Cancer test maker Grail made its debut on the Nasdaq on Tuesday, marking a significant pivot nearly four years after its initial public offering plans were disrupted by a takeover from Illumina. This development follows a prolonged period of regulatory disputes involving both the U.S. Federal Trade
Commission and the European Commission, which challenged the acquisition on grounds of anti-competitive concerns. Despite Illumina completing the purchase, the companies were instructed to operate independently throughout the review process, maintaining their distinct operations.
Grail was originally a part of Illumina, spun off in 2016 to focus on developing a blood test called Galleri, which detects indicators of over 50 types of cancers using a small blood sample. The test, aimed at early cancer detection to improve treatment outcomes, was sidelined by regulatory concerns as Grail directly competes with other Illumina customers. Eventually, facing heavy fines and investor dissatisfaction, Illumina decided to divest Grail. The European Commission’s directives ensured Grail would revert to its pre-acquisition status and receive around $1 billion in funding for approximately two-and-a-half years.
Unable to find a buyer for Grail, Illumina chose to spin it off into an independent entity, distributing 85.5% of Grail’s shares to Illumina shareholders, who received one Grail share for every six shares of Illumina stock owned as of June 13. Although the spin-off marks Grail’s operational independence, Illumina retained a 14.5% stake in the company. Furthermore, along with the spin-off, Grail received a significant one-time cash payment of $932.3 million from Illumina, which appeared as a “disposal funding payment” in the regulatory filings. Grail now trades under the symbol “GRAL” on the Nasdaq.
Since its introduction to the market in 2021 as a laboratory developed test not requiring FDA clearance, Galleri has reportedly sold over 180,000 tests and established more than 100 commercial partnerships. Despite these achievements, Grail has not reached profitability, incurring a $1.4 billion net loss last year, with a reported revenue of $93.1 million in 2023, marking a 67.7% increase from the previous year.
Grail is actively seeking FDA approval to enhance the commercial viability of Galleri in the U.S., considering that FDA endorsement could lead to wider coverage by large commercial insurers. Currently, Grail is conducting a large-scale randomized, controlled trial with over 140,000 participants to gather data anticipated to support a premarket FDA approval application set for submission in the first half of 2026. The company also highlighted ongoing discussions with the FDA, which has offered preliminary, non-binding feedback on evaluating the test’s safety and efficacy.
However, one significant roadblock to widespread adoption of Galleri and similar multi-cancer early detection (MCED) tests is the existing regulatory and reimbursement framework. The FDA has not approved an MCED test yet, which complicates the approval process. Additionally, coverage for MCED tests by Medicare, which does not currently insure screening tests considered preventative, would require legislative changes, a topic currently under discussion among stakeholders.
Analysts have expressed concerns regarding the financial viability and growth prospects of Galler on the market, particularly without FDA approval and necessary Medicare support. The risk associated with the commercial success of non-FDA-approved screening tests intended for average-risk individuals skews towards limited and uncertain outcomes. As such, the future of Grail’s Galleri, and its impact on early cancer detection, while holding promise, remains contingent on overcoming these substantial regulatory and financial challenges.
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