Grail today
(As of 12/13/2024 ET)
- 52 week range
- $12.33
▼
$23.44
- Target price
- US$16.00
GRAIL NASDAQ: GRAL is a small-cap biotech company that has done very well over the last month and a half. Healthcare stocks are up 58% since Oct. 24 through the close of trading on Dec. 11. The company has an interesting technology that sets it apart from many smaller biotechs. I’ll explain what this firm does, what makes it unique, and my thoughts on this stock targeting a $100 billion market.
GRAIL’s goal is to give doctors great support in the fight against cancer
GRAIL’s business revolves around its Galleri product. Galleri is an early cancer detection test for people over 50 who do not have symptoms. Illumina NASDAQ: ILMN spun off the company in mid-2024. The Gallery test can detect more than 50 types of cancer simultaneously and is available on the market.
This is one of the factors that sets the company apart from other small biotech firms. Many similarly sized firms in this industry have yet to generate any revenue. This is because they are still working to obtain approval from the Food and Drug Administration (FDA) or approval from foreign health regulators. Without these permits, which can take a decade or more to obtain, they won’t be able to generate much revenue. Not so for GRAIL, which reported $112 million in sales over the past 12 months.
The company’s registration statement clearly states the need for earlier cancer detection. The company estimates that more than 60% of cancer deaths in the United States are from cancers for which there are no generally accepted screening guidelines. Only five types of cancer have the level of screening recommended by the US Preventive Services Task Force. These include breast, cervical, colorectal, lung and prostate cancer. Doctors test each type of cancer individually.
GRAIL believes that if doctors performed the Galleri test at the same time as cancer screening, they could prevent 100,000 deaths a year. This represents about 16% of the 612,000 cancer deaths estimated to occur in 2024. Early detection can increase cancer survival by 360%. In the company’s PATHFINDER study, Gallery’s test correctly predicted the area from which cancer originated in the body 88% of the time. Understanding where cancer comes from is key to treating it.
GRAIL seeks FDA approval for Galleri to expand rollout
The Gallery test is a laboratory-developed test, which exempts it from immediate FDA oversight. However, GRAIL is seeking FDA approval for the test as a medical device, which requires premarket approval (PMA). This is because major healthcare industry players generally do not cover medical devices without this approval. The company will apply for a PMA in 2026. She expects to receive results from an ongoing trial in NHS England around the same time.
Morgan Stanley Analysts New York Stock Exchange: MS GRAIL is said to have a first mover advantage in the $100 billion total addressable multi-cancer early detection (MCED) market. This is MCED’s first test to hit the market, and Morgan Stanley believes the company can support its long-term valuation of $50 per share. This implies an upside of 142% from the December 11 closing price. However, Morgan Stanley’s short-term price target suggests a 22% downside potential.
Despite the efforts to obtain FDA approval, another significant advantage of the Gallery test is that the PMA approval timeline is typically much faster than that of a drug. Assuming everything goes smoothly, Morgan Stanley says FDA approval will be “likely in the first half of 2027.”
GRAIL’s financial performance improves sharply
Another reason to be excited is that Galleri’s accessibility allows observers to see whether the product is gaining traction. This is unlike most small biotechs. This is obvious. Galleri’s third-quarter revenue grew 52% year over year. The company is also improving profitability and cutting costs.
The company’s adjusted gross profit increased 68% and its adjusted gross margin increased 460 basis points. The cost reduction is aimed at significantly reducing the company’s expenses. With these adjustments and more than $850 million in cash, the company believes it has runway until 2028.
Grail, Inc. Price Chart (GRAL) on Saturday, December 14, 2024
Overall, GRAIL is an interesting company with a huge market opportunity. Worth just under $700 million, this stock could be a huge long-term success. However, as is often the case among small biotech companies, it remains a highly risky investment for now. Poor results from ongoing studies may result in the inability to obtain PMA, which will significantly limit its growth potential. However, with key catalysts coming in one to two years, I will be keeping a close eye on this company.
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