Q3 2020 Guardant Health Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Garden Health Q3, 2020 earnings call.
At this time all participants are in listen only mode. After.
After the speakers presentations will be a question and answer session to ask a question. During the session you need to press star one on your telephone.
If you wish to address your question press the pound key.
I would now like to turn the conference over to your Speaker today, Gary Mandel with.
With Investor Relations you may begin.
Thank you.
Earlier today Garden Health released financial results for the quarter ended September Thirtyth 2020.
You have not received this news release or if youd like to be added to the company's distribution list. Please send an email to investors at garden health Dot com.
Joining me today from Garden, it's called me out to be co founder and Chief Executive Officer, and barely Teladoc co founder and President and Derek Hitachi Chief Financial Officer.
Before we begin I'd like to remind you that management will make statements. During this call that are 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.
Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in the press release Garden issue today.
For a more complete list and description. Please see the risks factors section on the company's annual report on form 10-K for the year ended December 31st 2019 and in its other filings with the Securities and Exchange Commission.
Except as required by law garden disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast remember fed 2020, but that I'd like to turn the call over to help me.
Thanks, Gary Good afternoon, and thank you for joining our third quarter 2020 earnings call.
During the quarter, we continued to make substantial progress across our business driven by our commitment to serve patients consistent with these values I will start off our call with a patient story.
A 44 year old non smoker was diagnosed with stage four adenocarcinoma a type of non small cell lung cancer.
His oncologist originally ordered a limited panel issued does but he would confirm negative for easier far L. Cross one and PDL one.
So as oncologists, who elected chemotherapy plus pembrolizumab for first line treatment, despite not having complete bio marker testing however.
However, the patient failed to respond to treatment and was being considered for hospice. Fortunately. His oncologists, then decided to try and liquid biopsy for a complete genomic assessment of his tumor and ordered a garden Threesixty test.
We quickly identify the B RAF mutation based on this result, oncologists was able to put them on a corresponding targeted therapy, a combination of definite central madness for treatment history demonstrates the importance of the precision oncology paradigm.
Multiple studies comprising more than 5000 samples and represents what we believe to be one of the most rigorous validation of the clinical and analytical performance of a liquid biopsy tests.
Following FDA approval, we launched two versions of Garden 360 in September the first product Garden 360, Cvs is FDA approved version of our assay.
We are confident better FTAA approval will help to accelerate wider adoption of guideline recommended genomic profiling and increase the number of advanced cancer patients who receive potentially life changing treatments, specifically, we expect FDA approval to strengthen reimbursement by advancing conversations with private payers in further.
Improving Medicare pricing.
Extend momentum for a companion diagnostics business.
In advance they use of garden 360, with physicians, who have been slow to adopt comprehensive genomic profiling over the medium to long term.
The second product we launched the next generation version of our Garden 360 laboratory developed test or LDP that doubled down on our commitment to continue innovating in this space and offer additional biomarkers to our customers as they become relevant that's exciting new version provide even higher performance.
Than previous versions of Garden 360. It includes additional homologous repair deficiency Jean in an effort to keep up with the continued expansion in the park inhibitor space.
And track two in track three fusions.
And a best in class tumor mutational burden or TMV score, which was recently approved and tissue as a biomarker remember losing that for solid tumor patients who have progressed following prior treatment.
Our blood based <unk> highly differentiated and built upon deep sequencing of two mega basis of genomic content.
And uniquely integrates information about tumor setting levels somatic driver alterations and chip mutations to provide a robust tmv's core that can help identify more patient and other TMV test.
This product operating allows us to address the barrier of confidence in liquid biopsy amongst some late adopters with an FTA approval and the opportunity to provide enhanced features to those customers who are regularly using liquid biopsy and clinical practice.
Overall, I could not be more proud of the garden team for the progress made this year. It's hard to believe it was only a little over two years ago and he became a public company and broadly presented our vision to address the continuum of cancer care for screening to recurrence monitoring to therapy selection with a portfolio of practice changing products.
There is clearly a growing appreciation of this vision and a growing realization of the potential of liquid biopsy to truly transformed the field of oncology.
Center IPO, we have made incredible progress establishing liquid biopsy as a vital clinical tool for therapy selection and advanced cancer patients.
Chairman of several key milestones, including securing reimbursement have made the 6 billion addressable market attainable as comprehensive genomic profiling become a standard of care.
We have also made significant progress with our lunar programs aggressively addressing the even larger opportunities and the recurrence monitoring and screening populations.
These programs are initially focused on colorectal cancer, which will serve as a beachhead for expansion of monitoring and screening for multiple cancer types I.
I am confident from recent data that are lunar one assay for occurrence monitoring is best in class from both the performance and clinical work flow perspective.
I'm also encouraged by the breakneck speed with which our team is executing eclipse colorectal screening trial and that if successful will address significant unmet need.
With that I will now turn the call over to a mirror Ali for more detail on our Biopharma business and our lunar program.
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Starting with our Viropharma business.
As county Nightstand during the quarter, they're very strict critical milestone far Cvs business FDA afternoon off guard entries 60 CVA.
SK I approve all in mid August are Cvs discussions have accelerated and we believe our first approval will pave the way for a new companion diagnostic partnerships.
We had that other strong quarter for a day or a local service so that others are avenue growing 63% to 14.
14.2 million.
By increasing Cvs services.
And the sample testing files Biopharma sample volume of 3071 cast.
42%.
Know that prior year period, but through 9% probably the second quarter of 2020 due to the expansion of our customer base.
A robust Cvs pipeline demonstrates that our buyer Arnold partners are recognizing that value of CGP to ask Harry clinical trial enrollment.
To that end and new steady publishing nature medicine led by the National Cancer Center Hospital East.
C H E in Japan.
Australia that the garden and she's 16 liquid biopsy is not only concorde into keisha genotype pain, but also accelerates clinical trial enrollment.
<unk> more actionable alteration and at <unk> similar treatment response rate of progression free survival and patience as gastro intestinal cancer.
Patient, we'd add mascot straying tests, and all cancer, including gas Street and colorectal cancer.
Max two novel therapies that target this specific biomarkers identify.
Compared to tissue genotype paying a garden Enchase 60, sped up spinning by three full and improved Charlie Norman Bates by 132%.
We are also making great progress with garden and farm.
Real world, claiming called genomic platform, which we live in June to help accelerate research and they are a lot of the next generation of cancer Therapeutics.
God anything farm combines a robust genomic data from each guard at 60 pass.
If I'd clinical information for each patient.
Our Viropharma partners are finding significant value.
Largely through the note real world evidence, which gives insight into how patients are treated based in there and irritation profile.
As well as patterns of drug response.
And Schumer evolution.
We are excited by the number of deals we have signed up to date and by the number of active discussions that are going with the additional customers.
Now and then car known their program.
Since our inception.
CB and we are optimistic that the results on white cliffs trial, we will confirm that our ascertain meets those requirements.
This development on this draft proposal reaffirms our choice of CRC as a beach head of our early detection program.
Finally during the quarter the FDA granted emergency use authorization on garden team for using detection of Sars core be too.
The test is being offered to garden and health employees and select partner organizations. While we are leveraging our expertise in liquid biopsy testing and are proud of the contribution that we are maintaining battling the pandemic serving cancer patients remain our top focus.
With that I will now turn the call over to Derek Browe Touchy for more information and details on our financials Derek.
Thanks, I mean really.
Revenue for the third quarter of 2024.
Totaled $74.6 million.
23% from $60.8 million in the prior year quarter.
The increase was driven by an increase in precision oncology testing revenues, resulting from significant increases in clinical sample volume and average selling price or ASP per test as well as higher development services and other revenue.
Total precision oncology testing revenues for the third quarter was $60.4 million comprised of $48.4 million from clinical tests and $12 million compile pharmaceutical tasks.
Decision oncology revenue from clinical tests included $4.3 million in revenue received from Medicare for samples processed can 29.
Given the ages the samples associated with this revenue.
I do not believe it to be indicative of ordinary course of operations.
Third quarter clinical precision oncology volume totaled 16950 tasks.
28% from the prior year quarter.
And up 24% from the second quarter, 2020, which was especially impacted by the COVID-19 pandemic.
Clinical precision oncology NSP was $2852 in the third quarter of 2022.
23% from $2319 in the prior year period.
The 23% increase in clinical ASP over the prior year quarter due principally to the reimbursement from Medicare for testing of non lung cancer samples. In addition to lung samples starting in March 2020.
As a result of the evolution of coverage for the testing of Medicare patients.
When changes in coverage have permitted we have submitted appeals and revised claims for samples processed in prior years.
In the third quarter of 2020, we recorded $4.3 million of revenue for payments from Medicare from peels and revised claims for samples processed in the prior year.
In the third quarter of 2019, we recorded $5.5 million of revenue from Medicare Appeals.
Excluding the impact of revenue from Medicare Appeals.
Clinical ASP in the third quarter was approximately $2600 per sample.
Down from approximately $2700 per sample in the second quarter.
The decline was due principally to commercial payers with whom we are a non covered provider beginning to provide lower payments for tests.
Precision oncology revenue from biopharmaceutical test in the third quarter totaled $12 million down 44% from $21.4 million for the prior year quarter.
But up 6% from.
From $11.4 million in the second quarter of 2020.
Already expenses for the third quarter of 2020 or.
$36 $2 million.
<unk> 224 $6 million in the third quarter of 2019.
The increase was primarily attributable increased spend to support our lunar programs, including the eclipse clinical trial, our FDA submission for garden, 360, CTX and other research and development programs.
Sales and marketing expenses for the third quarter of 2020 or $25.1 million compared to $18.8 million in the third quarter of 2019.
The increase was due to growth in sales and marketing staff.
Plus then on programs to increase education and awareness about liquid biopsy.
General and administrative expenses for the third quarter or $66.3 million compared to $16.4 million in the third quarter of 2019.
G&A expenses for the third quarter of 2020 included $50 $1 million in stock based compensation or Sp's.
Including expenses related to market basic restricted stock units grants company's founders on May 26, 2020.
As compared to $1.7 million and SBC in the third quarter of 2019.
The remaining increase in G&A expenses $1.5 million.
Which was primarily due to additional staff to support the growth of the company.
Legal expenses and the cost of complaints with requirements of being a large accelerated public filings with the SEC.
Net loss attributable to attributable to garden health common stockholders with 77 $7 million or 78 per share for the third quarter of 2020.
Compared to 12 $8 million.
Or 14 per share in the third quarter of 2019.
We ended the third quarter of 2020 with slightly over $1 billion in cash cash equivalents and marketable securities.
Beginning in the second quarter of 2020.
We added disclosure of adjusted EBITDA, a non-GAAP financial measure to our financial reporting.
To assist management and investors in evaluating the performance of our core business.
By removing the impact of income or expenses attributable to material non-cash items.
Specifically stock based compensation and fair value and measurements due to the subjectivity management judgment and market fluctuations involved around these amounts.
We exclude certain other items, because we believe that these income or expenses do not reflect expected future operating expenses.
Additionally, certain items are inconsistent amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance.
You will find a detailed presentation of non-GAAP adjusted EBITDA and a full reconciliation to GAAP net loss attributable to garden held come stockholders and our Q3 2020 press release results.
And quarterly 10-Q filed with the SEC.
Our use of adjusted EBITDA as a non-GAAP financial manager is not intended to be considered in isolation from as.
Substitute for for as superior to the corresponding financial measure prepared in accordance with gap.
Non-GAAP adjusted EBITDA was a lhasa $14.6 million in the third quarter of 2020.
Compared to 9 million dollar loss in the third quarter of 2019.
The impact of COVID-19 created headwinds for the oncology space during the third quarter.
And do too it's unpredictable evolution.
We do not believe that we can reasonably estimate the magnitude or duration of specific impacts on our business.
Accordingly, we're not reinstating financial guidance at this time.
Where we sit today, we believe the effects from Covid are likely to continue to impact.
Colleges space in the near term.
And tell me mentioned there has been a resurgence of Covid cases in some regions across the U S and.
And we are seeing signs, indicating that this resurgence will adversely affect clinical volumes.
While we have been successful in continuing to serve our customers in this environment.
Our diagnostic peer so we weren't expecting a major recovery for you in the third quarter here given that backdrop, but just trying to understand some of the comments that you made around cobot resurgence is that I understand the conservatism there, but is there anything else that we need to keep in mind.
After all the value of GE Threesixty liquid has been the ease of access than the.
Blood based test and accessible to the patients and their home setting with double bottomless. So I'm just trying to understand.
How to frame.
Frame that given the second sort of second wave covert that that's coming here and then.
On key Threesixty LDP, if you can help us understand if that's going to be meaningful next quarter. Obviously you are having some unique features here with TMB and.
A number of additional genes.
Yes, great question. So in terms of the co good outcomes of the clinical volume.
The efficiency of being able to service and detail physician offices.
On a remote and virtual environment, just not the same as being an in person, but I think we saw very quick recovery to pre covered levels because of the agility of our teams on both medical affairs and commercial teams of really being able to convert to this new normal this new environment of being able to do.
What is the regulatory pathway there as well.
I think I think you alluded to on the call.
We now have this framework, where we have a F D. A approved product with garden tree 60 C D X.
A product you know as best in class turnaround time, it's an amazing tool with.
12th of clinical evidence supporting it.
In terms of one of the most rigorously validated tests to liquid biopsy tests out there and there's something that is extremely useful for the first time studying and very useful for onboarding physicians, who maybe aren't used to using C. G. P. In a day in day out basis, and so we see that is a very important piece of our product quick.
Polio.
And I just wanted to get your thoughts on how a garden to use the multi cancer screening opportunity in the light of the two large pretty revenue transactions that have happened in the space.
I'm in Maryland, you're gonna take this.
Yeah sure so I think.
Maybe a vacation is CRC angry are far away all other kind of players are are trying to build log base.
Screening assays would be the third farms those that would be the increase in compliance and best space Compliances screening.
The same core platform technology in fact, adopting able to this other cat stereotypes. So.
The last quarter, we added over 10 million covered life. So we're continuing to make very good progress on that front in terms of Ah improvement in ESP.
There were a couple I think different.
Components to that especially on the Medicare side.
As the approval on Garter entries sixties, San Diego accurate.
The topic guideline enhancement around that product having spent that there is other part of markets Victor that Thursday run.
Is too.
Made us on the greatest in terms of biomarker testing.
Maybe shorthand truck shedding our trial that'd be how did I experience yet but.
Some kind of issues still we would be able to finish the trial on time. So it would be done with it by November of next year in terms of enrollment.
And another.
Another one.
Cyrus studies are going to studies on.
Yeah, No great question, Doug So in terms of the first part of the question.
Yes, we are seeing very nice engagement with.
Care.
Really bringing focus to the conversation and so we see that as a overall positive for the space, we see it as clarifying the space as well in terms of really reducing the noise that exists and I really just focusing on those if they approved projects in this space, but that being said.
Confident we have what we believe is really a best in class product in terms of performance sensitivity breadth and.
As well as.
Service level.
And so were.
I think we're we're very bullish and very optimistic in terms of continuing to grow use of garden 360, and overall CGP in space.
Yea I would say that.
Start and then Maryland patching.
Patients in the blood and tracking them.
So we have a very I think much more I think.
Okay.
Maybe I started then maybe at Shannon.
So in terms of actually.
Acuity Q3, Q2 weeks, besides huge impact August and Q3 was modest better than Q too and chew for we are conscientious.
Progress trended six two.
Roadblocks and then a complete and then you're filling in with others, but we're what we're happy with is that we're seeing a browsing the basic customers and so in the future. We're hoping that those will be to the kind of growth.
But we saw in the past.
Thank you.
Brian Weinstein from my.
Blair Your line is open.
Hey, guys. Thanks for taking the questions just to go back to a couple of questions to go on the CMS.
Draft on CRC.
I wanted to see if I heard a mirror retirement right did you think that that would potentially shorten the timeframe for coverage because our read of it was with inclusion now required of one of the guidelines that it might actually extend it. So I wanted to make sure I understood. The thought process. There and then also do you think that there's a need for advanced adenomas goalposts to be.
Added to to the final document there.
Okay I'll start.
Actually no different the requirement and kind of statutorily, that's required for coverage by CMS and.
And the setting.
So we don't really see that as a as a big difference in terms of.
Previous thinking and what was typically.
Cleared versus what's being proposed.
This only.
Further.
You know I think gives us confidence in terms of being able to have a timeline that is extremely quick and I think reaffirms our choices.
It's colorectal cancer is a beachhead for early detection program.
In terms of.
Second.
Okay Alright.
Advanced.
Yeah. So I think they didn't give patrick clinical application. If you want to increase in compliance rates are screaming.
The performance though.
Which is a very broad concepts and.
Excited with some any data that we have but those are very early so.
Let's forget those more as pipeline activities for us.
Understood. Thank you.
Thanks Brent.
Patrick Donnelly from Citi. Your line is open.
Thanks, Homi, maybe one for you just on the resurgence on the clinical volume side for for Q Yeah.
I'm just trying to figure out I guess, how much impact you guys have seen quarter to date already in terms of the October trends versus some level of conservatism baked in I mean, I know even three months ago, you guys had some conservatism for Threeq you with with the potential second wave. How are you viewing this quarter in terms of the research I mean, how much impact have you seen already and how much are you seeing kind of key.
Currently versus fear of what's to come I guess in the next.
Two months or so.
Yes, it's a good question I would say, it's really along the lines of.
When we commented on that in our Q2 earnings call. We're seeing these regional flare ups, we're seeing impact on.
Okay.
Kind of short term basis, depending on.
The region and the level of fear that exists and clearly we're in a much more.
I would say high alert time was.
U.S. crossing 100000 cases per day.
In terms of new infections, and so there is.
I think a.
Well founded.
Well founded.
You know I think.
So level of.
You know I think.
Well founded kind of level.
You know I think.
In terms of them on the part of the physicians in terms of really trying to make sure that they keep their patients as healthy as possible.
We're also this is not this reflected in our own data you're seeing in the patient visit data and overall oncology field data.
That.
Theres a fluctuation there from week to week in terms of.
And in a person patient visits the.
The field in general as moved.
Okay significantly to remote visits and so all of that reduces the number of opportunities for patient engagement and physician engagement.
Virtual calling is just not as effective as being in person, but that being said we are seeing excellent metrics in terms of number of physician and in terms of unique physician orders.
Really in terms of our share of voice in the field. So we're very confident that despite these headwinds we are doing I think something that is really second to none in terms of the oncology diagnostics space.
But it's going to continue to be a challenge it's not the same type of conversion.
That we had.
A year ago pre covert.
Very exciting.
Business for a subprime business perspective also jacking, a bunch of new claim to call.
Data to show the value of liquid biopsy, Dara debit or even more excitement and what were you doing in guard Ensing farm is looking at the line between another you won't ended up.
One of the unique advantage of liquid biopsy is and the database that we have is.
Multiple bleed time point that we have from different patients and you could really see what's happening to a patient.
As a result of treatments over the course of.
Relatively long period of time blended patients getting test it multiple times.
Some interesting opportunities for us.
Beside like Israel Every award evidence demand in terms of single clients.
Data.
And a lot of experience.
Right above my arm Viropharma.
Nurse.
Almost reads all Viropharma partners that we have we have some interesting conversation around garden unseen are.
Sign bunch of deal then many mart deals are in the pipeline up conversations still it's empty for us So and we have to go through this process of conversation to really be able to access that offered trying to size for next year better so.
But.
Sitting area.
Emerging business for us.
Got it.
And then just a couple of ones on on lunar your.
I mean, just in terms of.
Implications of the Palmetto draft LCD would you consider accelerating your plans to submit for other indications beyond colorectal, particularly as you know on the space gets a little bit more competitive here in light of the support of reimbursement landscape and then.
On lunar too I mean this this goes back to an earlier question around some of the M&A activity in the space, but in terms of your own commercial channel Buildout efforts ahead of lunch.
Are you sort of incrementally more open to considering partnerships in the space forces. It go it alone strategy as far as that.
Targeting those.
Physicians is concerned.
Yeah, Great question the first one.
Orders ago has to really.
Being able to invest in building out a.
Really differentiated and leading commercial channel in that space and doing so in a way thats aggressive that is timed.
For the potential launch of a product.
And for colorectal screening so yes, that's something we're very committed to and we believe that bridge.
Really making sure that we engage all channels not just personal promotion, but digital promotion and direct to consumer as well as partnering with other stakeholders is those are on the table and all going to be components of our commercial framework.
Got it thanks, so much for the color.
Thanks.
Again, I would just ask a question. Please press star and the number one on your telephone keypad. Your next question comes from the line of 10 Gen Ma'am.
BTI Gi your line is open.
Hi, Thanks for taking the question just a couple of quick ones. Firstly I was curious whats the rationale of the of the enhanced pardon 360.
This time, it's not program, yes. So we think the next generation Garden G 64 clinical testing the best product is what we put in the market one side as a tool mango based pattern similar to army that'd be out for the pharma at basically does that can be calling based on that content.
<unk>.
And also the Cat 80, plus jeans, which are very claiming created relevant I'd also be enhanced that panelists how may mention on the Amtrak site in charge. These sites to read the match all the biomarkers that based on guidelines.
I'm interested to test.
I mean, there were running covid, yes, so regarding covid actually there'll be maybe I'd look very comments about an hour covid revenue in queue tree, but since it's not really the focus of our business.
Not really expecting covid revenue too.
<unk> in a room in a few private quarters to calm because really like pier laser focus oncology era, having said that very excited about this.
Because like.
Thanks to offerings of the tests to garden, including the partners and didn't maintain our work environment as safe as we can.
Has been very important for us to keep the productivity level.
During this time that may.
Great.
State of mind that vast venture into our employees have found out here doing this testing for Garnett employees also we all signed up to a bunch of partners, but we are not commercially.
Pushing it in a significant way.
Yeah, So <unk> sweet.
We recorded a million dollars worth of revenue.
Or.
COVID-19 test and we reported in the development services line item because.
Cause we don't want to confuse or.
Combine it with our oncology testing, which is in precision oncology.
So that hesitate clean and it's really small sitting in the development services and we don't have merely.
Merely suggested we're not working on it to be a big element and we don't expect it to because the government.
Sounds great. Thank you so much.
Well thank you.
There are no further questions at this time and this concludes today's conference call you right now disconnect.
Okay. Thank you.
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