Interview – Grail approaches unicorn status

Grail has raised what appears to be the largest venture round in life science history. Its gobsmacking $900m series B round will allow the company, a spinout of sequencing giant Illumina, to develop a product that can diagnose and track the treatment of cancer by detecting DNA shed by tumours into patients’ blood – so-called liquid biopsy.

“I’m not aware of a therapeutic, diagnostic or medical device company with such an aggressive long-term vision for the intersection of technology and biology – largely because that opportunity wasn’t available in the past,” Grail’s chief business officer Ken Drazan tells EP Vantage.

The technology can diagnose many different tumour types thanks to what it calls high-intensity sequencing, which is “ultra-broad and ultra-deep”. But Mr Drazan is quite cagey when asked about Grail’s hardware. He says the company is pursuing innovative means of sample preparation via new laboratory techniques. The sequencing systems themselves come from Illumina, however, and Grail is buying in bulk.

“We’re purchasing sequencing machines from Illumina and our goal is to create some proprietary way by which we manage large numbers of sequencers,” he says. “The scale of the clinical trials we’re seeking to conduct is so large we’re building some of our own software tools and workflow to manage large numbers of patients and activity across many large-scale clinical development programmes.”

Blood and treasure

Then it is a question of analysing the data, and as ever more data is churned out by the sequencers, more computational power will be needed to divine meaning from it. “That’s where our expertise in computer science is going to be unparalleled,” says Mr Drazan.

The trials are indeed gigantic. The first one has an enrolment target of 10,000, and this is just for starters; Mr Drazan says the trial could “expand to much larger numbers.”

But this is not a clinical study in the classical sense – it is merely a validation exercise. Blood and tumour tissue will be collected from patients newly diagnosed with cancer, as will blood from donors who do not have a cancer diagnosis. Grail will then develop models for distinguishing cancer from non-cancer, and thence develop a test that can be used as a diagnostic.

Mr Drazan could not say when concrete clinical data that demonstrating the diagnostic utility of Grail’s technology might be available. Some product development studies are in the planning stages and others “will be commencing immediately,” he said, but Grail will only be able to give reporting dates for these new trials at the end of this year at the earliest.

Unicorn

Mr Drazan refuses to be drawn on the company’s valuation, but with a $100m series A under its belt and a second close of the series B expected within the month that will take the round to the billion mark – unquestionably the largest ever in medtech or biotech – Grail is starting to look very much like a unicorn.

The series B was led by Arch Venture Partners and included Johnson and Johnson Innovation, which put up most of the money, plus Bristol-Myers Squibb, Celgene, Merck, Varian Medical Systems, McKesson Ventures, Tencent Holdings and Amazon. The investment should see the company through the next several trials, Mr Drazan says, even though these could enrol hundreds of thousands of patients.

Top five medtech rounds ever
Date Round Company Investment ($m) Medtech focus
March 1, 2017 Series B Grail  900.0 In vitro diagnostics
January 26, 2017 Seed capital Verily Life Sciences 800.0 Diabetic care; ophthalmics; patient monitoring
December 30, 2010 Undisclosed Liberty Dialysis Holdings 348.4 Nephrology
April 20, 2010 Undisclosed Liberty Dialysis Holdings 315.0 Nephrology
December 31, 2008 Undisclosed Devicor Medical Products 250.0 General and plastic surgery
Top five biotech rounds ever
Date Round Company Investment ($m) Focus
August 23, 2016 Undisclosed Moderna Therapeutics 451.4 mRNA therapeutics for infection, immuno-oncology and CV disease
January 5, 2015 Series D Moderna Therapeutics 450.0 mRNA therapeutics for infection, immuno-oncology and CV disease
May 31, 2015 Undisclosed Acerta Pharma 375.0 Cancer and auto-immune diseases
July 16, 2015 Undisclosed Immunocore 320.0 Cancer and viral diseases
November 29, 2016 Series D Innovent Biologics 260.0 Cancer and other immunological diseases
Source: EvaluateMedtech, EvaluatePharma

Some of the cash was also used to repurchase part of Illumina’s stake in the company, knocking it down from 50% to less than 20%. This positions Illumina less as an owner than as a business partner, Mr Drazan says.

Partnership is a key plank in the company’s development plans; as well as making an equity investment Bristol-Myers has kicked off a research collaboration with Grail, whereby each will have access to the other’s trial data and work together to shape Bristol-Myers’s R&D efforts, including in immuno-oncology.

The involvement of so many big pharma and medtech groups might ordinarily bespeak an interest in buying. But with a likely valuation in excess of a billion dollars, and nearly a year to wait for even the announcement of the date on which clinical data might appear, surely a buyer will not bite for a while yet.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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