Grail spinoff- the largest AI Machine Learning Project in Medicine- Galleri is "The Holy Grail" of Genomic Testing

Grail is hard to analyze, but the potential upside is staggering.  Due to their regulatory challenges, there is a paucity of information, obfuscated by likely insider dealing and related third-party transactions, and an abundance of lawyers due to regulatory challenges. Icahn waged a proxy fight, and ultimately, the EU forced Illumina to divest Grail.  Analysts are probably waiting until the spin-off is done on June 24th before there will be much commentary, as many banks have been feeding at this trough . But first, here are some quick facts about the spinoff itself.

https://www.sec.gov/Archives/edgar/data/1699031/000119312524148672/d556103dex991.htm#toc556103_

Grail will only have slightly over 31 million shares outstanding. Based on $15 per share, that is less than a $500 million market cap. They are likely to have close to $1 billion in cash as Illumina has agreed to fund them for two years.

Check out this podcast from the founders of Grail

1 – The Promise of Multi-Cancer Early Detection

But even when analysts opine, they will get hung up on insurance reimbursement. Does it even matter for the initial Grail story that insurance pays for the test? Analysts are too hung up on insurance reimbursement. My concierge doctor offered the test, and I didn’t hesitate to take it, knowing that I wasn’t getting reimbursed by Medicare. Cancer is the 2nd largest killer, and age is the greatest indicator of possible cancer. Early cancer detection is the Holly Grail, hence the name Grail. It is commonly believed that if you can catch cancer early, you have better odds of beating it.  I can afford the test. It’s only $750. I’m pretty sure that’s how a significant amount of the more than 12 million moderately wealthy households with more than 2 Million dollars will feel about it once they learn that it can early detect more than 50 cancers, including the deadly pancreatic, lung, ovarian, and others that there are no early detection tests for.

• 10% take up in this cohort of moderately wealthy Americans at $750 a pop is a staggering $900,000,000 million yearly on a test that insurance doesn’t even pay for. This is repeatable revenue as the test needs to be retaken annually or every few years.

And this is just the beginning; The tests will get smarter as they are using AI on the largest population genomic testing pool done to date.

Let’s delve into the fascinating history of GRAIL, the cancer detection company, and its relationship with Illumina:

1. Formation and Spin-Out from Illumina (2016):
   • GRAIL was initially formed by Illumina in 2016.
   • Illumina, a global leader in DNA sequencing and array-based technologies, recognized the potential of GRAIL’s mission focused on multi-cancer early detection.
   • Key Personnel: The early employees of GRAIL were part of Illumina.
   • Financial Highlights: Illumina retained a 12% ownership stake in GRAIL during this period¹.
2. Acquisition by Illumina (2020):
   • In 2020, Illumina announced its definitive agreement to acquire GRAIL for a total consideration of $8 billion in cash and stock.
   • This acquisition aimed to launch a new era of cancer detection by leveraging GRAIL’s expertise in early cancer identification²³.
3. Divestment Plan and European Commission Approval (2024):
   • April 2024: The European Commission approved Illumina’s planned divestment of GRAIL, although the specific method of divestment was not yet finalized.
   • Illumina explored options for divesting GRAIL through either a trade sale or a capital markets transaction.
   • If a capital markets transaction occurred, Illumina would capitalize GRAIL with approximately $1 billion based on GRAIL’s long-range plan⁴.
   • Key Personnel: Jacob Thaysen, CEO of Illumina, emphasized GRAIL’s role in advancing genomics innovation and improving human health.
   • Financial Highlights: Illumina shareholders would retain their current shares of Illumina common stock and receive one share of GRAIL common stock for every six shares of Illumina common stock held⁵⁶.
4. Recent Spin-Off (June 2024):
   • June 24, 2024: GRAIL officially spun off from Illumina and applied to list on Nasdaq as “GRAL.” The current when issues symbol is GRALV
   • Illumina maintained a minority share of 14.5% in GRAIL.
   • The distribution of GRAIL shares occurred, and Illumina shareholders received their shares of GRAIL common stock.
   • Fractional shares of GRAIL common stock were aggregated and sold in the open market, with net proceeds distributed to shareholders⁵⁶.

In summary, GRAIL’s journey from formation to spin-off has been marked by groundbreaking advancements in cancer detection, and its close ties with Illumina have played a pivotal role in shaping the future of genomics and healthcare.  Undoubtedly, this is the largest, if not one of the world’s largest, machine learning genomic research programs. If enough rich people take the tests from their doctors, it will only be a matter of time before there will be a popular groundswell that Medicare and other private payers offer Galleri.

Analysts on both the bull and bear sides will have their points. No cancer test or screen is perfect, but there is only one question that merits serious analysis at this time: Ask your doctor: If he were over 50, would he take it and pay for it himself? The answer might surprise you, and it might be all you need to form your investment opinion.