Here's Why Grail Stock Soared Higher in May (And Where the Company is Heading Now)

Shares in multi-cancer early detection (MCED) test company Grail (NASDAQ: GRAL) soared by 31.6% in May, according to data from S&P Global Market Intelligence. The move came as investors bought the stock on optimism that management's presentation at the annual American Society of Clinical Oncology meeting at the end of the month would strengthen the case for the Galleri test's approval by the Food and Drug Administration (FDA) and, ultimately, for medical insurance coverage.

Grail's presentation at ASCO

The presentation gained increased importance following the failure of its 50-cancer MCED Galleri test to meet a primary endpoint in a landmark 3-year trial conducted by England's National Health Service (NHS). The trial aimed to demonstrate a statistically significant reduction in the detection of Stage III and Stage IV (combined) cancers by detecting cancers at earlier stages in a test group compared to a control group. Unfortunately, the trial failed to meet this endpoint, causing the slump you can see in the price chart below in February.

The NHS-Galleri Trial

As often with clinical trials, it's not quite cut and dried, and in February's press release, management noted a few key points:

• "There was a favorable trend toward fewer Stage III-IV cancers in a pre-specified group of 12 deadly cancers" that are responsible for two-thirds of cancer deaths in the U.S.
• "Substantial increase in the absolute number of Stage I-II cancers in the 12 pre-specified deadly cancer types that are typically found in late stages"
• A "clinically meaningful reduction in Stage IV diagnoses compared with standard of care alone across the pre-specified group of 12 deadly cancers."

In addition, management said it aimed for a 6-month to 12-month follow-up to the trial, which could prove out the test, notably if late-stage cancers developed in the control group.

Image source: Getty Images.

Management's game plan

The game plan after the top-line results release:

• Continue to work with the FDA to gain approval for the Galleri test
• Present more detailed results from the NHS trial, and a smaller trial in the U.S., at ASCO, which would strengthen the case for FDA approval and better convince insurers to cover Galleri.
• Obtain approval for the follow-up for the trial with the NHS

The stock rose in May on anticipation that the ASCO presentation would be a game-changer.

What happened at ASCO

The reaction to the presentation was mixed, to put it mildly. As previously discussed, the market was initially unimpressed, but has recovered lost ground as investors took advantage of the dip and focused on some of the positives that include a 69.8% episode sensitivity (the rate of detecting cancers in people later diagnosed with it) in the top 12 cancers in the U.S. trial and 54.7% in the NHS trial.

Image source: Getty Images.

In addition, Chief Scientific Officer Harpal Kumar emphasized the improvements in reducing detection in Stage IV cancers and noted, "The reduction in Stage IV cancers is clinically meaningful. While it varies by cancer, for most of the 12 prespecified deadly cancers evaluated, a diagnosis at Stage III improved survival rates dramatically compared to a diagnosis of Stage IV.

Ultimately, management aims to gain FDA approval for Galleri and NHS approval to conduct the follow-up, with data on it hopefully available by the summer of next year.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Grail. The Motley Fool has a disclosure policy.