Okay. Good afternoon, everyone. I'm Derik de Bruin, the Senior Life Sciences and Diagnostics Tool Analyst from Bank of America. Thank you for joining us at our 2023 healthcare conference, coming to you from live at the Encore Hotel in Las Vegas. Our next company is Guardant Health. With us today is Helmy Eltoukhy, Co-founder and CEO, Amirali Talasaz, also Co-founder and CEO, and Michael Bell, Chief Financial Officer. Gentlemen, thank you for being here. Thanks for coming out to Las Vegas and being here. Let's kick it off. You just reported Q1 last night. Upside quarter, raised the guide, stock's reacting nicely to it. What drove sort of the upside? What drove the beat? Let's talk about the core business, and then let's start over there.
Yeah, no, it's been a really great start of the year. We've seen a bunch of tailwinds, a bunch of catalysts that have really kicked us off to a nice start. We got the breast approval in terms of companion diagnostic expansion of Guardant360. We saw a really nice step up as soon as that approval came in. Our breast volumes, they went up 30%, 40% almost overnight. You know, we saw expansion in payer coverage. We got United in Q1. Having good conversations, we think we'll get Aetna and Humana in Q2. All of that has a really positive effect on our core business. We're continuing to see strength in our new products.
We saw Guardant Reveal and TissueNext go up 100% year-over-year in terms of volumes. It's a really good place to be, you know, first quarter. We think this bodes well for the rest of the year.
Should we think about the impact to the ASP on some of these recent coverage decisions?
Sure. Mike, do you wanna take it?
Yeah. Well, you know, over time, it's only gonna be a positive impact getting reimbursement coverage. We were really pleased this quarter with Guardant360 ASP. You know, we saw that at the top end of the range that we've been seeing over the last year or so at the $2,600-$2,700 marks. It was at the high end there. And that's been driven by a positive, the positive payer traction that we're getting. As well as the mix, having mentioned, you know, we've got the breast CDx, that's pushing some of our volume towards the CDx, which is higher reimbursed. We've seen really good traction there. I think, you know, with Reveal now, we're reimbursed by Medicare with Response and Tissue, we're reimbursed by Medicare.
Overall, positive movements on the ASP. There's some mix issues between the new products and Guardant360, which, you know, keeps that blended sort of lower than the Guardant360 ASP. You know, over time, we expect positive movements on all fronts there.
Got it. You know, one of the questions we've been getting, and it goes to the ASP, but also goes from the co-competition standpoint. There's a lot of companies now that are sort of, like, following what you pioneered and being the first out there with an FDA-approved with a biopsy test. How do you sort of think about the competitive dynamic in that landscape? I mean, at some point, does pricing start to come down because it gets hammered, right? You know, and there's just a lot of other companies that are out there. What are the competitive moats around Guardant360?
Look, it's been nine years since we launched Guardant360. We've gone through multiple upgrades. If anything, we're seeing really nice acceleration of market expansion in its 9th year. We think that just has to do with the fact that, you know, it's very hard to have the level of customer service, the level of data, level of reimbursement, and so on that physicians require. The bar keeps getting raised higher and higher. This is in a year where we're gonna go through a major platform transition. We're gonna essentially change the game once again with our smart liquid biopsy. It's just a fantastic place to be. The fact that we have sort of increasing market share, market expansion, and we're doing a major platform change to boot. We feel like that bar is gonna keep getting raised.
We're gonna essentially provide features that are just nonexistent on any other testing platform, and that's gonna expand our lead over time. We're, yeah, we're just very pleased with how this year is shaping up.
can you talk a little bit more about the smart platform?
Yeah.
Just given some of the people might not be familiar with it and what sort of just differentiates it from some of the followers.
Yeah. This is something that, you know, we spearheaded with our screening program in terms of really using methylation epigenomics to really crack the early cancer detection nut. You know, that's just scratching the surface of what that can do. When you think about it from a human biology point of view, epigenomics is really an underexplored area that is extremely powerful from a sort of, you know, clinical utility, clinical disease point of view. Smart liquid biopsy will bring that sort of age of epigenomics, that layer to all our products, Guardant Reveal, Guardant360. Guardant Reveal will be the first one that is essentially switched over to that new platform.
This is really gonna raise the bar in terms of and redefine what liquid biopsies can do in the sense that you're gonna be able to, you know, look at promoter methylation, that has implications, let's say, in PARP inhibitors in terms of therapy selection. Look at tissue of origin, understand where the metastases is coming from, understand where re-recurrence is coming from. It's really gonna provide capabilities that seem like science fiction today and really make them the new standard for this field.
You have still got response coverage. That was a nice little pickup. How should we think about that product going forward, uptake of response? I don't believe you have a ton of embedded in your guide for this year.
No, it's not something that we pushed very hard ahead of reimbursement. The way we look at these first 8, 9 years was it was a sort of 0 to 1 moment where we were just trying to get physicians to use 1 liquid biopsy per patient. We are able to get repeated reimbursement for Guardant360 every time there's a progression. We just needed the other half of the picture, which is using this testing platform for treatment response monitoring. We got the indication we received was essentially monitoring of IO for all solid tumors, which is a major indication in this space. We think you can go now from 1 test per patient to potentially 4 or 5 tests per year per patient with the inclusion of response now.
It is a major milestone for us and really the, I think, beginning of this chapter of adaptive management of patient disease that, you know, we envisioned 8, 9 years ago, but now it's finally coming to a reality with the tests being out there, the tests being reimbursed. Response is really that sort of last piece of the picture, the last test that we got through Medicare. We have 5 tests now on the oncology side of the business that are reimbursed by Medicare. We're in a very solid position now as we think about really bumping up ASPs and getting to profitability.
Yeah, going back and looking back a few years, I mean, we did the IPO in, what, 2018, I think.
Yeah. Mm-hmm.
Has your view on sort of like the therapy selection market changed and, you know, has it taken longer and cost more than you thought? I mean, you're approaching breakeven in this business, but I'm just hearing your thoughts on what have you... You know, when you thought about it when you were going public and you sort of look at it now and sort of like what has changed in that?
I would say probably reimbursement was harder than we expected. We're just getting to 300 million lives now. We thought that would probably happen earlier. In other ways, I'm pleasantly surprised that therapy selection in lung cancer with liquid biopsies outstripping tissue biopsy approaches. More patients today from the data that we're looking at are getting liquid biopsies up front than comprehensive genomic profiles, at least in lung. That's really exciting to see that, you know, this thing that just seemed like a niche use case of using liquid biopsy when you had no tissue available. Because of product market fit, the fact that it's faster, it's easier, it's, you know, more reliable, you know, has really paved the way for this thing to become the new standard of care in the U.S.
We think this bodes well for similar, you know, kind of, roadmaps for our other products, whether it's Respond or Reveal and so on. We really do believe when the fundamentals make sense, the performance is there, the customer service, turnaround time, reimbursement, that all of that falls into place and gets you to the top spot.
Let's switch gears a little bit and talk about MRD. can you I mean, how has Reveal done? How is that picking up? Yeah, I just... Yeah, let's start with that. I've got a, I've got sort of one bigger picture question.
Yeah, no, it continues to do well. We're on track in terms of our forecast for this year. As I said before, we increased volume 100%, over 100% year-over-year. That's with us really engineering the demand. We're focusing the volume on the reimbursed indications, so really around CRC, tamping down some of the breast and lung volumes. As you know, we get closer to releasing data that we believe should be sufficient for additional reimbursement, then it'll be essentially, you know, putting the pedal to the metal more so and ramping up some of those volumes. We think second half of this year, we should be able to have some robust data sets around CRC surveillance, breast cancer. Those look good.
We'll submit them to MolDX after they're published.
You know, there are a lot of tumor-informed approaches out there that are going on and, I mean, there seems to be a new one every day that comes out.
Yeah.
Is it a winner-take-all? Is it a split market? What's the aha moment that gets tumor-naive more traction?
I just think that where tumor-naive can go, or at least where our platform can go with smart liquid biopsy, are places that a lot of these other technologies can't. When you think about, you know, the idea of it's not just tracking the level of tumor in blood, you know, and you wanna do that with high sensitivity and high specificity, which we will achieve with the platform, but it's about telling the physician what to do with that information, what to do next when there is a positive recurrence. Where is the disease? What should I treat it with? How can I reflex to therapy selection quickly?
All of that is gonna be possible in this platform. It's gonna create what we believe is a really nice ecosystem where a physician is gonna get incremental data, sometimes 5x, 10x faster than any other approaches because we can potentially do some of that informatically.
Obviously, a tumor-naive approach doesn't require tissue, and so you can have very fast turnaround time. Just the experience is gonna be fundamentally different and fundamentally better with our platform, is what we believe.
Okay. Turning to screening. It's your turn now, apparently. Sort of a boring day yesterday, not much going on. I mean, you had a call earlier. You were at DDW in recent information. You held a panel with the study investigators and some other KOLs. I guess, what are some of the key takeaways you can share around Shield performance by stage? You know, what it could mean for potential FDA approval, guidelines, uptake in the market? Can you just sort of like summarize what happened, where we are right now? Yeah.
We had a pretty good day in DDW, and study investigators presented ECLIPSE data in the conference, starting with the overall sensitivity that we reported before late last year of 83% CRC sensitivity with 90% specificity that we believe exceeds the bars for getting FDA approval, bars for getting Medicare coverage. Two big hurdles that all diagnostic tests need to deal with. This data and this performance enables us to get there. We hosted a panel conversation with the study investigators and some expert key opinion leaders, former members of ACS, American Cancer Society, former scientific director of USPSTF, to get their insight of based on the data that they've seen, do they think this blood test can add value? We were very pleased with actually what was shared.
Talking about like ACS should seriously consider this test. The performance of 83% is in range with other non-invasive CRC screening tools, which are recommended by guideline which range 74%-92%. Even from task force perspective, the former scientific director of USPSTF was talking about the parameters that they look at in task force, quality of the studies, quality of the data, real world evidence supporting those, the value of adherence. Many positive kind of statements about the potential inclusion of this test, not only just in ACS but in the USPSTF. In terms of staging performance, also we provided more details about the performance of the assay for cases that got stage 62 out of 65. What we've seen for blended stage 1 to 3, the performance was 81%.
Which again, in line with other kind of modalities for screening on the non-invasive side. This is a very important parameter since early stage detection is important. For CRC 1-3 blended has a high 5-year outcome survival post-treatment. Talked about stage 1 too, of 72%, again in line, and even stage by stage distribution of stage 1, 55%, and stage 2, 3, and 4 of 100%, that we are detecting all CRCs as long as they're at stage 2+, which is pretty exciting.
Got it. There was some discussion around three cancers that were not staged and five malignant polyps that were included in stage one. Can you clarify how this impacted the study results and what insights you can draw on the performance of the stage from this?
Yeah, sure. Through like, you know, the regular, you know, standard course of doing this kind of clinical trials, the study was powered to look at the CRC sensitivity in kind of blended fashion. For the cases that the patient went through staging, which they should, but in real world, some patients do not go through complete staging based on the way guideline recommends. Some of the staging performance came about. Out of the 65 evaluable CRCs, three patients were lost to follow-ups for staging. Our test detected two out of three, we had to exclude them from staging analysis. There were, interestingly, five very small T1 malignant polyps, which they were CRCs, and they were excised during colonoscopy. Based on the treating physician, the patient is done, no further follow-up was required.
The patient was actually did not go through staging and looking at the node involvement for those CRCs. Those are not considered staged, but for a purpose of the staging analysis, the investigators decided for a right reason to consider them clinically as stage one, and they were included in the performance analysis. The Shield detected one out of those five. That's why the data of 55% I mentioned earlier was including these clinically stage one cases.
Got it. I'm sorry, excluding?
Excluding three cases that were lost to follow-ups, like, you know, we don't know anything about the staging, like one case is even out of the country. The Shield detected two out of those three.
Got it.
So.
Got it. I mean, are you still convinced that the adherence is still the predominant one over the AA detection?
Let's look at actually what we are hearing from KOLs, even from the panel conversation that we hosted yesterday. I invite you guys to actually look at that and listen to it. It's posted now. That's about the unmet need in CRC is to come up with a test that patient completes. The best test for CRC screening is the one that at the end gets done with in practice, in real world practice. When we are talking about effective sensitivity of these tests, one, performance of CRC detection. On the other side, what fraction of the test would get completed and the patient would participate in that testing modality? That's frankly the value of blood testing. If people were doing colonoscopy, we don't need blood tests, we don't need stool tests. Everybody should just do colonoscopy.
The reality is, small fraction of the people are doing colonoscopy is 20%-40%, up to 50% in some cases. Stool testing, still 1 out of 3 people at least are not completing their ordered stool tests. This is heavily contributing to the fact that over 40 million of people are still in the UnitedHealthcare States remain unscreened. That's a huge opportunity for blood-based colorectal cancer screening.
If a blood-based test were to come in with a higher AA rate, I mean, could that be counter-detailed against you?
I think frankly, it's a function of first CRC sensitivity and the performance and FDA approvability of getting access. You know, at the end, you know, you need to get FDA approval, you need to make sure people get access to. The most important parameter is first CRC sensitivity. In a kind of a just theoretical conversation, if two tests get FDA approval all at the same time in the same day, that one, let's say has 83% CRC and like 13% advanced adenoma, and the other one has 83% and like 50% advanced adenoma, yes, I agree that would be a parameter. I think the reality of the matters is we are at least looks like one year ahead of anybody else in terms of submission of a PMA device to agency.
This bar that we established, 83% with 90% specificity in range with other tests is frankly was not an easy bar to achieve. Once we get FDA approval, most probably our performance would become precedent for approvability of any other test, blood test. I think over time, just this bar is gonna go higher and higher for other people to get FDA approval. We are not sitting kind of stationary. I talked about the next generation of Shield. Already, we are seeing some signs based on additional data insight that we gathered, that the performance of this test could get upgraded, like what we've done with other Guardant brands, continuous improvement. We set a high bar and already the bar is moving for the competition.
Still looking at, in theory, end of Q1 next year.
For approval?
For approval, yeah.
When you look at the PMA kind of devices, the timeline that typically it takes for agency, like, you know, on average, you see like around maybe 12 months, we submit our package in March. We are gonna have a better understanding of our timeline when we make more progress review cycle, but so far so good.
Got it. Do you still think you don't think it'll get a committee?
Comments maybe for some of you guys if, you know, to, you know, make sure you guys are connected to this conversation. Sometimes FDA calls for advisory boards to give some expert opinion about approvability of a test, some of the clinical implication of the test. It's FDA choice if they wanna call for an advisory panel or not. Based on like our judgment, again, it's FDA choice, when I talk to like my head of regulatory, who was a lead reviewer for Epi pro colon blood test, ask about, okay, what happened during those days. FDA called for panel discussion for the first stool-based test that they approved, Cologuard. They called for panel for a first blood test that they approved, 'cause specificity was low, and the performance was even worse than FIT.
They want to discuss clinical implication of higher false positives and lower performance even than FIT. For us, they have experience with blood testing. Our performance looks like it's even better than FIT. What they're gonna do, it still, it's their choice.
Got it. Any questions from the audience?
Yeah.
Yeah.
No, I mean, the question was, what percentage of tests in therapy selection aren't getting reimbursed, and can we ever get that to 100%? It's a pretty high percentage that's getting reimbursed without putting an exact number on that. You know, again, we've seen traction. We're getting now UnitedHealthcare coverage in Q1. We're in good conversations with Aetna, Humana, Anthem. I think, you know, more and more, those tests can get reimbursed. There's probably always gonna be some level of tests that don't get reimbursed, like Medicaid, for example, you know. I don't think we'll ever get to the 100% level. I mentioned before our 360 ASPs are about $2,700.
You know, I think we're targeting over time, if we can get all the commercial pays on board, to have ASPs north of $3,000 per test, which we think is, you know, would be a really good strong ASP, where gross margins then would be in the 70%+ level, and we'd be in a very good position in therapy selection.
Mike, staying with you, can we talk a little bit about capital and OpEx expenses and break even, and all that type of stuff? I think obviously people are worried, nervous, because historically there's a lot of spend required to ramp up tests, particularly if Shield is successful. I think, can you just talk about what your sort of like thoughts are on managing your balance sheet?
Yeah. You know, over the last few years, we've, you know, done considerable spend building the infrastructure, particularly on the therapy selection business. Now we're starting to get leverage from that. You know, we've mentioned on the call yesterday, therapy selection is 6-9 months away from being break even. You know, we look at that next year as starting to generate positive cash. You know, we've set a target for our cash burn of this year to be less than $350 million. We're on track with that. I think if you break that down, we talked yesterday, you know, screening over the next 12 months, we're gonna limit that spend to $200 million.
That gets us to a launch. It gets us further along on development of the next generation Shield, and it gets us further along with developing in lung also. The other big chunk of the spend, probably, you know, around $100 million is on MRD. This year, therapy selection, the burn's only gonna be $50 million. I think we're really focused on what our investment is, how our burn is sort of split between the investment on screening and MRD, and a real focus on getting therapy selection to be generating positive cash.
Got it. You mentioned lung. That reminded me, I meant to ask that earlier, what's the timeline on lung screening?
We are gonna have a data readout from, not our pivotal study, but a screening study that we are doing with UCSF and San Francisco VA, later this year or early next year. Our pivotal screening study for lung cancer is ongoing. It's a three-year enrollment process, and we are in the second year of it, and so far so good in terms of enrollment.
You mean, you raised the guide yesterday, and you've got a few quarters coming up that have, you know, the comps are not particularly difficult. You've got some good tailwinds in the core business. How do we think about the puts and takes for the year and think about, you know, the potential for guidance?
Yeah. I think, you know, if you maybe contrast it to last year where everyone was worried about COVID snapback and hospitals getting reopened and so on, the good news this year is we have a sort of status quo. We have a stable backdrop that we can forecast against. Yeah, we're seeing obviously a good start to the year. We're seeing a lot of tailwinds we've put into the bank in terms of impending coverage. We're building very strong connectivity into the ecosystem through our EMR integration. We have a very strong key accounts team that is building partnerships with some of the largest community practices out there. There's a lot of good things happening. We obviously have our big platform transition to smart liquid biopsy.
We have a lot on our plate, but a lot of it is, you know, potentially to the positive, I would say.
Biopharma is behaving?
Yeah, it's behaving. I mean, you know, I think we called out very early on some of the challenges with the small biotechs and some of the reshuffling in the large biopharma companies. We have 150 companies we work with and very diversified revenue stream. We're really able to, I think, weather some of those, some of those shuffles and some of those changes, pretty well. I think we have a good, we have a good grasp of our pipeline and really the, I think, cadence for this year.
EMR integration, you mentioned that. I mean, how much of a tailwind could that be?
You know, we're just starting deployment, starting to turn on a bunch of Epic systems. So far so good. We see really increased utilization with every account that we turn on. Every time you remove friction in terms of pushing the button and getting a test, it, you know, it really reduces that sort of inertial barrier and just gets physicians onto the platform. This investment is leveraged not just with Guardant360 but our whole testing portfolio, so it's one that I think will pay dividends over time.
You know, my last question, what's underappreciated about Guardant? What's the Street missing? Mind you, we don't have another hour.
You know, I think, I think it's just, you know, I think we tried to highlight it in this earnings call, just how nice of a business therapy selection is, getting to break even end of this year, $500 million revenue stream growing, you know, really rapidly more than 20%. Then just the exciting pipeline that we have with MRD and screening. So I think there's very few companies that have opportunities in these three discrete areas that are as large as what we have before us.
Great. With that, gentlemen, thank you for being here. Audience, thank you for listening. AI season's coming out. Remember B of A.
Thanks, everybody.
Have a great rest of the conference.