What Should Investors Make of Guardant Health's Newest Competitor?

It hasn't been a publicly traded company for very long, but Guardant Health (GH -1.42%) has made one heck of impression on Wall Street. The company is one of the first to demonstrate that liquid biopsies, an oncology pipe dream only a few years ago, really might live up to the hype and reduce the need for risky and invasive tissue biopsies.

The potential and challenges are huge. The data extracted from a simple blood draw could be used to fine-tune treatments for individuals with cancer, detect recurrence, and even find cancer in individuals during routine checkups and blood draws -- when it's the easiest to treat and cure.

Success in early studies and healthy revenue growth have combined to drive Guardant Health to a market cap of over $8 billion. That helps to put the massive opportunity into context, but investors should know that the enormous market is attracting a healthy amount of competition. The newest entrant is Thrive Early Detection Corp., a spinout from Johns Hopkins University. What should investors think of the competitor?

Image source: Getty Images.

Off to a solid start

Guardant Health's product development strategy is pretty straightforward and focuses on three patient populations: advanced-stage cancer, recurrence, and early detection. Each successive population is larger than the previous, but so are the data analysis challenges.

Liquid biopsies work by detecting circulating tumor DNA (ctDNA), or genetic material from cancer cells that is released into the blood. However, ctDNA comprises a median 0.46% of the material in blood for advanced stage cancer patients, while the biomarkers are typically present at levels below 0.01% in early stage cancer patients. 

Therefore, Guardant Health's initial commercial focus is developing tests for advanced-stage cancers, which it hopes can fund the development of more advanced and more challenging diagnostic tests -- which also have to be lower-cost if asymptomatic individuals are going to purchase them. It has four unique test platforms on the market or in its pipeline: 

Data source: investor presentation.

Currently, all revenue is generated from Guardant360 and GuardantOMNI, but that hasn't limited growth. Guardant Health has provided over 100,000 tests to over 6,000 oncologists and more than 50 biopharma companies to date. It reported first-quarter 2019 revenue growth of 120%, increased full-year 2019 revenue guidance to at least $145 million, and exited March with $493 million in cash. And that doesn't include an additional $319 million in gross proceeds from a public offering in late May. The timing probably wasn't random. 

Similarities, differences, and a common goal

The last capital raise for Guardant Health occurred right around the time Thrive exited stealth with an impressive $110 million Series A round. The start-up is developing a liquid biopsy diagnostic called CancerSEEK, which works similar to tests from the publicly traded peer. It detects cancer-specific genetic mutations in ctDNA that can be used to identify the presence of eight different cancers, including five that currently have no screening methods for asymptomatic individuals.

Therein lies an important distinction. While Thrive could also target advanced-stage cancer populations, it appears to be focused on the larger early stage cancer and asymptomatic individual populations. But there's a catch: CancerSEEK detects both ctDNA and tumor-specific proteins. In other words, it's being developed to detect multiple data signals to increase the accuracy of the test, especially important given ctDNA comprises less than 0.01% of most blood samples. 

Image source: Getty Images.

Does that alone give Thrive an advantage over Guardant Health? That's probably not the right question to ask. The data analytics challenges of detecting tumor-specific biomarkers in blood are enormous. To successfully develop tests for early stage disease -- the Holy Grail of cancer diagnostics and screening -- will require the ability to detect many molecular data signals.

For instance, it's important not just to detect ctDNA, but also to see how that genetic material is mutated and activated, and from what part of the tumor it originated. There are similar metrics for proteins. Both Thrive and Guardant Health are working on incorporating these and more into CancerSEEK and Lunar-2, respectively. Similarly, both companies are interested in incorporating data such as clinical history, imaging, behavioral data, and even demographic information into the scoring of their liquid biopsy tests in the future.

Put another way, the race for liquid biopsy glory is all about data -- and it remains wide open.