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

Good day, everyone, and welcome to the Guardant Health ECLIPSE results. I would now like to hand the conference over to Alex Kleban. Please go ahead, sir.

Thank you. Earlier today, Guardant Health released a readout from its ECLIPSE study. Joining me today from Guardant to discuss the results are Helmy Eltoukhy, Co-CEO; AmirAli Talasaz, co-CEO; and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release Guardant issued today. For a more complete [ listen ] description, please see the Risk Factors section of the company's annual report on Form 10-K for the year ended December 31, 2021, and in its other filings with the Securities and Exchange Commission. Subject to required by law, Guardant disclaims any intention or obligation to revise -- update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, December 15, 2022. With that, I'd like to turn the call over to AmirAli.

Thanks, Alex, and thank you, everyone, for joining us. I am pleased to share that this afternoon, Guardant announced positive results of our pivotal ECLIPSE trial. We've been working steadily for many years to reach this milestone. During those years, our ambition to detect cancer with high sensitivity from a simple blood draw was considered science-fiction. As of today, blood-based CRC screening is a reality. This is a momentous day for all of our stakeholders, patients, providers, healthcare systems, payers, employees and investors. For the first time, the power of blood-based testing to transform the CRC screening paradigm has been demonstrated in a large-scale prospective clinical trial. Turning to Slide 3. As you have likely seen in our press release issued this afternoon, our test demonstrated overall sensitivity of 83%. This is the best performance shown in a large prospective trial for a blood-based CRC screening test. We believe this level of performance will create a new category for CRC screening, potentially leading to millions more patients getting screened and with the potential to save countless lives. Specificity was 90% in both individuals without Advanced Neoplasia and in those who had a negative Colonoscopy result. Taken together with 83% sensitivity, we believe this test exceeds the performance criteria set by Medicare to qualify for reimbursement. As a reminder, these criterias were established by the national coverage decision for blood-based CRC tests published by CMS in 2021. At this time, staging for a good fraction of confirmed CRC cases remains ongoing. We believe that the final staging will be close to our expected distribution for newly diagnosed CRC patients. We expect to be able to provide the remainder of this data and additional insights at some point during 2023. Advanced Adenoma sensitivity was 13%. It's well established that only about 5% of adenomas become CRC, and this process can take decades. With the -- with the rich data set and bio bank of thousands of Advanced Adenoma samples obtained from ECLIPSE, we believe now we have the right development cohort for further technology enhancements. That said, we continue to believe the most important parameter is the performance of CRC detection. For this study, we evaluated 2 configuration of our multimodal blood-based screening test independently to minimize risk in the study. One was based on cell-free DNA only and the other was based on cell-free DNA with protein biomarkers. The announced results were derived from the cell-free DNA only test, which outperformed the cell-free DNA test with protein biomarkers. We will, therefore, carry this configuration forward for final PMA submissions to FDA. The completion of the ECLIPSE is a major catalyst for Guardant in multiple ways. First, it cements our position as the leader and first [indiscernible] in blood-based cancer screening. As we scale to bringing hundreds of thousands of samples commercially, we will further accelerate the progress we can make in pushing the boundaries of early cancer detection. Now we will focus more intensely on expanding our test to additional cancers to deliver a true multi-cancer early detection assay. We are pleased with our progress in our lung cancer screening study, SHIELD LUNG and have expansion to multi-cancer screening in our sites. Turning to Slide 4. We conducted ECLIPSE to capture the most representative cross-section of the U.S. across many factors, including age, ethnicity, gender and healthcare setting. The ECLIPSE study included more than 200 clinical trial sites in rural and urban communities across 34 states. ECLIPSE study locations included community hospitals, private clinics, gastroenterology clinics and academic medical centers. In addition, numerous strategies were implemented to increase representation from underserved communities that have lower CRC screening rates, including mobile phlebotomy, transportation, [ right shirt ], assistance and language translation services. Looking more closely at participant demographic on Slide 5. Participants were representative across a range of factors, including age, ethnicity, gender and race. ECLIPSE data includes pretty balanced distribution of age and gender. This study included 13% Black, 15% in Hispanic and 7% Asian-American population. Enrollment amount -- among Black Americans was above average for a clinical trial, which is important given the disproportion of the impact of CRC on the black community. At CRS to CRC's training is particularly poor among medically underserved population, including those with low income and racial and ethnical minority population. Only 59% of individual aged 50 and older were Hispanic and 65% of individuals who are Black African Americans are up to date with recommended screening compared to 68% of individuals who are White. Turning to Slide 6. As a reminder, in the United States, there are about 137 million people between the age of 45 and 85 and about 120 million of these individuals are at average risk and eligible for CRC screening. The latest estimates show that only around 71 million people are currently screened for CRC. Of this screened group, Colonoscopy is the main screening modality and about 15 million individuals are being screened for CRC using stool tests, while by comparison, 49 million individuals are not getting screened. This unmet need in this segment alone translates to a potential annual opportunity of 16 million tests for our blood-based screening tests, assuming a 3-year interval testing. Not only we are confident that our blood-based test can significantly increase screening in unscreened individuals, but we believe it will also make a significant impact across the entire eligible screening population. Turning to Slide 7, in addition to the strong clinical performance, blood-based screening has been shown to significantly enhance adherence to CRC screening in a real-world setting. Among the initial 8,000 individual for whom the test was ordered during a routine visit with their physician, 90% completed the test. This is in stark contrast with adherence rate ranging from 43% to 66% for other noninvasive stool tests. Screening rates remain stagnant and well below the centers for disease control and prevention goal of 80%. One out of every 3 patients that receive a Cologuard kit never completes their tests, even with significant resources spent on patient engagement and navigation programs. These early data points through the power of truly integrating CRC screening into a patient visit and the high unmet need that exists for screening tests that will be completed. In a recent patient survey, results demonstrated a strong patient preference for blood-based tests. For individuals who are previously screened with a stool test, 7 out of 10 said no to stool test again and voiced is strong preference for blood over stool testing. For those who have never been screened, the preference for blood relative to stool was almost 5:1. Turning to Slide 8. Previously, we discussed how the performance of the assay in terms of CRC sensitivity will form the starting point for physician adoption. We are pleased with the CRC performance from our ECLIPSE study, and we believe it will unlock an opportunity of approximately 10 million annual tests by 2032. These results demonstrate for the first time that the blood test can indeed achieve high sensitivity detection for colorectal cancer, a disease that was thought to be difficult to detect in blood. And as groundbreaking as these results are, colorectal cancer is just the beginning. Fueled by this success, we will expand this test to detecting many other cancer types, including lung cancer, the leading cause of death from cancer. We believe long-term adoption of our CRC screening test will be further boosted by patient preference and additional utility of multi-cancer screening. The future competitive landscape between blood and stool test will be a choice between a patient referred blood-based multi-cancer screening versus single cancer, CRC screening using stool. And finally, turning to Slide 9. With our positive ECLIPSE results in hand, we expect to complete our PMA submission for FDA approval shortly in the first quarter of 2023. This is a landmark moment, not just for Guardant but for the liquid biopsy community as a whole which has taken many decades of collective research. I'm so proud of our team for their years of hard work to get us to this point while we are still early in the journey, we have just passed a critical milestone. We are so excited about the potential impact on the wellness in our community and reducing cancer mortality in a meaningful way. At this point, we will now open up the call to questions. Operator?

[Operator Instructions] Our first question will come from Puneet Souda, SVB Securities.

AmirAli, couple of questions. So first one is, I mean 83% sensitivity here for CRC is significantly below the high 80s or the low 90s that you were seeing consistently throughout the last few years in the control data sets and even in the Spanish cohort. Obviously, it was lower versus our degradation impact at 85% to 86%. So can you elaborate a bit on what happened here in terms of degradation? And why was this degradation not part of your expectations from the start given the majority of the GIs and KOLs that already highlighted that as a factor having seen in prior CRC screening trials?

I think there are multi factors, Puneet. So thanks for the question. One is, I think when you look at it from a statistical perspective, when you look at our CRC sensitivity in terms of lower level confidence interval, higher-level confidence intervals. So our observed sensitivity is 80%, higher level confidence interval goes above 90%. When you look at even test like Cologuard, with observed sensitivity of 92%, the lower-level confidence interval goes to like 83%. So from a statistical perspective, when you're running this kind of trial, there is some elements of variation based on like just the low number of CRCs that we are talking about. But more focused than is it 83% or 85% or 86% in terms of really be having the landmark CRC screening device, the way we are looking and actually when we presented even our data to our ECLIPSE committee, which are a bunch of GI specialists and the people who have been part of this study, they are very excited with the results that got presented. And in fact, they mentioned now we are going to have a new modality to be used in our practice. So I think that's -- we need to consider that what are the current options for screening right now? What are the sensitivities that have been observed and like for about, as I mentioned in prepared remarks, in 50 million people, you are not compliant to anything. When you look at the mostly widely used tests out there on the stool side in terms of fit, the sensitivity is around 73%, 74%. So as a result, I think the sensitivity we've seen really put us in a very good condition to really have a great opportunity in front of us. Having said that, this is a starting point and doesn't mean that over time, the test after running hundreds of thousands of tests cannot get improved. This is I think a great starting point for us, and we'll see how much progress we can make even in terms of improving the performance from this point.

Okay. And then on Advanced Adenoma, you came in at 13%. I mean, that's even lower versus the 20% that you had presented earlier. Do you think you can have Advanced Adenoma indication on the FDA label with 13%? And maybe just talk to us overall as to what's your expectation for the 83% CRC as well when you go and present this in FDA? And what's your expectation that there -- do you expect that to sail through? Or do you expect more questions from FDA?

Our expectation in terms of -- we have to go through FDA review and like it becomes a lot more clear. But as I mentioned for some time now, we think actually as long as the device has CRC sensitivity above 76%, 77%, we are in a domain that actually we can get FDA approval for the test. Please remember that Epi proColon test as an FDA-approved test has 68%, 69% sensitivity with like 78% specificity. So in terms of FDA approvability, that's the way we look at it. In terms of Advanced Adenoma claim, again, we designed a study from the beginning for a device to have claims around CRC and Advanced Adenoma by looking at Advanced Neoplasia. 13% is lower than our numbers that we've seen in our LDT validation, still it's above the random calling obviously. And -- but we are going to go through the FDA review cycle and see actually what happens, but the study is designed to get a CRC on Advanced Adenoma claim.

Next up is Jack Meehan, Nephron Research.

My first question is, was the analysis of the 2 different versions of the test. So the cell-free DNA with proteomics in the cell-free DNA alone, was that planned from the beginning? Or was this a post-hoc analysis of the cell-free DNA alone results?

So these are actually 2 configurations of the test. And in fact, kudos to our technical team that although we've generated a lot of data with cell-free DNA and the proteomics in combination, they had this kind of a second device of cell-free DNA only version, which effectively is the same algorithm, but like just a cell-free DNA compartment of that device, which was designed and developed in parallel and frozen and analyzed actually in parallel at the end on the clinical database. So that was a mitigation plan based on proteomics over the years have been a biomarker that sometimes can surprise you, although we did not expect that, that proteomics would surprise us, but still, we are proud of the team that they had that second device actually developed, frozen and was part of this study, and we unblinded the clinical database with both devices and so how each one performs.

Great. And then if you don't mind, can you share with us what was the performance for the version of the test that did include the proteomics?

The one that included proteomics? So that was actually lower than what we saw with cell-free DNA only still specificity was good, but the sensitivities on both sides was lower. And for competitive reasons, we don't get into the details of it. And cell-free DNA only is the device that we are going to pursue from now on in terms of our PMA submission and we think it's a great starting point. It's a very good performance of having 83% CRC sensitivity with 90% specificity. So that would be our plan in terms of next steps.

Our next question today will come from Derik De Bruin, Bank of America.

So -- can we go back and talk about the specificity, the 90%? I'm just looking at the language here in both individuals who have had Advanced Neoplasia and those who had a negative Colonoscopy result. I mean is that -- is that the same sort of like definition of specificity that's used in the Cologuard studies for both the CMS and the FDA approval? For CMS looking at it and then also for FDA. I'm just sort of making sure that we're doing an apples to apples to compare.

So actually, both specificities came the same for us, both of them like the way FDA looks at it is 90%, the way CMS looks at is also 90%. Just as a reminder, the specificity based on in the FDA kind of -- and in the study on the way, FDA looks at it is detection of early adenoma is consider the false positive and detection of early adenoma in CMS is not considered false positive. So specificity of CMS is just looking at screen-negative patients or the one that Colonoscopy report was negative, but both of the specificities for us came at 90%.

Our next question is Tejas Savant, Morgan Stanley.

I'm really -- maybe just to kick things off, I think you said this in your prepared remarks, but will you be press releasing the staging info along with your PMA submission? Or is that later? And then I have a couple of follow-ups.

Yes, staging has actually we made progress in getting more of the cases staged. Yes, we would talk about it in 2023 in the right venue, and we would update the field based on the distribution that we are seeing, the distribution of CRC stages is very, very close to actually what we expect based on the staging of CRC population based on public databases. So it's very close. It's not by a significant or any material way towards early stage or advanced stage. But there are a good fraction of CRC that still need to get final confirmation of staging.

Got it. That's helpful. And then just wanted to have you sort of like a [ pioneer in ], what in your mind drove the poor performance for the cell-free DNA plus proteomics assay? And then what does that mean for your ability to improve Advanced Adenoma performance over time?

Yes. So we expected actually cell-free DNA with proteomics to have better performance mainly on the Advanced Adenoma side. And we did not see that. There are -- like -- and this data that we are presenting right now is very, very fresh. We just got this data, and we prepared to come and share this positive results with everybody. So we need more time to actually get more detailed data and more analysis done to see actually what happened. In terms of the future of Advanced Adenoma more than proteomics, yes or no, to me, is now, we have access to thousands of right and rich Advanced Adenoma samples that got collected as a result of ECLIPSE. We continue to believe that the main performance requirement is around CRC sensitivity and specificity. But now based on this rich database that we have, like there is probability that we can optimize future generation devices to have better performance around Advanced Adenoma. To me, this is just a very strong starting point. And over time, this is just the beginning in terms of performance, this is not the end of the performance, obviously.

Kyle Mikson with Canaccord has the next question.

I guess, merely, I heard you kind of mentioned that you might improve the tech over time. Is there any chance where you try to change the assay? Run another study to get better data? And I guess like -- I'm sure the answer to that is probably no, obviously, you want to go to FDA pretty soon. Based on this experience with the ECLIPSE, are you going to make any changes to like future large screening trials that you conduct? This data set had 13,000 patients, [indiscernible] was used quite a bit. I mean, how are you thinking about that test going forward?

So first, I would like to actually reiterate that we are very actually pleased. This data has been positive, like 83% sensitivity. We think it's kind of a game-changing moment for the future of CRC screening. But it has room for improvement. Like when we look at an Guardant360 over the last 9 years and the update cycles that we had and over 9 years, we released 7 different generation of that technology and performance improved significantly and complexity actually improved significantly. So I wouldn't be surprised when we talk about our CRC screening device in 1 year, 2 years, 3 years down the road, still, we would have just the same performance that we have right now. But it's a very strong point -- performance point. We want to take you to the FDA approval, get reimbursement. We believe we can get USPSTF guideline inclusion with this performance based on conversations that we had before. We have to go through that process and see what's going to happen. And again, this is just a starting point. In terms of the path for upgrades. So like ECLIPSE trial, as we talked about, has continued to enroll and is continuing to enroll for biobanking purposes. We have thousands and thousands of samples, which have not been part of the study even after locking the database for our CRC analysis, we have a lot more CRC that we have detected even during the last 2, 3 months. So the biobank is going to get continue to enrich. And whenever we have assets that we believe can perform better for upgrades. The upgrade path is completely open for us. But we are happy with this starting point, and we are going to pursue it and hopefully take you to the finish line. And we are going to even get to that almost $10 million annual testing in 10 years, even with this version of the test.

Okay. That was great. And on that note, I'm just curious how the results announced here kind of impact your targets to achieve cash flow breakeven. I think it was 2 years after USPSTF inclusion. Given the 83%, your projections for revenue may not be lower than your base case, I think it was 85%. So just curious if your breakeven target is now kind of pushed out a bit.

So we really look at like this 83%, 85% are really like on the same ZIP code, like when we do this kind of market research analysis, like as we talked before, we looked at -- what's the -- what's the adoption if we have a test at 75% sensitivity? What's the adoption if you have an 85% sensitivity? And then what's the adoption if we have 92% sensitivity? That's the kind of analysis we've done. It's not that 85% is really the point that after that you have a failed study before that, you have a positive study or you have a failed brand or you have a positive brand. 83% and 85% to us, it's in the same ZIP code. We always talk about approximately 85% at that kind of change. But again, it's not going to be a digital change. It's kind of an analog and gradual change in terms of performance versus adoption. If based on market's feedback and what we are hearing from our customers, we didn't have confidence that with even this 83%, we can all like that 10 million test opportunity within 10 years, we wouldn't talk about it. So we are pleased with this data. We are in that neighborhood of really having a $5 billion brand opportunity. And over time, we are going to show that we can get to those volumes. And from a P&L perspective, again, as long as we get FDA approval, CMS' path is clear, USPSTF is clear. Pricing for this test is clear, interval testing is clear. So now 83%, 85%, 86% would not really make a very significant material impact.

We'll take the next question from Patrick Donnelly, Citi.

AmirAli, maybe just picking up on your last point there in terms of some of the interval commentary. Can you just talk about the path forward in terms of dictating the intervals? Obviously, there's been a lot of conversation about the Advanced Adenoma piece, 13%. A lot of noise in the market that, that could dictate where the screening goes and -- maybe just talk about, again, the path towards establishing that and when we should hear about that a little more?

Yes. Thanks for asking that question. So we continue to believe based on conversations we had with the former USPSTF members who -- some of them have been part of, even the review of Cologuard test that one of the main factors that goes into the interval testing is manufactured recommendation and also saw the communication with CMS to -- there is alignment in terms of the recommendation versus how the coverage policy agencies are thinking about it. So they would consider those elements potentially in their recommendation also. That's why when you look at the USPSTF recommendation languages, for a test like Cologuard, it says it's 1- to 3-year interval testing. And when you look at the footnotes and description, you see that it's based on manufacturer recommendation. And really, the main reason that goes into this 1- to 3- years from just a scientific mentality is like CRC is a cancer that takes a long time to get developed in the body. So like we talked about, adenomas, it takes like between 17 to 27 years for 5% of them for adenomas to become CRC and again, CRC staging to evolve. Just due to the nature of evolution of that disease, we continue to believe if the patient gets tested every 3 years would be sufficient. Having said that, also the NCD is clear in terms of interval testing, which Medicare would cover and the path for pricing also for FDA-approved ADLT test are very clear, how the tests are going to get priced. So we don't think these interval testing would really impact our opportunity size. But we'll see based on the future progress that we are going to have on conversations that we are kind of have with FDA and hopefully, when we go through the USPSTF review cycle.

Okay. That's helpful. And then just how many cancers were there at the end of the day? And then in hindsight, kind of looking back over the past few months, obviously, the readout was pushed out a few times. Any kind of reasoning that you can look at now that it's done that kind of led to it? Was it just kind of finding those cancers and the amount of patients ended up being a little higher, again, now that we're finally at the finish line, maybe there's some more findings?

So at the end, the number of CRCs that were part of this study cohort were 71 CRCs, all in, some of them like just based on inclusion-exclusion criteria in our study, although the CRC were confirmed, we couldn't include them in this study. So for the CRCs that actually passed our inclusion and exclusion criteria, and we have a past lab test with our blood-based test, there were 65 of them that they were confirmed CRCs. We had colonoscopy reports, and then we also have lab data. So all the analysis on the CRC side were based on 65 at the end, although 71 were included in the database. In terms of the time line, let's maybe step back and talk through like this is a study that we started in October, November of 2019. That enrollment is going to take about 2 years and potentially a few months after to get to the readout and we thought this study would be 10,000 patient study to get to this like about 60 to 70 CRCs. Now, and obviously, we didn't imagine pandemic would happen. So that was not even part of the plan. And 3 years after effectively, 3 years and 2 months, now we are sitting on this positive ECLIPSE readout with 70 CRCs in this study and almost 20,000 patients got enrolled in this study cohort. It almost got doubled up, too. So I think that prevalence was lower than expected, that we needed to enroll more patients but our team was very agile. And really, although the study got doubled up and some of the prevalence changes happen late in the game for us in terms of our assessment. We finished it and got to the study readout by end of December of this year. I'm proud of what our team has done at the end.

Next, we'll hear from Max Masucci, Cowen and Company.

Congrats to the whole Guardant team. First one, patients consented to 1- and 2-year outcomes evaluation. So how should we be thinking about the 1- and 2-year outcomes data in terms of so that potentially factoring into updated performance data for the assay? And then maybe if we could speak to that in terms of -- could that potentially influence the overall CRC detection sensitivity or the AA rate?

Make sure I got your question right. So we are following the patients for a year or 2 after and just to see what happens to the patient, in case there are some cases that we found some positive signals in them if they develop CRC down the road. But those are mainly for investigational analysis and understanding some of the false positive rate better. The official endpoint and clinical endpoint of the study is now mature, and we have this positive readout, which is just based on CRCs that got cofirmed from in the first colonoscopy with a follow-up pathology. So even if there are more follow-ups, CRCs get detected even like a few months after the colonoscopy, the data is not going to get changed. We are going to understand some of our false positive potentially better but this is the reality of the clinical practice and how the CRCs are getting diagnosed. So the data for CRC sensitivity and specificity is going to remain the way it is.

Okay. Great. Second question, any observations around the diversity of the ECLIPSE population compared to DeeP-C and then how that -- the diversity of the ECLIPSE population has sort of factored into your internal discussions in recent days around the ideal effort and resources that you'll be dedicating towards the capture of the unscreened population versus displacing stool-based tests in the compliant population?

Yes. So I think that biggest piece of the pie in terms of opportunity continues to remain in like 49 million, 50 million patients, which are unscreened. That's potential 16 million tests just for blood-based cancer screening. And those are the patients who over time have not been compliant to colonoscopy or any mode of stool-based testing at this time. But we believe also based on patient preference and also additional boost that we are going to get when this test becomes really a multi-cancer screening test, really the patients are going to have the options of are they going to do a single stool test that can do a single CRC screening with a fit performance of 74% or Cologuard of 90% or they're going to even do a blood test that maybe not 90%, but 83% of the cancers are going to get diagnosed, but not just CRC, it can detect a bunch of other cancer types with very high performance, and it's a test that patient preferred and patients would complete. I think that answer is clear, but maybe I'm biased. So over time, we're going to figure it out. So I think that's the way it's going to look like. In terms of reaching out to underserved patient population, look, we have the Shield LDT out there and yes, we are going to some underserved patient population communities, but the reality is we are also hitting a lot of accounts, which are heavy users of current stool-based testing or scoping. And we are seeing a great adoption and a very great depth of ordering of a blood test relative to what looks like is the order rate of stool-based tests. So we are very pleased with the current adoption feedback that we are getting from the market.

Our next question today is Julia Chen, JPMorgan.

A quick housekeeping item. How -- can you confirm how many Advanced Adenoma cases were there in a cohort? And then I have a follow-up.

We're going to talk about details of it actually soon. I don't want to make a mistake, but it was like 1,000-plus of Advanced Adenomas that was part of this cohort, around that.

Got you. That's helpful. And then a follow-up in terms of pricing. Is the performance advantage over FIT and then the ease of use enough to justify the higher cost in your opinion? And how open are you in terms of exploring the price elasticity here in light of where a stool-based are priced? I know CMS pricing is a set pass and not really sensitized to that. But from a commercial standpoint, how important a factor is that in your consideration?

Maybe I mentioned a few points about this. So one, in terms of our pricing strategy with Medicare and then Medicare pricing is going to become a center point in conversation with commercial payers post USPSTF guideline inclusion. Medicare pricing is very clear, like the -- if we get FDA approval, and that's really the risk factor. The rest is just process. We are going to get ADLT status, and the pricing is going to be based on the market price and collections that we have. And we put [ $895 ] as the center piece for this device. And it's kind of value-based pricing from my perspective that for the patients who are not completing the test, they are not complying to any kind of testing, how much value you're offering to the community by really reducing CRC mortality in a very meaningful way versus like competitive pricing with stool-based tests. Now that's on one side. On the other side, I think when you look at even some of the research that has been done in some health systems, even when you look at FIT, and I think there's sometimes a notion that okay FIT is very cheap. It's like $20, you can get that test done. How could you compete even with FIT in terms of pricing when you look at all-in cost of FIT based on some of the analysis that has been done by some health systems. In fact, the FIT cost all-in cost is around $350 at least based on some select analysis that we've done that has been done by some systems looks like. So -- so effectively, there are hundreds of dollars of test for any kind of stool testing ranging from 74% to 92%. And the modality that patients, again, do not complete and do not prefer.

We'll take the next question from Matt Sykes, Goldman Sachs.

I'll just leave it to one, a lot's been asked. But just in terms of -- I mean thinking forward a little bit too much, but just in terms of commercialization and ramping up that spend and maybe for Mike, who I think is also on the call. Just how are you thinking about capital needs for that commercialization? And how are you thinking about pacing of that over time as you think about building out that market?

Yes, it's Mike here. No, I think it's consistent with the messages that we've had before. The commercial build now is going to be based on milestone approach. So we've got roughly 100 commercial people on the screening side of the business now. The next sort of milestone will be FDA approval, Medicare reimbursement, and we'll look to really ramp that sales force up then once we've got Medicare reimbursement. And then as we get closer to guidelines, we'll be ramping up the commercial team again. So the plan stays as it is. And from a capital needs point of view, we've got -- we're in a very strong position. We've got $1 billion plus on the balance sheet. So we've got the capital that we need to get us through at least the next few years, and really push this from the commercial perspective as hard as we possibly can.

Next up is Mark Massaro, BTIG.

Thank you for the questions. So the 83% sensitivity is well above the CMS bar of 74% sensitivity. So -- by my eyes, it looks like Medicare should be pretty safe. FDA approval, in my opinion, should probably be safe given the superiority to another FDA-approved device of its kind. But I just -- given the fact that the stock is down 40% in the after hours, is there any reason for investors to think that kind of reaction seems potentially overblown when it looks like you've cleared the hurdles both for the FDA and Medicare? And perhaps, is there any risk in your opinion to getting either FDA or Medicare?

Maybe I mention a few comments and then I invite Helmy to add in. So in terms of the risk factors, like -- we believe actually the sensitivity that we have, as you mentioned, is pretty good. It's clear like how it stands based on CMS is clear, the delta between the performance we've seen versus Epi proColon, other FDA-approved test. FDA reviews, again, always there are risk factors with the review, but we have a good feeling for it. We have to go through the process and take that to the finish line after that FDA approval is done, I think the rest is processed. We are going to get CMS. We are going to get ADLT. We are going to get to the USPSTF review based on the value that we can offer. So -- but the next milestone for us is FDA approval.

Yes. No, it's a great question, Mark. It's kind of interesting like this is really a landmark moment for the whole liquid biopsy field. And I look at it as if we launched a rocket and we successfully got someone to the moon and people are worried that we landed on crater A rather than crater B. I mean, this is -- we have to take a step back. This, as you said, opens up a clear pathway to the biggest diagnostic opportunity in history, a multibillion-dollar opportunity. We have clear sailing to that. We already know from Shield LDT that Advanced Adenoma, some of the exact performance specifications don't matter as long as it's right in the ballpark that we're in. And so there's no question in our minds, we've just opened up an enormous TAM. But more importantly, we've established something that, as AmirAli said, has been science-fiction for many years, that a liquid biopsy and blood screening test in colorectal cancer can be a primary mode of screening. And this is really an amazing spectacular thing. I mean, in my view, there should be a Noble Prize for this. And so the reaction is just -- it's actually a logical or rational and people don't understand kind of the scientific achievement that Guardant has made today.

Yes. My second question, I think one of the reasons why people are reacting as such is the 13% sensitivity in AAs. I think, AmirAli, you mentioned that only about 5% of AAs turn into CRC. Oftentimes, I think it takes 10 years for AAs that are malignant to become cancer. But maybe help us put this in context, how important is AA detection. I've talked to some clinicians. I've surveyed folks. AAs are not necessarily on their radar screen but can you give us a sense -- is there any challenge that you think the FDA might give you with respect to lower sensitivity to AAs than Cologuard?

I mean there are different modalities of testing like again, FDA like, Epi proColon is clear that got FDA approval years back and the performance is clear for that device in terms of like what they saw sensitivity of 68% and specifically of 78%, I think, like with 78% specificity, which means 22% false positive. They had 22% advanced adenoma sensitivity, which is like random, right? So I think -- it's -- we are really in a good position. We have to go through that review cycle, but we are really in a good position based on the precedent, what happened this clinical study that we've done, that clinical validation that passed with this device. So we are very pleased with that. Now in terms of clinician, what we are talking about is not just based on some survey results anymore. We are in market since May. We have hundreds and hundreds of ordering physicians. We ran many, many thousands of cases now, well over 10,000 now. And we are hearing the kind of conversation that we have with physicians and the type of questions that we get and the type of ordering depth that they are doing with our tests relative to the ordering depth of stool-based tests. I think day and night. And this is just a validation and confirmation of what I think all of us should believe that patient preference is towards blood. And it's not that we are even need to directly compete, let's say, with Cologuard, vast majority of the market still is not getting any screening done and there are many of those patients out there, and that's why I think it's getting connected to the very strong depth of ordering that we have with our LDT today. So more than survey, more than what we think, more than a survey result of 75%, 85%, 92%. And now we just have a post of 85% is great and 84.9% is pretty bad. I mean, that's not the reality. We are in market, and I think the physicians are -- we know the physician conversation. And we believe this test with 83% sensitivity is going to get to that approximately 10 million testing opportunity in 10 years that we talked about during the last few quarters.

Next we'll hear from Andrew Brackmann, William Blair.

Just a couple of straightforward housekeeping questions on FDA. First, is your expectation still that Shield is going to be able to get a primary screening label on par with the other stool test? Or has that changed here? And then separately, how are you thinking about the probability of an advisory panel meeting here for approval?

So we have to go through the review process and actually in after, I think, first initial conversation with the FDA and after FDA looked at our data after the first few months, I think we are going to have a much better sense. But again, we are talking about the huge adherence advantage here, huge compliance advantage. And the issue is FIT is frontline, but it doesn't have FDA approval, right? But FIT is the most utilized frontline cancer screening in the U.S. and globally, and that has 74% sensitivity, right? So we are like almost 10% higher than that of most utilized testing paradigm for CRC detection. But again, like the labeling and we need to go through the review and talk to agency and see what are the thoughts and see what's going to happen. Our understanding of why Epi proColon label became the label that they got is really lack of specificity, like an annual test that every year, 20% of the patients get false reports, generate a lot more colonoscopy risk versus even doing colonoscopy. And that was a huge concern when you look at the detail of what was getting discussed even during those panel reviews, that's our understanding. If our tests need to go through the panel review or not, again, it's FDA decision. I think the fact pattern is anytime that FDA saw a testing mode like stool for the first time they call for a panel. They stopped a lot for the first time, they called for a panel. Now they have experience of these 2 devices, and we are the second blood test that they're kind of review. So again, we have to go through FDA review, and we can have better understanding of how are we going to see -- go through panel review or not.

Okay. And then you gave a decent amount of data around health care disparities across stages and races in the U.S. I realize it's early, but is there anything you can tell us with respect to performance of the test by age or race? I know some other -- the Epi proColon did have showed better performance in different populations. So curious if you have any early data on how you perform there?

So at this time, actually, we just have like these data that actually we shared, but we are going to break down the data in like the final tables by all these kind of specification and demographies soon. And we -- like definitely, it would be part of our publication, and we are hoping to get to the publication in either a very few months. So all these analysis are going to get done in with our device.

Our next question is Dan Leonard, Crédit Suisse.

I have a follow-up, AmirAli, to something you answered to Patrick earlier. What's the difference between the 71 cancers in your trial and the 65 that you're reporting data upon? I want to make sure I'm clear on that, it's proportionally a large number, so I want to make sure I understand.

Yes. So we had actually inclusion-exclusion criteria in our protocol, like I'll give you an example, like patients who had previous kind of cancer and they were cancer survivors, they should have been excluded from our study but sometimes those information get collected late in terms of we enroll a patient, we figure out in colonoscopy let's say they have a confirmed CRC, but later it gets confirmed that, that patient was a cancer survivor, right? And then we have to exclude it from this study. So 71 was all the CRCs, which were part of the cohort. Out of those, a few of them got excluded because of this exclusion criterias that we had during the clinical database lock down all the reviews that has happened. And then there were, I think, a couple of cases of CRCs that like we had the clinical data, but we did not generate the lab data, like they failed in our labs. So very few percent, I think 2%, 3% of the cases, if I recall right, we did not have the lab data at the end. So when you look at the combination of included CRCs with passing inclusion-exclusion criteria and passing the lab data when we unblinded the database, then the overlap was the 65 CRCs, which were part of the analysis.

I understand now. And just a follow-up, a logistical question on your ability to version the test over time. So as background, I wasn't aware you were running 2 versions of the assay on this initial trial. So how much blood is left over for future performance improvements over time?

So actually, we collected between 4 to 8 tubes of blood from the patient for a vast majority of our CRCs and the cases that we have analyzed in the ECLIPSE cohort for vast majority of them we have left overs. And we continue to collect ECLIPSE, again as a trial engine continues to enroll even as we speak today, it's continuing to enroll a lot of patients. And every month, we are finding CRCs. So if at any point, we want to even run an ECLIPSE 2 with any kind of upgraded device now because of CRC or Advanced Adenoma or even reaching it to our next-generation Shield, which is our multi-cancer device, we have those leftovers. We have those retains and we have even some additional fresh samples already in our biobank. So we can do that very soon if we have [indiscernible].

Next up is Andrew Cooper, Raymond James.

A lot has been asked, but -- maybe just to start, you talked about the Delta versus FIT being almost 10%. The Delta versus Cologuard is similar. So maybe just help us think about why on one side that makes you feel good. And on the other side, it shouldn't be viewed as a pretty substantial and a pretty big Delta? Just would love some kind of thoughts on framing that line of thinking.

I think the main point I'd claim here is as we are in this big game now, like it FIT, Cologuard and us for the whole patient population that needs to get screened again pending we can get the FDA approval underway. So it's not that our test is far away from this kind of a game. We are between FIT and Cologuard and also patient preferences in our site. And when you think about long term, I tell you just maybe think about it yourself. You have a stool test, you just look at colon cancer, sensitivity of 74% to 90% or you're going to do a blood test that not only look at CRC, look at lung cancer and a bunch of other cancer types with high performance of 83% for CRC and high performance for lung and a bunch of other cancer types, make a decision which test you want to take.

I think I'd just turn your question back around and say, how come FIT hasn't disappeared off the face of the earth, given the 20% performance difference between Cologuard and FIT. FIT by numbers is still the #1 used test globally.

Fair point. I appreciate that. And then kind of switching gears a little bit, but just thinking about -- I think we tend to think adding an additional sort of modality or an additional way of looking at -- looking for what you're looking for is generally going to help. So again, sort of surprised by the protein dynamics you talked about. Is there anything you can take away from that result in terms of applying it to other assays, other things you're working on when it comes to using multiple modalities and the benefit or in this case, the detriment that, that might bring to what you're actually looking for?

Yes. I think the reality is like we have just even at Guardant 10-year history of working with cell-free DNA even before that, like liquid biopsy was something that how much have Guardant or [indiscernible] for even years before that. So this is something that we have a lot of experience and not just our experience, I think, like DNA over time proved to be like a very stable, predictable biomarker, and that's why there are many diagnostic tests, which are well performing using cell-free DNA. The result from proteomics, I said it's going to be better than just the cell-free DNA only. But I think, again, kudos to our technical team, there were some kind of risk factor just based on, like, I think, the history of protein in terms of affinity biomarker that sometimes surprise you. And although we've done a lot of development around finickiness, we built a bunch of parameters and calibrators and controls to make sure we have those kind of pre-analytical or any kind of variation on their control. Still, we tested device in both configuration, just mainly as a mitigation plan. I think I'm happy that they've done it that way. So in terms of the future, I think we need to understand really what happened with the proteomic arm. Would proteomic never add any value to any cancer screening test? I cannot claim that. But definitely, the risk factor are higher, and we need to learn more. Again, we just got to this data in a matter of last very few days. So we just need to get more detailed information and understand our data better.

We will now take a question from Alex Nowak, Craig-Hallum Capital Group.

Just real quickly a follow-up here. Just the next step for the ECLIPSE study, time line to submit this? I know you said Q3, I know you originally got a plan on submitting the full study here to the FDA by the end of Q4. So is that going to be an early Q1 sort of submission. And then when should we see data presentation either in a publication form or at a conference in 2023?

Yes. So now that we have actually this positive ECLIPSE in our bag, we are going out, the next milestone for us is to complete the submission of our PMA to FDA and like we are going to give our internal team a little bit of kind of rest during this Christmas and so taking it to finish line and like hopefully, early Q1, we would have this final PMA to FDA for submission describing in Q1 of next year. And that's our plan. Was there any other question? The publication.

Just on the publication.

Yes. Yes. I think the publication, like we are hoping to get it out in a matter of next few months. So I think some aspects of publication is review time line that we have to go through a process and see how long that would take. But from our perspective, we're going to have the draft publication ready that we have to copy paste the finding of the data to the publication. So it's going to be soon. It's -- I would be surprised if it doesn't come in 2023. So probably near the end of 2023.

At this time, there are no further questions. I'll hand things back to our speakers for any additional or closing remarks.

Thank you.

And ladies and gentlemen, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.