GRAIL, Inc. (GRAL) Q3 FY2025 Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the GRAIL Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that this conference call is being recorded. GRAIL Investor Relations, please begin.

Thanks, operator, and thanks, everyone, for joining us today. On the call are Bob Ragusa, our Chief Executive Officer; Aaron Freidin, Chief Financial Officer; Josh Ofman, President; Sir Harpal Kumar, Chief Scientific Officer and President, International; and Andy Partridge, Chief Commercial Officer. We'll be making forward-looking statements on this call based on current expectations. It's our intent that all statements other than statements of historical fact, including statements regarding our anticipated financial results and commercial activity will be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 as amended and Section 21 of the Securities Exchange Act of 1934 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 GRAIL 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 that GRAIL files with the SEC, including the Risk Factors section in GRAIL's most recent quarterly report on Form 10-Q. This call will also include a discussion of GAAP results and certain non-GAAP financial measures, including adjusted gross profit or loss, which are adjusted to exclude certain specified items. Our non-GAAP financial measures are intended to supplement your understanding of GRAIL's financials. Reconciliations of the 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, we can turn to Bob.

Good afternoon, everyone, and thank you for joining us. On today's call, we will review third quarter results and discuss recent updates. These include PATHFINDER 2 results shared at ESMO, updated SIMPLIFY data shared at EDCC and recent strategic and financing activities. We remain very pleased with our commercial progress. Growth in Galleri volumes and revenue in the third quarter of 2025 were 39% and 29%, respectively, as uptake continues to grow. From the launch of Galleri through September 30, approximately 420,000 Galleri commercial tests have been sold by more than 16,000 healthcare providers. We are continuing to progress our activities beyond the United States as well, recently announcing a strategic collaboration with Samsung to bring the Galleri test to key Asian markets. Subject to execution of definitive agreements, we and Samsung will work as exclusive partners to commercialize Galleri in South Korea and potentially other Asian markets, including Japan and Singapore. In addition, we plan to explore other strategic and operational collaborations. Samsung has also agreed to make an equity investment of $110 million in GRAIL, subject to closing conditions. In October, we also introduced Galleri commercially in Canada in partnership with Medcan, a global leader in proactive health and wellness services. Eligible adults in Canada may now access the Galleri test at Medcan's clinics. In addition to these operational updates, we recently completed a $325 million private placement. This transaction strengthens our balance sheet as we progress through additional milestones. Galleri is the only MCED available, which has demonstrated performance in people being screened in the intended use population. This includes data from our registrational PATHFINDER 2 study, where a prespecified analysis was presented at ESMO last month. I'll ask Josh then Harpal to discuss recent results from Galleri's clinical program.

Thank you, Bob, and hi, everybody. We were really pleased last month to share very positive performance and safety results from the prespecified analysis of the first 25,000 participants in our registrational PATHFINDER 2 study. This study started in 2021, and PATHFINDER 2 is a large prospective trial in a very broad and diverse enrolled group representative of Galleri's screening eligible intended use population. Releasing the first results of this study at ESMO was so exciting and a big milestone for our company and all of our partners and investigators, and it was a meaningful contribution to the evidence base for the effectiveness of multi-cancer early detection. As you'll recall, we found that adding Galleri to recommended screening for breast, cervical, colorectal and lung cancer yielded a more than sevenfold increase in the overall cancer detection rate. Approximately 3/4 of the cancers detected by Galleri have no recommended screening options. And more than half of the new cancers detected by Galleri were in Stage 1 or 2 and more than 2/3 were detected at Stages 1, 2 or 3. One of the most important clinical metrics, the positive predictive value, or PPV, which is the likelihood of receiving a cancer diagnosis following a positive test result, Galleri's PPV was 61.6%. Specificity was 99.6%, translating to a false positive rate of 0.4%, a critical safety metric. Galleri's ability to accurately identify where in the body the cancer is located also helped guide an efficient and effective diagnostic evaluation. Importantly, there were no serious study-related adverse events reported thus far. Diagnostic resolution, an important economic and patient-centered outcome measure took a median of 46 days. and only 0.6% of all participants had an invasive procedure. And again, no serious study-related adverse events were reported. Invasive procedures were 2x more common in participants ultimately diagnosed with cancer than in those who are ultimately not diagnosed with cancer. PATHFINDER 2 and NHS Galleri make up our registrational clinical program for Galleri. Our PMA submission will include these data from the first 25,000 enrolled in PATHFINDER 2 to complete 12 months of follow-up, plus findings from the prevalent round of screening from the NHS Galleri randomized clinical trial as well as the results of a bridging study between the version of Galleri used in the 2 registrational trials to the updated version that we plan to submit to the FDA for premarket approval. As a reminder, we announced positive top line results from the prevalent round of screening in the NHS Galleri trial in May of this year, namely that data from the prevalent screening round showed a substantially higher positive predictive value than that was observed in the first PATHFINDER study. Now to review important new findings from our SIMPLIFY study, I'll hand it off to Harpal.

Thanks, Josh, and good afternoon, everyone. Working with the University of Oxford, we recently shared positive long-term results for an extended follow-up of the SIMPLIFY study at the Early Detection of Cancer Conference, or EDCC in October. As a reminder, we conducted the observational SIMPLIFY study in symptomatic participants in the U.K. to understand whether our technology could play a role helping clinicians guide investigation and accelerate time to diagnosis when patients present with concerning but nonspecific symptoms. Examples of these symptoms could include unexplained weight loss, fatigue, persistent abdominal pain and others. The previous primary analysis from SIMPLIFY published in the Lancet Oncology in 2023, followed participants until diagnostic resolution or up to 9 months and demonstrated Galleri's PPV in this population was approximately 75%. Patients determined to have a false positive Galleri result were followed for an additional 15 months in the National Cancer Registry for England and Wales. The updated analysis presented at EDCC includes the subsequent registry follow-up period for all 79 of the patients who were originally classified as false positives, and the data contained a number of important learnings. First, approximately 1/3 of the participants initially believed to be false positives were diagnosed with cancer during the full follow-up period. Second, of that group, a cancer signal of origin or CSO prediction from the Galleri test was correct in all but 1 patient. And finally, with the reduction in false positives in SIMPLIFY from 79 to 51, the updated PPV for Galleri in this symptomatic population increased to 84.2%. These findings reinforce the importance of proactive follow-up after a positive MCED test result and the value of the Galleri test's accurate CSO capability. Now to Aaron for a review of our financials.

Thanks, Harpal, and good afternoon, everyone. I'm pleased to present our results for the third quarter. Revenue for the quarter was $36.2 million, up $7.5 million or 26% as compared to the third quarter of 2024. Total revenue for the quarter is composed of $32.8 million of screening revenue and $3.4 million of development service revenue. Development services revenue includes services we provide to biopharmaceutical and clinical customers, including support of our clinical studies, pilot testing, research and therapy development. We continue to see demand for our Galleri test and sold more than 45,000 tests in the third quarter. We have historically observed seasonal fluctuations over the course of the year, in particular, relatively high volume in the second and fourth quarters and lower in the first and third. And we would expect these seasonal trends to continue. Screening revenue of $32.8 million in the third quarter was up 29% as compared with the third quarter of 2024. U.S. Galleri revenue was $32.6 million, up 28% compared to the third quarter last year. At the beginning of the year, we guided full year 2025 U.S. Galleri revenue growth between 20% to 30%. We are refining this growth guidance today to the middle of that range. Cost of screening revenue, exclusive of amortization of intangible assets as a percent of screening revenue decreased mainly due to lower variable costs of Galleri testing performed on our automated platform, partially offset by a decrease in ASP and higher sample reprocessing costs. Net loss for the quarter was $89 million, an improvement of 29% as compared to the third quarter of 2024. Gross loss for the third quarter 2025 and 2024 were $13.7 million and $22.2 million, respectively. Non-GAAP adjusted gross profit for the third quarter of 2025 was $20 million, an increase of $8.2 million or 69% as compared with the third quarter of 2024. In Q3, we achieved a non-GAAP adjusted gross margin of 55% compared to 41% in the third quarter of 2024. This change was largely driven by improvements in variable costs on our updated Galleri platform that launched last year and by an increase in sample volume for the quarter as we ran a onetime batch of research and development samples for clinical validation, resulting in reduced fixed cost per sample related to higher lab efficiency at higher volumes. We do not expect similar clinical validation sample volume in future quarters, but the higher number of samples processed demonstrates the benefits we expect to see in lab efficiency as the sample volume grows. We ended the quarter with cash and investment position of $547.1 million. Including net proceeds from the $325 million private placement in October, we have approximately $850 million of cash and investments. This does not include the recently agreed upon investment in GRAIL by Samsung, which is subject to closing conditions. In August, we drew down our cash burn guidance for the full year 2025 to be no more than $310 million from no more than $320 million. Today, we are updating our cash burn guidance further to no more than $290 million for the full year of 2025, net of $13 million in placement fees from our recently completed financing. Expected full year burn represents a significant decrease of approximately 50% compared to 2024 as we remain focused on cost management. We believe our cash runway extends into 2030, enabling us to achieve major planned clinical and regulatory milestones. I'll hand it back to Bob for concluding remarks.

Thanks, Aaron. Our strategic priorities are seeking FDA approval of Galleri and pursuing broad reimbursement. We are advancing Galleri in the near and midterm towards key clinical and regulatory catalysts to achieve broad access while maintaining our disciplined cost management. As we move into 2026, our key milestones are the completion of our modular PMA submission to the FDA and full clinical utility results from our 140,000-participant NHS Galleri study, which we expect to read out midyear. This longitudinal data set will be reviewed by the NHS to determine Galleri's potential deployment within the U.K. population. Lastly, we look forward to welcoming many of you on site tomorrow at our centralized labs in Research Triangle Park, North Carolina. A live webcast of our Analyst Day will begin at 11:00 a.m. Eastern Time and will also be available at the Investor Relations section of our website. Let's now go to Q&A. Operator, please go ahead.

[Operator Instructions] Our first question will come from Subbu Nambi with Guggenheim.

The FDA time line is moved to Q1 instead of first half of 2026. What changed?

Yes, Subbu, thanks for the question. So I think the main thing is just as we move forward in time, we've gotten more certainty in the range of when we'd be able to deliver that. So we've been saying first half for a fair amount of time, and it looks like things are on track well enough where we're more confident to be able to put out for the first quarter. So it's really just kind of tightening the confidence intervals around the time frame.

Perfect. And you're currently running a promotion on your website offering $150 off of Galleri for patients getting tested from October to year-end. What incentivized you to offer this promotion? How has the demand elasticity in response to this promotion been? And is this -- are you piloting a reduction to $800 moving forward? And could this impact ASPs moving forward?

Yes. Maybe a couple of comments, and I'll turn it over to Andy Partridge, our CCO. So we've done a fair amount of work looking at the price elasticity on the test. And this is kind of a reflection of some of that work. We do know that there's significant price elasticity and going into the end of the year is a good time to exercise some of that. But maybe to answer some of the other pieces. Andy, do you want to take that?

Yes. Thanks, Bob. So as you saw, we have reduced the price on the website. The growth that we've seen in Q3 year-over-year has been predominantly driven by the provider channel, where we've seen improvements in both breadth of prescribing, bringing new prescribers onto using Galleri and also depth of prescribing. So discounting has been a component of increasing that depth and breadth of prescribing. Also the integrations we've done with companies like Quest and Athena have also driven a lot of that breadth and depth. And then finally, repeat testing, which price is also a component of that has also driven that depth of prescribing as well. So we're very pleased with what we've seen in the market.

Your next question will come from Kyle Mikson with Canaccord.

Congrats on the progress. So you've obviously bolstered the balance sheet nicely. You should have over an additional $400 million by early '26 with the Samsung investment. I was just curious how you plan to use the additional capital? And specifically, how does the commercial strategy change, especially in light of recent or upcoming competition? And I appreciate to hear Andy's thoughts on that as well.

Yes. So I think you hit some of it. Obviously, it gives us a lot more flexibility on the balance sheet. With competition emerging, it does give us more flexibility in how we think about flexing our commercial investments. So we're looking at those things as well as any of the other areas that we need to really fortify as we continue to scale and expand our test footprint in the marketplace. But I guess, Andy, do you want to also comment on that?

Yes. I think, Bob and I really covered it. I think the thing that I would emphasize is we feel like we've got a lot of momentum right now with customers for all of the reasons that I described and definitely coming now off the back of the PATHFINDER 2 data that we presented at ESMO, there's a palpable momentum that we have in our business.

Got it. That's helpful, guys. And also, Hims & Hers has made an investment in the company recently. Consequently, there's been some speculation that means GRAIL is going to take a direct-to-consumer approach to Galleri at some point. So could you just comment on those plans or the potential to take that route over time in light of the increasing focus on longevity among consumers?

Yes. No, it's a good question. We're -- as we just reiterated our time line for our PMA, we're very committed to the PMA pathway. And so there's kind of no change in that. In fact, you saw a slight acceleration in the actual time frame. But beyond that, we do also recognize that the digital health channel is an important channel out there more broadly in this sector as well as many others. And so we want to make sure that we're able to utilize all the channels that are available to bring. We've talked from the very beginning about how do we get broad access for Galleri, and that will be one other element to enable broad access. But that also would not diminish our -- again, our push towards a PMA and broad access through that.

Your next question will come from Doug Schenkel with Wolfe Research.

So I want to actually talk about NHS England a little bit more, and then I have a COGS-specific question. So starting on NHS England, looking back to May 2024, when the statement was issued saying that early results were not compelling enough to justify a large-scale pilot, were they referring to any clinical utility data from year 1 or to test level performance metrics such as PPV, sensitivity and/or specificity? Can you share a little bit more on what prompted that decision? And then on the same topic, has anyone besides GRAIL and the NHS evaluation team seen the year 1 NHS Galleri data. I'm just curious if anyone else has seen it? And then if not, at what venue do you anticipate releasing that data more broadly, keeping in mind that you've said the FDA module submission is expected to be, I think, completed in Q1. So it would seem like that data would need to be released soon.

Yes. Harpal, do you want to take that one up?

Sure. Thank you, Doug. So on NHS England's decision last year, important to reiterate that what they would have wanted to see in order to initiate a pilot at that stage was very exceptional data. And they looked at a few specific metrics, of which PPV was definitely one. To remind everyone, it isn't possible to look at the sort of broad utility measure of Stage 3 and 4 reduction with only 1 year of data. That has to come with 3 years of data. But PPV was certainly one. And you'll have seen our announcement earlier this year that the PPV in that first round was substantially greater than we saw in our first PATHFINDER study, which to remind everyone was 43%. So it gives you a sense of some of the information that was seen at the time. But again, to reiterate what the NHS would have wanted to see was truly exceptional data in order to accelerate -- and the point is they were looking about an acceleration of an implementation rather than waiting until the final study results. And what they said at the time was, it wasn't exceptional enough to accelerate that implementation and so that they wanted to wait for the final study results. In answer to your second question, no, only the NHS evaluation team have seen that data so far. To the third question, yes, it will be the data from the prevalent round only from the intervention arm will be part of our FDA PMA submission package in Q1 next year, but that does not mean it will be in the public domain at that point. There won't be any data in the public domain from NHS Galleri until we have the final study results.

Yes. And we're expecting that full readout in the midpart of 2026.

Your next question is your final question and will come from Bradley Bowers with Mizuho.

Just one on volumes and then maybe one a little high level. But just on volumes, pretty acceleration here outgrew some seasonality. Just wanted to hear what's kind of driving volumes here, what cohorts? And then how that -- how we should think about that into next year and if international will have a tangible contribution next year?

Yes. Aaron, you maybe want to take the volume question and maybe pass this off to Andy as well.

Yes. I mean I think Andy, I can tag team that. So yes, you're right. I think volumes were up 39% for the quarter year-over-year. Andy has kind of touched on already where we're seeing more provider pull-through and so on for the reasons that you stated. As far as international goes, there's very minimal international volumes today. It's an area that we're focusing on. And as you see through the Samsung engagement and so on that we're being opportunistic there, and we're excited about what could be. It's probably a little too early right now to say what volumes will be next year. But we're getting, as Andy said earlier, momentum internationally and lots of momentum domestically. So Andy, anything you want to add?

Nothing else to add. I think we covered it.

And then if I could just double-click on the SIMPLIFY study. I think that's actually an interesting data point that going back and following up patients who were previously identified as false positives. I mean, does this -- were these patients, I guess, that went under typical protocols? Why were these cancers, I guess, kind of missed in follow-up? And then also, there's, I guess, some serious implications about the possibility to detect cancers even earlier than the current paradigm or what follow-up testing would be. So I just wanted to hear your thoughts on that.

Yes. Harpal, why don't you go through that?

Yes. I mean, look, first of all, it is, as you say, a really interesting set of data, and it's relatively recent. So we're still examining some of the detailed information. I think one of the most significant points is that many of these patients are presenting with very nonspecific symptoms. And these are the types of symptoms that could be indicative of cancer and often they are, but they could also be indicative of many other conditions. And so primary care physicians, when they see patients like this and they suspect cancer, will typically refer them to where they think that cancer is likely to be in the body. But given these nonspecific symptoms, many of them could be several different sites. And so then what happens is a patient gets referred to a particular type of clinic and they get worked up in that clinic for that type of cancer. But if nothing is found at that point, they may not be worked up any further. And because this was an observational study, we didn't provide the CSO prediction to the clinician at the time. But what we've subsequently determined from this further follow-up is, had we done so, it would have provided a directional investigation in all but one of the patients, which we think is a really encouraging development in terms of that CSO prediction capability.

Yes. And I would just add to Harpal's point, the value of the CSO because what we've also seen in centers that have adopted Galleri in the U.S. is physician confidence growing in the value of that CSO. We've seen real-world publications from both Mayo and Dana-Farber where their PPVs have been in excess of 70%. So that physician confidence in the value of the CSO really means they really work that diagnostic workup to a final resolution. And what we've seen there, therefore, there is more cancers being diagnosed due to that guided diagnostic follow-up from the CSO.

We have time for one more question. So we'll return to Doug Schenkel with Wolfe Research.

So I think it's an Aaron question. Cost of screening revenue, I think in dollar terms, it was down $3 million relative to Q2. That's kind of a mid-teens decline sequentially on a per test basis. I think it was down 28% on a per test basis year-over-year. So I just want to make sure, at least I'm in the right ballpark in doing the math. And if so, that's pretty impressive and remarkable. Can you just share how you're getting there and the durability and the trajectory from here?

Sorry, jump up.

Yes, I was say Aaron talked a little bit about that in the prepared remarks. But yes, Aaron, why don't you go into a little more detail on that?

Yes. Doug, I think it's really an example of what we've been saying for a year now about the platform that we've built for high throughput, the capacity that we have to run 1 million samples a year and just what higher volumes will show from a fixed cost leverage perspective. Comparing year-over-year, you've also got the variable cost impact that we've been talking about. We've kind of talked about that as a 4 to 5x more samples per flow cell compared to the older version. So it's really a demonstration of what more volume will do to our fixed cost leverage and why we're really focused on driving more volume, getting more access out there because we've got the infrastructure to handle it and the margins are there for the day.

And there are no further questions at this time. I will now turn the call back to GRAIL for closing remarks.

So thank you, everyone, for joining today's call.

Ladies and gentlemen, this concludes the call, and you may now disconnect.