What if a simple blood draw could play an instrumental role in detecting and treating cancer?
That’s the premise of the buzzy cancer-testing startup Guardant Health, which plans to go public in the coming weeks and trade on Nasdaq under the ticker “GH.” The company expects to offer 12.5 million common shares at between $15 and $17 per share, per its most recent prospectus, with estimated net proceeds of about $182 to $210 million.
Founded in 2012, Redwood City, Calif.-based Guardant sells liquid biopsy tests that “map” out genomic results for advanced cancer tumors, helping match individual patients with the right cancer treatment. One of its main products, Guardant360, a liquid biopsy for advanced solid tumor cancers, has been used more than 70,000 times since it came out in 2014, per the company prospectus.
Guardant also has even bigger ambitions: to use its tests to find cancer recurrences, and even for early detection of cancers.
If successful, early cancer detection would be a major advance — one that some describe as the holy grail. One of Guardant’s privately held rivals, founded by a former Google GOOGL, +0.01% executive, is even called Grail.
Guardant, which has raised $550 million so far, according to Crunchbase, first announced plans for an initial public offering earlier this month. The startup sets its total market opportunity at more than $35 billion in the U.S.
That includes a market Guardant is already in — using liquid biopsies in late-stage cancers (an about $6 billion opportunity, by the company’s estimates) — plus two that it is working toward, the cancer recurrence detection market (about $15 billion) and early cancer risk detection (about $18 billion).
Liquid biopsies aren’t just used by doctors and their patients, but also by biopharmaceutical companies for research, clinical trials and drug development/commercialization. Guardant already has relationships with more than 40 such customers, per its prospectus, including AstraZeneca PLC AZN, +1.01% .
Here are five things to know:
1. Liquid biopsy is promising, complex — and controversial
Doctors usually use a small tissue sample called a biopsy to diagnose cancer. A liquid biopsy is a newer, cutting-edge iteration, one that excites many in the field because it’s typically less invasive. One major area for Guardant is lung cancer, for example, which is difficult to biopsy.
Liquid biopsy could also help doctors detect cancer early, when it is thought to be easier to treat. Cancer could be detectable in the bloodstream because of “tiny fragments of DNA in the blood that break away from tumors,” according to the American Cancer Society.
But it’s a complex area: Not all cancers lead to a person’s death, some may not be treatable, and false positives are possible, American Cancer Society Deputy Chief Medical Officer Dr. Len Lichtenfeld has said.
Still, the technology is promising. When speaking with MarketWatch early this year in San Francisco, Guardant co-founder and Chief Executive Helmy Eltoukhy said that Guardant360, which costs about $6,800 and takes about seven days for a result, is weeks faster and significantly cheaper than a traditional tissue biopsy.
The information that Guardant collects through its existing tests is also supposed to inform development of next-generation tests, like its Lunar-1 test for cancer recurrence and its Lunar-2 test for early cancer detection. Lunar-2 is geared toward individuals who don’t have symptoms but do have a higher risk of cancer due to genetics, smoking, health conditions and other factors.
Guardant Health
Data from Guardant Health’s Guardant360 and GuardantOMNI, both of which are already being sold, should help the company develop liquid biopsy tests geared at identifying cancer recurrence as well as early cancers, according to co-founder and Chief Executive Helmy Eltoukhy.
With more data, Eltoukhy told MarketWatch in January, “the better we are at decoding signals in the blood.”
Though collecting enough data is a big challenge, an early cancer detection test is “certainly” possible in our lifetimes — think a few years away, rather than decades, he said.
But questions have also been raised about the reliability of a liquid biopsy.
When Johns Hopkins researchers tested out Guardant’s Guardant360 and another company’s test, Personal Genome Diagnostics’ PlasmaSELECT, the results showed “very low congruence,” they found.
Depending on what test was used, then, “patients could potentially receive different treatments,” they suggested in a peer-reviewed research paper published late last year.
Responding early this year, Eltoukhy said that the results were all valid, noting that cancer is a complex, heterogenous disease.
Even with a tissue biopsy, you’re “only looking at one site, only seeing one part of the picture,” he said, describing that as among the advantages and limitations of any testing methodology. “There’s nothing in the world that’s perfect.”
Bloomberg News/Landov
Helmy Eltoukhy, co-founder and chief executive officer of Guardant Health Inc., speaks during the Bloomberg Technology Conference in San Francisco in 2016. 3. A competitive field
Eltoukhy has described Guardant as a pioneer in the space, having released the world’s first liquid biopsy test.
The space has grown competitive. Rivals include Foundation Medicine, which was acquired by Roche RHHBY, -0.03% in July, Thermo Fisher Scientific Inc. TMO, -0.10% , Illumina Inc. ILMN, +0.68% , privately held Personal Genome Diagnostics Inc., Qiagen NV QGEN, -0.27% and Sysmex Corp.’s Sysmex Inostics 6869, -3.59% .
(Notably, Illumina supplies certain genome sequencers and other materials to Guardant, according to the company’s prospectus, and CEO Eltoukhy previously worked at Illumina for four years before co-founding Guardant.)
There are also companies working in early cancer detection, including Grail and Natera Inc. NTRA, -1.67% , and ones that perform genomic analyses of tissue biopsies, like Opko Health’s Bio-Reference Laboratories Inc. OPK, -6.77% , Laboratory Corporation of America LH, +0.18% and Quest Diagnostics DGX, -0.10% .
New competitors could also emerge. Guardant notes in its prospectus that “certain of our customers are also developing their own tests and may decide to enter our market or otherwise stop using our tests.”
4. The question of FDA approval...
Though Guardant is selling liquid biopsy tests, they haven’t been approved by the Food and Drug Administration.
Instead, they are being sold as “laboratory developed tests,” a designation that was once for tests made and used by a single laboratory but has expanded dramatically.
Critics say that the category serves as a loophole, letting companies evade regulatory scrutiny — so much so that the FDA has said it wants to change the policy.
Guardant, notably, said it has invested “heavily” in clinical studies, including 80 peer-reviewed publications for its flagship Guardant360 test, according to its prospectus.
Guardant360 got a “breakthrough device” designation from the FDA early this year, which could allow for faster regulatory review, and the company said it plans to file for approval through the FDA’s medical device pathway in the first half of next year. Guardant said it may pursue approval for other tests too.
Still, it’s a touchy subject because of another blood-testing company that also sold laboratory developed tests: the now-notorious, soon-to-be-dissolved Theranos.
Related: How blood-testing startups are pitching themselves after the Theranos scandal
5. ...and the concomitant financial risk
Guardant has brought in revenue over the last several years — since 2016, primarily from its Guardant360 test — but isn’t yet turning a profit.
The company made nearly $50 million in revenue last year, up from about $25 million in 2016, and has brought in roughly $36 million in the first half of 2018. It had net losses of about $83 million in 2017 after net losses of $46 million in 2016, and recorded a net loss of roughly $36 million in the first half of 2018.
Part of the problem is that, although Cigna Corp. CI, +0.46% and multiple Blue Cross Blue Shield plans cover Guardant tests, major health insurers like Anthem Inc. ANTM, -0.29% , Aetna Inc. AET, +0.06% and Humana Inc. HUM, -0.27% consider Guardant360 experimental and have said they won’t cover it.
Through last year, Guardant testing services have “nearly always” been provided as a nonparticipating provider, meaning that the company wasn’t in a contract with the patient’s health insurer. In those cases, Guardant gets paid less because the provider chooses how much to pay — significantly less, according to Guardant — and the health insurers can even later review the claim and decide that they paid too much.
Guardant gets a higher average price for biopharmaceutical sample testing, by contrast, the prospectus noted, adding that if its tests are approved by the FDA, wider health insurance coverage would likely follow.
But the company also noted that some payers are starting to have third-party entities managing their laboratory benefits, which could hurt Guardant’s revenue in the short-term by complicating reimbursement, favoring less expensive tests, implementing preapproval or other administrative requirements and other pricing pressures.
“We expect to continue to focus substantial resources on increasing adoption of, and coverage and reimbursement for, our current tests and any future tests we may develop,” the prospectus said. “We believe it may take several years to achieve broad coverage and adequate contracted reimbursement with a majority of payers for our tests.”
