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3 Stocks to Watch Closely This Earnings Season

By Keith Speights and Brian Orelli, PhD – Oct 21, 2021 at 6:31AM

Key Points

  • Seagen's Q3 update could indicate how the recently launched cancer drug Tivdak is doing in the market.
  • For DermTech, procedure growth -- not revenue growth -- could be the most important metric to watch.
  • 10x Genomics may increase its full-year guidance.

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One Motley Fool contributor is looking forward to the quarterly updates from these healthcare stocks.

Another earnings season has kicked off, and hundreds of companies will deliver their latest quarterly results over the next few weeks. Some of those updates will be more important than others. In this Motley Fool Live video recorded on Oct. 13, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss three healthcare sector companies whose reports should be watched closely.

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Keith Speights: Brian, it's kind of hard to believe that earnings season is about to begin yet again. It does not seem like it has been three months, but earnings season's about to crank up again. Are there any companies that are reporting earnings over the next few weeks that you're going to especially watch closely?

Brian Orelli: Yeah. Seagen (SGEN 1.22%) -- it used to go by Seattle Genetics -- reports on Oct. 28. They recently gained approval for Tivdak. That won't probably be material to the third quarter because it got approved in late September. But perhaps we'll see how the launch has gone since it will have launched for about a month.

It has three drugs in the market -- a blood cancer drug called Adcetris that's pretty old, but still plugging along. And then it has two fairly new drugs -- a breast cancer drug Tukysa and then urothelial cancer drug Padcev. But you'll want to watch both of those drugs.

DermTech (DMTK) is another company that I'll be watching closely. They haven't released a date for their third-quarter results yet, but I would expect it to be in early November based on previous quarters and how long it takes them from the end of the quarter to actually release their data.

This company is in the business of diagnosing melanoma -- that's skin cancer. They're working to change the dermatology practice. Currently, dermatologists take biopsies, but DermTech's product can diagnose melanoma basically with a sticker. You put a sticker on it and then you rip off some of the cells, and then DermTech analyzes the cells' DNA, and then that's how they determine whether the funny-looking spot that the dermatologist is worried about is cancerous or not.

Rather than looking at revenue, I think investors should probably be more focused on procedures that DermTech is processing, so the number of samples that they're processing. It's giving away a lot of its product right now to get doctors to use it. I think that's a good thing at this point.

Longer term, they obviously have to focus on reimbursement. But I think right now, the more and more doctors they can get used to it, and change their practice away from biopsies first to DermTech first and then biopsies to confirm, I think that'll benefit DermTech substantially.

Then one more -- 10x Genomics (TXG 4.41%). They report on Nov. 3. They recently launched [the] Chromium X system that's capable of looking at 1 million cells individually in a single experiment. Then, on the Visium platform, they can now look at cells that are preserved with something called formalin-fixed, paraffin-embedded tissue samples. That goes by FFPE.

More broadly, I'd like to see where management puts guidance from here. It's at 61% to 67% growth for the year -- the current guidance. In the first half, the growth, if I did my calculations correctly, was 122%. Obviously, that was spurred on by the comparison to the first half of 2020, which had pandemics and therefore laboratories were closed, and so they didn't have as good sales in the first half of 2020, especially in the second quarter.

But the third quarter will be really telling, where the guidance moves from here. But they're going to go from 122% down to [about 65%] -- or are they going to raise that guidance? I'm hoping that they raise that guidance.

Speights: Of those three, I own shares of one of them -- DermTech -- so I will especially be watching those results as well. And I agree with you, the focus probably should be more on procedure growth than revenue growth at this point, but I expect the revenues to kick in over time.

Keith Speights owns shares of DermTech, Inc. The Motley Fool owns shares of and recommends 10x Genomics Inc, DermTech, Inc., and Seagen Inc. The Motley Fool has a disclosure policy.

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