GRAIL, Inc. (GRAL) Earnings Call Transcript & Summary

Good morning. Welcome to the Jefferies Global Healthcare Conference. My name is Ryan Delaney with the Jefferies Investment Banking team. It's my pleasure to introduce Bob Ragusa, CEO of GRAIL.

Thank you, Ryan. Welcome, and thank you, everyone, for attending the session. It's a pleasure to be here today, and I'd like to thank the team at Jefferies. I'll quickly highlight our disclaimer for any more information on GRAIL's filings with [indiscernible]. So GRAIL is focused on detecting cancer early when it can be cured. We know that current recommended screenings which test for single cancers are limited and most deadly cancers are found too late. GRAIL is uniquely situated to address one of the most meaningful opportunities in health care. Galleri, our first-of-its-kind multi-cancer early detection test is designed for population scale screening. Our expansive clinical evidence program is setting the standard for the multi-cancer early detection field. The Galleri test is routinely today finding deadly cancers before symptoms arise. So think about that. It's routinely finding deadly cancers before symptoms arise. We've seen strong commercial momentum in the pre-reimbursement environment. We sold more than 325,000 Galleri commercial tests through March of this year. That, coupled with large clinical program designed to support population scale use of our technology. We've run more than 640,000 Galleri tests across commercial and clinical applications at GRAIL. Our commercial initiatives are focused on building the market with an eye towards broad access for the future. We are pleased that we have made a number of exciting announcements in 2025 thus far. First, GRAIL and Quest Diagnostics launched a program to improve provider access to Galleri, whereby providers can now order the Galleri test directly from GRAIL through Quest Diagnostics connectivity system. And second, we announced integration with Athenahealth's EHR platform, athenaCoordinator Core, which can further streamline the Galleri test ordering process for providers. Additionally, the U.S. military's TRICARE program, one of the largest health plans in the U.S., has added the Galleri test as a covered benefit for patients who are 50 years older and at elevated risk for cancer. We have breakthrough designation with the FDA and are progressing our modular PMA through the FDA with an expected final submission in the first half of 2026. We have a large global opportunity with an eye towards that future. We've made significant investments in our infrastructure and operations. Today, as we pursue FDA approval and broad reimbursement of the Galleri test, we are equipped for commercial scale and global leadership. The value of the Galleri test is its ability to find cancers that aren't screened for today and our biggest opportunity is deploying the test in a reimbursed environment to screening eligible asymptomatic people in the U.S. and abroad. So critically, the Galleri test is working in the real world. Commercial use of Galleri is finding lethal cancers early and in Tad Carper's case, head and neck cancer. Tad, the SVP of Communication for the Dallas Cowboys is one example which was shared last Thanksgiving day during a Dallas Cowboy football broadcast. The majority of early-stage cancers Galleri is finding do not have any screening tests. And remember that localized solid tumors often have -- have effective often curable treatments, typically surgery with or without radiation. We are immensely proud to be able to help patients and providers find these cancers early and enable positive outcomes for patients. We have conducted market research over time to discern consumer attitudes towards cancer screening technologies and affirm -- our data affirms adults in the U.S. care deeply about innovative cancer screening options. This includes a recent survey conducted by Ipsos of 1,000 U.S. adults aged 50 to 75 years old. The survey showed a vast majority of those surveyed want to know if they have cancer as early as possible, wish to be informed of the latest screening technologies regardless of their perceived ability to pay and want their providers to educate them on multi-cancer early detection tests. Switching to the financials for a moment. We have a strong financial profile. Total revenue for the first quarter of 2025 was $32 million, up approximately 19% year-on-year. U.S. Galleri revenue was $29 million, up 22% and on track to the guidance range we provided for the year. Our cash balance of $678 million provides runway into 2028, and we are well positioned ahead of major milestones, including the readout of our registrational studies and the filing of our PMA. Going forward, we will continue to invest in market development focused on obtaining reimbursement and broad access. The updated Galleri tests, which we recently rolled out, will allow us to reduce COGS per test over time as we scale. Turning to existing 2025 guidance. We expect our core U.S. Galleri business to grow at 20% to 25% in 2025. This reflects the reduced investment we are making in commercial as we work towards achieving commercial spend neutrality. With a focus on efficiency and the completion of some of our larger research and infrastructure investments in 2025, we are projecting a cash burn of no more than $320 million, a significant reduction from 2024. So there is nothing acceptable about the current state of cancer -- about the status quo in cancer screening today. The reality is that most deadly cancers are found too late. This is both a problem statement as well as an enormous public health opportunity at population scale. On the problem statement side, current cancer screening is very limited. The reality is that 70% of cancers we're not even looking for. There's no standard of care screening for those 70%. We also know that 86% of cancers are not found through recommended screenings and that proportion is even higher once we get outside the U.S. On the opportunity side, we know that there's a 4x improvement in survival rates when cancer is detected early in a localized stage. So how do we seize this opportunity? Through comprehensive research, GRAIL has confirmed that our methylation platform can identify a cancer signal that is shared across many types of cancer. This is the fundamental breakthrough that marks GRAIL's leadership in the field. The test is designed for use in asymptomatic populations to drive earlier detection of cancers and better outcomes. Abnormally methylated DNA is the hallmark of cancer. And additionally, it provides valuable information about where in the body that cancer signal is coming from. In other words, it can predict the cancer signal of origin. Galleri was designed to have a very high specificity to limit false positives and to drive a high positive predictive value, a key clinical measure. The technology has a number of other benefits, including a low clinical limit of detection and a cell-free DNA signal that preferentially detects highly shedding cancers that are typically aggressive. Our first clinical implementation study, PATHFINDER, which was presented at ESMO in 2022, showed that Galleri more than doubled the number of cancers identified when added to standard of care screening. We're very pleased that we have demonstrated consistent results across our observational and case -- observational case-controlled and interventional studies. About half of the MCED detected cancers were early stage. About 7 in 10 of the MCED detected cancers had no recommended screenings. The positive predictive value for Galleri in the population -- in the study population was 43%, which is an order of magnitude higher than leading single cancer screening tests. As a reminder, PPV is among the most critical performance metrics for successful MCED at population scale. The localization accuracy from the cancer signal of origin was high, leading to more efficient diagnostic workup. Galleri's cancer signal of origin is differentiating. The test is designed to be easily implemented into clinical practice and the cancer signal of origin enables directed diagnostic evaluation. There were no serious adverse events in the diagnostic work reported. And additionally, patient satisfaction was high even among those who experienced false positive results. Staying on the PPV that we observed in PATHFINDER, it is important to note that we did not see deterioration in the test performance as we advance into the real-world implementation. Our model PPV, based on the results of CCGA, our case-control study was 44%. Subsequently, the implementation of PATHFINDER study, the PPV was 43%. We are pleased that these 2 studies demonstrate consistent results across our observational case-controlled and interventional studies. One would typically expect a deterioration in performance, we did not see that. Moreover, last month, we reported positive top line results from the prevalent screening round of our NHS Galleri trial. We saw substantially higher PPV than the 43% observed in PATHFINDER as well as specificity and cancer signal of origin consistent with our PATHFINDER study. As a reminder, Galleri demonstrated specificity of 99.5% and a CSO accuracy of 88% in PATHFINDER. There were no serious safety concerns in the NHS Galleri prevalent screening round consistent with our PATHFINDER study. These top line results from the prevalent screening round of the NHS Galleri trial are very exciting and encouraging, and the results of all 3 years of the trial are expected in mid-2026. These longitudinal results will be the first clinical utility results of their kind in the MCED field. So the impact of cancer is enormous, both in terms of its human toll as well as the financial cost. Nearly every adult has a story about someone important to them that's been impacted by cancer. In fact, 19 million new cases of cancer will occur globally every year and about 10 million resulting deaths. Cancer is currently the #2 cause of death globally and is projected to become the #1 killer. The ultimate opportunity for multi-cancer early detection is significant. The total addressable market in the U.S. is over 100 million individuals. That TAM expands quickly when we add the U.K., where we're running the NHS Galleri study with about 19 million individuals. If you add in the rest of the EU, there's about 160 million TAM, and the TAM in Japan is just under 50 million. So very sizable. And Galleri has found strong commercial reception in the largely pre-reimbursement market. We have currently run 325,000 Galleri commercial tests to date through March, including more than 37,000 in the first quarter of 2025. Currently, we have over 14,000 ordering providers. We've also seen repeat volume moving higher over time, including in early 2025. More than 20% of Galleri volume today is representing repeat testing. There is robust interest from providers and commercial partners. Our partnerships span health systems, employers, life insurance and first responders. Our partners are often also innovators such as Function Health. Function Health is a member-based telemedicine provider focused on empowering patients to take control of their health by proactively monitoring for early indicators of disease. Galleri is offered as an add-on to Function Health's core testing menu at an additional cost. And we're seeing strong uptake with customers on the Function Health platform. Earlier this year, we announced a new partnership with Quest Diagnostics and Athenahealth, and these are intended to further streamline the Galleri test ordering process. Integration of the Quest ordering system enables easy ordering for more than 500,000 physicians and allows patients to access the Galleri test at 7,400 Quest locations nationwide without the need to bring in the Galleri test kit. Integration with the Athenahealth EHR platform, athenaCoordinator Core enables a more seamless ordering process to over 160,000 U.S. providers. Additionally, Galleri test results will be returned directly in the EHR. So we remain on track for continued commercial growth in 2025 with expected volume growth from TRICARE coverage and Galleri integration into the Quest Diagnostic and Athenahealth ordering systems. We have already built out our laboratory infrastructure to scale. Our Research Triangle Park, North Carolina site has approximately 170,000 square feet in total and enables us to continue to scale lab capacity substantially with sufficient capacity to meet multiple years of growth. As I mentioned, our new test version where we've integrated significant automation, which supports large-scale testing and will drive cost down over time. We've also demonstrated significant scale already as we've run more than 640,000 Galleri commercial and research tests to date. So stepping back for a moment, the long-term vision of MCED is clear. There is an enormous global market for people at elevated risk of cancer who would benefit from broad access to MCED. Many of our investments have been designed to meet that future with a high degree of capability. And this includes our new version of the assay that has significant automation for scalability and lower cost at volume. Our commercial and medical affairs teams educating physicians and health systems on how to effectively implement MCED into their practices, driving an understanding of how to effectively handle both positive and negative test results. All of this will help speed uptake when we get to broad access. To that end, we are tightly focused on execution of our business plan and disciplined cost management. Since GRAIL was spun out of Illumina in the middle of last year, we have achieved planned objectives and undertaken new initiatives to help support achieving our long-term vision. That includes completing study visits for our 2 registrational trials, which occurred in July of last year as well as a restructuring in August of last year, after which we continue to achieve strong growth in today's current pre-reimbursement market. Our key objectives are deliver the first FDA-approved multi-cancer early detection test and achieve broad commercial reimbursement. Looking ahead later this year, we will read out foundational data, including early performance and safety results from our 35,000-person PATHFINDER II study, the first of the 2 registrational studies at GRAIL, and we anticipate final clinical utility data from the longitudinal 140,000 participant NHS Galleri study in mid-2026.

And with that, I think we have a few minutes for questions. Any questions people might have.

[indiscernible].

Yes. So we haven't fully quantified that yet, but what we do know is every time we remove friction from the system, we see orders increase. So for example, even in employers, we have a lot of self-insured employers that offer the Galleri test as a benefit to their employees. And when we run events there where the phlebotomy is very easy to gather, we'll often see 200, 300 people gather at those. So we know each time we take friction out of the system, we see uplift. So we do expect the both the Athenahealth and the Quest Diagnostics to, over time, boost volumes.

Just wondering for your international expansion, what's the turnaround times around there? Are you going to be expanding labs outside of North Carolina?

Yes. So right now, we're focused on the North Carolina lab. So we don't have an international lab planned at this point. We do have some small international volumes. So we run that out of the North Carolina lab. And the logistics, so we currently run at about a 10 business day turnaround time. And so the relatively short transit time for that has not been an issue at smaller scales. As we go larger internationally, which will look after we get the NHS data out in mid next year, we think that's going to be a good calling card for most national health systems to be able to really look at Galleri. And so if we do generate substantial sales outside the U.S., we would look for also international labs to reduce turnaround time.

Can you comment, I guess, or give some color on the pathway to broad adoption by the NHS after the Galleri -- NHS Galleri trial reads out? Because, I guess, it looks like over the weekend or a couple of days ago, the NHS announced like a pilot trial for lung and breast cancer liquid biopsy test that was developed at Guardant. And I'm just curious as to does GRAIL fit in parallel to that? Or how does the NHS think about that?

Yes. So NHS is obviously, been in partnership with the study. It's a large-scale study across 140,000 people. The key driver we'll be looking for in mid-next year is the clinical utility factor. So we're looking for a reduction in late-stage cancer. And so they'll be looking at that relative to their current screening programs and seeing if adding Galleri into their current screening programs make sense for them. So we're hopeful based on the performance data we've seen to date that they'll be positive, but that's something for them to determine.

[indiscernible] kind of feedback and then also use cases in pancreatic that's obvious to wrap, but how much of that is being driven by that versus cancers where you do have screening in place?

Yes. So again, if you look at the study, 70% of cancers don't have any screening. So we're finding a tremendous number, whether it's head and neck, gall bladder. You saw the whole slide with that. So it's things outside of pancreatic, but pancreatic is one of the things we're particularly good at picking up. And physicians comment, we just had a recent testimonial that came and talk to our employees of a firefighter who had early-stage head and neck and the physician is out in Ohio. Physician said, "My normal routine is I do surgery, radiation, chemotherapy. It's just what I do." And I said, "With yours, it's actually early enough. We don't normally see it like this. I can just do surgery." So they literally just stopped that surgery, and they'll obviously observe and everything, but it was early enough and it's unusual for physicians. So they're going to have to a little bit change their mindset in it. I'm sorry, the second half of your question was?

That's it.

Okay. All right. Well, thank you, everyone. I appreciate it.