The Biggest Liquid Biopsy Company Files for IPO
We’re not sure about other countries out there, but here in ‘Murica “curing cancer” is kind of a big deal. Everyone seems to think that there’s some magical potion that cures cancer. Some people think the “cure for cancer” is being hidden by “big pharma” so they can make billions of dollars on cancer treatments. The truth isn’t what most people think though.
The cure for cancer is early detection, something we elaborated upon in our article on how Early Detection of Breast Cancer Cures Breast Cancer. The vast majority of breast cancer cases could be “cured” if they were detected at the earliest stages. Eventually, you will have a smart toilet that detects cancer in your urine stream and then communicates with your smart fridge so that your morning smoothie sorts you right out. We’re a long way from that today with our primitive “feel for lumps” detection methods, and it’s time we adopted something with more sensitivity than someone’s fingertips.
The basic idea of cancer is that cells start multiplying uncontrollably until there’s an actual tumor that can be seen with the naked eye, at which point in time we do something very primitive. The doctor cuts open the person and then cuts a piece of the tumor off so it can be examined for cancer. It’s called a biopsy, and it’s as primitive as feeling for lumps. Biopsies cost lots of money to perform, especially when the tumor is benign. In many cases, patients need to go in for multiple biopsies. Wouldn’t it be better if we had a blood test that we could use to detect the cancer? Well, we do. It’s called a liquid biopsy, and the company behind today’s best-selling liquid biopsy just filed for an IPO.
Liquid Biopsies and Cancer Genomics
Founded in 2012 by a team of serial entrepreneurs, San Francisco startup Guardant Health has now taken in a whopping $550 million in funding with their latest round of $360 million closing in May of last year and led by Softbank. Lots of big names have backed Guardant over the years including Sequoia Capital, Khosla Ventures, asset management firm T. Rowe Price, and Singapore sovereign wealth fund Temasek Holdings. Now, Guardant is looking to raise $100 million in an Initial Public Offering (IPO), a dollar amount that may change as terms are solidified.
The appeal of a liquid biopsy is obvious because you don’t need to perform surgery, but there’s a bit more to it than that. As Guardant describes it, they offer “breakthrough genomic cancer testing from a single blood draw”. It’s not just about detecting the presence of cancer but also determining what type of cancer is present so that personalized therapies can be administered. This sounds an awful lot like a company we’ve talked about before called Foundation Medicine.
Foundation Medicine vs. Guardant Health
It was more than 4 years ago that we penned some thoughts on how Guardant Health may challenge Foundation Medicine, a company that’s doing something very similar. Both companies use next-generation sequencing to identify cancer-associated alterations that can be attacked using targeted therapies. Here is an example of the cancer “markers” that can be detected using the Guardant360 liquid biopsy:
In other words, everyone’s cancer is unique, and targeted therapies are starting to prove more effective than a one-size-fits-all platinum-based chemotherapy treatment or blasting someone with radiation until their hair falls out.
We came across a paper that looked at the differences between FoundationOne and Guardant360, but the biggest difference is that Guardant Health uses a blood test and FoundationOne uses a tissue biopsy. Well, that was the case until this year when Foundation Medicine announced the availability of their own liquid biopsy test – FoundationOne Liquid – and just days ago released the next-generation of their test – which has been granted breakthrough device designation by the FDA:
It’s no coincidence that Guardant Health is looking to raise more money around the same time that Foundation Medicine is ramping up their own liquid biopsy test. It’s not the first time these companies have clashed. First, there was a patent infringement lawsuit filed in 2016 against Guardant Health by Foundation Medicine regarding U.S. Patent 9,340,830. One month after Foundation Medicine was acquired by Roche, the lawsuit was dismissed. Perhaps in response, Guardant Health sued Foundation Medicine claiming false advertising through which Foundation was allegedly bad-mouthing Guardant360 in an attempt to sell their own tests. This lawsuit was also dismissed this year as well, with both companies agreeing to “establish a working group to explore the development of standard formulas and definitions for the validation of genomic profiling assays.” How’s that coming along gents?
Guardant Health and Guardant360
So far, we’ve actually said very little about Guardant Health and their Guardant360 blood test which measures 73 cancer-related genes from circulating tumor DNA, or ctDNA. Over 70,000 tests have been administered by more than 5,000 oncologists, over 40 biopharmaceutical companies, and all 27 National Comprehensive Cancer Networks. Guardant360 is their flagship product which is only meant to be used for advanced solid tumors, something that the term “liquid biopsy” seems to imply. In addition to their flagship product, the company’s other products include:
While Guardant has been selling lots of their flagship tests, they’re also burning through a lot of cash. Since companies that file for IPO usually only give investors a few years’ worth of financials, the SEC seems to have recently required them to break things down by quarter (we’ve seen this with all the IPOs we’ve looked at recently). It gives you a better picture of what running the company might be like:
While revenues have been experiencing growth – admittedly, growth that has tapered in the past three months – what’s most surprising is how much cash is being burned. Burning an average of $19.6 million in cash over the last six quarters means that their planned $100 million raise will fund the operation for about 1 year and 3 months before they need to raise again. That is until you see that the company has $300 million on cash on hand already, and you realize that they’re only beginning to spend. The hot IPO market this year means they can raise more money at loftier valuations, and create a little brand awareness to boot.
Guardant Health may be trying to mimic the Foundation Medicine success story with their planned IPO. When Foundation Medicine had their own IPO back in 2013, shares were sold for around $18 a pop, but on the first day of trading, they soared to nearly $35 a share. In 2015, Foundation Medicine announced a strategic partnership with Roche, who acquired a majority stake in the company, which sent shares soaring again to around $46 a share. Finally, Roche acquired Foundation Medicine this summer for $137 a share. Foundation Medicine has already profiled over 180,000 patients, and they’re just now entering the market with a liquid biopsy test. Guardant has already tested over 70,000 patients using their liquid biopsy test. Still, these numbers are relatively small and there’s plenty of room for others to play in this space.
Liquid biopsies aren’t just being developed by the two companies we’ve talked about today. We looked at some of the other players last year in our article on “8 Blood Tests for Cancer Being Developed by Startups“. Then there’s Illumina’s Grail which wants to provide tests that detect cancer when no symptoms are present. They’ve raised a whopping $1.6 billion in anticipation of an IPO in Hong Kong this year. They’re backed by Bill Gates and Jeff “Deep Pockets” Bezos – a man who has probably decided that the next thing to do after dominating the entire retail industry is to cure cancer.
Maybe there isn’t enough room for everyone after all. If the Guardant Health IPO is successful, the shares will trade under the ticker “GH”.
Are you paying too much in transaction fees to your broker? Check out a brokerage firm called Zacks Trade that's offering $1 trades until 2019. After that, you'll pay just $3 a trade or a penny a share, whichever is greater. It's one of the cheapest brokers out there and you can also trade stocks on foreign stock exchanges. Click here for $1 trades until 2019.