Q1 2021 Guardant Health Inc Earnings Call
After the speaker's presentation, there will be a question and answer session. If you'd like to ask a question at that time, you may do so by pressing star and the number one on your telephone keypad.
As a reminder, today's conference is being recorded.
It is now my pleasure to hand, the conference over to Kerry Mandeville from Investor Relations.
Thank you.
Year to day Guardant health.
Actual results for the quarter ended March 31 2021.
And he's not the St. Louis, Missouri for if you'd like the attitude of the company's distribution list. Please send an email to investors at guardant health Dot com.
Joining me today from Garden, and tell me LCB, Chief Executive Officer, <unk>, <unk>, President and Mike <unk>, Chief Financial Officer.
Before I 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 Guardant issued today.
For a more complete list and description. Please see the risk factors section of the company's annual report on form 10-K for the year ended December 31, 2020, and other filings with the Securities and Exchange Commission.
This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles reconciliations for the most directly comparable GAAP financial measure maybe found in today's earnings release submitted to the SEC.
Except as required by law guardant disclaims any intention or obligation to update or revise any financial projections of forward looking statements of there because of the new information future events or otherwise.
This conference call contains time sensitive information and is accurate only as of the life broadcast may six 2021 for that I'd like to turn the call over to help me.
Thanks, Gary.
Good afternoon, and thank you for joining our first quarter of 2021 earnings call.
Everything we do at Guardant is motivated by our commitment to serve patients.
In line with our pace of Bruce commitment I will start off of our call today with the patient stories.
Six years ago of 64 year old man with diagnosed with metastatic colorectal adenocarcinoma and went through numerous therapy regimens and surgeries.
In the spring of 2020 as cancer recurred and as new oncologist ordered the garden 360 <unk>.
The Europe you 600, <unk> mutation was identified it is estimated that this mutation occurs in approximately 8% to 10% of colorectal cancers.
By identifying the actionable mutations who was able to begin treatment with the combination of targeted therapies of EMCORE asking it was kind of tumor map only recently approved by the FDA.
Fortunately the patient responded to the start the therapies.
You know tumors are constantly evolving.
After about six months, the patient was showing signs of progression.
As oncologist ordered another garden for use of T cells with our expanded channel that includes tumor mutational burden for <unk>.
The second garden 350000 identified the patients tumor as CMV highs.
A few months earlier, the FDA had approved member Luiza Mab for patients with <unk> high tumors of 10 mutations per megabase and above for this finding opened up another therapeutic Avenue for the station.
The story highlights how genomic profiling of using garden $3 50, you can keep up with the evolution of the tumor and identify ongoing therapeutic options.
Turning to our first quarter performance, we started the year strong with revenue growing 17% for approximately $79 million.
I am really proud of our team for their continued hard work this quarter, which translated to solid growth in other clinical business as well as progress across our product pipeline.
As expected, we continued to see residual COVID-19 impact at the beginning of the year, but over the course of the quarter as physician offices started to reopen business improved further.
Even with the persistent presence of COVID-19 headwinds clinical volume grew 21% to record levels of 18395.
We continued to extend our position as the liquid biopsy leader for therapy selection and there is still a vast amount of greenfield opportunity ahead in this market.
The underlying fundamentals of our clinical business are very strong and we continue to see growth in both new physician adds and repeat orders.
Even with the residual impact from COVID-19 that we anticipated this year, we expect our clinical volume to grow more than 40% over 2020.
We also made important progress on the reimbursement front.
At the end of March the EMS confirm that our garden 360, Cvs debt meets the criteria for advanced diagnostic laboratory test or a DLP status.
It is reserved for FDA approved test as well as for innovative products that provide novel clinical information that cannot be obtained by any other method.
The <unk> status Garden, 360, <unk> will be reimbursed at a rate of $5000 for all Medicare patients in line with our internal expectations.
Now moving on to our recurrence monitoring opportunity with garden to reveal.
We are very pleased with the tremendous enthusiasm we are hearing from oncologists since its launch in mid February.
As a reminder of reveal is the first blood only liquid biopsy test for the detection of residual on recurrent disease.
For the simple blood draw the test of improve disease management of early stage colorectal cancer patients by detecting Cte DNA and blood after surgery to identify patients for the residual disease, who may benefit most from adjuvant therapy and by detecting recurrence of months earlier than current standard of care.
We believe Gardner of deal is truly in a class of its own with industry, leading sensitivity and specificity and an average turnaround time of only seven days compared to the other tests that require of tissue biopsy and that of turnaround times of four to eight weeks.
Much of these talks with the launch of Darden's 60, the blood only solution addresses the significant logistical challenges posed by tissue in this setting.
Today, the standard of care of C. H.
Blood tests, where your debt your results a few days later importantly, gardened the reveal fits into an oncologist workflow in the exact same way of C. A abuse, but give them extraordinarily better performance.
<unk> has the sensitivity of 59% was 54% specificity in the surveillance setting versus 91% sensitivity with 100% specificity for garden reveal.
So they are getting the better product market fit with the benefits of improved performance.
It is still early but we are seeing strong uptake from both new users as well as customers that have been using other products on the market and benefiting from the deep relationships, we have within the policy community.
From the onset we have said that it takes more than just great technologies to drive durable long term adoption of new products.
This type of sustained growth requires seamless integration into the clinical workflows demonstrated the clinical utility regulatory approvals and broad reimbursement.
As for our work with garden of <unk>, we are committed to achieving excellence in each of these to ensure that our product driving superior value for the market and maximize access for patients.
We're making great progress on the reimbursement front and are confident we will have Medicare reimbursement in place for the newer deals by end of 2021.
At the beginning of April the New York State Department of Health Clinical Laboratory evaluation program or clubs.
Proved gardened the reveal for the detection of minor thing of MRV in patients with early stage cancer.
This approval is an important proof point for reveal and builds on our commitment to improving care for all cancer patients.
By expanding access to our tests to complying with the appropriate clinical laboratory regulations.
I'm. So excited about what is the head for gardens, and believe 2021 will be a pivotal year for us as we expand our product portfolio and invest across our business to build the foundation for complete cancer testing across the continuum of care.
Looking ahead in our therapy selection business will continue to expand the utility of garden 360, with additional approvals clinical data and broaden the use of the test from the molecular response from monitoring studies.
There have been more than 40 publications to date and highlight the utility of garden of <unk> 50 in the setting.
The generated data across multiple tumor types, including lung breast gastric and bladder cancers and multiple classes of therapies, including Immunotherapies that demonstrate a second gardens with 50 tests of few weeks after treatment initiation can segment responders versus non responders.
To that end of New study recently published in J C O precision oncology.
All of the Garden for says he provides an early indication of treatment of response September lose the mab based immunotherapy by detecting the molecular response as measured by changes in the circulating tumor DNA levels early on.
This study adds to the growing body of evidence showing that our garden for years 50 tests kind of effectively measure of molecular response, giving clinicians in earlier indications of whether to continue or stop treatment.
For other therapeutic regimen, Florida enrolled the patients in the clinical trials.
Minor thing molecular response is an important application of our technology platform that will soon usher in a new era of adaptive management of treatments and disease all within the reach of any oncologists using a simple blood draw.
We are also looking forward for the upcoming launch of our first tissue product, which we believe will address the unmet need that persists in the therapy selection of the market today due to the challenges with many of the existing tissue operating.
And recurrence monitoring we will continue to drive the adoption of Gardner of yield that's as we did with garden piece of <unk> several years ago.
Ushering in a new era of precision oncology for earlier stage patients and finally in screening we expect to complete enrollment of the Baroque clips filed before the end of the year and to begin work on our expansion into other cancer types.
To support our ambitious vision.
Moving to grow our incredible team I'm excited to welcome Dr. Craig Eagle recently joined garden of their new Chief Medical Officer.
Craig Most recently served as vice President of Medical Affairs oncology for the net debt.
Oversaw the medical programs across oncology portfolio, Craig has a wealth of experience driving medical affairs of clinical development and clinical trial operations of leading pharmaceutical companies and he will undoubtedly make a great impact as we continue to develop and commercialize best in class products and scale of the company for the future.
With that I will now turn the call over to the neurology for more details on our Biopharma business and our pipeline of activities.
Thanks, Tony.
Our biopharma business as the whole is roughly back in line with the pre COVID-19 levels and we are pleased with the progress we have made in Q1.
Looking at Biopharma samples.
As expected the.
Volume sort of first quarter was sequentially down from Q4 levels, but higher than the COVID-19 trough. We saw in Q2 on Q3 of 2025.
Biopharma sample volume was 3520 of true test for the first quarter.
The decline of 33% from the prior year period.
The continued to serve the growing number of biopharma customers with more of that 70 partnerships currently underway.
We're supporting any increasing the number of studies and we have the robust pipeline of discussions for future collaborations.
However, while clinical trials are picking back up.
Rowling patient volumes are still depressed compared to pre COVID-19 levels kind of changed the impact both prospective and retrospective samples of audience.
Looking at several of the managed services.
<unk> received strong interest in our companion diagnostics business.
One of the FDA approval of garden of <unk> 60 in 2020.
The other local services revenue for the first quarter 2020, one grew more than 100% for $14 9 million.
Last week, the announced the strategic collaboration with Daiichi Sankyo to pursue regulatory approval and commercialization of GARP on trees 60, Cvs as a companion diagnostic for inherit true.
Two of targeted antibody drug conjugate being stead.
Steadied in the treatment of patients with advanced metastatic non small cell lung cancer.
This further strengthened the same quarters of comprehensive profiling as more and more of Biomarkers are being pursued in the stupid.
We are also investing in our global companion diagnostic footprint as part of our mission to make CGP broadly available to patients around the world.
So that and the recency received our CE IBD self certification for the EU.
So for me that our initial P. M D E filing in Japan.
Our platform continues to generate data that further demonstrates the clinical utility of our product portfolio.
At the ACR Amgen presenter of clinical studies that demonstrated how our garden true 60 C. Bx was effective on selecting patients with K Ras G 12 C from a.
Benefits from treatment rich so tourists.
This mutation exists and one out of every eight patient with non small cell lung cancer.
So there is a critical need for improved access to high quality diagnostics on the routine biomarker screening.
Now turning from Garden entry view before its launch did your DNA based test to detect the MRV mainly required two of them are tissue to identify patient specific tumor mutations.
And your study led by Massachusetts General Hospital of Cancer Center, which was published in clinical cancer research demonstrated that the garden Street meal identify patients most likely to recur with highest clinical accuracy.
The integration of cancer specific epigenomics of genomic signatures on those guard on three wheel to detect for minimal residual disease in the early stage colorectal cancers.
The industry, leading performance and read out their need for tumor tissue.
The primary landmark analysis 80 for blood samples were taken from the curative intent patient population of one month after competition of the three time.
In the subset of patients with at least one year of clinical follow up all patients with detectable CPE DNA Richard.
God entry of real sensitivity specificity were 55, 6% kind of 100% respectively for this single time point.
By incorporating the one gets who'd been on surveillance samples sensitivity improved to 91%.
Tissue dependent on lot detached has previously reported of sensitivities of 40 to 50 per cent redistricting go post surgical blood drop.
Interesting right.
Grading epigenomics signatures.
<unk> test sensitivity price, 36% versus just using genomic alteration alone.
Also see a test.
The standard of carrying of colorectal cancer did not predict returns in this patient cohort.
We believe that garden entry Bill can be a powerful decision makings for for oncologists managing patients with early stage colorectal cancer.
In addition, our blood only approach offers on more streamlined workflow kind of.
Faster turnaround time for clinical decision, making.
We remain committed to generating clinical utility evidence based on prospective interventional studies.
Please read our progress on multiple studies, including the Cobra stand up to cancer and pay us the trials.
The contents of believes that the administrative claim on coding activity will be the critical component to drive long term and deep at the auction in this space.
Turning to of screening on it.
Flips trial.
The continued to see robust patient enrolment throughout the first quarter.
We now have over 180 sites enrolling patients.
Overall, we are pleased with our progress and we remain on track to complete enrollment by the end of this year.
As we prepare for the readout of the eclipse.
We are beginning to establish a commercial team engaging industry groups kind of lay the foundation for our commercial organization to focus on the screening of returns yet.
In parallel we are concentrating together the screening Vega for CRC internally I look forward for presenting data from our largest early stage patient cohort two data at the Ash Grove and arity true.
We are also looking further ahead to the opportunities beyond the CRC, you're starting to plan. Our next screening clinical of studying other cancer types and expect to share more updates about this and latter part of 2020 one.
With that I will now turn the call over to Mike for a more.
Our details of our financials.
Thanks for the Maryland.
Total revenue for the first quarter of 2020 volume was $78 7 million of 17% from $67 5 million in the prior year quarter.
The strength was driven by year over year increase in both the precision oncology testing of new and development services and other revenue.
Potential confusion oncology testing revenue for the first quarter of $63 7 million of growth of 6% compared to $60 2 million and the quality of quota.
Precision oncology revenue from clinical testing of the first quarter was $49 eight maybe for Don.
The 1% from $38 million for the party of the quota.
First quantum of critical tasks for you with the 18th 2019 of 21% from the prior year quarter the.
The clinical test average selling price was $2 710 in the fourth quarter of 2020 of them.
From 2499 in the prior year period.
First quotes the 2021 clinical continuum includes approximately $5 million recognized from cash collected for gone from 360 tests performed in prior periods.
So the several factors that will impact the ASP may have gone from 360 for the remainder of 2021.
Firstly, we will have a potency of impact from the new <unk> Medicare.
Medicare reimbursement rates.
And does the guidance.
The deals.
For the remainder.
And the other Medicare rates took effect on I think the 2021 and will continue until January of the fall of 'twenty to 'twenty two of which 10 of the rate will change to the median private payer rates.
Hello, Mark we continue to anticipate for the April price change to the <unk> billing code may have the short term impact on the processing and payment of kind of 360 C. The X games by non contracted private payers, which could offset the poll will take advantage of <unk> can be in case, the ABL to Medicare reimbursement.
In addition, we expect the impact on the ASP for prior periods of cash collections.
To reduce in the second half of the year of that revenue recognition becomes more weighted towards tests performed in the current period.
On the whole, we expect the asp's the guidance to 60 to.
The average of approximately $2600 for 2020 of them.
Not that it will take time to receive medical on part of the whole reimbursement coverage for newly launched chemical pumps, such as government the deal.
The result, we expect minimal revenue for these newly launched pumps from 2021, which income and depending on volume couldn't pump on the overall clinical assets.
Precision oncology revenue from Biopharma testing of the fourth quarter totaled $13 9 million from 38% from $22 3 million for the prior year of quota.
Post close of Biopharma test total 2022.
Thank you, 2% from the prior year, calling for.
As previously mentioned Biopharma volume back and think of them as we saw on the second and third quarter of 2020. So we are still facing headwinds with respect to clinical trial the patient volumes.
From a test that is to the street and one of them you can talk to for 7% 4230 in the part of your opinion.
Mainly due to changes in the mix of tests performed.
Development services and other revenue continued to be of strained gross level and then the first quarter totaled $14 9 million of 160 zone from the prior year quarter.
Gross profit for the first quarter of 2020 of them is $49 9 million compared to the gross profit of 40.
$7.7 million in the same period of the point of view.
Gross margin was in line of expectations in the first quarter of 63% components of 70% during the first quarter of 2020.
Operating expenses for the fourth quarter of 2021 for one of them getting to $57 8 million in.
An increase of 92% compared to $81 9 million in the fourth quarter of 2020.
Non-GAAP operating expenses exclude stock based compensation and related employer payroll tax payments acquisition related expenses amortization of intangible assets and changes in fair value of contingent consideration.
Non-GAAP operating expenses for the first quarter 2021 for $100 7 million of 53% increase from $65 9 million from the first quarter of 2020.
As mentioned during the last earnings call. We expect operating expenses to continue to accelerate in 2021, that's really investing our lunar program.
The clip studying and other development activities I was one of those launch new products on expand our commercial organization for some of the U S on international.
Net loss was $109 7 million of $1.09 per share for the first glimpse of 2020 of them.
Compared to $27 7 million on 29 cents per share from the first quarter of 2020.
Non-GAAP net loss was $49 $4 million of 14 on per share for the first quarter of 2021.
On parts of $15 4 million of <unk> 16 per share for the first quarter of 2020.
Adjusted EBITDA was the loss of $44 million from the first quarter of 2021 points of 15 5 million Mark in the first quarter of 2020.
The defined adjusted EBITDA non-GAAP.
Net loss adjusted for interest income taxes depreciation amortization on the other income of Mexico.
We ended the first quarter of 2020 of them with one $9 billion in cash cash equivalents of marketable securities.
Now turning to our revenue outlook for full year 2020 of them.
We're pleased with us so it starts for the year and be the fundamental changes in the business through the strong however.
Some of the global COVID-19 pandemic as Hany mentioned, we are still seeing COVID-19 impacts in our clinical business. The same physician offices remain closed.
Two of Biopharma business, while clinical trials of kicking off with patient volumes as COVID-19 costs because of pre COVID-19 levels continuing to impact both perspective, unless the stock.
For example of Williams.
On this backdrop, we continue to expect revenue to be between 260, <unk>, introducing $2 million representing growth of approximately of 2017% of retransmission fees for the midpoint of the range.
So expect clinical comparability of the pitch constituents, who won the day to the 90000 tests.
Represents growth of at least constitute the sum total 2020.
At this point of love to turn the call back the helmet for closing comments.
Thanks, Mike.
Before closing I want to thank our team for their incredible work to bring the progression division. We had when we founded gardens of significantly improving outcomes across the entire continuum of cancer care.
2021 will be a pivotal year for us as we expand our product portfolio and invest across of our business to open up the massive opportunity to transform cancer care for millions of patients.
These new products also mark an important inflection point as we began to transform Gardner from the leading liquid biopsy company to the leading cancer testing company.
I am so excited about what is the head for gardens and look forward to updating you on our progress with that we will now open it up for your questions.
At this time, if you'd like to ask an audio question you may do so by pressing star and the number one on your telephone keypad again that is star one we do ask the handling of ore its limit their questions to one question and a follow up.
We'll pause for just a moment to compile the Q&A last day.
The first question will come from the line of connect setup with SBB Leerink.
Yeah.
The number of merrily. Thanks for taking the question. So first one is on the guide.
You're obviously, maintaining your guidance before so just wanted to get a sense from you what youre seeing in the channel.
From the sales reps and maybe can you give us a sense of what percentage of the reps are actually in person detailing the.
<unk> hundred 60 on the other products where says.
They are still on line.
Obviously vaccinations of brand of patients are coming back to the clinic, obviously not at the same levels as before of pandemic, it's still something here.
L T reimbursement appears to be improving Boyd I.
When Michael was saying, but you also have FDA approval and that should be helping so just wanted to get a better understanding of the 90000 test what is sort of driving that conservatism.
And if you can just walk us through what you know is is that something debt.
You are just waiting for a little bit more time to get a better sense of that or anything else. You can provide on that would be very helpful.
Thanks, Brett.
Good question I'll, let me start on of myself Jonathan.
I think.
Quarter over the year, obviously a lot of.
For clothes.
And then total.
The aging in January.
The towards the end of the order the largest reserve.
And.
And resolution of below the.
All of this is starting to open back up.
And now for 30% to 40% of the visit relative.
Alright, thank you for getting payments for Medicare of the.