Grail Jumps as Cancer Test Nears Market

It’s not a cancer cure, but it’s an oncological Holy Grail in its own right.

Shares of biotech firm Grail jumped more than 11% last week after a US Food and Drug Administration advisory panel endorsed its groundbreaking blood test technology that is capable of screening for dozens of different cancers. How about that? Some potentially honest-to-God good news. One final step will be sorting through the insurance question, which is exactly as complicated as it sounds.

That Scans

Under present FDA-approved guidelines, only prostate cancer can be screened for via blood testing. Grail’s testing mechanism, dubbed the Galleri, can test for 50 different cancers from a single blood draw. The hitch? As one study of 140,000 patients showed, Galleri is much better at catching late-stage cancers (detecting 60% of Stage 4 cancers) and not so good at catching early-stage cancers (the tests detected just 14% of Stage 1 cancers). That means that Medicare and major insurers are far less likely to approve coverage of the test, at least in widespread early-use instances; the FDA must also still give a final stamp of approval, but the advisory panel endorsement is a critical first step.

Securing Medicare coverage or not dramatically changes the financial math of the medical breakthrough:

• According to Grand View Research, the multi-cancer early detection market size stands at around $1.5 billion this year and could grow to $4.6 billion by 2033. Gabelli Funds Portfolio Manager and Research Analyst Elena Meng told Reuters last week that widespread insurance coverage for the tests could create a $60 billion market in the US alone by 2030.
• Meanwhile Wolfe Research, which initiated coverage of Grail’s stock earlier this summer, says the value of the company could thus change greatly depending on which way the coverage question goes; with coverage, the stock would be worth around $150, roughly on par with its current price, without coverage, it may be worth just one-third that much. 

Cautious Optimism: Grail isn’t the only cancer-focused biotech company enjoying some Wall Street overexuberance. Last week, Citi analyst Geoff Meacham downgraded Moderna’s stock to a sell rating, arguing that the roughly 200% share price surge since the company announced positive news for its melanoma vaccine back in August may have been “outsized.” Shares of Moderna slipped nearly 3% last week.