Why Guardant Health Crushed the Market Today

What happened

Oncology diagnostics company Guardian Health (GH 3.82%) made its investors happy on Wednesday with an almost 4% rise in its stock price. That performance, far better than the nearly 1% slump of the S&P 500was due to the expansion of a collaboration deal with a top name in the pharmaceutical industry.

So what

Guardant Health announced that it has increased its cooperation with that pharmaceutical company, the sprawling Merck & Co. (MRK -1.75%). The deal centers on the former company’s GuardantINFORM diagnostics platform, which Merck will use to help develop the products in its precision oncology pipeline. Guardant data scientists will work closely with their Merck colleagues to disseminate the data supplied by the platform, the company said. But it did not provide any financial details of this expanded arrangement with Merck. It also did not specify how long it might be in force.

Guardant did quote its CEO Helmy Eltoukhy as saying that the new deal “represents a great opportunity to help accelerate the development of [Merck’s] pipeline of potentially transformative cancer medicines,” and that this “can help them bring much-needed cancer therapies to patients more quickly.”

Now what

Sentiment on Guardant stock has been fairly positive of late. Much of this was due to the company’s second-quarter earnings report, which revealed growth of almost 20% year over year, thanks largely to notably higher sales of diagnostic products.

Oncology remains a hot area for biotechs, pharmaceuticals, and a myriad of companies associated with those sectors. And if Merck makes significant strides in its cancer-fighting efforts, we can expect a lift for collaborator Guardant Health too.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Guardant Health and Merck & Co. The Motley Fool has a disclosure policy.

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