It very much depends on your choice of canon. In the film and comic, his powers are certainly up to the task of interacting with humans on a cellular (or even atomic) level but the reality is that removing the cancer in that way would be prohibitively time-consuming.
I have witnessed events so tiny and so fast...they can hardly be said to have occurred at all...
[later]...like oxygen turning into gold... I've longed to witness such an event
In an earlier draft of the screenplay, Laurie was the one with cancer. Dr Manhattan does indeed cure it. I've edited for brevity;
LAURIE : Then do me a favor. If the world's going to end, it shouldn't matter a bit. I want you to cure me [of cancer]
DR. MANHATTAN : I won't do that.
LAURIE : You have the power to do it. I want you to do it. Please.
Eyes wild, she GRABS his great blue HAND -- and THRUSTS IT into her chest, where it DISAPPEARS UP TO THE WRIST.
A BRILLIANT BLUE AURA engulfs them both. It SPREADS and GROWS IN INTENSITY, suffusing the sky, finally BLOTTING OUT the vast Martian landscape altogether.
LAURIE: What -- am I --
DR. MANHATTAN : Cured, yes.
