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

All right. Great. Welcome, everyone. I'm Puneet Souda, SVB Leerink tools and diagnostic analyst. And it's my pleasure to be hosting Guardant Health at our conference. We're literally saving the best for last here. And so first of all, Helmy Eltoukhy, CEO at Guardant; and Michael Bell, CFO. Glad to have you guys. Welcome to our conference.

Thank you for having us.

Great. So to me, Guardant Health is really the best-in-class liquid biopsy company that is expanding into a massive TAM of more than $50 billion. And as products across that continuum from late-stage to upcoming trial readout, positioning the company into screening markets as well. So a lot to talk about, Helmy. The first question, let me start, given the quarterly call this week. The one question we've been getting frequently here is on ASP commentary that you provided for 2021. It appears, obviously, conservative. But just walk us through the sort of the short-term and long-term dynamics of the ADLT reimbursement, I think that is important to understand in order to understand the overall, the revenue guide that you have.

Yes. No, that's a great question, and it's certainly a little bit kind of complicated in terms of things we're going through this year. So let me break it down as simply as I can. So the ADLT is certainly a positive thing in terms of the pricing that we're going to be receiving. So as part of Guardant360 CDx really becoming an ADLT, will be issued a new ADLT code, a PLA code that's specific for Guardant360. So the positives are, with that code, we expect our Medicare pricing to go from what it was previously at $3,500, to something that's above $4,000. So certainly, a big positive there, a big tailwind there in terms of contributing to increasing ASP. Now we take the private payers and the impact of that new code on how we currently bill our private payers. So we have 200 million covered lives right now. With those payers that we currently have coverage and have contracts with, it's a little bit more straightforward. We can go back to them, amend our contracts, add this new code. And that's work that's been ongoing now for some time. So we've been kind of forward-looking there. The team has been amazingly successful and very proactive in terms of getting those contracts amended and converted. There may still be some hiccups there, but those aren't really being factored in. We're assuming that things will go fairly smoothly there. And if there's any short-term disruption, it's weeks or so on in terms of the impact. So nothing substantive there. The challenge is really the 100 million or so lives where we don't have coverage, where we don't have contracts, those lives. Right now, we're getting paid on some of those claims as an out-of-network provider. The challenge is when we move to this new garden specific code, none of those payers really have any -- one, they don't have coverage. And two, they don't have any payments associated with that new code. And so basically, what we're forecasting is that for those payers, our payment rates will go down to 0 from where they are today. And so essentially, we have the 2 counteracting one another, neutralizing one another. We have the positivity from the ADLT on the Medicare side, being balanced by some short-term disruption with the uncovered private payers. Over -- once we get those payers on board and we have coverage from them, then ADLT should be a significant net positive for us and for ASP. But we're essentially going through the short-term transition period until we get those last 2 payers on board.

Got it. Okay. So it appears to be largely timing, but ultimately, the ADLT reimbursement, which is superior to the current reimbursement should prevail in the longer run. Great. On guidance, the volume guidance that you provided, 90,000 tests for clinical volumes, definitely ahead of us and feels robust. I appreciate the commentary on ADLT separately. But just walk us through the key drivers to that 90,000 for the year. What are you factoring in? And what is -- if there is any opportunity for upside from the Medicare patients and other immunocompromised patients maybe coming back to the clinic?

Yes. So I think there continues to be headwinds in the first half of the year. Certainly, on the clinical side, we're -- the height of the pandemic early on, offices were, I think, went down to about 10% access. So about 90% of them are closed for any account representatives or account executives to be able to call on. Things loosened up in the summer and got better. And I think we were able to get some access as high as 30%, 40% at one point. And then we saw in November and December, things closed back down, and we were well below 20% access. We're seeing things come up a little bit in January, but they're still at pretty low levels. And so we're basically factoring in the first half of the year. There will still be some challenges and some headwinds due to COVID. But I think if you see the underlying metrics we have in our business in terms of the new physician ads, the depth of ordering and the consistency we're seeing, other metrics as well in terms of share of voice in the field. We're just seeing that we're really out competing, and we're really firing on all cylinders even in this kind of environment in terms of the underlying metrics we're seeing. So very confident that once we get back into these offices, that we should really be able to really see accelerated growth in terms of the business and the volume we have. I think the other factors that are positive in '21, I mean '21 is really an unprecedented year in terms of Guardant's history, just in the sense of the number of product launches. We have Guardant Reveal, just -- we're days into the launch of that, and it's been -- it's gone extremely well so far in terms of the early signs we're seeing. We clearly are going to launch a tissue product sometime this year as well. And so there's, certainly, I would say, some potential upside in terms of when we think about aggregate clinical volume. It's always hard to say early on in exactly what that ramp rate will be and what the run rate would be a few quarters in. But I think we're cautiously optimistic that there are a lot of kind of positive factors in our favor this year.

Got it. And since you spoke of Guardant Reveal, maybe if I could touch on that first. Guardant has typically built a solid foundation of data to -- prior to launching some of these assays. Obviously, the market is moving fast. So I appreciate that there's public data that's coming out. Just help us understand how should we -- what should we expect in terms of publications, papers, new data sets there, building up sort of a publication stack given the current state of the market in MRD and recurrence monitoring?

Yes. No. I mean we have publications in press right now or at least, they've been submitted and waiting for them to come out. And we've invested significantly in terms of ISTs as well as very robust studies such as COBRA and ACT-3 and PEGASUS and so on. And so our -- the commitment we've had to clinical evidence, clinical utility is still as strong as it has ever been, and we're clearly committed to investing in that. And so I think it's -- you'll start seeing that, I think, drumbeat of publications come out soon around Reveal. We certainly have had no lack of conference presentations and collaborations with leading investigators, but there's always a lag before you have that data, and you start seeing kind of the swell of publications come out. But yes, that's something that's a hallmark of Guardant is really a commitment to high-quality evidence generation.

Got it. And then on Reveal, tell us about the assay a little bit. What does tumor-naive help you get versus a tumor-informed assay? And in terms of turnaround time, you pointed out 7 days? And why does that matter?

Yes. So yes, I think there's a lot of, I think, conversation and discussion around how does one ctDNA test differ from another one and so on. And what we're seeing in the early days is that the standard of care today is CA, which is a simple blood test, a blood draw. You get the results a few days later. And clearly, as human beings, we're creatures of habit. We're used to some -- basically the format of how we test for something or how we do something. And so we're even more, I think, bullish in terms of the fact that Reveal is really plug-and-play to the current standard of care that physician expects to just order CA really simply, simple blood test, get the results a few days later. Reveal really does the same thing, but gives them an extraordinarily better performance. I think early mentioned in the prepared remarks that CA has something in the mid-60s on both sensitivity and specificity, which is maybe slightly better than flipping a coin. And the fact that we can give them something with 90% sensitivity and 100% specificity. That's as simple to use as CA, I think, is going to be a game changer for the field. So you really have to -- you have no compromises that they make versus other ctDNA tests, but they have simplicity of a blood-only test that is very integrate-able in terms of how they practice medicine today.

Got it. Great. I want to switch over to ECLIPSE a bit. That is obviously a very important trial. This is a prospective trial of colorectal cancer patients, large-scale trial. And you've talked about enrollment completion by October. But maybe just if you can provide sort of anything around sort of the enrollment dynamics sort of time lines that you're -- that we're looking here? Because I think the real question is that there is -- this is an important modality in this space compared to the existing stool-based modality or colonoscopy. Just tell us sort of, if you can, in terms of expectations wise? And also, anything you can provide in terms of time line wise? Because obviously, this is a very important anticipated trial. And anything that early data sets that you provided so far that give you insights into what the pivotal trial could be?

Yes, great question. So I think there's really no update in terms of time line. I mean I think we are still very happy that we believe we'll be able to finish within the 24 months we highlighted when we started the trial and kicked it off. Despite COVID, despite all of these disruptions. I mean we are clearly seeing, I think, ups and downs in terms of elective procedures, obviously, in the beginning of the pandemic, and then again, late last year. But I think the good news is we've really increased the number of sites very dramatically. And so we have really the ability to buffer and weather storms that may pass through from time to time. So yes, we're still committed to the 24 months, and we believe we'll be able to finish on time there. In terms of giving investors and others more competence around the assay. Clearly, there have been multiple data sets that we've presented over the last couple of years around the performance of our LUNAR-2 assay and other cohorts. I can tell you that a lot of that work is ongoing. We're working with other collaborators. And a lot of the work we're doing is basically to try to give more confidence around certain open questions people may have around differences between the types of samples that would be part of ECLIPSE. And those may be that we've tested in previous data sets and other cohorts. And so I think we're -- the more samples we test and kind of the more corner cases we see, I think the more confidence we've built up internally around ECLIPSE. And the fact that we think we're -- I think we're optimistic that we should be able to hit the NCD bar, certainly, if not much better. So yes, we're hopeful that we can present some of that data in upcoming conferences. Some of that is dependent on investigators we work with, but if we are able to do that, I think we'll certainly give, I think, even more confidence to -- goes outside of Guardant in terms of us being able to get over the finish line, so to speak.

Great. Great. And in terms of -- you mentioned the CMS bar, that is 74% sensitivity, 90% specificity. Clearly beatable from -- in your view, you've highlighted that before. How should we think about the performance of the assay, meaning sensitivity, specificity versus the ease of use of the assay? And how should we weigh those 2 factors? And what's going to be important in the longer run in your -- as you guys have closely looked at this market?