Every now and then, I'll see an article online about some scientist who has supposedly made a breakthrough discovery that could cure cancer. Almost exactly one year ago, I read about Israeli scientists who believed they had identified peptides -- which are similar to proteins but smaller -- that could cure cancer.
The chairman of the board of the biotech researching the potential therapy even told The Jerusalem Post that his company "will offer in a year's time a complete cure for cancer." I was very skeptical at the time (as were many others). And, sure enough, the Israeli biotech's hype hasn't turned into reality.
So when the BBC reported last week about British scientists discovering an approach that, in the words of one of the researchers, "raises the prospect of a 'one-size-fits-all' cancer treatment," I was doubtful, to say the least. However, the more I learned about the new research, the less skeptical I became.
Don't get me wrong: I'm not saying that a cure for cancer is definitely on the way. But there's at least a possibility that it could happen.
As an investor and a healthcare investing writer, my mind pretty much always drifts to the investing implications of anything that could present a significant change. A cure for cancer certainly would bring about a huge change. And I think it could turn healthcare investing upside down.
A Swiss army knife for beating cancer
It's been known for a long time that immune cells called T cells not only fight infection but can also attack cancer cells. Several cancer immunotherapies are already available that involve genetically engineering T cells to fight specific types of cancer. For example, Gilead Sciences' Yescarta is a chimeric antigen T cell receptor (CAR-T) drug that was approved by the FDA for treating B cell lymphoma. The FDA approved Novartis' (NYSE:NVS) CAR-T drug Kymriah for treating large B cell lymphoma and acute lymphoblastic leukemia (ALL).
Thus far, these CAR-T therapies have only targeted specific types of blood cancer. But researchers at Cardiff University in Wales have identified a type of T cell that could kill solid tumors as well. This T cell can seek and destroy cancer cells for many of the most common types of cancer, including bone, blood, breast, cervical, colon, kidney, lung, ovarian, prostate, and skin cancers. And the T cell doesn't harm noncancerous cells.
The key to this "Swiss army knife" for cancer is that the T cells hone in on the MR1 molecule. This molecule is present on the surface of every cell in the body. The Cardiff University researchers think that MR1 can signal to the immune system that a cell is cancerous. The special type of T cells that they've discovered can then attack and kill the cancerous cells, regardless of where the cancer is in the body.
There are several reasons why I'm more hopeful about this news than other past reports of potential cancer cures. First, the researchers at Cardiff have published their findings from lab tests in a scientific publication, Nature Immunology, instead of just making undocumented claims about their discovery. Second, their theory about why these specific T cells could be effective against multiple types of cancer seems plausible. Third, the scientists aren't overhyping their findings and acknowledge that much more research is needed.
Healthcare industry upheaval
It's a long road from lab testing to winning approval for a drug that could cure most if not all types of cancer. The vast majority of experimental cancer drugs fail along the way, either because they're not effective or they cause too many other health problems. But the potential for the MR1-targeting T cells to cure cancer raises plenty of questions about what it could mean for investing in healthcare stocks.
The company that owned the rights to a cure for cancer would see its stock skyrocket -- if the company was publicly traded. In this case, though, privately held British biotech Ervaxx has licensed the exclusive rights to the Cardiff team's potential universal cancer immunotherapy.
My prediction is that chaos will ensue if Cardiff's T cell therapy is successful. Let's just look at the three drugmakers with the biggest market caps. Johnson & Johnson made 13% of its total revenue last year from its cancer drugs, which include Imbruvica and Darzalex. Oncology drugs generated close to 19% of Novartis' total sales. More than 17% of Pfizer's total revenue in 2019 came from its cancer drugs.
The figures are even higher for other major drugmakers. Merck made at least one-quarter of its total revenue from cancer drugs. Four cancer drugs contributed more than 28% of Bristol-Myers Squibb's total sales.
Should a bona fide cure for cancer hit the market, these stocks would take a big hit. But it would be catastrophic for many biotech stocks. Exelixis and bluebird bio, for example, are focused solely on developing cancer drugs. There are nearly 500 biotechs with late-stage pipeline candidates that exclusively target cancer.
And we haven't even touched on the potential financial impact of a cure for cancer on other parts of the healthcare system. Hospitals could see their revenue shrivel. Some medical device companies that focus on cancer treatment, such as AccuRay, could be significantly affected as well.
Investing for a sort-of black swan event
A cure for cancer could fit author Nassim Taleb's definition of a "black swan" -- an unforeseen event that has extreme consequences. The major difference in this case, though, is that we can foresee the possibility that a cure for cancer could be on the way based on the Cardiff team's research.
The best way to invest for black swans (and sort-of black swans) is to find stocks that could benefit if the major event occurs and preferably would perform well even it doesn't. The first type of stock that immediately came to my mind with the potential for a cure for cancer was health insurance stocks.
Health insurers might have to pay out a lot more initially if a cure for cancer reached the market. However, they would almost certainly win over the long run as cancer treatment costs plunged. UnitedHealth Group (NYSE:UNH) is the biggest health insurer in the world and would be a huge beneficiary of a cure for cancer. Of course, health insurers face their own potential sort-of black swan -- the prospect of the U.S. switching to a single-payer healthcare system.
Is there a kind of stock that would be a big winner if a cure for cancer materialized -- and deliver strong gains even if it doesn't -- that doesn't potentially face its own black swan? I think so. Senior living stocks would almost certainly soar, as people lived longer and eventually moved into senior living communities. These stocks should perform well regardless, though, simply because of long-term aging trends.
My favorite senior living stock is Welltower (NYSE:WELL). The healthcare-focused real estate investment trust (REIT) focuses on private-pay senior living properties in major growth markets. It also pays a really attractive dividend. For investors looking for a way to profit from a cure for cancer, I think Welltower is a great alternative.
I don't want to come across as callous with my focus on the investing repercussions from a cancer cure. Like many Americans, I have had friends and family battle cancer. Some survived, but others, unfortunately, didn't. The prospect of a cure is exciting. There's no price tag that can be placed on what it would mean for families to not lose loved ones to cancer.
At this point, the odds are still very low that a cure for cancer is at hand. But just as many cancer survivors beat the odds, there's a chance that the T cell therapy discovered by Cardiff University researchers could do so also. If it happens, healthcare investors are in for an entirely new ballgame.