NEW YORK – Investment bank Craig-Hallum on Wednesday initiated coverage of liquid biopsy firm Guardant Health with a Buy rating and a price target of $88.
In a research note, analyst Alexander Nowak argued that the company's 10 years in the market are "just a precursor" to its future potential. A key factor is the awaited release of results from the firm's ECLIPSE trial, which will better determine the performance of its new blood-based colorectal screening test, Guardant Shield.
"Our work indicates the study will be successful, change how CRC is screened forever and open the door to multi-cancer screening via a blood test," Nowak wrote. That the study might fail is a possibility, but one Craig-Hallum views as unlikely. If successful, he estimated that Guardant will be "on a path to $1.5 billion [in] sales in five years and a multiple of that in ten."
Nowak and his colleagues have estimated based on past case-control data that the ECLIPSE data will show approximately 85 percent sensitivity at 90 percent specificity, as well as advanced adenoma sensitivity in the mid-teens. "Combined with strong compliance rates this could make Shield the screening test to use when colonoscopy is refused. It may also challenge Exact Sciences' Cologuard as a more compliant sample medium," he wrote.
With these performance numbers, Craig-Hallum believes Shield will be able to gain FDA approval, Centers for Medicare and Medicaid Services coverage, and inclusion into the 2026 US Preventive Services Task Force guidelines as an A or B service, which designates screening at an interval of one to three years. Although this has become a point of debate in the field, Nowak argued that although 85 percent sensitivity is lower than Cologuard's 92 percent, "patient compliance is just as critical and Shield's blood vs. Cologuard's fecal should be superior."
An A or B USPSTF label secures $500 reimbursement. As such, "if Shield ramps in line with Cologuard it becomes [an approximately] $450M product in five years," Nowak said.
The investment bank calculated the chances that this scenario does not come to bear at about 25 percent. A complete failure, with ECLIPSE showing sensitivity so low as to render the test a "non-starter" has about a 5 percent chance of happening, Nowak wrote. A mixed success, where the test shows merit but only if used at shorter intervals with lower pricing, is about 20 percent likely.
Regardless of ECLIPSE, Nowak argued that Guardant's overall business, which includes the Guardant360 tumor profiling assay and Guardant Reveal for minimal residual disease detection, is poised to grow significantly. "We see G360 doubling in five years, [and] Reveal recurrence ramping to $200M+ as the test to use when tissue samples are inaccessible." This, plus the likelihood of success for Shield informed Craig-Hallum's rating and price target for Guardant's stock.