Even the best investors don't always beat the market over relatively short periods, say 12 months, for instance. Case in point: Last year Cathie Wood, CEO of the asset management company ARK Invest, was one big name in the investing world whose actively managed, exchange-traded funds (ETFs) lagged the broad indices. And now, the market itself is moving into correction territory.
But that doesn't mean investors can't take a look at these ETFs for inspiration. Let's consider two Cathie Wood stocks that have been hammered recently but still look like excellent stocks to buy and hold through the next decade: Exact Sciences (EXAS 0.41%) and Incyte (INCY 0.19%).
1. Exact Sciences
Exact Sciences' selling point is simple: its most important product, Cologuard, helps save lives.
Cologuard is a non-invasive test for colorectal cancer -- the second-leading cause of cancer death in the U.S. Yet, this cancer is highly treatable and has a 90% survival rate when caught early enough. The numbers suggest, then, that not enough eligible people are getting screened. That's why it's crucial to raise the public's awareness and get more of those who could benefit from regular screenings to start doing so.
Exact Sciences' other main products are its Oncotype DX tests, which help improve outcomes for breast cancer patients by predicting the probability of recurrence of the disease, among other things. During the pandemic, the company also benefited from marketing COVID-19 tests although normally it generates most of its revenue from the non-coronavirus products.
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In the third quarter, the company's revenue increased by an unimpressive 12% year over year to $456.4 million. That was primarily because sales of its COVID-19 tests decreased 70% to $30.6 million. Coronavirus-related products played a significant role in Exact Sciences' performance in 2020. With the need for coronavirus diagnostic kits decreasing during the quarter, it's not surprising to see the company not performing nearly as well on this front.
The good news, though, is that Exact Sciences' Cologuard and Oncotype DX tests do seem to be performing well. The company's screening revenue (which includes sales of Cologuard) and its precision oncology revenue (covering sales of the Oncotype DX tests) grew by 31% and 59% year over year, respectively.
There is still much room to grow for Exact Sciences' products, including CancerSEEK, a multi-cancer early detection test. Exact Sciences sees an addressable market of roughly $58 billion ahead. Even grabbing a relatively modest 10% of this market would meaningfully move the needle for the company, especially considering that it expects to record revenue of about $1.7 billion for fiscal 2021.
So despite the troubles it experienced last year, the company has a real shot at beating the market over the next decade as it continues to make headway into its massive, addressable market .
2. Incyte
Over the past couple of years, Incyte has earned a few important regulatory approvals. In 2020, the U.S. Food and Drug Administration gave the green light to the company's cancer medicines, Pemazyre and Monjuvi. And last year, the agency approved Opzelura, a treatment for atopic dermatitis. Opzelura is the topical formulation of Jakafi, which is Incyte's top-selling medicine.
These recent approvals were important since Incyte has relied heavily on Jakafi over the years. This drug treats myelofibrosis and polycythemia vera, both of which are bone-marrow diseases. Jakafi also treats a dangerous complication of stem cell transplants called steroid-refractory acute graft-versus-host disease (GVHD). Incyte's heavy reliance on Jakafi likely played an important part in its underperformance over the past couple of years.
But with a new lineup that can drive top-line growth for many years before having to worry about losing patent exclusivity, the biotech's future looks brighter now. Incyte sees peak sales of $1.5 billion for Opzelura in the U.S. alone. For context, in the first nine months of 2021, Incyte recorded total revenue of $2.1 billion, representing a 13% year-over-year increase.
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Further, Jakafi should continue to contribute meaningfully to Incyte's top line until it loses patent exclusivity in 2027. Last year, the medicine earned a new approval as a treatment for chronic GVHD. Jakafi's net product revenue for the first nine months of 2021 came in at $1.5 billion, 9% higher than the year-ago period. Incyte also collects royalties for Jakafi from Novartis, which holds the rights to market the product outside the U.S.
Incyte has a pipeline with nearly two dozen clinical programs, including several undergoing pivotal studies. In the next five years, expect the company to launch new products that will eventually replace Jakafi. And with the company's new lineup already capable of driving top-line growth, Incyte looks well-positioned to stage a strong comeback, making it an excellent biotech stock to buy right now.
