Guardant Health‘s (NASDAQ:GH) liquid biopsy DNA screening tests are being used by oncologists to determine the appropriate cancer drugs for patients with advanced cancer. In the future, Guardant Health believes its tests could significantly improve cancer detection, too. This week, management updated investors on its first-quarter performance and announced plans to study liquid biopsy tests for colon cancer detection. If successful, it could threaten Exact Sciences (NASDAQ:EXAS), the company behind the highly popular Cologuard cancer test.
What’s Guardant Health?
Guardant Health was co-founded in 2012 by Helmy Eltoukhy and AmirAli Talasaz, two former executives from Illumina, the largest gene sequencing systems manufacturer. Eltoukhy and Talasaz serve as CEO and CFO of Guardant Health, respectively, and together they own over 12% of Guardant Health’s stock.
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Using sophisticated gene sequencing techniques, Guardant Health analyzes blood samples for genetic insight that can inform advanced-stage cancer treatment. The company markets the Guardant360 and the GuardantOMNI tests.
More than 6,000 oncologists have used Guardant360 to analyze samples from over 100,000 advanced cancer patients, making it the leading liquid biopsy test. Over 50 biopharma companies are using the Guardant360 in drug development, too. GuardantOMNI launched in 2017 and it’s also being used in biopharma research.
The company generates revenue from per-test fees paid by third-party insurers or drug developers.
Historically, genetic discovery used to inform cancer treatment decisions has come from analyzing tumor tissue obtained from biopsies. However, biopsies are invasive and costly, and often don’t produce enough tissue necessary to analyze all the possible genetic targets. Guardant’s solution overcomes those drawbacks because its analysis requires only a simple blood draw.
In Q1, the number of patient and biopharma company tests performed by Guardant Health increased 31% to 9,521 and 61% to 3,762, respectively, from one year ago. Increasing demand for its tests resulted in revenue of $36.7 million, up 120% from the same quarter last year, and $5 million higher than industry watchers were anticipating. In 2019, management is forecasting sales of $145 million, up 60% from 2018.
Expanding into new markets
Currently, Guardant Health pegs the market opportunity associated with using genomics to inform patient treatment and improve drug development at $6 billion annually.
The potential associated with expanding into new markets, including cancer recurrence and initial cancer screenings, is even bigger. In the U.S., testing for cancer recurrence is a $15-billion-per-year opportunity, while screening patients at high risk for developing cancer represents an $18 billion opportunity.
Given how much money’s at stake, it’s little wonder Guardant Health is eager to expand into these markets. As part of its strategy, it announced this week it plans to begin a 10,000-person study later this year to see if liquid biopsy can be successfully used to detect colon cancer.
The colon cancer screening market is an attractive target for the company. Colorectal cancer is the second-leading cause of cancer death in the U.S., and that’s largely because it frequently goes undiagnosed until it has become tough to treat.
Too often, a delayed diagnosis is because of poor adherence to current testing guidelines. It’s recommended that everybody over age 50 be regularly screened for colon cancer, but many people avoid screening because of the cost and prep regimen associated with a colonoscopy.
Recognizing an opportunity to revolutionize colon cancer detection, Exact Sciences created a noninvasive, stool sample test — Cologuard — that launched in 2014. Cologuard’s low cost and ease of use have made it a hit with patients, validating the argument the market is ripe for new screening options.
In 2018, Exact Sciences screened 934,000 people with Cologuard, generating $454 million in revenue. Exact Sciences completed 334,000 tests and pocketed $162 million in revenue in Q1 2019, prompting management to forecast sales of $725 million in 2019.
That’s only a small proportion of the total sales Exact Sciences thinks is up for grabs, though. Screening recommendations are shifting to everyone over 45 years old, and if that continues, the company thinks that the market for colon cancer screening could grow to be worth $20 billion by 2030.
Too early to predict
There’s no telling if Guardant Health’s colon cancer study will demonstrate its liquid biopsy is sensitive enough to catch cancer sooner than Cologuard. Earlier this year, it presented exploratory data with sensitivity exceeding 80% and specificity in the mid-90% range for early-stage colorectal cancer. There’s no guarantee a larger trial will confirm those results, or if they do, how doctors will choose liquid biopsy relative to other screening options. For comparison, Cologuard’s sensitivity is over 90% with 87% specificity, and Exact Sciences is working on a second-generation Cologuard test that could be even more sensitive.
Importantly, investors should recognize that it will be a while before we have Guardant Health’s data in hand. To secure FDA approval, Exact Sciences spent years conducting multiple trials to prove Cologuard’s effectiveness. A similar timeline isn’t out of the question for Guardant Health. Moreover, Exact Sciences isn’t resting on its laurels. In addition to its Cologuard 2.0, it’s working on its own liquid biopsy tests.
Overall, genomics are going to play an increasingly important role in cancer detection in the future, but it’s too early to predict which company will be the big winner.