Here's Why Grail Stock Surged 55% This Week

Multi-cancer early detection (MCED) test company Grail (NASDAQ: GRAL) stock surged 55% through Friday morning after the Food and Drug Administration (FDA) voted favorably on its Galleri MCED test. The vote opens the pathway for the FDA to grant premarket approval to Galleri and, in turn, for increased adoption by medical bodies and insurers.

Grail's Galleri wins an FDA committee vote

The Molecular and Clinical Genetics Devices Panel of the FDA's Medical Devices Advisory Committee voted unanimously on Galleri's safety, seven to two, that Galleri's benefits outweigh its risks, and, in the most eagerly awaited vote, Galleri received a six-to-four vote in favor of its effectiveness.

The vote increases the likelihood of pre-market approval and may open conversations with medical insurers that might not consider Galleri without FDA approval. The close efficacy vote indicates the key issue for Grail. The Galleri test missed its primary endpoint: a statistically meaningful reduction in late-stage (Stage III and Stage IV) cancer detection in a three-year, 142,250-person trial with England's National Health Service.

Galleri and medical insurers

However, management has consistently argued that Galleri has demonstrated superior episode sensitivity (share of cancer cases the test detects from those confirmed within 12 months) in the 12 most deadly cancers that cause two-thirds of cancer deaths. As such, insurers may adopt Galleri if the cost savings from treating cancers, notably the most deadly cancers, earlier outweigh the costs of more expensive testing of false positives and the cost of the test itself.

Image source: Getty Images.

The recent FDA committee vote will strengthen that case and, if granted, subsequent pre-market approval. Whichever way you look at it, this week's news is a major plus for Grail.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Grail. The Motley Fool has a disclosure policy.