Cup today
(As of 12/13/2024 ET)
- 52 week range
- $12.33
▼
$23.44
- Price target
- $16.00
The cup NASDAQ:GRAL It is a small biotech company that has had very strong performance over the past month and a half. Shares of the healthcare stock are up 58% since October 24, as of the December 11 close. The company has interesting technology that sets it apart from many smaller biotech companies. I’ll explain what this company does, what’s unique about it, and my perspective on this stock targeting a $100 billion market.
GRAIL aims to give doctors a major boost in the fight against cancer
GRAIL’s business revolves around its product, Galleri. Gallery is an early cancer detection test for people over 50 who do not have symptoms. Illumina Nasdaq:LMN It was spun off from the company in mid-2024. The Gallery test can detect more than 50 types of cancer at once and is commercially available.
This is one of the factors that makes the company different from other small biotech companies. Many companies of similar size in this industry have not yet generated any revenue. This is because they are still working to obtain FDA approval or approval from foreign health regulators. Without these approvals, which can take a decade or more to obtain, you won’t be able to generate much revenue. That’s not the case with GRAIL, which generated $112 million in sales over the past 12 months.
Company Registration statement It clearly demonstrates the need for increased early detection of cancer. The company estimates that more than 60% of cancer deaths in the United States are due to cancers for which there are no accepted screening guidelines. Only five types of cancer have the screening level recommended by the US Preventive Services Task Force. This includes breast, cervical, colorectal, lung and prostate cancer. Doctors test each type of cancer individually.
GRAIL believes that if doctors performed the Gallery test alongside cancer screenings, they could avoid 100,000 deaths a year. This represents about 16% of the total 612,000 cancer-related deaths expected to occur in 2024. It can increase cancer survival rates By 360%. In the company’s PATHFINDER study, Galleri’s test correctly predicted the area in the body where cancer originated from in 88% of cases. Understanding the source of cancer is key to treating it.
GRAIL is seeking FDA approval for Galleri to expand its approval
The Gallery test is a laboratory-developed test, which exempts it from direct FDA oversight. However, GRAIL is seeking Food and Drug Administration (FDA) approval for the test as a medical device, which requires premarket approval (PMA). This is because major players in the healthcare industry typically do not cover medical devices without this approval. The company will apply for a PMA in 2026. It expects to have results from its ongoing trial with the NHS in England around that time.
Analysts at Morgan Stanley New York Stock Exchange: MS GRAIL says it has a first-mover advantage in the $100 billion total addressable market for multiple cancer early detection (MCED). It’s MCED’s first test to go to market, and Morgan Stanley believes the company can support a long-term valuation of $50 per share. This means an increase of 142% from the closing price on December 11. However, Morgan Stanley’s near-term price target implies a 22% downside.
Despite the efforts to obtain FDA approval, another important advantage of the Gallery test is that the timeline for PMA approval is usually much faster than that of a drug. Assuming things go smoothly, Morgan Stanley says FDA approval “is likely in the first half of 2027.”
GRAIL’s financial conditions are improving significantly
Another reason for the excitement is that since Galleri is available, moderators can see if the product is gaining traction or not. This is in contrast to most small biotech companies. Clearly it is. Gallery revenues 52% increase From the previous year in Q3. The company is also working to improve profitability and reduce expenses.
The company’s adjusted gross profit increased by 68%, and its adjusted gross profit margin increased by 460 basis points. The expense reduction aims to significantly reduce the company’s cash burn. With these adjustments and over $850 million in cash, the company believes it has a runway through 2028.
Grail, Inc. (GRAL) price chart for Saturday, December 14, 2024
Overall, GRAIL is an exciting company with tremendous market opportunity. This stock is worth just under $700 million, and could be a huge hit over the long term. However, as is common among small biotech companies, it remains a very risky investment at this stage. Weak results from ongoing studies could lead to failure to obtain a PMA, which would significantly limit the upside. However, with major catalysts a year or two away, I will be watching this company closely.
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