A Cancer Test Has Investors Betting Big --- An FDA panel backed Grail's Galleri test. But the Medicare money the business depends on is far from guaranteed.

“In the age of AI and gene sequencing, we still catch cancer one organ at a time. Only a handful of cancers have any test at all.

 

A blood test that could screen for dozens of cancers at once would be a major leap. Last week, that prospect moved closer when a Food and Drug Administration advisory panel backed Grail's Galleri multi-cancer test.

 

Grail's stock has surged past Wall Street's average price target and has nearly doubled over the past month.

 

But investors might be overlooking the harder question: Finding cancer is one thing. Finding it early enough to save lives -- and justify widespread payer coverage -- is another.

 

For most of medical history, doctors waited for cancer to announce itself with a lump or some other symptom, then went looking for it. Screening turned that logic on its head: Find cancer before the patient knows it is there, when it is still small enough to treat. Decades of trial and error have produced a shortlist of tests like colonoscopies and mammograms that actually work. They are unglamorous, but they save lives.

 

The trouble is that they cover only a few cancers. Grail spent a decade and billions of dollars trying to fill that gap. Galleri scans the blood for fragments of DNA shed by tumors, and it looks most promising exactly where medicine is blindest: cancers such as pancreatic, ovarian and liver cancer, for which there is no routine screening.

 

But it isn't particularly good at finding cancer early. Advanced tumors shed more DNA, making them easier to detect.

 

In a U.K. trial of more than 140,000 people, Galleri detected about 14% of Stage 1 cancers, versus 60% at Stage 4. The trial missed its main goal of cutting cancers caught in Stage 3 and 4 combined. Stage 4 diagnoses did fall, but Stage 3 diagnoses rose, possibly because cancers were being caught earlier. Regardless, the bottom line was that late-stage cancers weren't reduced overall.

 

That leaves the central question unanswered: Is Galleri finding cancer early and consistently enough to change patient outcomes? The FDA itself asked its advisers whether calling it an "early" detection test was justified.

 

Being sure of the clinical utility of the test is important because screening healthy people carries risks. A false positive can send someone into scans and biopsies they never needed. A false negative can create false reassurance.

 

The question is whether those risks are justified by the fact that some people will find their cancer earlier. The FDA usually follows its advisory panels, so approval now looks likely. The bigger commercial prize is insurance coverage, particularly Medicare.

 

A law passed this year created a pathway for Medicare to cover multi-cancer screening tests starting as early as 2029. But it didn't guarantee payment. The Centers for Medicare and Medicaid Services (CMS) still has to decide whether a test is reasonable and necessary.

 

On Wolfe Research's model, Grail's stock is worth about $50 without Medicare coverage and $150 with it. With the stock trading around $150, Wolfe's Paige Chamberlain notes, the stock is priced for almost the entire upside in her model -- as if coverage were a near-certainty -- when she puts the odds closer to a coin flip.

 

An outright rejection would be politically fraught. But a yes could come with some strings. Sean Tunis, a former Medicare chief medical officer who advises Grail, notes the agency could opt for "coverage with evidence development" -- a policy he helped design that pays for promising tests or treatments with the condition that data is systematically collected on all treated patients to provide additional evidence.

 

Even a favorable ruling would build a market only slowly. Coverage wouldn't begin until 2029, at first only for those between the age of 50 to 65, with the upper limit rising one year at a time after that. It would help in another way, too. A Medicare decision, especially alongside a blessing from guideline groups like the American Cancer Society, is what tends to pry open the commercial market, says Dan Brennan of TD Cowen.

 

For now, Grail leans on a niche cash market. This year it will sell about 250,000 tests mostly to what Brennan calls the "worried, wealthy and well."

 

Compared with about 180,000 tests sold last year, that is respectable growth. But it isn't enough for a company that is expected to keep bleeding hundreds of millions of dollars in annual losses through the end of the decade, making a fresh capital raise almost inevitable.

 

And Grail won't have the field to itself: Rivals including Abbott, Natera and Guardant Health are developing tests of their own, ready to walk into the market Grail is working so hard to create.

 

Investors are probably right that multi-cancer screening is coming. The route there, though, will be slower, costlier and more crowded than the excitement suggests.” [1]

 

1. A Cancer Test Has Investors Betting Big --- An FDA panel backed Grail's Galleri test. But the Medicare money the business depends on is far from guaranteed. Wainer, David.  Wall Street Journal, Eastern edition; New York, N.Y.. 02 Oct 2026: B12.