Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FDA approval of Shield blood test for colorectal cancer screening in adults aged 45 and older.
- Strong clinical evidence supporting Shield, including publications in leading medical journals.
- Robust revenue growth of 29% year-over-year, reaching $177 million.
- Significant increase in Guardant360 ASP to $2,950-$3,000, driven by improved cash collections.
- Launch of upgraded Guardant360 LVT with a 10 times larger panel, enhancing its competitive edge.
Negative Points
- High cash burn with negative free cash flow of $99.1 million for Q2 2024.
- Continued management of Reveal volumes to minimize cash burn, indicating ongoing financial strain.
- Non-GAAP gross margin excluding screening decreased to 62% from 64% year-over-year.
- Challenges in achieving Medicare Advantage plan reimbursements for Shield.
- High out-of-pocket costs for non-Medicare patients using Shield, potentially limiting its adoption.
Q & A Highlights
Q: Can you discuss your expectations on Medicare coverage in the CRC surveillance space? Do you think you can crosswalk to existing coverage, or will you need a new Medicare coverage decision?
A: We already have coverage in the adjuvant setting for Guardant Reveal. The aim of our recent publication and data is to secure coverage for the surveillance setting, testing patients at multiple time points. The study was designed with Medicare coverage in mind, and we believe it qualifies under the current LCD.
Q: What are your thoughts on obtaining ADLT status for Shield, given that many lab tests with ADLT status are not for asymptomatic screening?
A: The criteria for ADLT designation are clear: unmet need and FDA approval. We expect to go through the process and obtain ADLT status sometime in 2025, which will enable favorable Medicare pricing.
Q: Can you expand on your comment that other blood tests will not be viable if they don't meet Shield's performance?
A: With our first-line indication and FDA approval, we believe the performance of CRC screening set by Shield will be the benchmark. Achieving similar milestones with lower performance would be challenging for other tests. We are confident in our position and the data supporting Shield.
Q: What drove the significant beat in biopharma revenue this quarter, and what are your expectations for the rest of the year?
A: The strong performance was driven by the uptake of Guardant Infinity and our comprehensive offering, including regulatory competency and global reach. We have increased our biopharma revenue growth expectation for the full year to high teens, reflecting a strong pipeline and continued demand.
Q: Can you explain the rationale behind the $1,495 cash pay price for Shield, which is significantly above current non-invasive CRC screening products?
A: The price reflects the value of Shield, considering the health outcome benefits and the cost savings associated with early CRC detection. The ADLT pathway allows for pricing based on the test's value rather than historical precedent. We aim to build a sustainably profitable business, and the price is justified by the value Shield brings.
Q: What are the next steps needed to get Shield into USPSTF guidelines?
A: We are optimistic about Shield's inclusion in guidelines, starting with ACS and then USPSTF. We have generated robust clinical evidence, including randomized studies and outcome models, to support Shield's value. We expect the review process to start soon and are ready with the necessary evidence.
Q: Can you discuss the pros and cons of an NGS approach versus a lower-cost PCR-based approach for screening assays?
A: The science of cell-free DNA biomarkers is complex, and NGS allows us to look at thousands of features, providing superior performance. At scale, our cost is competitive, and we are confident in the long-term viability of our NGS technology stack.
Q: How do you see the size of the commercial team evolving for your clinical oncology business?
A: The oncology market is promotionally sensitive, and we have built a sizable sales team. We adjust the number of reps based on the marginal improvement they bring to volumes. We also leverage other channels like EMR digital and top-down partnerships to maintain our market share.
Q: Can you provide more color on your marketing plans for Shield?
A: Our strategy focuses on direct sales force promotion to PCPs. The FDA approval has garnered significant media attention, and many PCPs are already aware of Shield. We will try different marketing approaches to see which scales best.
Q: How do you address concerns around potential out-of-pocket costs for non-Medicare covered patients using Shield?
A: We are transparent with both physicians and patients about the financial responsibility. For patients 65 and above, Medicare covers the test. For younger patients, we clearly communicate the cash pay price to avoid any surprises. This approach helps us focus on scaling reimbursable volumes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
