Liquid biopsy in the cancer testing is the next big investment opportunity

The market size

Public companies like Roche (RHHBY), Guardant Health (GH), Exact Sciences (EXAS), Natera (NTRA) and Personalis (PSNL) and many in the private space like GRAIL (which has been acquired by Illumina)  are creating this market for genetic testing. Some companies like GH, NTRA and EXAS have been in the market for the last few years and I see this market size expanding as these companies prove their merit and get more studies out the door along with more FDA approvals in the pipeline.

These companies, besides working with pharma companies on the medicine, are also rolling out a series of genetic tests that can help detect cancer indicators early and these testing kits are being used extensively in the doctors’ offices and clinics. According to investor presentations from these companies and looking at analyst research testing services is a huge market and analysts agree this could become a USD $50+ billion market within a few years, from its current size of approx. USD 6 billion. Recurrence monitoring alone is a $15 billion potential market, according to Guardant Health and the recurring opportunity assumes that every one of the 15 million living cancer survivors receives one $1,000 test per year (US only) and then, there is the rest of the world to add to the total addressable market, The current penetration adding all the revenue from these companies is less than 5% and therein lies the massive opportunity for these companies in the next decade.

The front runners

Doing repeat biopsies of the traditional tissue is quite onerous and this is where Natera and Guardant shine. Natera started with a non-invasive prenatal testing (NIPT) to detect fetal aneuploidy (abnormal number of chromosomes) and recently introduced a  diagnostic test called Signatera that monitors the potential for cancer relapse well before a tumor would ever show up on a traditional scan. Another blood test available for patients later this year can detect cancerous cells before they group together to form a mass and this Natera product will monitor for recurring colon cancer. Pseudo-progression is a phenomenon whereby the tumor appears larger on an initial scan during treatment before shrinking on subsequent scans, and it has been reported in up to 1 in 10 patients treated with immunotherapy. The ability to distinguish true progression from pseudo-progression earlier in the course of treatment, has emerged as a significant unmet clinical need, according to Natera If a patient is not responding to treatment, one would expect the tumour to get larger on a scan over time, however up to one in 10 immunotherapy treated patients see their tumor get bigger before it gets smaller, as it’s filled with lymphocytes and swells up under attack from the immune system. With a CT scan, this swelling looks like disease progression, which it’s not, hence the term pseudo progression. Natera hopes to expand its market share with its offerings that could constantly keep track of any recurrence. It is also entering the transplant market with its Prospera line of tests and expanding into China. So there are multiple expansion possibilities for Natera.

Guardant Health also hopes to follow with a blood test that monitors for recurring lung, breast, colon and ovarian cancer as I had mentioned in my previous article. Guardant is conducting a trial called Lunar-1 for the same purpose and it would be completed by late 2021 according to their report. These tests are less invasive, and don’t expose patients to excess radiation often associated with scans. Both companies also sell their products to pharmaceutical companies for clinical research as well, hence there is a 360 feedback loop for these companies to go through continuous improvement and innovation. I have already written extensively on Guardant in a previous article and they recently got approval for Guardant360 a complete genomic profiling test to optimize treatment selection that has added to their overall TAM. Guardant’s Softbank overhang has still not cleared out, but business is humming along though I have to admit, there has been a COVID bump that has hit growth rates for the year but should clear out by early 2021.

Another company which has put its hat in the race is PSNL, which has recently launched its own liquid biopsy platform called NeXT. PSNL has been engaged in whole genome sequencing (WGS) services for the VA (Veterans Association) for last several years, and has used this data to take its offerings to the next level. Drug developers could use the NeXT Platform to establish relationships between immune responses and tumour mutations and incorporate the findings into drug discovery and clinical trials and PSNL had a 20% sequentially increase in the most recent quarter for its NeXT platform. PSNL claims, its NeXT platform can identify biomarkers including neoantigens for all cancers with comprehensive data across all 20,000 human genes from a small tissue sample. They are still early in this space but I would encourage the readers to monitor their progress.

EXAS a market leader with its stool based colon testing kit, is also progressing on other cancer testing fronts. I will analyse EXAS in a later article as more data on their liquid biopsy trials come out, after their recent acquisition of privately held Thrive.

Illumina has also thrown its hat in the ring with its acquisition of Grail which it partly owned,  at a rich valuation of $8 Billion but it may take a few years before we can evaluate the value generation potential of this deal. Grail plans to launch its test for early detection of cancers next year.

There are others that have been making a foray into this space like, NeoGenomics, Freenome and many more, which validates, that the era of liquid biopsies has arrived. I will let readers know a bit more on the others as and when I get verifiable data.