Q4 2022 Guardant Health Inc Earnings Call
It is our greatest wishes after their trends being able to impact patients' lives. In this way is what motivates all of us here at gardens.
Now turning to our performance on slide four we are pleased with our strong finish to the year. We ended the fourth quarter was $127 million in revenue, bringing our full year revenue to $450 million representing growth of 20% over the prior year.
On to slide five clinical test volume reached over 36000 tests in the fourth quarter up 41% compared to the prior year quarter and fueled by increased depth of ordering of garden $3 60.
This resulted in 26% year over year growth in clinical revenue in the fourth quarter, which is led by Gordon $3 60, with increasing contribution from new products.
Turning to slide six.
I am more excited than ever about the growing potential of our garden 360 franchise. We are still in the early days of building the $10 billion of therapy selection market with less than half of newly diagnosed metastatic patients receiving some form of comprehensive genomic profiling garden 360 has established liquid biopsy leader with more than two of every three non small cell lung cancer liquid biopsy test.
And garden 360 in fact over the past year, despite new entrants in the field. We have continued to maintain if not expanded our market share by one hundreds of publications CTX approvals and best in class commercial team have proven to be high competitive barriers.
Progress continues for garden 360, with a number of significant milestones recently, including our first approval for garden 360, <unk> to be used as a companion diagnostic for breast cancer alongside a first of its kind treatment in patients with <unk> mutations. Following this approval we are already seeing a positive impact in clinical volumes expanded reimbursement across the portfolio with.
More than $250 million covered lives. After a recent unitedhealthcare coverage for lung and breast cancer and the introduction of garden Galaxy, our AI enabled tissue based testing platform to enhance the portfolio and accelerate biomarker discovery Importantly, galaxy has shown an over 20% improvement in PD Lone detection. We think this will further accelerate that.
Gains, we're making in the tissue market.
As we look ahead to 2023, we have multiple drivers fueling our strong growth trajectory as we approached breakeven in our therapy selection business. These drivers include deployment of EMR integrations with customers as we continue to streamline ordering through our partnership with epic expected reimbursement in Japan later, this year and expanded utility and comprehensiveness of our therapy selection portfolio.
Palio.
Turning to slide seven one of the key Differentiators of Garden 360, <unk> is the strength and breadth of our companion diagnostic offering. We now have seven regulatory approved companion diagnostics covering a range of therapies biomarkers in tumor types in both the U S and Japan global sales of the Therapeutics, where we have CTX coverage are expected to surpass 35 billion.
In 2022.
Building on our success in lung cancer. We recently received our first pediatric approval in breast cancer in the U S and we have approval to book Keytruda in solid tumors and Opdivo in metastatic colorectal cancer in Japan.
<unk> of our efforts and investments over the years is becoming apparent as payers such as United healthcare increasingly that Cvs approval to grant coverage and our Biopharma partners look to Amtrust increasingly critical pdx programs with established independent players with strong track records moving to Biopharma on slide eight we finished the quarter with record volumes up 24.
Percent year over year, we have over 150 partners supporting our growth garden Infinity from our smart liquid biopsy platform now represents over 20% of our volume mix. Despite the strong growth in 2022, we now expect to see the impact of Biopharma budgets from the inflation reduction act and a more restrictive funding environment growth.
Smaller Biopharma partners, which has led to delays and cost pressures not seen in many years.
Because of these pressures, we conservatively expect low double digit growth for Biopharma test volumes in 2023.
That said, we do not expect these near term headwinds to dampen the longer term structural growth of our biopharma business with a steady trend toward more biomarker driven therapies, our infinity platform ramp and the opening of a large market opportunity in China, all forming the foundation for further growth in 2024 and beyond.
Now shifting gears to Gardner deal on slide nine.
Our MRV franchises in its second year post launch and is growing rapidly with 250% year over year growth in 2020 to.
Garden's as the only company in the market with a clinically validated tissue free MRV assets with our industry, leading turnaround time existing commercial infrastructure and strong growth in CRC patients in 2022, we're just scratching the surface of the $20 billion opportunity in 2023, we expect growth to be driven by increasing traction in key tumor types, including CRC.
And loans and the technology upgrade to our smart liquid biopsy platform. We're also making great progress in a number of our clinical studies designed to demonstrate the powerful platform for patients in the adjuvant and residual disease settings.
Recent clinical results from attract part B study showed a 92% negative predictive value and greater than two year residual disease free survival in Cte <unk> negative patients supporting chemotherapy of items based on these exciting results study is expanding significantly into track part C, which will include more than 600 patients the trial will evaluate the use.
<unk> CTD may to guide chemotherapy treatment decision following surgery for stage two three CRC patients based on test results for MLD with reveal the study holds the potential to improve patient care and quality of life by reducing unnecessary use of chemotherapy <unk> III <unk>.
We're also making excellent progress in packages I think cosmos will be looked at our results from the latter part of this year into early next.
<unk>, we had a substantial year of development across all aspects of our business and 2023 is off to a great start our efforts towards payer coverage customer relationships clinical partnerships and technology upgrades will fuel our growth in oncology for years to come I will now turn the call over to Lee to provide an update on our screening business.
Thank you help me.
Turning to slide 10.
2022 was an exciting year for spring.
Screening business NFL Bangalay Eclipse trial readout.
And eclipse shale demonstrated 80 cheaper SaaS sensitivity in detecting individuals with CRC, 90% specificity.
Moreover, readout LDC test, we're seeing adherence rates of over 90% in the first half.
Compared to just 43% at Trs Fort Smith in the real world setting.
We believe these results meet the criteria needed to obtain FDA approval Medicare coverage guidelines are a combination and it would become a preferred CRC screening option for millions of patients.
The true effectiveness of a screening test is driven by both clinical science activity and the rate at which the testing modalities are completed.
When individuals to net positive order, a colonoscopy or stool tests more cancers.
Detected.
Yeah. Thanks, <unk>. So can you just you have our test kit or 75% and 30% respectively.
As a reminder, for CRC detection indication, we expect to complete our PMA submission for FDA approval this quarter and anticipate FDA approval and launch of shield IBD in 2020 four.
We expect to receive Medicare coverage obtained a DLT status and it included an Acs guidelines following FDA approval.
We expect shields Medicare.
Pricing to be $895 with a blended ASP of approximately 500. The other ahead of private payer coverage.
Turning to slightly level.
As we shared at the Jpmorgan conference in January .
Receiving overwhelmingly positive feedback from the top leaders and patient advocates.
Leaders understand unmet need game part I saw that Trs and completing a task and believed to up their sensitivity was about the bar.
These leaders for the beginning of a new era and the cancer screening shield with a disruptive blood testing modality.
Now turning to slide 12.
We've often said the best test is the test that gets done.
As shown in this graph the effective sensitivity of shale dengue test and cancer is higher than all other modalities of CRC screening.
As a result, I think Sheila as a testing option will increase overall screening compliance and the result in potentially sending millions of life years over the current standard of care.
Moving on to slide 13.
We recently announced the initiation of a prospective study you are the same in partnership with the University of Chicago that will examine whether shield improves overall CRC screening and medically underserved populations.
This study will enroll up to 24 100 patients will have scale can possibly the CRC screening.
The evidence from prospective studies like this in combination with regard to observe their rollouts, yeah, that's right.
<unk> USPS TF guideline inclusion for sure.
In summary.
Excited about the future of shale and the beginning of EMEA, <unk> and MC cancer screening ship.
With that I will now turn the call over to Mike for a more detail of our financials and outlook for 2023.
Thanks and morale at.
Turning to slide 15 to review our financial results.
Revenue for the fourth quarter of 2022 was $126 $9 million.
Up 17% from $108 1 million in the prior year quarter.
Total precision oncology testing revenue for the fourth quarter was $113 8 million, increasing 28% compared to $88 7 million in the prior year quarter.
This increase was driven by year over year growth in both clinical and Biopharma sample volumes.
Precision oncology revenue from clinical tests was $83 $7 million, 30% from $64 2 million for the prior year quarter.
Fourth quarter clinical test volume was 36000, an increase of 41% from the same period of the prior year, an increase of approximately 3600 test from the previous quarter.
This increase was driven by strong Gartner 360 growth as well as the increasing contribution from our new products revealed tissue next time response.
For the fourth quarter of 2022 government 360, ASP was in the range 2600, $2700 consistent with the last few quarters.
The blended clinical ASP was approximately $23 20.
As previously stated the blended clinical ASP will continue to be influenced by both the volume mix of <unk> hundred 60, and the new products as well as the reimbursement amounts received from new products.
Precision oncology revenue from Biopharma tests in the fourth quarter totaled $31 million.
23% from $24 5 million in the prior year quarter.
Biopharma test volume was strong with the fourth quarter totaling 8200 tests.
24% from the prior year quarter.
Biopharma ASP in the fourth quarter was approximately $3670.
Development services and other revenue in the fourth quarter totaled $13 1 million.
33% from the prior year quarter, primarily due to a onetime catch up royalty payment that was received in the fourth quarter of 2021, which should increase the comparison base.
Gross profit for the fourth quarter of 2020 to $79 $8 million compared to a gross profit of $74 7 million in the same period of the prior year.
Gross margin continues to be in line with our mid <unk> target.
Getting at 63% compared to 69% in the prior year quarter.
The main driver of this change was the year over year difference in fourth quarter royalty revenue as just mentioned.
Operating expenses for the fourth quarter of 2022 with $225 9 million, an increase of 31% compared to $172 9 million in the fourth quarter of 2021.
Net loss was 139 9 million or $1 36 per share for the fourth quarter 2022, compared to $19 9 million or <unk>.
<unk> per share in the fourth quarter of 2021.
Turning to the full year.
Total revenue was $449 $5 million of.
20% from 373 7 million in the prior year.
Precision oncology revenue increased 29% to $392.0 million and was comprised of clinical testing revenues of $298 1 million, which grew 26% year over year and Biopharma testing revenue of 94.0 million.
Which increased 38% year over year.
Clinical test volumes for the year grew to 124800.
42% year over year from 87600 tests.
The blended clinical ASP was approximately 2400 tons for 2022, which was lower than the blended chemical ISP.
$2700 in 2021.
While the ASP <unk> at 360 has been consistently in the range of 2600 to $2700 since mid 2021 the.
The change in the blended ASP.
Due to both lower cash troops in 2022 versus 2021 and the change in mix between got a 360 degree of.
Tissue next in response.
Biopharma testing volume increased 40% year over year to 26000 tests.
Biopharma ISP in the full year was approximately $3610 slightly down from approximately $3650 in the prior year due to changes in product and customer mix.
Development services and other revenues declined 17% to $57 5 million in 2022, primarily due to the variable timing progress and milestones related to projects with both parties.
Gross margin for the full year, 2020% to 65% compared to 67% in 2021.
Operating expenses for the full year 2022.
$837 6 million an increase of 27%.
$661 7 million in 2021.
Net loss was $654 6 million in 2022.
<unk> $5 $7 million in 2021.
Net loss per share was $6 41 in 2022 as compared to $4.00 in 2021.
Moving on to non-GAAP financial measures on slide 16.
non-GAAP operating expenses exclude stock based compensation and related employer payroll tax payments amortization of intangible assets and contingent consideration.
non-GAAP operating expenses for the fourth quarter of trying to 'twenty, two with $201 2 million.
37% increase from $146 2 million in the prior year quarter.
This increase was primarily driven by the investments made over the past 12 months across both our oncology and screening businesses.
Primarily in our commercial infrastructure and the continued development of our product pipelines and clinical data.
non-GAAP net loss was $119 6 million.
$1 17 per share for the fourth quarter of 2022 compare.
Compared to $70 4 million or 69 cents per share for the fourth quarter of 2021.
Adjusted EBITDA was a loss of $109 $8 million in the fourth quarter of 2022.
Third to $64 $6 million loss.
In the fourth quarter of 2021.
We define adjusted EBITDA as non-GAAP net loss adjusted interest income tax depreciation amortization and other income and expense.
non-GAAP operating expenses for the full year 2022, with $736 6 million.
45% increase from $506 8 million in the prior year quarter.
non-GAAP net loss was $435 4 million for 2022.
As compared to $251 $7 million for the corresponding prior year period.
non-GAAP net loss per share is $4 <unk> for 2022 as compared to $2 48 trends of the corresponding prior year period.
Adjusted EBITDA was a loss of $403 $4 million in 2022.
Prior to a loss of $231 5 million and <unk>.
'twenty one.
Okay.
We ended the year with approximately $1 billion in cash cash equivalents and marketable debt securities.
Flexing approximately $600 million in cash use that primarily consisted of a free cash outflow of $397 million.
And a onetime payments totaling $192 million related to the purchase of our EMEA joint venture.
Turning now to slide 16 and.
In 2023, we will continue investing to maximize the very large opportunities and principles, but we'll take actions to lower our operating expenses below 2022 levels reduce that cash flow to $350 million and extend our cash runway beyond three years.
2022 was a peak year in terms of cash burn as we completed significant investments to establish what we believe is the strongest platform in oncology diagnostics.
We can now start gaining material leverage as our infrastructure is firmly in place to support our core operations research and development activities and commercial organization.
In addition, we have begun to implement operational efficiencies across all areas of our business, including the recent reduction of our workforce by 7% translates into approximately $25 million in annualized savings.
For our therapy selection business in 2023, we will continue to aggressively target <unk> hundred 60 revenue growth both in the U S and abroad, while simultaneously remaining on track to be breakeven in about 12 months' time.
In 2023, MLP spend will continue to be focused on clinical data development reimbursements and increasing our market penetration.
The screening we will continue with select market development activities as well as continuing technical and data development for lung and other cancers.
Reserving the necessary resources to fund a strong commercial launch and CLC following FDA approval.
Now turning to our outlook for the full year 2023 on slide 17.
We expect full year 2023 revenue to be in the range of $525 million to $540 million representing growth of approximately 17% to 20% compared to 2022.
The key driver of revenue growth will be precision oncology, which we expect to grow by more than 20% over 2022.
Clinical volumes are expected to increase by more than 35% with all products continuing to drive this growth.
Clinical Asps will continue to be dependent on product mix with potential upside from additional commercial coverage for <unk> 360 <unk>.
<unk> reimbursement for response.
While we continue to expand our biopharma partnerships, we conservatively expect top biopharma volume growth to be in the low double digits.
<unk> from the impact of reduced Biopharma budgets from the inflation reduction act and the more restrictive funding environment for our smaller Biopharma partners.
We expect development services and other revenue to be about $50 million in 2023.
With quarterly revenue dependence on the signing of the amount of new partnerships the timing of existing project milestones and the amount of royalty revenue received.
Finally, as previously discussed we expect 2023 operating expenses to be below full year, 2022, and free cash outflow to improved to $350 million in 2023 and to further improve in the following years.
This represents a significant departure from previous expectations and reflects our increased focus on operating expenses and cash burn.
And finally, turning to slide 18, our long term vision.
From cancer diagnostics through cutting edge technology, our focus on high impact opportunities and consistent execution at.
At this point, we will now open the call to questions.
Thank you we will now begin the Q&A session.
I'd like to ask a question again it is star one on yourself from keypad. If for any reason you'd like term of that question. You May Press Star followed by two as a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
Our first question comes from the line of Dan <unk> with Stifel. Your line is now open.
Afternoon, guys. Thanks for the questions help me or maybe Mike on <unk> and just to help me comment on increasing contributions from new test anything you can help us with just in terms of reveal assumptions underneath the revenue guide for 2023, and then as you think about the reveal reimbursement process. So I'm just curious whether.
Sure.
It feels like CMS is getting more familiar with performance and data and the differences between assay types in a way that makes coverage decision timelines store for you guys. In other words do you think the time between the tariff coverage decisions the breadth.
And the one that you presumably get for reveal can be shorter than what you saw for colorectal cancer.
Yes, so I'll start there I'll start with the second part I mean I think so.
Only when you have something disruptive.
The issue free assay.
I think as.
Ultimately as.
Product market fit in this market.
Also harder to understand.
Around with more advanced technology in many ways, but we went through a lot of I think.
That back and forth and that education, I think in getting to where we are with CRC. So I think we are fairly optimistic that as we of subsea.
Subsequent data sets supporting additional indications.
But we will be able to we'll be able to go through that process in a more timely fashion.
The other thing I'll add is that.
Increase we're very excited about the progress we've made with the reveal I mean, I think we're going from.
Insignificant revenue in 'twenty.
'twenty one.
R 22 is something that is going to be in the low double digit millions.
23, and so we're seeing that sort of engine really kick on just like we saw with 360. When we started and so this is this is going to be a big business for us and one that ultimately we believe will be in a pole position for.
Thank you.
Question comes from the line of Max Masucci with Cowen.
Hi, Thanks for taking the questions and congrats on another year of great progress.
So I'm just going to ask.
Just looking at the ramp we've seen for some competitive R&D test I would imagine.
The range for <unk> revenue contributions.
It could be quite wide I was just curious maybe how you are accounting for that and then more generally it would be great to hear.
How you would rank order the key factors.
That will determine your ability to meet the 350 million free cash outflow guidance.
Yes sure.
Thank you.
On the.
The deal size.
Yes, I mean really we'll see we'll see reveal drive.
Volumes I think more than more than the revenue this year because of the reimbursement that we get which is currently just from really from Medicare and it's in the CRC.
<unk> <unk> payments, so I think.
We're still driving volume.
C band.
And also we launched in breast and lung last year and we've seen really good traction there so I think.
And that feeds into our clinical volume growth, which we said is going to be over 75%.
In 2000, and 2023 and it is how do we just mentioned it is going to start to.
Drive some of that revenue growth.
Going to take longer to come in who is going to be dependent on reimbursement and then from the the drivers from the free cash flow.
Reduction I don't know.
The increase in revenue that we'll see this year and the gross margins that we see which we still expect to be in the 60. This year is going to have.
With a gross profit and then we've talked about.
Managing.
At levels lower than in 2022 and so.
Can do that if we can achieve the revenue.
The gross margins.
So maybe we can manage the operating expenses.
Taken actions already to do that then that's going to drive that.
Reduction in.
And free cash flow and obviously, we've mentioned a few times that we built out now a lot of the infrastructure within.
Within guidance.
So now so it is really leverage leverage that across the operations.
Randy on the marketing side and even on our Capex spend.
Which has been in the sort of $70 million level.
For the last couple of years, that's going to significantly come down and in 2023.
Great. Thanks.
Yeah.
Thank you.
The next question comes from the line of <unk> <unk> with Morgan Stanley .
Your line is now open.
Hey, guys good evening and thanks for the time here.
Can I ask a two parter, one on <unk> and one on screening.
With MRV, perhaps help me or Mike could you chime in on how you think about the balance between the near term revenue generation.
And cost control versus expanding into newer indications in priming the market ahead of getting reimbursement and making a bigger push.
And then on.
On the eclipse data imminently any perspective, you can share on the protein market situation there.
Was it was it a choice of marker or was it perhaps more related to adding those markers thats changed the way the classifier sort of weighted the non proteomics markers that we're already there.
Any insight on the performance degradation, so far or is it still too early to tell.
Okay great.
Good question so.
Actually the that's sort of.
Balance do we think about the framework, we think about it as we launched our products essentially.
How much do we spend that sort of market shape.
Develop the market.
Take some market share.
Versus how much do we wait until reimbursement comes in and.
Given the competitive kind of environment, we see which is.
Is one where we are the only bought it.
Let me know if that is tissue free.
And so that's ultimately the I think.
Sort of product markets that is required to take over the <unk> market. We believe that we have the luxury to engineer demand ware.
We can sort of move that pendulum move that balance towards essentially reimburse test.
<unk> really tried to concentrate on that.
So that's what we're concentrating on CRC demand I would say.
This is Tom the other thing I had mentioned in the guidance.
We're very excited in terms of the overall MRV months, because I think it's moved very quickly, it's clearly going to be a major opportunity.
But we see the.
The.
Tests out there.
To give you another analogy.
The flip back.
Back in the two thousands where todd everyone how to use video camera, but ultimately didn't help product market such as smartphone and co op.
That functionality and improved on it and.
Obviously, we talked about our smart liquid biopsy, we are that smartphone in MRV market.
Okay.
And then maybe I take the <unk>.
Question, So in terms of Protonix.
Still we're kind of learning from the data already some learning has happened.
Some competitive reasons, we'd love to solve the our competitors, maybe Atlanta similar lessons themselves.
But solve the interesting factor is our I can these multiyear studies samples coming from hundreds of sites, if Frank kind of ship temperature kind of observation samples go through that.
Kind of cubes that you use and so forth.
Many variables that could contribute in the performance of <unk>.
<unk> performance.
Financially biomarkers, including proteomics, but.
There are some learnings for us and.
<unk>. Our next close touch has had this time in terms of performance degradation.
What we saw in terms of just this 83% CRC SaaS activity.
On one side this small and steady up like 6% to five CRC, so higher level constant on a same store about this 83% is actually 90% having said that.
Already awesome learning so actually.
<unk> has an interesting observation that.
At a fraction of it.
All of these borderline early stage kind of Crc's.
When the patient go through colonoscopy and that kind of I guess kind of dream of.
The testing of those cases with the tech stack and the training of algorithms that redeveloping have lower performance and.
The main reason from my perspective is in that case control earliest stage symptomatic patients those are the cases, which are.
Last matrix.
Colonoscopy.
So.
That's what I explained some of this delta that Youre seeing.
But the good point is now we have a bunch of these samples bunch of lending from these town halls.
Our potential path for us that over time, probably the pair farms that hit that gets further improved from this 83%.
Okay.
Very helpful. I appreciate the time guys.
Right.
Thank you.
Next question comes from the line of Derik de Bruin with Bank of America.
Hi, good afternoon, and thank you for taking my call could.
Could you give a little bit more into the biopharma market dynamics.
<unk> been some other companies that have commented that they havent really seen any impact from the IRI or this I mean, we were on a sum of the CRO calls that we've been on have suggested that so can you just talk a little bit more about the dynamics, there and I guess.
Is there also any competitive dynamic going on here from a.
In fact, Theres a lot of companies now that are now offering.
Similar liquid biopsy products are competing in liquid biopsy products, just a little bit more on what youre seeing from a volume versus competitive standpoint, then I have a follow up.
Okay, Yes, I can take that.
I would say that.
What we're seeing.
I think some potential sort of headwinds with us, but the IRA and frankly just we.
We work with over 150, Biopharma companies and biotech companies and a lot of them are.
Sure.
Obviously trading below enterprise value and difficult kind of macro conditions.
A lot of the testing, we do arent necessarily the.
<unk>.
Bread-and-butter trials, maybe the arrows are doing where.
We're doing a lot of retrospective analysis.
Resource research for follow on target I mean, obviously, a good part of our business is the bread and butter.
Patient selection type business and so we're seeing a whole mix of things we are seeing some clients, where we're doing a lot more and others, where there is sort of on the fence today do they delayed for one quarter and so on and that being said our pipeline is very strong we came into it.
Very strong order book into 'twenty, three and so we are hopeful that some of these headwinds hopefully don't.
Materialise.
But obviously, we want to be kind of prudent in terms of how a.
How we look at the upcoming year.
There was a second.
A question.
Yes, Yes, just have you had a <unk>.
Pre submission meeting with the FDA and if so what's been the feedback on the trial having run the two different.
Variable assay is one with printing and some without.
Alright.
Sand concentration devices on the screening side so.
Yeah.
As we've mentioned before and have restarted itself free DNA only configuration, then be additive towards you got to think so.
<unk> had that coffee ratio of cell free DNA, only device, which was kind of.
And frozen in terms of device <unk> clinical threshold everything before any clinical data.
Pace was actually.
But unblinded so.
We believe that in a proper way in terms of the.
Clinical planning statistical planning and think of this in a proper way in terms of coordination with the FDA.
Alright.
Post Covid bond southeast kind of pre sub meeting that conversation with the FDA at the end, we prioritize and renamed the timeline that we had it was not possible to pre salt both who are multi month kind of discussion to have a triage alignment plan in terms of this kind of multi device coffee.
Duration testing, having said that we've done such kind of multi concentration testing on.
<unk> is before on some other manufacturers have covenants and other kind of IBD studies. So we'll see on a go to FDA review, we believe we have dived in a proper way.
Thank you.
Thank you.
The next question comes from the line of Jack Meehan with Nephron.
Please proceed.
Thanks, Good afternoon.
Amira Lee I wanted to continue on screening.
First any thoughts on expected timeline to publish eclipse and a leading medical journal and then kind of second.
Continuing on the FDA process just after the submission this quarter what do you think the timeline is.
For potential approval and do you think they could commission a panel.
Yes, so in terms of the.
FDA process like we are planning to announce that this PMA submission is eminent sounds like.
I know this quarter its backdrop to the agency.
In terms of review timeline.
We are going to have a better understanding of it after we get some initial feedback from FDA, which typically app like hundredth day after submission.
Based on our judgment before those kind of.
Feedback from FDA, we expect that.
Early 2024.
Language is appropriate for.
Our FDA approval, but once we go through that kind of a background of course, we are going to have a better understanding in terms of panel conversation.
Fda's decision, if they want to make that call right now.
They've done that for Cologuard dates on that proactive protocol line.
But both of those devices, where first of its time for them to review.
And some up and downs with both devices during the review cycle. So now they are more experience by again, it's their choice if they want a call for a panel discussion or not.
And on the medical Journal.
Our medical Journal.
So.
Yes.
Some aspects of publication timeline has extended our factor on like how long that review would take but based on our internal kind of activities I'm, having a pay per residential towards submission of their conscientious I expect to have the publication in a.
Peer reviewed journal throughout 2023.
Awesome.
I can ask one more follow up for me.
She made health decision would be great to get your thoughts what do you think this means competitively for <unk> hundred 60, <unk> just financially what could this mean.
So maybe Mike as Mike said about the financial side of it but in terms of competitively.
The only game coverage.
The companion diagnostic approval and as you know that's an extremely high bar there are very few even issue Ngls, let's say.
MAA approval.
Not easy to get an easy to submit.
And that's it.
Very hard on the on the CDI.
To go through the entire process.
That is one of the many mode. We have in our business I think Derek.
You have talked about competitive pressure, we're not seeing any of that.
Pharma side and even on the clinical side as we said in the prepared remarks.
Are you seeing in maintaining if not expanding our market share despite the number of trends.
If there's 3500 37, hundreds frankly hasn't mattered over the last eight years some of them have billions of dollars spend yet could not correct essentially the market achieved 360.
Continues to command and therapy selection.
Yes, maybe I can add from a financial.
Yes.
Yes.
It needs with that with United We don't have any increased pricing.
Assumptions in 2023, and our guide for.
For this.
Got it at 360 ASP assumption is it's going to stay in the same 2000.
600, 2700 range and because of the way, we recognize revenue and the timing of getting payments from from age is going to take a bet. If time to start to if we can see the impact, but maybe to quantify if we went to get.
$100 increase in <unk>.
Got it.
Over $10 million.
Kris saw two our revenue so.
We're looking at closely and were seeing traction potentially with other payers. So there's room for upside, but it's not baked into our numbers at the moment.
Awesome. Thank you.
Thank you.
The next question is from the line of Trulia Chin with Jpmorgan Julia.
Hi, good afternoon, thanks for taking our question so.
So first off just following up on that do you think 60 breath.
Click on as many units for lung cancer to reach 15% penetration today, what do you expect that.
Next question comes from Macquarie compare that Lon.
Whether in terms of being a patient of payer mix. One are there any lessons that you've learned from your own experience to drive a potentially faster adoption in last longer term and then my second question is for me Ali.
Holly.
David when you use the steady on compliance can you help us understand how important is to support guideline inclusion what kind of goalposts do you hope to achieve in a real world setting versus that 90% compliant that you're currently seeing launch experience.
Given that the scope of the study only included Noncompliant population.
No matter the scope guideline inclusion will clarify Sheila.
Hey, good questions and.
In terms of the breast cancer approval.
That is what drives adoption is essentially the therapeutic.
Options for patients and really making the fact that testing is to be top of mind in order to access those lifesaving options for.
Advanced cancer patients and so traditionally breast cancer Hasnt had many kind of therapeutic options lung is sort of in the Canary in the coal mine, but we're starting to see a breast cancer.
<unk> mutations now ESR, one and whole host of others.
Really require the need for genomic testing upfront, but what's unique about this approval, though is the fact that this is often an emergent resistance mutation. So it's often not.
<unk>.
Kind of inherent to the primary tumor.
And that means that the only way to really access that.
Feasible manner is through blood and we are the only companion diagnostic for this new class of therapy.
These GSR one mutation driven.
Driven therapies.
And so it's very exciting and it's why it's a big opportunity we're already seeing.
Really nice.
Kind of volume increases because of that.
This approval.
We're hopeful that faded away for.
As you said.
Faster adoption.
Additional cancer types, including breast cancer.
And regarding the use screen and actually the studies that we are doing to show the improved adherence to.
Colorectal cancer screening using blood test.
So use screen would be a piece of the puzzle in terms of.
One of the prospective studies that we're doing which in combination with a series of all other evidence that Gartner is going to generate and some other health system partners are going to generate.
Really not only pave the path for guideline inclusion, but also for commercial adoption of such test over time.
Spect that can as we've talked about where you have this real world evidence more than 90% clearance rate and I expect before USPS TF guideline inclusion in guidelines get updated youre going to have.
A series of these kind of data coming to the field.
Use screening is first of a kind in SaaS types of prospective study that via our software offering.
In terms of the impact of this and the fact that we are just ethane that patients who are non compliant at this time. So those are the patient population, which are the hardest one so imagine that if we show very high actual compliance and those patients who are talking about some of the pockets of the health system. That's the current compliance rates and speeds going forward.
60%.
And showing a good fraction of those patients are in fact.
When they get access to blood tests, they're kind of conflict of blood tests, which generated a huge.
Value for us that even those patients are compliant.
Got it.
Thank you. Thank you. The next question comes from the line of Puneet <unk> with SVP Securities Cooney.
Yes, hi.
Merrily. So first one on reveal I mean I appreciate it.
Both a 250% here, but as we as you look at the data the trials here pegged assist cosmos track there most of the Readouts in 2020 quarter. So should we be thinking about reimbursement for reveal in 2020 for mostly for these indications.
And then on smart liquid biopsy, how do you incorporate that into reveal do you have to generate new data or how do you insert that into these ongoing trials.
Yes, great question.
This is just the highlights of some of the.
I would say.
More pivotal trials with either pivotal in the sense that they are largely intervention.
These are sort of a dataset that really haven't.
<unk> really been seen in this kind of perspective of fashion in the field in terms of really establishing clinical utility, especially for the private areas in terms of thinking about Medicare reimbursement, we have many other datasets around clinical validity that are not highlighted here.
And hopefully some of them will.
We will be able to be published or presented.
This year.
Right.
Yes.
And then the reveals transition.
Yes.
Something that others had been in the works for some time and so many of these studies.
Either of bridging coins or are essentially going to be carried out using the sort of new version of reveal in the smartphone.
So that's something that hasnt not all of them.
We're confident we can make the very.
Graceful transition.
Got it and then if I could ask on the screening side I mean, just given the focus on cash burn and cost reduction here.
Can you just outline your priorities on potential indication expansion for shield into other.
Tumor types and sort of how should we think about given the.
Other competitors that are working on multi cancer early detection, how should we think about your position there beyond CRC and the investments you have.
Mhm.
<unk> was our firsthand the cash as we had mentioned the price will be we are pursuing the lancastrian indication very serious as well.
So we are doing our Registrational study 10000 patient screening study.
High risk patients, who should go through line cancer screening we are in the second of Europe enrolment ctrip, yet probably around three year enrollment study.
And.
As we mentioned actually in our prior presentation, we are expecting to get some kind of additional visibility to data and lung cancer studies actually step down with FCA and UCSF since 2017.
That's the readouts to be sometime later this year or early part of 2024.
Got it okay. Thanks, guys.
Yeah.
The next question is from the line of Matt <unk> with Goldman Sachs.
Hey, good afternoon. Thanks, taking my questions, Mike maybe just one quick one for you just could you talk about the implementing efficiencies and workforce reduction.
And the drop in Opex in 'twenty three could you maybe talk about sort of R&D versus SG&A and where some of the big levers are and particularly on the workforce reduction side, what you've done.
Kind of think about how we should kind of see that split over 'twenty three as we move into 'twenty four.
Yeah, I'd say on the on the workforce reduction and it's pretty much across all all areas of the business. So we really weighted in any specific area. So.
You'll see a bit of that impact across each of the lines.
Moreover on the.
On the Opex.
Opex side, and how we sort of bring the room right down and how we bring the overall full year below.
2022.
Primarily focused on the on the R&D line.
No I'd say SG&A is going to be relatively flat.
Year over year.
On the oncology side.
Continuing to invest on the on the commercial side to really drive.
The opportunities that we have I think on the R&D side.
On the first half of the year.
Obviously.
Similar similar spend.
The latter half of last year.
Then onto a lot of the studies.
We've been doing stuff and we're going to be carrying on with the clinics at.
At least for the next few months.
We continue to build as Avaya bankruptcy.
Second half of.
2023 will see the R&D expense start to significantly come down and so that's how we look at opex as well.
The room night really dropping off in the second half of the year.
Got it thanks very much.
Thank you.
The next question comes from the line of Stan letter of Credit Suisse.
Thank you two questions.
First off on the sales guidance it would be helpful. If you could characterize what trends you've tried to bake into your outlook versus what you have left as potential upside.
And then for my follow up question.
I want to make sure I understand your answer to <unk> question on the reveal upgrade how do those logistics work for trials that are already in flight if theres, an interventional trial in a physician has made a therapeutic decision how do you change the assay.
I'd just like to understand that thank you.
I can start.
Start off on the on the trends.
Thanks.
A few trends that we were definitely baked in I mean, one we mentioned that clinical volume.
And then the real revenue driver and now has gotten 360 and so we.
Im continuing to banking strong consistent growth year over year with garden city. So I'm estimating revenue drivers that I just mentioned from the ISP point of view, we've done the 360.
We're assuming that stayed constant.
Last year Tracey.
<unk> hundred 2700 range, but.
With commercial payers that are coming on board I think there is opportunity maybe in the latter half of the year.
Sure.
The asps.
Start to improve.
I think the other thing.
That could also drive an upside and that would be reimbursement in Japan, we're expecting that some point in this year.
And Gautam response, we still don't have reimbursement for that to come that will be a positive for us.
And then I think we've talked as well about biopharma.
We saw 25% year over year growth in just the last quarter.
We mentioned low double digit growth on the Biopharma side. So we're banking that are in slot revenue guide obviously.
We want to be conservative about the spend of the biopharma customers. So again the potential for that too.
That's been improved.
Overall over our expectations, we continue to see a similar growth rate as we did in the last quarter. Then obviously that again would be an upside in how we mentioned we've seen a good order book, but.
But I think we just wanted to be very conservative on how we're looking at the Biopharma business.
The development services, we've said that will be over $50 million. That's again, it's quite a lumpy lumpy line a lot depends on the timing.
Partnerships and again I think the.
Don't have that in.
In a conservative way and if things were to accelerate.
Above what we were planning then that could also a trend upwards.
Yeah in terms of the cutover.
Right.
<unk>.
Enrolled patients reached target enrollment.
That's not a trial that we're going to cut over to the new platform and the results will be.
From the old one.
But for trials that are still in the early inning.
I haven't quite started.
We knew this transition was happening so a number of those trials.
We ensure that.
<unk> testing with the.
Smart liquid biopsy platform already.
Waited until it was ready to start those trials of those clinical validation data sets.
That's helpful. Thank you both.
Okay.
Thank you.
Our last question today comes from the line of Patrick Donnelly with Citi Patrick.
Hey, guys. Thanks for squeezing me in here, maybe just another one on the profitable growth side as you think about.
Following up on the earlier questions about kind of the funnel on the screening side. How you think about that piece and then similarly, just on the international opportunity.
Have you changed kind of the trajectory of some of the investments to build out again, both the screening pipeline and then some of the other opportunities there and then just a quick follow up for Amira Lee on the PMA submission. Just I know you guys were initially talking early <unk>, just a confidence that it happens in <unk> and what has to happen to get it done. Thank you.
Oh, yes on international.
Yes, that's an area that.
We think of the big growth driver for us.
Years.
Obviously.
The standard of care as it were.
<unk>.
Please selection MRV in screening.
I'm going to save lives.
Not just in the U S.
But globally Japan.
First opportunity for us to establish.
A really big market outside of the U S.
We're very excited about.
Partnership with Amazon in the lab that has been set up in China be able to access.
Both biopharma and eventual patients there and then obviously in Europe , we have a number of labs. There. So we're taking I would say.
A very systematic.
I think disciplined approach to investments where.
We're doing the investing and the activity that will get us as quickly as possible public reimbursement.
Or I think gross margin positive kind of revenue and it's one of those localities.
Regarding share in that.
Timeline, it's kind of a Q1 so.
Eminent it's almost done it's got to be done by this.
Yeah.
Okay.
Okay. Thank you guys.
Thank you.
That concludes our Q&A session as well as the garden, how fourth quarter and full year 2022 financial results call.
You all for your participation you may now disconnect your lines.