Hello, everyone. I'm Subbu Nambi. I lead the Life Sciences Tools and Diagnostics team at Guggenheim. Thank you for joining us today for our inaugural Healthcare Innovation Conference, Day 2. It is my pleasure to be hosting the team from Guardant Health. Joining us are AmirAli, CEO; Mike Bell, CFO; and Zarak, IR. Amir, congratulations on the fantastic 3Q report. To start, what feedback have you been hearing since reporting, and what's resonated most with investors this quarter?
Hello, everybody. Thanks, Subbu, for having us. Excited to be here. Yeah, we had a fantastic Q3, and our results have been very well received. We started having some conversations with investors, and I think the progress that we made is really getting well resonated with investors. Maybe just to highlight some of the main points, in Q3, we saw very good growth in our core business on the oncology side. We talked about Guardant360 having a mid-single-digit sequential quarter-over-quarter growth, which we are very excited about. We reiterated the clinical volume growth goal that we had for a whole year of 20%.
And also, we shared very good progress on the Shield side with getting a very favorable, unexpected, or more than expected, Medicare price for Shield of $920 from the Noridian, our local MAC, which effectively put us at ASP of about $500 now, way ahead of our original target. If you may recall, our target was to get to about $500 ASP in 2028. And effectively, we have it right now within the first few months of launch of Shield IVD in the marketplace.
Perfect. And 2025 is top of mind for everyone. As we move towards the end of the year, on the call, you provided initial expectations of over 20% clinical volume growth in 2025, which excludes Shield. Can you please walk us through the key drivers of that growth and break it down across the different tests?
Yeah, sure. So Guardant360 continued to be the major driver of our overall clinical volume growth. And we are very excited with actually the early reception that we are seeing with the upgraded Guardant360 LDT based on our Smart Liquid Biopsy platform. As a reminder, a Smart Liquid Biopsy platform enables liquid biopsy tests like Guardant360 to go beyond genomics and look at epigenomics in the same test. And that's getting a lot of interesting attention. Also, we upgraded the panel size for 360 to over about 700 genes, very actionable content of genomic signatures that we are looking at continues to be best performing. For instance, for tumor level quantification, this new 360 can detect tumor levels at 10 times higher sensitivity than the previous generation Guardant360 powered with that epigenomic signature and content that we are looking at.
So I think we are very bullish about Guardant360 franchise growth powered by Guardant360 and Guardant360 LDT. And we are actually seeing very good signs of growth on other brands, namely Reveal, TissueNext. We also upgraded TissueNext a few months ago to a much larger panel size, which is more competitive relative to other tissue CGPs which are in the marketplace. They're at the lower volume contribution to the overall clinical volume that we are talking about, but we are excited about how much they can contribute in Q4 and as we go to 2025.
Awesome. Next, moving to Shield. I'd like to start with Shield. We know it's only been a few months, but it would be great to start with any initial feedback in the market from patients and providers on the IVD launch. Any initial signs of what do you think the ramp could look like from here to maybe mid next year?
Yeah, we are very excited with actually early signs of some of the commercial KPIs on Shield IVD front. PCPs are very enthusiastic to get access to this test, and once they order Shield, patients really complete the test. The adherence rate continues to be over 90%, meaning when the doctor orders the case, 90% plus of the patients do the blood draw and we get the sample in our lab for processing so the screening test gets completed. We look at some of the metrics, including our expected volume generation for these new reps that we hired and new territories that we are going into. We are in very early innings of it, but we are meeting and beating the initial projections that we had. We ended Q3 with a very good momentum, and that momentum continued to build in Q4.
And October was a very good month, and we are excited to see what we can deliver in Q4. And based on everything that we are seeing, we fully intend to disclose our revenue and volume contribution in our Q4 result. So I think we continue to really see confirmation that this unscreened market is a very deep market, and Shield with the performance and the label that we have today has a great product-market fit.
The next big milestone for Shield is ADLT status. Could you provide us an update on how that has been progressing and what remains to be submitted or completed? What's your current ADLT timeline expectation?
Yeah, so ADLT status, or Advanced Diagnostic Laboratory Test status designation, is put in place to really promote innovation and also secure pricing for innovative technologies. A way to get actually qualified for that ADLT status is if you're addressing an unmet need and you get FDA approval. So since we have an FDA approval, we need to just go through a mechanical process to activate that status designation and then get access to premium Medicare pricing, which is kind of secured by an ADLT kind of process. We are very pleased with this gap-fill-like price that we got, $920 for Shield. And we expect once we get to that ADLT status, as you mentioned, that Medicare rate is going to get bumped up to $1495 for Shield. The process that we are pursuing is we are pulling our PLA code.
The ADLT's pricing and status would be just specific for Shield. We would apply for that ADLT status. These are kind of quarterly processes, and sometimes some unknown unknowns that could happen in terms of delaying it, but it's just kind of a mechanical process. We expect ADLT to be in place sometime in 2025. It's hard to know exactly when in 2025, but probably a best guess would be sometime in the middle of 2025.
Got it. Shield is the first blood test to reach the market, giving you a notable first-mover advantage, which you now expect to be preserved at least for two and a half years, as you mentioned on the 3Q call. At that time, how will you defend that advantage as other blood-based CRC tests that are in development start to come to the market?
Yeah, actually, we are very excited that it's very hard for us to imagine how anybody in our competition can have an FDA-approved Medicare blood-based colorectal cancer screening test till two and a half years from today. And that gives us a long lead time to really build this market and leverage the first-mover advantage that we have. This is a very long lead time that we could have. We do expect that as we are kind of building this brand and the progress that we are making and commercial infrastructure that we would make, the infrastructure that we are going to have two and a half years is going to be much higher than what we have today.
Also, when you look at two and a half years from today, we are seeing some interesting sign of progress in our R&Ds that probably Shield at the time would be a different kind of product than even what we have today. We believe Shield of today is top-notch as great product-market fit. And also, at the same time, we are excited with some of the progress on our pipeline front, having better CRC screening tests through Shield V2, and also indication expansion to multicancer detection with the same blood tests. We are expecting to share some results of utilization of Shield for multicancer detection and sharing that data publicly sometime in 2025. And we expect to have this Shield V2 approval and upgrade sometime also in 2025.
So when you look at all this just within one year of 2025, just maybe imagine where we could be two, three years from today. And the competition not only should beat the Shield V1 that we have today, but competition would be for a multicancer, even potentially better performing Shield of three years from today versus what they are going to show whenever they have clinical trial readout if they get to that point.
That's interesting that you said you could achieve all this in 2025. How should we think about the regulatory process?
Yeah, so for CRC screening, any kind of upgrades is going to be under supervision of FDA. Obviously, we are going to go through the label upgrade and supplemental PMA submission with agency. As we speak here, it's work in progress for us to coordinate some activities with FDA in terms of how exactly we are going to do the clinical validation for Shield V2. And for multicancer detection, as we get closer, we are going to talk about some of the regulatory pathways for it. So some of it may need to go through FDA review, and some of it can get activated through just LDT upgrades and adding professional services to the same Shield test that we are running. For instance, Guardant360 CDx is an FDA-approved test. It has a chapter of report which is FDA-endorsed, FDA-approved, and has another chapter which is regulated by LDT.
It's validated under LDT, but it does not have FDA approval. So the details are more complicated, and I think as we get closer to that product offering, we would share more details.
Perfect. Longer term, you talked at Investor Day almost two years ago now about getting to $500 million Shield revenue in 2028, assuming 1 million tests and a $500 ASP. Although all the progress that you've made seems like you're tracking way ahead than expected, how much do you think all these factors, such as higher price point, the expanded label, first-line label, delayed competition, how much of upside do these three outcomes represent to the prior guidance?
Yeah, if I look at last fall when we set actually the long-term expectation, and if I miss anything, please, Mike, chime in. We did not imagine that we would get first-line label in terms of our conservative assumptions. We wanted to have a good amount of conservatism in the first long-term guidance that we are going to put out there for Shield. So we couldn't assume we were going to get first label. So we assumed we were going to have second label. We assumed some of our competitors would have more progress than what they made. We assumed we were going to have 60% market share in blood-based colon cancer screening in 2028. But right now, I'm not sure where that 40% is going to go to at this time.
In terms of pricing, we assumed maybe we are going to have ADLT pricing of $895, and now we paved the path to have ADLT pricing of $1495, so we are sitting here a lot more confident about the 2028 guidance that we put out there. I think it's still too early to make any kind of adjustment, but definitely we are more confident and a bunch of assumptions went in a better direction than our expectation last fall. Anything else?
No, I think that covered it.
Switching to Guardant 360. You've done a great job in this market so far. What share of these expanded market do you believe Guardant has today, especially in the liquid biopsy space?
Yeah, we continue to see it looks like about 50% of the liquid biopsy CGP is based on 360, 360 LDT, or 360 CDx. It's been kind of steady now for some time with some kind of ups and downs, like when some companies launched liquid biopsy CGPs and some physicians were testing or not. We were seeing some kind of small blips, but again, went back. I think when we look at really 360, it looks like continuing to be after nine years, best in class in terms of technology turnaround time of the median of five days. It's been a big contributor for 360 winning the market. Frankly, we expected more even in terms of maybe what competition can do versus the reality of launching some tests that even sometimes cannot detect some simple mutations very reproducibly.
So in getting to these turnaround times that we are talking about, it looks like it's much harder than what it took us to get to that point. So this is a hard science, hard field for people to replicate. And we continue to enjoy this kind of about 50% market share that we had, and we continue to have.
You kind of touched on this, but is that how you think about the competitive dynamics of this market? Do you feel pretty good about the pole position and continuing to grow sustainably?
Yeah, like in terms of there is a product differentiation in terms of technology. There is operational differentiation in terms of turnaround time and customer service. There is a commercial differentiation. When we do surveys now for now two, three years, we continue to see the oncologists grade our commercial team as number one brand in diagnostics in terms of their experience. So when you look at these kind of multifactor edges that we have relative to competition, it puts us really in a good position to lead this market and continue to lead this market. We have work to do on other products. Like for instance, on tissue CGP, it doesn't contribute like we don't have a material market share on tissue CGP. That was because we really focused on liquid CGP.
But now with some of the tissue upgrades that we've done and again, the commercial brand that we have, we expect that brand to contribute more and more as we go to the next few years.
Sticking with the TissueNext, do you see a lot of providers adopting both the tests? And if not, what is the barrier to that adoption?
So when you look at the overall market, there is a fraction of the market that would like to deal with single vendor for a bunch of kind of oncology offering in terms of some of the verticals that maybe have some kind of connection for treatment selection decision-making. But some doctors want to have access to best in class, best in class tissue, best in class liquid, best in class monitoring products. So it's a combination of all these kind of dynamics.
For us, that now we have 360 really as our lead and anchor indication to the CGP market, we are going to actually leverage all those connections to really bring up other offerings that we have on the oncology side over time to really build a better growth, better PNL, and highly leveraged channel that we have invested and built to go after this 15,000 oncologists in the United States.
Got it. I want to spend the next few minutes on Reveal. This is clearly a huge opportunity. You're viewed as the lead horse in tumor diagnostic MRD. There are clearly logistical advantages to be fair, but I think the data so far also shows some potential shortcoming compared to some of the ultra-sensitive tumor-informed MRD data that we have seen. What is your view on the tumor-informed versus tumor-agn ostic dynamic in the MRD market?
From my perspective, for instance, if you look at colon cancer, which a lot of data has been generated by tissue-informed and our platform, TissueNext, frankly, I believe our Reveal test is at least as good as tissue-informed, best in class tissue-informed MRD test. We are dealing this is what you're saying is the reality. I think there is perception that if you know the prior tissue information, you should be able to get better performance. But the reality with this innovative technology of epigenomics that we have at Guardant is without knowing that prior information, still the same signals are in blood. We are detecting them with high specificity. So let's say, for instance, for Reveal CRC, I'm confident that our test is as good as tissue-informed. But the perception is out there. The perception, even for oncologists, is that tissue-informed should be better.
We need to address that perception through additional data generation and some other mechanism that we are working on to really educate the market that, no, you don't need that tissue information necessarily to get to the performance that you need.
Got it. Mike, one for you. You had said Reveal received MolDX. Once Reveal receives MolDX coverage, you would just flip on the volume switch, so to speak, and you have been suppressing volumes given the reimbursement dynamics. Do you expect to hear back from MolDX on the submission of the data sometime early next year? Is that the accurate timeline?
Yeah. I mean, in short, we submitted to MolDX a few months ago. There's always a back and forth, clarification questions that come from MolDX, and so we're in that process at the moment, so we're looking at sort of 2025 as being when we get that reimbursement, and hopefully in the first half of 2025. And yeah, for being able to sort of push on the volumes, we've been actively not promoting Reveal, holding back on the volumes, because at the moment, that test is negative gross margin. And there's two things that are going to change that. One would be getting incremental reimbursement, and so for CRC surveillance, once we get the MolDX reimbursement, we'll have a nice uplift to our ASP. And the other is the COGS. Currently, the COGS is just over $1,000 for Reveal.
And we're doing a lot of work focusing on the workflow to reduce that COGS per test. And that should go live. A change to that workflow should go live early 2025. And that's going to reduce the cost by roughly 50%. And so I think sometime in 2025, we'll reach the point where Reveal now is flips from being negative gross margin to positive gross margin. And that's going to really allow us to push on the volumes, because we've been managing our cash burn. But once it becomes a positive gross margin, then yeah, we'll really push hard, incentivize the sales team to focus on Reveal.
Mike, just to play devil's advocate for a second, let's say you don't get the MolDX reimbursement. With the COGS reduction, can you then even increase volumes just on the adjuvant setting?
Yeah. Reducing the COGS per test is going to save us a lot of cash burn, and so yeah, that's going to allow us to push on the volume regardless, but I think getting this CRC surveillance, we're very confident that we can get that, so I think that's going to be a real driver for us.
That's great. By the end of 2025, where do you anticipate Reveal ASPs and gross margin will be?
By the end of 2025?
2025.
I mean, our current Reveal ASP is around the $500 mark. Getting CRC surveillance reimbursements, it's going to increase that. There are a few factors that play into that, exactly what that increase is going to be. One is whatever the Medicare rate is. So we're not clear on what that is yet. We'll find that out. And there's a bit of a mixed impact, because as well as CRC, Medicare, we have commercial volume, and then we have breast and lung volume. So there's a mixed impact. But we know that the ASP will increase when we get CRC surveillance reimbursement. So difficult to say exactly where that'll be. But we know COGS per test is going to come down. We'll have a positive gross margin. What we have said is for 2028, we're targeting an ASP of $1,000 with gross margins of 60%.
I think the moves that we'll make in 2025 will put us on the path to that. We're not going to be there by the end of 2025, but we'll be on a nice path to $1,000 ASP, 60% gross margins.
Thank you for that, Mike. In the last one minute, I would like to hear from both of you. Three years from now, what will investors wish they realized about Guardant Health today from a CFO perspective and also from a co-CEO perspective?
From a CFO perspective, I think there's a lot of focus on our cash burn. But I think what gets missed is therapy selection is a profitable business now. MRD, we're going to really flip that next year and drive that to profitability over the next couple of years. And we're making investments on screening really to drive this business. And so I think in three years' time, people will see that we're well on the path and close to being break-even with a fast-growing top line.
That's good. Amir?
Nothing much to add. I think the investors would see the continuous excellence in execution, both on the top line and bottom line, and meeting the goals and the promises that we made in terms of our long-term trajectory. So we are way ahead of what we talked about last fall, and we are very, very excited of what we can do in Q4 and 2025.
Fantastic. With that, thank you guys for joining. Thank you guys for joining us today.
Thank you.