Grail (GRAL), which owns and markets the cancer-screening blood test known as Galleri, has many powerful, positive catalysts.
Given the latter point, along with the rapidly expanding demand for the test and its ability to save millions of lives annually, I believe that GRAL stock is quite attractive for long-term growth investors. One of the multiple health insurance firms that’s covering Galleri for individuals in some categories is Tricare, “the uniformed services health care program.” Tricare is run by the Defense Department.
A Growing List of Impressive Partnerships
Earlier this year, Galleri announced that Tricare was covering the Galleri test “for beneficiaries aged 50 and older with an elevated risk for cancer, as determined by (their) healthcare provider.” As news of this decision spreads among the insurer’s beneficiaries, a large number of them may take advantage of the test, causing Grail’s revenue growth to accelerate meaningfully.
Moreover, Tricare’s decision could spur other government-managed health insurers, including Medicare and Medicaid, to cover Galleri for at least some of their beneficiaries. Importantly, by detecting cancer early and preventing long, costly treatment programs for patients with cases of advanced cancer, Galleri can save health insurers large amounts of money, giving them a strong incentive to provide coverage for the test.
One of the major healthcare providers that has recently begun utilizing Galleri is Chicago-based Rush University System for Health. According to Grail, Rush, a hospital owner “is one of the largest health systems in the U.S.”
Since hospitals can lose significant amounts of money on treating cancer patients, many other hospital owners will probably follow in Rush’s footsteps and begin providing Galleri to their patients.
In February, Quest Diagnostics (DGX), one of the most prolific providers of medical lab tests in the U.S,, initiated a partnership with Grail. Under the arrangement, healthcare ” providers can….order the Galleri test directly from GRAIL through the Quest Diagnostics connectivity system.”
Finally, Everywell, a major provider of “at-home health testing,” disclosed in June that it would provide Galleri to its customers. And according to Grail, Everywell has contacted “hundreds of thousands of (its) customers about” Galleri.
As Grail’s list of impressive partners who will inform their customers about (and in some cases pay for) Galleri continues to expand, the growth of the demand for Galleri is likely to accelerate a great deal.
The Data Picture, and Likely FDA Approval
Two major trials of Galleri have shown that its specificity is about 99.5%. Specificity refers to the likelihood that the test’s negative results are accurate. In the first major trial, 43% of those who tested positive did indeed have cancer. But in the second trial, the latter proportion had significantly risen, Grail reported, although the firm did not provide an exact percentage.
In the first trial, 48% of the cancers detected by Grail were in the first or second stages, when treatment is more likely, to be successful while 74% of cases detected involved cancers for which Americans are not routinely screened.
Overall, the test has been shown to detect slightly over 50% of all cancer cases. However, for the most deadly cancers which cause two-thirds of the deaths from cancer in America, that rate jumps to 76.3%. Unsurprisingly, the later the stage that the cancer has reached, the higher the chances of it being revealed by Galleri.
In light of this data and the fact that it shows that Galleri can save millions of lives by detecting millions of cases of cancer much earlier than they are being found with the standard of care, I expect the FDA to approve the test. The company predicts that the agency will make a decision about the product sometime in the first half of 2027.
Once the FDA has blessed Galleri, many more insurers and healthcare providers are likely to start covering it and providing it to their patients, respectively. That’s because insurers generally look to the agency for guidance, while FDA approval lowers the potential liability from lawsuits that providers face.
Finally, on the earnings call, a Wolfe Research analyst suggested that a study of Galleri being undertaken by the UK’s healthcare system could result in many countries “with single payer systems” adopting Galleri for their citizens. Grail CEO Bob Ragusa suggested that the data would spark “significant discussions with a lot of countries around the globe.”
Since only $200,000 of Galleri’s total revenue of $34.4 million was generated from outside the U.S. in Q2, international sales obviously represent a huge growth opportunity for the firm.
*This article is intended to be informational only; it is not financial advice.
