IBD 50 stock Guardant Health took a tumble Thursday after the company's second-generation colon cancer test lagged expectations in a pivotal study.
The blood test, Shield V2, correctly identified 84% of patients with colorectal cancer — a measure known as sensitivity. The sensitivity for advanced precancerous polyps was 13%. Shield V2 also had a specificity of 90%. Specificity is a measure for how well a test rules out people who don't have a disease.
But the results were only narrowly better than the first iteration of Shield, which had a sensitivity of 83%. Sensitivity for advanced precancerous polyps and specificity matched the first Shield.
The results fell short of investors' expectations, William Blair analyst Andrew Brackmann said in a note.
"Shares are trading down 8% in the morning session, which feels appropriate given these results do not materially change the narrative on the long-term prospects for the test (nor the entire class of blood-based CRC screening tests," he said.
On the stock market today, Guardant Health stock dropped 6.7% to 61.36. Shares had run up to a three-year high of 67.51 on Aug. 29, rising 67% from a late-July low. Guardant Health ranks No. 35 on the IBD 50 list of elite growth stocks.
Guardant Health Vs. Exact Sciences
Canaccord Genuity analyst Kyle Mikson says the results missed investors' expectations for a mid-80% sensitivity.
"That said, we think the modest improvement vs. V1 should be viewed as a net positive and should help support the company's screening objectives," he said in a report. "Of course, the data sets a new bar for blood-based CRC screening tests."
In the blood testing market, Guardant Health is notably going up against Exact Sciences. Last month, Exact Sciences shares crashed to a three-year low after the company announced a deal to license a blood test from Freenome for up to $775 million. Exact Sciences is also developing its own blood-based test for colorectal cancer. The company also notably sells a stool-based test called Cologuard.
Freenome's test showed a sensitivity of 81% and a specificity of 90%. It also correctly identified 14% of people with advanced precancerous polyps. Exact's test had a significantly lower sensitivity of 73% while its sensitivity for advanced polyps and overall specificity matched the Freenome test.
Evercore ISI analyst Vijay Kumar says the Street is overly focused on Guardant Health's Shield franchise. But the company is working on tests that can help patients select targeted cancer treatments as well as monitor patients for cancer relapse. Together, those markets are worth $7 billion, he estimates, vs. just $1 billion for Shield alone.
Kumar kept his outperform rating on Guardant Health stock.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
