Episode Details

GRAIL, Inc. (GRAL) Q2 2026 — Q2 2026: revenue $44.687M, +25.7% y/y, beating a ~$42.4M bar. Galleri volume +35% to more than 61,000 tests. Loss per share $2.56 vs a $2.66 estimate - a beat. But the operating loss WIDENED to $173.783M from $158.854M. The stock closed -14.53% on Aug 6, then rebounded 9.59% on Aug 7. GRAIL lost $2.56 a share against a $2.66 estimate and beat. Take out the $56.5M benefit from income taxes and the same quarter, on the same share count, is a loss of $3.87. That benefit is the unwind of a balance-sheet liability with only $133.7M left on it. THE CALL: AVOID (2/5, THE TEST IS IMPROVING; THE PRICE ALREADY PAYS FOR APPROVAL) — base-case value ~$52.00 vs ~$69.48 today. KEY METRICS: - CALL: AVOID 2/5, fair value $52 vs the $69.48 close (-25%), below a $65.17 Street target that is ITSELF below the price. GRAIL is deeply cash-flow negative, so we use path-to-profitability plus a reverse test, not an owner-earnings DCF: adjusted operating cost $447M/yr at a 48.2% adjusted gross margin needs ~$928M of revenue to break even, ~1.33M tests a year vs ~244K today. Bull $105, base $48, bear $15. - THE PRINT: revenue $44.687M, +25.7% y/y vs a ~$42.4M bar. Screening (Galleri) revenue $42.642M, +24%; volume 61,000+ tests, +35%. Adjusted gross profit $21.555M, +33.8%, a 48.2% adjusted gross margin vs 45.3%. Adjusted EBITDA loss $90.270M. Net loss $110.247M, $2.56/sh vs a $2.66 estimate. - THE BEAT IS A TAX LINE, PROVEN NOT ASSUMED: GRAIL publishes NO non-GAAP EPS, so the -$2.56 actual IS the GAAP line - the 2025 quarters -3.10 and -3.18 sum to the reported H1 -$6.28 exactly. Same ruler. But loss from operations WIDENED to $173.783M from $158.854M (-$14.9M) while the tax benefit rose $17.6M to $56.461M. Net loss improved only $3.7M. - THE FUSE: the tax benefit is the unwind of the deferred tax liability from the Illumina spin-off intangibles. FY2025 benefit $126.153M vs a DTL decline of $127.277M - one-to-one. The DTL was $218.583M in Dec and is $133.706M now. Roughly a year left. Ex-benefit this quarter is a $3.87 loss per share, not $2.56 - 51% worse from accounting alone. - UNIT ECONOMICS: Galleri revenue +24% against volume +35% means realised price per test fell ~8%, ~$761 to ~$699; the 10-Q says discounts and rebates keep reducing ASP. But cost of screening revenue rose only 20.7%, so cost per test fell ~10.6%, ~$428 to ~$383. Contribution margin 43.7% to 45.3%; gross profit per test still fell ~$333 to ~$316. - TWO CLOCKS AND THE PRICE: cash and securities $861.6M against H1 operating cash use of $167.719M (~$335M/yr) is ~10 quarters, to roughly Q1 2029 - the same year the Nancy Gardner Sewell Medicare MCED Act first opens a coverage pathway. Bridging means equity: $110M from Samsung in June, shares 40,331,360 to 44,666,234. At $69.48, EV is ~$2.24B = 13.6x trailing revenue of $165.3M; the reverse test needs ~2.1M tests a year by 2033, ~8.8x. What to watch: UP: Galleri volume +35% to 61,000+ tests, revenue +26% and a beat, cost per test down ~11%, adjusted gross margin 48.2%, $861.6M of cash with ZERO borrowings, an FDA panel on Sept 23 and a Medicare MCED pathway already in law. DOWN: the operating loss widened $14.9M; the improvement is a deferred-tax unwind with $133.7M left; break-even needs ~5.4x today's volume; cash runs to about early 2029. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.