Hi, welcome to the Canonical Journey Growth Conference. I'm Kyle Nixon. I cover lifestyle and tools and diagnostics for Canonical. We're really pleased to welcome you to a fireside chat with Guardant Health today. Guardant Health is a leader in liquid or blood-based, as well as now tissue, you know, testing for oncology across screening, therapy selection, and MRD. With the company, we have AmirAli Talasaz, Co-CEO, Helmy Eltoukhy, Co-CEO, and then Mike Bell, CFO. Thanks a lot, guys, for joining us today. Let's first start with the Q2 2025 earnings recap. You guys reported earnings a couple of weeks ago. Really great quarter. Can someone just provide, you know, an overview of some of the highlights there?
Yeah, no, it was a really fantastic quarter. Really, I think all parts of our business really kind of hit a really nice stride. We had clinical volumes on the oncology side, really massive growth, you know, 30% year over year. Obviously, overall revenue for the company was 31% year-over-year . The screening business just continues to really be an amazing launch for us in terms of volumes, in terms of ASP, in terms of gross margins. I don't think there was a single aspect that really wasn't knocked out of the park in terms of the readout in Q2.
And a lot of it was in the backs of really this impressive innovation engine that we're able to sort of keep chugging away at in terms of new apps on Guardant360, you know, launch of Tissue V2 in terms of our new tissue test, and then, you know, continued success of Guardant Reveal in terms of MRD and Shield. If you guys want to add anything.
No, that was good. Thanks, Helmy. One of the highlights was the tissue kind of performance. ASP was about $2,000. That was three years ahead of schedule. Really impressive. You know, how much of that is attributed to the recent RNA feature on tissue? Just talk about how you guys are doing in tissue relative to the others in the markets. Obviously, a little bit more mature, let's say, than liquid.
Yeah, I mean, I can take the ASP piece. No, I mean, we've seen really strong ASP progression and improvements across all of our products and tissue, particularly in Q2, which went from roughly around $1,700 per test to now around $2,000. Actually, Kyle, you know, there were a few moving parts in that ASP. One is at the start of the year, we had an increase in the Medicare rate from $3,140- $3,500.
We're starting to see now the pull-through with Medicare Advantage payers paying at a higher rate. We're continuing to make really strong progress with commercial payers. That also was an impact. Sort of mid-quarter, we upgraded tissue. We added the RNA element to the product end. That's reimbursed at the moment by Medicare around $300. Medicare is just a proportion of the test. That added a little bit to our ASP. I think when we look forward, there's still quite a way to go with tissue ASPs. I think, again, Medicare Advantage pull-through and continue to work on the commercial pay. We expect that to continue to improve over the near term.
Yeah, in terms of the product itself, we couldn't be more excited in terms of the reception we've seen. It really is the single product out there that has the three legs of the stool that are really required for comprehensive analysis of tumor tissue. When you think about DNA, RNA, and methylation, there's no one that has really this broad methylation footprint. The beauty of that is it unifies our entire portfolio around this smart platform.
All these apps that we just launched on 360, on the liquid side, we're going to be able to launch on the tissue side as well. It is going to create this cohesive language and really cohesive application framework by which the physicians can truly provide, I think, better sort of decision support and hopefully outcomes for their patients.
Perfect. On the screening side, the Shield side, you've continued to kind of exceed expectations, over $50 million in revenues expected for the year. I think it's like 70,000 tests or so. You know, you've had FDA approval, CMS coverage for about a year or so. What surprised you most thus far about the launch and adoption this first year or so?
Actually, we continue to be very positively surprised with how this launch is going. At Guardant Health, we always have high expectations from ourselves and our team, but we are even beating our own internal expectations that we had about the strength of this launch. That helped with now multiple rounds of increasing our guidance for both revenue and volume side.
We continue to see a very strong pull by the market about this product. It's very exciting. We are surprised, actually, to really see a very strong depth of ordering by ordering accounts, ordering physicians, which really is an endorsement of how deep this market is, how many unscreened patients are out there in these practices that we are targeting. We see a lot of room to grow. It's going to be an exciting second half of 2025 for us.
Perfect. On the cost side for Shield, maybe just talk, I mean, I think it's gross margin positive, right? Talk about what that process has been like and if there's any near-term upside in terms of gross margin for that test.
No, I mean, gross margins are, you know, particularly pleasing for Shield. We've seen over the past few quarters, you know, the cost per test coming down significantly. This time last year, the cost per test was over $1,000. Now it's below $500. Gross margins have ticked up, and in Q2, we had a 48% gross margin. Also driven by ASPs, you know, we had an ASP of around $925.
A really strong start to the launch. I think when we look at where we can go with gross margins, really the driver there is going to be continuing to reduce the cost per test. We have a target cost per test of around $200. We think when we're at scale, roughly a million tests a year, we'll be at that $200 level. We've got workflow efficiencies to implement. We're going to implement automation.
We're very confident we can get cost per test significantly lower than where it is now. That's just going to help gross margins. We set out our investor day two years ago, gross margin expectation of around 60%. We think with the ASP progression that we've got and getting that cost per test to $200, we can get gross margins much higher than 60% now. We're feeling really pleased with where we are.
Yeah, and given all the beating expectations with Shield, you're now expecting to hire 250 sales reps for that business by the end of the year compared to 200 before, which is a pretty material increase. What does that really afford you in terms of like the growth trajectory, let's say, especially talking about like in the near term? Ultimately, I mean, do you still want to get 700 reps or so, or do you think like a thousand makes sense maybe over the next few years?
Maybe for some of you guys who are kind of newer to this space, in this PCP channel, we expect to, you know, at steady state to have about 600 - 700 sales reps in the field to target really profitable and valuable PCPs which are out there for CRC screening.
We started the year with 100 people in the field. We mentioned, you know, based on this actually improved trajectory that we are seeing in terms of adoption, productivity per rep, gross profit that we are generating to further accelerate actually building that commercial infrastructure build-out. We said we are going to end the year with more than 250 reps. Now we are in the hiring process.
Until we hire these new people, put them in the field, you know, they become productive, they start actually making appointments and stuff. We don't expect like material productivity from them really in the second half of this year, but it should be a very good growth driver for us as we go to 2026.
Awesome. Welcome. The other, you know, Shield topic obviously is the announcement of the version two data. Maybe first, talk about where that data is coming from and the samples, and just give us some context of, you know, can we really compare this to ECLIPSE, for example?
Maybe just a quick background. When we did our pivotal study, ECLIPSE trial, we decided to continue enrollment of that study to build a treasure of biobank for Guardant for test versioning and, you know, having the samples ready for technology upgrades when we have better algorithms or better assays that can potentially improve the performance of the test.
Now we have a very deep biobank of many of these samples, pivotal samples that effectively for each test versioning, we just need to pull them out of our biobank and run them with a new assay or with a new algorithm. We are very excited that we have our current version of the Shield approved by FDA. It's best in the class in terms of performance, COX profile, and so forth. We are getting very good market feedback.
Having said that, we have initiatives to see if we can improve the performance of AA and CRC and also add additional indication to the same test. We talked about Shield is becoming a multi-cancer detection test and go well beyond single cancer of colon cancer to at least 10 different cancer types. That would happen in the near future. Going back to Shield V2, it's a program that we have to see if we can improve CRC in our test. It's a test that now we know analytically the performance of the test very well. We know if the sensitivity is two times higher than the current version of the Shield, which is FDA approved. We don't expect this two times improvement to change the precancer detection based on the biology that we are much more aware of these days than a few years back.
But it has potential for CRC sensitivity. We need to see what fraction of CRCs would land within the previous band of we were not detecting them, but now we detect. That's the part that we need to wait for the clinical trial data readout to get unblinded for us to become aware of it. It can improve it or not. Hopefully, we get to that point in the near future. It's a very active program for us. We'll see what happens.
All right. AmirAli, just to clarify and confirm, the only reason why you haven't announced the data yet is because it just hasn't, you haven't, no one's seen it yet, basically. It's not like you've seen the data and you're choosing not to share it, right?
Once we know the study performance data, it would come out shortly after.
Yeah, and the assay has more or less been locked down for a while, right?
This is the algorithm that we have in place for a while now. In fact, there has been a bunch of pipeline development for us to see if there are additional improvements that we can do, again, on the CRC and AA front, in parallel on the multi-cancer detection front. We are excited with some of the progress of the pipeline activities too, but they are not ready for prime time. Let's just see what happens to this Shield V2 readout and we go from there.
Okay. In terms of the data, it's really hard to kind of estimate what that's going to look like, but it was, I think, 91% CRC sensitivity back at the investor day two years ago. That was for V2, again, probably different samples to everything. That's similar to the Shield V1 when it had the case control studies. It was in that low 90s. Ultimately, the prospective CRC sensitivity was like 83%. In terms of how investors should think about a bogey for the new sensitivity, right? Are we expecting a meaningful, substantial, let's say, improvement or just a couple of points or something like that, and that would be a win for you guys?
Let's see what the data is going to show. In this computer landscape, we take any kind of improvement as a step forward for also patient benefit. Any single, any additional sensitivity probably means a larger impact even in stage one performance. Let's see what the data is going to show us. We are very confident with the product market fit of the current version of the Shield.
Hopefully, these pipeline activities would continue to give us an upper hand in terms of having the best product in the marketplace. Liquid biopsy and early detection, as it turns out, and we've been constantly saying, is not an easy science. We are very pleased with where we are. We'll see how much we can make improvements from the current position.
Yeah. Just as a reminder, you know, Shield has definitely been outperforming liquid biopsy screening tests for CRC. Obviously, just last week, we had a deal kind of announced, right? You had this company, a major player in screening for colon cancer, provide data for its own internal blood test. The sensitivity was 10% lower than Shield, for example, and similar AA, similar sensitivity.
They chose to basically acquire or license a competing test that's already provided data, you know, just a little bit less favorable than Shield sensitivity and other metrics. I mean, what's your response or your reaction to that news, that update, I guess? Is that more of a positive for Shield, or does that sort of make you a little bit nervous about the long-term potential or the overall opportunity of liquid biopsy in terms of like, you know, the performance that we can kind of ultimately get to?
The reality is it really confirms what we've been consistently talking about during the last two, three years, that this blood-based CRC screening market is real. It's huge, very big, and could revolutionize the way colorectal cancer screening is getting done.
We were confident before too, but we are even more confident than before in terms of our upper hand, in terms of innovation, technology performance, the COX profile of the test that Mike actually talked about earlier. Some of these technologies do not have a very straightforward roadmap to get to the COX profile that we are talking about. We wish our competitors like it. It would be good for the market development to have multiple players at some point. We wish them luck, and we'll see what happens.
We are continuing our mission of making sure Shield is the best-in-class product in terms of performance, COX, and also indication. We are very excited that in the near future, Shield would go well beyond CRC, and we would give physicians and patients the option of a multi-cancer detection within the same blood test that they're using today for CRC screening.
And maybe just on that point about the market, what's like a total market share that liquid biopsy could have in this CRC screening landscape?
Look, I think time will tell, but there are about 120 million people who are eligible for CRC screening in the U.S. 50 million people are unscreened, and that's after having multi-decades of having colonoscopy or stool-based tests, or even the last FDA-approved stool test has been in market for over 10 years. If it was easy to convert this 50 million unscreened patient population to a screening patient population, you should imagine after 10, 20 years, these companies would have performed, and they would have converted this.
This 50 million people, or a vast, vast majority of them, need a new modality. I think when you're talking about a routine, convenient, pleasant blood test for colorectal cancer screening, we can convert a very large fraction of these patients from unscreened to screened. Maybe I just put a clinical data point out there for you.
We've done now two randomized studies in two different practices, and we've seen that once you put Shield blood tests in the menu of CRC screening choices in practices, the rate of screening doubles up. What doubles up means it goes from a rate of 45% screening to a 90% screening rate. That's really the promise of this blood test. When you kind of extrapolate like what this would end in terms of market share, I think the numbers would be very exciting.
Just a couple more, just one or two more on screening. Do you have any expectation for timelines on the ACS guideline inclusion for Shield, as well as maybe the HEDIS measure inclusion as well?
Shield today is guideline-recommended by NCCN, which is the voice of oncologists. ACS is the American Cancer Society guideline, and there are some state-level mandates. It's a very powerful guideline body for screening. We expect that by the end of the year. We've been very pleased with conversations that our team had with ACS stakeholders during the last couple of years, and those positive tones are continuing. That gives us a lot of optimism about the potential of inclusion of Shield in the ACS guideline for CRC screening before the end of the year.
Quality measures, do you have any thoughts on that? That was helpful for Cologuard.
Quality measure, actually, we are monitoring what's happening at the HHS front-end task force. There are some other initiatives that actually we are pursuing directly with the administration. When you're looking at CRC screening, innovative tests, there are some aspects of this, you know, preventative services, early disease diagnosis, which is really matching very well with the agenda of MAHA and what the administration is trying to pursue. We'll see if any of those efforts come to results. We are monitoring what happens with the task force guideline recommendation, which is typically the prerequisite of HEDIS score upgrades by CMS.
Yeah, I was going to ask about the task force USPSTF. That's been critical for you guys, especially your cash flow, you know, break-even targets as well. You think you're going to hit break-even or positive, like, you know, after you get that milestone. Just theoretically, if you think, AmirAli, like if, you know, if the task force were replaced or if it was, you know, if there's big changes there, how does that affect that milestone for you guys? Would you have to look at other options to, like, you know, drive really, like, accelerated adoption if that's no longer, you know, the standard, let's say, that guideline?
Our team is in touch with the administration on the task force front. We are monitoring the situation. It looks like the administration wanted to renew the membership and the people who are on that council. We are not seeing any sign that they want to actually cancel the task force. We are monitoring the situation to see what happens there. Having said that, today, out of 120 million that I mentioned earlier eligible for CRC screening, about 60 million have coverage for Shield.
There is a lot of business for us to mine while we are waiting for task force guideline inclusion, which would broaden the access to the other 60 million people. Even with ACS guideline inclusion, we are going to increase this 60 million to a higher number because of state mandates. So t here is a lot of opportunity and business in front of us to mine while we are waiting for task force recommendation and guideline inclusion by then.
Interesting. Enough on screening for now. Helmy, just on the Guardant Reveal MRD business, that was the fastest grower in the portfolio in Q2, I believe, and got the surveillance reimbursement earlier in 2025 for CRC. What have some of the trends in adoption been like for that test since full reimbursement was given? I think in the past, you were more measured and you were kind of holding back on volumes and so forth. How's that going now?
No, it's been great. Obviously, MRD is a big market. We're the largest player in tissue-free MRD, really the only company that has reimbursement there in the solid tumors, especially CRC. There's a lot of demand for a product like ours in terms of fast turnaround time, high sensitivity, high specificity. One of the things that is nice about having that surveillance reimbursement is that essentially, the volume pull-through, a lot of it is under our control because these are patients that have been tested with Guardant.
It's about essentially following up and making sure they get their three-month test or six-month test and so on and so forth. We're seeing good traction there in terms of logistics and execution by the team in terms of getting those samples in. We submitted breast, just a few weeks ago, and that is maybe even the largest indication in MRD. So o nce we get that, I think we're going to be in a really good spot for our Reveal MRD franchise.
Yeah, the breast is exciting. You know, how much of your volume today, let's say, is breast? Is that going to be a big, you know, turning? Is that going to really flip on a lot of revenue for you, basically? Also, you know, synergies with the kind of 360 side of the business, obviously, you have a big breast, you know, kind of relationships as well. What's that like?
Yeah, breast is just behind CRC. It's our second largest indication. It's not something we've necessarily been pushing. We're sort of getting pulled there. We're seeing a lot of demand. It continues to grow without us necessarily really investing a lot of promotional effort there. We're very excited about that. I think we have data now on IO monitoring with Reveal that'll be submitted shortly for reimbursement as well.
I think the big turning point there is that once we have reimbursement there, you'll see this merging of comprehensive profiling, advanced cancer, and MRD testing. The beauty of our portfolio is that these products work together very synergistically. I think it's going to be an exciting new paradigm that we're going to initiate in the coming quarters.
Okay. Could you follow a path similar to the therapy selection side where you were dominant in liquid and then you moved to tissue? Could you do that maybe on the MRD side as well, have a tumor-informed test ultimately?
Yeah, look, I mean, we think tissue-free market is an enormous market, multi-billion dollar market. So many patients are out there that either don't have tissue in the neoadjuvant, adjuvant setting, those that are in the surveillance further out, or in the advanced cancer setting where you just need to be able to monitor those patients. You need to be able to essentially reflex to genomic targets of interest as soon as they progress. The beauty of our platform is that it allows and enables all of that in a very unique and differentiated fashion.
All right. Quick one on AI, because I know that's really topical in diagnostics recently. I mean, you guys have some AI-based efforts going on. I think it's underappreciated, honestly, when it comes to Guardant. In terms of looking forward, how can you maybe integrate AI further and offer signatures or, you know, profiles or whatever to customers to further kind of enhance your competitive offering?
I mean, we already are. These 11 applications we launched in 360 are off of our Infinity AI Learning Engine. We have something like close to a million genomic profiles, hundreds of thousands of epigenomic profiles with clinical outcomes data. I think it's probably the largest data set, at least in blood by far that I know of. That has allowed us to essentially sort of train in this sort of internal fashion and move very quickly in this closed feedback loop. I can tell you these 11 or 14 apps we have out there are just scratching the surface. There are dozens more apps in the pipeline that will be launched in the coming quarters.
Awesome. Last one, just finally, you have an investor day coming up. I think it's in late September. It's the first one in two years. A lot's happened. You've kind of really exceeded expectations in that timeframe, I would say. I'm going to, first starting with AmirAli, how, you know, coming out of that investor day in September, what do you think will surprise investors and what will people be focused on heading into 2026?
Stay tuned. You know, there is exciting stuff happening. I'm looking forward to updating you guys and have a conversation about them.
Helmy, anything on your thoughts about the business?
Yeah, look, I mean, I think we hit a lot of the targets I think we set out to hit at investor day two years ago. Sometimes people do these investor days and it's very aspirational and people kind of forget in terms of all the stuff they do. I think for us, we saw that we made so much progress in just the last two years that it was really worth it for us to go in and update sort of the trajectory of where we're going over the next five years.
Yeah, Mike, I guess that's affirmation that we'll see some new financial targets and so forth.
I think, obviously we'll talk about the financials at the investor day. I think to Helmy's point, you know, we set a lot of financial targets. I'd say across the board, we're either on track or ahead of targets. Looking forward to updating on the financials in September.
Great. Okay. Thanks a lot, guys, for joining. This was great. Appreciate it. Thank you.
Thank you.
Thank you.