GRAIL, Inc. ($GRAL)

Our digital health channels. It's been great to see there despite some of the NHS headlines, the growth persisted and so on. So really excited to be there. For the rest of the year, we've got -- we've announced we're going to implement Epic by the end of the year. We continue to see momentum from some of our other integrations, whether it's Quest or Athenahealth, and the pull-through is there. So it's great to see...

Maybe let's -- you mentioned NHS. -- let's just dive right into that. That was sort of the big update that happened during the quarter. A lot to parse apart there. Has that impacted any of your customers or in your conversations around demand? So has that had any impact on the business as you see it in terms of like volume?

Yes. So I'd say that the headline came out and physicians who are orderers, physicians who are prospective orderers ask more questions. It was pretty clear though that those who saw beyond the headline and saw some of the clinical utility measures such as Stage IV reduction, increase in Stage I and II, decreased emergency room presentations, 4x more cancers found than the standard of care, like they got it. That all being said, everyone wants to see the data at ASCO. It's one of those SEC disclosure type things where you've got data in-house, you've got to say something vague, to not protect your -- I mean, to not ruin your ASCO presentation. So everybody wants to see the ASCO data, and that will be coming out here at the end of the month.

Okay. Any way you can frame that? I know it's not ASCO yet, but we are getting the same question sort of any way you can frame out like what the various scenarios are what the various outcomes are and sort of like where it could go from there?

Yes. I mean I think what you'll see is all the underlying data beyond the headline, right, the qualitative headline, the cancers by stage, how many were there, were in each of the years, where we really made -- what all the details are behind those clinical utility metrics. And so our field team, we've expanded that. We've expanded our salespeople. We've expanded our medical sales team. They're all being hired and trained up. So by the time ASCO hits, they can hit the ground running with updated materials, education for physicians and so on. So we're excited to finally have the data out there because it really is -- this data has never been seen before. It's a randomized controlled trial of 140,000 people, 3 tests over the period of the 3 years, 3 time points. And really see just how our test, how a multi-cancer test can detect cancer very efficiently when it's sitting alongside standard of care. Standard of care only catches 14% of cancers. So there's a whole lot that people aren't testing for.

Okay. And what about the -- going back to NHS, what are the next steps there?

With the NHS? Yes. So, we're -- we've got -- we have an agreement with them, right, as part of this whole trial thing. There was a series of clinical utility endpoints to look at, and we've met some of those. So we'll have a discussion. But like anything with NHS or any other government agency, that's always going to be balance of politics, budget and then data. So we'll have those discussions. Those discussions will happen probably over the next 12 months or so. There's a lot going on with NHS right now. I think they're consolidating the way that they run the NHS with the government. So -- but we are -- we do talk to them. And of course, we look forward to working with them on how and if this gets implemented in their population.

Okay. Is there anything that will come out at ASCO that you think could impact those conversations or...

No. I mean I think at this point, I believe they have the data. The key people there have been read in. As I said, I think they've got a lot going on outside of our study.

Okay. Fair enough. In terms of the NHS data and what you presented at ASCO and how that impacts the FDA, that was a big debate point with what would be considered, what would be considered. What gives you confidence that, that's not going to be interpreted as an incremental negative in terms of the data package?

Yes. So we've been in breakthrough with them since 2018. We've designed our study package for them. We've submitted all that in January of this year. They've accepted the review package, and we're in a review process with them now. The part of the NHS-Galleri trial that was going to them is the first year data, which was not the primary endpoint, right? It's the performance data, which we've now repeated in multiple studies, interventional studies, case-controlled studies, really something that no one else in the space has done. No one else has interventional data or prospective data. So we're confident that the package is the package. That's what they're reviewing. Could there be an AdCom? Could there be other people who want to talk about the clinical utility metrics? I'm sure that will -- that may happen. We'll see how that goes. But what the FDA said they're going to be looking at the benefits and harms of the test, and the test performance. I think the NHS data, the clinical utility will be more impactful on like CMS or payers. I would say just on that, we also have the REACH study with CMS and FDA, where the primary endpoint of that study is a Stage IV shift, which is kind of what we've shown in the NHS data. So we have a path there as well.

Okay. All right. Maybe since you mentioned REACH, let's go to that. Can you give us an update on the timing for that? When we can expect the next update there?

Yes. It's continually enrolling. It's going to be over 3 years, 3 blood draws for the population. I believe the final readout is sometime in early 2031-ish, somewhere in there. But the CMS, the intention is to have interim data for them to look at in their population that will sit alongside the NHS data and real-world evidence that we've gathered. We've done over 0.5 million commercial tests at this point. And that will give them a large package to review to make a decision on coverage. Of course, CMS has never reviewed a multi-cancer early detection test before. So we don't -- they haven't stated publicly where the bars are at. But I imagine kind of like with the FDA over 7 years of 8 years of working with them on a breakthrough, they'll get -- they'll form an opinion, the more we work together, the more that they understand how the test works and what the benefits are.

Okay. In terms of that FDA review timelines, the ongoing conversations. Is there a timeline you can share with us sort of like how that's going to play out?

Yes. I mean I think what the FDA has said publicly is if there's no AdCom, it's a 180-day review. If there is an AdCom, it's 320 days. At this point, we don't know if there's going to be an AdCom. We're preparing for one, just so we're ready if it happens. But that's the package was submitted at the end of January. So you can all do the math from there if it fits in their stated timelines. But we're working with them iteratively right now. And when we have something to update, we will.

Okay. Okay. All right. And just to be clear, there has been no change in conversation. There has been no change in tone since NHS came out.

No. No.

Maybe let's pivot to sort of like the commercial performance and what you're seeing in the market outside of NHS and the FDA process. You talked about Epic. You talked about Quest a little bit. Can you expand a little bit more on sort of where you're seeing the benefits?

Yes. So right now, our channels, it's really a self-pay test, 70% of it is self-pay, really driven by brick-and-mortar physicians' offices, where we've seen an expansion of physicians ordering the test and also existing order -- physicians order the test more. Things like those tools like Athena, Quest, Epic will really help there. The digital health, I don't know what revolution, whatever you want to call it, that's happening where consumers are really driving their own healthcare through things like Function, Everlywell, Hims & Hers. That's a new opportunity, and it's been an opportunity that's shown to be fruitful. It's still early days for some of those partners. We've been with function for a while. We just launched with Hims & Hers. So we'll really see how that expands over time. But if you think about it, that's like a captive health seeker who's signed up to care about how they feel, how they're living. And so one of the harder parts of finding a patient is addressed. These are people who want to know -- want to live longer, want to know what their health is. And generally, they have -- they'll invest in that. They'll spend their own money on it. And so the more and more people in the U.S. are combining these digital health platforms with standard care. I think there's like something just under 4 billion apps -- digital health apps have been downloaded in the last year. Of course, there's some of those are multiple apps for the same person. But it's a good opportunity, and it's really just more proof that there's this large self-pay opportunity, large pre-reimbursement market as we work toward the broader access, right? Because GRAIL has been built for population health from day 1, making sure that there's a low false positive rate that, it's easy for physicians to implement and that it can be affordable. The whole plan is to get the price of the test down. The MCED legislation that was passed that set reimbursement at just about $500, a little bit more than $500, and that's what our current version is built to be able to support margins in the 50% to 60% range at. So we think it's well positioned. And the investment that we're making now and the traction we're seeing in this pre-reimbursement space with these partners with the physicians who are adopting is very fruitful and will help on the broad access side.

You talked a lot about the digital health and some of the newer channels. What about more traditional channels like Quest or the traditional healthcare provider? Is that gaining traction in the market? How much of that is about educating the channel themselves given sort of the new market opportunity here?

Yes. So as I said, the brick-and-mortar, so we started in concierge medicine back in 2021 when we launched whatever it was. Now concierge is not a large part of the business. It's physician practices in areas where there's real champions who physicians really see the benefit of the test. At the end of the day, 1 out of 100 people will have cancer. The physicians who find a cancer, we've found order the test a hell of a lot more than the ones who take a lot longer to find a cancer. So commercially, we try to connect these physicians so they can listen to each other and talk to each other. Yes, your brick-and-mortar physicians' offices continue to grow and expand. I think we added 1,300 physicians last quarter, if I remember correctly. And that's really driven by market awareness. So any of these things -- any of the medical education that we do, any of the social media advertising that we do and then these physician groups that we put together, that's really how awareness is driven on the physician side. Patients can go to physicians as well and ask for it. But what we find is that the physician doesn't know about the test, they're not likely to prescribe it. So I think now there's other market players in there like Exact's out there now and so on. That's actually driving more awareness. They've got over 1,000 reps, I believe. We've got 150-ish. But what we've found is the more people out there, and we've been waiting for this, helping build the market, add credibility to it, educate people on what an MCED test is, the easier it's going to be. We're really confident with the position that we're in from a data perspective and our experience that this is helpful to us. There being more players out there educating.

The physicians that you're adding, I mean, are you seeing any improvement in terms of attach rate, how much they're reordering? Is that sort of compounding over time?

Yes. I mean I think our -- what we call our retest rate, so the people who've come back for another test after getting a first test is over 30% now, which we're really happy with, given that it's a self-pay test. It's not reimbursed. I think for comparison, other screening tests, other stool-based screening tests have about a 30% retest rate after a decade of reimbursement. So it just shows this can be a really highly compliant, highly adhered to technology because it's blood-based. So yes, but we see that.

You mentioned on other players coming into the market and sort of the expanding MCED landscape and a lot of that is sort of bringing market awareness. Still very early, obviously, but are you seeing any change in conversation in terms of competitive landscape or what the alternative tests are?

No. I mean, as I said, we've -- we're the only company that's got interventional data, prospective data, and not just case-control data. Like we can actually tell you what -- how this test performs in a population of this room or people who are actually asymptomatic for cancer. Really, no one else can do that. We've also submitted our FDA approval and no one else has done that. So they're building awareness to the space, which is, again, helpful. It's educating more doctors. It's expanding the reach of awareness to physicians. So I think that landscape will evolve. We'll see what -- if we have an FDA approval, what that does to the landscape. But we're excited about the position we're in. That being said, we're always looking at what we can do to improve the quality of the test, to improve the delivery of the test and so on. So we're not just resting on our laurels that we've got like the winning technology, and we're done at this point. So we'll continue to monitor and pay attention. But for now, it's a bit of a tailwind.

I mean a lot of the debate we've heard is sort of having a one-off test versus the cancer care continuum, right? A lot of the other vendors and a lot of other players in advanced molecular diagnostics, they'll have therapy selection. They'll have MRD, they'll have recurrence monitoring. How do you feel that sets you up in the competitive landscape in terms of conversations with physicians, with channel?

Yes. So some of those are to PCPs, some of those are to oncologists, right? But at the end of the day, back in 2024, we've focused the company on MCED when we did our restructuring. But we have MRD capabilities. We've got therapy selection capabilities. We have recurrence capabilities. Those are all investments that we would need to make at the right time to move things forward to like clinical studies. I've always -- I mean, I'm the CFO here. I'm not the scientist, but I've always said that if you can find cancer in people who don't know they have cancer, you don't know have cancer, you're probably going to be pretty good about finding people who you know have cancer. And so if you get the top of that funnel, then the rest of that funnel is going to be easier to penetrate. But right now, winning in the MCED space, creating the MCED space is where we're investing. I've also always said as a CFO that if we failed at MCED but one at MRD, we'd be the most expensive MRD company ever funded. There are probably much faster ways to do that than we would have. But yes, that's -- given the position that we're in now, FDA approval and NHS data read out. We financed ourselves last year. We've got about $830 million on the balance sheet. Now is the time that we can start thinking about what we do with those other product applications if it's the right time to get back into them.

Okay. You touched on reimbursement a couple of times and obviously, the cash pay nature of the business. So how critical is that for you going forward? Do you have various scenarios mapped out depending on how the reimbursement decisions go? And where ASPs shake out over the next couple of years?

Yes, definitely. I mean from broad access, which is what we've been built for, we're talking about running millions of tests, like our lab in RTP just with the infrastructure that it has today can already run over 1 million tests, and it can be expanded significantly from there in the same footprint of that building. So there's a couple of different paths to reimbursement or broad access. They're global, right? There's international and there's the U.S. Of course, we're working internationally with NHS. We've worked with Samsung. So there's ways to get to broad access globally that are actually kind of independent of what's happening in the U.S. We've got the infrastructure to kind of service both. And domestically, for reimbursement, we've talked about REACH leading to a CMS. We've talked about the MCED legislation that passed, which would allow CMS to start covering the test in 2029 upon a positive national coverage decision. And then there's always new developments that are happening with legislation or on the hill. So there's a new push for the rapid legislation or rapid rules, which would allow essentially FDA and CMS to work faster together, essentially to drive reimbursement for FDA breakthrough approved devices faster than the normal timelines. So there's all sorts of positive ways that you could get to reimburse reimbursement faster. The offset of that is the reimbursement takes longer. But we're -- I think we've demonstrated, we're demonstrating a growing self-pay market, a growing pre-reimbursement market in the U.S. Things like Samsung and some of the things that we're doing, got a distributor in Canada. We've got one in Israel. We'll see what that looks like. But we're still talking 1 million -- couple of million tests there pre-reimbursement for now, get into like the 40 million test range with broad access, which is what we're built for. But it's -- we're definitely aware and conscious of running the business pre-reimbursement longer if we need to. versus getting to broad access in the proposed timelines.

Okay. I mean the other side of that coin is COGS and the cost structure, making some progress there. Can you talk about road map there for the next couple of years and how that can help offset reimbursement if it doesn't play out as favorably?

Yes, definitely. So as I said, the version we have now is going to be capable of supporting a lower cost at scale, right? With the lab infrastructure we have now can run more than 1 million tests. And so if you look at our last 2 or 3 quarters, you can see how many tests we've ran and you can see us growing into that fixed cost leverage and you see margin improvement. That will just continue to happen. We're nowhere near running 1 million tests a year right now. And so we can definitely be bringing the price down. We've kind of built the model now and the business now to at like the MCED legislation rates of around $500-plus a test to support a 50% to 60% margin, right? And that's what the version we have today. And we're always looking at things that we can do, have development efforts to bring the cost down further or to -- and/or improve the performance of the test. So we're going to continue to drive this cost down because it's -- we think it should be accessible to everybody. We do think -- we do appreciate it's going to be a large line item, a budget line item. It might be cost effective. Who knows, it might even be cost neutral someday, but it's going to be a large budget item. And so the more we can bring that down, the better we think, for people and for systems who are going to want to adopt it.

And is that operational efficiency? Is that scale? Is that new platforms, new technologies?

Scale and probably some technology changes.

In terms of sequencing workflow or...

I mean test format, the sequencing workflow, regions and so on and so on.

Okay. Any questions from the audience? All right. We'll keep going. You talked about cash balance and the raise and sort of being well positioned there. What are your investment opportunities or investment priorities in 2026 and '27. You did a little bit of a commercial expansion so far. Can you just talk about the road map there and the timing for contribution?

Yes. So the goal is to have those batches of expansion, those people up and running after ASCO and contributing to growth by the Q3, Q4. As far as other investment opportunities, I mean, the whole point of the raise was to give us the flexibility to intercept the demand that we believe will come from things like NHS data being out there and understood, the FDA approval and so on. So we may make further investments into people. We've invested in Epic, right? There's other tools that we'll do to wrap around the ordering process, the reporting process that should make things easier as well. And alluding to like investing in the next versions of the test and so on. We may make some decisions to go into things outside of screening. But right now, we're still focused on MCED. I don't like doing early victory dances and I think investing in things outside of that right now would be a little too early.

Is there an argument of, let's chat post ASCO, let's chat post FDA decision, maybe let's chat post CMS and then that will determine, are we going after, are we going right here?

Yes. I mean I think we'll learn a lot after ASCO. We'll learn a lot after FDA approval. And those two things are not very far away right now. I don't see myself waiting for CMS to make any of those decisions.

Okay. Okay. I mean maybe a couple of big picture ones. We've got about 5 minutes left. You've been talking about population scale screening for a while. You touched on a couple of the barriers there. It's been a long road, certainly, sort of like what do you think has been the biggest factor holding you back, and the biggest factor holding back broader adoption of population scale MCED? Is it reimbursement? Is it awareness? Is it test accuracy and sensitivity? -- why is it -- it's been a long road if you go back to GRAIL's founding in 2016?

I wouldn't put performance as a barrier. It's just an understanding of a new technology. Like the FDA, as I said, we've been working with them for 8 years. The FDA didn't have a plan on how to approve MCED tests. CMS doesn't have a plan on how to improve MCED tests. There's just physicians. Physicians -- the first thing most people think about is a single cancer test. Well, this is not a single cancer test. Most folks don't realize that when you do your standard of care screening, as I said, that detects about 14% of cancers in the population. That probably -- that surprises most people when you talk about it. So it's just so new and paradigm changing that you've got to do a lot of education, show a lot of data, show that consistently, right, be transparent about it and do a lot of work to show that this can work and it works consistently. And so the barriers haven't really been performance. I mean, as we've demonstrated, I mean, with a false positive rate of less than 0.5%, if you can find 4x more cancers than the standard of care, that's a pretty powerful tool. You just have to believe in the tool. You have to believe that that's accurate. So ASCO data hopefully shows that, FDA approval shows that. And then we move into the economic discussions with CMS and other large payers on affordability and on the economics of reimbursement.

I mean to that point, in terms of how paradigm shifting it is, that kind of speaks to some of the other players in the space are starting with a single test and sort of using that to piggyback into more of an MCED approach. There's a lot of debate on like the pros and cons of those 2 methods. I mean, does that kind of speak to maybe this is not the way to go after, maybe the paradigm shift at FDA and CMS is too much of a hurdle?

I don't believe that. The world has single cancer tests. Developers develop single cancer tests, where there's already reimbursement. So you have another colorectal cancer tests, another breast cancer test. That's why companies choose those things. When we were founded, we did a bake-off of multiple technologies, methylation, mutations, fragment, so on and so on to find multiple cancers. And so we picked that to find MCED. We didn't take a technology that we already had and then shoehorn it into something else. It's simple, companies go after single cancer screening tests because they're already reimbursed. I don't think that's paradigm changing at all. That drives more people into compliance with things like colonoscopy. We're trying to find, as I said, the 86% of cancers that people aren't looking for. And that's where you find a paradigm shift.

Okay. I don't know if there's any -- we got a question...

You talked about preparing your sales force for the upcoming commercialization. Can you talk about what you're doing with oncologists to kind of prepare for that outcome?

I'll just repeat the question for the webcast. The question was preparing the sales force. What can you do to prepare oncologists?

Yes. So right now, the primary orders of this are PCPs. Oncologists, as you guys know, work for so many months, they already have a cancer. We do engage oncologists because they are KOLs and they're thought leaders. Oncologists that we've engaged are -- they're excited about the data at ASCO. I've actually never heard more oncologists say positive things about GRAIL than after the ASCO release went out because oncologist knows that a reduction in Stage IV cancers of that amount is a very important thing. Physicians don't and oncologists specifically would rather treat people with Stage I, II or III cancer than Stage IV cancer. There's a large mortality cliff between Stage III and Stage IV right now for many cancers due to the advances in cancer therapies. But we have forums, symposiums, we show up at ASCO, AACR and ESMO and so on. We have a lot of publications out there. The oncology community is an important community, but they're not the orderers of the test right now. So we're trying to tackle the 500,000-person PCP sale physicians that are out there and educate the oncologists as well, which is, again, back to the competition. We were doing this by ourselves for multiple years, which is very expensive. Now there's other people out there helping do it, which is nice. I hope that answers your question.

We've got about a minute left. So maybe just we'll end with our usual closing question of what do you think is most underappreciated or most misunderstood about GRAIL? A lot to choose from, I'm sure.

Yes. I mean just -- again, the opportunity in front of us to find more than 14% of cancers by adding one test with a very low false positive rate, right? So you're going to make the whole cancer detection system extremely more efficient than it is today. The cost of finding a cancer goes way down. And it's probably the best shot we have at finding -- bending the cancer mortality curve, adding single cancer tests, you already have about a 40% false positive rate as a person getting 4 annual screens. That's just not sustainable. If you multiply that by all the cancers that are out there, you're going to have to start testing an individual for cancers, not an individual for all -- for a single cancer. So what cancer does that individual have versus looking for prostate cancer or looking for colon cancer. And our technology does that. It just all it cares about is finding cancer that then tells you where it's at.

Okay. Well, on that note, we're going to wrap it there. Thanks, everyone for joining. Aaron, thanks for being here.

Thank you for having me, Mike.

Looking forward to ASCO. Sounds like you must attend.

Yes, definitely. It's going to be a good time.

Thanks, everyone.

Thank you.