Q4 2024 GRAIL Inc Earnings Call
133 as amended.
In section 21 of the Securities Exchange Act of 934 as amended.
Forward looking statements are subject to risks and uncertainties actual events or results may differ materially from those projected or discussed all forward looking statements are based upon currently available information and grill assumes no obligation to update these statements.
To better understand the risks and uncertainties that could cause actual results to differ we refer you to the documents the Grail files with the SEC, including the risk factors section in <unk>. Most recent quarterly report on Form 10-Q, and the Companys upcoming annual report on Form 10-K. This call will also include a discussion of GAAP results.
non-GAAP financial measures, including adjusted gross profit and adjusted EBITDA, which are adjusted to exclude certain specified items, including accounting impacts related to aluminum acquisition of Grail.
non-GAAP financial measures are intended to supplement.
<unk> Financial's reconcile.
Reconciliations of non-GAAP measures to most directly comparable GAAP financial measures are available in the press release issued today, which is posted to our website and with that I'll turn the call to Bob <unk>.
Bob: Afternoon, everyone and thank you for joining us to review our results for the fourth quarter and full year of 2020 for 2024 was a transformative year for Grail as we separated from <unk>.
Trading in June.
Bob: In July we completed final study visits for our two Registrational studies, the NHS galleries study and Pathfinder II and.
Bob: In the third and fourth quarters, we implemented a significant restructure intended to extend our capital runway pass some major anticipated milestones, including the completion of our modular PMA submission for FDA approval of gallery.
Bob: In addition, we grew U S calorie revenue, 45% year over year selling more than a 137000 gallery tests. We are pleased with galleries commercial momentum and are excited to progress initiatives to make it easier for physicians to order the test, including our recent integration into quest diagnostics test orders.
Bob: Cisco.
This integration enables easy ordering for more than 500000 physicians and allows patients to access the gallery test at 7400 quest locations nationwide without needing to bring along a test kit.
Speaker Change: To discuss some additional recent highlights I'll hand, it over to <unk> President Dr. Josh Hoffman.
Josh Hoffman: Thanks, Bob.
Josh Hoffman: As you May know gallery was designed to be utilized at population scale.
Josh Hoffman: And we've continued to enhance our technology and our laboratory infrastructure to enable all of this future growth.
Josh Hoffman: Over the past several years, we've been working on an updated version of gallery, which will enable efficient growth and support testing at scale at.
Josh Hoffman: At the end of 2024, we rolled this enhanced version now which includes a reduced panel size, allowing us to lower sequencing costs and to run approximately four times the number of samples on every flow cell.
Josh Hoffman: Additionally, the testing workflow has now been fully automated and integrated meaning we've been able to eliminate numerous manual steps in the lab, allowing for much greater efficiency.
Josh Hoffman: The implementation of these updates has substantially expanded our lab capacity and we do not anticipate any additional capex investment will be needed to support our expected volume for the foreseeable future. The next several years.
Josh Hoffman: We began offering this version of the test in December and expect to see Cogs improvements as we continue to scale.
We're also really pleased that the U S military as Tri care Health Insurance program has added the gallery test to be approved list of lab developed tests as a covered benefit for patients who are 50 years or older with an elevated risk of cancer.
Josh Hoffman: This addition came after the defense Health Agency reviewed gallery to determine if it met tricare requirements for both safety and effectiveness. We're currently working with <unk> carriers to implement this new offering.
Josh Hoffman: We're really pleased with the progress we've made since grow was founded in 2016. The gallery test is identifying deadly cancers in asymptomatic adults in clinical care today.
Josh Hoffman: We continue to demonstrate our scientific leadership in this emerging field to completely transform how we screen for cancer and to dramatically improve the cancer detection rate in the population.
Josh Hoffman: We continue to make progress on our modular FDA submission and we're looking forward to continuing to help individuals and their families detect cancer early when it can be cured to.
Josh Hoffman: To discuss our fourth quarter financial results I'll hand, it over to <unk>, Chief Financial Officer, Eric.
Eric: Thanks, Josh and good afternoon, everyone I'm pleased to present the results for our fourth quarter and the full year of 2020 for.
Eric: Fourth quarter results were strong with revenue of $38 3 million up $7 9 million or 26% as compared to Q4 2023.
Eric: Total revenue for the quarter is comprised of $31 $6 million of screening revenue and $6 $7 million of development services revenue.
Eric: Development services revenue includes services, we provide to biopharmaceutical and clinical customers, including support of clinical studies pilot testing research and therapy development.
Eric: Full year revenue was $125 6 million up 35% from full year revenue in 2023.
Eric: 2020 for full year revenue was comprised of $108 $6 million of screening revenue up 45% over full year 2023 and in line with our narrowed guidance in the fall of 40% to 50% growth.
Eric: Revenue also included $17 million of development service revenue a decrease of 6% from 2023.
Eric: We see continued demand for our gallery test.
Eric: And sold more than 40000 tests in the fourth quarter and a total of approximately 137000 tests throughout the year screening.
Screening revenue of $31 6 million in the fourth quarter was up 39% as compared with the fourth quarter of 2023, primarily based on increased sales volumes.
Eric: <unk> service revenue in Q4, 24 was $6 7 million a decrease of 13% as compared with the fourth quarter of 2023.
Eric: Net loss for the quarter was $97 1 million, an improvement of 48% as compared to Q4 2023.
Eric: Net loss for the full year was $2 billion an.
Eric: An increase of $561 million.
Eric: Or 38% as compared to full year 2023.
Eric: Net loss was primarily different by goodwill and intangible asset impairments.
Eric: non-GAAP adjusted gross profit for the fourth quarter of 2024 was $17 9 million, an increase of $2 6 million or 17% as compared with Q4 2023.
Eric: Primary drivers of the increased margin, where revenue mix and efficiencies of scale related to increased gallery volume.
Eric: Full year non-GAAP adjusted gross profit was $57 8 million.
Eric: An increase of $17 6 million or 44% as compared with full year 2023.
Eric: Adjusted EBITDA for the fourth quarter of 2024 was negative $84 million.
Eric: Representing an improvement of $39 4 million or 32% as compared to Q4 2023.
Eric: Adjusted EBITDA for the full year 2024 was negative $483 5 million, an improvement of $40 3 million or 8% as compared to full year 2023.
Eric: We ended the year with a cash position of $766 8 million.
We are focused on driving growth efficiently and reducing our spending profile in 2024, we made significant strides here and we plan to continue to reduce burn in 2025 and.
Eric: In January we guided that we expect cash burn for the full year of 2025 to be no more than $320 million, a projected decrease of more than 40% of our cash burn in 2024.
Eric: As we've shared before our cash runway extends into 2020, enabling us to achieve major milestones such as Readouts of our Registrational studies and completion of our modular PMA submission.
Bob: Turn it back to Bob concluding remarks.
Bob: Thank you Erin.
Bob: Since the separation from Illumina in June of last year, we have made great progress as a public company. We have seen strong growth for gallery improves our cost efficiency and recently completed a major initiatives to watch the new version of the test preparing us for scalability.
Bob: We believe we are in a strong financial position and are pleased with the momentum we are seeing as we continue to drive multi cancer early detection from an idea towards becoming a new standard of care.
Bob: We are in the final stages of data collection for our Registrational studies and are looking forward to readouts from the Pathfinder to an NHS Gallery studies as well as completion of our modular PMA submission with the FDA in the first half of 2026.
Bob: We are grateful to our employees for their incredible commitment and dedication to our mission to detect cancer early when it can be cured.
I will now turn the call over to Q&A operator. Please go ahead.
Bob: Thank you.
Bob: At this time, if you would like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of your screen you may remove yourself from the queue at any time by lowering Johan.
Speaker Change: When it does return you will hear your name code and receiver products to Amit.
Speaker Change: A reminder, we are allowing analyst one question and one related follow up today.
Speaker Change: We will wait one island to allow the key to film.
Speaker Change: The first question is from Doug Schenkel at Wolfe Research. Please limit yourself I'll begin with your question.
Speaker Change: Okay. Good afternoon.
Speaker Change: For taking my questions and I'll, just I think I have two and I'll just throw them out there and get out of the way.
Speaker Change: First I think it's a Josh question regarding essentially the new Gallery, if you will.
Speaker Change: Would you be able to share.
Speaker Change: A little more detail on how the lower Cogs per test allows you to be more flexible from a pricing standpoint.
Speaker Change: And maybe more importantly, I'm just wondering if in the early going youre seeing anything to suggest that.
Speaker Change: Lower pricing will actually are resolved.
Speaker Change: Actual true elasticity for for the test in terms of demand. So really a question about how low Cogs can go how much and allows you to change pricing on whether youre seeing any evidence of elasticity in the market and then the second topic is more of a current events question on.
Speaker Change: M a C E D.
Speaker Change: Dan.
Speaker Change: Our understanding is that.
Speaker Change: That.
Speaker Change: This debt status essentially that debt.
Speaker Change: The Bill was reintroduced in the house.
Speaker Change: A couple of weeks ago I'm wondering if you could share anything in terms of what you're hearing and what might come next there. Thank you very much.
Speaker Change: Great. Thank you Doug.
Hey, Josh.
Speaker Change: Let me take it first and I'll go over to go ahead Bob.
Speaker Change: I appreciate the questions.
Speaker Change: So on the new version of the test as Josh mentioned in his prepared remarks, the we're able to put significantly more.
Speaker Change: More samples as a forex and number of samples due to a more focused panel.
Speaker Change: So clearly we have a near term reduction in variable reduction in Cogs in terms of the longer term and any price elasticity, we really looked at this platform to be able to build out our scalability and the long term cost structure that will lead us.
Speaker Change: In order to beat.
Speaker Change: We think kind of population scale pricing and margins will get to.
Speaker Change: And so we won't see the the fixed cost leverage on the automation that Josh referred to four for a period of time until volumes volumes really build so we really haven't done the elasticity testing with it.
Speaker Change: And so we will.
Speaker Change: It's really future proofing them to get us to the scalability and cost structure that we know will need over the long term.
Speaker Change: Josh any any pieces to add on that no.
Speaker Change: I'll, just say well, it's early days and as volumes increases will be able to take advantage of that scalability, but not not today.
Speaker Change: Yes.
Speaker Change: The legislation.
Speaker Change: We remain encouraged by the by the reintroduction by the momentum the stakeholder groups that have been advocating for this remain remained very strong and vocal.
Speaker Change: We continue to have bipartisan bicameral support.
Speaker Change: For the Bill so.
Speaker Change: Good good momentum really looking for the right vehicle.
Speaker Change: To be able to move it forward, but again I would say no no real change in the level of support for it.
Speaker Change: And Josh maybe if you have any other color.
Speaker Change: No I think that's right.
Speaker Change: It's got great support bicameral bipartisan, it's been reintroduced and and we're hopeful that.
Speaker Change: And one of them moving vehicles either.
Speaker Change: The first spending bell or in reconciliation that it'll get it'll get seriously considered.
Speaker Change: Thank you again guys.
Speaker Change: The next question is from Tejas Savant from Morgan Stanley. Please limit yourself I'll begin with your question.
Speaker Change: Please on mute yourself and begin with your question.
Speaker Change: Sorry, Hi, this is Jason on for pages congratulate on the quarter and thank you for taking my questions. Maybe just starting off on the recent collaboration with Quest diagnostics can you just hear what's embedded in your 2025 guide regarding this collaboration and confirm if those incorporated in your preamble outspent from mid January.
Speaker Change: And similarly are somewhat out of the Tri care News was this incorporated in your mid January 'twenty, 'twenty guide or do they represent for startups I. Thank you.
I think that yeah definitely yes. So we're excited about both these opportunities as Josh you know really elaborated on for both quest and Tri care cost is going to make the test directly available to be ordered through their system.
<unk> won't need to go get a kit to get their blood drawn and so on.
Speaker Change: <unk> as Josh said.
Speaker Change: Very very excited and working with the payers to show for it.
Speaker Change: Blend coverage as far as guidance goes we contemplated the several things and opportunities for the U S Gallery next year.
Speaker Change: And right now there is no change to our 25 guidance.
Speaker Change: Got it. Thank you and then I guess just following up on Doug's question on the upside of legislation.
Speaker Change: So I believe there was a December build I've mentioned reimbursement beginning in 2020 nine and then a more recent bill from February and the Senate, which had reimbursement beginning in 2028.
Speaker Change: Could you share your thoughts on how these timelines are line for expectations and then on a related note I believe the Bill in February also mentioned reimbursement in line with multi target still screen tests. So does that potential reimburse prevent rafer answer tests also align with your expectations. Thank you.
Speaker Change: Yes.
Speaker Change: On the on the first piece in terms of the timeline.
Speaker Change: And December was what was you know kind of negotiated back and forth and you know what's what's currently in there just kind of resetting back to the beginning position. So as soon as it gets reintroduced just kind of back into the mitigate beginning starting position for the bill on the pricing.
Speaker Change: Pricing has referenced in that as well similar to <unk>.
Speaker Change: Similar to the current current market for school based testing so.
Speaker Change: Seems to be accurate.
Speaker Change: Great. Thank you just call you back.
Speaker Change: Sorry, just adds to tie back to the conversation on Cogs and margins.
Speaker Change: We were saying we've implemented this new version in contemplation of population scale. So we've contemplated that pricing in that.
Speaker Change: Ever.
Speaker Change: Thank you I appreciate the color.
No.
Speaker Change: The next question is from <unk> <unk> from Guggenheim Partners. Please limit yourself I'm thinking with your question.
Speaker Change: Okay.
Speaker Change: Hey, guys. This is Thomas on for Simeon Thanks for taking our questions.
Speaker Change: Just to start maybe one on Pathfinder too I'm curious to know what success looks like for you guys for that study any color on.
What sort of readout, you're looking for maybe any endpoints as.
Speaker Change: As well and then obviously acknowledging it's early days.
Speaker Change: When would you call it if it wasn't playing out to expectations.
Josh Hoffman: And Josh do you want to jump in on that one.
Josh Hoffman: Sure. So as you remember Pathfinder too is a U S study.
Josh Hoffman: Single arm interventional trial, where we're really evaluating the safety and the performance of gallery and an adult U S population over the age of 50.
Josh Hoffman: With elevated risk for cancer, So really the main endpoints of that study are going to be.
Josh Hoffman: Traditional measures of test performance.
Josh Hoffman: The diagnostic evaluation work ops specificity sensitivity predictive values on the safety issue, obviously, the traditional safety measures of complications associated with work ops and weather individuals' continued to get their standard of care screening.
Josh Hoffman: And Thats all very similar to what was in Pathfinder, one as well.
Josh Hoffman: And so we will we've got steady out and it will be part of our final modular submission.
Josh Hoffman: To the FDA in the first half of 'twenty six.
Josh Hoffman: So.
Josh Hoffman: I guess that probably answers your question.
Josh Hoffman: Great. That's helpful. And then just one follow up on a separate note on cash.
Josh Hoffman: Those that with 2024 can you speak to what.
Josh Hoffman: What cash preservation initiatives may have done.
Josh Hoffman: Efforts to get more payer coverage and other is the recent announcement that you said on the call.
Josh Hoffman: But any any new color on longer and longer term impacts there. Thanks.
Josh Hoffman: Yes, no no no change from what we've communicated at JP Morgan and prior the restructuring.
Josh Hoffman: Completed last year before last year.
Josh Hoffman: It gives us the cash runway into 'twenty eight.
Josh Hoffman: Cash burn decreasing.
Josh Hoffman: Over the coming years is because we get there.
Josh Hoffman: Awesome. Thanks, guys.
Speaker Change: And the final question is from Carl Mixon from Canaccord. Please limit yourself I'll begin with your question.
Speaker Change: Everyone's Alex one for Carl Mixon.
Speaker Change: So obviously a major topic of discussion has been the company's spending and burn profile.
Speaker Change: Obviously, there continues to be a lot of uncertainty related to answer that legislation, which as you noted earlier in the call. So if your internal FDA submission and approval timelines are ultimately either meaningfully elongated or shortened how could this impact your cash burn. Thanks.
Speaker Change: Yes. So currently our plans for the F D. A PMA submission or the first half 'twenty six.
Speaker Change: We see cash runway into 2028, so we believe we've built in some some cushion in some flexibility there.
Speaker Change: Two to cover any sort of delay if that were to happen.
Speaker Change: Today sitting here confidently, though with our first half 'twenty six timeline.
Bob: Bob Josh anything else you guys want to add.
Speaker Change: Safety.
Speaker Change: As Aaron mentioned, we have built in some buffer we wanted as part of choosing to do the restructure and drive our cash runway into 2028. It was to give us a level of flexibility. So we believe that's built in.
Speaker Change: Got it. Thank you and one quick follow up so in January towards refi, President Trump announced Oracle open AI and Softbank.
Speaker Change: During force still on Stargate.
Speaker Change: Essentially a lot of funding going towards AI and Larry Ellison actually noted early cancer detection in a I could kind of team up jaws.
Speaker Change: Joining forces overtime I was curious if any of this.
Speaker Change: This news impacted results in <unk> at all thus far thank you.
Speaker Change: Yes.
Speaker Change: We think thats more about longer term opportunity it was great to see.
Speaker Change: It was great to see you know cancer in the forefront as the killer killer application for AI that was called out in that press conference but.
Speaker Change: But in terms of Q1 impact I don't think we'll see anything there.
Speaker Change: Got it thank you.
Speaker Change: Thank you there are no further questions at this time I will now turn the call back to <unk> for closing remarks.
Speaker Change: So thank you everyone for joining the call today.
Speaker Change: Ladies and gentlemen, this concludes the call you may now disconnect.