NEW YORK – Equity research firm Wolfe Research said Friday that it is launching coverage of multi-cancer screening firm Grail with a Peer Perform rating and of molecular diagnostics company Veracyte with an Outperform rating and a $50 price target.
In an email, Wolfe Research called the multi-cancer early detection (MCED) market an exciting and large opportunity but expressed caution regarding the likelihood of Grail's success considering the money and time required to prove utility and gain regulatory and reimbursement support.
Grail's flagship product is a test called Galleri, designed to detect over 50 types of cancer from a blood sample. Founded as a spinout from Illumina, Grail operated under Illumina from 2021 until regulatory pressures required its divestment earlier this year.
"While we have tremendous appreciation for efforts made to advance the MCED field … we have numerous concerns about the outlook from here [including] assay performance, health economics, lack of regulatory clarity, lack of a clear reimbursement pathway, potential for competitive disruption, cash burn, and by extension the business model," wrote Wolfe's Doug Schenkel.According to Wolfe Research's estimate, the company could face as much as $40 million in future annual cash burn but has only raised about $850 million thus far.
"Even if [Grail] can clear all these hurdles, investment in a potentially massive commercial infrastructure is then required. We respect the mission, but this is just a really, really tough business," he added.
Veracyte offers a variety of tests intended to personalize treatment for thyroid, breast, and lung cancer, as well as other assays under development and validation. The Decipher genomic classifier for prostate cancer and Afirma thyroid nodule test make up the bulk of its current sales volume.
In a separate email, Schenkel wrote that the company's revenue has doubled since a leadership change in 2021, calling Veracyte "close to best-in-class in lab diagnostics."
The $50 price target represents approximately seven times what Wolfe Research has forecast for Veracyte's 2026 total revenues.