GH - NASDAQ

Hello, and welcome to the Guardant Health First Quarter 2023 Financial Results Call. My name is Lauren and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host Alex Kleban, Vice President of Investor Relations to begin. Alex, please go ahead.

Thank you. Earlier today, Guardant Health released financial results for the quarter ended March 31, 2023. Joining me today from Guardant are Helmy Eltoukhy Co-CEO; AmirAli Talasaz, Co-CEO; and Mike Bell, Chief Financial Officer. Craig Eagle, Guardant's Chief Medical Officer will join for Q&A. Before we begin, I'd like to remind you that during this call, management will make 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. This call will also include a discussion of non-GAAP financial measures are adjusted to exclude certain specified items. Additional information, regarding material risks and uncertainties, as well as reconciliations to the most directly comparable GAAP financial measures are available in the press release Guardant issued today, as well as in our Form 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. Information in this conference call is accurate only as of the live broadcast. With that I'd like to turn the call over to Helmy.

Thanks, Alex. Good afternoon, and thank you for joining our first quarter 2023 earnings call. I will start off today's call today for providing an update on our progress so far in 2023 and go into more detail on our progress in therapy selection and MRD. I will then turn the call over to AmirAli for an update on screening. And finally, Mike will provide a more detailed look at our financials and outlook for 2023. At Guardant, we have built one of the fastest-growing platforms in diagnostics, coupled with what we believe is the most exciting pipeline in the industry to fuel long-term growth. Today, we are the market leader in therapy selection and technology innovators at the forefront of MRD in cancer screening. All of this enables us to help patients at all stages of cancer, live longer and healthier lives. In line with this, I would like to start off with a patient story. A 43-year-old woman with no history of smoking went to a physician with testing. A CT scan ruled out a pulmonary embosum but showed a 3.5 centimeter mass. Following additional tests she was diagnosed with Stage 3 lung adenocarcinoma. Further testing from other modalities indicated that tumor was negative for EGFR ALK and ROS1. However, a Guardant360 liquid biopsy revealed several somatic mutations including a ROS1 fusion, making her candidate for the targeted therapy entrectinib. Following treatment for oncologist ordered imaging to confirm whether or not she was responding to therapy, which came back inconclusive. A Guardant response test was ordered and detected no ctDNA indicating she was responding to therapy. One year into treatment she continues to do well with an over 50% reduction in the primary tumor mass and complete resolution of other nodules. Her story illustrates the power of the combined Guardant360 in Response testing regimen to assist doctors making these crucial decisions to deliver better patient outcomes. Turning to Slide 4. We started the year off strong with our first quarter revenue growing 34% to $128.7 million. Guardant360 continues to be the main growth driver with increasing contributions from Reveal and TissueNext.. Our team continues to focus on delivering superior execution, operations and customer service. All in all, we accelerated our growth in the quarter and is stable market conditions, driving market expansion and a backdrop of notable retrenchments by competitors. Turning to Slide 5. We are pleased to report that in mid-April, we received Medicare reimbursement for Guardant Response. This is our fifth assay to receive Medicare reimbursement. It is the first blood-only liquid biopsy, for immunotherapy response monitoring, representing a major step forward for patients. The overall testing program will consist of the Guardant360 test treatment initiation followed by a response test in the appropriate time frame. Our rate for response has been finalized at $1,943 and we are exploring an ADLT pathway for this test in the medium term, which should increase pricing further. Turning to Slide 6. After another record quarter, in which we continued to significantly grow market share, we want to take a moment to spotlight our core therapy selection business. Over the years, we have built on the foundation of the first FDA-approved comprehensive liquid biopsy, to create what we believe is the strongest platform in oncology diagnostics. Our entire therapy selection portfolio is now reimbursed by Medicare, with reach to over 300 million covered lives when we include commercial payers. We have established ourselves as technology and market leaders, with a greater than 300-person commercial team across clinical and biopharma, over 12,000 ordering oncologies, more than 150 biopharma customers all supported by hundreds of patents and clinical publications. Achieving scale is not a long-term vision, but at our doorstep. For therapy selection, which represents more than 95% of our total revenue, we expect to generate more than $500 million in sales this year, with clinical revenue growth of greater than 25%, gross margins above 60% and reach cash flow breakeven in six to nine months. Moving on to Slide 7. Clinical test volume reached over 39,100 tests in the first quarter, up 45% compared to the prior year quarter. Guardant360 continues to be the main driver with continued strong growth in lung cancer, with a significant uptake in breast cancer, following our CDx approval for ESR1 mutations early in the quarter. Guardant Reveal and TissueNext added to the growth, as we rapidly onboarded patients in MRD and also gained market share driven by the recent launch of our AI-powered, Guardant Galaxy tissue offering. We continue to execute on building account depth, with more oncologists ordering more Guardant test again in the quarter. This is due in large part to the leverage, we are gaining from past investments in EMR integration, processes and systems. We saw a nice upward move in our Guardant360 ASPs, supported by mix and positive momentum from commercial payers. We are closing on coverage from all major commercial payers in the US, for Guardant360 given the addition of United during Q1 Aetna, Humana expected in Q2, and others that are in advanced discussions. Our ESR1 CDx, has been a major driver and is helping us to address remaining coverage limitations. All of this is providing a tailwind for ASP. Turning to Slide 8. We had another solid quarter of biopharma growth, with volumes up 21%. Our partnerships continue to rise and we have now converted more than 20% of our mix to GuardantINFINITY, our epigenomic or smart liquid biopsy-based panel and also continue to see strong utilization of Guardant360 CDx. In addition, we announced another ESR1 collaboration and are on target to start seeing China sales ramp up later in 2023. Turning to Slide 9. With our strongest quarter yet in breast cancer, I would like to highlight the transformational potential that our CDx can have for breast cancer that develop an ESR1 mutation. Between 65% and 80% of breast cancer in women are estrogen receptor or ER positive and up to 40% of patients with ER-positive HER2 negative cases will develop an ESR mutation, which qualifies them for a new class of targeted therapy. ESR1 mutations can emerge months or years after initial tissue or liquid biopsy demonstrating a real need for liquid biopsy testing. With six biopharma partnerships focused on ESR1 already this will be a key focus area for CDx programs where our partners can leverage Guardant technical and regulatory capabilities. I'd like to take a moment to thank our team who worked tirelessly to ensure we live up to our most important value to put the patient first. Everything we do is led by that North Star. At Guardant we have built one of the most transformative platforms in diagnostics and we think extensively about how we get our work done more efficiently from development through delivery to fulfill our primary mission of helping patients. In line with that goal we recently made some key additions to our leadership team in an effort to further improve our ability to operate effectively while balancing our need to innovate quickly. Ines Dahne-Steuber joined Guardant as our new Chief Operating Officer. Ines brings more than two decades of broad diagnostics experience, including overseeing operations for labs running millions of tests per year. Under her leadership we will bring further efficiency, leverage and scale to the way we operate as a company. Darya Chudova was promoted to Chief Technology Officer. With this newly created role we are bringing together our research and development efforts for oncology and screening to leverage our products across a single platform and allow us to scale more quickly and efficiently. I look forward to their contributions and strategic leadership to help Guardant continue to scale for this next exciting chapter of our journey. I'm very proud of our team and our products and look forward to the opportunities ahead. With that, I will now turn the call over to AmirAli to provide an update on our screening business.

Thank you Helmy. Turning to slide 10. We continue to make good progress in our screening business as we spearhead a new patient preferred category in the screening market. Our PMA for Shield for its first clinical indication of CRC screening is now filed with FDA and the review process is underway. Shield demonstrated 83% sensitivity and 90% specific in ECLIPSE trial in the range with other guideline recommended noninvasive CRC screening tests where performance ranges from 74% to 92%. We believe this test performance, not only is above the bar for FDA approval and Medicare coverage but also meets the requirement for a robust commercial success post FDA approval. In addition the real-world customer feedback from our LDT ordering physicians continue to exceed our expectations and validates the value of incorporating Shield test into screening menus. Moving to slide 11. Just this morning at Digestive Disease Week, the study investigators presented additional details and insights from our pivotal ECLIPSE study. We are fortunate to host a call with the trial investigators and other cancer screening experts to share their perspective on these results. The performance of screening test in detecting early-stage CRCs is an important parameter. CRCs with Stage I/II/III have a very high survival rate with 72% to 91% of patients surviving at five years post-treatment. For advanced Stage IV CRC's 5-year survival rate is only 14%. The sensitivity of Shield in detecting Stage I to III was 81%. For localized CRCs meaning no sign of spread beyond the ball wall which would likely be cured through surgical procedures Shield sensitivity was 72%. For regional and distant cancers, where cancer spreads to nearby length notes or to distance part of the body, Shield sensitivity was 100%. Taking a closer look by cancer stage Shield detected 55% of Stage I CRCs. 100% of all CRCs with Stage II, 100% of CRCs with Stage III and 100% of CRCs with Stage IV. Based on this performance, we believe that as a longitudinal screening test one every three years Shield will detect nearly all CRC at a curable stage and will save many lives. I want to take a moment to highlight a few notable details. Three CRCs were lost to clinical follow-up and could not be staged. As a result, they were excluded from the staging analysis. Shield detected two out of the three excluded CRCs. In addition, the study had five small T1 malignant polyps which were excited during colonoscopy procedure and considered fully treated by their doctor hence they have no further staging. For the purpose of the staging analysis, they were all considered as Stage I. Of these one was detected by Shield. Now going back to the overall performance. We are confident the first generation of our Shield has everything needed to drive a major step change in live save and be the first commercially successful blood-based screening test for CRC. We believe the detection performance of 83% at 90% specificity exceeds the requirement for FDA approval and Medicare coverage, two critical hair dose for any test. This is a major victory for creating this new patient-preferred screening category. With Shield, Guardant has now set the performance bar for the future computing blood-based screening tests. We are excited to bring the first generation of Shield to market. We have a clear time advantage relative to our competitors in blood-based screening. And this first mover advantage in this new patient preferred category will result in cost-effective commercialization activities post FDA approval. The second major win provided by our first mover advantage is the learnings we have already been able to gain from running our ECLIPSE samples. By completing our pivotal study well ahead of our competitors, we have a significant lead on further innovation and technology platform upgrades that we can incorporate into future generations of Shield. For ECLIPSE, the missed Stage I cancers were predominantly malignant polyps excise during colonoscopy procedures that were not well represented in our development cohorts and have lower level of signals in blood. Since locking our PMA device last year, we captured more data through both commercial testing with Shield LDT and analyzing more screening relevant cohorts. I'm very pleased with the progress we have already made in upgrading our platform technology performance powered by this additional data and insights. Based on this progress, we are working on developing the second-generation Shield with the aim of improving very early stage sensitivity. Guardant has set the bar for that future test we'll need to compete with and that bar is already moving. Just like with Guardant360, we will continue to improve test performance to lead this new patient-preferred category. Turning to slide 12. The unmet median CRC screening is a test that gets completed. Blood test and clinical practice have demonstrated an adherence rate of 85% to 96% for Shield. In the real-world experience with our LDT over the last 12 months, we continue to show adherence rates of more than 98%. The effective sensitivity of clinical tests is a function of both the test sensitivity and the patient adherence rate. Taken together, with 83% and 90% adherence, we are confident that Shield will contribute to detecting many more CRCs at a curable stage. Turning to slide 13. Going beyond the first indication of Shield platform in CRC, we are making good progress with our lung cancer screening trial. SHIELD LUNG will pave the path for Shield to potentially be the first FDA-approved multi-cancer screening blood test. Now, I would like to take a moment to talk about our milestone-driven investments and research allocation for our screening program. We anticipate that the contributing operating loss from our screening pipeline will be less than $200 million for the next 12 months. With this level of investment, we will be ready for Shield IBD launch upon successful FDA approval, deliver the second generation of Shield with even better early-stage performance and make significant progress on indication expansion to lung cancer. Future investments would be contingent on receiving FDA approval and then gated by ongoing commercial success and revenue milestones. With that, I will now turn the call over to Mike for more detail on our financials.

Thanks, AmirAli. Turning to slide 14 to review our financial results. Total revenue for the first quarter of 2023 grew 34% to $128.7 million, compared to $96.1 million in the prior year quarter. Total precision oncology testing revenue for the first quarter was $113.4 million, increasing 35% compared to $84.1 million in the prior year quarter. This increase was driven by strong year-over-year growth across both our clinical and biopharma businesses. Precision oncology revenue from clinical tests in the first quarter totaled $91.6 million, up 39% from $66.0 million for the prior year quarter. First quarter clinical test volume was 39,100, an increase of 45% from the same period of the prior year and an increase of 9% or 3,100 tests from Q4 2022. While Guardant360 continues to be the main revenue driver with continued strong growth in lung cancer and a significant uptick in breast cancer, we also saw more than 100% year-over-year volume growth in both Reveal and TissueNext. First quarter Guardant360 ASP was towards the top end of our expected range of $2,600 to $2,700, supported by mix and positive momentum from commercial payers. Blended clinical ASP was approximately $2,340 which was slightly above the blended ASP in Q4 2022. As a reminder lended clinical ASP will continue to be influenced by both the volume mix between Guardant360 TissueNext Reveal and Response as well as the mix of overall clinical volume between U.S. and international. Precision Indiscernible revenue from biopharma tests in the first quarter totaled $21.8 million up 20% from $18.1 million for the prior year quarter. Biopharma test volume was strong with first quarter totaling approximately 6,150 tests up 21% from the prior year quarter. Biopharma ASP in the first quarter was approximately $3,550 which was in line with our expectations. Development services and other revenue in the first quarter totaled $15.3 million up $3.4 million or 28% from the prior year quarter, primarily driven by higher revenues for partnership agreements in the first quarter of 2023. Gross profit for the first quarter of 2023 was $75.6 million compared to gross profit of $64.1 million in the same period of the prior year. Gross margin was 59% compared to 67% in the prior year quarter. The change in the gross margin was driven by a number of factors. For precision oncology, the gross margin was 60% in the first quarter compared to 64% in Q1 2022. This reduction was due to the changing mix between clinical and biopharma revenue with clinical revenue growing faster than biopharma revenue as well as the year-over-year change in blended clinical ASP from $2,250 to $2,340 due to the increased proportion of volume coming from Reveal TissueNext and Response. Development services and other gross margins 48% in the first quarter of 2023 compared to 89% in Q1 2022. Roughly 1/3 of the decline in margin is due to a onetime cost incurred in Q1 2023 related to one of our partnership agreements with the remainder of the decline due to the cost of processing Shield LDT samples as part of our market development activities for which we are currently booking many more revenue. Despite the factors influencing our gross margins we still continue to expect overall gross margin to be approximately 60% for the remainder of the year. Operating expenses for the first quarter of 2023 were $209.7 million increasing 12% compared to $187.5 million in Q1 2022. Net loss was $133.5 million or $1.30 per share for the first quarter of 2023 compared to $123.2 million or $1.21 per share in the first quarter of 2022. Moving on to non-GAAP financial measures on slide 15. As a reminder non-GAAP financial measures exclude stock-based compensation and related employee payroll tax payments amortization of our intangible assets contingent consideration, acquisition-related expenses, and realized gains on marketable equity securities and the impairment of nonmarketable equity securities. Non-GAAP operating expenses were $188.3 million for the first quarter of 2023, a 19% increase from $158.7 million in the prior year quarter. Non-GAAP net loss was $108.5 million or $1.06 per share for the first quarter of 2023 compared to $93.2 million or $0.91 per share for the first quarter of 2022. Adjusted EBITDA was a loss of $101.0 million in the first quarter of 2023 compared to $86.6 million loss in the first quarter of 2022. We define adjusted EBITDA, as non-GAAP net loss adjusted for interest, income tax, depreciation, amortization and other income and expense. Taking a closer look at our operating expenses, and cash burn on Slide 16. We've made very good progress with respect to meeting our target of reducing both our operating expenses and cash burn, for the full year 2023. As mentioned, non-GAAP operating expenses in the first quarter of 2023 were $188 million and include approximately $8 million of onetime severance costs, related to the recent workforce reduction. Excluding severance costs, this represents a reduction of approximately $21 million versus our non-GAAP operating expenses in Q4 2022. Our free cash outflow in the first quarter of 2023 was $82 million, which also declined in comparison to Q4 2022. These decreases were driven by efficiency measures, implemented in the first quarter including the workforce reduction, as well as by our ability to leverage the infrastructure, we've built over the last few years. While both operating expenses and cash burn levels could fluctuate up and down throughout the year, depending on the timing of certain activities and cash outflows, we will continue to diligently manage our spend with the goal of lowering our full year operating expenses, compared to 2022 and reducing our free cash outflow to under $350 million for the full year. Turning to Slide 17. As I just mentioned, we demonstrated leverage in Q1 from infrastructure investments made in prior years and the recent workforce reduction, and as a result ended the quarter with $937 million in cash, cash equivalents and marketable debt securities. As we look ahead, we will continue our progress towards breakeven and serves selection which we are targeting to achieve in the next six to nine months. At the same time we will continue investing to maximize the large market opportunities in principle. In order to achieve this balance, and fulfill our commitment to capital stewardship, we are leveraging a decade's worth of investments in scaling our core therapy selection platform, where we actively manage our growth investments to align with key milestones. We are also gaining material leverage in therapy selection thanks to our rapid volume growth and pay coverage expansion. As our core business in therapy selection reaches breakeven our cash flow will be driven by our two major growth opportunities MRD in screening. In 2023 MRD spend will continue to be focused on increasing market penetration our technical platform upgrades and developing clinical data to support reimbursement coverage. As AmirAli mentioned, for screening we are managing our spend very closely ahead of FDA approval. We anticipate that the operating loss from our screening pipeline, will be less than $200 million over the next 12-month period. With this level of investment, we will be ready for the Shield IVD launch upon successful FDA approval, deliver the next generation of Shield with even better early-stage performance. We made significant progress on indication expansion to lung cancer. Investments beyond this will be contingent on receiving FDA approval and engage it by ongoing commercial success and revenue milestones. Now turning to our outlook for the full year 2023 on Slide 18. We are raising our full year 2023 revenue guidance, and now expect revenue to be in the range of $535 million to $545 million representing growth of approximately 19% to 21% compared to 2022. This compares to our previous expectation of $525 million to $540 million. This update reflects a very strong performance of our clinical business in the first quarter healthy market dynamics and our continued confidence in our competitive strength. Finally, as previously discussed, we expect 2023 operating expenses to be below full year 2022 and free cash flow to improve to be approximately negative $350 million in 2023 and to consistently improve in the following years. Capital stewardship is a top priority for us and we will deploy cash in line with key triggers such as regulatory approvals clinical and R&D milestones and achievement of commercial goals. And finally, turning to slide 19, our long-term vision is to transform cancer diagnostics through cutting-edge technology are focused on high-impact opportunities and consistent execution. At this point, we will now open up the call to questions.

Thank you. [Operator Instructions] Our first question comes from Dan Arias from Stifel. Dan, please go ahead.

Good afternoon guys. Thanks for the questions. Helmy, I wanted to ask about resistance monitoring overall and the Response assay now that you've got the Medicare decision. Can you just talk about the volume contribution and the revenue contributions that we should think about near term but also maybe a couple of quarters down the road as the assay ramps. And then as adoption for Response get going do you see that being impactful to the G360 trajectory? It does seem like there's some off-label 360 usage for treatment response. So, just curious if you think that's meaningful going forward? And then maybe Mike is there anything to respond in your revenue guide? Thanks.

Yes. Thanks for the question. We're very pleased with the recent Medicare approval we got for Response. It's for the indication of immunotherapy for all solid tumors which as you know is I think one of the really largest use cases in terms of oncology in terms of the major classes therapeutics where Response can be difficult to assess. And this is really going to fill an important need. Response is not a test that we've been pushing very strongly ahead of reimbursement. But now that we have Medicare reimbursement in hand, we're going to be pushing that a lot more aggressively. I would say that it's a really nice sort of kiosk of an initial Guardant360 test. It's a single test acquisition forum. There's a certain attachment rate. And so the two really go hand in hand with one another. And this is just the beginning, we'll be increasing and attempting to collect more data. We have publications out there that show this test works. And targeted -- for targeted therapies across multiple tumor types. And so we'll continue working with payers and certainly with more Dx in terms of trying to expand this further. We'll also be pursuing ADLT status in terms of trying to move up the price as well. So, I think we have both of those tailwinds and levers ahead of us. And I'll let Mike talk about the financials.

Yes, just on the revenue guide. At the start of the year when we guided, we didn't have anything in that for Response, but now we've got the Medicare reimbursement for the remainder of the year. We've added that to the guidance, but it's very sort of very low single-digit millions. So minimal contribution this year I think we're looking at for 2024. But yes, a small amount in this revised guidance.

Okay. Thanks guys.

Thank you. Our next question comes from Puneet Souda from SVB Securities. Puneet, please go ahead.

Yes. Hi, Amir, Helmy. Thanks for taking the questions. So could you talk a little bit about the next-generation Shield for CRC? What do you need to do there? What are the next steps? When could that be potentially submitted to FDA? Obviously you have a test that's -- at least from a Stage two to four is delivering at 100% which was good to see. Then Stage 1 it was 55%. So just maybe talk to us both on Stage 1 and advanced adenoma improvement sort of what's the time line of improving that and ultimately bringing this test to market? Thank you.

Thanks Puneet. So we are very pleased actually. We believe this first generation of Shield, the performance that we reported is way above actually what's needed for FDA approval. CMS coverage is clear and also commercial success of this brand. So we're going to take this first generation to the finish line to get the FDA approval for it and go to market with it. Having said that, Guardant always -- we have this philosophy of continuous improvement powered by data. And now this is going to be another showcase that the first generation of Shield is not going to be the best and the last of what can be done with blood testing and liquid biopsy through running ECLIPSE, additional samples that we process. As I mentioned, our team figured out a specific soft class of very early-stage cases that we are missing. And the core technology is capable of potentially detecting more of these cases. It's just they were not represented very nicely in our development cohort before. So, we are pleased we are excited with the progress we made. Still it's too early to mention a specific time line and we want to make sure we take this first generation to the finish line but shortly after, we are going to upgrade this device and we are going to work with agency to upgrade it through potential SPMA routes to upgrade the claims. In terms of the routes I think it's clear. As you know in terms of upgradability, we have a bunch -- additional biobank samples that we have. That was a strategic move that we took at Guardant that ECLIPSE continued. We have many more CRCs many more samples in our freezers leftover from the first cohort. So we just need to process those samples. But let us make more progress and take this first generation to the finish line and then we can talk about the second generation.

Got it. And one super quick question. Do you expect it to be an annual test with the current first generation? Thanks so much.

No, I think when you're looking actually at the rate of -- and I think it's really like -- the biology of CRC when you look at in terms of the literature in terms of how long it takes for CRC to go from one stage to the next stage based on some modeling, you're going to see that actually a minority of Stage 1 or a kind of become like very late-stage advance for even like three years app there. So when you're looking into it that really at what intervals you need to run this test. We believe as long as this test is getting done every three years with high compliance, here band detect almost all CRCs at curable age. That's why we are very excited with the potential of this device for CRC. But again, this doesn't mean that this would be the last performance. And I would bet you over time, it's just going to continue to get better and better. It cannot get worse. The only way is make it better.

Got it. Super. Thanks guys.

Thank you. Our next question comes from Jack Meehan from Nephron Research. Jack, please go ahead.

Thank you. Good afternoon. My first question is on the G360 ASP. So high end of the $2,600 to $2,700 range. Recently you've had a big acceleration in terms of the covered lives and payer wins. Just curious as you get better claims experience with some of these new players do you think it's possible to outperform that range for the remainder of the year? Can you talk about what guidance assumes in terms of G360 ASP?

Yes. Jack, it's Mike here. I can take this one. Yes, I mean, I think first the main driver of this improved ASP this quarter is really the mix between the CDx and the LDT versions of the test. And CDx -- from Medicare is reimbursed at $5,000, the LDTs better ASP on the CDx version. And some of that's being driven by -- some of that mix towards the CDx is being driven by the FDA approvals that we've been getting over the last year or so. So I think that can continue positively. And then from the payer tailwinds, yes, I think as we start to see the claims come through hopefully, we'll see positive momentum there and it could lead to that going higher than $2,700. Our guidance at the moment just assumes that this $2,700 level. And so we'll see. But again, we've had really positive news over the last few months. And so that really bodes well for the remainder of the year.

Great. Okay. And then sticking with oncology and with Reveal just on guidance. I think previously you were targeting a low double-digit million contribution to sales. Can you talk about how you're tracking relative to that? And just how are the volumes building for Reveal? Any updates would be helpful. Thank you.

It's Helmy. I'll let Mike. I mean, as you know we've been sort of engineering our overall volume such that we focus on a lot of the reimbursed products. And that strategy has been working extremely well. And so we've seen growth in categories with those products that are best reimbursed. That being said, we continue to see very strong growth in Reveal. I think we mentioned it was over 100% year-over-year. And so yes, I think we're very much on track. And Mike, do you have anything to add?

Yes. No, we're on track. I think that number we mentioned of low double-digit mains. We're still on track for that and that's still assumed in the current guide.

Thank you. Our next question comes from Kyle Mikson with Canaccord. Kyle, please go ahead.

Hey Guys. Thanks for taking my questions. Congrats on the quarter. And I want to start on Reveal as well. Maybe help me how sticky has Reveal been with [indiscernible]? Are you seeing a shift in more tests performed in that recurrent monitoring setting where you don't have a rate right now? And also if you could comment on timing of private or commercial payers and the other reimbursement for Medicare as well would be helpful. Thanks.

Yeah. So -- we're seeing I think a very similar mix to what we've been seeing. We've been focusing a lot more on reimbursed volumes. So it's the CRC indication and the adjuvant setting. So if anything we've seen utilization in the -- kind of the -- sort of the existing indications continue to be strong. We're making excellent progress in terms of additional clinical data sets. We're hopeful that, we'll still be on track to have some of those released later in the year. And once those gets published assuming, they're positive we'll submit that for breast cancer and for the additional surveillance setting in CRC.

Okay. That's perfect. Thanks for that. And then, AmirAli just one on the kind of USPSTF from earlier this morning thanks for doing that call guys. In the DDW data on the Stage 1 Sensitivity included those five in completely staged CRCs. If those were more advanced out those can move into Stage 1, I guess, you would have picked up more cancers. I know you're really conservative here but would FDA and USPSTF take that kind of a nuance into account because. If you back those out overall Sensitivity -- Stage 1 Sensitivity would be much higher. So I'm just curious, how they would sort of treat that aspect?

Hey. I just say a few words I'd ask Craig to provide more details. Those malignant polyps are malignant there CRCs, but they are like so early stage it looks like that even the patients are not going through the next step in terms of staging and the [Indiscernible] things they've done. All the treatment required. I'll let Craig to provide additional details.

Thanks AmirAli. It's Craig. One of the things to think through and when you get to assessing the data, it's about everyone's going to have a different perspective on these cases. And what we're providing to the FDA and others is a transparency around how they were staged and then how the malignant polyps were managed and not staged to use traditional criteria HCC or the more histological basis. How they're going to deal with that. That's something obviously we're going to work with them on and talk to them about and we'll just have to see how that pans out. But it's quite clear that there's differences in the way they were staged different protocol and these are things FDA no doubt will want to talk about.

Got it. Okay. Thanks Craig. Thanks guys.

Our next question comes from Julia Qin from J.P. Morgan. Julia, please go ahead.

Hi. Good afternoon. So AmirAli, regarding the under $200 million spend on Shield over the next 12 months could you give us a sense of what's the rough between commercial and R&D including loan expansion and then the next-generation test development. And does that include the potential step-up investment once you receive FDA approval which I assume is within the next 12-month window? And how would you characterize this efficiency in commercial investment in that $200 million budget especially given that we know sales and marketing plays a pretty important role in driving adoption?Thanks…

Yeah. Thank you. So we believe with this level of investment actually we are adequately resourced to really have a successful IVD launch that definitely includes the sales and marketing resources to launch this product. It's not that right after we are going to increase our spend significantly on the S&M side actually it's all embedded in that number. And it's going to be around that until we make more progress actually that some of our R&D kind of activities would kind of taper down in terms of how the studies would add and so forth. So in terms of the split of that $200 million still we are heavy on the R&D side just based on the trials that we are doing some of the technology improvements that I talked about and some of the infrastructure that we are building to be able to really be able to handle the samples at scale with low cost and so forth. So still it's really R&D heavy, but there are reasonable amounts of actually sales and marketing, very reasonable amount that we believe is adequate enough to have a successful FDA launch for this product. And as we make actually more revenues and we meet the milestones on increasing the ASP and getting the revenue coming with kind of the volumes that we expect. We are going to manage our operating expense. Keep in mind as I mentioned in the prior calls, we believe you can have much higher efficiency running the S&M for a blood-based screening test especially for us that we would be first mover in a completely new category. Frankly in this new category, it's not that we are competing with other players based on what we are seeing LDT. We are going to have that first-mover advantage in terms of market penetration and already we shaped the market a little bit to -- based on the accounts that we are in that we feel confident that actually post FDA approval we are going have a successful launch with this level of investment that I mentioned earlier.

Thank you. Our next question comes from Dave Delahunt from Golden Sachs. Dave, please go ahead.

Hey guys, thanks for the additional color on the data earlier today, and Julia actually took part of my question on the sales and marketing. And if you guys could give us a little bit more color on the sales force ramp and the strategy for calling on all the PCPs across the country if you're thinking about any other type of media campaigns or anything to get in touch with these PCPs and get Shield out there and there -- it gets its patients?

Yeah. Again actually at the time of FDA approval and shortly after that for a few quarters after even FDA approval. We are not expecting that we are going to have a very large sales force in terms of what we need to have for national coverage. At the end like I said as we are getting to USPS time lines, our commercial team as talked about before potentially it was going to be about 700, 800 people. But at the time of FDA launch and in a few quarters after that it's going to be a timing fraction of the number that I mentioned. And we believe in our strategy based on actually what we are seeing in the market right now and the depth of ordering that we are seeing for the blood-based cancer screening. So when you look at the depth of ordering, when you look at actually a higher efficiency selling that because of patient adherence more than 90% of so test would get converted to available case versus for other modalities. It's a very leaky process frankly. This gives us confidence that in order to meet the revenue milestones that we have in mind we don't need to go to hundreds and hundreds of people in the commercial team. We can really do it very efficiently. And we will execute and we will show that this is possible. But definitely, in terms of our OpEx, it's not that we get FDA approval and we are going to ramp it up significantly. We are going to meet some revenue milestones. And step-by-step milestone-driven we would increase our investment justified by the revenues that we are seeing and we will manage our contributing operating loss accordingly very close to the number I mentioned earlier.

Great.

Our next question comes from Mark Massaro from BTIG. Mark, please go ahead.

Hey, guys. Thanks for taking the question and congrats on the strong quarter. My first question is for you Helmy. When we think about the portfolio of therapy selection obviously you guys are the strong market leader in blood. As you're gaining additional traction with Guardant Response and TissueNext 360 and then Reveal. To what extent do you think you can start moving perhaps some other competitive assays onto the platform by - through bundling? And then I wanted to get a sense if you have a ballpark of what the attachment rate is between 360 and some of the other tests?

So we have this essentially ecosystem of tests now, where we can really manage the complete interaction from a precision oncology point of view that an oncologist has with their patients. And a lot of this will fall into place further, as we move to the smart liquid biopsy platform, where it will really make the sort of data connection between the different pieces much more powerful and to increase the utility. But we're already seeing that right now we're going through this evolution. We call this Guardant Complete where essentially a physician can push one button and really get a sort of testing workflow that they request in place for their patients. And so if they want to start with liquid and reflex the issue, if they want a response test after the patients put on immunotherapy all of that can be managed seamlessly now. And so we're really turning a lot of those features on. I don't think we've broken out the attachment rates, but we've seen very strong, I would say, connectivity between our tissue test and our blood test in terms of the initial Guardant360 test, as well as Response tests. So it's working. It's why I think one of the strongest leverage points we have is the fact that our Guardant360 business itself, which is that first test is growing very, very rapidly. We're actually we believe taking market share not just growing, but taking market share from other companies. And everything else is a function that get attached or connected to that initial time point. So it's – we're feeling very good going forward and it's an exciting time for us.

Great. And maybe one for AmirAli. Obviously, the Stage 1 through 3 sensitivity at 81%, certainly exceeds the FIT test. And – but I wanted to get a sense – obviously, stages 2 through 4 were excellent at 100%. To what extent should we look at the 55% and just wonder what the uptake of the test will be in light of the incredible sensitivity at Stage 2, where it is surgically resectable. Just give us a sense for how to think about the numbers overall?

So I maybe make a few points about this. So number one, bear in mind, we are talking about a new market category here for the people who are delaying or refusing to get any kind of screening done at this time. So for those patient population, who are not participating in any modality of screening, I think we need to have the right perspective in terms of like they are not getting feet down, they are not getting other stool tests on. They are not getting colonoscopy done. The most important thing and actually what we heard also in the call that we coordinated experts, opinion leaders in the field is the most important factor is making sure the uptake of the test is proper and patient participation is adequate. And blood test has that kind of advantage. So that's why I don't think necessarily like kind of comparative numbers is the most important factor here in terms of adoption. Number two, in terms of what data actually – which data should we look at. I look at what level we are going to get FDA approval, we are going to get Medicare coverage. We are going to generic access for all patients who are eligible for this test. And those numbers are clear. We know it, you know it, like our test performance is what we've reported is way over those mainland requirements. When we go to early stage, I think we have to keep in mind, when you cut the data into smaller pieces like there are some statistical variation associated with it just from scientific mentality. But if you just look at these numbers in face value, it's exciting to see you're detecting all cancers at Stage 2 at Stage 3. And let's say half of Stage 1 for the patients who are not getting screened and they don't have any symptom. What fraction of the missed Stage 1 are going to become Stage 4 three years after. When you look at it it's a minority. So in a longitudinal test for a test that patient adhere to, which is not applicable to other modalities. This kind of test performance and interface value. It's kind of exciting and that's why we believe it would do take nearly all CRCs at curable stage and would save many lives.

Excellent. Thank you.

Thank you. Our next question comes from Derik De Bruin from Bank of America. Derik, please go ahead.

Good afternoon. This is John on for Derik. So last quarter in biopharma, you guys were seeing some headwinds with some clients selling their decisions. Has there been any improvement? And obviously you spoke of your strong order book. So I was wondering how that's balancing out with your order book. And in terms of in Japan, how are the conversations going in terms of getting that reimbursement finally.

Yeah. No, I think when we mentioned that on the biopharma side, I think there are potential for some headwinds. We haven't necessarily seen them affect our business considerably. And we're obviously doing extremely well in terms of biopharma volume. We're happy where things are. We're happy with what the pipeline looks like. We do think that as we said that some of that will resolve we have some of the uncertainty around budgets and someone will resolve second half of this year. And we are seeing a lot of very encouraging conversations we're having with pharma companies across multiple programs. So we think this is going to continue to be an important growth driver for our business. In terms of Japan, we're having good conversations there. And yeah, we still think we're on track for this year to have a reimbursement there and that will be a big business for us. And I'll just add I think -- we're making good progress in China as well. And we think that will also be a similarly strong business for us once that gets going.

Thank you.

Thank you. Our final question comes from Tejas Savant from Morgan Stanley. Tejas, please go ahead.

Hey, guys. Good evening and thanks for the time here. One for you Helmy on the Guardant response testing protocol. Can you just lay out in your mind like what do you think are the advantages of measuring just those two time points over the course of viral treatment versus tracking the patient over a longer period of time via multiple follow-up tests? I mean for example, if a physician wants to look at that continued, discontinued decision a little bit later, how would that work or is it relatively rare to use an assay in that fashion right now?

Yeah. I mean, if you look at the literature including other tests that are out there. A lot of the clinical utility almost amongst all of it really derives from the initial time point post-treatment initiation. And so that's really the benefit. If you wait out longer then you're -- essentially you can start relying on other approaches, radiographic imaging and so on. So it's -- we don't think that you're missing out by using kind of that time point. And it's really focusing on what the data shows and where the clinical utility is. That doesn't mean that there may be use cases in the future where monitoring may be beneficial. Obviously, that's where the field is going as extensive monitoring. But we don't see much sort of -- almost any loss in sort of utility or value. But in fact it's nice just to know that with a single test you can help make a decision.

Got it. That's helpful. And then one quick one for AmirAli here. AmirAli with ECLIPSE sort of full staging sort of now available, how does the CRC mix by stage compared with your previous A-priority expectations if you will? We had a few unbounds on more Stage 4 patients in ECLIPSE versus DeeP-C, et cetera. Were there any differences in trial design in retrospect that may have contributed to the differences in the mix for the population enrolled?

So, maybe I make a few statements then I ask Craig to chime in here. So, in fact, when you look at public databases on like the staging distribution of recently diagnosed CRC patients. So, actually pretty close. Like I think if I recall right for Stage 4, it's about 20% of the patients are getting diagnosed at Stage 4 and in 65 patients in this cohort we had 10. So, it's kind of pretty close. But Craig do you want to add?

Yes, I might add. I mean we're talking about small numbers when you compare across trials number one. Also a time difference for those trials you talked about and our study collected a diverse US population. So, it's really at that point in time. And you can start to get into theories about what's different between the population from 2019 to 2022 versus 2012 to 2014. And obviously one thing that would make a nice story is COVID and people talk about the delay in screening and other things. But as AmirAli mentioned, when you look at the actual Stage 4 breakdown, it's actually pretty much spot on to where things would expect from other databases in the population.

Got it. That’s helpful. Thanks guys. Appreciate the time.