5 Attractive Ways to Invest in Oncology

Drug development is a high risk and high reward proposition. For those comfortable with this trade-off, several top investment experts, and contributors to MoneyShow.com, offer their favorite ideas in oncology detection and treatment. Mike Cintolo, Cabot Top Ten Trader Incyte Corp. develops small molecule drugs to treat cancer and inflammatory diseases. Most of the company's current value derives from sales of its commercial drug, Jakafi, which is the standard-of-care drug in myelofibrosis and is also approved for patients with polycythemia vera, a condition in which the bone marrow makes too many red blood cells. This blockbuster treatment is also being evaluated for acute graft-versus-host disease (GvHD), and has a key data readout due in the second half of 2019. Baricitinib is the most advanced pipeline drug and was recently fast tracked by the FDA for the treatment of systemic lupus erythematosus (SLE). Then there is itacitinib, which is also being evaluated for GvHD, with a data readout due this year. Incyte recently reported fourth-quarter 2018 results (revenue up 25%, EPS of $0.40 way ahead of last year's tally) that pleased Wall Street, so investor attention continues to be centered on the pipeline. There's obviously some risk going forward with the numerous data readouts, but Incyte has a combination of solid current growth and profitability, as well as a few big potential hitters in the pipeline. Array Biopharma develops targeted small molecule drugs to treat patients with rare diseases and cancer. It's an exciting story because one year ago Array had six drugs progressing through trials that were either owned by Array or part of collaborations; fast forward to today and Array now has BRAFTOVI (encorafenib) capsules and MEKTOVI tablets on the market for BRAF-mutant inoperable or metastatic melanoma. Those two drugs delivered $23 million in sales for the December quarter, demolishing consensus estimates of $15 million to $16 million. This two-compound treatment is believed by many analysts to be on track to become the go-to choice in BRAF melanoma, mainly because of a more favorable tolerability profile than other combinations. Array also has other irons in the fire, most notably the encorafenib-cetuximab combination for metastatic colorectal cancer that's expected to deliver a phase 3 trial readout (BEACON trial) in the first half of this year. Array has collaborations with many of the big biotech players, so factoring in collaborations (and a big milestone payment), second-quarter fiscal 2019 revenue was $82.6 million (up 96%), while EPS of -$0.05 beat by $0.10. Analysts see 44% revenue growth this year and another 32% in 2020, which should keep big investors interested. John McCamant, The Medical Technology Stock Letter In our view, Myovant Sciences is poised for significant value creation in the next 6-12 months. In their most recent quarterly update, the company highlighted Relugolix and emphasized that all important timelines remain on track for top-line Phase III data readouts in uterine fibroids from LIBERTY 1 and 2 expected in the second quarter and third quarter, respectively. In addition, the HERO data in advanced prostate cancer is still expected in the fourth quarter. The timeline for endometriosis data from the Phase III SPIRIT trials did, however, slip with top-line data now anticipated in the first quarter of 2020; previous guidance was this year. It looks like slow patient recruitment during the holiday season had an effect and represents a short delay. With multiple data readouts due to be reported before SPIRIT, the company remains in position for significant catalysts in 2019 despite the endometriosis delay. In our view, all three indications for relugolix have already been clinically de-risked and with $183 million in cash, MYOV is sufficiently resourced through the important upcoming Phase III readouts. It is not surprising to us to see additional Wall Street sponsorship (Barclays) for Myovant given the fact that the company has several near-term high-profile catalysts representing opportunities for significant value creation. This comes on top of a J.P. Morgan analyst making Myovant one of their top picks for 2019 back in January. Sponsorship can be particularly important for a very low volume stock like Myovant as there appears to be little supply to soak up any increased volume. Orilissa -- from AbbVie -- is priming the market as they have begun a national advertising campaign with TV commercials to raise public awareness for new therapies to treat pelvic pain caused by either uterine fibroids or endometriosis. This patient awareness campaign is important as there are currently no effective treatments for either affliction. Lastly, with a late stage, de-risked wholly owned asset (x-Japan), the company is a prime takeover candidate. Jon Markman, Strategic Advantage Testing for cancer might soon be as simple as drawing a vial of blood. That is the ultimate promise of Guardant Health , a precision oncology company. The Redwood City, Calif., company came public last October, and it was a humdinger. Even after bumping the initial offering price to $19, from a range of $15 to $17, shares still jumped 70%. And that was only the beginning. Investors should pay attention. This stock has plenty of room to run. It's hard not to like Guardant. The story is so good. The company is using cutting-edge big data, machine learning and genomic sequencing techniques to help clinicians diagnose cancer cheaper and more effectively. Ultimately, the goal is to develop a test capable of detection. Helmy Eltoukhy, chief executive officer and co-founder, is a genomics wunderkind. The Stanford grad developed the first semiconductor sequencing platform while working on his PhD at Stanford Genome Technology Center. He founded Avantome in 2007, a sequencing firm acquired by Illumina only a year later. In his new role as senior director of advanced technology research at Illumina, Eltoukhy paired up with Amir Ali Talasaz, the senior director of diagnostics research, and fellow SGTC alumni. Amir Ali's company, Auriphex Biosciences (also acquired by Illumina in 2008), performed advanced research on circulating tumor cells for cancer treatment. The pair formed Guardant Health in 2012. That kind of star power attracts capital. Prior to its IPO, the company had seven funding rounds, raising $550 million from the likes of Softbank, Sequoia Capital, T. Rowe Price, Khosla Ventures and Lightspeed Venture Partners. Guardant's liquid biopsy lets oncologists see all of the genomic information of a patient's tumor with a simple blood test. The alternative is a tissue biopsy, which can be expensive and risky. Guardant's secret sauce is applying digital communication algorithms to the process of DNA sequencing. Whereas tissue biopsies look at the tumor only, this process reveals the entire genome. It also means the science works across all cancers. Moreover, the company asserts its system of its machine learning, coupled with big data analytics lead to a vast reduction in the error rate. The current business model involves payments from traditional health insurers striving to cut costs, and big pharmaceutical companies looking for patients for clinical trials for new drugs. Those sources led to 97% revenue growth in fiscal 2017. The company is at the intersection of data science and life sciences. It is well into its plan to use its liquid biopsy test on 1 million patients by 2022. If successful, it would bring a treasure trove of data. It might also deliver Guardant's promise to develop a test for cancer detection. The play for investors now is the run up to that goal. This is a stock to put on your radar. Todd Shaver, Bull Market Report Bristol-Myers Squibb is doing extremely well, with both the top and bottom line expanding twice as fast as the market as a whole. Business is booming. Costs are stable. And oncology drugs already account for 65% of all sales and are growing at least 25% a year, more than enough to make up for slowing franchises elsewhere in the company. Management's outlook remains solid. They're looking for roughly $4.15 a share in profit this year, about what we expected. However, while the market initially applauded these numbers as proof that Bristol-Myers is a great company, the elation ebbed when people started fixating on the company's decision to pull an FDA application in order to collect more convincing data from an ongoing trial. However, we are not alarmed. If management thinks they can produce evidence that lung cancer patients live longer on a combination of Bristol-Myers drugs, it's probably better to make sure the regulators have the most compelling argument available. And since that data won't be available until sometime between now and the end of June, it's better to pull the application instead of running the risk that the FDA will make up its mind before better facts come in. Bristol-Myers needs this application to win approval. So much energy on Wall Street is wrapped up in making sure this company can expand its oncology franchise and fend off competitors in lung cancer in particular. We'd rather they raise the odds of approval even if it means waiting another few months to resubmit the application and then another year for the FDA to review. In the meantime, we're looking at a multiple around 12X earnings here and a yield of 3.2% to reward you while you wait for satisfaction. We've waited almost three years for Bristol-Myers to prove itself. One way or another, that patience will either be rewarded soon or we'll find the best place to exit. And remember, we're also getting Celgene biotech programs here once that $75 billion merger closes.

5 Attractive Ways to Invest in Oncology

Experts offer their top stock ideas in oncology detection and treatment.

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