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Grail Projects Future After Illumina, May Present Trial Data to NHS This Summer


NEW YORK – Grail officials presented their vision for the firm's post-Illumina future on Monday, sharing recent financial metrics and near-term strategies for growing the company's multi-cancer early detection liquid biopsy testing business.

Illumina has still not yet settled on whether it will spin off Grail or sell it to another firm. However, if it sends Grail off as a standalone company, it would endow it with approximately $1 billion in cash. That should be enough to fund the company through the end of 2026, Grail CFO Aaron Freidin said on a conference call with investment analysts. Grail's cash burn in 2023 was $532 million, and it expects its second half 2024 cash burn to be about $250 million.

Grail officials said that should be enough to take the company through "key milestones" including its prospective study with the UK's National Health Service on Galleri and a premarket approval application with the US Food and Drug Administration.

Though near-term revenue growth could fluctuate, Freidin said, the company is "focused on making significant reductions in our cost of goods per test, bringing down our operating loss over time. As we progress to major milestones, we expect to have line of sight to profitability." 

For the first quarter of 2024, Grail recorded revenues of $27 million, up 36 percent from $20 million a year ago. The firm's full-year 2023 total revenues were $93 million, up 68 percent year over year. Grail has sold 180,000 tests as of March and recorded $75 million in test fees in 2023, up from $40 million in 2022, mostly through the firm's clinic sales channel.

Grail's precision oncology business has run more than 6,000 samples across multiple partnerships with pharma companies, "generating a pipeline of companion diagnostic opportunities," Freidin said. Revenues from this segment were $18 million in 2023, up from $16 million in 2022.

On the call, Grail officials shared more details on their plans after independence from Illumina. One near-term indicator of its prospects could come after this summer, when the company may submit data on the first year of its NHS study to the UK government. Grail will do so "only if we see some really compelling information" that might lead the NHS to pull its implementation pilot study forward from its original planned launch in 2026, said Harpal Kumar, Grail's president for biopharma and Europe. Metrics will include positive predictive value, the number of stage IV cancers found, and total cancers found.

"To evaluate MCED tests, one needs to look at this from a different perspective vs. traditional single-cancer screening tests," Evercore ISI analyst Vijay Kumar wrote in a note to investors following the Grail presentation. "We thought management did a good job explaining the benefit versus risks of implementing Galleri. … The tricky part will be around the test's sensitivity," which, so far, has been just over 40 percent in case-control studies, he noted.

While Grail officials said they have no intention to publish the results of the first-year analysis they will submit to the NHS, Kumar said, "a decision sometime in [the second half of 2024 or first half of 2025] by the NHS to do a commercial pilot will increase confidence in the test’s utility."

Since committing to divesting Grail last fall, Illumina has pursued both a capital markets transaction, such as an initial public offering, and an asset sale. Last week, Illumina filed a Form 10 registration statement with the US Securities and Exchange Commission, a necessary step in a capital markets transaction. However, in a Monday email, Illumina said it is "still pursuing parallel paths."

Grail will owe royalties to Illumina after separating from the firm. It is also close to completing development of an automated version of Galleri that it believes will help it scale better. R&D costs as a percentage of revenue could fall to 10 percent to 15 percent of revenues once it has reached this scale, Freidin said.

During the Q&A portion of the call, Grail officials addressed several aspects of running a standalone company, including its sales and marketing needs, regulatory strategy, and testing metrics.

One analyst used a competitor as a starting point, suggesting that Grail may need hundreds of sales reps; however, Grail officials thought that offering a blood-based assay might help them be more efficient.

Kumar noted that the NHS, once it starts its implementation pilot, will be running a centralized testing program, "so the need to invest in sales and marketing infrastructure is lower than we'd need in the US." This will allow the firm to offer the test to the NHS at a lower price than elsewhere while still maintaining its desired profit margins.

Grail's leadership stressed that the NHS study is doubly important, as it will provide the data needed for a PMA filing with FDA in the US.

Grail officials said the firm is not planning to pursue single-cancer indications for the test in order to try to get Galleri into US Preventive Services Task Force (USPSTF) guidelines, as some liquid biopsy competitors have. Instead, it believes that Congress will pass legislation that would allow the Centers for Medicare and Medicaid Services to pay for Galleri in the same way it pays for other cancer screening tests such as mammograms and prostate-specific antigen assays.

If the legislation doesn't pass, Grail would reconsider its strategy to get into USPSTF guidelines, though.

Despite the FDA's recent rulemaking progress on regulating laboratory-developed tests, Grail CEO Bob Ragusa said he isn't concerned. "Galleri is well positioned; it already has breakthrough device designation and is on the market as an LDT. I don't think recent FDA rulings are going to have a significant impact on Galleri," he said, though the firm is evaluating other programs.

Grail officials also discussed return rate, or the percentage of people who get its test more than once . Recent data from one study suggested that approximately 6,000 out of more than 50,000 subjects got a repeat test, or a return rate of about 11 percent. "In the pre-reimbursement world, we don't know what we should expect in terms of repeat testing," Grail President Josh Ofman said. "In the long run, when this is a reimbursed, FDA-approved test, we expect the majority of people to get this test annually."

"Until now, our clinical studies have been a single test," Kumar said, but ongoing studies will have annual testing. "Hopefully, those studies will show the value in it."

In Monday afternoon trading on the Nasdaq, shares of Illumina were up 2 percent at $112.99.