Why Grail Shares Crashed Today
Key Points
Galleri test showed strong sensitivity for 12 key cancers, but weaker overall performance.
The sell-off may present a buying opportunity if insurers focus on those 12 cancers.
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Multi-cancer early detection (MCED) test company Grail's (NASDAQ: GRAL) stock was down 16% as of 12 pm today. The slump comes as the market digests the company's recent presentation at the American Society of Clinical Oncology (ASCO) Annual Meeting.
Why the presentation mattered
As recently discussed, investors were hoping that the data presented at ASCO from its 3-year landmark trial of the Galleri test with England's National Health Service (NHS) would strengthen the case for Food and Drug Administration (FDA) approval and, arguably more importantly, insurer adoption.
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But judging by the market's response, that did not happen.
The NHS-Galleri test
The test aimed to reduce the detection of combined later-stage cancers (Stage III and Stage IV) by detecting them earlier at Stage I and Stage II. Unfortunately, as reported in February, the test failed its primary endpoint of a statistically significant reduction in later-stage cancers, but management claimed "a substantial and clinically meaningful reduction in Stage IV diagnoses compared with standard of care alone across the pre-specified group of 12 deadly cancers."
As such, the hope was that more detailed data at ASCO would support insurers' case for paying for the test. But the results were mixed. The Galleri test detected cancer in 287 trial participants, of which 173 were later diagnosed as having cancer, meaning a 60.3% chance of receiving a positive result after receiving a positive result from Galleri.
Image source: Getty Images.
There was some good news: the test showed "69.8% episode sensitivity for the 12 cancers responsible for two-thirds of cancer deaths in the U.S." On the other hand, "for all cancers, episode sensitivity was 39.3%," which is less encouraging.Episode sensitivity means how often the test correctly finds cancer that is later confirmed in the person tested.
What it means for investors
The market may be selling off the stock too aggressively here. Instead of thinking of it as a more-than-50-cancer test, perhaps investors should focus on the 12 key cancers the test is good at detecting. If insurers take a similar view, then today's sell-off could prove a decent buying opportunity.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Grail. The Motley Fool has a disclosure policy.
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