Is Illumina a Buy Following UK NHS Partnership? Analyst Weighs In

Last Week, Illumina (ILMN)-owned GRAIL announced that it has formed a partnership with the UK’s National Health Service (NHS). Starting in 2021, GRAIL’s multi-cancer early detection blood test Galleri will become available to UK patients.

The program will initially screen 165,000 patients, but that figure could rise to 1 million by 2024-25 and consequentially expand to include the broader UK population.

Leerink analyst Puneet Souda says the “first of its kind program holds potential to establish Galleri as a multicancer screening test in a large single payer national healthcare system,” and is testament to the “strength of the Galleri test and ILMN’s own relationship with UK NHS.”

Although Souda believes the revenue contribution from the program in 2021 will likely remain “modest,” with a long-term view in mind, the “clear positive” partnership holds potential for a sizable chunk of revenue.

The liquid biopsy multi-cancer screening TAM (total addressable market) is estimated to be worth $30 billion.

While the cost of the test has yet to be established, Souda assumes the price will range between $200 to $700. This means the early cohort will generate between $33 million to $116 million in sales, while the expansion to 1 million patients could generate between a “conservative” $200 million and the more “aggressive” $700 million.

The end game as far as the UK is concerned would be the eventual rollout of the test for the entire 40+ year old UK population.

The significance of the Galleri screening assay is underscored by the fact that over “80% of all cancer deaths in the UK are from cancers that don’t have any available recommended screening in place.”

However, Souda notes the opportunity stretches far beyond just the UK.

“We continue to believe that the majority of the population in the world is likely to be sequenced by one or more genetic tests in their lifetime, creating a massive market benefiting ILMN the most. This partnership again highlights an example of how ILMN will recognize such a benefit,” the 5-star analyst summarized.

In contrast, not all Street analysts look favorably on Illumina’s prospects. Based on 4 Buys, 10 Holds and 1 Sell, the stock has a Hold consensus rating. At $315.62, the average price target suggests a 10% downside over the next months. (See ILMN stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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