Guardant Health Faces a $245 Million Patent Judgment, But Its Newer Tests Could Offer Protection

Guardant Health, Inc. (NASDAQ:GH) faces a costly legal setback after a US court ordered the cancer-testing company to pay more than $245.2 million in a DNA-sequencing patent dispute. The final judgment upheld a 2023 jury verdict finding that Guardant willfully infringed two DNA-sequencing patents asserted by TwinStrand Biosciences and the University of Washington.

The financial consequences extend beyond the immediate award. Guardant must also pay a 6% royalty on US sales of 11 products and services covered by the ruling until the patents expire in March 2033. However, the company plans to appeal, while the current versions of two important products, which are Guardant Reveal and Shield, are excluded from the order and potential royalties.

Bull Case

The most encouraging detail for investors is that Guardant has already updated some of its technology. The company said the current versions of Guardant Reveal and Shield are not covered by the order or subject to potential royalties. Although earlier versions were among the products found to infringe, excluding the latest versions may reduce the judgment’s effect on those products’ future sales. That holds significance because it limits the ruling’s effect on sales of the current versions of those two products. The ruling creates a financial liability, but the exclusions suggest that Guardant has at least partially separated its current product portfolio from the disputed technology.

The legal process is not necessarily over either. Guardant Chief Legal Officer John Saia said the company strongly disagrees with the decision and will promptly appeal, expressing confidence in Guardant’s intellectual property and research and development. An appeal does not guarantee that the award will be overturned or reduced, but it gives the company another opportunity to challenge the judgment.

Investors also now have greater clarity regarding the amount covered by the judgment, with the total including $83.4 million in original damages, $19.5 million in supplemental damages, $119.4 million in accrued royalties, and $22.9 million in pre- and post-judgment interest. A defined award can be easier to evaluate than an unresolved claim with an unknown potential cost.

Bear Case

Investors should keep in mind that the size and scope of the judgment could be serious. TwinStrand said the affected products and services accounted for approximately 90% of Guardant’s revenue during the infringement period. That figure refers to the historical period covered by the case, rather than Guardant’s current revenue mix, but it demonstrates how extensively the disputed technology was allegedly used. The judgment covers 11 products and services, including Guardant360 CDx, earlier versions of Guardant Reveal and Shield, and other cancer-testing and genomics offerings. The continuing 6% royalty on covered US sales until March 2033 could create an additional financial burden beyond the $245.2 million award.

Guardant also faces an unfavorable procedural position. According to TwinStrand, the court rejected Guardant’s efforts to overturn the jury verdict or secure a new trial. The final judgment upheld both the finding of willful infringement and the validity of the disputed patent claims. Those decisions do not prevent an appeal, but they leave the original verdict substantially intact for now. Furthermore, only the current versions of Reveal and Shield were specifically identified as excluded. The supplied information does not establish that newer versions of every affected Guardant product have escaped the royalty requirement.

Conclusion

The judgment creates a substantial liability and potential royalties extending to 2033, making it a meaningful risk for Guardant investors. The company’s appeal could change the outcome, while the exclusion of the latest Reveal and Shield versions offers some protection for future growth.

For now, however, the final judgment has been entered, and Guardant has said it intends to appeal. Investors should distinguish the encouraging product exclusions from the broader reality that Guardant must still contest a large award and continuing royalties covering several important services.

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This article is originally published at Insider Monkey.