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United States securities and exchange commission logo
January 8, 2024
Robert Ragusa
Chief Executive Officer
GRAIL, Inc.
1525 O Brien Drive
Menlo Park, California
Re: GRAIL, Inc.
Draft Registration
Statement on Form 10-12B
Submitted December
11, 2023
CIK No. 0001699031
Dear Robert Ragusa:
We have reviewed your
draft registration statement and have the following comment(s).
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe a comment applies to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to this
letter and your amended
draft registration statement or filed registration statement, we may
have additional comments.
Draft Registration Statement on Form 10-12B Submitted December 11, 2023
Summary, page 2
1. We note that your
summary appears to discuss primarily the positive aspects of your
business. The
information statement summary should provide a brief, but balanced,
description of the key
aspects of your business. Please revise the summary to also discuss
the following points as
discussed in the Risk Factors and other sections of the Information
Statement:
the fact that you
do not currently have coverage and reimbursement from third-party
payors, either
private or government, for Galleri;
that Galleri has
not been approved by the FDA or equivalent foreign regulators and
that the process of
obtaining a PMA generally takes from one to three years, or even
longer, from the
time the application is submitted to the FDA;
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that while you have a number of clinical studies underway
designed to evaluate the
clinical validity of Galleri, your product is not yet, and may
never be, listed in any
guideline recommendations, even if approved by the FDA;
that upon closing of the Spin-Off, your obligation to pay to
Illumina a high-single
digit royalty will resume, which was suspended while you were
owned by Illumina
and that it may be difficult for you to offset the costs of this
royalty; and
quantify your net losses for the financial periods presented in
the filing and your
accumulated deficit as of the most recent fiscal period presented
in you filing.
2. Please clarify what it means for the Galleri test to be
"clinically-validated" and who has
made this determination. In this regard, we note that you have not
received FDA approval
for the Galleri test and your NHS Galleri and PATHFINDER 2 studies are
still ongoing.
3. We note certain statements in your information statement that do not
appear to be
attributed to the company or an outside source. Please provide support
for these
statements or characterize the same as management's opinions or
beliefs. For example, we
note, without limitation, your statements:
on page 2 that "Galleri detects a shared cancer signal across
more than 50 types of
cancer and can predict with high accuracy the specific organ or
tissue type where the
cancer signal originated;"
on pages 3 and 19 that you estimate "[a]pproximately 67% of
cancer deaths result
from cancers that have no recommended screening guidelines;"
on page 3 that "a recent analysis demonstrated that diagnosing
cancer early could
result in an estimated $26 billion in annual cost-savings in the
United States;"
on page 3 that "Galleri predicts the tissue type or organ
associated with the cancer
signal (the cancer signal origin) with high accuracy;"
on page 3 that "Our clinical studies, including our early
discovery work, have
demonstrated robust and reproducible test performance;"
on page 3 that you are "an early leader in MCED testing;"
on page 4 that your "targeted methylation approach can detect
lower levels of cancer
signal in blood compared to the other approaches, enabling early
cancer detection in
asymptomatic individuals more efficiently compared to
whole-genome methylation;"
on page 118 that "It is estimated that the global economic cost
of cancer from 2020 to
2050 will be approximately $25 trillion;"
on page 119 that "Treatment costs increase by stage across all
cancers, and treating
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cancers that are in more advanced stages can be up to two to four
times more costly
than treating cancers at earlier stages;" and
on page 119 that "less common cancers . . . account for a
majority of all cancer
deaths."
4. As a related matter, we note your disclosure that "Galleri detects a
shared cancer signal
across more than 50 types of cancer and can predict with high accuracy
the specific organ
or tissue type where the cancer signal originated, all from a simple
blood draw." Please
revise these and all similar statements in your registration statement
to eliminate
conclusions, predictions, or opinions that your product is effective
or accurate, whether
implicitly or impliedly. We do not object to the presentation of
objective data without
efficacy or accuracy determinations.
5. We note your statement that "[w]e seek to use data from the
NHS-Galleri Trial, together
with data from our PATHFINDER 2 study, as well as supplemental data
from other
clinical studies, to support our planned PMA submission for Galleri in
the United States."
Here or elsewhere in the Information Statement, please explain why you
intend to use data
from the NHS-Galleri Trial and PATHFINDER 2 study to support your PMA
submission
rather than relying on data from other studies such as PATHFINDER or
CCGA.
6. We note your reference on page 2 to Grade A, B, and C recommendations.
Please revise
your disclosure to define and describe the significance of these
grades. In addition, please
clarify your reference to "these five standard of care single-cancer
screening tests." Make
conforming changes throughout your filing.
7. At the first instance, please define the following terms or provide a
cross reference to their
definition elsewhere in the filing: methylation, targeted methylation,
highly informative
and low-noise methylation regions, interrogating mutations,
chromosomal alterations,
fragment lengths, and other genomic features, and describe their
relevance to your
statements about your product. As a related matter, we note your
disclosure that "[i]n
our head-to-head analyses, methylation exhibited stronger performance
when compared to
interrogating mutations, chromosomal alterations, fragment lengths,
and other genomic
features, either alone or in combination." Please revise your
disclosure to briefly describe
how you measure "performance," and include the relevant data from your
head-to-head
analyses supporting your belief that targeted methylation exhibited
"stronger"
performance when compared to other features. Make conforming changes
throughout your
filing.
8. You disclose that you are developing your diagnostic aid for cancer
("DAC") test to
accelerate diagnostic resolution for patients with non-specific signs
and symptoms, but
with a clinical suspicion of cancer. Please revise your disclosure to
describe the status of
your development efforts and your expected timeline for the
development and
commercialization of your DAC test. As a related matter, we note your
reference to "other
future products in development." Please identify any other products in
development and
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their relevant status.
Reasons for the Spin-Off, page 11
9. We note your disclosure that the Illumina Board also considered a
number of potentially
negative factors in evaluating the Spin-Off. Please revise your
disclosure in this section to
briefly describe these negative factors.
Risk Factors, page 28
10. Please revise your risk factor disclosures to include risks related to
the regulatory
proceedings described on page 96 in the Background of your spin-off
transaction and on
page F-35 in note 12 to your financial statements, including but not
limited to any
significant costs incurred or expected to be incurred related to
GRAIL's intervention in the
proceedings, risks related to the completion of the Separation and
Distribution pursuant to
the legal proceedings, reputational risk due to news media reports on
the relevant
regulatory intervention, and any other material risks.
Risks Relating to Our Business and Industry
We may be unable to develop and commercialize new products, including enhanced
versions of
current products., page 39
11. We note your statement that you "continue to expand [y]our research
and development
efforts to use [y]our proprietary methylation platform and [y]our
large clinical and
genomic datasets to develop enhanced versions of [y]our products and
future products."
Please briefly explain what changes or improvements you expect to make
to the enhanced
versions of your current products and if you believe these changes
will impact your ability
to rely on previously-collected data on earlier versions of your
products in connection
with your submission for marketing authorization (or certification) of
your products.
Risks Relating to Regulation and Legal Compliance
Our multi-cancer detection tests are a new approach to cancer screening, which
present a number
of novel and complex issues. . ., page 59
12. We note your statement that "As part of our ongoing discussions with
the FDA regarding
the data that will be needed to support a PMA for a multi-cancer
detection test based on a
proposed intended use, the FDA has provided feedback regarding how it
plans to assess
the safety and effectiveness of our new version of Galleri based on
potential intended use
statements." Please briefly describe the feedback received from the
FDA and clarify what
you mean by the new version of Galleri.
Risks Related to Intellectual Property
If we are unable to obtain and maintain intellectual property protection for
our technology. . .,
page 75
13. We note your statement here that "eight of our in-licensed European
patents and one of
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our owned European patents have been subject to oppositions in Europe,
as described
below." However, we also note your statement on page 79 that you
"faced three
oppositions in Europe with respect to European patent number EP 3 363
901 B1 in-
licensed from the Fred Hutchinson Cancer Center, European patent
number EP 3 354 747
B1 in-licensed from The Chinese University of Hong Kong, and European
patent number
EP 3 478 856 B1 assigned to GRAIL, LLC," and your statement on page
147 that you "are
currently facing oppositions from anonymous challengers against two of
our in-
licensed European patents and one of our owned patents." Please
clarify if you received
opposition to European patents other than EP 3 363 901 B1, EP 3 354
747 B1 and EP 3
478 856 B1.
Cautionary Statement Concerning Forward-Looking Statements, page 95
14. We note your statements that "neither we nor any other person assumes
responsibility for
the accuracy and completeness of any of these forward-looking
statements" and "you are
cautioned not to place undue reliance on such forward-looking
statements as predictions
of future performance or otherwise." Please revise these statements to
remove any
implication that investors are not entitled to rely on disclosure in
your registration
statement.
The Spin-Off
Background, page 96
15. Please revise your disclosure describing the background of the
spin-off transaction in this
section to include a discussion of the regulatory proceedings
initiated by the US Federal
Trade Commission on March 30, 2021, described in Note 12 to your
financial statements
on page F-35 of your filing. In your discussion, please clarify
whether and to what extent
you expect the divestment of GRAIL, including Illumina's retention of
the 14.5%
ownership interest in GRAIL, to impact these proceedings.
Reasons for the Spin-Off, page 97
16. You disclose that "[i]n connection with the EC Divestment Decision and
with the goal of
enhancing stockholder value, the Illumina Board conducted a process
through which it
considered a range of potential divestment transactions," and "[a]s
part of this evaluation,
Illumina retained outside advisors, and the Illumina Board considered
a number of factors
. . . ." To the extent that the board's decision to effect a spin-off
was based in material part
on the analysis or recommendation of these outside advisors, please
identify the
outside advisors and discuss the nature of the reports and
recommendations provided by
them to the Illumina board.
Reasons for Illumina's Retention of up to 14.5% of GRAIL Common Stock, page 99
17. Please revise your disclosure to provide additional detail regarding
the reasons for
Illumina's retention of up to 14.5% of GRAIL common stock, including
what is meant by
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"investment purposes," and advise us of any specific plans Illumina
currently has to
dispose of such shares. Disclose whether there is any minimum period
of time following
the distribution during which Illumina will refrain from distributing
its retained shares. In
this regard, while your disclosure indicates that there is a maximum
period of five years
following the distribution to consummate a disposition of the retained
equity, your
disclosure does not address whether there are any active plans to
dispose of such equity
shortly after the distribution.
Business, page 113
18. Revise your disclosure to clarify whether cancer may be "cured" and if
so, please provide
a basis for your assertion that early detection results in discovering
cancer "when it can be
cured." Alternatively, please delete this statement.
19. You disclose that "key results from our interventional PATHFINDER
study were
generally consistent with data from our case-control CCGA study, which
is evidence
supporting the generalizability and robustness of Galleri." Please
revise your disclosure to
expand upon the key results to which you refer, describe what is meant
by "generally
consistent," and describe the significance of the "generalizability
and robustness" of
Galleri.
20. You disclose that your targeted methylation approach can detect lower
levels of cancer
signal in blood compared to other approaches. Please clarify the
"other approaches" to
which you refer.
Galleri Performance, page 123
21. We note your disclosure in the footnotes to your table that your false
positive rate was
based on participants with cancer status assessment at the end of your
study. To provide
investors with additional context needed to understand your data,
please clarify the
percentage of your study participants who received cancer status
assessment at the end of
your study, including whether any participants received a positive
result without a status
assessment, and therefore could be omitted from your false positive
rate.
Our Products: Galleri and Beyond
Backed by robust analytical and clinical performance, page 124
22. We note your statement that you "established clinical validation using
a locked assay and
classifier in case-controlled and intended-use populations." Please
expand on this
statement to explain what locked assay and classifier and
case-controlled mean in this
context.
Galleri and standard of care performance, page 124
23. You disclose that your graphic presents the PPV and number of false
positives associated
with the current standard of care screening tests. Please disclose the
source for your data
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related to the current standard of care screening tests.
Precision Oncology Portfolio, page 129
24. Please expand on your statement that "[t]he low input requirements
support retrospective
research studies" to explain what a low input requirement means in
this context and how it
supports retrospective research studies.
25. We note your statement that you have "validated performance of our
technology in an
MRD setting, with sensitivity on par with tumor-informed methods."
Please expand on
this statement to note the measurement of sensitivity for both your
technology and tumor-
informed methods.
Our Clinical Studies, page 134
26. We note your disclosure that your population-scale studies involve
partnerships with
numerous leading academic and cancer institutions and large community
networks.
Throughout your discussion of each of your clinical trials, please
identify the relevant
partners, academic and cancer institutions, and community networks to
which you refer.
Clarify who performed each of your studies and disclose whether any
serious or
unexpected adverse effects or other performance issues were
identified. As a related
matter, we note your statement that you "announced plans for a 100,000
individual real
world study in the Medicare population." Here or elsewhere in the
Information Statement,
please expand on this statement to fully describe this planned study,
including who is
expected to perform the study and key inclusion criteria of the
patients enrolled.
STRIVE, page 141
27. We note your statement that "[w]e have not used other samples to
analyze or validate
performance in an asymptomatic and intended use population to date,
and thus we have
not reported any interim findings or results from STRIVE." Please
clarify why you have
not reported any interim findings or results from STRIVE and how this
relates to not using
other samples to analyze or validate performance.
SUMMIT, page 141
28. Please note when the SUMMIT and SYMPLIFY studies were initiated and
when you
completed enrollment for each study.
Operations
Supply Chain and Agreements, page 145
29. We note your disclosure that Madison is your sole supplier of tubes
used for sample
collection and Twist is the sole supplier of your DNA probes. Please
file your supply
agreements with Madison and Twist as exhibits to the Registration
Statement or explain to
us why you are not required to do so. Please refer to Item
601(b)(10)(ii)(B) of Regulation
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January 8, 2024
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Intellectual Property, page 147
30. With respect to your material patents, please disclose the specific
products, product
groups and technologies to which such patents relate, whether they are
owned or licensed,
the type of patent protection you have, the expiration dates, the
applicable jurisdictions,
and whether there are any contested proceedings or third-party claims.
License Agreements with the Chinese University of Hong Kong, page 148
31. We note your disclosure that "To the extent our products use the
licensed technology, we
are required to pay the Chinese University of Hong Kong low
single-digit percentage
royalties on net sales of such products," and that "[u]nder these
license agreements, you
are obligated to use specified efforts to reach milestones relating to
the development and
sale of products that use the Chinese University of Hong Kong's
technology, and our
failure to do so could result in termination of the license
agreements." Please note whether
your existing products, including Galleri, your precision oncology
portfolio, and DAC,
use licensed technology such that you are required to pay the royalty
on net sales of those
products or if you reach certain milestones with respect to those
products. If so, and to the
extent material, please discuss these royalty payments and milestones
in the Summary and
Risk Factor sections of the Information Statement.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Non-GAAP Financial Measures, Adjusted EBITDA, page 179
32. We reference your adjustment number (5) for "Non-recurring transaction
related
compensation." Please quantify the amount of the adjustment related to
retention bonuses.
Tell us how you determined it is appropriate to adjust for such
payments in the
determination of your non-GAAP measures and clarify how such
compensation differs
from other compensation paid to employees and management. Refer to
Question 100.01
of the Commission's Compliance and Disclosure Interpretation for
Non-GAAP measures.
Certain Relationships and Related Party Transactions
Other Arrangements, page 204
33. We note your statement that "Prior to the Spin-Off, we have had various
other
arrangements with Illumina, including arrangements whereby. . . in
connection with
Illumina s acquisition of GRAIL in 2021, Illumina issued contingent
value rights
("CVRs") representing the right to receive future cash payments on a
quarterly basis
FirstName LastNameRobert Ragusa
representing a pro rata portion of certain GRAIL-related revenues."
Please clarify to
Comapany
whom NameGRAIL,
the CVRs wereInc.issued and if there will be any material
obligations to make
Januarypayments following
8, 2024 Page 8 the Spin-Off.
FirstName LastName
Robert Ragusa
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Consolidated Statement of Operations, page F-4
34. We see from page 176 that you recognized $15.7 million of development
services
revenue. Please tell us why you do not separately present the service
revenue and related
costs of revenues on the face of the statement of operations under
Rule 5-03(b)(1)(a) of
Regulation S-X.
Audited Consolidated Financial Statements
Note 8. Stock Incentive Awards, page F-26
35. We note your disclosure on page F-26 you use independent valuation
experts and analyses
to value the cash based equity awards. Please tell us the nature and
extent of the valuation
experts involvement and whether you believe the valuation expert was
acting as an expert
as defined under Section 11(a) of the Securities Act of 1933 and
Section 436(b) of
Regulation C, such that you must disclose the name of the valuation
expert in the Form
10 along with a consent from the valuation expert once the Form 10 is
publicly filed. If
you conclude the valuation expert is not considered an expert under
the Securities Act,
please revise your filing to clarify.
Please contact Kristin Lochhead at 202-551-3664 or Terence O'Brien at
202-551-3355 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Conlon Danberg at 202-551-4466 or Katherine Bagley at 202-551-2545 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Industrial Applications and
Services
cc: Ross McAloon, Esq.