Guardant Health Q4 2024 Earnings Call Transcript

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Provided by Quartr
February 20, 2025

There are 18 speakers on the call.

Operator

Good afternoon. Thank you for attending today's Garden Health Q4 twenty twenty four Earnings Call. My name is Tamiya, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Zeik Khurshid, VP of Investor Relations.

Operator

You may proceed.

Speaker 1

Thank you. Earlier today, Guardant Health released financial results for the quarter and year ended 12/31/2024. Joining me today from Guardant are Helmy El Touki, Co CEO Amir Ali Talasaz, Co CEO and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call, management will be making forward looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.

Speaker 1

This call will also include a discussion of non GAAP financial measures, which are adjusted to exclude certain specified items. Additional information regarding material risks and uncertainties as well as the non GAAP financial. Reconciliation to most directly comparable GAAP financial measures are available in the press release Guardant issued today as well as in our 10 K and other filings with the SEC. Guardant disclaims any intention or obligation to update or revise financial projections and forward looking statements whether because of new information, future events or otherwise, except as required by law. The information in this conference call is accurate only as of the live podcast.

Speaker 1

With that, I would like to turn the call over to Helmy. Thanks, Eric. Good afternoon, and thank you for joining our fourth quarter and full year twenty twenty four earnings call. Starting on Slide three, 2024 was an outstanding year for Guardant. I'm so proud of

Speaker 2

our team for their hard work and execution on delivering on a number of key milestones across our portfolio. In oncology, we made significant strides in both therapy selection and MRD. We completed a major upgrade of our flagship Guardant360 test onto our new smart liquid biopsy platform, all while generating record revenue, increasing test volumes and expanding the profitability of our therapy selection business. And we continued growing reveal volumes and generating evidence for our MRD business, positioning us well for an inflection this year. In screening, we received FDA approval and Medicare coverage for SHIELD, our screening blood test for CRC, opening up an enormous market for early detection of cancer.

Speaker 2

Our team fired on all cylinders in 2024, and I'm even more excited for what's to come in 2025 in terms of product innovation, accelerated volume growth and most importantly, the impact we will have on cancer patients around the world. As we typically do, I would like to start our call today with a story that highlights the importance of our tests and how they can work together synergistically to improve patient outcomes. In 2021, a 57 year old woman was diagnosed with triple negative breast cancer. After completing standard of care therapy, she was tested for germline predisposition and was negative. Her oncologist then used imaging to monitor for recurrence.

Speaker 2

Unfortunately, after some time, imaging identified lung nodules. To get more information on whether or not these nodules were indeed metastatic, her oncologist ordered a noninvasive GARDEN Reveal test. The test came back positive for ctDNA and was automatically reflexed to a Guardant360 test. Guardant360 identified a pathogenic BRCA1 mutation. The nodules are also confirmed to be metastatic triple negative breast cancer and the patient is being considered for PARP inhibitor.

Speaker 2

GARDNER BIA was crucial in confirming her cancer recurrence and the ability to effortlessly see a reflex to GARDEN360 helped her oncologist move quickly to determine the next steps in her treatment. Turning to top line performance in Slide four. We had an excellent finish to the year with SPF4 revenue growing 30% year over year to $2.00 $2,000,000 bringing our total full year revenue to $739,000,000 an increase of 31% year over year. Turning to Slide five. This performance was driven by incredibly strong clinical revenue, which grew 34% year over year supported by ASP and reimbursement tailwinds.

Speaker 2

Total oncology clinical volumes in the fourth quarter increased 24% year over year, bringing our total clinical volume growth to 20% for the full year 2024. This was largely driven by Guardant360, which saw double digit volume growth in 2024. Turning now to Slide six to take a closer look at the reimbursement tailwind supporting therapy selection. We saw significant ASP improvement over the course of the year. At our Investor Day in September of twenty twenty three, we stated our goal was to reach an ASP of $3,000 for Guardant360 by 2028.

Speaker 2

We achieved this goal roughly four years ahead of target due to a number of reimbursement wins, including the increase of our Guardant360 LVT Medicare rate from $3,500 to $5,000 We also saw significant improvements in both the amounts we have been paid for our tests and the speed at which we have been paid by commercial payers. In addition to wins for Guardant360, tissue Medicare price increased from $3,100 to $3,500 effective January one of this year, creating another important tailwind for our therapy selection business. Looking ahead this year, there are additional opportunities from state biomarker laws and continued commercial coverage expansion to further improve the ASV for our therapy selection products. Moving on to Slide seven. Last July, we transitioned our Guardant360 LBT onto our smart liquid biopsy platform representing the most significant upgrade to our flagship precision oncology product.

Speaker 2

The upgraded test called Guardant360 Liquid reinforces Guardant360's leading position in liquid CGP. Guardant360 Liquid expands a number of genes by nearly tenfold, including all guideline recommended genomic markers for solid tumors and improve the sensitivity for tumor burden detection by a factor of 10. Guardant360 liquid is resonating incredibly well and is helping to drive greater depth of ordering and increase testing frequency as physicians experience the capabilities of the upgraded platform firsthand. Importantly, we have a rich pipeline of additional features leveraging our smart platform, which we believe will generate a limitless number of differentiated applications. These apps will allow Guardant360 liquid to help identify more patients for existing therapies that are undetectable by current CGP tests, detect harmful adverse effects of chemotherapy and provide detailed phenotypic information about the tumor such as histology, subtype and much, much more.

Speaker 2

Given the positive traction we are seeing from Guardant360 liquids, we expect to continue to see an acceleration in Guardant360 volume growth in 2025. Turning to Slide eight, with our major product upgrades, growing use cases in both early and late stage settings and opportunities for international expansion, I'm more confident than ever that the therapy selection portion of our oncology business will continue to see very strong growth over the next few years. Now shifting gears to Rovio and FLIGHT nine, where we are the leader in tissue free MRD. We were thrilled that Guardant's Rovio, which runs in our smart liquid biopsy platform, recently received Medicare coverage for CRC surveillance testing after curative intent treatment for stages one through four. Medicare reimbursement for AVEAL is $16.44 dollars per test consistent with prior expectations.

Speaker 2

Utilizing ctDNA testing, the surveillance setting alongside standard of care monitoring such as CT scans and CA testing has the potential to identify molecular recurrence of CRC ahead of traditional imaging. Now, REVEAL will be more widely available to patients and support oncologists in making more informed therapeutic decisions. We are encouraged to see the recent NCCM guideline updates related to MRD. The changes are beginning to reflect what we are seeing in clinical practice and represent an increasing recognition of the value of ctDNA testing and returns monitoring. The NCCM guideline updates only further reinforce our view of the attractiveness of the opportunity as well as of our commercial strategy.

Speaker 2

Turning to Slide 10. Beyond CRC surveillance, we have an extensive pipeline of clinical cohorts to further support validity and utility for GARDEN Reveal. We recently submitted data for publication supporting potential Medicare reimbursement for coverage in breast cancer and therapy monitoring. Looking ahead, we have a number of ongoing clinical validity studies for additional cancers, and we look forward to sharing updates on their progress throughout the year. Moving on to Slide 11.

Speaker 2

During the course of 2024, we made critical progress to reduce the COGS for AVIELD and achieve more than a 50% reduction exiting the year. This reduction will save tens of millions of dollars in 2025 and was largely supported by the transition to our smart liquid biopsy platform. This is an incredible accomplishment and is a testament to our team's ability to execute well. Turning to Slide 12. REVEAL is on track to reach an important inflection point in 2025.

Speaker 2

As a reminder, despite very strong demand, we have been managing REVEAL volumes ahead of Medicare reimbursement in order to manage our cash burn. Now with CRC surveillance reimbursement in place, improving ASP and achieving a meaningful reduction to our COGS, making the test gross margin positive, we'll be leveraging our robust commercial channel in oncology to push ahead with the reveal to meet the market demand for a tissue free MRD test. This long awaited milestone unlocks a key commercial market for us this year and our team is focused on executing at a high level. Turning to Slide 13. We had a very strong year for biopharma with 2024 revenue growing 31% year over year.

Speaker 2

This was fueled by a growing number of biopharma partnerships now above 180 and the growing mix of our smart liquid biopsy platform, which now represents more than 50% of reported samples in new contracts. Our smart liquid biopsy products offer improved performance as well as key applications such as novel biomarker discovery and signature development. This offering was a major growth catalyst in 2024 and is supporting strategic partnerships with top 20 global biopharma companies. Looking more closely at some of the recent highlights within our biopharma and data business on Slide 14. We recently announced a collaboration with Boehringer Ingelheim to develop a companion diagnostic for the detection of specific mutations in advanced lung cancer and we have a robust pipeline of other companion diagnostic partnerships positioning us well for this year.

Speaker 2

Moving on to data, in early January, we announced a collaboration with Concert AI to create a differentiated data as a service platform that integrates comprehensive patient EMR records with both genomic and epigenomic tumor profiling data. This platform augments Guardant and Form with insights from ConcertAI's national database of 5,500,000 clinical records and are profiling data across more than 60 tumor types. This combined real world evidence platform will help to accelerate cancer therapy research and development for biopharma partners. Our mission is to conquer cancer with data and this collaboration brings us one step closer to achieving this goal. With that, I will now turn the call over to Amir Ali for an update on screening.

Speaker 3

Thanks, Elmi. Turning to Slide 15. Our goal has always been to identify and catch many cancer types early when they are most treatable. We developed our SHIELD assay as a platform capable of multi cancer detection across a range of indications. We selected CRC as our first indication for SHIELD, given it has an established regulatory and reimbursement pathway.

Speaker 3

We've made incredible progress in 2024 with SHIELD becoming the first FDA approved and Medicare covered blood test for primary CRC screening. Turning to Slide 16. Upon our FDA approval, SHIELD was covered for 45,000,000 Medicare beneficiaries at average risk of CRC. We are very pleased that SHIELD was recognized as an important new class of CRC screening and received a favorable Medicare price of $920 We recently received a unique CLA code for SHIELD and expect that upon securing advanced diagnostic laboratory tests or ADLT status designation for SHIELD, the Medicare rates will increase to an even more favorable price of $14.95 dollars Moving on to Slide 17. In early August, just a few days after FDA approval, we were thrilled to launch our Shield IBD assay.

Speaker 3

We are seeing outstanding reception from physician and patients and are excited that thousands of patients have been screened using our test. We are looking forward to scaling our impact quickly. Our strategy is to focus on the covered patient population to drive the high mix of covered reimbursable tests. We delivered $4,100,000 of SHIELD testing revenue in Q4, driven by a majority of samples coming from covered Medicare beneficiaries. In addition, I'm happy to report that in our first full quarter of launch, we achieved gross margin breakeven for SHIELD with COGS and ASP of approximately $600 With the current rate of improvement, we are expecting Shield to be gross margin positive in its first full year post launch much sooner than we originally anticipated.

Speaker 3

This gives us flexibility to reinvest in our commercial infrastructure in 2025, while we maintain our annual screening cash burn target of $200,000,000 Turning now to Slide 18. While we are focused on our scale up in The U. S, we are exploring some strategic international interest in our screening platform. Recently, we were excited to announce that the Abu Dhabi Department of Health selected Shield to be a part of their screening program. Currently, the overall compliance to colorectal cancer screening in the region with the current screening modalities including slit and colonoscopy is less than ten percent, and the majority of colorectal cancers are getting diagnosed at later stages.

Speaker 3

The introduction of a non invasive blood test as a more pleasant option may encourage greater participation in screening and boosterly detection of CRC. This program, initially in its first year, aims to screen approximately 10,000 patients in Abu Dhabi and the surrounding regions in UAE and may scale to approximately 100,000 annual tests in the later phases. Moving on to Slide 19. We recently announced that SHIELD has been selected through a highly competitive process by NIH for the Vanguard Multi Cancer Detection or MCV study. NIH decision to select SHIELD recognizes Guardant as a leader in the field of MCV and validates our technology.

Speaker 3

The MCD test needed to detect the presence of disease across a variety of cancer types with good sensitivity, especially for the detection of early stage cancers, as well as accuracy predict the cancer site of origin. We are pleased to announce that the performance data of SHIELD MCV in approximately eight hundred patient NI cross ten cancer tests will be presented in a scientific conference in the second quarter of twenty twenty five. Looking ahead, we are excited about our upcoming milestones in 2025, including presentation of our multicancer data, the potential inclusion of SHIELD in American Cancer Society or ACS guidelines and securing ADLT status, which enables improved ASP. We are also planning to operate our CRC screening test with SHIELD V2. With that, I will now turn the call over to Mike for more detail on our financials.

Speaker 4

Thanks, Amarali. Turning to Slide 20. I'll now discuss some select financial highlights for the quarter and year ended 12/31/2024. I'll refer to year over year growth rates unless otherwise noted. Fourth quarter total revenue grew 30% to $2.00 $2,000,000 primarily driven by precision oncology revenue, which also increased 30 to $185,000,000 Precision oncology revenue from clinical tests increased 35% to $146,000,000 Clinical test volume grew 24% to a record 57,300 tests in Q4 twenty twenty four and was primarily driven by Gartner three sixty, which grew sequentially in the mid single digits.

Speaker 4

We continue to see very strong uptake of our upgraded Gartner three sixty liquid, which we launched in our small liquid biopsy platform at the start of Q3. We also saw continued strong growth of revealing tissue during the fourth quarter of twenty twenty four. Garden360 ASP in the fourth quarter of twenty twenty four was approximately $3,000 As we have seen throughout the year, we also had very strong commercial payer collections in the fourth quarter, which led to an active period revenue upside of approximately $8,000,000 above our expectations. Once again, our biopharma business performed incredibly well in the fourth quarter with precision oncology revenue from biopharma tests circling $39,000,000 increasing 15%. This strong growth was fueled by another record quarter of tests in the fourth quarter, '11 thousand and '50, which was up 16%.

Speaker 4

Finally, development services and other revenue totaled $17,200,000 in Q4 twenty twenty four and includes $4,100,000 screening revenue generated from the 6,400 SHIELD test that we reported in the quarter. For the full year 2024, total revenue grew 31% to $739,000,000 with growth again being primarily driven by precision oncology revenue, which increased 34% to $688,000,000 Precision oncology revenue from clinical tests increased 34 to $543,000,000 Clinical test volume in 2024 was 206,700, which represents growth of 20%. As Helmut mentioned, clinical volume growth was largely driven by an increase in GARNA three sixty test volume, which grew double digits in 2024. We saw continued strong growth in Revill throughout the year, which, despite us managing volumes ahead of Medicare surveillance reinvestment, was our fastest growing clinical test in 2024. Finally, tissue also grew strongly throughout 2024.

Speaker 4

Clinical test revenue growth was also driven by a significant improvement to our Garmin360 ASP, which increased from approximately $2,750 in the fourth quarter of twenty twenty three to approximately $3,000 in the second half of twenty twenty four. In addition to this tailwind, the significant improvement in reimbursement trends throughout the year led us to collect more cash for our tests than we had previously accrued for, which resulted in after period revenue upsides throughout the year. For the full year 2024, revenue recorded for tests performed in prior years was approximately $35,000,000 Of this $35,000,000 approximately $13,000,000 was consistent with our expectations based on historical experience and payment trends. However, the remaining $22,000,000 was the result of better than expected cash collections, and we view this as a nonrecurring after period revenue upside for 2024. Turning to biopharma.

Speaker 4

As mentioned earlier, our biopharma business performed incredibly well during 2024 with precision oncology revenue from biopharma tests totaling $145,000,000 increasing 31% and biopharma test volume growing 35% to 40,500 tests during the full year 2024. Finally, development services and other revenue totaled $51,100,000 for the full year 2024 and includes $5,100,000 of screening revenue generated from SHIELD tests that were reported between the IVD launch at the August and the end of the year. Moving on to Slide 21. Our non GAAP gross margin continued to be very strong and was 63% in the fourth quarter of twenty twenty four compared to 61% in the fourth quarter of twenty twenty three. We also saw an improvement on an annual basis with 2024 non GAAP gross margin of 62% compared to 61% in 2023.

Speaker 4

Excluding screening, non GAAP gross margin is 64% for both the fourth quarter and full year 2024, an improvement from 63% in the prior year period and above the full year guidance range of 61% to 63% that we provided on our Q3 earnings call. Non GAAP operating expenses were $215,000,000 in the fourth quarter of twenty twenty four, an increase of seventeen percent and $757,000,000 for the full year 2024, an increase of 4%. Our full year non GAAP operating expense was above our guidance range of $720,000,000 to $730,000,000 due to a couple of one time items in the fourth quarter of twenty twenty four. Firstly, we incurred significant litigation expense related to the November false advertising trial, at which the jury unanimously found in favor of Guardant Health on all its claims and awarded us $293,000,000 Secondly, in Q4, we increased the full year accrual for the 2024 company bonus plan in line with the board approved payout level, which reflects a successful year with respect to bonus performance components such as top and bottom line financial measures, the FDA approval of Shield and the launch of new products. As a result of our increased revenue, gross profit and operating leverage, both our adjusted EBITDA and free cash flow improved year over year in full year 2024.

Speaker 4

Adjusted EBITDA loss was $258,000,000 for the full year 2024, an improvement of $86,000,000 compared to a loss of $344,000,000 in 2023. We continue to be focused on cash and materially reduce our burn in 2024. Free cash flow burn of $275,000,000 for the full year 2024 was in line with the guidance we provided on our Q3 earnings call and represents an improvement of $70,000,000 compared to $345,000,000 in 2023. I'm also pleased to report that our core therapy selection business was free cash flow positive in 2024 and that we successfully managed our cash flow for screening to be in line with our guidance target of approximately $175,000,000 Turning to the balance sheet on Slide '22. We ended the year with approximately $944,000,000 in cash, cash equivalents, restricted cash and marketable debt securities.

Speaker 4

Earlier this month, we successfully completed a private convertible debt exchange where we extended the maturity on $600,000,000 of convertible debt with favorable terms, which we believe helps to mitigate potential balance sheet risk, while at the same time provides greater optionality to optimize our capital structure in the future. The $600,000,000 of new convertible debt is now due in 02/1931 and comes with a 1.25% annual coupon and a 35% conversion premium, which represents a conversion price of $62.22 As a result of the transaction, our total debt was reduced from $1,150,000,000 to $1,090,000,000 of which $491,000,000 is our zero coupon convertible debt, which is due in November 2027. We also structured a concurrent stock repurchase of $45,000,000 to help mitigate dilution. Following these transactions, our pro form a cash division was approximately $887,000,000 We continue to expect that we will reach cash flow breakeven in 2028 with cumulative free cash outflow of $450,000,000 to $550,000,000 over the next three years. Turning to Slide '23.

Speaker 4

Before discussing our outlook and assumptions for 2025, we want to take a moment to preview how we intend to present our revenue going forward. Rather than splitting revenue into precision oncology and development services and other, we're changing the presentation to better reflect our different business lines and to provide clarity on the performance of Shield. As such, for 2025, we'll start to break out revenue to four components, which are shown in the slide with 2023 and 2024 full year numbers. In summary, the new revenue components are oncology, which represents clinical therapy selection and MRD testing revenue, which we previously reported as clinical testing revenue within the Precision Oncology line. Biopharma and data, which represents the total revenue we generate from our biopharma customers, namely biopharma sample testing revenue that we previously reported in precision oncology as well as biopharma companion diagnostic and data services revenue that we previously reported as development services Licensing and Other, which was previously reported as other revenue and finally, screening, which will represent shield testing revenue.

Speaker 4

Moving to Slide 24 for our outlook and assumptions for full year 2025. We expect full year 2025 revenue to be in the range of $850,000,000 to $860,000,000 representing growth of approximately 15% to 16% compared to 2024. Excluding the $22,000,000 non recurring out of period upside in 2024, this range implies total revenue growth of 19% to 20% in 2025. Now breaking down the key assumptions in our revenue guidance. We expect oncology revenue to grow approximately 15% year over year in 2025.

Speaker 4

Again, excluding the nonrecurring asset period upside in 2024, this represents oncology revenue growth of approximately 20%. Given the positive traction we're seeing from our launch of Guardant360 LDT on smart liquid biopsy, our recent Medicare CRC surveillance coverage for REVEAL and the upgrades we're making to our tissue test, We expect volumes across all oncology clinical products to accelerate in 2025 and total oncology clinical volume growth to be approximately 25%. We expect our biopharma business to continue to perform well in 2025 and are forecasting low double digit growth for biopharma and data revenue. Finally, although it's still very early into the launch, we want to provide some initial guidance for screening revenue, which we expect to be in the range of $25,000,000 to $30,000,000 driven by 45,000 to 50,000 Shield tests. We expect this full year volume to be significantly back end loaded due to the time it will take to ramp up the productivity of newly hired reps throughout the year.

Speaker 4

Also, our guidance does not include any ASP impact from receiving ADLT designation. We continue to expect this to occur in 2025, and we'll update our guidance accordingly at the appropriate time. We've made great progress in reducing our COGS over the last few months with both REVEAL and SHIELD reaching gross margin breakeven. For 2025, we're confident that we can deliver full year non GAAP gross margin in the range of 62% to 63% despite the impact of changes in product mix that we expect during the year. We expect total non GAAP operating expenses to be in the range of $815,000,000 to $825,000,000 representing an 8% to 9% increase compared to 2024.

Speaker 4

We'll continue to gain significant operating leverage during 2025 and expect R and D and G and A expenses to be relatively flat compared to 2024, with the increase in operating expense coming mainly from investments in screening, sales and marketing as we continue to ramp up our commercial assets for Shield. Lastly, we continue to be committed to reducing our cash burn each year in order to reach company wide cash flow breakeven in 2028. For full year 2025, we expect free cash flow burn to be in the range of $225,000,000 to $235,000,000 an improvement compared to $275,000,000 for 2024. Our burn in 2025 will consist of approximately $200,000,000 related to screening as we scale our Shield business and maximize our first mover advantage. Significantly, excluding screening, we expect the remainder of the business to burn approximately $25,000,000 to $35,000,000 during the year and to reach cash flow breakeven in the fourth quarter of twenty twenty five.

Speaker 4

Finally, turning to Slide 25. We have a rich pipeline of catalysts across our business segments and are excited about the opportunities ahead. With that, we will now open the call to questions.

Operator

Thank you. We will now begin the question and answer session. You. The first comes from Puneet Souda with Leary Partners. You may proceed.

Speaker 5

Yes. Hi, guys. Thanks for taking my questions. First one on screening and I'll try to wrap one on the REVEAL as well. Shield guide of $25,000,000 to $30,000,000 was well ahead of us and I believe The Street as well.

Speaker 5

I appreciate the second half loaded, but could you talk about the sales force expansion that you expect is going to contribute here for the second half? Any other drivers and the feedback that you're getting from the field that gives you confidence in this $30,000,000 on the upper end? And maybe what are you contemplating for the lower end? And on Reveal, congrats on the surveillance coverage, but can you square the NCCN? Unfortunately, NCCN recommended against surveillance.

Speaker 5

So could you balance those two? I know it's still early days of this market. How do you expect, the adoption and Reveal to go as a result of that? Thank you.

Speaker 3

Thank you, Puneet. Maybe I start with the Shil question and I give it to, Tommy about REVEAL. So, we continue to be very pleased with what we are hearing in the field, physician response, patient response. Now connecting it to our guidance, I make few points. One is, you know, we launched consent back in August with 50 reps in the field.

Speaker 3

We increased it to a hundred as we ended the last year, 2024. Vast majority of the people we added, you know, they came late very late in 2024 in fact. And, it's gonna take them some time to contribute in productivity. As a result, we are, we believe that actually our ramp rate is gonna be more back ended. The other thing to consider is this is our first full year of launch.

Speaker 3

So, you know, obviously in the launch years, you know, this kind of growth is always when you look at it just numerically, it's more back ended too. In terms of total number of reps that we are going to have, we mentioned our Investor Day fall of twenty twenty three that we are planning to have about maybe 150 people in the field by end of twenty twenty five. Some stuff went better than what we expected mainly the Medicare pricing. As a result, we will have maybe a little bit more people in the field. But again, you know, bunch of these newly hired reps are not gonna contribute meaningfully till like three, six months after their hire date.

Speaker 3

Maybe I'll leave it like that and give it to Telkom for review.

Speaker 6

Hey, Puneet. Yeah. Good question, Nama. We actually were, fairly encouraged when we saw the update in NCCM guidelines. I think on the whole, it's actually a step forward in terms of recognizing the value of ctDNA testing, really in the sort of adjuvant setting.

Speaker 6

And, this is not too dissimilar from the sort of cadence we saw with NCCM guidelines with three sixty in terms of liquid biopsy testing. The guidelines tend to be a little bit behind where clinical practice is, but, I think, you know, all in all, we're encouraged in terms of this moving in in the right direction. And we're very confident given the utility we see with surveillance testing as a whole and especially with BRAVEAL that, we'll we'll get to the right place, in

Speaker 2

the coming years from a guideline perspective.

Operator

Thank you. The next question comes from Bill Bonais with Craig Hallum Capital Group. You may proceed.

Speaker 7

Hey, guys. Thanks for the call. Another one on Shield. I'm just curious if you are having any kinds of preliminary discussions with payers outside of Medicare commercial payers about Shield. I mean, obviously, the thinking has been, well, you have to wait on USPSTF and whatnot.

Speaker 7

But I wasn't sure if there was activity you might be trying to accomplish ahead of that.

Speaker 3

Yes, Bill. We are in very kind of early conversation with Sam, mainly in terms of, like, you know, having advisory boards, getting some initial feedback from them. We are planning to ramp up some of those engagements after we go into guidelines and, you know, right after ACS guideline inclusion that we are optimistic hopefully it could happen in 2025. We will ramp up those

Operator

activities. Thank you. The next question comes from Tito Peterson with Jefferies. You may proceed.

Speaker 8

Hey, thanks. A couple on field. So you're guiding for ASPs to move a little bit lower here, $5.80 at the midpoint versus $6.25 in the fourth quarter. Is that just Medicare fee for service dynamics? Or is that Abu Dhabi and maybe subsidized samples?

Speaker 8

And can you maybe just confirm whether the shield volume guide includes Abu Dhabi? And then any risk to ADLT status? And then lastly, just ACS guidelines, do you expect that in the second quarter? And how do you think about the lift, that could come? I assume that's not baked into the guide.

Speaker 3

Yes. So, Tycho, thanks for a great question. We are very pleased with the ASP that we printed for Q4. We just don't want to get ahead of our SKUs. That was really the first full quarter data that we had and we want to be very thoughtful with the ASPs that we are going to put in the first full year of the launch.

Speaker 3

We are gonna we are continuing to monitor our payer mix that would impact the ASB. I think, again, I emphasize that this, bump of ADLT, improved Medicare rates is not kind of embedded in our guide. You know, we are gonna get to that point and then, look at our payer mix at a time and then revise the guidance accordingly. Based on everything that we know, we are very confident about this ADLT process. We know how it works.

Speaker 3

It's just matter of the mechanics of the timing. It's a quarterly process. When exactly it's going to get activated for us, it's something that's not very clear. So we just wanna make sure we derisk it before we include that upside to our guidance and our ASV. And Abu Dhabi, very quickly, it's not a dilutive for our ASV.

Speaker 3

So without going into more details of it, we are very pleased with the engagement that we have with, Department of Health Care.

Operator

Thank you. The next question comes from Dan Brennan with TD Cowen. You may proceed.

Speaker 9

Great. Thanks for the questions. I'm going to focus on reveal. Can you help us think through kind of what's baked in for 2025? We show you guys that like 35,000 tests and '24 maybe ramping to like 80,000.

Speaker 9

I know you're not going to give us specifics, but how do we think about what the impact of surveillance could be? And then B, when you think about the additional indications, breast and monitoring, could you just give us some color about timelines of when we might hear back on that? Thank you.

Speaker 5

Maybe I'll start and then if

Speaker 6

maybe Mike wants to fill in some of the sort of cadence there on volumes. But as we said in the prepared remarks, we see acceleration across each of our product lines in oncology in terms of volume growth. And certainly, we're very pleased with how the SERVIR has started, not just for Avial but for all our products. That being said, in terms of, you know, kind of additional indications, as we said, we submitted data for publication for both breast and monitoring, late last year. And, as soon as those are published and accepted in, in respective journals, we'll be submitting that to MolDX.

Speaker 6

And so we think, you know, sometime second half of this year, the earliest we could see potential indication expansion for AVEAL. Yeah.

Speaker 10

Maybe I'll ask. Yes, so we mentioned, we expect for AVEAL volume acceleration. You're right. We're not breaking out the REVEAL volumes or the volumes across all of the clinical oncology lines. But yes, we expect REVEAL is going to accelerate.

Speaker 10

You know, it'll take some time, and we think this will be more, you know, again, back end loaded for the acceleration increase during the year. And that's really because, you know, we're just sort of getting the field now, ramped up to be very much focused on on CRC. So, you know, we had our national sales meeting kickoff, just two or three weeks ago. You know, the team is very excited, and energized to go out and sell revealed CRC, but it's going to take time for that traction to take hold. But, yes, we're looking very much forward to accelerating the volumes throughout the year.

Operator

Thank you. The following question comes from Sulu Nimbien with Guggenheim. You may proceed. Hey guys, thank

Speaker 11

you for taking my question. Two questions. On Shield, the Shield COGS reductions have already been impressive. Is it fair to assume that you're achieving the Shield COGS reduction via a similar approach like the Veo? And what is embedded in the 2025 guide?

Speaker 11

And for review, what ASP is embedded in your guidance with respect to ramp, mix, ADLT timing?

Speaker 3

Yes. So actually a bunch of R and D activities that we are doing at Guardant is highly leveraged and especially for the platforms that are based on epigenomics mainly, there is a lot of synergy. So on REVEAL, which is a LBT product, you guys have seen what we have achieved by reducing the cost through some of the improvements and technology stack and process improvements that we had. Shield is an IVD product, so implementing some of these changes takes a bit longer, but there is bunch of synergy and cross learning, cross deployment that we are doing across both Shield and Rebuild.

Speaker 10

Yeah. And maybe I'll take the Rebuild ASP. Yes. So, of course, we were very pleased to get the CRC's Medicare, CRC surveillance Medicare coverage at 1644, starting, at the start of the year. So that's going to have a positive impact on ASP.

Speaker 10

We ended 2024 with an ASP roughly between $400 and $500 and so we're going to have an impact positive impact of the Medicare coverage. There there there is a big, sort of mix impact in all of of Brazil because we have CRC surveillance, CRC adjuvant, and then we have breast and lung, and then, of course, there's Medicare, Medicare Advantage and Commercial. So there's a lot that we have to sort of deal with, from a mix perspective. But, yeah, we would expect the ASP in our guide roughly to increase to something like $600 We haven't included any impact for ADLT in that $600 It's our intention to apply for ADLT rate. And so similar to Shield, you know, if if and when we get that, we would expect an increase on the on the Medicare rates and we would, you know, we would change our guidance, in line with, with receiving that.

Operator

Thank you. The next comes from Mark Massaro with BTIG. You may proceed.

Speaker 12

Hey guys, thanks for the questions. Congrats on a strong 2024. The first one is for you, Helmi. I think about a year ago, there was probably an investor misconception that your G360 business was either saturating or about to go into diesel. But your prepared comments today, you indicated you plan to accelerate volumes across all your products this year.

Speaker 12

So I was curious if you could just give us some anecdotes about what you're seeing in the field with the upgraded G360 liquid product? And then one for Emerily, I recognize that the majority of your revenue came from Medicare in Q4, but I would be curious about what level of interest you're seeing build from the non Medicare population and whether or not you think you'll be well addressed to equip, those orders when commercial payer coverage comes in?

Speaker 6

Thanks, Mark. I appreciate your question. I can tell you, international sales meeting, you know, obviously, I've been going to them every year. This is probably the most excited I've seen the the team, given the sort of products we have out there in smart liquid biopsy with three sixty and reveal and then some of the ones that we have upcoming especially with tissue. And so, we are seeing that momentum.

Speaker 6

We saw that momentum, since we launched three sixty and Smart Liquid Biopsy. It's been, really nice uptake from existing physicians and new physicians, alike. And we really haven't even turned on a lot of the exciting features yet. And so we have extremely high confidence, just given how this year has started, how the last year ended, that three sixty liquid will continue to do well and there's a lot of room for growth over the next few years in this market. I outlined, you know, some of the the growth drivers.

Speaker 6

It's not just, sort of increased penetration, it's more applications going in sort of the long tail of, tumor types that only really epigenomics can address. Some of the new findings we have as well as, where the field is going in terms of testing patients at each progression. And so there, we are really at the sort of very early innings in terms of where liquid biopsy for therapeutic cell selection can grow.

Speaker 3

And regarding Shield, Shield on the younger patient on commercial side, you know, our experience during Shield LBT when we didn't have proactive workflow adjustment to really focus on covered patient, We're experiencing that in fact, the 65 and above was a minority of our ordering and payer mix. And our workflow changes actually has worked that now vast, vast majority of our volume coming from this covered patient. But totally, we have that market feedback and data that once the coverage get expanded and access get expanded to younger patient population, there's a huge demand and opportunity for Shield to go to younger patients. Right now though, we are just focused on reimbursable covered case like Medicare and some of, for instance, initiatives that we have internationally in Abu Dhabi. I maybe take this opportunity.

Speaker 3

There was earlier question I forgot to answer about what's the level of assumption of contribution of this Abu Dhabi partnership. You know, that program in the first one year, the expectation of the Department of Health there is to test about 10,000 patients. Having said that, since the program need to go through their ramp logistics, we don't know exactly how quickly they're gonna ramp. At this time, we are just assuming a fraction of those patients would get tested by Shield till we get more visibility over that ramp.

Speaker 13

Thank

Operator

you. The next question comes from Patrick Donnelly with Citi. You may proceed.

Speaker 13

Hey guys, thanks for taking the questions. Helmut, maybe one on REVEAL. Just I know before the reimbursement you're holding back a little bit kind of pursuing the volumes. Can you talk about just the change in strategy, how that will go? I know Mike mentioned maybe a little more of a second half ramp as we go through that.

Speaker 13

And then a quick one for AmirAli, just on V2 for Shield. Can you just talk through what the expectations there should be on the catalyst set front for V2? Thank you, guys.

Speaker 6

Yes. As we have said before, we're sort of limiting in some ways how much we are servicing the demand that was out there, from our sales team. And, you know, one of the big, sort of, you know, kind of exciting initiatives we had at our, national sales meeting this year was really training on Reveal, really getting the the sales team sort of, you know, I think motivated and and they were very excited in terms of being able to now offer this product a lot more robustly, and really accelerate our efforts there. So, yeah, there's there's a lot of room to grow, especially with tissue free MRD. It's really the surveillance setting, where you sort of get most of the juice out of the market and where most of the opportunity is.

Speaker 6

And that's not really been an area that we've been targeting, given the fact we didn't have reimbursement there. And so, yeah, the team is is ready to go and, you know, very, very excited for what this means for our oncology business.

Speaker 3

Regarding Shield v two, it's an active program for us right now. Stay tuned. And, you know, we are planning to have hopefully, to approve our launch of that version of the test by end of the year.

Operator

Thank you. The following comes from Dan Arias with Stifel. You may proceed.

Speaker 14

Afternoon guys, thanks. Helmy on MRD and maybe just piggybacking up your last comment there. The way that the field is evolving here as companies increasingly shooting for both tumor informed and tumor naive approaches, as you think about your own portfolio and just the way to best serve the community, how interested are you in that idea and having both? And then just quickly and Verily, I had someone ask for a clarification on Tycho's question whether Abu Dhabi volumes are considered in the $45,000 to $50,000 outlook for test volumes? Thanks.

Speaker 6

Yes. I mean, look, we ultimately think that tissue free MRD is going to be the largest portion of the market. It's the simplest, from a product market fit to use that addresses the twelve million, cancer survivors that are more than five years out of the eighteen million in the market. But that doesn't mean that, you know, the, a tumor informed product would at some point not be part of our portfolio as well. We have to listen to the market, understand what the needs are for our customers and we'll continue to do that.

Speaker 6

We, you know, obviously launched, Garden three sixty, Tissue Next a couple of years ago. We have a major upgrade, of that test, this year. And so we're gonna continue to

Speaker 4

listen to

Speaker 6

the needs of the market and adapt as required. Hey, Abou Dhabi.

Speaker 3

So the contract and the program aim is to approximately test 10,000 patients within the first year. Having said that, since we don't have really visibility over how quickly they can ramp it up and if adult they can screen this approximately 10,000 patients or not, At this time, we are just assuming a fraction of that. So effectively not a really material part of our guide, it's just a fraction of that 10,000 is included.

Speaker 6

Okay. Thank you.

Operator

Thank you. The next question comes from Tejas Savant with Morgan Stanley. Your line is open.

Speaker 15

Hey, guys. Good evening. So just a quick follow-up there on one of Tycho's earlier questions. Is ACS guideline inclusion, second half twenty five catalyst for you, Selamir Ali? And then, with that Supreme Court case looming here, I know there's offsets via, you know, ACS states and the Medicare opportunities obviously inflated from that situation, but would the decision require any sort of rejigging on your commercial effort on SHIELD or perhaps, you know, need, you know, in the past you've talked about this activation energy sort of phenomenon.

Speaker 15

Will that be sort of a bigger gating factor for you? Will that decision to, go against USPSTF?

Speaker 3

Okay. So maybe I start with ACS about some of this stuff. Maybe you need to clarify it a little bit more, Tejas. So in terms of ACS, you know, we are pleased with the conversation that we continue to have with that team and we are optimistic that they would consider Shield and the CRC guidance review that they started working on. So, exact timing, we are not sure, but we are confident based on what we know it should be sometime in 2025.

Speaker 3

In terms of the supreme case, you know, we are right now focused mainly on Medicare patient population and, you know, the covered patient population, which is not gonna get impacted by that case. We are monitoring it actually very closely. It's kind of good for the field, the fact that Trump administration is continuing to kind of be on the opposite side and kind of, work against the success of that law case, but we'll see what happens. There is a lot of business actually for us on Medicare to mine while we are waiting for building that pathway access for younger patient population in in future. I'm not sure if I got the last question.

Speaker 3

Maybe we just move on. Yeah.

Operator

Thank you. The following comes from Rachel Waffna with JPMorgan. You may proceed. Perfect. Good afternoon and thanks so much for taking the questions.

Operator

So So I wanted to dig into ASP assumptions this year, specifically on G360. So just given the traction that you saw throughout 2024, can you walk us through your assumptions embedded for 2025? And what are the levers this year that you can see for continued growth in ASP on that front for core therapy

Speaker 10

selection? Thanks. Yes, Rafe, it's Mike. I'll take that one. Yes, no, I think just to reiterate, we had a very, very impressive increase in our ASP and GALEN360 in 2024.

Speaker 10

The main driver at the start of the year was increasing the Garden360 LDT rate from three thousand five hundred to five thousand. And then throughout the year, we saw sort of the Medicare Advantage pull through bringing them up to that rate. And so, yes, our Garden three sixty ASP went from $2,750 at Q4 '20 '3 dollars to $3,000 in the back half of $20.24 dollars And also, on top of that, we had these out of period upsides just because we were getting, receiving a lot more cash than we previously accrued for. I think when we look at 2025, definitely the $3,000 ASP we believe is here to stay. And the opportunity for us over the next sort of twelve months and longer is really to focus on the commercial payers and expanding the coverage that we have for Garden360.

Speaker 10

Know, we've got very good coverage now. All our national payers cover Guardant three sixty, but they don't cover every time that we run the test. So, you know, some cover for the LBT version, some for the CDX only and vice vice versa, and in certain cases, only for certain cancer types like lung or breast, FDA approved indications. And so, yeah, that's that's really gonna be the focus for us to expand coverage over time. What's built into our guidance is really just the $3,000 ASP for Ganon three sixty.

Speaker 10

So if

Speaker 6

we can

Speaker 10

accelerate the expansion of the coverage, that'll be upside. If we continue to get any more of these out of period upside above our expectations, then again, that will be an incremental to our guidance. But yes, we're feeling bullish about what we've got to with our Ghana Three Sixty ASPs and looking forward.

Operator

Thank you. The next question comes from Kyle Mixon with Canaccord. You may proceed.

Speaker 16

Hey guys, thanks for the questions. Helmut, could you talk about the contribution from G360 tissue in 2025 and how important that's going to be longer term

Speaker 3

in the portfolio?

Speaker 16

Just given that quick standard opportunity, enhance your competitive position and maybe lengthen the runway for that franchise in G360? And secondly, Marielle, could you, just clarify the volume of TUSHIELD this year in terms of demographics of the patients and their insurance?

Speaker 3

Is that going to be different from the '24? Thanks.

Speaker 6

Yeah. I mean, we've seen that I think pretty strong growth from our tissue franchise over the last few years since we launched it. But this is, gonna be, I think, a significant upgrade for that test. We think it'll be sort of, bar none, one of the most competitive offerings in in this space from a capabilities point of view, and one that is really gonna resonate, with physicians. And so, yeah, we are, are expecting that this is a product that is gonna be a, very important pillar for our therapy selection business and a major contributor over the next, couple years.

Speaker 6

And, you know, we I think it's really important to, as a sort of, you know, pillar of what physicians, use when they're seeing a patient, really doing both tests upfront and then continuing to sort of monitor the patient

Speaker 4

with three sixty going forward.

Speaker 3

And shift volume q '4 was vast majority, from Medicare beneficiaries. And what we assume in 2025 is still majority of the volume would come from the targeted covered patients, meaning Medicare beneficiaries. So the commercial insurance, like younger patients are a minority of our volume.

Operator

Thank you. The next question comes from Mason Carrico with Stephens. You may proceed.

Speaker 3

Hey, thanks.

Speaker 16

Sorry if this has been asked and jumped in between a few tonight. But on the growth you're seeing for G360 in The U. S, could you just give us some insight into where exactly that incremental growth is coming from? Is it capturing incremental share from competitors? Is it higher utilization in tumor types where penetration was lower?

Speaker 16

The new accounts, any color there would be helpful.

Speaker 6

I would say it's largely from greater depth from existing accounts. As you know, we have majority of U. S. Oncologists order Guardant360 today. And so it's it's a lot more about, getting greater depth.

Speaker 6

So some of it is, sort of taking back share from, you know, some of the competitors out there. But it's also just greater utilization as well. There are still still a lot of physicians that don't test all of their patients. Luke, a comprehensive genomic profiling test and having a test like this that has, capabilities that go beyond just a standard genomic test, I think, has been exciting. It's been resonating, with a lot of physicians.

Speaker 6

And we see, a lot more of that to come, as we roll out these applications, these apps onto the platform.

Operator

Thank you. Our final question comes from Matt Sykes with Goldman Sachs. You may proceed.

Speaker 17

Thanks for taking my questions. Maybe just quickly, Amarali, just on sales force expansion for Shield. You talked a little bit earlier in the call about maybe being a little bit bigger than what you originally expected. But a year or two ago, you talked about gating factors that you would consider at any given point in terms of building that out. Could you just maybe kind of walk through what those gating factors today are?

Speaker 17

Is it ACS guidelines, competitive launches in the future? Just how you're thinking about sizing that investment over this year and maybe into '26?

Speaker 3

Yes. Everything that we are talking about in terms of Shield investment is gated by continued execution and continue to believe this brand is gonna have a huge opportunity for us at Guardant Health. So that remains constant. The other part which is constant is like what we mentioned now for some time that our annual, net burn is going to be ring fenced at around this $200,000,000 So we are executing we are continuing to execute based on that financial discipline. So what's embedded there is continued execution

Speaker 13

on the commercial showing that the volume is coming, the

Speaker 3

P and L the point I made earlier about commercial expansion was just based on the fact that unit economics is more favorable today than what we assumed a year and half ago. Because of multiple reasons, the main factor, we didn't expect Medicare pricing to be $920 a year and half ago and what we are going to expect with ADLC is going to be $14.95 versus a year and a half ago it was lower cash paid price. So this would give us some additional gross profit that we can reinvest in this building the commercial infrastructure.

Operator

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.

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Earnings Conference Call
Guardant Health Q4 2024
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