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

Welcome, everybody. I'm Matt Sykes, Senior Life Sciences Tools and Diagnostics Analyst at Goldman Sachs. And today, I have the pleasure of having Helmy Eltoukhy and Mike Bell from Guardant -- Helmy's Chief Executive Officer and Founder; and Mike Bell is the Chief Financial Officer. Thank you both for joining us. I appreciate your time today.

Yes, thanks for having us.

No problem. I thought maybe we'd start out and kind of let you set the stage a little bit, maybe talk about some of the recent results, kind of your view on the year and some of the key drivers for investors to look for?

Yes. No, thank you. 2021 is really, I think, a fantastic year for Guardant. If I look back to the history of the company, I can't think of a single year where we're going to be making so much progress. The vision we had behind the company when we started was really providing tools and tests across the continuum of cancer care, from screening all the way to late stage. And our methodology was really one-off. Let's start with the easier-to-solve problems first and learn by doing and incrementally build up towards screening. And in 2014, we launched really the first comprehensive clinical liquid biopsy in the market. And now this year, we launched Reveal, which is being used for really that adjuvant setting early cancer patients. Guardant360, conversely, is being used in the late-stage setting. And by end of this year, we'll have finished enrollment in our 10,000-patient screening trial, ECLIPSE, which I think would -- if successful, puts us very well positioned in terms of what we believe is having really the first FDA-approved screening liquid biopsy on the market. So a very, very big pivotal year for us. If we think -- if we dive in into 2021 and think about some of the near-term catalysts for our business. Clearly, we had the launch of Guardant Reveal back in February. And that is opening up this opportunity on recurrence monitoring, this $15 billion TAM, that is, I think, obviously in its early innings, but it's an exciting opportunity. And so that launch couldn't have gone better. We're seeing a market where there are tests that require tissue sequencing. There are tests that are blood, like CEA, which don't have very good performance. And so we see our offering as very singular in terms of really being able to hit the needs of the market in a way that is absolutely resonating with oncologists. So we're very excited in terms of where that continues to go over the next few quarters. We recently presented data in bladder and lung cancers at ASCO that was very compelling as well. So CRC is just the beachhead. We're going to be expanding to other cancer types. Similarly, to the success we've demonstrated with Guardant360 in the late-stage setting, really started with promoting lung and then expanded into multiple cancer types. We have pan-cancer Medicare coverage there, and the test is being used in 50 different cancer types for treatment selection. We've made a lot of progress there as well. Just the last couple of weeks, we've got some major companion diagnostic approvals with Amgen and Janssen. We think that's going to open up really treatment options for patients that really had no hope previously and for a large percentage of patients. And so we think that's going to be another catalyst for further driving adoption in our existing business. And then I think in that area of the business, we are launching a tissue test as well. That tissue test, I think, is going to be very differentiated in the sense that it's going to be able to accept, I think, much more challenging specimen types, have a much better turnaround time. But more importantly, I think it's -- the way we're offering it is really going to be integrated with how we do liquid testing. And so Guardant360 on the liquid side and the tissue side are really going to try to answer essentially the driving question, the most significant question that a physician has, which is -- or a need that he or she has, which is, "Find me any biomarker possible in this patient and get it to me as quickly as possible so that I can put this sick patient on treatment as quickly as possible." And we think we can do that by really integrating how liquid and tissue are done, really, maximizing the hit rate but getting -- but minimizing the turnaround time. And so we're very excited by that. We think we can finally catalyze really adoption of comprehensive genomic profiling full stop in this space. It's just not where it needs to be, and we think our tissue offering will help drive and accelerate adoption. And then finally, as I alluded to before, we're still on track for finishing our ECLIPSE trial later this year, 10,000-patient colorectal screening trial. We presented data at ASCO recently, one of the largest cohort of CRC positives really ever tested, I think, over 1,300 patients there in that presentation and saw, I think, very compelling performance of 91% sensitivity with 94% specificity that, I think, puts us in excellent shape for really, I think, a fantastic product if ECLIPSE is successful.

Got it. That's a really helpful overview. Thank you, Helmy. And maybe just starting big picture, obviously, liquid biopsy market has received a significant amount of focus from investors. And we've seen a number of new entrants. And could you just talk about how you feel Guardant is positioned within liquid biopsy? And if this market gets to be more competitive, what are the advantages that Guardant has? And how can you sustain that advantage? Or is the TAM just simply big enough, there's going to be room for a lot of different people, and it's not as much of a competitive issue as people might -- make it seem out to be?

I would say that the liquid biopsy market is obviously one that is very broad. And so I think it depends on where you're looking at in terms of what segment. And I go back to the 3 buckets that I talked about, the late-stage therapy selection, recurrence monitoring is the second bucket and then screening as the third. And we feel very well positioned in each of those 3 areas, frankly. I don't think there's a time in our company's history that maybe we felt as well positioned as we are today. I think with our success and the success of some of the others that came before us, you're going to drive more competitors. Obviously, we're seeing more and more money flow into the space. And so the stakes have gotten much higher in recent years than they were historically. But that being said, when we started, there were 30 or 40 companies going after this space. This has just been a dream of oncology and a dream of cancer management for decades. And so competition is not something that we haven't faced before. We've faced it since we started. And half of those companies when we started probably don't exist anymore, and there's now another -- a new host of other companies now. But competition is good. It defines spaces. It moves adoption of products more quickly and, I think, keeps the products and services and offerings of companies. It keeps us honest in terms of making sure that we continue to provide top-quality and then top level of service. And so we actually enjoy it quite a bit. But I would say that delving in more specifically on the late-stage side, we continue to see that our service offering, even from a technology point of view, continues to have what we believe is market-leading performance in terms of sensitivity and specificity, in terms of finding genomic alterations that can drive patient care. Even in terms of the service level offering, we're averaging 5-day turnaround time with Guardant360, which is much, much faster than a lot of comprehensive genomic profiling tests out there, whether they're liquid or tissue. So across -- and we just have what we believe is the most comprehensive reimbursement for that product in this space. And so I think over the last 8 or 9 years, we've really built multiple moats around that franchise, whether it's 200 peer-reviewed publications or 200 million-plus covered lives. Really, the depth of relationships we have with now close to 10,000 oncologists out of the 12,000 or so that exist in this space, we believe, is unmatched. And we think there's a lot of leverage there. And so as we launch new products into that channel, whether it's a tissue product that's upcoming or other products, we think we're very well positioned for continued success and growth in the late-stage market. With the other 2 segments, with the Reveal in the recurrence monitoring, once again, what we believe is it's not necessarily the first product that's out there that wins. It's the first product with product market fit that wins. And we think having a tissue independent approach is one that finally has a product market fit. It's a true liquid biopsy, true wireless technology, as we sometimes say. And so we think that has and will continue to resonate with the field in terms of the same kind of adoption we saw with Guardant360. Guardant360 wasn't the first liquid biopsy out there by any means, but we think it was also the first with the right product market fit. And in the late-stage setting, we feel very good in terms of where we are with ECLIPSE. I believe we're really the only company that hasn't delayed its time lines in terms of the trial that we're -- that's ongoing now. And I think there's enormous credit to the team for expanding the number of sites we had and really just being aggressive in terms of how we manage ECLIPSE and enrollment in the trial despite COVID and despite some of those headwinds. So we feel very good in terms of where we are not just with the performance but the execution of that trial. And so the national coverage decision got finalized for CRC. And so we believe that CRC is really the only cancer type on the screening side today that has clear line of sight to a real business in terms of something that's fully reimbursable where the regulatory framework is very clear. We're very excited about expansion to other cancer types in terms of screening, but I think as the landscape sits today, CRC is one that is a singular kind of very exciting opportunity that is very tangible.

Got it. Thank you for that. That's really helpful. I think one question I've been getting is just -- and maybe we'll go back to the tissue test and the thought process between -- behind developing that. Sometimes, it seems it has to be like a binary decision, so either liquid biopsy or tissue. And I don't think it necessarily has to be that way. I think there's different advantages of either. You have the turnaround time issue on the tissue and you have the ease of use and noninvasiveness of liquid biopsy. But just could you talk about the thought process behind developing a tissue test just given your focus?

It's something that we've always debated from when we started Guardant in terms of offering a tissue test. And it's something we also knew that would be a matter of when, not if, which is when is the right time to develop this and dedicate resources to it and launch this test. And I come back to the comment I made about 2021 being such a pivotal year for us. If you think about where we've come, we've always wanted to prioritize the larger market opportunities first as a company, which is why we didn't launch a tissue test 5 years ago. We wanted to focus our resources on bigger market opportunities of recurrence monitoring, of early detection screening. But now that we're close to the finish line or we've launched products in each of those different areas, we looked back at the therapy selection space, and we said, "What are some of the remaining challenges? Why are the majority of patients still not getting genotyped comprehensively?" If you think about a lung cancer patient, only 50% of them get a second chance at treatment in terms of a second line of therapy. And so that first shot on goal is so vitally important. The lung cancer patient -- metastatic lung cancer patient has an average life expectancy of 11 months. And so we want to make sure we can drive adoption of testing to 80%, 90%; 100%, if possible. And part of having -- a liquid solution, we think, can solve a large percentage of that. But clearly, there are a lot of physicians that are still in the sidelines who essentially prefer tissue or think that tissue is the gold standard and so on. So how do you move those physicians across the finish line where even moving them from using hotspot testing or depending on what their pathology is doing to even doing tissue into genomic profiling is no easy task, and that's the major -- that's the majority of physicians today. And what we saw was a lot of the tissue solutions that are out there are doing a disservice in terms of that adoption of comprehensive profiling. If you think about it, the average turnaround time is 3 to 4 weeks for a lot of these tissue tests. It takes 1 to 2 weeks to get the tissue sample and then another couple of weeks to run the test. What happens with that is even when tissue comprehensive profiling is ordered, only 50% of the time is that information used in first-line treatment decision-making. Because it takes so long, the physician feels like he or she needs to pull the trigger on treatment within 1 to 2 weeks of seeing the patient. And so it's seen as something that's nice to have but not necessary. And a large part of that is just because of the logistical challenges that it provides. When we've gone around Guardant360 on the liquid side with this 5-day turnaround time on average, we've invested very heavily into automation and high-performance compute and so on to really get the turnaround time so fast. And a lot of that work we've done, a lot of that innovation that went into that can be applied directly to the tissue side. The process is very similar once the DNA is extracted. And so we realized that we had a lot to offer in terms of solving some of these remaining challenges that exist. And some of these impediments that continue to exist in terms of getting every patient genotyped. And really, the only way we think to solve that is really by grabbing the reins, so to speak, on comprehensive genomic profiling full stop and really offering this integrated portfolio where we think about -- we have liquid here and we have tissue here, how do we combine these 2 in a way that essentially, as I mentioned before, ensures that a physician doesn't miss a potential biomarker and gets it to them in the majority of patients before they need to pull the trigger on treatment. And we think really the only way solving that is by really having a kind of a one-stop shop offering, really combining the 2 and doing it in a way that, I think, addresses some of the fears that some of the physicians have of missing out if they only use liquid. So we're very excited by this. We think that this approach and this tissue offering on the base case will catalyze greater adoption and acceleration of Guardant360 testing. But in the, I think, optimistic case, we think that it could potentially drive really a whole new paradigm across kind of existing tissue users in the market today.

Great. So it's safe to say that there was some [ 3 robust sounding ] out of your oncologists to determine whether or not this was something that they needed, and the turnaround time was sort of one of the main obstacles. Because when I think about just product development, just broadly speaking, like if you're solving a problem for a customer, it tends to end up being a really good product versus something that's great in your head but doesn't resonate with your customers. And so like, how much are the discussions did you have with the doctors asking for a tissue solution from Guardant? Did you have? And was that a big part of the reason why you developed that or starting to develop it?

Yes. No, I mean we're very customer-centric as a company. We, frankly, don't care about cannibalizing our existing products, if it's something that's going to resonate with customers more than what we have. And this is no different. I mean I think one thing that's underappreciated about Guardant is really the quality of the commercial channel we have built and the deep relationships we have with oncologists. And so many of them would tell us, "Well, gosh, I mean we wish you guys had a tissue test. We'd totally use you over who we're using now if you did because the level of service you guys have, it's white club service with Guardant. We feel like you're an extension of our back office." So we've heard that so many times over the years. And so that, I think, was a big impetus and big driver in talking with customers and really understanding what the continuing pain points are on the tissue side. And yes, we're -- obviously, it's something we'll see how it plays out, but I think we're very optimistic about the potential for this tissue offering.

Yes. It's something that we see and that we had written about, our recent initiation about the way the diagnostics landscape is changing in terms of value and the infrastructure, the commercial relationships, the relationships with the doctors that maybe, as you said before, it's not the first test. It's the best product fit. And it's the relationship that you have to actually drive that adoption that could be the actual competitive advantage going forward. Just a question from the audience while we sort of on the bigger picture, and that is, could you just talk about the ability to get into the oncologist's office? How many -- any percentage of those that are open? And are things opening up for you? And do you see that continuing to open up over the course of this year?

Yes. I think as we mentioned before, in January, we saw only about 15% of offices accessible, at least in person. I think that opened up to about 35% in person and in the March, April time frame. And I can tell you that things are much better now. So I think in line with our expectations. That second half of the year, things would be back to sort of near-normal or at least improve significantly. I think we're on target for that. And certainly, the rates of COVID continue to come down and plummet, seem to harbinger, I think, a great -- a fairly good outlook, I think, for office access by second half of this year.

Great. I think you announced this morning the hiring of Chris Freeman as Chief Commercial Officer. Could you just give a little bit of a background and where you think he'll have the most opportunity to add value to the team going forward?

Yes. I mean, as we continue to expand our commercial channel, the team is becoming very sizable. We're thinking about going from a single-product company now to multiple products, multiple call point. The type of complexity we have is really on the order of some of the more sophisticated, I think, drug franchises that are out there. And so we are very excited to have someone of kind of Chris' background. He ran a $13 billion P&L in terms of one of the most successful HIV franchises out there at Gilead and obviously understands how to deal with that complexity. If you think about that franchise, it's almost like a primary care channel in some ways in terms of the types of patients you need to target, the different types of call points and offices. And he comes deep from a background at Genentech and oncology. And so he has the best of both, and really, he's used all of the tools, whether it's on the personal side or nonpersonal in terms of digital promotion or kind of national advertising campaigns. And so having someone with his wealth of experience come to Guardant, I think, is obviously something we're excited about. And I know he's excited to really lead us in terms of this next chapter on the commercial side.

Got it. And just shifting to ECLIPSE. You mentioned that the enrollment is still on track. You've expanded the number of sites. Maybe just help investors think about what should we be looking for? What are the next kind of data points that we should be looking for? And what would define success for you in terms of the data readout? And how should we measure it?

Yes. So as we mentioned, we're still on track to finish within the 24-month time line that we indicated when we launched the trial in November of 2019. It wasn't an easy task with COVID, but I think we're very fortunate that I think we're still committed, and we believe we have a very good chance and very good probability of hitting that time line. So that's something we're very happy about. I would say that what we just presented over the weekend at ASCO is probably a very significant data point in terms of really giving, I think, us and others encouragement around the probability of meeting sort of the mark with ECLIPSE in terms of performance. And with that ASCO data, we really tried to, I think, test 2 different dimensions in terms of if the assay failed, where could it be from. One was -- I think there's a criticism in this space about over-fitting or having small sample sizes, and is this really a representative. And in that presentation, we had over 1,000 -- I think 1,300 colorectal positive samples. If you think about some of the largest studies that have really ever been done in the noninvasive colorectal side, I don't think any of them have had more than 100 positive colorectal cancer patients, even the ones with top line numbers that are in the many thousands. Most of those are normal patients, non-CRC patients. The CRC cohort tends to be less than 100. And this had 1,300. So it's extraordinarily kind of massive compared to anything that's been done before, which I think is clearly something that is, I think, very encouraging in the sense that these are multiple cohorts, regional diversity, and we still saw our performance really stay kind of rock-solid at 91% sensitivity and 94% specificity, which is great to see. I think the second dimension we are trying to test is really this idea of asymptomatic versus symptomatic patients. And there's a hypothesis that individuals who are asymptomatic are much harder to detect with these types of tests because maybe they have a smaller cancer, harder-to-detect cancer and so on. And there's been some data that's been published that suggest that. And what was interesting was that, one, the punch line is that the assay performed just about as well in the asymptomatic individuals as symptomatic. I think it was 91% or 93% in symptomatic versus 88% in asymptomatic. But I think the interesting part of it was that the hypothesis was actually a directionally correct hypothesis. We actually saw that signal levels were much lower in the samples that came from asymptomatic individuals. And so clearly, level of circulating tumor DNA is lower in those individuals. But the assay, I think, was high-performing enough that we're still able to detect cancer in the majority of those individuals. So it was good to see on both fronts and I think gives us a lot of confidence that ECLIPSE is likely to read out in the way that I think we all hope. Obviously, ECLIPSE is in a league of its own. These are case-control type trials or studies that we've presented. So slightly different in terms of the nuances but highly encouraging, nonetheless, in terms of where ECLIPSE could read out.

Got it. And then just as you mentioned it, obviously, this is focused on colorectal today. Multi-cancer is a future opportunity. But as you think about that opportunity, what are some of the challenges that you think you'll face? And what do you think about sort of the time line in terms of rolling out additional cancers and completing that multi-cancer?

From a technology point of view, I think we're very positive that that's not the impediment. I think we presented, on the Reveal side, data on lung and bladder. But because we do MRD in a way that is a tissue agnostic or tissue independent, you can kind of see how that test could be used in the screening side. And we're seeing really excellent performance, frankly, in terms of detection rates in early-stage cancer and multiple cancer types. I would say that, really, the remaining open questions or the criteria that are going to dictate the particulars of the strategy we take as we expand from CRC to multiple cancer types are largely going to be in the regulatory and reimbursement fronts. We want -- those are going to be essentially the bottlenecks to getting paid and actually realizing the large multibillion-dollar TAM that potentially exists. These tests are only going to realize that TAM when they're fully reimbursed and fully, I think, endorsed by some of the guidelines that are out there in the U.S. and that are FDA approved. And so essentially, this regulatory and reimbursement framework that has to be said, I think there's a lot of encouraging flux around that. There's a bill that is going to Congress around multi-cancer detection that is going to try to streamline, I think, some of the roadblocks that exist today. And I think there's a lot of other efforts that are ongoing that I think are positive as well. So I think by later in this year, I think there'll be more clarity there, and I think we'll be prepared to share more about what that road map looks like, at least from the Guardant side, in terms of pursuing multiple indications outside of colorectal cancer.

Got it. And then I was going to actually ask you about that reimbursement, regulatory as being one of the main hurdles really. Do you think the landscape is shifting a little bit? You mentioned to the bill that's going through. I'm just wondering, on sort of a post-COVID world, what do you think? And just given all the investment and time that's spent in liquid biopsy, do you think that regulatory and reimbursement regime could be shifting for the positive in the near term? Or is this still going to be something that will be a challenge for everyone?

I think it is shifting towards positive. I mean I think there's a few things that need to be streamlined, right? So the way that the task force is set up is I think there are excellent individuals that are really doing great, unbiased work in terms of how they're reviewing these tests. I think the challenge is they're just underfunded compared to how much funding has flown into the actual testing side and development side. I mean we've never historically have had this kind of funding, billions of dollars of funding, and R&D efforts going into development of these kinds of tests for screening. And so there's just an impedance mismatch between, I think, some of the regulatory and reimbursement kind of machinery that exists in this country and how much investment is being made in terms of developing these tests. And so I'm very confident that screening, I think, is, hopefully, one of the last remaining bipartisan issues in terms of health care. I mean I'm always surprised by what becomes partisan. So we think there could be a lot of support if it's done the right way. I think on the regulatory side, I don't think there is an issue there necessarily. I think there's an issue with what we think has clinical utility. I think there was a large study in the U.K. that recently read out in ovarian cancer. And the interesting thing about that study was that I think it poked a hole at the common fallacy that I think exists in screening in this space that detection of cancer equals improvements of outcomes. That's not a proven equality in terms of that statement. And I think what the ovarian study showed that aggressive screening does find more Stage 1 cancers, but that doesn't necessarily translate into better outcomes or less deaths because cancers are not necessarily linear in terms of something in Stage 1 and Stage 2. And so this concept of stage shift is a nice kind of argument theoretically but, unfortunately, the biology doesn't work that way in many cancer types. It does in some. It does in CRC, to a large extent, which is why screening works there. But I think unless you have a precedent screening technology that has shown improvement in outcomes, you're likely going to have to do some of those long-term studies to show that there's a net health -- both population health benefit as well as economic -- net health economic benefit from aggressive screening in that particular cancer type.

Got it. And then just going back to your comment on technologies, not necessarily the issue for multi-cancer, but just what gives you confidence in your kind of ability to achieve that high sensitivity and specificity in other cancer educations that might have lower methylation? I mean how do you think about from the technology standpoint? How do you get comfortable with that?

Look, I mean we're not necessarily hanging our hats on just one modality. We're, I think, one of the few that have this multimodal kind of framework of looking at genomics, methylation, fragmentomics. And that's not the end of the picture. We think there are other biomarkers that are going to be helpful as well. So we're not religiously wed to one modality.

Got it. And then just you made a couple of announcements, and you mentioned in your opening comments on the companion diagnostic side, Amgen and Janssen. Could you just talk about maybe the progress that you -- obviously, that's clear evidence of progress but just talk about how we should think about the companion diagnostics for 360 evolving over time?

Yes. What we're working on -- that's not the end of the story. We're working on multiple other companion diagnostic to Daiichi and Radius and a number of other companies. And so we're -- we see Guardant360 as that universal diagnostic with companion therapeutics. We really see it as a sort of aircraft carrier where we can essentially put on all of these different claims on top of it. And we think, ultimately, that's where the field goes. I think both -- it's unproductive to kind of continue to move into a world where we're thinking about companion diagnostics one by one. We're thinking about therapies one by one. We just need an easy button where you take 1 test and you figure out which of the dozens of potential therapy options are relevant to patients. And so the companion diagnostic side, we think, is going to continue to be a, I think, major source of business for us, a significant source of business. But I think more importantly, or as importantly, it, I think, is synergistic with the clinical side. I think they both drive business. If our pharma partners want to make sure that they don't miss a day in terms of potentially getting to peak drug sales as quickly as possible, the beauty of leveraging Guardant360 is that it's already there in the wild, it's already there being used. And as soon as they get approved, their test is -- the test is out there and is getting patients on their new drug. And vice versa, I would say that essentially having really the ability to really have some of those drugs associated with the test and so on is important because, ultimately, why our physicians ordering this test is to get on to the right drug and to get on that life-saving drug. So it's a very nice virtuous cycle.

Got it. And then just maybe one question from the audience. And just could you remind us where Reveal is priced? And do you expect that to improve with favorable reimbursement decisions or experienced pricing pressure as competitors enter the market that was on Reveal?

Yes. With Reveal, I think we haven't disclosed pricing at this point. We're still in the middle of negotiations and setting that up. But we expect it to be priced at a level where I think -- we think that gross margins will be, I think, in line with our current business.

Okay. And maybe, Mike, turning over to you with the mention of gross margins. Can we just talk a little bit about how, from a financial standpoint, the balance sheet, gross margin progression, how you're thinking about this over the course of the year and maybe into '22 in terms of framing it in terms of your guidance?

Yes. On gross margin progression, our gross margins are sort of mid-6s now. And we've said that -- we think that will continue through the year. We've got upsides on ASPs, and we've got the recent ADLT news from Medicare where the reimbursement rate is $5,000 for 360 CDx. And so we've got the upside there. But we are launching new products. We talked about Reveal and then upcoming tissue. And so there'll be a bit of pressure on our gross margins as we wait for the reimbursements to come through for those. But we've talked about sort of this mid-60s level being the level that we're looking at this year and really on a more sort of medium-term basis, similar levels as well, as we start to ramp up reimbursement. But we're getting more efficiencies with more automation. And obviously, we get economies of scale as the volume growth goes.

Yes. I wanted to ask you about that, efficiencies. Obviously, you're building scale. You're continuing to grow. How much of that can be an offset for some of the reimbursement pressure you might face? And how many levers do you have that you feel you can pull? And will those continue to grow? Will those levers get bigger as you continue to build scale and create efficiencies within the business? Maybe just help me think about the progress of that from the cost side.

Yes. I mean, we're running out of the sites at the moment. We've got a lot of capacity in the current site. And we're focused on automation. So I think we've got a lot of room where we are to grow the volume. And if the volume is growing significantly, then obviously, the overhead per test is coming down. We get a lot more leverage with our suppliers. And we're getting faster and faster with our turnaround time. So I think as we look at this, there's a lot of efficiencies that we can gain, we're getting now and we can be getting over the next 2, 3 years, even longer term.

Maybe talk a little bit about how you're thinking about on the investment side. You've obviously done a lot of organic investments. Any thoughts on inorganic and how you're thinking about the balance sheet at this stage and utilizing that.

I mean, I would tell you from a balance sheet perspective, we're obviously in a very, very strong position with a lot of flexibility, and we're looking at how we use that balance sheet for the current pipeline. But also from an M&A perspective as well, we're looking at the best opportunities. I don't know, Helmy, if you wanted to add anything specific there?

Yes. I think -- obviously, we have very sizable balance sheet, and I think we have that for a reason. We do think that some of the best companies out there balance organic growth with inorganic growth. I mean I think the bar is high for Guardant given where our pipeline is and the opportunities we have at our disposal in terms of what's addressable with our pipeline. But that being said, we think companies need to do -- should do acquisitions before they need to do acquisitions. And so we are -- we think it brings in the right talent, diversity of thinking and so on. And we have -- as I said, we've built, we think, a channel in oncology diagnostics that is second to none. And I think there's a lot of leverage we can potentially exploit by bringing new products there.

Got it. And then, Mike, as you think about the -- you've had a pretty durable 30% growth rate. And as you think about kind of longer term, it seems like you've got a good runway to achieve that. But just any thoughts on how we can kind of frame long-term growth profile for Guardant in your mind.

Well, I mean obviously, on the clinical side, on the 360 side, we've talked about volume growth of around 40% this year, so continuing with that strong growth. But we're obviously layering on top of that new products. And again, we talked about Reveal, and we talked about tissue and then coming in sort of 2 years or so on the screening side. And so I think there's potential for us to continue the growth on the 360 side. We're still relatively unpenetrated in that market. But I think as we're just adding on more products and become a multi-product company, there's a lot of room for us to continue really strong growth over the next few years, absolutely.

Great. And then just a quick question from the audience on LUNAR-2 data you presented at ASCO, showed a sensitivity of 91% early-stage colorectal Stage 1, 2 and 3, and a specificity of 94%. Why do you think it's important to solve for Stage 1 through 3 instead of just Stage 1 and 2?

Yes. I think we split things out. I think Stage 1 and 2 was 88% in that abstract. If you look at typical colorectal screening trials, there's a fairly healthy distribution between Stage 1, 2 and 3 in terms of what's being detected. And so I think what's important to solve for is certainly the detection rates, you're going to see -- with the typical distribution, you would see in that kind of trial, and that really comes out at around 91%, if you prevalence-adjust appropriately. So it's sort of the right metric that I think you would think about in terms of sort of what the headline would be on an ECLIPSE-like trial.

Okay. And then just one more question from the audience, maybe a little forward-looking, but how do you think about the levels of sensitivity and specificity you will need to reach in ECLIPSE to achieve favorable reimbursement?

Well, so we know what that is on the Medicare side, it's 74% sensitivity with 90% specificity. That's a red line that we certainly can't cross, anything lower would certainly be failure of that trial. That being said, then it's how much above that do you need, if anything, to really drive success and what are some of those inflection points above that. And we think it's maybe less about exact performance above 74%, 90% and more about -- essentially, the second catalyst will be inclusion in task force guidelines since that essentially drives private payor -- the requirement that private payors reimburse with $0 co-pay because of the Affordable Care Act. So that's largely, I think, the major driver for success outside of ECLIPSE and outside of the NCD. And given that FIT as part of those guidelines, we think there's a good chance that having anything above the NCD that's blood-based is going to be a big game changer for this space. Just from a compliance point of view, there are 30 million or 40 million Americans who are not taking and not using any of the existing tests out there. And so a test that meets that bar and has a much higher compliance rate is going to save lives.

Great. Yes, just one thing I do want to touch on, which we kind of just did, but just the importance of compliance in regards to colorectal and, obviously, what's currently already on the market. How do you see that as kind of in terms of the priorities when folks are looking at that? And how important is it to you as you're developing this test, that compliance is obviously higher?

Huge. I mean it's -- yes, I think as the saying goes, "The best test is the one that gets used." And that's where we see one of the biggest advantages that a blood-based modality has is that it takes patient participation out of the equation. You're in the physician's office. You're kind of attacking another blood test on to the labs that are already being prescribed and, essentially, its ordering done, the time period between consent being given and the test being carried out is minimized. And we think that has an exponential kind of impact on compliance. You look at blood-based tests, whether it's PSA and so on, you have compliance rates that are well above 90%. So we think it's a big, big factor. And you think about something like lung screening, low dose CT scans that approved for a 30-pack-per-year smoker, they think they got dropped to 15 pack per year. But you have compliance rates that are high single digits, 8% or 9%, with that modality. And that's just -- it's basically like having no screening when you have compliance so low. So it's a huge factor in terms of -- as important as sensitivity, frankly.

Great. All right. Thank you very much, guys. I appreciate the time, and thanks very much for joining us.

No, thank you.

All right. Bye.