Play Guardant Health for the Long Term
The company that cures cancer will be the next Apple (AAPL). That is the consensus of most scientists and investors out there. The question is: which of the hundreds of players out there should one be picking up today?
Guardant Health employs a unique approach.
The company believes the key to conquering cancer is unprecedented access to its molecular information throughout all stages of the disease. It is developing a solution through tests that require only a blood sample.
Guardant’s blood tests are enabling timely therapy selection for patients with cancer while we also advance programs for recurrence detection and early cancer detection. In addition, it is working together with pharmaceutical companies to discover and understand new treatment approaches that lead to better outcomes for patients.
So far, GH has exhibited a great health rating. Unfortunately, there remains anxiety over its profitability. In particular, some investors look at its medium growth rate and feel that this biotech stock is valued expensive.
On the other hand, GH has shown a remarkable growth rate in the previous year. In fact, this oncology-focused company has achieved an impressive revenue growth of 81.85% in 2018.
Looking at the company’s performance and the estimates in the next two years, GH is projected to report a strong growth in its earnings per share. To be specific, its EPS is estimated to jump by 17.24% on average annually.
Meanwhile, the sales of its breakthrough treatments are anticipated to break above $200 million in 2019 alone -- showing off over 125% in annual growth.
To provide more tangible results to support these predictions, here are the highlights from the company’s third-quarter earnings report released in November:
GH raked in $60.8 million in revenue, indicating a 181% jump from the value recorded in 2018. (Roughly $5.5 million of this revenue was from the sample GH processed last year. No reimbursements were granted to payers for those samples, and GH succeeded in its appeal. The said revenue was added to the 2019 third-quarter report.)
GH increased its full-year revenue prediction from $180 million to $190 million to reach $207 million instead, showing an increase of over 125% year-over-year.
GH performed 13,259 tests with clinical customers, indicating an 89% jump from the number recorded during the same period in 2018 when the company only had 7,027 tests.
Meanwhile, GH’s biopharmaceutical clients performed 5,280 tests. This shows a whopping 111% increase year-over-year as well.
Apart from increasing the number of tests performed, the average revenue for every biopharmaceutical test actually jumped by 16% to be priced at $4,052. This is a result of more OMNI tests performed, which is priced higher than the Guardant360 tests previously favored by the clients.
GH has finally hit its stride this year. Its gross margins have improved to 70% compared to the 54% it recorded in 2018. The company also managed to lower its operating losses. A year ago, GH’s third-quarter operating loss amounted to $24.2 million. In the same period in 2019, the company decreased it to $17.5 million, indicating a 28% improvement.
To date, Guardant Health has reported an estimated annual revenue of $170.8 million. Its main competitors are Biocept, Epic Sciences, and Pathway Genomics.
