Guardant’s ‘optical miss’ presents ‘compelling’ entry point, says Morgan Stanley

After Guardant Health disclosed results from its three-year, pivotal ECLIPSE trial evaluating the performance of its blood-based test for detecting colorectal cancer, or CRC, in average-risk adults that were "modestly lower" that expectations, Morgan Stanley analyst Tejas Savant said the after-hours stock reaction implies a "fatally flawed" performance and not just what the analyst sees as an "optical miss." While the results demonstrated overall sensitivity a couple percentage points below Street expectations, Savant sees the data as sufficient to unlock a $2B-plus opportunity and over the longer term is confident that expansion into additional tumor types and the convenience of a blood-based non-invasive approach will allow Guardant to achieve $4-$5B in annual revenue "in CRC alone." Given that view, Savant sees "a highly compelling entry point into a name that is extremely well positioned in the attractive liquid biopsy vertical" and reiterates an Overweight rating on the shares with an $80 price target.