Illumina (NASDAQ:ILMN), Mazor Robotics (NASDAQ:MZOR), and Novocure (NASDAQ:NVCR) are reshaping healthcare with innovative solutions that may produce market-beating returns for investors. Here's how these three companies are disrupting personal medicine, surgery, and cancer treatment, respectively, and why you might want to include them in your portfolio.

A person in lab coat points to a double helix.

IMAGE SOURCE: GETTY IMAGES.

Let's get personal

Precision medicine that could turn life-threatening diseases such as cancer into chronic illnesses relies heavily on genetic discoveries. Usually, those discoveries are made using Illumina's gene-sequencing machines.

The company has already installed thousands of its machines at research facilities worldwide, and recently it launched NovaSeq, a faster and more accurate sequencing tool that could someday reduce the cost of gene sequencing to less than an annual subscription to Netflix.

In Q2, management said that NovaSeq demand is running ahead of forecast, and as a result, Illumina thinks full-year sales will grow 12% and non-GAAP earnings per share will exceed $3.60, up from $3.33 last year.

Though adjusted profit growth will be slower than sales growth this year because of costs associated with NovaSeq's launch, operating margin should improve as NovaSeq volume scales up and more genetic tests are run on newly installed systems.

It's not just the company's sales of systems and high-margin consumables used in genetic sequencing that could reward investors. Illumina is on the cutting edge of making genetic discovery increasingly relevant and useful to people. For example, it owns equity in Helix, an app store that provides insight on health, nutrition, and ancestry based on a permanently stored genetic sample, and Grail, a company working on using deep sequencing to find cancer in its earliest stages.

Since Illumina is already dominating the market for gene sequencing, its technology is significantly reducing sequencing costs, and its investments are unlocking new valuable insights, I think investors who buy this stock will be rewarded hansdomely.

A surgeon performing spine surgery with a Mazor X.

IMAGE SOURCE: MAZOR ROBOTICS.

Sci-fi surgery

Investors may already be familiar with Intuitive Surgical's da Vinci, a robotic system that's increasingly used in laparoscopic surgeries, but they might also benefit from getting acquainted with lesser-known Mazor Robotics, because it's carving out an important niche in spine surgery.

Today, most spine surgical procedures are performed by surgeons freehand. Yet robotic surgery is beginning to move beyond its early adopters, and as a result, Mazor Robotics is enjoying increasing demand for Mazor X, its latest spine-surgery system.

Surgeons use Mazor X to plan and guide minimally invasive spine surgery. The system can improve accuracy, lower complication rates, reduce pain, and speed up recovery times -- advantages that are resonating with hospital systems and industry participants, including Medtronic (NYSE:MDT)

Last summer, Medtronic inked a co-promotion deal with Mazor Robotics to introduce Mazor X to its spine customers in exchange for a finder's fee. The first phase of this agreement went so well that the two companies announced last month that they're expanding their relationship, with Medtronic taking over global sales of Mazor X.

As part of their pact, Medtronic has acquired Mazor Robotics shares on two separate occasions, and with the expansion of their relationship, Medtronic is acquiring another $40 million in Mazor Robotics, bringing its ownership stake to nearly 12%. If the relationship remains positive, Medtronic could exercise warrants that will increase its equity ownership to more than 14%.

Medtronic's collaboration could add hundreds of unit orders to Mazor Robotics' sales over the next four years. Rising sales could turn Mazor Robotics into a profitable medical-technology company worth owning in portfolios.

Novocure's Optune system, including arrays and the battery pack.

IMAGE SOURCE: NOVOCURE.

Revolutionizing cancer treatment

Historically, treating brain cancer has involved surgery, radiation, and chemotherapy, yet survival rates in the indication remain poor. New treatment approaches are necessary.

Thanks to Novocure, oncologists have a fourth treatment option. Novocure has created an entirely different approach to battling cancer that disrupts cancer cell multiplication and division using electric fields. These electric fields are called tumor treating fields (TTFields) and they're delivered via disposable transducer arrays in a wearable cap. A transportable, battery-operated TTField generator creates the specific frequency necessary to disrupt cancer cells and arrays are swapped out every few days.

It may sound like a crazy idea, but it works. In trials, adding Novocure's Optune system to chemotherapy in newly diagnosed glioblastoma multiforme (GBM) patients extended progression-free survival and improved overall survival at five years. Currently, Novocure's Optune is approved for use in newly diagnosed GBM patients and patients who no longer respond to radiation and chemotherapy; ongoing trials could someday expand its use to mesothelioma and lung cancer patients, too. 

Growing use of Optune is already translating into significant revenue. In Q2, Novocure's sales jumped 114% to $38.4 million. The company is not profitable yet, but management thinks that it can get itself into the black solely with its existing FDA approvals. If that's true, then the chance to expand Optune into new cancer indications could make Novocure's stock a very smart buy.

 

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Illumina, Intuitive Surgical, and Netflix. The Motley Fool owns shares of Medtronic. The Motley Fool has a disclosure policy.