Illumina, a San Diego-based diagnostics company, is launching a new company that is developing a blood test to screen for cancers even before symptoms develop.
The venture, known as GRAIL, counts a number of high-profile investors, including Bezos Expeditions, Bill Gates, ARCH Venture Partners and Sutter Hill Ventures. The independent company has raised more than $100 million in Series A funding, with $40 million coming from Illumina.
Illumina disclosed the partnership on Sunday, as investors arrived in San Francisco for the annual JPMorgan Healthcare conference, one of the industry's largest healthcare events. CEO Jay Flatley presented a company update on Monday, in which he said shipments, revenue and earnings per share have exceeded corporate expectations.
GRAIL's test screens for cancer cells that are shed in the blood, or circulating tumor DNA.
Illumina placed the market opportunity at about $20 billion to $40 billion for screenings in high-risk individuals. As the test gains traction, and can identify not only the presence of cancer but also its origin, the market could be as large as $100 billion to $200 billion, Illumina projected.
The test is expected to cost between $500 and $1,000, performed once every two years.
GRAIL is a four-year investment and is not expected to generate revenue this year, Flatley said.
The venture comes at an inflection point for the diagnostics industry. Early stage companies have struggled to raise capital as the sector faces a number of challenges, said Jon Norris, managing director at Silicon Valley Bank.
Takeovers in the sector declined to five in 2015, down from 10 the previous year, he said. And companies that have gone public have lost valuation.
Commercial reimbursement is the largest hurdle.
“It's so difficult to get these tests to be covered even once they're out in the market,” Norris said. “It's a very difficult, time-intensive strategy.”
Yet Norris suggested that companies in the sector developing complementary tests may pursue a roll-up strategy—joining forces with peers in order to consolidate their sales forces and back-office operations.