Early cancer screening start up Grail Inc. could raise more than $1 billion in a series B round, making it in one of the largest financings in med-tech history. Grail said the funding would be used to develop a blood-based test for cancer screening. In addition, part of the funding would be used to repurchase a portion of Illumina Inc.'s stake in Grail.

The San Diego-based company launched Grail almost a year ago. (See Medical Device Daily, Jan. 12, 2016.) Since that time, Grail has taken in $100 million in a series A round from the likes of Bill Gates, Bezos Expeditions and Sutter Hill Ventures. The liquid biopsy specialist has not revealed who the investors are for the series B round. Grail said it intends to close the round before the end of 1Q17.

"Through high-intensity sequencing, population-scale clinical studies, and unparalleled computing power, we hope to transform the paradigm from late stage diagnosis and poor outcomes to early stage detection and more cancer cures," said Jeff Huber, Grail's CEO and a former Google executive. "The indication of interest for this capital raise is a testament to investors' shared belief in our commitment."

With the funding round, Illumina's stake in Grail will be less than 20 percent, and it will change its contract with the start up to a market based agreement. Grail will then be treated as a cost-based investment instead of a subsidiary. This move could make Grail one of Illumina's largest customers over time, both by providing royalties on future testing and through the gene sequencing company's appreciation in ownership.

Grail uses Illumina's gene sequencing technology to potentially spot any kind of cancer in the body before symptoms appear.

The gene sequencing company will no longer have representation on Grail's board said Doug Schenkel, an analyst with Cowen and Co. Illumina shares (NASDAQ:ILMN) were up 5.15 percent late last week.

Schenkel said this is a win-win for both companies as it gives Illumina the opportunity to return to its roots and Grail the chance to boldly go strike at the liquid biopsy market.

"Grail needed to get bigger," he said. "Grail now has the ability to focus on more than an asymptomatic pan-cancer test.

Grail is now free to pursue other areas such as tumor-specific indications and patient monitoring/therapy selection."

Previously, Grail had agreed to not participate in those areas because Illumina did not want to effectively directly compete with customers.

Already, Grail has started making bold moves on the liquid biopsy front – which would call for exorbitant funding. In December, Grail launched the Circulating Cell-free Genome Atlas (CCGA) study, a trial which will enroll at least 7,000 cancer patients and 3,000 healthy individuals, interrogating the biology of both tumor biopsy tissue samples and the circulating, tumor-derived nucleic acids in blood. (See Medical Device Daily, Dec. 6, 2016.) Circulating tumor nucleic acids in the blood are an emerging biomarker for earlier cancer detection.

Large-scale studies like CCGA will support the development of a pan-cancer screening test for asymptomatic individuals, which could, according to Grail, make a major dent in global cancer mortality. The company said these studies have to include samples from tens of thousands of people in order for researchers to identify the patterns required to detect many types of cancer. Confirming clinical validity and utility of these tests, however, will be an even bigger feat, which Grail said will require studies of hundreds of thousands of people.

Such a trial is also costly, which will likely consume a lion's share of the firm's investment dollars.

LIQUID BIOPSY LANDSCAPE

The true clinical impact of liquid biopsy technology remains to be seen, but the potential to represent a major shift in cancer treatment has attracted interest from a growing number of companies of all sizes. The promise of liquid biopsy technology is so strong, in fact, that 20 stakeholders, including biopharma companies, diagnostic players and academic institutions, are working to create a large database for cancer genomic profiling data as part of outgoing U.S. Vice President Joe Biden's Cancer Moonshot effort. This liquid biopsy database is expected to serve as the basis for the development of blood-based cancer tests, pooling data from assays that use circulating tumor cells, circulating tumor DNA and exosomes.

If Grail is successful with the CCGA study, then the company could be miles ahead of its competition in the liquid biopsy space, which includes Boreal Genomics Inc., Natera Inc., Personal Genome Diagnostics Inc., Pathway Genomics Corp. and Trovagene Inc.

While both blood-based and urine-based assays qualify as liquid biopsy tests, the majority of players in the space are focused on blood, leaving San Diego-based Trovagene Inc. one of few contenders on the urine-based side of the market.