We recently compiled a list of the 10 Most Promising Cancer Stocks According to Hedge Funds. In this article, we are going to take a look at where Merus NV (NASDAQ:MRUS) stands against the other promising cancer stocks.
According to the World Health Organization (WHO), cancer remains one of the leading causes of death globally, responsible for nearly 10 million deaths in 2020, or about one in six deaths worldwide. Moreover, the World Cancer Research Fund reports that approximately 18.1 million cancer cases were diagnosed that year, with the age-standardized rate, when considering all cancers except non-melanoma skin cancer and combining data for both men and women, came in at 190 cases per 100,000 individuals. This rate was notably higher in men, with 206.9 cases per 100,000, compared to 178.1 per 100,000 in women.
Cancer drugs are usually aimed at slowing cell replication or selectively killing cancer cells at a faster rate than healthy cells. While this approach has been effective for certain cancers, innovative strategies are now emerging. These include modifying immune cells, harnessing mRNA, and improving early detection through simple blood tests. Advancing our understanding, prevention, screening, and treatment of cancer is essential for reducing its global impact, yet it comes with escalating costs—global oncology spending is expected to exceed $250 billion this year.
In response, biotech and pharmaceutical companies are in a competitive race to develop cutting-edge technologies and therapies for major cancers like lung, breast, and prostate. In that vein, targeting tumors directly with radiation is poised to be a significant breakthrough in cancer treatment. Leading pharmaceutical companies have invested around $10 billion in acquisitions and partnerships with radiopharmaceutical developers, often acquiring smaller, innovative companies to access this promising technology. Though still in its early stages, radiopharmaceuticals hold the potential to treat a wide range of cancers. The first such drugs were approved in the early 2000s, but only recently have major pharmaceutical companies shown substantial interest.
Reflecting on this trend, Guggenheim Securities analyst Michael Schmidt remarked, “Any large company that has a business presence in oncology or for whom oncology is an important therapeutic category will probably need exposure in this area one way or another.” Schmidt projects that if radiopharmaceuticals remain focused on treating specific cancers, like prostate and neuroendocrine tumors, the sector could generate at least $5 billion in revenue. However, if proven effective in treating a broader range of cancers, this figure could rise to tens of billions.
Since there is no universal cure for cancer, developing a drug capable of treating multiple cancer types is incredibly lucrative. This dynamic fuels continuous breakthroughs in the oncology market, significantly boosting its growth potential. On that front, the oncology pipeline is expanding rapidly, with over 2,000 products currently in development. Notably, 71% of these are being developed by mid-sized, high-growth biopharmaceutical firms, which have significantly increased their investment in cancer treatment innovations from 51% in 2017.
Over the past two decades, 237 new active substances for cancer have been introduced globally, with approximately 115 launched in the last five years alone. Moreover, the global oncology market was valued at approximately $201.75 billion in 2023 and is projected to exceed $518.25 billion by 2032, growing at a compound annual rate (CAGR) of 11.3% from 2024 to 2032, according to Fortune Business Insights. This expansion is fueled by rising prevalence of the disease, the introduction of new therapies, regulatory approvals, and advancing research in the field.
Our Methodology
To compile our list of the 10 most promising cancer stocks to buy according to hedge funds, we started by evaluating companies in the cancer therapy sector using ETF holdings and media analysis. We then narrowed down the list to notable stocks with an average analyst upside of at least 30% and favorable analyst ratings. From this selection, we identified the top cancer companies with the most hedge fund investors, based on Insider Monkey’s database of 900 hedge funds, as of Q3 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A scientist looking through a microscope conducting research in an immuno-oncology lab.
Merus NV (NASDAQ:MRUS)
Average Analyst Upside: 61.05%
Number of Hedge Fund Holders: 48
Merus NV (NASDAQ:MRUS) is a biotechnology firm focused on developing antibody-based therapies to treat cancer, with multiple programs in its pipeline, including Zenocutuzumab and Petosemtamab (MCLA-158).
On October 24, UBS initiated coverage on Merus NV (NASDAQ:MRUS) with a Buy rating, spotlighting the potential of its lead candidate, petosemtamab. UBS projects petosemtamab’s risk-adjusted peak sales at $880 million and anticipates favorable Phase 2 results in 2024.
In its Q3 earnings report, Merus NV (NASDAQ:MRUS) reported a net loss of $99.9 million, a significant increase from the $23 million net loss in the same quarter last year, driven by higher research and administrative expenses. Despite these losses, Merus NV (NASDAQ:MRUS) strengthened its financial position, reporting $433 million in cash and cash equivalents, up from $204 million at the end of 2023, fueled by successful public offerings and strategic partnerships.
TimesSquare Capital Management U.S. Small Cap Growth Strategy stated the following regarding Merus N.V. (NASDAQ:MRUS) in its Q2 2024 investor letter:
“Our preferences among Health Care stocks are those companies providing novel therapies for unmet needs that deserve premium pricing, or specialized service providers. A new addition this quarter is Merus N.V. (NASDAQ:MRUS), a clinical-stage immune-oncology biotechnology company. Their pipeline consists of several programs targeting solid tumors with various bispecific antibodies.”
Overall MRUS ranks 3rd on our list of the most promising cancer stocks according to hedge funds. While we acknowledge the potential of MRUS as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MRUS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.