EquityZen Knowledge Center

EquityZen has curated this list of quality resources for secondary investors, shareholders and company representatives.
Have additional questions? We'd love to hear from you.

SoftBank-Backed Guardant Health IPO: A Litmus Test for Cancer Gene Sequencing?

SoftBankGuardant S-1Guardant HealthHealthTech2018 IPOs
...show more tags

Adam Augusiak-Boro   September 13, 2018

A Closer Look at Guardant Health’s Impending IPO

Guardant Health, which filed an S-1 on September 5, 2018 in anticipation of going public, is a precision oncology company that aims to improve the diagnosis and treatment of cancer through its proprietary gene sequencing technology. Founded in 2012 in the San Francisco Bay Area, Guardant has received over $500 million in private funding, most recently closing a $360 million round in May 2017 led by SoftBank’s Vision Fund. The company plans to list on the NASDAQ under the ticker “GH.” Timing, pricing and size of the offering are still TBA.

Guardant’s sector, precision oncology, focuses on “matching cancer patients to personalized treatments based on the underlying molecular profile of their tumors.” In other words, precision oncology aims to treat cancer with a scalpel instead of a sledgehammer. Traditionally, a tumor’s molecular information has been collected through a tumor tissue biopsy requiring surgery. However, Guardant’s technology allows for liquid biopsy-based tests, or the extraction of a tumor’s molecular information via a blood test. Unlike tissue biopsies, which Guardant also argues are more invasive, time-consuming and costly, liquid biopsies can be used across all stages of cancer (including early stages) and provide a more representative molecular profile of a tumor in its entirety, improving diagnostic and treatment abilities.

Guardant Health’s IPO may serve as a litmus test for more pure-play, gene sequencing oncology companies.

Notably, Guardant’s competitors are mostly diversified, large, multi-billion-dollar companies with substantial operating histories. Additionally, Guardant Health’s younger competitors have largely remained private, such as Adaptive Biotechnologies, or have been acquired, such as Foundation Medicine, Inc. Consequently, Guardant Health’s IPO may serve as a litmus test for more pure-play, gene sequencing oncology companies.

Because of the advantages of liquid biopsies, many leading companies are entering the space and competing with Guardant Health. Guardant’s main competition comes from diagnostic companies that profile cancer’s molecular information using gene sequencing in either blood or tissue. Within the liquid biopsy sector, Guardant’s chief public competitors include Roche Holdings, Inc., Thermo Fisher Scientific Inc., Illumina, Inc., Qiagen N.V. and Sysmex Inostics.  Illumina-backed GRAIL and Natera Inc. are also developing early cancer detection tests. Traditional public competitors in the broader tissue-based genomic profiling sector include Laboratory Corporation of America, Quest Diagnostics Inc., and Myriad Genetics. For reference, we have included below one-year forward Price / Sales multiples for Guardant’s closest public competitors.

Guardant Health Public Comparables (as of Sept. 10, 2018):

                                                           Source: YCharts data as of September 10, 2018
                                                                                           *Represents TTM figures
                                                                                           **Excludes data for Thermo Fisher Scientific, Laboratory Corp. of America and Quest Diagnostics

Summary--Can Guardant Prevail Over the Giants?

In recent newsletters we highlighted the growing dominance of large companies over smaller challengers.  Relatedly, despite some stumbles over the summer from the tech giants, Amazon, Apple, Google and their peers (of which there are few) continue to outperform and concentrate tech dominance within their hands.  With Guardant’s IPO, we see another smaller challenger to established companies, like diagnostics and biopharmaceutical giants Illumina, Inc. and Roche Holdings.  Hoping to avoid a similar fate faced by other prominent emerging companies, who were either outspent or acquired by larger rivals, Guardant’s IPO may further illuminate whether the corporate elite’s cash war chest is too great for most entrepreneurial ambitions.

Click here to download a full report on Guardant's S-1 filing, which includes a deeper dive of the analysis above. As you evaluate prior investment decisions or whether to buy GH in the future, please consider our key investment highlights and considerations from Guardant’s S-1 filing in our report. For more information on all things private markets, IPOs, and investor/shareholder education, please check out our Knowledge Center.


SoftBank: Vision or Delusion?

SoftBankVision FundWeWorkUbermegafund
...show more tags

Adam Augusiak-Boro   August 23, 2018

On October 14, 2016, SoftBank shocked the world with the announcement of its $100 billion Vision Fund, which would focus on investing in late-stage technology companies. Within 7 months of the announcement, SoftBank had already cemented $93 billion in commitments and has since closed on the entire $100 billion amount.  Now, as SoftBank begins to deploy capital from the fund, we believe it faces a colossal undertaking in delivering competitive returns to its investors, which include tech titans like Apple and Qualcomm, as well as the Saudi and Abu Dhabi sovereign wealth funds.

Assuming an internal rate of return (“IRR”) of 20%, which is quite modest by VC standards, our research team estimates that SoftBank will have to generate over $142 billion in cash for the Vision Fund, which is approximately what Amazon was worth 16 years after its IPO. We further argue that, to compensate for the riskiness of SoftBank’s underlying investments, its investors are likely expecting returns of at least 30 to 40%, or a confounding $35 to $55 billion of cash generated per year in the second half of the fund’s life.  This would be the equivalent of spitting out an eBay-to-Tesla-sized company every year at current market prices.

“Masa’s ability to raise money is staggering,” according to Atish Davda, EquityZen CEO and Co-Founder. “SoftBank cemented $93 billion in only 7 months for its Vision Fund.  Compare that to the entire U.S. venture industry that took over 3 years starting in 2014 to cross $100 billion raised. The real question for Masa now is whether he’ll be able to generate competitive equity returns, especially following the mega rounds SoftBank is leading at seemingly frothy valuations.”

Have questions?