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

Perfect. I think we can get started. Kallum Titchmarsh here from the life science tools and diagnostics team at Morgan Stanley. Thank you all for joining us today, joined by Eric Fung, Chief Medical Officer at GRAIL for a fireside chat discussion. But just before we get started, for all disclosures relating to this presentation, please see morganstanley.com/researchdisclosures. Eric, maybe for those that haven't had the opportunity to meet you, could you just tell us a little bit more about yourself and your kind of involvement with GRAIL during those 9 years, I think you've been in there.

Yes. Well, thank you, Kallum, and thanks for the Morgan Stanley team for having us here. I'm Eric Fung, Chief Scientific Officer for GRAIL. I've been at GRAIL as concept for 9 years. I really spent my life -- my career developing novel diagnostic tests. And when GRAIL was first announced in 2016. It was really fascinating to me this idea that you could screen for cancer using just a blood draw. Now you may recall at that time by the time Theranos is really very much in the news. And so I'm talking to my colleagues, there's a lot of can they really do that? Is it real and I decided to take the LEAP, and I've been working at GRAIL ever since. They've really developed a clinical evidence program, really bring the science to bear, and it's been really paradigm changing.

Perfect. GRAIL has obviously spent a lot of time and dollars throughout our period, building the evidence and infrastructure behind Galleri. What do you think the company is today on the path from a kind of niche early adopter product to something that could become more routine in that preventative care?

So there are several steps along the way, as you point out, early adopters are really important. But obviously, clinical evidence is the single key driver that clinical evidence opens many doors. And I think the 3 doors that are really important are broader adopters from early adopters to people who are really evidence-based and that includes KOLs and health systems and so forth. The second is FDA approval. FDA approval is really kind of a stamp of an external party validating and really having reviewed the data. And the third is coverage. Coverage is ultimately the end game when it comes to being able to offer a test widely.

And another strong quarter recently. I think Galleri volumes grew 35% year-over-year. When you deconstruct that growth today, what are you focused on the most between kind of adding new prescribers, driving utilization amongst physicians and then setting up those health channels as well, which I think have been pretty important?

So when we think about who's ordering the test today, you have the individuals who are dabbling, so to speak. Then you have high-volume users, health systems. And so our goal is really education is key. The dabblers they're usually ones that patients come to them and say, "Oh, I've heard about this test, I want to take it, but they're not the ones who will actually drive it." Then there are the individuals who are high-volume orders because they have they have actually seen the data, understand the data and then health systems, which are at an organizational level are ready to adopt the test. All of that requires at the root of it and understanding the test. And so our field team is out there educating physicians about the data, about the nuances of what makes a multi-cancer led detection test clinically useful, that benefits and we put that together. The other element that's really important is making it easier for the test to be offered and to be deployed. And so that's where a lot of our partnerships come into play.

And a lot of data as well to discuss what's feedback been since ASCO from the oncology and PCP community on the recent Galleri data in HS and then a PATHFINDER 2 as well?

So we were fortunate enough at ASCO to have 2 podium presentations. One was on our randomized controlled trial done in collaboration with NHS England. That study is called NHS-Galleri. And the other podium presentation was our U.S.-based multi-center prospective trial called PATHFINDER 2. Now NHS-Galleri has the headline use that we did not meet our prespecified endpoint of a reduction in Stage III and IV. The nuances underneath that and what we were able to present at ASCO was that we actually saw a reduction in Stage IV cancer. And so when the headline is we do not meet a reduction in combined Stage III and IV, underneath the hood is we actually did see a reduction in Stage IV. That was offset actually by an increase in Stage III. And this hold us a lot about the biology, which is that there's actually a lot of Stage III cancer that is in people who don't suspect it asymptomatic individuals. And that Galleri was able to detect them. And so if you look at the next layer of data, the reduction in Stage IV, the reduction in emergency room presentation, the fact that Galleri detected more Stage I and II cancers than all of the NHS guideline recommended screen combined, that's really compelling data. And so our field team has been taking that data and showing that to KOLs to PCPs and to health system executives and other stakeholders to really show them that the next layer of the onion is really compelling data about the performance of the test. And then the PATHFINDER 2 really is a great example of how this test performs very similarly in two different populations. And that level of validation is one that I think people who really understand the data come to appreciate.

Could you give us a little more context on the cancer types where you saw perhaps the best performance and maybe those that perhaps were lagging?

So this is a conversation that goes on in the MCED field quite a bit, which is looking at aggregate performance over all the cancers in a population versus cancer by cancer. And obviously, we've been focused because it is multi-cancer related detection because we did try to share cancer signal across all the different cancer types. We've been focusing on that aggregate signal. And shown that we have a very high positive predictive value north of 60%, which is 10x greater than single cancer screening. We show that our sensitivity for the cancers that cause -- the 12 cancers that caused 2/3 of mortality. Our sensitivity that -- sorry, about 70% of the cancer be detected are in that -- those cancer types and about 60% sensitivity. The other way people think about it is, well, maybe you should separate out cancers that we screen for like breast, colorectal and separate those from cancers that we don't screen for. But important fact is we detected a large number of breast cancers and colorectal cancers and lung cancers because those are cancers that are not always detected by screening for a variety of reasons. People are not up to date with their screening. There are interval cancers. There are people who are survivors in lung cancer, more cancers are -- more lung cancers are present in people who are not eligible for screening that who are eligible for screening and those are ones that we could detect as well.

Very helpful. What do you think distinguishes a physician or practice that writes 1 to 2 Galleri orders from those who incorporate it routinely into their practice?

So I mentioned to you the 2 kinds of phenotypes, the routine orders and the dabblers, the 1 or 2 tests. What really distinguishes is experience. And so cancer is, although it's top of mind for everybody who works in the field, it's only in a 1% to 1.5% of people who are over 50. And so it's a relatively rare event. And so if someone only orders 1 or 2 tests, they're not likely to see that positive and get that positive feedback loop of oh, I detect a cancer and help this individual. The physician who orders hundreds of tests will have that experience. And so if you actually look at the public docket and some physicians have actually written in prior to the advisory committee, which I'm sure we'll talk about. The physicians who have said, I've ordered 500 or 600 or 1,000 tests, and I have seen patients who benefit that's really the difference. And so the way to get the doubler into the routine user is for them to understand the data and hopefully get that experience that tells them, "Oh, it is a valuable test."

And the workflow improvements, I think have been pretty important there as well, the EHR integrations. Maybe just give a little color on what you've seen evolve there.

So ease of ordering is obviously reducing the friction. That's clearly a key step in adoption and increasing access. So we have partnerships with, like, for example, Quest. We've had a good partnership with Quest for multiple years. renewed it last year. And there are 2 elements of that. One is integrating into the ordering system. And the other is actually integrating with Quest phlebotomy. And so that the kit doesn't have to be taken mail to a patient and then brought in, for example, they can just go to a Quest draw center. So that's very helpful. We also have integrations with ordering with Athena and Epic. Again, any time you can reduce friction that helps with that ability to order and offer the test.

I want to spend some time now on the FDA outcome coming up. The PMA, I think, is based upon the 12-month follow-up of the first 25,000 patients from PATHFINDER 2 and then the prevalent round of NHS-Galleri and the bridging study. So what are the key factors, performance and safety that you think the FDA is here to evaluate?

So FDA approval is really predicated on a demonstration of safety and efficacy. They will ask a question on do the probable benefits outweigh the probable risks. And those are questions that we address in both PATHFINDER 2 and NHS-Galleri. So if you look at the performance characteristics, which is the effectiveness, we can demonstrate that we have very high positive predictive value over 60%. We are able to, as I mentioned earlier, detect the really dilute cancers and with high sensitivity. Close to 60% of our cancers are Stages I through III. And so that tells us that we are detecting early-stage cancers in asymptomatic individuals. If we look at the data from PATHFINDER 2, 80% of the individuals whose cancers were Stage I through III went on to receive curative intent therapy. So these are cancers that are meaningful detect in asymptomatic individuals. On the safety side, we are able to show that we do not reduce adherence to guideline recommended screening. It's really only a blood test. And so of course, routine blood tests are very safe, and we show that there are very few invasive procedures. In fact, the rate of invasive procedures in a population that gets MCED is actually less than the rate of procedures than a population of women who get guideline recommended mammography. So both from a safety and effectiveness standpoint, we have very strong data.

This isn't the first AdCom for GRAIL. So maybe just talk us through the learnings from the 2023, one, and what prep you're doing behind the scenes as well now ahead of next week.

So in 2023, the FDA convened an AdCom on multi-cancer early detection. That's not quite 3 years ago, it was held in November-ish time frame 3 years ago. And that was really to help educate the FDA from this advisory committee. And they really had 4 takeaways that they said that our required events says. One is that performance characteristics, what are the performance characteristics of high-quality MCED?And the focus was on safety. And so very high positive predictive value, very high specificity. They said that really a benchmark should be 99.0% specificity. We easily cleared that benchmark with over 99.5% specificity in our validation data. A second characteristic is that physicians couldn't just be told, "Oh, we see a cancer signal that they really need a guidance as to how to work up individuals." And so this has encapsulated in something that is collection the tissue of origin. We call it a cancer signal origin for biological reasons, but we won't get into that. But essentially, this cancer signal origin is a guide for the physician. So you can imagine if we say, oh, the cancer signal origin is long, they would do a chest and so forth. And we showed that we have over 90% accuracy in our cancer signal origin. So that was item #2. Item #3 is that there should be clear labeling that an MCED test does not replace guideline recommended screening. And is that just something that we have built into the safety profile of Galleri since the beginning. And so we're very clear about the role that MCED plays in the context of guideline recommended screening. And as a consequence, we presented data earlier this year at AACR, showing in the real world that women who had a negative Galleri result were still highly adherent to getting their mammograms on their regularly scheduled cadence. Fourth element maybe a little bit more, we'll call it, controversial in the sense that the AdCom-recommended randomized controlled trials. Now the randomized controlled trial is not necessary to demonstrate safety and effectiveness. It's much more useful in showing utility. As we pointed out, for the AdCom next week and for FDA approval, it's focused on safety and efficacy. But the 2023 advisory committee panel did say that to demonstrate utility RCTs would be necessary. We've actually accomplished one in NHS-Galleri, and we've reported out on some utility measures and other utility measures will still be forthcoming as we have longer follow-up.

Very helpful. And then just assuming a favorable decision there, what do you think changes commercially the day after that FDA approval? Are you anticipating like a pretty noticeable effect on physician adoption, confidence, payer engagement, maybe just lay out how you think that could perhaps evolve?

So FDA approval really changes the landscape in the sense that it reduces some of the noise because it's very easy to point to. This test has FDA approval and this one does not. And I think that, that clarity is going to be really important in helping physicians patients and payers really understand which test has gone -- undergone the rigorous validation and external review because that's one of the most important thing is the external review. And so that bifurcation is going to be really important as the landscape continues to change. And the other element too is that we'll open doors. Many payers will say, you know what, we know that FDA approval is neither necessary nor sufficient, but it's really an important step along the way. So being able to say we have FDA approval is an important milestone that open stores and increases payer engagement.

And we've had quite a few questions coming in on just the label and what that could look like. So talk us through your initial expectations for what that could perhaps be. And then how you would be preparing for different scenarios, how they could evolve?

So our go-in position is because Galleri detects a cancer signal that's shared among all cancers, regardless of cancer types, that the most important characteristic of Galleri is the ability to report out a signal detected result when we see it. The label itself is really about how we educate physicians and patients. There will be some who argue that the label should be restricted in the sense that one might say this test has been validated in cancers A, B and C because there have been many examples of those. When we do a study in a population, the distribution of cancer types will be dependent on that population. And by definition, the most common cancers will appear more often than the rare cancers. It would not make sense for us to do a cancer -- a study that is size for the most rare cancer as possible. And so it is conceivable that the labeling might state that there is relatively little data in the rare cancer type A, B and C. But we believe that, that's still okay and in fact, it's scientifically accurate and we will describe the distribution of cancers in our study. The other aspect of the labeling that will be very important will be how people should continue their guideline recommended screening. So at the end of the day, when we think about the potential outcomes on the labeling, I think we've been prepared for that because, a, we've been saying since the beginning of the Galleri launch that should continue their guideline recommended screening. And in all of our test reports and other documentation, we're very transparent about what cancers we've looked at and this data around each of the cancer types.

And how meaningful the differences in eligible age range or patient population be to that go-to-market strategy?

So the labeling will be really dependent on the antenna use population. And in both NHS-Galleri and PATHFINDER 2, we enrolled individuals who are 55 and up. PATHFINDER 2 did not have an upper age limit, but NHS-Galleri had an upper limit of 77. So really, because age is the most important risk factor. So one's cancer risk increases, if you look at it by age, it's almost like a hockey stick with starting at 50, it starts to accelerate. And so that age group is going to be really important. There have been some questions about, well, when this has to be most beneficial in a, we'll call it, high-risk population as defined by, for example, genetic risk. But in fact, there's a difference between asset risk and relative risk. And so like BRCA status, for example, increases your test in a relative fashion, but age is still the most important absolute risk factor. So we believe that the data that we presented will really be focused on our intended use population as defined by age.

And then the final one, specific to the AdCom, but are there any areas you are anticipating some pushback? And then how would GRAIL respond to those areas, you're assuming there could be some friction toward?