According to data released late last year from the Bureau of Labor Statistics, the health care sector is on pace to be the biggest source of jobs growth over the next decade. Based on its findings, the top three prospective job growth industries all hail from the health-care sector -- home health care, individual and family services, and outpatient, laboratory, and other ambulatory care services – with expected growth of 60%, 54%, and 45%, respectively.
Yet, for all intents and purposes speculative traders are nothing short of obsessed with marijuana stocks since the beginning of the year. With the passage of personal use laws in Colorado and Washington state and nearly two dozen states now allowing marijuana to be prescribed for medicinal purposes, many people now view marijuana, currently a schedule 1 drug according to the Drug Enforcement Agency, as the next great investment opportunity.
On one hand the innovation behind marijuana research is astounding. GW Pharmaceuticals (NASDAQ:GWPH), for instance, has discovered five dozen different cannabinoids from the cannabis plant. GW hopes to effect positive biologic changes to treat diseases and disorders such as MS-related spasticity as well as pain associated with cancer. At the moment GW has one product approved in more than a dozen countries (Sativex) to treat MS-related spasticity, although it's not currently approved in the U.S. (though GW is running three phase 3 studies on Sativex for cancer pain in the U.S.).
But dig a bit deeper and you'll discover that most of the marijuana trade right now is nothing more than a bunch of smoke. Tough federal regulatory laws may make an expansion of marijuana use on a medical and/or personal level difficult or unlikely. In addition, convincing physicians to prescribe drugs derived from cannabis plants may prove tough given that it remains a schedule 1 drug.
Instead of investing in marijuana and possibly watching your investment go up in smoke, you should seriously consider these three other health-care trends which could provide more robust growth potential than marijuana over the long run.
According to a study from IMS Health released last month, global spending on cancer drugs and supportive care medicines grew 5.4% last year to a whopping $91 billion. This is up from $71 billion in 2008 and just $37 billion a decade ago. Furthermore, the World Health Organization in February released a report citing that worldwide cancer incidence would rise by 57% over the coming 20 years to approximately 22 million persons. In sum, it's no reason why biopharmaceutical companies are throwing billions at cancer research.
One novel subcategory within cancer research that's gained a lot of accolade in recent years is cancer immunotherapies, or drugs which teach your body's immune system to recognize cancer cell signatures and to attack those cells. The idea here is that your body's immune system is your best line of defense compared to targeted chemotherapeutic agents, so retraining it to fight cancer may improve progression-free survival time, but it may also extend overall survival and improve a patient's quality of life.
There are risks with any investment, and the primary risk associated with cancer immunotherapies is that it's a largely unproven area of research. There are countless early and midstage studies that demonstrate the positive effects of cancer immunotherapies, but the now infamous drug launch stumble of Dendreon's late-stage prostate cancer vaccine Provenge still stings immunotherapy enthusiasts.
Galena is currently in the midst of a crucial phase 3 study involving NeuVax, its adjuvant therapy designed to help patients with HER2-negative breast cancer remain disease-free. In the final results for its phase 2 study just 5.6% of NeuVax treated patients had a cancer recurrence compared to 25.9% for the control arm, for an overall recurrence reduction of 78%. Reducing breast cancer recurrence would be a big step in the right direction for patient care considering that it's the second most commonly diagnosed cancer type in the U.S., behind only prostate cancer.
Northwest Biotherapeutics, or NW Bio for short, has two particularly intriguing candidates working their way through clinical studies in DCVax-L and DCVAx-Direct. DCVax-L is being designed in the U.S. as a possible treatment for glioblastoma mulitforme, the most aggressive type of brain cancer, and was recently approved in Germany via a hospital exemption that will allow NW Bio to market its product for all types of brain cancers within the country for a period of five years. Just this week we also received incredibly encouraging data on DCVax-Direct whereby all nine patients with inoperable solid tumors that had received the fourth of their six-course injection treatment exhibited some level of clinical response, ranging from tumor cell death to disease stabilization.
These are two names to keep a close eye on, although both are clinical-stage biotechs burning through cash -- so think carefully about your risk tolerance!
Robotic-assisted surgical tools
As the reliance on technology increase in the medical field my initial impression was to throw out the idea that cloud-based health-care information system service providers may crush marijuana stocks. However, many of these plays have already seen enormous runs, so I decided to shelve that idea and look at the broader use of technology within the medical field which led me to this: robotic-assisted surgical tools.
There is perhaps no bigger player in robotic-assisted surgery than Intuitive Surgical (NASDAQ:ISRG), the developer of the da Vinci robotic surgical system which helps perform precise soft tissue surgeries. The concept behind robotic surgery is simple: it's incredibly precise and utilizes smaller incisions which can lead to quicker recovery times for the patient. As the technology and training behind these surgical systems improves, we should see them used by more and more hospitals, thus the huge market opportunity.
Of course, like cancer immunotherapies even robotic-assisted surgical devices have their risks. For example, the FDA is currently investigating the safety and efficacy of the da Vinci surgical system based on an increasing number of complaints from patients. I would contend, though, that the ratio of complaints per procedures performed has remained steady since the da Vinci surgical system was introduced. In essence, more procedures has led to more complaints, but no more complaints per procedure than we'd seen in the past.
In addition, the Affordable Care Act, also known as Obamacare, will play a key role in determining the success of the da Vinci surgical system. Because Intuitive's product isn't cheap – the system costs just shy of $2 million – hospitals have used uncertainties associated with the implementation of the ACA as a fallback to remain skeptical and holster their capital expenditures. Intuitive will need hospitals to step up their spending in order to thrive over the long-term.
But, Intuitive also has a major advantage over its peers – namely, networking. Because Intuitive introduced its first da Vinci surgical system 15 years ago it's been able to sell, support, and service its system, as well as train physicians across the country. Its peers combined don't even have a fraction of the customer network that Intuitive has built across the U.S. What this means for investors is strong pricing power for its da Vinci systems and minimal serious competition at least for the next couple of years.
Lastly, as something of a complement to a growing number of cancer incidences in this country and the expectation that preventative care visits are going to soar with more people insured under the ACA, I believe diagnostic product developers have a chance to handily outperform marijuana stocks.
One of the most crucial components to successfully treating cancer patients is choosing the right medication pathway. For physicians it's not always clear which therapeutic agent to prescribe since no two people are alike and multiple competing treatment options often exist. Cancer diagnostic tests should help personalize the treatment process, allowing patients to receive the right choice of care upfront.
Similarly, the passage of the ACA could create a wave of preventative care visits by citizens, opening the door for rapid, on-site oral fluid diagnostic kit developers like OraSure Technologies (NASDAQ:OSUR) to profit from this health-care shift. OraSure's in-home HIV test and its hepatitis C diagnostic could see their usage surge as more effective medications meant to eradicate or curb the progression of these diseases is introduced. With 3.2 million people having hepatitis C in the U.S. according to the Centers for Disease Control and Prevention, and most unaware they have the disease, OraSure and other diagnostics developers could stand to see a surge in demand over the coming decades.
Of course, like the previous two health-care trends, keep in mind that even diagnostic product developers aren't without risks. Many of these companies are reimbursed by Medicaid or Medicare patients, and the ACA is slowly reducing the reliance of businesses on government-sponsored care. If diagnostic manufacturers are unsuccessful in luring more individual payers toward their products they could struggle to grow their top- and bottom-line without a large influx of new consumers.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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