All right. All right. Good morning, everybody. I'm Dave Westenberg. I cover life sciences, tools, and diagnostics here at Piper. Joining me right now is the team from Guardant Health. We have CFO Mike Bell and IR, Zarak Khurshid. Thank you both for being here. We're gonna jump right into MN Q&A. Not M&A. How do you envision the mix of Guardant360, Shield, Reveal, when we think about your market share, or your, your, five-point sorry, $5 billion in revenue, target?
Yeah. No. Thanks. Thanks, Dave. Thanks for having us. Actually, just to correct you, $2.2 billion.
2 billion.
$2.2 billion was, was our target. If we can do $5 billion, that would be fantastic. Yeah. I mean, just, you know, breaking that down, by split, you know, the key revenue, the key revenue driver at the moment is, is on-oncology. You know, it's still gonna be the major proportion of our revenue in 2028. Of that $2.2 billion, you know, oncology, which is Guardant360 Liquid, Guardant360 Tissue, and Reveal, you know, we've forecasted that will be at $1.4 billion, by 2028. You know, over 60% of the total revenue. That's really gonna be driven by, you know, all of those three products.
We see still, you know, continued strong growth from Guardant360 over the next few years, really fueled by the, the SMART apps that we've been launching and will continue to launch. You know, Guardant360 Tissue, we've just upgraded that. We feel we've got a best-in-class product that's gonna continue to grow. And then Reveal, you know, it's been our fastest-growing oncology product, for a while now. We think that will continue. We're excited about the new indications that we can launch with, with Reveal. You know, effectively, on the oncology side, that revenue line's gonna more than more than double, over the next three years. You know, biopharma, you know, this year, it's roughly a $200 million business. We, we sort of forecast that will continue strong growth and be at $300 million revenue by 2028.
Then screening, you know, this year, it's in the low $70 million. You know, again, we think we've got very good apps, very strong growth here with Shield, CRC. Over the next few years, and we're forecasting, you know, that will be roughly 25% of our revenue by 2028, you know, $500 million revenue, 700,000, 700,000 tests. I think, you know, we look at the business over the next few years, still oncology's gonna be the major, major majority of our revenue, but screening becoming, you know, more and more, a sizable part.
Got it. I know you weren't around at the time, but, you know, Guardant360 is still gro— is, you know, launched in 2015, 2016, I believe, and it's still growing near 30%. Can you talk about what's driving the growth today versus what was driving the growth then, and how you've been able to kind of continue this, you know, kind of monumental growth with a decade-old test?
Yeah. You know, obviously, back in the day, liquid biopsy was new. And within therapy monitoring, that was new. You know, a lot of that early growth was from early adopters and basically building up the oncologists that are using the test. You know, over the last few years, I'd say we've very well penetrated on the oncology side. You know, we're consistently seeing over 10,000 oncologists ordering Guardant360 on an annual basis. That's been pretty consistent. What we've seen really fueling the growth in the recent year or two is we've seen an increase in the number of orders per ordering oncologist. That started to rapidly increase.
That's really where we've seen the growth from those oncologists that have been using Guardant360, using it more and more. That, you know, over the last sort of 12-15 months has been really driven, again, by the smart apps that we've been sort of releasing in waves. You know, when we look forward, as well as the continued growth in tests per ordering physician, we think there's an opportunity to start to drive an increase in tests per patient. We've not really seen that increase over the last 12 months. It's sort of around the 1.2 level.
You know, with the monitoring opportunities that we're seeing with the SERENA-6 potential approval sometime in the near future, you know, we see the ability then for the physician to be monitoring the patient with a Guardant360 on an ongoing basis can increase the test per patient. Yeah, we think, you know, Guardant360, we're really pleased that we're delivering, you know, 30% year-over-year growth for a product that's 10 years in. We think we can continue, you know, strong growth over the next few years at least.
I'm gonna dig into that whole monitoring flywheel here. I know this is a topic Helmy loves, so maybe you can pretend to be him. He's a speaking CadiaN when he's answering this question. Can you talk about kind of the late-stage cancer patient flywheel here of therapy selection, monitoring, back to MRD, back to monitoring, back to therapy selection, and how, you know, you can really build on the number of tests per patient here and how to think about that paradigm?
Yeah. You know, again, it's something that we feel very strongly about. You know, we recently launched Reveal, for therapy monitoring. And we, you know, we submitted to MolDX for reimbursement for IO and chemo. But we think there's a real opportunity there for us. You know, when a physician orders a Guardant360, they can also, at the same time, order a follow-up Reveal for therapy monitoring. It makes a lot of sense for the doctor who will, after a Guardant360, put that patient on a therapy and then want to be following up with the patient and ensuring that that therapy is working.
If it's not working for the patient on the follow-up, then reflexing again to a Guardant360 and identifying potentially another therapy for the patient to be put on. We think there's a very strong flywheel that can continue, as well as the smart apps that we have, to continue driving both Guardant360 and Reveal. It's early days with Reveal therapy monitoring, very early days. But, you know, so far, so good. It's looking very, very promising for us, and we're very excited about that.
Gotcha. Let's talk about Reveal. How are you thinking about ADLT? You mentioned in your investor day you do plan on submitting a bunch of different tissue types over the next year, year and a half. How are you thinking about ADLT? How are you thinking about Reveal volumes and ASP for, say, 2027, 2028 if you have all those new medications as well?
Yeah. You know, Reveal ADLT, it's, it's, it's a potential upside for us. You know, we submitted an application for ADLT for Reveal based on, it's, it's novelty, being that it's, the only tissue-free Medicare reimbursed MRD test. That process is still ongoing. We've had quite a bit of dialogue, back and forth with the ADLT team. I think it's, it's fair to say, you know, there's, there's a bit of a difference of opinion as to whether this, is a novel test. You know, there is another, MRD Medicare reimbursed test on the market. But we, you know, absolutely believe that we're addressing, a new need here. It's for patients, where there's no tissue readily available. And so a tissue-free test can address those patients. You know, the analysis that the analysis that we're providing with, with Reveal is much, much broader.
and the information is much broader than a bespoke tissue-informed test. That process is ongoing. You know, we're hopeful that we will get ADLT through that process. If we don't, our backup is to go by the FDA approval route. Of course, that will take a little bit longer. You know, we're probably looking maybe, beyond our LRP timeline. We'll have to see. You know, maybe one thing to say about our LRP, you know, we set an ASP target for Reveal of $1,000 by 2028. It's currently $600-$700. That was excluding any ADLT upside. If we do get ADLT, it would be an upside to that $1,000. What's really gonna drive us going from $600-$700 to $1,000 is getting Medicare reimbursement for, you know, various indications. We've submitted for breast.
I mentioned we've submitted for IO and chemo. If and when we receive Medicare reimbursement, that'll put us well on the way to $1,000. We're also seeing very good traction with commercial payers on the back of the biomarker bills. We're feeling very confident that even without an ADLT, we'll get to $1,000. That application is still ongoing.
All right. Let's talk about the Shield and the scaling there. What is the long-term operating margin target? What are the primary levers to get that gross margin up there?
Yeah. I mean, first of all, we would say, you know, when we look at, we look at Shield as a blood test, we see the unit economics being, much, much stronger than, you know, a stool-based, a stool-based test driven really by, the ASP that we're achieving and where we think the, the, the COGS can go. You know, ASPs on the back of the ADLT 1495 that we got from Medicare are very, very strong. Our sort of long-term targets are over $700. And our cost per test, we've made, we've made huge progress over the last 12 months, reducing the cost per test from what was over $1,000 a year ago. Now it's consistently below $500. And, you know, we see a very clear pathway to get to $200 COGS. And that's really gonna drive, drive, the, the favorable economics on this.
You know, what's gonna drive down to $200 COGS? Volume's obviously gonna make a big difference. We're making changes to the workflow, reducing the sequencing cost. That needs to go through an FDA process. That'll take some time. We're also investing heavily in automation. Once those have gone through an FDA process, we should see some very nice step-downs in our cost per test and get that to $200, $200. Maybe, you know, on the OpEx side for Shield, we're leveraging a lot of the infrastructure that we've built across Guardant, especially on the R&D side, on the same SMART platform and across the G&A functions. There's a lot of leverage that we can gain there.
Where we're gonna be investing over the next couple of years, heavily, same as we have been this year, is on the commercial build-out. We think by, you know, 2027, we'll have got to a sufficient scale then that, any incremental gross profit that we're generating is gonna drop down to the bottom line. We see from 2027 starting to really drive to break even for screening. You know, long-term operating margins, we see can very much be in the sort of 20%+ region.
Yeah. That's great. Let's talk about the anticipated buying timelines for FDA approvals and Shield for other kind of cancer types. When do you expect to read out some of these applications? And when do you expect some of these FDA approvals? I get that, you know, we are talking about probably a three- to five-year time frame. We'll give you some liberty if you can't get this perfect.
Directly.
Yeah. Good, good question, Dave. Yeah. We're super excited about, you know, how we're positioned with Shield right now, with CRC obviously ramping, you know, very strongly in the marketplace. We're out there now with our MCD launch as of our investor day. We talked a lot about that, and on our recent conference call. We are in the marketplace with a multicancer detection offering. You know, we think we're really well positioned, you know, for the near future. The long-term plan, as with, as you've seen with the entire portfolio, really, is to move towards FDA approval. You know, we're not gonna put any kind of fine point on the timing there for those kind of pivotal readouts.
You know, one thing we would, you know, call out, and we talked again, a lot about this at the investor day, is, the data initiative that comes along with the MCD offering really has allowed us to supercharge our, our kind of, data collection initiatives. This is regulatory-grade data that will then power a wave of, you know, potential FDA submissions. You know, I'd say, you know, stay tuned for a little more detail and clarity on, kind of that, that MCD, you know, broader MCD FDA strategy, going into next year.
Got it. You know, one of the things we've been picking up is increased insourcing in hospital labs wanting to do their own tissue CGP. How do you think liquid CGP will play out in terms of insourcing? Do you think it may be too difficult for hospitals, or do you think it's just more of a matter of time?
You know, I'd say on the liquid side, that's something that we've seen every now and again with hospitals. We have seen hospitals that are able to do this. Whether or not, you know, they can get their economics to work, the way we look at this, you need a certain level of scale for the economics to work. We have seen that. You know, I think one thing that makes us feel that over time, you know, it'll still be a centralized lab business is with the smart apps that we're rolling out, the additional information that we're providing to doctors, which, you know, I think is very, very difficult for hospitals to do. Often they're using sort of, you know, off-the-shelf products.
You know, we're really separating what we can offer to the oncologist versus what maybe potentially a hospital lab can provide. Yeah, I think, you know, there's always gonna be some hospitals that wanna do this. We feel that it's not necessarily a threat to our business. There's always gonna be one or two that are doing that.
Gotcha. We can talk about being on track for your breakeven, and by the end of 2027. Does the recent offering indicate any kind of change to the plan in terms of breakeven by 2027?
No. Good question, Dave. I mean, I think first and foremost, definitely no change in the plan to get to breakeven by the end of 2027. We're very committed to drive the business to breakeven and then to be profitable. You know, the recent raise that we did was primarily focused on pre-funding the convertible debt of $490 million that we've got coming due end of 2027. You know, we successfully did that now. I think our balance sheet looks very nice. The subsequent convertibles that come due 2031, 2033, well beyond our timeline to be breakeven and to be profitable. You know, we did add a little bit of extra cash to the balance sheet in addition to what we needed for the convertible.
I think that just gives us, you know, some additional flexibility. It definitely doesn't signal any change to our plan to be, to be breakeven end of 2027.
We'll talk about the confidence in the emergent targets. I believe a 65-70 in the LRP that you laid out at investor day.
Oh, gross margins. Yeah. You know, I think across the whole portfolio, you know, we see very good gross margin progression. You know, with Guardant360, you know, that's already in that 65%-70% range. And we think we've got, you know, opportunities to continue to further improve that gross margin with ASP increases and continued sort of chipping away at the cost per test. With Reveal, again, you know, we set a target ASP of in 2028 of $1,000 and a target cost per test of under $400. You know, we're very confident by 2028 Reveal will be in that ballpark, gross margin range. I just mentioned, again, with Shield, you know, our target ASP's $700, cost per test $200. You know, that would put Shield in roughly a 70% gross margin position.
I think, by 2028, you know, we'll have a portfolio of products, all with very strong gross margins. Again, we feel really confident. When you look at the business as a whole, that gross margin profile in 65-70%, we're very confident we'll be there.
Got it. No. And then, you know, just diving into that further of that 2028 breakeven, what are the OPEX and CAPEX expenses that you plan on making over the next few years? Are you pretty good in G&A and you're pretty good in R&D, and maybe it's just sales and marketing? How are we thinking about that mix?
More or less, that's the story, Dave. You know, I again, I mentioned earlier, you know, we've built now a significant G&A infrastructure across the business. And so that's something we can absolutely be leveraging. If you look back at over the last couple of years, our G&A line has stayed relatively flat. We would expect that to tick up, you know, in small amounts each year as we continue to grow. There is a lot of leverage that we can achieve with that. Similarly, in the R&D line, you know, roughly for the last two, three years, it's been around $300 million on a non-GAAP basis. We think that's a healthy R&D spend for a company our size. We can do a lot of innovation with that.
That may tick up a little bit over the next couple of years. We have no, you know, very large sort of eclipse-like studies coming down the pathway. You know, R&D should be relatively stable. Where we're gonna be investing over the next two, three years is really on the sales and marketing side, primarily for screening, building out the PCP sales force, and, you know, taking as much of this first-mover advantage that we have and accelerating as quickly as we can. We also wanna continue to invest in the sales and marketing line across oncology as well because we've got a very strong business there. We wanna make sure that we're driving that as hard as we can.
You know, on the CAPEX side, we've got our facilities in Redwood City and Palo Alto. You know, they can manage the capacity for the foreseeable future. The CAPEX spend that we'll be doing over the next few years will be similar levels to this year and last year. It's been around the $40 million mark. That's just continuing to build capacity ahead of the sales that we have, across all products. Yeah, really, I think over the next couple of years, it's gonna be business as usual on the OPEX and CapEx line.
Gotcha. Can we talk about some of the commercial strategy in Shield, particularly, you know, rep hiring and kind of what you're gonna do with, with Quest to help drive volumes? How do you make sure that stays as a win-win?
Yeah. Good, good question, Dave. You know, as far as rep hires, we, you know, we've been very transparent, I think, throughout, throughout the year in terms of that, that build-out. It's really a world-class team. We exited the quarter with a little bit over 250 reps. We feel comfortable with, you know, where we are there. That will continue to ramp over the course of next year. Quest is really an amazing, you know, deal for us. Really, I think in a nutshell, it brings, kind of pulls forward our EMR strategy by at least a couple of years and allows us to tap into the 650,000 practices that they're involved with and the, you know, 2,000 phlebotomy service centers. I think it's 8,600 in-office phlebotomists that they have.
Really, you know, huge, huge network. We're excited to really get, you know, get the ball rolling next year. You know, a lot of investors are asking, you know, how do we quantify it? It's, you know, there's no real precedent for this. I think we don't wanna get over our skis and make, you know, get expectations out of whack there. Needless to say, it's a massive network. Yeah, it's, you know, potentially a, you know, a real important relationship for the company long-term.
Got it. Can you talk about any ongoing clinical or, upcoming clinical trials that could serve as major catalysts, for product adoption or market expansion over the next 12- 24 months? I'm sorry, 12 to 24 months?
Yeah. I'll take a stab at that one. You know, I think you're alluding to maybe things of the ilk of the SERENA-6 readout, which is really a groundbreaking, you know, readout for AstraZeneca, earlier in the year. I wouldn't expect anything of that magnitude. Right now, you know, we are super excited for, you know, that protocol, which really is practice-changing to, you know, come to fruition potentially with the drug approval. That has, you know, real important kind of ramifications for this kind of frequency of use increase that Mike mentioned. This is the first monitoring-like application for Guardant360 Liquid. And, yeah, we're super excited to see, you know, how this plays out through 2026.
All right. Perfect. You know, you did just raise some cash. Thinking about M&A opportunities, what would be the optimal M&A kind of opportunity? What are the things that you're essentially looking at over the next three to five years for M&A?
Yeah, Dave, you know, I'd say over the last few years, we've really been focused on looking at new technologies and those technologies that could make our tests better, provide more information to doctors, but really be accretive to the tests that we're providing, the product portfolio at the moment. And we've done a lot of pilot studies looking at these technologies that say we set a very high bar in what we wanna achieve, and the level of performance of those new technologies. They're the things that we focus on. There's nothing that we've actioned as of yet. But we, you know, we have an active co-op dev team. They're always looking at things.
I think, you know, if we were to do something, again, with the raise that we've got, it gives us a bit of firepower to potentially do that. We're, you know, we're looking at sort of relatively small M&A if we were to do something in the sort of near future.
Gotcha. Just as a last question here, the year is 2030. You're back at the Piper Conference, and you're talking about all that you've achieved in the last five years. What would you be most excited about to talk about?
You know, it's, I mean, when we look at all of the, the, the products that we have, I mean, it's, it's difficult to call out one. I think, I think if we're sat here and we've, you know, executed on our LRP that we set out at the, at our investor day, and again, you know, I talked about it right at the start of this, you know, strong growth across all products, I think if we've done that, you know, we're, we're then a profitable, a profitable diagnostics company, then I think, you know, we'll, we'll sit here and be, you know, very pleased at what we've achieved over, over that five-year period.
All right. Thank you very much for your time.
Thanks, Dave.
Thanks for wearing the hat, Dave.
Thanks. No problem.
Good.
It's Winsay's birthday yesterday, so.