Guardant Health, Inc. (GH) Earnings Call Transcript & Summary

Got it. So switching gears to the pipeline, which, in a sense, seems strange to me to say for a company that just starting to penetrate its base business. But that's where all the excitement is around the story. So on LUNAR-1 and sort of the MRD opportunity in general, what is your view of a tumor-informed approach to MRD? This trade-offs involved with that. I mean, obviously, you can get to perhaps a better limit of detection, but then there's a longer turnaround time and potentially limitations around use cases, if there's no access to tissue. Walk me through just how LUNAR-1 stacks up to some of those competing offerings out there?

Yes, no. We're very pleased with where LUNAR-1 is it's -- if you recall it, we don't just look at the genomics, which, I think, not just our company, but I think many others have now shown that really looking at the epigenomics is key to getting high sensitivity on the early detection side. Or at least is one approach that seems to improve sensitivity dramatically. And so having a genomics-only approach even if its tumor informed, we think is going to miss a lot of these smaller cancers that are out there. And I think some of the data that we're representing at ESMO, I think that will come out in the next week or so shows some data in the colorectal side, where I think we have very high sensitivity at the landmark point with a single test right after surgery and with extremely high specificity. And so that's, I think, the beauty of this small multi-model approach that we've taken. And we really just don't see much that compares to it out in the field. And you bring up a good point, a lot of the current tissue-informed approaches suffer from very long turnaround time. We're hearing many, many weeks, sometimes longer than 4 weeks, which if you think about really the paradigm of care that's out there, we've seen on the treatment selection side, that having a turnaround time in the tissue, CGP end of things, that's 3 or 4 weeks as it is today, is really a nonstarter for converting the market. It's seen as kind of a second-line option or information that's used down the road. Time to treatment is just, I think, an underappreciated aspect to the realities of clinical workflows in oncology today, whether it's early stage or late stage. And so having information that can come back a week or 2 after the test is ordered. I think it's vital. I would just say that any test you order that takes 4 weeks or more, the physician has probably forgotten about the test at that point in terms of what they've ordered. And so it's -- or it's just not going to use that information is going to wait for it. So yes, we just -- we think that you have to -- you can't think about these things theoretically. You have to think about how is the information going to be used in kind of the realities and necessities of real workflows that are out there. And we believe our product, LUNAR-1 1 product, both from a performance point of view, in terms of the sensitivity and specificity, but from a turnaround time and from a defensibility in terms of having something that can continue to command and maintain premium pricing down the road is going to be something that is really second to none. You're seeing these kind of hotspot tissue informed kind of methodologies to really proliferate. There are a number of start-ups that have this, a lot of the academic centers are doing it on their own. And so that's a market that, unfortunately, is not very defensible because it's very limited as well. But that being said, competition is a great thing. It's good to have multiple players in the market. It helps define markets, it helps create awareness. It's very hard to single-handedly really open up a new area, a new paradigm of testing. So I think we appreciate the fact that there are a lot of players that are looking at this market and looking at this opportunity now.

Got it. And then any thoughts on the Signatera LCD that was recently finalized? I mean, it seemed pretty positive. It talks about a series of tests. And I asked Nate Hara this yesterday as well. I mean what do you think is a fair number to use per patient as we look at sort of building that opportunity out in models, right, because there's the adjuvant therapy selection part of it and then there's the monitoring setting. And obviously, you would think that the monitoring setting involves a lot more test than the therapy selection?

Yes. I think it's certainly a positive step forward for the field. Medicare is an important piece, but not quite as important as in the advanced cancer setting. What's going to be important is really getting the private payers on board. And it's something where we've tried to invest in clinical utility studies because we know it's going to be -- it may be a long road in terms of getting a lot of the private payers on board without the right data. And so the earlier we invest in that the more assured we can really open up the large market opportunity that exists. I think the testing is going to have to be something that is, I think, played out in terms of these studies in terms of looking at what that paradigm looks like in terms of the frequency and number of tests that are taken for individual. And that's something that I think we're really looking to clinicians to kind of provide their insight in terms of what is that right frequency for monitoring these patients. It's going to be more frequent early on and it will start getting spaced out later on. But I would say that we are looking at things from a maybe semiannual initially and then, obviously, an annual basis going forward.

Got it. So switching to LUNAR-2, Helmy, I mean, obviously, you've chosen the beachhead approach. Several of your peers have gone after the Pan-Cancer out. How important in your mind, is it that you have a precedent test that is well-established as a screen?

We think that the hardest kind of hurdle to pass in diagnostics is reimbursement. And so it was very important for us in any disease area that we went after, whether it's advanced market or MRD or screening to really follow the path of maximum clinical utility. The fact that was essentially most expedient for us to create a beachhead in. And I think there's no argument that colorectal screening is one where it sounds like the stars align. It's 1 of 2 cancer types that's carved out of USPSTF requirements in terms of Medicare coverage. There are clearly quality scores and measures in place from a quality standards to ensure compliance. And frankly, Exact has done an excellent job in terms of establishing that non-colonoscopy based tools exist and can be used in that market. And so you have very few market opportunities in diagnostics where everything is fairly clear sailing towards the finish line. The biggest hurdle there is clearly having the right clinical utility data through a large study. And we're obviously investing in that with ECLIPSE. But that being said, once you've established that you've established the right reimbursement amount and you have clinical adoption. Commercial channel is another big hurdle, especially in the primary care space. If you think about it, you typically have teams of 1,000 to 2,000 sales reps to call on multi-hundred thousand physicians. And that's on the one hand, obviously, a daunting task to build up that infrastructure. But on the flip side, once you've done it, there's extraordinary leverage you can continue to drive if you continue to feed that channel with other tests out there. And so we see colorectal screening as a beachhead where eventually that same test will essentially expand to other indications. And we think that to convince a physician to really forgo a screening methodology that they're used to. That's in guidelines. You really need head-to-head kind of counterparts. They go after drugs that have sometimes a pan-cancer indication or multi cancer indication. But really, the way they get traction and the way they convince physicians to forgo previous methodologies, is really head-to-head studies, one by one. And that's one of the reasons we did this additional fundraising a couple of months ago, was to be able to invest in ECLIPSE-like studies in other cancer types. The methodology and platform we have is scalable, and we're seeing good early signs of data and in other cancer types. We presented data in lung as well in the past. And so we -- this is a kind of multistep process. Similar to the process we took with Guardant360, but we think, ultimately, a process that gets us to a much larger percent of the big TAMs actually realized in a faster time frame.

Got it. One of the things you've always sort of told me is your belief that the detection of cancer, even at the earlier stages cannot be an endpoint in itself. As you see a lot of these early detection efforts ramp, what, in your opinion, will define not just sort of clinical utility but commercial adoption? And then secondly, real-world use can obviously be quite different from a clinical trial setting. So do you worry that an early detection test could lead to a decline in already spotty compliance rates with standard of care screening?

Well, I guess if I unpack that a little bit, if you have a pan-cancer screening test, that's compliant in and of itself, right, if they're using that. So I would say that I applaud all these efforts that are out there, too. There's just been a historical dearth of investment dollars in screening and early detection, in preventive medicine. And being able to see this type of investment, and I think this spotlight in such an important area of human health, I think, is fantastic to see. It's something that I wish had happened many years ago, but it's great that it's happening now. So yes, we see it as a positive. There's going to be multiple approaches to really understanding what cancer looks like, whether it's in the blood or other biomarkers or radiographical approaches and so on. And the fact we're seeing startups as well that are looking at different modalities. And it's exciting to see kind of just how much scientific inquiry is happening now in this space. And so we think, ultimately, I think cancer mortality is going to come down over the next few decades, clearly. And we think we're going to be a very large part of that in terms of our offerings. But as I said, cancer is not going to go away completely. There are many cancer types that are born metastatic or very hard to detect very early on that are going to evade even the best tests that are out there. And for that, you're going to need early cancer management, you're going to need advanced cancer management. And so that's really where we believe we have a core advantage in the fact that we really can be that company that really stands side-by-side each and every patient from beginning to end of the journey. And so that's what we've been building out over the last 8 years.

Got it. Got it. And then just 1 final one on LUNAR. Just stepping back, the next couple of years, you're going to see a slew of data coming out from you guys and from a bunch of your early detection peers as well, right? And every time a study reads out, investors want to know who wins on an absolute basis. But a lot of times, I mean, these aren't sort of apple-to-apple compares and the devil is in the detail, right? But on the other hand, the opportunity is also clearly large enough that it can support multiple players. What are your thoughts on how investors should view these data readouts? And if you had to pick a couple of technologies other than your own to keep an eye on, which ones would those be?

Yes, that's a great question. We certainly believe that kind of the first mover with product market fit is one that ultimately takes the lion's share of the market. And it's something that I think has played out on the pharma side quite well and it's very well studied. One of the reasons that we -- secondarily to this fundraising was to be able to build that commercial channel as aggressively as we can. As we see, ECLIPSE continues to roll on in terms of the seeing record enrollment in June and July and continuing to progress at a very nice clip there. As well as some of the recent data that we presented there, we're seeing that there's increasing, obviously, probability of success. And so obviously, very bullish on what that readout will look like. We want to make sure that that we continue to be in [ pole ] position, not just in terms of execution of the trial and publication of the data, but launching of that commercial team that's out there. And so we see that all of those elements are important, not just the scientific elements and the testing elements. But what is the product market fit of the test itself, things like turnaround time and reimbursement and so on. But then also, obviously, share of voice and really having a commercial channel that is second to none in terms of white glove service and customer service and so on. In terms of other technologies that are out there, I think some of the non blood-based approaches, some of the radiographical kind of approaches using AI and deep learning for looking at features and early tumors or even for diagnosis of breast cancer, there's a really high false positive rate as a mammography and so on. And there are a lot of cancers that are missed right now. And so those are areas that I think are ripe for more sophisticated, I would say, algorithmic kind of approaches using deep learning and AI. And there are obviously a number of start-ups that are out there that are working on that. And I think they're showing some very promising data there. And so I think if we can continue to really use data to our advantage in all these areas where data is already part the process. It's just a matter of aggregating it and analyzing it. I think we're going to see a lot of progress in the near term.

Got it. That was awesome Helmy. So thank you so much for your time. Apologies, Derek, I couldn't lob a few financial model questions at you. But we'll leave it at that. And thanks, everyone, for joining. This concludes this presentation.

Yes. Thank you.

Thank you.