modest sequential growth, with expectations for further acceleration into 2025. Additionally, the Shield LBx CRC screening assay garnered attention after receiving a $920 Medicare reimbursement rate this quarter, with an Advanced Diagnostic Laboratory Test (ADLT) rate of $1,495 anticipated in 2025.
Overall GH ranks 8th on our list of the most promising cancer stocks according to hedge funds. While we acknowledge the potential of GH as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.