3 Stocks To Consider In Molecular Diagnostics

by: Mel Daris

Medical professionals typically rely on molecular diagnostic testing to determine the presence of potentially fatal diseases such as HIV, kidney disease, Hepatitis C, cancer, and malaria. From a blood, urine, or tissue sample, clinicians can examine small amounts of DNA/RNA to identify the type of disease present. Realistically, the profit potential for companies that specialize in these testing procedures and equipment seems limitless - as long as there's a market for these types of tests, companies can earn a steady income for many years.

In addition to testing patients that exhibit specific symptoms of a disease, more and more at-risk patients undergo now DNA testing as a precautionary measure. So far, conducting molecular diagnostic tests, even on patients who do not show signs of illness, have not posed any health risks. For those at-risk for kidney disease, for example, testing before the kidneys show signs of advanced damage may help save lives. DNA testing for genetic or hereditary diseases may also help reduce fatalities if physicians can treat the disease early before it causes permanent damage to the body.

The Molecular Diagnostics Market

Increased demand and profits have helped propel the molecular diagnostics market forward - this area is estimated to experience 11% growth by 2014. For investors, this means a strong return for an indefinite period of time. For companies that develop testing procedures, competition is high, but the payoff may be worth the risk.

Infectious disease testing makes up about 60% of the molecular diagnostics market. HPV testing, for example, is expected to generate revenues of about $800 million by 2014. Testing for non-infectious diseases including cancer, prenatal and genetic diseases are also expected to rise.

Companies that provide molecular diagnostics testing services and equipment include Abbott Diagnostics, controlled by Abbott Laboratories (NYSE:ABT), and Rosetta Genomics (NASDAQ:ROSG-OLD). Abbott Diagnostics has developed testing procedures and equipment for use in hospitals, research labs, and clinics that aid in the discovery of cancer, infectious diseases, prenatal, and organ transplant acceptance. Rosetta Genomics has developed tests for specific types of lung cancer and the detection of tumors in the kidneys.

With advances in testing procedures, especially transrenal DNA diagnostics, patients can expect much less stress and pain when undergoing testing procedures. Easier procedures could compel more people to see their physician for testing. Not only will this enhance a patient's health and reduce risk of fatality, this also increases profits for companies providing diagnostic services. For the treatment of diseases in remote or poverty-stricken regions, this type of testing reduces costs and allows for the testing of more patients in less time. Early detection can provide less costly treatment options.

Transrenal DNA Diagnostics

Transrenal DNA testing (from urine) is much less evasive and uncomfortable for patients than traditional blood and tissue testing. Also, this type of testing takes less time to produce results and costs less in equipment and other costs. Over the years, transrenal DNA testing has become more sophisticated and has made a definite impact on physicians and researchers.

With growing interest from the medical community, a handful of pharmaceutical companies have developed testing procedures and devices to best extract DNA from urine. To remain competitive in this growing market, some companies have gone to great lengths to protect extraction and testing procedures, along with other items including disease markers.

Trovagene (NASDAQ:TROV), for example, recently acquired a worldwide license for markers (SF3B1) associated with chronic lymphocytic leukemia (CLL). Over the years, researchers and others have identified specific mutations in diseased cells that signal the presence of certain types of cancer. With exclusive rights to study and research these markers, Trovagene can develop proprietary transrenal testing procedures without having to worry about the competition.

The company also received exclusive rights to prenatal testing procedures after settling a lawsuit with Sequenom, another diagnostic testing company.

Over the past year, Trovagene has shown it's a fierce competitor in the transrenal molecular diagnostics arena. In addition to obtaining a license to study SF3B1 markers, the company also acquired MultiGEN Diagnostics clinical laboratory (with all assets associated with it) for expansion purposes. The company also has plans to collaborate with The University of Texas MD Anderson Cancer Center to develop testing procedures to help diagnose those with pancreatic cancer.

Investing in Molecular Diagnostics

With expected growth and profits, this may be a great time to invest in molecular diagnostics. According to a new report from Global Industry Analysts, DNA probes-based diagnostics will earn about $30 million by 2017.

Investors should pay particular attention to transrenal DNA testing as this form of molecular diagnostics could become the new standard in testing for disease. This may take several more years, however, as companies like Trovagene still require more time to ensure its testing procedures produce accurate and fast results. But from a long-term investment perspective, molecular diagnostics should provide strong and steady returns.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.