Now is a great time to have biotech stocks in your portfolio. Although biotechnological investment can be scary because small-cap companies are often unprofitable research and development laboratories, there is also a lot of innovative science going on here.
Let's see how Mirati Therapeutics  (NASDAQ: MRTX) Iovance Biotherapeutics (NASDAQ: IOVA) and Personalis (NASDAQ: PSNL) uses all gene therapy in the fight against cancer.
. By using genetic research to inhibit the genes responsible for cancer growth
Mirati Therapeutics is in a race with Amgen (NASDAQ: AMGN) to find a drug that successfully inhibits KRAS- mutations. KRAS is a gene in our bodies that has been identified as a cause of several cancers. Right now, one of Mirati's medications targeting a specific sub-mutation has been identified as KRAS G12C. This genetic malfunction is seen in 14% of non-small cell lung cancer, 5% of colon cancer and 2% of pancreatic cancer. The company's drug is an attempt to shut off this mutated gene, so it will stop producing cancer cells.
Investors who want to play it safe may want to invest in Amgen, not Mirati; Amgen is also pursuing medication to inhibit KRAS mutations. Imgen, however, is a very profitable $ 130 billion biotech with multiple drugs in clinical trials. If the KRAS program fails, Amgen's stock will take a minor hit, and the company will continue on and on. On the other hand, if Amgen and Mirati are both right in the importance of KRAS genes, Mirati shareholders are likely to see far greater returns on their investments. With the smaller biotechnology, the risk is higher, but the benefits are greater.
Mirati is a small $ 4 billion roof with extensive knowledge of KRAS. Failure here would be brutal for the stock. On the other hand, any success will increase the stock in the stratosphere. So far, Mirati investors have won big. Amgen has returned 56% to investors over the past five years, which underperformed the S&P 500 but tiny Mirati has returned 523%.
2. Using the body's own immune system to destroy cancer
Iovance Biotherapeutics introduces a new way to fight cancer. The company relies on medications that are specialized for each patient. When a cancer begins to attack your body, the system begins to produce lymphocytes designed to infiltrate and attack the tumor. Cancer cells adopt and mutate to avoid destruction.
What Iovance does is remove some of these cancer-fighting agents, referred to as tumor-infiltrating lymphocytes (TIL), from your body. The company's technology amplifies and multiplies these cells in the lab and creates billions of them. Then your own anticancer drugs are injected back into your body.
Iovance is running a Phase 3 trial for Lifileucel, its treatment of skin cancer. But what causes the most excitement is the LN-145, which is tested on several cancers. The company is running a phase 3 trial for cervical cancer, and a phase 2 trial for head and neck cancer. The MD Anderson Cancer Network also runs a phase 2 test on LN-145 for ovarian cancer and sarcoma.
The stock declined after it was reported that LN-145 had a 44% overall response rate to cervical cancer, and Lifileucel had a total response rate of 38% to melanoma. Iovance is a low ceiling of $ 2.72 billion. It has $ 400 million in cash, $ 12 million in debt, and no revenue. So far in 2019, it has returned 132% to investors.
3. Mapping 20,000 genes in 775,000 people
Personalis is developing the NeXT platform, a hugely ambitious company that maps about 20,000 genes in the human body. The company is spun out of Stanford University and has a contract with the U.S. Department of Veterans Affairs. The federal agency provides the DNA information to over 775,000 veterans, so with that data, Personalis is mapping over 15 billion human genes. With all these volunteers, it is developing a huge library of genetic data. Biotechs who subscribe to the service can access this information when designing cancer-fighting drugs in the lab.
The company's immediate market is all biotechnology companies engaged in cancer research. By using the library, subscribers can find cancer targets and design specific drugs to suppress the mutation genes that spread cancer in humans. Right now, Personalis has over 45 biopharma subscribers on its service. The company estimates that this is a $ 5 billion market opportunity.
Next year, Personalis hopes to compete in the $ 14 billion cancer diagnosis market. It will offer its own liquid biopsy designed to detect cancer, competing with Guardant Health (NASDAQ: GH) as well as NantHealth Grail (a startup funded in part by Jeff Bezos and Bill Gates), Thrive (a startup spun out of Johns Hopkins), and others. We do not yet know how much Personalis will charge for his biopsy, or how successful it will be.
But what we do know is that right now the company is much cheaper than the market-leading peers:
|Company||Revenue Growth||P / S Ratio||Market Cap||Stock Price Change Since Listing|
|Guardant Health||181%||32||$ 6.75 billion||146%|
|Personalis||79.8%||6||$ 325 million||(65% )|
It seems that the market is taking a wait-and-see attitude to Personalis; There is absolutely no excitement right now about the stocks. This may change when its liquid biopsy is introduced next year.
Meanwhile, Personalis is developing a very impressive library of knowledge about the human genome. Maybe one day the company competes with 23andme to offer personalized medicine to individuals (a market estimated to be worth $ 40 billion). It is definitely a stock to watch as the future looks bright.