Guardant Health: Reducing Fair Value Estimate on Liquid Biopsy Leader With Long Road to Profitability

We are transferring coverage of Guardant Health GH, keeping our moat rating at none, and lowering our fair value estimate to $47 from $63 previously. This is driven by a slower projection of Shield’s revenue trajectory and partially offset by a more optimistic view of its Reveal franchise.

Guardant is a leader in liquid biopsy with tests for comprehensive genomics profiling, or CGP, molecular residual disease, or MRD, and single cancer screening for colorectal cancer, or CRC. Although these are all promising markets with multi-billion-dollar revenue potential, it is still in early days, and there is considerable uncertainty around the details of payer coverage and scope of use. We do not expect the company to generate positive cash flows until around 2028, which is a couple of years after the anticipated inclusion of Shield in the U.S. Preventative Services Task Force guidelines in 2026.

We expect Guardant to see fast growth in the midterm, driven by the Guardant 360 platform, its blood-based CGP tests for therapy selection based on actionable biomarkers, and the Guardant Reveal platform, which is its tumor-agnostic MRD test. Although the market landscape for CGP testing is very competitive, we expect Guardant 360′s revenue to grow in line with the market. We expect more limited competition for MRD given the time and cost of collecting clinical trial data. Additionally, Guardant Reveal is the leading tumor-agnostic MRD test, which gives it a niche in the 20% or so cases where tumor tissue is not available.

The biggest question mark is the long-term revenue potential of Shield, its first-in-class blood-based CRC screening test. We think the test is likely to be approved, reimbursed, and recommended by physicians, and should be able to build market share especially among unscreened patients. However, the details of pricing and physician use cases remain unclear, and there is considerable uncertainty surrounding Guardant’s profitability and revenue potential.