Invest in the future of cancer diagnostics and treatment
New cancer diagnostics and treatments mean the disease is no longer the death sentence it once was. Here's how you can back these developments
“Nothing is as complex as cancer, which is aptly called the emperor of all maladies,” says Servaas Michielssens, head of healthcare at asset manager Candriam. The emperor has been expanding his dominion. The number of cancer cases has been on the rise recently. That's partly due to populations ageing, but is also a result of the fact that they're getting fatter. Worryingly, the average age of onset of some conditions, such as colorectal cancer, is getting younger and younger as a result, says healthcare investor Paul Major.
The earlier you catch the cancer, the better chance of survival and the less money that healthcare systems have to spend treating patients, says Moritz Dullinger of Pictet Asset Management. There is “a tremendous amount of excitement” among researchers about work to find new ways to detect cancer early. Cancer diagnostics is expected to improve in the years ahead, as Joseph Cordi, co-manager of the Impax Asset Management US Large Cap Strategy fund, points out.
Cancer diagnostics – “liquid biopsies” showing big promise
Most systems, especially in the US, are “set up for sickcare, not healthcare”, says Maryann Selfe, a global wealth and investment strategist and author of The Billion Dollar Blindspot: Why Women's Health Is the Investment Opportunity of Our Time. Diagnosis is therefore largely “reactive”, with the responsibility placed on patients to go and see their doctors when they have symptoms. But for many cancers, that may be too late – by the time symptoms have emerged, the cancer may have become untreatable.
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Even the few proactive cancer screening programmes that currently exist have their limitations. Mammography, for example, has been proven to help spot breast cancer early, but it “doesn't necessarily spot all types of breast cancer equally well”, says Simon Vincent, chief scientific officer at Breast Cancer Now. That's especially true of lobular breast cancer, which accounts for around 15% of all breast cancers. Not everybody takes up the offer of going for mammograms – all the four parts of the UK are not currently meeting their targets – and the offer is limited to specific age ranges. Overworked GPs may be reluctant to order tests for those outside these groups.
Amanda Rice, founder and CEO of Chick Mission, who has survived cancer three times, has experienced such failings first hand. She went to the GP in her 30s concerned about her symptoms, but was dismissed by her doctor, who thought that at her age it was unlikely to be anything serious. She had to do a lot of pushing to get the tests she needed before she was formally diagnosed with breast cancer. Had she not been so persistent, she would probably have accepted her doctor's reassurance or skipped the additional tests because they were “so painful, invasive and costly”.
The limitations of traditional cancer diagnostic methods have led to a search for blood tests that can diagnose cancer. These “liquid biopsies” test for “circulating tumour DNA” (ctDNA), which are small fragments of DNA released into the bloodstream by cancer cells. The aim is to come up with tests sensitive enough to pick up even tiny amounts of such DNA and hence catch the disease at an early stage, says Major. Some tests screen for mutations associated with individual cancers, but the ultimate goal is to produce a “multi-cancer early detection test” (MCED) that can identify a range of cancers and which you can take every few years.
A big challenge is that any test needs not only to be sensitive enough to detect the presence of disease at an early stage, but also have the specificity to avoid large numbers of false-positives, which would clog up healthcare systems and cause patients unnecessary stress. It must also be affordable. Meeting all three criteria is tough. Diagnostic firm Grail's Galleri MCED recently failed in a large trial, which found that its test “wasn't quite effective enough and produced too many false-positives for the NHS to use”, says Major.
Despite these setbacks, there is optimism that liquid biopsies will become “incredibly valuable”, especially for cancers where there is no specific screening programme, or for ones that currently go undetected until they've started to spread around the body, says Vincent. The market for liquid biopsies was already worth between $5 billion and $10 billion in 2025 and is estimated to reach $10 billion-$20 billion by the end of the decade, reckons Erin Xie, managing director and portfolio manager for health sciences at BlackRock.
Blood tests that screen for a wider range of potential signs of cancer are likely to be more successful in diagnosing cancer than those which use ctDNA alone, says Major. One company working on this is DXcover, which was spun out of the University of Strathclyde, Glasgow. Its MCED screens for proteins, lipids and carbohydrates as well as DNA to detect whether cancer is present, its CEO Matthew Baker explains. Trials have suggested that such tests can detect malignant brain cancer with a sensitivity of 86%, even though only a small number of brain cancers shed ctDNA. They might also detect a broader range of cancers at the very earliest stages.
Some cancer diagnostic tests might not even need a blood sample. A test developed by Serox, for example, uses surface-enhanced raman spectroscopy to identify cancer in urine in under three minutes. That makes it much easier to screen, as getting samples will not require trained phlebotomists, as Serox's founder and CEO Cici Muldoon explains. Serox is working on a lateral-flow style stick that works in a similar way to a pregnancy test. Serox is still in the early stages of raising money and is working with John Radcliffe Hospital in the UK and Massachusetts General Hospital in the US.
From diagnosis to treatment
Detecting disease is “only part of the equation”, says Michielssens. Cancer diagnostic tests also have a role to play in directing treatment (companion diagnostics) and in detecting minimal residual disease (MRD) – the small number of cancer cells that may remain in the body following otherwise successful treatment. They can also help determine whether a treatment is working. For example, ctDNA is released when tumour cells die, so a sudden increase in levels of ctDNA immediately after treatment can indicate that the treatment is working.
Similarly, other more complex genetic tests, including those provided by companies such as PacBio, “can give an indication as to whether a patient's cancer is becoming resistant to a particular treatment”, says vice-president Neil Ward.
Another company operating in the area where cancer diagnostics and personalised medicine overlap is CanCertain, which has developed a test that enables clinicians to “pre-screen cancer treatments on the patient's own cells”, says its business development director Dharmesh Mehta. Circulating tumour cells are extracted from patients' blood and then exposed to potential treatments so that the oncologist knows in advance what is likely to work and what is likely to fail. CanCertain is working with The Christie NHS Foundation Trust in Manchester and the University of Leeds to test the technology.
Even if initial therapies treat the cancer successfully, patients typically have to undergo adjuvant treatments, such as chemotherapy and radiotherapy, to eliminate any lingering cancer cells. Patients are then monitored to see if there is any evidence that the cancer has come back, says Gareth Powell, head of healthcare at Polar Capital. Liquid biopsies may in many cases reduce the need for adjuvant therapy and enable quicker follow-up treatment if the cancer returns, says Powell. The fact that there are nearly 20 million cancer survivors in the US alone suggests that there is a great demand for accurate MRD tests, says Michielssens.
A revolution in scanning technology
Alongside the development of more efficient blood tests, imaging and radiology is also starting to undergo its own revolution. While the average MRI machine “isn't fundamentally different from the first machines produced by Peter Mansfield and his team nearly 50 years ago, they are lighter, can fit in smaller locations and don't need as much power”, says Lizzie Tuckey, managing director at imaging platform Scan.com. Advances in AI are also transforming the software that is used in the machines.
AI has made the process of taking a large number of images of the body and then combining them much more efficient, allowing radiologists to get away with fewer images without reducing the quality of the final image. This in turns means that each patient now needs to spend less time inside the scanner, which means that more patients can be scanned, bringing down costs. In the case of CT scans, the fact that the patient is in the scanner for less time means that their exposure to radiation is reduced. AI is also very good at spotting small changes over time.
One firm using AI to cut both the cost and duration of MRI scans is Ezra, part of Function Health. Ezra already offers comprehensive scans for most organs and tissues, which take only 22 minutes, “typically the time most other providers would take to scan a single major organ”, says founder and CEO Emi Gal. The firm hopes that by next year it will have reduced this time to 15 minutes and has set a medium-term target of five minutes for repeat visits.
Such a premium product comes at a price – Ezra's multi-organ scan currently costs £1,299 in the UK. But prices are falling and Gal indicates that he hopes to cut the US price to around $500 soon. Once this happens, having an annual MRI scan to track all sorts of changes in the body “could become something that everyone does, in the same way that we give smokers low-dose CT to screen for lung cancer, or give women who are over a specific age regular mammograms”.
Going forward, the technology is only likely to continue to make scans quicker and cheaper as we already see in the “explosion” in the number of patents filed (traditionally a good leading indicator of future development) and the number of devices approved. At the time of writing, the Food and Drug administration, the US regulator, has approved 1,451 AI-enabled medical devices, “of which around 80% are in the field of radiology”, say Robert Wiseman, Rob Sackin and Alexander Frank of Reddie & Grose patent and trade mark attorneys.
Improving the patient's journey
As well as improving medical imaging, Wiseman, Sacklin and Frank think that AI could help speed up blockages in “the patient's journey”, by making sure that patients get referred to the right specialists, that the proper tests are carried out, and that these tests are then analysed appropriately. The legal uncertainty surrounding software patents makes this sort of development less publicly visible, but they reckon that beneath the surface there is plenty of work going on in this area.
One company at the forefront of using AI to bring together the vast amount of medical information available to doctors is xCures, a service platform that “basically aggregates, organises and structures medical records”, says CEO Mika Newton. Instead of doctors “having to read thousands of pages of medical records and then manually input the information into their own system, the information can automatically be extracted, enabling them to see all the important information quickly”. The technology can, for example, convert unstructured records, such as scans and medical notes, into a more structured form.
In the longer run, speeding up the flow of information through the medical system could be helpful in cancer diagnostics, enabling researchers to find new connections between various symptoms and cancers that human researchers might be unable to spot on their own.
Only 5% of cancer patients are currently involved in some sort of clinical trial, so opening up medical records in this way (with appropriate consent) could speed up developments in both the diagnosis and treatment of cancer.
AI can also help hospitals and healthcare systems decide how to choose between the various cancer tests that are suddenly appearing on the market – many of which are built by small companies with very specific applications, say Flann Horgan and Mitchell Goldberg of NTT Data. NTT Data has recently developed a platform, in conjunction with the Royal Marsden Hospital and the Institute of Cancer Research, that helps researchers “evaluate lots of different algorithms without having to fly all over the world, and then integrate them into their workflow”.
The best cancer diagnostic investments to buy now
Until recently, one of the leading players in the liquid biopsy market was Exact Sciences. It had several of its tests approved and had developed Cancerguard, a separate blood-based multi-cancer early detection (MCED) test. This year, the firm was acquired by Abbott Laboratories (NYSE: ABT). While liquid biopsy is only part of Abbott, which also sells medicines and cardiovascular devices, the deal gives Abbott a strong foothold in the area. Indeed, Grégoire Biollaz of Pictet Asset Management points out that Exact Sciences with its high-teens revenue growth adds a faster-growing segment to Abbot's Diagnostics division. Abbott trades at 17 times expected 2027 earnings and pays a yield of 2.5%.
A purer play on liquid biopsies is Guardant Health (Nasdaq: GH). It has already had a blood test for colorectal cancer approved – a more convenient alternative to the current stool-based test. The colorectal test is, however, really “just a proof of concept” for Guardant's more ambitious medium-term plans for further MCED tests, says healthcare investor Paul Major. Guardant is also developing tests that will help guide treatment as well as one to detect residual levels of cancer. It isn't yet making any profit, but its revenues more than tripled between 2020 and 2025.
Major is also a big fan of Adaptive Biotechnologies (Nasdaq: ADPT). It has already developed clonoseq, a test approved by the US regulator to detect the presence of residual tumour cells in lymphoid cancers. It can be used to inform decisions around treatment, sparing many patients unnecessary chemotherapy, and is also used by many drug companies in clinical trials to evaluate the effectiveness of drugs. Like many biotechnology companies, it is currently losing money, but sales are rocketing. Major believes that it is a prime takeover target for a large company looking to acquire its core technology.
The leading imaging company in the US is RadNet (Nasdaq: RDNT). As Polar Capital's Gareth Powell explains, RadNet has found a way to undercut hospitals, which means that many US insurance companies will try to get patients to use the company's services. It has been investing large sums in developing AI that can read scans, which has been validated in clinical studies, and the firm is in the process of rolling it out. The stock trades at a pricey 57 times estimated 2027 earnings, but revenues have essentially doubled between 2020 and 2025. It is expected to keep on growing strongly.
Siemens Healthineers (Frankfurt: SHL) is “in a very good position” when it comes to producing MRI and CT scanners, say Dullinger and Biollaz. Siemens also makes a wide range of medical devices and its laboratory division will benefit from any rise in the volume of blood tests being carried out. Sales have grown by two-thirds between 2020 and 2025 and the stock trades at only 15 times 2027 earnings. The yield is 2.9%.
Finally, Dan Buckley of Daytrading.com likes Illumina (Nasdaq: ILMN). It provides a lot of the infrastructure necessary in the use of genomics in diagnosing cancer and the use of diagnostics in informing treatment. The stock trades at 23 times 2027 earnings.
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