We're going to kick it off. I'm Tycho Peterson from the Life Science team. It's my pleasure to introduce Guardant Health. We got a lot to talk about. You guys have been busy. I think maybe we'll start out with the FDA breakthrough designation yesterday. Talk a little bit about how that impacts path to market and just feedback from the announcement.
Hello, everybody. Thanks, Tycho, for having us. It's great to see many of you. We are very excited, actually, with this designation. We are an IVD company. We had a deep partnership with the FDA throughout the last almost decade across multiple brands. It is great that they are recognizing the value of Shield as a multi-cancer detection test, faster pathway in communication, coordination, all activities around MCED with agency, and bringing this innovative test to the patients as quickly as possible. We are very excited by this designation.
How do you think about it in terms of discussions with payers?
In terms of MCED? We are starting for Shield. The first indication is colorectal cancer. We are very excited that we also announced, to our surprise, we did not expect this, that NCCN, a very well-reputable guidance body, Voice of Oncologists, is recommending Shield as a category 2A to be used as a screening test. That guideline should give us actually some good tailwinds in not just conversation with the physician and adoption of this test, but potentially in conversation with the commercial payers. That is where we are going to start with and step-by-step and strategically expand it to other cancer types and MCED over time.
Maybe put a little context on why you were surprised. It just came sooner, or?
We didn't expect it this year. We were always confident about the value of Shield in screening on a screen patient population, being a new screening choice to get added to the menu of many other kinds of modalities that guidelines recommend. Patients can make informed decisions on what's the modality that is the best suited for them and saving a lot of lives.
When you think about there are 50 million unscreened patient population and after a decade or two decades of different modalities in the marketplace, still almost half of the people are not doing any kind of cancer screening. That shows the unmet need. We are very bullish about it. NCCN, historically, in this field, has been more conservative in terms of taking actions. Literally being the first guideline body to put this recommendation out there has been a very positive surprise for us.
Maybe just stepping back and reflecting a little bit on ASCO. You guys had a pretty big presence there. I think you had 19 studies presented. Obviously, a lot of focus on the SERENA-6 readout. Can you just walk through that data and how you think about that impacting the breast opportunity in particular?
Yeah, no, we're very excited about the SERENA-6 study and the readout there. We've been working with AstraZeneca for a number of years on that trial. I think what's exciting about this is it really is a new paradigm of care in oncology, really thinking about essentially following patients and switching therapy as soon as you see molecular progression, as soon as you see emergence of a new clone, new resistance mutation in that patient, you switch therapy. I think you're seeing the results of that study, I think, show that you can get an outsized effect. You can get some really nice improvement over the standard of care.
This is the vision we had for essentially 360, twelve years ago, is that you would enter a regime where patients are being adaptively managed, proactively switched to new and better therapies. I think this is really just the beginning of this new architecture of care. Yeah, we're very excited about the coming quarters in terms of hopefully that drug making its way to approval. We are obviously the companion diagnostic partner for that program. I think it's a massive opportunity for our breast cancer business in the coming years.
Yeah, one question we tend to get is just how do you size that opportunity and how do you think about the volume lift? Anything you can point to there?
Yeah, so when we got the original ESR1 approval with Menarini, this is a couple of years ago, almost overnight when that drug was approved, we saw a doubling of our breast cancer volume. Given that in this trial, the average number of tests was around three to get to an ESR1 mutation, we think conservatively there could be at least another doubling of breast cancer volume.
Just maybe sticking with G360 for a minute, thinking about opportunities for additional coverage, market expansion, what else should we be thinking about?
Yeah, so it's been a busy, I would say, first half of the year for us on the therapy selection franchise. We just announced 11 new applications on our smart liquid biopsy program with 360. This is the third wave of applications we've launched in just the last few quarters. You're seeing this sort of crescendo, this growing drumbeat, drumroll in terms of all these applications we're able to churn out from our platform. I think the reason we can do that is when you think about the epigenetic layer, we have this nearly genome-wide methylation footprint. We're not really constrained.
We're only constrained by essentially what is shed into the bloodstream in terms of seeing all of the different aspects of tumor biology, segmenting patients. With the recent update, we're doing things that I think many thought was never possible with a blood test. Essentially, all but diagnosing cancer with a blood test, we can actually see the subtype of disease, see that it's non-small cell lung cancer, small cell, squamous.
We can see it's HR positive breast cancer. We can see it's triple negative. We can track how triple negative it is over time as it's changing. Things that you really can't even do with a traditional biopsy. You're not going to sort of open up the patient every three months to find out how the cancer is changing. That's just the beginning. The nice thing is we're creating a very large, I would say, data moat in the sense that all these applications required a lot of processing, a lot of data. Nearly 100,000 samples were used to develop these applications.
A lot of supervised, unsupervised learning, AI, obviously. It's only getting better. The more samples we collect, the more robust these applications are, the more finer tuned they are. It's really panning out to sort of the vision we had when we first started this and actually exceeding our expectations. Secondly, we launched this tissue test as well, which takes all of the same features of our smart platform as the full sort of methylation footprint, RNA, DNA, full complement of IHC, germline. We just launched a couple of weeks ago, but I can tell you there's a lot of excitement in the field from our customers in terms of switching over to this new tissue assay.
Is there a way to kind of, as we think about the ramp in terms of volumes, how much do you think comes from tissue versus traditional liquid?
We've been in a really good place with all our products. You see with 360, we had the third sort of successive quarter of growing volumes. I've said this before. When we looked at our 360 liquid volumes for the last four years or so, this has been the fastest sort of ramp rate we've seen in the last three quarters in those four years. We know we have product market fit there, and that's really exciting. Tissue has been our second fastest growing product behind Reveal. We're seeing acceleration there with this new launch. We have high expectations for these new products.
Pricing has been another success story there for you guys as well with the ADLT rate at $5,000 and ASPs $3,000-$3,100 or so. How do we think about the continued path in ASPs? How much headroom do you still have?
Yeah, we think there's still room to continue to improve ASPs. Yeah, over the last 18 months or so, we've gone from an ASP on Guardant 360 from around $2,700 and now to, in this range, $3,000-$3,100. Yeah, Medicare for both CDX and LDT versions of the test are at $5,000. Medicare Advantage reimbursement now is very, very strong. The team's done a great job at the pull-through on Medicare Advantage. On the commercial side, that's probably where our focus is now.
We have over 300 million covered lives, but there's still some gaps in the commercial coverage. Some of the larger payers maybe cover the CDX and not the LDT or vice versa, and maybe some specific cancer types are not across the board. That's where the focus is. I think over the next couple of years, we think the range of ASP can go from this $3,000-$3,100. We can get that up to something between $3,200 and $3,300. So yes, there's still some nice improvements to come.
Last week, you announced nearly a dozen applications for G360 liquid that'll basically help oncologists better identify treatment plans. Can you maybe walk through some of these applications? Which oncology settings will benefit the most?
Yeah, I sort of teased a few of them already. In terms of some of the other ones, one of the challenges with liquid biopsy has been not determining whether a patient is wild type for a mutation. Does the absence of detecting that mutation really mean that that mutation is absent from the tumor? We have a new application for negative prediction. We can actually tell that they're KRAS wild type or wild type for certain mutations. That's really exciting. We have, I think, features that allow us to do prediction for immune checkpoint inhibitors, for PARP inhibitors.
As I said, some of the diagnosis features, the subtyping features. One that's really exciting is someone can give us a cancer of unknown primary, a patient where that really hasn't been determined in terms of the tumor type. We can actually determine what type of cancer it is. We just had a case when we were at ASCO. We just launched the report a few days ago. One of the oncologists was very excited about the diagnosis coming back as a certain cancer type. We think this is already hitting the ground running, already providing tremendous value to patient care today.
Just maybe rounding it out on tissue for Guardant 360, you've had a number of enhancements, obviously, less tissue needed, RNA. Just maybe talk a little bit about how this is driving volume. I think you said at the BofA conference that customers would switch if you offered RNA. Is that starting to happen?
Yeah, no, we've seen a really good uptake so far. We essentially surveyed our customers. We said, what are you missing sort of with tissue today? A few things. They absolutely want clinical grade sequencing of the relevant genomic regions. We have, I think, some of the largest scope of clinical grade DNA sequencing in this panel. Same thing on the RNA side in terms of making sure they miss no fusions in terms of clinically actionable ones. We have RNA there.
On the methylation side, the beauty of our ecosystem now is they're all connected by this smart backbone. All these apps we talked about on liquid will make their way to tissue. We'll have essentially enormous differentiation in terms of all these applications that will populate on the tissue side. The other thing we heard about was that there's still just challenges with QNS, that a lot of these tissue tests that are out there just require so much tissue. Frankly, that has been one of the, I would say, one of the features that has resonated most with customers, the fact that we can use 40% less number of slides.
We can use a lot less surface area on each slide because that continues to be a challenge. Finally, the ancillary testing that's done, IHC, germline, and so on, was something that was important to many of our customers. This is really a significant upgrade given sort of the scope and breadth of all of the features and all of the different tests we've added to make sure that this offering is something that we feel is best in class.
Maybe just shifting over to Reveal, you started the year off with some good news on that front as well, now also GM positive. Can you maybe just talk a little bit about how we should think about that ramp? You'd been at 1.7 tests per patient previously. I mean, it'll obviously take some time to get to five or so on average. How do we think about that progression?
Yeah, so we started the year, as you said, off with the surveillance, a CRC reimbursement. We were at a good spot. We brought our COGS down, our gross margin positive. We're really sort of putting the pedal to the metal, so to speak, in terms of volumes. We're seeing nice uptake in terms of new patient starts after that surveillance reimbursement. Now there's a lot of execution of pulling through the subsequent tests. The team is doing a really good job in terms of handling that execution and those logistics.
We know that we've essentially signaled that second half of this year is when we'll see the inflection and sort of acceleration in terms of ramp rate. A lot of that is under control because it really is just about pulling volume through and making sure we get adherence to subsequent test ordering. We feel very confident about the sort of outlook for Reveal over the next couple of years.
As we think about menu expansion there, Breast-lung, where are you with kind of MOLDI-X and newer indications?
Yeah, making great progress. We believe that we'll have publications in breast and IO monitoring in the next quarter. Once those are published, we'll submit. Perhaps end of this year, early next year, we could start having additional indications. When you think about breast, CRC, and IO, those are the, I would say, most significant indications in MRD. Once we have those three, we'll be in a really good spot in terms of our MRD franchise. We're making really good progress in other data sets as well, seeing some really good data. The flywheel is spinning. I think next year will be, I think, just as good in terms of additional indications as this one.
I guess the whole tissue-free, tissue-informed, how do you think about that playing out over time?
Yeah, we see that essentially there are two segments of the market. We think that, as we've said before, 15 million cancers arrive, 12 million of them are more than five years out. I think there is a need to know if there has been a recurrence that is slightly different than what is taken out, if there's other primaries or evolution of the tumor. I think it's important to have a very wide catchment, especially as the patients progress further and further from surgery. We are seeing a need in the market there. We are seeing a need in the market in the adjuvant setting.
There are something like 10%-30% of patients that just do not have tissue or the logistics around that tissue is difficult. We are seeing a lot of patients that just want to know faster. They want we're averaging five days in terms of turnaround time with the Reveal. That's a very compelling argument compared to four, six, eight weeks with some of these tests that are out there. You imagine these patients are being drawn for a recurrence test and then having to wait many, many weeks to get the answer is not a pleasant experience.
Maybe just last one on Reveal, ASPs $600, COGS $500. So good to see positive gross margins. How much further do you think you can push ASPs over the next couple of years?
Yeah, we set out our invested a couple of years ago. Our target ASP by 2028 is $1,000. Helmy pointed out Breast and IO coming next. After that, Lung and other indications. They will get us on the path. Actually, our breast volume is quite a significant portion of our Reveal volume. Getting that would make a nice impact. On top of that, we're in the process of the ADLT process. Now we've got CRC surveillance reimbursement. If and when that comes, that would also be a significant uplift to ASP. I think with all the things, the data we're developing and the ADLT, we're well on the path to the $1,000, maybe potentially higher.
Maybe Mike, just sticking with you for a sec, if we think about back half of the year guidance, we've had a number of questions around just the ramp there. Obviously, you raised full year guidance this last quarter. Maybe just talk a little bit about the incremental growth drivers to add $30 million or so in revenues in the back half of the year.
Yeah, I mean, one of the drivers of the revenue guidance increase was getting the ADLT rate, which came into place on 1st of April. That is locked in now. The other drivers were basically continued volume acceleration really across all the portfolio. Again, we had a great start to the year with Guardant 360. We're seeing great traction with smart liquid biopsy. I mean, we expect that to continue for the remainder of the year. Helmy mentioned Reveal.
Again, I think as now we've got reimbursement for CRC and the team is really focused on Reveal, we're expecting that to accelerate, in particular in the back half of the year. Shield, I'm sure we'll come on to it. That is going very well. We're increasing the commercial infrastructure. As that grows, just as a natural byproduct of that, we're going to expect to see volume increase. We're very confident in the first quarter volume growth. That gave us the confidence to accelerate that for the remainder of the year.
Yeah, it's a good segue to Shield. You did 9,000 tests in the first quarter. You've had some positive developments there with ADLT and the VA community care announcement and the NCI Vanguard study. Maybe just talk a little bit about cadence of ordering among physicians and what percentage of customers are new at this point.
Yeah, we are very excited with what we are seeing. The Q1 result was better than what we expected. A major KPI that we monitor is the productivity of the reps in the field based on the tenure of their presence in the field. Across different waves, actually, the performance was better than what we forecasted. That was very pleasing for us to see. In terms of market feedback, we continue to see and hear very positive pull from the market, which is really an endorsement of the product-market fit that we have.
What we are seeing is once an account gets actually activated, meaning that when the doctor orders the test, the workflow for blood draw is established and the staff are trained, after two to three months, the depth of ordering in those accounts goes pretty high at a level that looks like they are materially higher than the depth of ordering being seen with other modalities, which is, I think, really a functional endorsement of the depth of this market and the fact that there are 50 million unscreened patient population out there. This blood as a new choice is resonating very well. We are very pleased with that.
Obviously, you've been scaling up the Salesforce. Just talk a little bit about time to productivity. Have you continued to hire since the 1Q call? And remind us where you think you'll end the year on headcount for reps?
Yeah, so we ended last year and entered this year with 100 people and deployed in the field. We ended Q1 marginally higher. We mentioned that we are planning to end the year with over 200 people fully deployed in the field. We noticed that the hiring and training is a very active project for us. We are very pleased with the quality of the people that actually we are hiring and the quality of our training program, frankly. We are excited. Always product launches are exciting, but this one is really taking it to the next level for us. We are pleased with what we see.
Are you hiring mostly from pharma? Where are the reps coming from?
There are different kinds of sources ranging from med devices to some pharma companies, PCP channels to other kinds of auxiliary kinds of markets. Vast majority of them have really PCP experience, high tenure rate average. I think the last, if I remember right, was seven, eight years, tenure shipping. Selling experience, consistent high execution and performance and award-winning in the prior jobs. We are pleased that actually the mission of Shield and the value prop of Shield is resonating with a lot of candidates that we have a lot of choices when and we could be very selective with the quality of people that we hire.
You've done a nice job on COGS there too. Talk a little bit about that step down and where you see additional leverage on the COG line.
Yeah, the driver for us to go from over $1,000 per test before launch now is around $500. That's really been driven by volume, the volume increases. Over the next couple of years, volume's going to continue to drive down the cost per test. We're focused on really step changes in COGS as well as we go forward. We're looking at workflow efficiencies and how we can reduce the cost per test there. That's on track. It's going to have to go through a sort of an FDA clearance.
Once we get that in place, we'll have a significant step down in cost per test. Also, we're investing heavily on automation. Again, that's going to take a couple of years to put in place. When we automate, we want to take out as much labor cost as we possibly can. When that goes in, again, we're going to have another step down. We feel very confident. We set this target of $200 per test when we get to a scale of a million tests per year. We feel very confident with the volume growth and the initiatives that we're taking that we can definitely achieve that.
How should we think, I guess, Shield 2.0? You've obviously said by the end of this year, we're getting a lot of questions as to whether it could come this summer, knowing that there's some other catalysts out there. Anything you're willing to say just on how that is progressing, sensitivity improvements you're seeing?
Yeah, during the last few months, we had very constructive conversations with the agency. Now for a while, we know actually what they want to see. It is a very active program for us. We continue to expect to hopefully get to the data as PMA submission. If the data is good, hopefully FDA approval by end of the year.
Anything on the performance? I think you said previously you don't expect a big step up in AA, but just talk a little bit about the improvements?
Based on the algorithm improvement that we have and the analytical performance of the test, we have some expectation for this algorithm improvement. We know once the tumor levels in blood is about half of the limit of detection that we had before, still this new algorithm should be able to detect them while the previous one was not detecting them. So we have a good understanding of the performance analytically. Clinically, still we don't know. But based on our understanding, we expect the AA performance not to change. But hopefully, it would result in some improvements in CRC. But we are not sure till we really get to the clinical readout of this V2.
Maybe just on shifting to multicancer, you had some data at AACR. That was pretty interesting. What's kind of the feedback been around that? You got into the Vanguard study. I know that was very competitive. Talk a little bit about that process.
Yeah, I think it's another reason for us to be very excited. This 2025 bunch of stuff that we've done throughout the years, I think all are coming to some kind of harvesting period, both for Shield and also oncology brands. One of the areas that we spent energies around is this multicancer detection. We built the Shield, developed that product to be multicancer friendly. Once we are running it, actually, we are finding if the patients have other kinds of diseases or not.
We are very pleased that through a competitive process, NCI picked Shield with another assay to be part of that interventional study. We expect that study to start imminently in terms of the first patient in. FDA completed the review and endorsed the device to be used in that interventional study sponsored by NCI. The performance that we are seeing is pretty good.
It's at very high specificities for 10 cancer types. We are seeing pretty good sensitivity, very good starting point for us. We see over time, as we go through more learning, more data generation, how much we can improve it. I think it's going to be a very good starting point.
I guess, how do you think about the reimbursement backdrop for multicancer? Obviously, you've got CRC out of the gate. How do you think payers are in terms of embracing multicancer?
We started with CRC as the first indication to really address the CRC screening market and develop the reimbursement pathway for Shield. Over time, as the test gets actually updated and upgraded, we are going to see how potentially we can share the information about multicancer detection based on some additional consideration and conversation that we are going to have.
It is a different kind of pathway than just going through the sales way opportunity. We believe in order to really open up the MCED market opportunity and achieve patient impact at scale, we need to have an accessible MCED solution. Over time, probably we are going to figure out that our strategy was the right strategy to go after.
It sounds like on guidelines, ACS is still on track. Anything to note there?
Our team continues to have a conversation with American Cancer Society. We are very pleased with the tone of conversation that we are having. We know that looks like they started their process on the CRC guideline. We are optimistic that we would see something before the end of the year. We'll see.
Last one, maybe just Abu Dhabi. You have got a good project there. You baked some of that into the guidance, not all of it. Just talk a little bit about how that is progressing.
Yeah, this Abu Dhabi project, it's pretty interesting in a way that it's the government-funded population scale screening program in that region, a region that the compliance rate to colorectal cancer screening, it looks like, is less than 10%. During the pilot phase, which is this year, they were planning to screen 10,000 patients. We contracted for that. In terms of guidance, since we don't have visibility over the whole workflow and the logistics that they are going to manage, we just consider a couple thousand of it in our guidance. We see how it goes.
Great. We'll leave it at that. Thanks, guys.
Thank you.