2 Biotechs with Big Rally Potential

07/18/2011 12:11 pm EST

Focus: STOCKS

Innovative new prostate cancer tests from these companies could fill a critical need as well as serve as catalysts that drive both stocks higher…eventually.

The death rate for prostate cancer has dropped since 1990, when the first early-detection tests became fairly common. Is this drop due to improved screening or better prostate cancer treatments? The medical community can’t seem to agree.

One thing that seems indisputable is the need for a better test, one that can help determine if the patient diagnosed with prostate cancer should just be watched closely or treated immediately with surgery. 

The urgency for an improved test is reflected in the 200,000 cases of prostate cancer that occur each year in the US alone. Prostate cancer is the second-leading cause of cancer death among men.

Two diagnostic companies appear to be making progress on the prostate cancer diagnostic front: Myriad Genetics (MYGN) and Genomic Health (GHDX). Both are seeking to find an alternative to the industry standard, the prostate-specific antigen (PSA) blood test, and capitalize on a market opportunity estimated at $740 million in the US.

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The PSA test has done yeoman’s work in the fight against prostate cancer. But it’s far from ideal; neither it nor the other popular diagnostic method, the digital rectal exam, is 100% accurate. These tests can have abnormal results even when cancer isn’t present and give normal results when cancer is present.

Another drawback is that the PSA test can’t tell how dangerous the cancer is. This is important because some prostate cancers grow so slowly that they would likely never cause problems. In fact, because of a merely elevated PSA level, some men may be diagnosed with a prostate cancer that they would otherwise have never even known about. It would never have lead to their death or even caused any symptoms.

But those patients may still be treated with either surgery or radiation, either because the doctor can’t be sure how aggressive the cancer might be, or because the men are uncomfortable not having any treatment.

Moreover, treatments like surgery and radiation can have side effects that may seriously affect a man’s quality of life, including urinary, bowel, and/or sexual problems.

Both Myriad and Genomic Health are applying gene technology to determine which are the aggressive forms of prostate cancer.

Myriad released its prostate cancer test to the market in April 2010. Since then, the company has been striving to gain the clinical proof it needs to get gain greater acceptance of the product among insurers and physicians. The company got a boost in February, when an article in The Lancet Oncology reported that British researchers who used genetic markers in Myriad’s test were better able to predict outcomes of patients with prostate cancer.

Genomic Health already has gene tests for breast and colon cancer on the market and recently concluded initial feasibility and gene identification studies for its prostate cancer test. The study found evidence that a gene test could provide valuable prognostic information.  

Genomic plans to conduct a clinical validation study with its finalized genomic assay in 2012. Depending on the success of the study, the company hopes to begin sales of the test in 2013.

By Barry Cohen, health care writer, InvestorPlace.com

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