This is a relatively unusual quiet period in medical technology, as there are so few emerging sectors that are really capturing attention and drawing high stock multiples. One of the areas that still is drawing attention, however, is molecular diagnostics. A subset of the lucrative multi-billion dollar diagnostics market, molecular diagnostics focuses on the use of modern life sciences technology to use genomic and/or proteomic expression information to diagnose or predict disease. (Find an investment that will give your portfolio a shot in the arm. To learn more, check out A Checklist For Successful Medical Technology Investment.)
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Molecular diagnostics (often abbreviated as MDx) has garnered a lot of hope, enthusiasm, and more recently, disappointment. Although many of the leaders in this space are some of the large companies investors might expect (Roche (Nasdaq:RHHBY), et al), there are several small companies that could give risk-seeking investors an interesting play on the space.

Once a key player in the race to sequence the human genome, Celera (NYSE:CRA) has since refocused on clinical lab services and tests. Celera has chosen to focus especially upon cardiovascular disease, with the idea of developing and administering tests that can use certain genetic markers to predict above-average risk factors for disease and severe consequences like heart attack and stroke. Celera has a relationship with Abbott Labs (NYSE:ABT). While cardiac testing could be more than a $1 billion market, Celera likely needs to show some solid growth to get institutional investors interested.

Exact Sciences
For all intents and purposes, Exact Sciences (Nasdaq:EXAS) might as well be a biotech. The company is still in development for what should be its key near-term product - a non-invasive colorectal cancer screen test. Early study results have been very encouraging, and this technology is another billion-dollar plus potential product if real-life clinical trials can replicate the earlier proof-of-concept studies. With the company unlikely to file its PMA with the FDA until the second half of 2012, investors will have to be patient with this idea.

Genomic Health
Genomic Health (Nasdaq:GHDX) is perhaps less risky than other names on this list from the perspective of product development (as it has successful products on the market), but analyst enthusiasm is decidedly muted on this name. Not only is Wall Street worried about the ongoing acceptance of the company's Oncotype Dx tests for breast and colon cancer, but there are a lot of uncertainties concerning the FDA treatment of genetic tests and the patents that protect them. This may be a case of undue concern, though, as the algorithms that power the tests are almost certainly patentable and defensible and the clinical worth of the tests does not seem to be in serious doubt. Longer term, then, the company could build on its foothold in breast and colon cancer with addition tests for other cancer types like melanoma.

Nanosphere (Nasdaq:NSPH) is a tiny company, and one that has been beset with some filing and development delays. Still, the company's Verigene system could eventually make the company a significant player in on-site MDx testing. The Verigene uses gold nanoparticles to detect genetic and protein markers and has shown high levels of sensitivity. The company has some promising tests in the pipeline, including a troponin test, cancer tests and improved flu/respiratory virus panel test, but also a lot of competition.

Although none of the stocks on this list have had an easy time, Sequenom (Nasdaq:SQNM) has had a much tougher go. The company was hit hard by the revelation that employees had mishandled and misrepresented data on the company's key Trisomy 21 (down syndrome) pre-natal test. The company took its lumps and has continued to develop the technology. Data should be coming out relatively soon from an internal validation study of clinical samples and positive results here should lead to larger pivotal studies. The opportunity for a non-invasive pre-natal Trisomy 21 test could exceed $1 billion, and although a PMA filing is not likely until 2012, a lab-derived test could be on the market before the end of 2011.

The Bottom Line
These are just a handful of ideas, and only a starting point for the thorough due diligence that a prospective investor needs to perform before buying into any of these ideas. Of course, other ideas like Luminex (Nasdaq:LMNX) and Cepheid (Nasdaq:CPHD) are certainly worth investigating as well. The field of molecular diagnostics is crowded, but the future looks promising. These are all risky plays and success is far from certain, but investors looking for some potentially under-appreciated names could certainly start here.

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