Cancer-detection company Grail, which counts Jeff Bezos among its investors, files to go public

Grail, a start-up trying to develop a blood test to detect early-stage cancer, has filed for an initial public offering of stock. The company seeks to join the Nasdaq and trade under the symbol “GRAL,” according to the filing.

Grail would follow a wave technology companies that have sought to debut on public markets in recent weeks, including Palantir and Snowflake, following the recovery of major U.S. indexes from a selloff in the spring brought on by the coronavirus pandemic. 

The biotechnology company reported a $136.4 million loss and no revenue in the first half of 2020. The loss widened from $117.2 million one year earlier. Most of the company’s losses come from research and development expenses, including the costs of developing technology and running clinical studies.

“We have never generated revenue from product sales, do not expect any near-term revenue to offset our ongoing operating expenses, and may never be profitable,” the company cautioned in Wednesday’s filing.

Although it’s unusual for information technology companies to go public pre-revenue, it’s more common in the biotech space, where some young companies use IPOs to raise money to help fund the extensive research and trials necessary for medical products. Among other examples, Gossamer Bio had no revenue when it filed to go public in 2018.

The medical industry has understood for years that so-called blood based “liquid biopsy” tests can find signatures of cancer. But the tests on the market today tend to monitor how the disease spreads as it’s responding to treatment. Grail and its competitors are looking to detect cancer at an earlier stage, when it’s theoretically more treatable. It competes with Thrive, a start-up that is also looking to screen for cancer with a simple blood test. Freenome, another well-funded rival, is focusing more specifically on colorectal cancer.

Grail was spun out of Illumina, a maker of DNA-sequencing machines, in 2015, and it has gone on to raise more than $2 billion in financing from a range of investors including Johnson & Johnson, Arch Venture Partners and Amazon CEO Jeff Bezos. 

Prior to the IPO, Illumina held 14.6% of shares, making it the largest single shareholder. The two companies have a decade-long supply and commercialization agreement in place that involves Grail paying Illumina “a high single-digit royalty, subject to certain reductions, in perpetuity on net sales generated by our products or revenues otherwise generated or received by us regardless of whether these products incorporate any Illumina intellectual property, subject to certain exceptions, in the field of oncology,” according to the filing.

The company said in the filing that is is planning to ramp up production of its test, dubbed Galleri, in 2021 as a laboratory developed test or LDT. These diagnostic tests are typically less regulated than traditional medical devices. It is prioritizing cancer types that don’t currently have a screening test. The pandemic has delayed the completion of studies, according to the filing.

The company has said it will use the funds raised in its IPO to support the kind of expensive and large-scale clinical trials that are required to prove that its test is safe and effective. Grail will also need to prove to insurers that the test will not add cost to the system by providing people with a flood of false-positive results, which might lead them to seek unnecessary care.

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