Who's Winning the Race for This $100 Billion Healthcare Market?

If you're over the age of 50 and you haven't been screened for at least one form of cancer, you're not alone. More than one-third of Americans should be tested regularly for early-stage cancer, but most aren't.

People avoid getting tested for the presence of solid tumors for all sorts of reasons, and discomfort is near the top. Over the past couple of years, Exact Sciences (NASDAQ: EXAS) has shown us just how much more likely people are to get tested for cancer when that test is quick and painless. Nearly half of patients screened with Cologuard have never been tested by colonoscopy or other means before.

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Collecting a sample for Cologuard is a lot more convenient than a colonoscopy, but a blood-based test for solid tumors, or liquid biopsy, that Guardant Health (NASDAQ: GH) is developing could be much easier.

Guardant's not the only company trying to bring the world a better way to screen for early-stage cancer. Grail is a well-funded start-up owned mostly by a company that leads the gene-sequencing equipment space, Illumina (NASDAQ: ILMN).

Unfortunately for Guardant, Grail's catching up fast, and it has no shortage of resources to work with. Here's what you need to know about the road ahead of both companies.

Different paths to the same goal

Guardant and Illumina's Grail spinoff are both working on cancer tests that look for tiny fragments of identifiable DNA floating around in the bloodstream after they've broken free from solid tumors. Both are driving toward a pan-cancer test for healthy people who might have early-stage cancer, but they're going about it much differently.

Grail isn't marketing anything yet, but it's developing a multicancer detection test aimed at the healthy population. Guardant Health already markets a product for advanced cancer patients called Guardant360, and its Lunar assay could be a new testing option for patients in remission and those monitoring nonaggressive tumors. Down the road, though, Guardant would like the Lunar program to include the giant population of healthy people over 45 years old.

Finding the right targets

Most people diagnosed with lung cancer and other hard-to-reach malignancies never have their tumors fully examined for gene mutations that could make them more likely to respond to new targeted lines of treatment. Patients with non-small cell lung cancer can waste valuable time waiting for complicated biopsy procedures that might not extract enough tumor tissue to screen for every possibility.

Since its introduction in 2014, Guardant360 has been ordered more than 100,000 times by at least 6,000 oncologists to screen new and recurrent lung cancer patients for a basket of tumor mutations. About a week after a simple blood draw, an oncologist can begin making better treatment decisions with a Guardant360 report in hand.

Guardant Health owes some success to results of a recent study that shows twice as many targetable tumor mutations were found with Guardant360 compared to the traditional testing of tissue samples. This is because around 44% of biopsies didn't harvest enough tissue to provide complete results, a common problem that keeps patients from receiving the best possible course of treatment for their disease.

Recent results

Guardant recently posted results from a colorectal cancer (CRC) trial with the Lunar test that indicated 99% specificity and 100% sensitivity, which is about as good as it gets. In the second half of the year, the company will begin a larger study with more than 10,000 healthy patients, and investors will be looking for a repeat performance.

Guardant would like to expand Lunar to a pan-cancer indication in another year or two, even though the company thinks the market for Lunar as a CRC screen could reach $15 billion annually on its own.

Grail recently gave us a look at early results that show its methylation technology correctly identified a tumor's tissue of origin in 144 of 166 samples tested, which will be important for a screen aimed at the healthy population. In a second successful study, investigators were able to show that patients with tumors detected by Grail's methylation technology were three times more likely to die from their disease. This ability to determine which patients need aggressive treatment could be another big selling point down the line.

Looking ahead

Illumina's a terrific company, but purchasing its shares probably isn't the best way to chase the pot of gold at the end of the liquid biopsy rainbow. Illumina's already a $45 billion company, and we really don't know how much of Grail it will retain ownership of.

Luckily for us, Guardant's probably a better option than Grail under any circumstances. Guardant360 has already gained Medicare coverage in California, and a premarket approval submission planned for the third quarter could go a long way toward accessing the rest of the population covered by Medicare.

Guardant Health recently reported first-quarter revenue that climbed 120% over the previous-year period to $36.7 million. With a chance to reach the mass market with a precancer screen and a solid lead in the space for advanced-stage patients, this stock has a lot of room to grow.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Guardant Health and Illumina. The Motley Fool has a disclosure policy.