Is Grail’s lurching start as a newly public company a bad omen for what some view as the future of cancer testing?
In its first week of trading since being spun off from Illumina, investors have valued California-based Grail at less than $500 million. That’s about 1/16th of the $8 billion that Illumina paid to buy it in 2021, on the hope that Grail’s blood test could screen for many cancers at once and become a backbone of oncology surveillance.
When Grail launched in 2016, backers like Bill Gates and Jeff Bezos were drawn to the idea of a broad test to help catch malignancies early while saving lives and money. Legendary biotech investor Bob Nelsen of ARCH Venture Partners made it his firm’s largest-ever investment at the time.
But in the years since, the field has been held back by questions over accuracy and the high costs to develop the tests. At least one competitor, Exact Sciences, has temporarily scaled back in multi-cancer detection, citing uncertainty over reimbursement. Other companies, including Delfi Diagnostics and Guardant Health, are interested in the space but for now are taking a cancer-by-cancer approach, which takes less investment and has a clearer regulatory pathway.
“Multi-cancer diagnostics could be a huge market, but these tests need years to work out the kinks,” Canaccord Genuity analyst Kyle Mikson said, adding the result has been companies narrowing their strategy compared to the past.
In an interview this week before trading began, Grail’s leadership said the multi-cancer detection field still holds tremendous opportunity, and that a retreat by competitors only bolsters the company’s leading position.
“There’s no question they’re years behind us,” Grail president Josh Ofman said.
In many ways, though, Grail embodies the field’s deflated expectations. In 2021, when Illumina bought the company, it predicted the deal would unlock what it called a $50 billion market. But to date, Grail has sold only 180,000 of its tests in the three years they’ve been on the market and generated $187 million in revenue.
The company’s goal had been to win FDA approval of its tests by last year, a step which would have set up insurance and government coverage that’s critical for growing the company’s business. But in a May regulatory filing, Grail said FDA approval could still be two years away, a milestone that will test Grail’s finances now that it’s independent from Illumina.
Regulations are still a work in progress, in part because the benefit-risk profile of broad cancer screening is much harder to calculate than for a single-cancer test.
In a clinical trial of 6,621 people without cancer symptoms, Grail’s test detected a cancer signal in 92 patients. Thirty-five people were ultimately diagnosed with cancer, a potentially life-changing finding. But 57 people had a false positive, according to the company-funded study, the results of which were published last year in The Lancet. False positives can provoke needless anxiety and a diagnostic odyssey.
But there have been questions about whether multi-cancer tests make a big difference in care.
“The tests were better at finding more advanced cancers, which are potentially less curable than early cancers, so more research is needed to know whether tests would actually save lives,” University of York researchers wrote in a recent preprint that analyzed dozens of multi-cancer tests.
In addition, companies want Congress to pass a bill that would make Medicare coverage easier to obtain. But the uncertain fate of the legislation drove Exact Sciences to “resize” its investment in multi-cancer early detection, its chief medical officer Tom Beer said.
“The program’s moving forward. It’s just moving forward at a somewhat more measured pace,” Beer said.
Exact is refining its multi-cancer test. Plans initially called for launching a pivotal trial in 2023, but that’s been pushed to an uncertain date.
From many to one
The lack of certainty and the challenges of creating good evidence have led other blood-testing companies to focus on developing better single-cancer tests, which would be used by doctors to diagnose people or monitor high-risk patients, rather than targeting the population surveillance market.
“Not that the single-test path is straightforward, but it is typically less opaque and somewhat more predictable,” said Michael Pellini, a managing partner of the venture capital firm Section 32. “So do you have the team, the technology, and the set of investors who want to swing for the fence? Or might a double or triple suffice? Either path can have a great impact on our nation’s health.”
The diagnostics company Nucleix weighed the tradeoffs: Its technology could pick up on many cancers, but such a broad approach came at the expense of accuracy. Instead, the company developed a test that’s designed to be sensitive enough to reliably detect lung cancer in high-risk smokers who typically don’t receive CT scans.
“It’s difficult not to run into compromises when you try to generalize for all cancers,” CEO Chris Hibberd said.
Guardant Health wants to build up to multi-cancer detection, including through its colon cancer test. In May, an independent panel of advisors to the FDA recommended that the agency approve the company’s diagnostic.
“We are a multi-cancer company, but just like Keytruda is a $25 billion drug, they started with a single indication,” Guardant’s co-CEO Helmy Eltoukhy said.
Freenome also has a colon cancer test, and the company launched a study evaluating its platform in 10 cancer types. Likewise, other companies are going cancer-by-cancer, while eyeing wide-spanning tests.
“I wouldn’t rule out us going after multi-cancer at some point. I think we’ll do it thoughtfully with a great deal of attention to which cancers are causing meaningful burden,” said Peter Bach, chief medical officer of Delfi Diagnostics, which is located in Baltimore and Palo Alto. Delfi, which has raised $330 million, is for now focused on lung cancer.
Not a sure thing
Single-cancer blood tests face their own challenges. They’re often up against established screening methods.
For instance, doctors weighing Guardant’s colon cancer test might still prefer a colonoscopy that allows them to preemptively remove precancerous polyps.
Still, Guardant’s test could play a critical role amid low colon cancer screening rates, especially for people who don’t qualify for colonoscopy coverage by insurers.
Others say single-cancer tests miss a broader picture, and that it’s unrealistic for people to take so many tests.
California-based diagnostics company Adela is developing a multi-cancer test, though the company scans select parts of the genome to save on costs, according to CEO Lisa Alderson.
“We’re trying to be astute in driving a more capital-efficient strategy forward,” Alderson said, “but while maintaining a vision to have broad and lasting impact amongst cancer patients.”