During the October 6 episode of Mad Money, Jim Cramer took a closer look at GRAIL, Inc. (NASDAQ:GRAL) following its sharp rally around an FDA advisory panel’s endorsement of Galleri. The stock has gained more than 50% year-to-date, ranking ninth on our list of 10 Small-Cap Stocks With Huge Growth Potential. See which eight stocks rank higher and whether they offer even greater growth opportunities.
Galleri Addresses a Gap in Cancer Screening
Cramer highlighted GRAIL’s blood-based screening test, which looks for signs of cancer that may escape existing screening methods. He noted that although it is not perfect or a replacement for mammograms and colonoscopies, it offers an easier additional layer of detection through a simple blood draw. Cramer had argued that GRAIL’s rally might have further to run, drawing a comparison with another healthcare stock at a specific point in its rise. His September remarks reveal the precedent behind that confidence.
On September 23, the FDA advisory committee voted 7 – 2, with one abstention, that Galleri’s benefits outweigh its risks. Members unanimously supported its safety but split 6 – 4 on effectiveness. The recommendation is nonbinding, and the company’s announcement said a final FDA decision was expected in the coming months. Commercial demand is already growing. Second-quarter Galleri revenue increased 24% to $42.6 million, while test volume rose 35% to more than 61,000. Total company revenue reached $44.7 million, up 26%.
Samsung Adds Funding and an Overseas Opportunity
GRAIL, Inc. completed a $110 million equity financing with Samsung C&T and Samsung Electronics in June. Its proposed collaboration with Samsung C&T remains subject to regulatory approvals and other conditions. The investment was already included in the company’s $861.6 million of cash, cash equivalents, and short-term marketable securities as of June 30. Cramer highlighted the potential to reach customers beyond the United States, as he said:
Samsung brings more than capital. The companies intend to commercialize GRAIL’s tests in South Korea with potential expansion into Japan and Singapore. More international distribution, more money.
Samsung joins a financing history that stretches back well before Galleri’s commercial launch. GRAIL’s entry in an earlier review of investments associated with Jeff Bezos traces the prominent backers involved at the company’s beginning.
Approval Would Leave Important Questions Unanswered
The NHS-Galleri trial did not meet its primary endpoint of reducing combined stage III and IV cancer diagnoses. Researchers observed fewer stage IV cancers and more early-stage diagnoses, but said longer follow-up is needed to determine whether these findings improve cancer outcomes. GRAIL’s entry in an earlier roundup of recent spin-offs outlined what Guggenheim expected further trial data to clarify before September’s advisory vote.
Insurance coverage is another hurdle. FDA approval could support broader reimbursement, but would not automatically make every insurer cover Galleri. Reuters reported that approval could make these tests eligible for Medicare coverage beginning in 2028, while a preventive-services recommendation would also matter for private coverage. Meanwhile, GRAIL, Inc. reported a $110.2 million quarterly net loss. Its adjusted EBITDA loss widened 15% to $90.3 million, showing that higher testing volume has not yet brought the business close to profitability. Furthermore, valuation was Cramer’s main reservation, as he said:
So, what bothers me? Valuation… GRAIL is a $6.1 billion company that currently trades at 34 times sales, not earnings… This is sales; that means it is very expensive. But the market for cancer screening is huge, and the potential for growth is equally immense.
GRAIL, Inc. trades at approximately 35.3x trailing sales, compared with 18.4x for cancer-testing peer Guardant Health. Their product mixes differ, but GRAIL’s substantially higher multiple shows how much future growth investors are already paying for. Neither company has a meaningful positive earnings multiple.
Fewer Hedge Fund Holders Despite the Excitement
Insider Monkey’s database showed 29 hedge funds holding GRAIL, Inc. in Q2, down from 33 in Q1. After increasing its stake by 28% in Q2, Farallon Capital became the most prominent hedge fund holder of the stock with 4.16 million shares. Short interest stood at 19.48% of the public float, indicating considerable short positioning. Those quarterly holdings predate September’s advisory vote. Cramer’s conclusion was:
Bottom line here: I think GRAIL stock can go higher. But I need you to keep in mind it’s already run a lot, and so therefore, because it’s up so high, it’s become speculative. Start with a small position, build up gradually on weakness. Maybe the stock will keep getting hammered like it was today. I’m betting that would be a buying opportunity as long as the FDA doesn’t end up hitting them with an excessively restrictive warning label. Remember, the fact that it’s run so much does make it more speculative. If it could shed some points, it would therefore be a more solid investment in an area where you know there’s lots of institutional investor interest.
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