Is Guardant Health a Threat to Foundation Medicine?
Table of contents
Sysmex Inostics and Apocell are companies that are looking to provide the ability to test for cancer via a simple blood test which is a promising potential market. Foundation Medicine (NASDAQ:FMI), is looking to address the emerging cancer genomics market by providing a service in which using a biopsy, Foundation can interrogate the entire coding sequence of 236 cancer-related genes. The resulting information is then used to create web-based reports used by physicians to create personalized cancer treatments. One company that is looking to offer both cancer blood testing and personalized cancer genomics reports is Guardant Health.
About Guardant Health
Silicon Valley-based Guardant Health was founded in 2012 by a team of serial entrepreneurs. The CEO, Helmy Eltoukhy, co-founded Avantome in 2007 which was sold to Illumina one year later for $60 million. The CTO founded Auriphex Biosciences which was acquired by Illumina in 2009. Ariphex was focused on purification and genetic analysis of circulating tumor cells for cancer management. To date, Guardant has raised over $10M in funds from Sequoia Capital and various angel investors, including a few well-known Silicon Valley tech executives.
The Guardant360
While other companies we highlighted like Apocell look for Circulating tumor cells in the bloodstream, the GUARDANT360 test looks for tumor DNA which is shed into the bloodstream for almost every type of cancer. The below steps from Guardant show just how simple the entire process is:
The turnaround time is about two weeks and the entire process is very similar to the one used by Foundation Medicine except there is no need for a biopsy to be performed. Guardant claims that recent clinical studies show excellent performance for the GUARDANT360 in the top five cancers (breast, lung, colorectal, skin and prostate), which in total account for over half of all cancer cases. The GUARDANT360 is now available to select cancer centers across the United States.
In a recent article by Xconomy on Guardant, the CEO of Guardant is quoted as saying that the test will be priced roughly in the same range as Foundation’s genetic analysis test. In regard to seeing Foundation Medicine (NASDAQ:FMI) as a competitor, the CEO stated that “Biopsies are still the gold standard for the initial genetic diagnostics on a patient’s cancer” but Guardant could “help “democratize” genetic monitoring of tumor status for patients far from large cancer centers who may lack access to tumor biopsy surgeons“.
Conclusion
Even with that rather diplomatic statement from Guardant, Foundation Medicine (NASDAQ:FMI) investors should be aware of this potential threat. Even though the initial price of the two tests remains the same, with the average cost of a biopsy falling in the $10,000 range, this has to be added to the total cost of each Foundation test. Patients incurring the costs of such biopsies will much prefer the blood test to the biopsy, not only for the cost savings but also for the convenience. If Guardant’s blood tests prove to be as accurate, and effective as the Foundation biopsy tests for initial genetic cancer diagnostics, then it seems quite likely that Guardant could displace Foundation’s tests over time.
Share
ARK sold its GH shares. So the question is: is there a problem with GH ? I noticed revenue growth was smaller in recent quarters.
Last quarter revenue was +17% Y/Y. Guardant Health was valued for a much higher revenue growth.
Also it is worth noting CEO of Guardant Health sold in April shares worth $40.8 million at avg price $157.6 a share. Current share price is $120.94.
If you do not understand why someone conducted a trade, don’t lose any sleep over it. ARK is an active fund manager, so we can’t begin to understand what’s going on there (lots of things ARK does cannot be explained rationally). As for the CEO, we see that sale noted on Yahoo Finance. These insider sells are very difficult to assess. You can be sure that the Board of Directors is aware of this and that whatever decision was made has some explanation that we’ll never know. Trading off of this information becomes difficult because then you’re trying to time the market. It’s about time in the market, not timing the market.
Is there a problem with GH? From where we’re sitting, nothing has changed. They have a lot of cash on hand, they’re burning through a lot of cash, and they have grand aspirations. As with all the stocks we’re holding, we’ll look to do an update at some point – usually coinciding with some major event.