Pushing Down Guardant FVE on Underwhelming Trial Data, but Test Still Approvable/Reimbursable

Guardant Health shares dived in after-hours trading following the release of underwhelming colorectal-cancer liquid-biopsy trial results. We are reducing our fair value estimate to $63 per share from $82 on this announcement, but we continue to view shares as undervalued. The trial data, which will be submitted for FDA approval in the first quarter of 2023, was weaker than earlier data but still decent, in our opinion. Additionally, if approved, the data virtually ensures reimbursement from the Centers for Medicare and Medicaid Services, or CMS, which has given prior guidance on the matter. However, these weaker-than-anticipated results highlight the very high uncertainty that surrounds cash flows for Guardant, which we believe has yet to dig an economic moat.