Day two of the TD Cowen Global Healthcare Conference. I'm Dan Brennan, Life, Health, Tools and Diagnostics . Really pleased to be joined with me on the stage here, are Senior Management team of Guardant Health. We have to my right, Mike Bell, Chief Financial Officer, and to his right, we have Helmy Eltoukhy, who's a CEO. Gentlemen, thanks for coming.
Thank you.
A lot to be excited about for Guardant after a really strong finish to 2024. You have acceleration in G360 volumes, momentum in MRD business after recent approvals, and you've got COGS reduction. Now you've got the CRC screening business really picking up steam here. Maybe I would just like to start off. Maybe Helmy, you can kick it off, kind of maybe look back on 2024 and talk a little bit about what excites you most heading into 2025.
Yeah, no, I mean, I think we have a really fantastic setup in terms of all the work that we've done in 2024, in terms of what we have to look forward for in 2025.
If you think about all the work we did in terms of setting up EMR integrations, the product upgrade cycle in terms of moving our Oncology portfolio onto Smart Liquid Biopsy, onto this new platform.
S ome of the progress we made with biopharma in terms of getting them onto Infinity and Smart Liquid Biopsy and some of the big deals that we signed, and then obviously all the work we've done in terms of FDA approval for Shield, getting first line indication and getting Medicare coverage at a fantastic rate, I think really sets things up really well for 2025.
And then obviously the beginning of the year has been fantastic as well in terms of getting surveillance coverage for Reveal. And then I think we're excited about the potential for what this SERENA-6 readout means for where 360 can go in the future.
Terrific. Maybe starting with Smart Liquid Biopsy, staying at a high level, it's kind of the centerpiece of your offerings and strategy. While you talk about it a lot, I think investors are still trying to incorporate its impact per se into a model, isn't easy.
So, you call out better insights that your approach delivers for some of the players. So, could you just break down the benefits of Smart Liquid Biopsy, maybe starting with G360 in clinical applications and then moving over to the pharma business, and what kind of impact could it have on your P&L?
Yeah, no, it's fundamentally essentially a different lens into the patient's disease, really looking beyond the sort of genomic markers that are there and really looking into essentially the biological underpinnings of each patient's cancer, and so we're going to be able to essentially subtype and classify disease at much greater resolution than was possible.
If you think about genomic, I'll give you an example. There are patients that are positive, let's say for a KRAS G12C, but you see very different response rates between those patients. Some that respond really well and others that don't respond at all. When you look at it through an epigenetic lens, you can see these essentially clusters of patients that essentially have different disease, but they just harbor the same mutation.
So that is like, I think why you're seeing the big traction with biopharma last year and sort of a leading indicator and where things are going, where I think it's going to look like essentially what people were doing with comprehensive genomic profiling before is going to look like black and white television versus 4K TV in terms of where we're going, in terms of the resolution and ability to actually diagnose disease, subtype disease, and then decide what tools to use.
I can tell you already what's out there has been resonating with the field. I think you've seen acceleration in terms of our volumes last year. We're off to an amazing start this year. And so you see essentially what's there already, like things like promoter methylation. You see many trials out there, promoter methylation of MGMT.
There are other genes that if they're methylated indicate meaningful change in clinical decision making today, and that's on the test already. It's been resonating, but all these other features we're talking about in terms of subtyping disease, understanding toxicity of drugs, we can actually see those patients that may be undergoing cardio toxicity, liver toxicity.
All of that will be sort of new information that will make essentially the oncologist's job a lot easier in terms of correctly caring for their patients.
And can the other kind of leading CGP players, can they catch up? Can they add methylation and epigenetic markers? Or kind of how do you view your level of differentiation today and kind of how durable is that?
So I mean, of course, I mean, we don't take anything for granted in terms of the competitive landscape. That being said, we think the bar is a little bit higher on Smart Liquid Biopsy just because the chemistry is a lot more challenging in terms of it's not just getting it to work, but it's getting it to work at scale.
And obviously we have an FDA approval on the Shield side behind us. We have years and years of operations in terms of getting that to the finish line.
But I would say that the other piece that's a little bit more unique about this than a genomic marker, sure, when you think about detecting an EGFR mutation, you don't need a lot of data to be able to do that. You just need an analytical validation. You can do that with a few hundred samples.
A lot of what we're classifying needs thousands and tens of thousands of samples to be able to sort of classify the biology that's there and make sure that the correlations we're making are sound.
And that's a lot of the legwork we've been doing over the last few years is literally now approaching 100,000 samples that have been used for training in terms of these algorithms. These subtyping algorithms, these toxicity algorithms, and so on, so there is a data moat that is required to be able to turn this on and get the kind of performance we're seeing.
Interesting. So, maybe Mike, Guardant recently completed some actions to address and extend the converts. Pro forma capital structure, you have, I think, $890 million in cash, $1 billion more in debt, and $490 million in converts due in 2027. Just speak to maybe what are the next steps. How do you guys feel good where you are today in terms of the remaining converts? How do you handle those?
Yeah, Dan, I would say, I mean, firstly, we feel very comfortable with where we are today with the balance sheet. Yeah, we restructured our convertible debt. We've pushed $600 million of that debt out to a maturity of 2031, so quite a long way in the future. And we've got $490 million left that matures towards the end of 2027, so still almost three years.
And cash position, you mentioned it of around $900 million. So, I think firstly, from a cash perspective, that's more than enough to get us to break even. We said we'll be break even in 2028 at the latest. And between now and then, we would burn something like $450-$550 million.
So, the sort of $900 million that we have cash today is sufficient to get us there. I think the focus next probably will be on the remaining convertible.
Again, it's still almost three years from maturity. It's 0% coupon. So, we feel we've got time to address that. And we've got a lot of optionality. So, I think, yeah, we're feeling very comfortable with how the balance sheet structured at the moment.
Okay. So, maybe digging into clinical, you guided your clinical oncology volumes to accelerate in 2025 to 25% growth, up from 20% in 2024. I think it's a mix of G360 and also MRD gaining momentum here. So, could you speak, kind of unpack the assumptions towards that accelerating volume growth?
Yeah, look, I think a big driver on the G360 side is this upgrade to the Smart Liquid Biopsy, this transition that we've made. And we have a lot of confidence there because we've already seen proof in the pudding in terms of volume acceleration late last year and good start to this year.
And we know we have many other features still yet to come, which will further drive, I think, that switching away from other providers, from other tests, as well as deeper penetration into the market. With MRD, I think we know that the surveillance population is really sort of the prime target for a tissue-free approach.
And we really haven't been going after that just because we haven't been paid there. And now that I think we have this surveillance reimbursement indication sort of behind us, we're going aggressively towards that very, very large patient population.
It's going to take some time to get to those patients. But we think certainly this year we're going to see that inflection. And obviously, we know we'll have acceleration in that business over last year.
And then I think the third component is the upcoming launch of our tissue test. We think moving tissue to sort of our smart platform is going to drive, I think, real acceleration in the tissue business. I think it's going to drive share gains in terms of the space because we're going to have a test that can meaningfully provide more clinical utility than we believe other tests that are out there.
Terrific. And we'll dig into MRD a little bit more. But you mentioned SERENA-6 earlier in the discussion. Helmy, just kind of wondering how investors should think about the opportunity there after AZ just announced the trial was successful. They're going to have a PFS benefit. We'll see as the trial matures.
But just kind of talk through a little bit of how we size that opportunity, like how this compares to the Orserdu initial approval, which saw a nice lift in your G360 volumes when that came through.
But I know this one is different in terms of, I believe the ctDNA is more of a primary readout as opposed to, I think you needed to confirm with a scan with Orserdu. So, just kind of talk to the opportunity and how we think about the potential impact.
Yeah, no, this is huge for this space. It's a true paradigm shift in terms of essentially treatment selection in terms of how patients are adaptively monitored in terms of their therapy. And you can think of this as almost like the first sort of monitoring CDx or even first MRD CDx in some ways because what you're doing is you're essentially testing these patients every three months and looking for the emergence of the first sign of an ESR1 mutation.
And that's very exciting in the sense that, and I think the fact that you're initiating a new drug regimen so early in the progression of that patient is probably one of the reasons that the results have been very positive. And so we think this not only is a dawning of a new paradigm in terms of this molecular monitoring of patients in the therapy selection space.
What it does is it sort of confers an MRD-like sort of business or growth in terms of testing volume to the therapy selection space. And so we think this is really the tip of the spear in terms of what therapy selection will look like in the coming years.
And there is a model of this in the heme space with multiple myeloma with many other diseases. You're switching therapies to the second line, third line, fourth line as soon as there's a molecular progression. And we think breast is just the first of many indications where this is potentially going to be a new paradigm.
If you think about sizing the opportunity, with ESR1, that was a big lift for us. We saw more than a doubling of our breast business very, very quickly within months of that approval.
And if you think about what this me,ans, this means that each of those patients are going to have not just one test for ESR1, but multiple tests. And so, at least it's a multiple in terms of the opportunity of the initial ESR1 approval.
I n AZ put in their press release that there are 200,000 plus women with HR-positive women treated with the medicine in the first line. So, I'm just wondering, and also catching up with some doctors, it sounds like these mutations can develop after years on therapy.
So, you're talking three tests a year for years. So anyway, I mean, is that 200,000 the right kind of size, or is it much smaller than any other numerical kind of anchors to think about?
Yeah, it's in that ballpark between probably 120,000-200,000 in terms of, so it's most of breast cancer. It's something like 70%-80% of breast cancer patients. So, it's a big opportunity.
And timing-wise, would you start to see it now? Would it take time until full results are reported out? And just kind of how do we think about the potential impact?
Yeah, that's gated by the drug. I mean, it'll have to get approved, obviously. This is just an interim readout. And so yeah, we think it's something that could take shape probably second half of this year, most likely.
Okay. So, the CGP business was cash flow positive in 2024. I think you're guiding to burn ex-screening of $25 million-$35 million this year with break even in the fourth quarter. So, kind of what does it imply for the profitability in the base CGP business this year? And just discuss maybe OpEx leverage going forward in that business.
Yeah, Dan, I think you're right. So the core business was profitable last year. It's going to continue to be profitable in 2025. In fact, that will increase. And yeah, we said by the end of this year, the business excluding screening will be break even.
And so that infers that, yeah, CGP is improving. MRD, we burned something like $100 million in MRD last year. With the COGS reduction that we put in place, the increase in the ASP, that burn's going to come down rapidly for MRD. And so that's really what's going to drive and allow us to get to that break even for the business excluding screening.
And I would say excluding screening, there's a huge amount of operating leverage now that we can get out of the business. Our research and development line is going to stay flat.
It's a healthy line that allows us to do everything that we need to do over the next few years. Our G&A, again, will be relatively flat for that part of the business next year, and on the sales and marketing side, we've built the infrastructure now to support both therapy selection and MRD.
And so it'll have a small increase this year, but a huge amount of leverage we can get across both CGP and MRD, and so I think we're feeling really good about how that business now is driving to be profitable in 2026.
I know one of the largest players in MRD is really taking up their OpEx for this year to add more salespeople, feet on the street. You guys feel comfortable with the size of your sales force? Is there any initiative maybe to take advantage as MRD is ramping to put more salespeople out there? You guys feel good?
Yeah, we've always had a methodology by which we basically split territories as soon as we see revenue hit a certain amount. And so some of that sort of takes care of itself as we see ASPs going up, as we see revenue in territories going up. That's just good hygiene for us to sort of split territories where it makes sense and keep adding sales reps. So, it'll happen sort of organically.
Okay. Maybe flipping over to screening. I think you completed a little over 6,000 Shield tests in the fourth quarter. You had between 50 to 100 reps of people in the field. But it might have been closer to 50. I think, as you said, the majority of the adds happened late in the kind of really late in the quarter.
And I know the plan is this year to have 150 reps by year-end. So, you're potentially tripling the activity of the reps. So maybe just talk through how you thought about the guide on screening. I think the guide is roughly 45 thousand- 50 thousand. I think that's the number versus 6,000 despite a tripling of the sales force.
Yeah, yeah, you're right. I mean, we ended the year with 100 people in the field on screen. But a lot of those was a wave that came in towards the end of the year. So, not really, they've not got up to the full productivity. For the new reps, I think it takes at least sort of six months to really see that sort of productivity level. And we'll be adding additional sales reps for the year.
So, I think the 45,000-50,000 we feel very confident in. But yeah, we feel it's going to be sort of back-end loaded this year because of the time it's going to take to really build up that productivity level. I think we see potential for upsides on that volume. We've not baked in any upside from getting into ACS guidelines.
And we've been very, very sort of focused on the covered patient population, so patients over 65. And if we get, if and when we get ACS guideline inclusion, then in those states that sort of mandated to follow those guidelines, that's going to open up the commercial patient opportunity for us.
And then we can push very hard on the volumes in those states. So again, I think we feel comfortable with that 45,000 - 50,000. It's going to take time to build into that with the productivity for the reps. But we feel it's a good number and there's potential for upside.
How do you think about, obviously, first quarter, 6,400 tests, but as you build up now to the 45,000-50,000? If you drew a circle in terms of who the target or what do you assume the initial uptake is in the first year between patients that weren't screened at all before, ones that would do a colonoscopy, ones that would do in Cologuard or maybe FIT?
I mean, I'm sure you've got some real good market intelligence on who the first customers who are likely to use Shield. Just could you give us a sense on that?
Yeah, I think certainly there's a huge opportunity in the unscreened population right now. I think 50 million Americans who are unscreened. And the good news is the physicians sort of know which ones of their patients are sort of due for screening that have refused a colonoscopy, that have not complied with stool testing.
And so there's a lot of opportunity to hit the ground running just in that population. And then, of course, you're going to get some crossover in the other ones. But there's just huge greenfield opportunity right now in that initial group.
So, back to ACS. I think you talked about maybe 11 states, or maybe you can remind us how many states are linked to ACS. If you get the ACS recommendation, do you just go after those specific states? Do you open up to the whole country? Just kind of walk through a little bit about expectations for ACS and then how you might use that to deploy the sales force.
Yeah, look, I mean, we have a strategy where we're going after patients that have coverage. And obviously, ACS coming online will change the dynamics there positively for us. And we're going to be very aggressive in terms of where we see patients who could benefit from this and who have coverage that's there. So yeah, of course, we're going to be targeting those states when they come online.
In terms of pricing, it's obviously been a real positive for Shield with the gapfill rate and then the ADLT rate. Just kind of remind us on, I know you talked about it just recently on the call, but ADLT kind of getting that implemented, kind of what's the outlook for that, Mike or Helmy?
Yeah, I know. I mean, again, we feel confident on getting ADLT status. It's an FDA-approved test. So, we look at this as just an administrative process that we need to go through. We successfully got our PLA code. That's a step in that. And so it's work in progress.
We fully expect it in 2025. And yeah, it would be an upside for us because our Medicare rate would go from $920 to $1,495. And so yeah, we look at that very positively.
Maybe just in terms of kind of real-world evidence on Shield, compliance is a big lever for you in terms of how potentially that will help patients actually take the test. What are you going to be doing? I know when you had the FDA panel last year, I think there was some stipulation to have some follow-up activities.
Just kind of walk us through, as you're launching this year, what kind of other clinical evidence you're gathering in the real world and how that potentially will be presented or influence the Shield outlook.
Yeah, but I think we've already had a number of publications that we're very excited about in terms of showing that the adherence rate is well above 90% with a blood-based modality. And so, I think there should be no question that we can sort of drive real gains in terms of compliance and essentially health outcomes with a blood-based modality.
I think even, and that's important and that work will keep ongoing. And we're obviously doing some longer-term studies to study that. But I think what's even more exciting in terms of is where blood-based testing can go in the future. I mean, obviously, CRC is not the only cancer we can detect in blood.
And the current performance we have is not something we're sort of settled on. We always have a V2 that potentially will come out later this year.
So, I think the innovation engine is alive and well. And I think what blood-based testing looks like now will be very different than what it looks like in three years and five years as well. And I think that's what's exciting in terms of we have a really solid foundation in terms of where we're building this, I think, new franchise on.
In terms of multicancer, I think you're supposed to have some data this year. Just update us on what we're going to hear from Guardant Multi-Cancer.
Yeah, I think the findings of the NCI will be presented in Q2 of this year. And I think that's something that we're also very excited about. The fact that I think somehow Shield was maybe pigeonholed as a CRC-only test when in reality, it was built from the ground up as a multi-cancer test with CRC just being the first indication we turned on.
And us now being part of the Vanguard study and being selected among many other tests that were submitted there, I think is very exciting to see kind of what the future holds for these tests. And that's the thing. In a few years' time, when you talk about these blood tests, if you're only detecting CRC, you're going to be behind the ball.
It's going to have to be a multi-cancer test with high performance to be able to essentially be something that is attractive to physicians in this country.
Is there anything in the guide for cash pay multi-cancer? When would that actually begin to kind of come on the market? I know Exact has something in the guide this year on a cash pay basis. Just wondering how should investors think about the evolution of multi-cancer impacting the income statement?
I think for us, we have the luxury of the fact that our business plan is rational in the sense that CRC is paying for the test. And multi-cancer is just a software over-the-air update on the same test, essentially.
And so, marginal cost is very low for us. And so yeah, we have a lot of leverage to think about that in terms of how the space evolves, whether the multi-cancer bill passes or not. And so which I think almost every other multi-cancer player doesn't have that luxury because they don't have a CRC indication.
So, on MRD, we're going to host a panel tomorrow afternoon and we'll ask the doctors about kind of tumor-informed versus tumor-agnostic. I think we've done some survey work as well. I'm just wondering, you kind of spoke about it earlier, Helmy, what type of share opportunity do you think you have in CRC?
I think we have an enormous one. I think right now the market is very focused on the sort of near-term patients, the patients with adjuvant setting, those that are one or two years out from surgery, but when you look at the numbers, they're enormous in terms of the prevalent population, 12 million that are five years out from surgery.
Essentially, the majority of the major cancer types, when you think about breast cancer and colorectal and even prostate cancer, most of those patients are surviving, thankfully, many years, and they're worried about in terms of peace of mind recurrence, and so a tissue-free solution is going to be the preferred modality in our minds to be addressing the needs of those patients.
We've sort of been hamstrung a little bit because we haven't had reimbursement in the surveillance setting in terms of really flexing sort of the muscle of this tissue-free MRD test in that patient population.
That's why I think this reimbursement win has been really positive for us because it'll really allow us to go after that big, big population of patients that are out there that really don't have anything that is meaningful for them to be able to give them that peace of mind.
And is the idea there where if a patient starts an adjuvant, say, with tumor-informed, that they would potentially go to agnostic? Or is it really that prevalence pool in agnostic that has never gotten an MRD test today that makes it much more appealing to do?
We're seeing both. I mean, we're seeing both. So basically, there's a sense that a year out, two years out, three years out, that a tumor-informed solution may not be a wide enough catchment to essentially catch a cancer that for some reason didn't rear its ugly head earlier.
And so many people believe that there's a secondary, primary. There's other clones that may be there that we're lurking in the background, maybe new incident disease in the same sort of tissue system that's coming back. And that's really where we see physicians actually preferring to use a tissue-free modality 18 months to two years out, even if the patient was on a sort of tumor-informed modality.
And then obviously, there's the wider sort of patient population of those that haven't been screened whatsoever.
And then I think longer term, we see a lot of synergies with our therapy selection business and the screening business, the fact that right now when patients are positive with our MRD test, they can reflex automatically to a Guardant360.
And so having that sort of nice ability for these tests to work together synergistically is a unique offering we have. And then over the longer term, being able to use the primary care reps to go after primary care physicians that may have cancer survivors there and offer them an MRD test, I think is going to be really important.
Got it. We have like a little under a minute left. So, I'll do a speed round. So ADLT for MRD, kind of what's the conviction in getting that status?
Yeah, I mean, we absolutely believe under the statute, we qualify for it, the first to hit that sort of unmet need. It is subjective, so obviously, it's not a slam dunk like an FDA approval, but we think the chances are very good.
Got it, and I guess the final one, which we asked most of the management teams, what do you feel between all the different pieces of your business, what do you feel is maybe most misunderstood or investors aren't kind of recognizing?
I think it's hard to really truly quantify all the different initiatives we have. The sort of sum of the parts analysis, I think, doesn't necessarily add up to the sum of the whole that we have here in the company. I think when you think about all the excitement around MRD, excitement around Shield in terms of where that's going, I think it's still very much underappreciated.
Great. Well, thank you guys for being here. Thanks to everyone in the audience.
Thanks, guys.