Grail has burned cash to pioneer an emerging field that screens for multiple cancers in a blood sample. But now the company faces questions about whether it can reshape cancer screening without deep-pocketed parent Illumina.
On Tuesday, Grail’s shares will start full trading as an independent company, after being spun off from Illumina following the $8 billion ill-fated deal that combined the companies in 2021.
“We’ve had the opportunity to do a lot of derisking, and we clearly have an enormous opportunity in front of us,” Grail CEO Bob Ragusa said in an interview with Endpoints News.
Under limited trading that started on Jun 24, investors have valued Grail at roughly $600 million, a steep discount compared to Illumina’s $8 billion acquisition price. Nephron Research analyst Jack Meehan believes it’s even more noteworthy that Grail’s valuation is well below its cash on hand — a so-called negative enterprise value that can signal a company is heading for trouble.
Grail has reported roughly $1.1 billion in cash, nearly all of which is from Illumina under a divestment order. The company has enough funding to cover planned operations over at least the next 12 months, according to its recent financial reports.
“Grail doesn’t have much financial flexibility as they navigate the regulatory gauntlet,” Meehan told Endpoints.
It has spent heavily to advance its test, Galleri, that’s designed to detect 50 cancers in the bloodstream. The company recorded a $227 million operating loss in the first quarter.
Ragusa said Grail’s new board is digging into Grail’s finances to “understand the best path forward.” Asked if layoffs are planned, a company representative in a statement said Grail is “focused on executing our strategy priorities.”
Launched in 2021, more than 180,000 of Grail’s tests have been sold under a provision that doesn’t require full regulatory approval.
The FDA has never approved a test like Grail’s — a necessary step to obtaining reimbursement dollars that the company needs to grow sales. Grail plans to seek regulatory approval by 2026, a timeframe that outside observers say is aggressive.
“That could be optimistic given where the data itself stands,” Canaccord Genuity analyst Kyle Mikson said.
Grail will try to win over regulators with data from several studies, including an ongoing 140,000-person clinical trial in the UK. It had hoped early data from the study would persuade the UK’s National Health Service this year to order cancer tests for one million people.
In a blow to the company, the UK agency decided to wait until 2026 before deciding on a broad rollout. The UK organization said data from the first year of a three-year study were promising but not exceptional enough to move forward at this point.
But other developments have been in Grail’s favor. In December 2023, the FDA signaled it won’t require final mortality data that would have forced Grail and other companies to likely wait more than a decade before trying for regulatory approval.
Ragusa said he was further encouraged that the FDA would measure its test using aggregated cancer data, rather than just data on each cancer individually.
“We feel very confident in the timeline,” Ragusa said.
Doctors have debated the merits of Grail’s tests. Critics are concerned over too many false positives that can lead to anxiety, invasive procedures and steep costs that tax the healthcare system.
Illumina is retaining a 14.5% stake in Grail, which is trading under the ticker $GRAL. In a statement, Illumina CEO Jacob Thaysen sought to move past the deal.
“As we turn the page, we are excited to share our plan to accelerate topline growth, achieve operational excellence, deliver for our customers, and maximize value for shareholders in our upcoming strategy update,” Thaysen said.