On time. So, thank you very much. I'm the analyst here, in Diagnostics, Dave Westenberg. I'm here with Guardant Health, AmirAli, and Mike Bell, and, you know, we'll kick it off here. So, I'll just go to the topical news from last week. You know, you won a $300 million false advertising claim against Natera. Does this have any benefits from a sales and marketing perspective, and when can you expect a payment, and what are kind of the ranges of fines that it could be?
Yeah, we are pleased with the way that verdict went, which I think justice worked. And I think it's a good kind of a verification of the performance of Reveal and the reality of the strength and the technology and the product that we have developed. It's one of the biggest and largest kind of verdicts in this field of misleading advertisement. And we believe oncologists deserve better, like you know, sharing the right information when you're talking about the performance of tests, especially by another manufacturer, really makes sense. So we are excited about it. Still, it's a long journey. You know, we expect that probably this is most probably or certainly, but it's gonna go to appeal process. And maybe in terms of timeline, you can add more, Mike?
Yeah, I think, you know, it's the post-trial motions that are coming up soon in December, but again, you know, we think it'll take time, and likely this would go to an appeal, so it could be more than a year away. I think the ranges of the payments, I think, you know, at the moment it's approximately $300 million. There's a portion of that, the non-punitive portion, that could get trebled, so probably the maximum would be $500 million, but yeah, we'll see how it goes through the post-trial motions and through the expected appeal process.
Gotcha, and, you know, I'm gonna actually go with the base business here. I know I have the screening expert, but it's okay. So let's just start with penetration rates and CGP. It's still pretty underpenetrated. That said, you know, you're not growing at 50% anymore. So what percent of potential cancers are getting CGP testing? Where should we think about the market growth rate of CGP today? And, I know you're expecting, you know, I think your guidance is for 20% volume growth. I, you know, that might include Reveal and others. But, do you believe that's around the market growth, and is there catalysts that could get CGP testing increased?
Yeah, sure. So for different cancer types, market is measured at different levels. Like, for instance, for lung cancer and after that, colon and breast cancer, the percentage is higher. Blended, we believe, most probably around 30% of the U.S. market is penetrated right now for CGP testing. In international market, it's very, very, very low. It's minuscule at this time. Now in terms of market growth, our best estimate is the tissue CGP market grows by single digit year over year. And liquid CGP grows, like in teens, around mid-teens, year over year. And we are very confident about actually that 20% clinical growth that we mentioned for next year. Keep in mind that's across all oncology products. Some of it, and, you know, still the lead grower is Guardant360, but TissueNext, Reveal, and Response are part of it.
TissueNext and Reveal, obviously they're at the earlier stage of market penetration, and the growth rate of those brands are higher than this corporate oncology growth here that we talked about. In terms of accelerators or even catalysts for growth, there are multiple factors. One is, as long as pharma is investing significant amounts of money in drug R&D, it would open up opportunities for biomarker testing. Like, just remember ESR1 kind of story we had last year. There are a few additional biomarkers that we are part of the clinical trial. We don't know which one is gonna work, which ones are not gonna work. But some of these biomarker-driven trials, as long as they have positive readout, it would generate additional utility for CGP testing, and that would be a growth driver for this market.
The second element is when the drugs are going from late stage to early stage management. Bunch of drug approvals are just for stage three and four, and there is some kind of interesting activity happening to bring some of these targeted immunotherapies to earlier stage, including stage two, so once that happens, that would also open up the market to a new set of patients for earlier disease treatment that's not part of the market today, and maybe the last one I would say is international market. As I mentioned, CGP market internationally is very small at this time, and we are seeing some interesting activities, like what's happening in the U.K., what's happening in some, you know, other EU 5 countries, and some other global nations are interesting.
Still, I think we have to see how much of these national reimbursements would evolve, but I think all these would be catalysts for the growth of CGP market in years to come.
Now, you know, you've always been a liquid company, and, and I, you know, there's additional barriers with liquid. It's more technically challenging, you know, bigger assays, more intense. That said, you know, there is Illumina TruSight assay, you know, maybe you could see some academic, maybe some breaking down of barriers. But any thoughts to how investors should think about some of these competitive barriers in liquid specifically? And then if you can maybe talk about data, IP, customer comfort with the test because, you know, a lot of times, you know, there's a level of trust that you with the oncologist around, you know, the accuracy of the report. So if you can go over some of that stuff, and including turnaround time as well.
Yeah, sure. So the liquid CGP market always has been competitive. I remember even 2014, when first we launched Guardant360, there were a few other players. Like, there were dozens of players that came and went, you know, in this market went away. It's just a hard field, and multiple things need to work all at the same time. One is technology. We believe Guardant360 today has the richest utility and information sharing after we upgraded Guardant360 with Smart Liquid Biopsy. Then operation need to work. Like, we have very low failure rate, and we have median turnaround time of five days. This is very important for oncologists to see a patient on a weekly basis.
When they order on Monday, they're gonna go and see that patient next Monday, and they have the 360 result in hand versus a bunch of, you know, competing assays that are having a hard time to even get to 10-14 days turnaround time. Complicated, then when you go to the regulatory approval, some accounts prefer FDA-approved tests. There are not many options today in this market that has FDA approval, then you go to the reimbursement. Yes, we have TSO 500 kit in the market, but that's not a new thing. It's been in market for a few years now. But, you know, when a lab brings those kind of tests up, they don't have economies of scale, their cost would be higher, they don't have the infrastructure of reimbursement, so probably their ASP is gonna get impacted.
So would they really like to scale that TSO 500 operation? We've seen some accounts that they internalize it, and then they decided to go with vendors again. So, but it's not a new, competitive pressure for us. TSO 500 has been in market for years right now. In terms of technology, ours is obviously innovative technology. We have 600 IPs, patent application, and we are kind of defending our innovation when other people are just trying to actually replicate what we've done. Again, this is a hard science, hard technology field.
Gotcha. You know, just going back and sorry to get my optics, the pharma business did really well last quarter. So, what's happening there? What happened there, and you know, can we expect on a go-forward basis?
Yeah, we were very excited with the pharma growth. Like, it was effectively an endorsement of the value of Smart Liquid Biopsy. That accelerated actually a bunch of projects for us on the translational research side with pharma. And, you know, more than biopharma growth, the way we look at it is typically this biopharma growth is a, is an important leading indication of what could happen in the clinical market in the years to come. Once pharma sees some kind of potential value, they may incorporate it in their clinical trial, in their drug development activities. Once those drugs get approval based on this kind of Smart Liquid Biopsy assay and power of epigenomics that we have, then what's gonna happen? Clinicians will even use it more, and our assay is the only assay who can do it.
We are very excited with what we are seeing and the level of excitement that we are seeing in pharma, within our pharma partners about what's happening with Smart Liquid Biopsy assay.
Gotcha. I'm gonna actually just move on to Shield. You know, I got the expert here. So you have FDA approval and CMS pricing. What's left to go in terms of coverage? Can you, do you feel comfortable going to market, you know, aggressively with a $920 price? When should we expect ADLT to hit, and when can we kinda expect commercial payers to come on board?
We are very proud of what we have achieved in 2024. Like, just imagine, and, you know, just remember the way we started the year, and actually now, literally, like, almost just short of a year after we have our pivotal publication, then we had a successful AdCom FDA approval with the first line indication. Endorsing that we understand reimbursement pricing very well, getting $920 Medicare rate for Shield today, which it was above our expectation. We always expected it's not gonna be a cheap $200 pricing by Medicare. We were confident about it. But even 920, that level of premium pricing, we didn't expect. So we are very pleased with that. So a lot of activity from now on is to penetrate this Medicare market as fast as we can within the ring fence spend and investment that we have.
We are talking about 45 million Medicare beneficiaries today who have access to Shield with $0 out of pocket or very, very minimal out-of-pocket in terms of fee-for-service or Medicare Advantage. A lot of business brought to mind while we are gonna wait and work on making sure younger patients get access to this innovative test too. How could we get there? First, with American Cancer Society guideline inclusion, and after that, Task Force guideline inclusion. We expect ACS guideline inclusion in 2025, and we see what happens with Task Force. We continue to monitor it on a daily basis for their draft research plan to drop any day to see what happens and when they start the process. Going back to that Medicare rate of $920, so this $920 is very favorable, but it's interim pricing for us.
We expect the Medicare pricing to go up to $1,495 after we get ADLT status designation from CMS. We expect that sometime in 2025 too, probably somewhere in the middle of 2025.
All right. Now let's just talk about the competitive dynamics with an Exact blood test. On one hand, they have a giant sales force. At the same time, I mean, I think their message is a little bit more complicated because they'll be selling both stool and blood. So how do you think that message is going to impact the competitive situation and how are you, you know, which one of you truly has the first mover advantage in colorectal cancer screening?
I think in terms of first mover advantage, I think that's clear. Like, you know, we launched the product August of this year. It's hard for me to imagine there would be an FDA-approved CMS reimbursed product by them till two years from today. But first, we'll see. I think it looks like they've decided to go back to technology development and, you know, their clinical trial would be sometime next year in terms of readouts. So we have to wait and see what happens. But the way I look at the competitive landscape is this in terms of product-market fit. When you look at two to three years down the road, the competing blood test, even if it works for CRC, would be a CRC-only test. We have always built Shield as a multicancer screening test. CRCs are a lead indication, but not the only indication.
The way I look at it is most probably two-to-three years down the road, the physicians are gonna have a choice. Do I wanna use a blood test that can just detect for CRC, even if assuming it works and it can even mimic the performance that we have? Or I'd like to use another blood test that the patient has access to, it's FDA-approved, that can detect multicancer. I would take that competition any single day. But we'll see. We'll see actually what their data readout would be, and we go from there.
Gotcha. What's the latest on the timelines of your V2, in terms of success? Do you wanna move that sensitivity rate up in cancer or AAs or both? I mean, which one's more important? And what would an FDA approval look like for V2? And what I mean by that is, you know, do you have to run the whole process over again for FDA approval, or can you kinda just file some?
What?
Yeah.
I like that word. We continue to expect, you know, this V2 data and approval sometime in 2025. We are in, the phase of the activity to work with FDA and align on a detailed clinical validation study for Shield V2, and we'll see what happens. We have all the samples in our freezer. It's just a matter of how many of those samples we need to take out of our freezer. We are gonna be very strategic. We don't wanna burn too many of the samples that we have spent years to really collect them. So that's why we are, wanna work with FDA to align on the scope of that study. It's gonna be in the form of a supplemental PMA, and it's gonna have the review time of typical supplemental PMA. In terms of our expectation, we know analytically V2 is a more sensitive test for CRC.
Clinically, we don't know. We have some data. We shared some data last year. But the reality is we have to run this additional blind of CRCs that we have in our freezer to see what the performance of V2 would be relative to V1. And that's what we have to do. But we expect CRC performance to be a notch higher than V1, but we'll see what the data is gonna show us. For AA, I don't expect any kind of changes or material changes in the AA performance with V2.
Gotcha. Let's get Mike involved in terms of cost of goods sold and,
Okay.
And Shield here. I think you just said it's sub 1,000. How should we think about the marchdown in cost of goods sold on Shield?
Yeah. You know, before we launched, the cost per test was over $1,000, but a large portion of that, roughly $1,000, was fixed cost. And so really, you know, as the volume starts to increase, we should see the cost per test go down quite rapidly. You know, we've set this goal by 2028 or when we do a million tests a year to have a cost per test of $200. We're very confident that we can get there. You know, one driver's gonna be the volume, but we're spending a lot of time, a lot of focus on automation, really taking out all of the labor costs and everything we can out of that test.
So I think, you know, what we'll see is, as again, as the volume ramps and as our automation kicks in, that cost per test going down over time, eventually driving down to $200.
Gotcha. Just 'cause we only have seven minutes, I'm gonna move back to Reveal here. Just in terms of, I think, investors definitely underestimate the convenience factor around tumor-agnostic. That said, I mean, Natera is building an incredible market and has a leading position. But tumor-agnostic does have this convenient advantage and can get into the market where, you know, tumor-informed maybe can't get to. So where do you think the low-hanging fruit is in MRD, that Natera is not picking and you can pick, you know, incredibly quickly?
We're very in agreement with you. When you look at, depending on cancer types, probably 20%-30% of the people do not have tissue. Doctors want to order MRD, then what are they gonna do? Like, it's not that something that you re-biopsy, right? You don't have tissue. What are you gonna do? Like, you know, so, you know, for that 20%-30% of the market, you know, this tumor-naive, blood-only liquid biopsies is the only option. I think when the awareness of this MRD market is building, when doctors are getting more and more comfortable with using MRDs in their practice, when there is a product that really works for some of these indications and it's blood-only, at least we expect it. Actually, they use it for those patients who don't have access to tumor.
That's, I think, the lowest hanging fruit, but probably it could go actually higher than that in terms of the convenience factor when you look at 12 million cancer survivors have done their surgeries over two years ago. It's not very easy to get access to those tissue samples when you're thinking about, like, busy offices. Doctors are dealing with a lot of issues, and especially in some of the community care. So blood-only is gonna have, I think, a great offering for really market accelerate, market development acceleration and usage of MRD in those settings as well. So this notion that Reveal, for instance, Reveal CRC, if you go blood, you're sacrificing sensitivity specificity. We don't believe that's true. I think that's some of the reality of actually what happened last week too, in the crowd.
We are confident about the performance of Reveal for the indications like CRC that we published and indications that we validated and we launched. We are very excited of what we can do next year once we get the Medicare reimbursement for surveillance setting for CRC.
Gotcha. Actually, that was the next question. What is the latest timelines in terms of surveillance and what kinda data do you think you need to show to CMS or MolDX to get that?
So I think we are over those days. We have the data. We have submitted the conversation. A couple of rounds have happened. The number of questions continue to go down. The questions are not about generating a new set of data. It's about clarification of some of the data that we have shared. So we are optimistic that as we go in 2025, sometime next year, hopefully the early part of 2025, we can get this expanded Medicare reimbursement that really enables us to go after those cancer survivors who are far away from their surgery, and bring those volume in, in a reimbursement way. 2025 could be an inflection point for Reveal brand. Going from a gross margin negative test, gross margin positive would really make it very scalable for us.
I know we've talked about our cost reduction initiative. You know, currently the cost per test is, again, roughly $1,000, and we're making changes to the workflow, which are imminent, will be implemented very soon, and that's gonna reduce the cost per test by 50%. So, yeah, as AmirAli said, once we get CRC surveillance, we've reduced our cost per test by 50%. We go from a gross margin negative to a gross margin positive test. That gross margin negative, that's been holding us back from really pushing on volume. Once we get gross margin positive, it reduces our cash burn. In fact, it starts to generate cash every test we sell, and we'll really push on the volume in 2025.
Gotcha. Okay. So, I mean, taking those last two questions, I mean, we can assume something like mid-25, you go aggressively at both the surveillance setting for the patients that have never been tested from a long, you know, from a couple years ago, and you're going right after, like, maybe some of the late-stage cancers where they don't have tissue.
And also pushing for multi-time point testing per patient. Since today, we don't have actually that reimbursement, the number of tests per patient is pretty low for us. So once we have that surveillance, we can really enable this multiserial testing, longitudinal testing of patients, which today is not scalable for us. Next year, hopefully they will.
We'll go back and give Mike some questions in terms of ASPs. I think they were north of $3,000. Do you have any more room on collection rate? When you're not getting paid, what is the usual?
Guardant360 has been a real tailwind for us this year. If you remember at the start of 2024, we got the Medicare increase from $3,500 to $5,000 for Guardant360 LDT. What we've seen throughout 2024 is the pull-through on Medicare Advantage. So getting the Medicare Advantage payers repaying us at this new $5,000 rate. And so that's driven our overall ASPs for Guardant360 to be over $3,000. The opportunity for us is that, although we've got 300 million covered lives on all of the large national payers cover Guardant360, there's still gaps in the coverage. So some might cover Guardant360 CDx and LDT or vice versa. Some might cover just for certain cancer types, maybe CRC or lung.
So the opportunity for us is to go after where we're not getting paid, and that's in those instances. So I think over time, you know, we would expect if we can get that additional coverage that, you know, our ASPs can continue to rise above $3,000. I don't think in 2025 we're not gonna see the major step what we did in 2024, but hopefully we can continue to make good, good traction there.
Gotcha. We have 20 seconds. Just real quickly on expectations for volume in Shield in the coming quarters. When do you expect to, you know, talk about volumes on, you know, on a quarterly basis? What has to happen, on a kind of a metric basis?
Based on the data and trends that we are seeing, we are fully intending to disclose volume and revenue contribution by Shield starting this quarter that we are in, so in the Q4 earnings call.
Thank you, guys.
Thanks.
Thank you.
Hi everyone. My name's Jessica Tassan. I cover healthcare services at Piper Sandler, and I'm extremely excited to be here this morning with Ido Schoenberg, CEO of Amwell, and Amwell's new CFO, Mark Hirschhorn. So thank you both so much for joining us, and welcome to the Piper Sandler Conference.
Thank you, Jess. It's a pleasure being here.
I actually want to start our questions with Mark. Mark, you're new to Amwell. What brought you to the company and kind of what do you consider Amwell's greatest unrealized opportunities from both a commercial and a financial perspective?
I wanna thank you again for having us this morning. I'm not really new to Amwell. I've obviously competed against Ido and Amwell since 2012.
Fair.
But we've been in touch.