Guardant Health, Inc. ($GH)

Good afternoon, everybody. I'm Luke Sergott, I cover life science tools and diagnostics here at Barclays. With me, I have AmirAli Talasaz, co-CEO; and Mike Bell, CFO of Guardant Health. I thought I wasn't going to try your last name, but I did it anyway. Thanks again for making it.

Thanks for having us.

Yes, great. I think that I just wanted to come off the jump. I mean there's a couple of conversations that we've been having around SERENA-6, right? Couple of fierce biotech or fierce articles out there around really the kind of the protocol design, et cetera. But in the articles and in the conversations, they've talked about like the clinical utility of discovering the ESR1 mutation. And it's broader kind of clinical utility question on the liquid biopsy side anyway, but I think that -- can you just kind of walk through where you see the clear clinical utility and the benefit to the patients and getting the test and making that switch without having to talk about the drug itself or anything like that.

Yes, sure. So maybe for some of the people who could be near to story at Guardant. We have 3 major actual business drivers and brands around treatment selection, MRD and screening, all of them are giving us opportunities for hyper growth. And the question about SERENA-6. One of the growth drivers for Guardant360, our liquid CGP test for treatment of selection is making the liquid testing also a monitoring tool while the patients are going through the treatment selection phase. . We got ESR1 approval from FDA a couple of years ago in breast cancer for treatment selection. And what happened right after the FDA approval, the volume of our breast cancer testing as of very few weeks doubled up. It's an emerging mutation that happens as mechanism of resistance response, and it's activating some other kind of opportunities for treatment for patients. Now within the SERENA-6 trial, our pharma partner AstraZeneca at this time, is monitoring the patient to figure out when ESR1 is getting detected in blood and using that as a surrogate for changing the decision on the treatment and starting kind of therapy. And that trial readout actually has been very interesting. It's got discussed in ASCO and the expected decision by FDA for FDA approval is in the near future in the first half of this year. Now it's a biomarker that uniquely can just be detected for liquid biopsy. It takes our liquid biopsy at a single time point testing at each round of progression to multiple time points of testing initially for breast cancer for this ESR1, but it could open up a utility over time to similar kind of studies and similar kind of biomarker testing in monitored setting. The utility of this drug actually is pretty interesting, like when you are looking at the response rate that's pretty strong our pharma partner, AstraZeneca, it looks like they are very bullish about the opportunity with this drug. They're getting ready to launch this test. And there's an AdCom to talk about the drug actually in late May. What we do know is whenever FDA want to approve something which could be paradigm change in clinical decision-making. It could be a big event. They want to actually call for AdComs and get some opinions from KOLs, that's actually we experienced that with some other brands at Guardant ourselves. And for SERENA-6, since the patients are not first line or second line, they are falling kind of between these two, it is an interesting new paradigm for oncology management. So it makes sense for FDA to go through this process. We are very positive and hopeful that would go smoothly.

And I guess just on the whole -- the SERD space, we have a Roche readout also come through. I assume that you guys are involved across the board on the indication. And as you think about that, like what that means for the particular biomarker within the franchise. And I know you guys don't have it in your '26 guide, but as we think about '27 and '28, how instrumental is this approval or if the drug comes on, like what can that do to the overall outlook?

It's a very good growth driver actually for Guardant360. There are 40,000 breast cancer patients who are candidates for this kind of monitoring if this drug gets approved for this indication. And 3, 4 time point of testing per year for these kind of patients. And if the patients actually still continue to be SR1 negative, testing would continue in the second year. But we expect, on average, maybe 3 to 4 testing per year. It's a very interesting growth driver for us. It's not part of our guide in 2026. We want to wait for FDA approval to secure that and then we see actually what happens to our breast volume, post approval, it could be something very interesting for us. .

Would this be included on the companion side? Or is this just where the HER2, whatever the indication is for the 40,000 breast cancer patients, it's associated with Astra's drug, right?

It's going to be a new CDx for Guardant360. It's kind of a first of its kind, it's going to be the first monitoring CDx for Guardant360. We already have 25 approvals for 360, but all of them are by companion to drug specifically for treatment decision-making at a single time point, but this one would be monitoring CDx.

Okay. yes, like you said, first of its kind. Sticking in G360 the recent liquid approval marries really well with the tissue side. And I think that there's a little bit of an unappreciated understanding of how these 2 are going to be married together and all -- kind of offered is like for a bundling opportunity. Can you talk about that?

Yes, actually, very recently, I think maybe what you're referring to, look, is the CRC approval that 360 got in January, we got the first approval for 360 in CRC indication. It's new for us. And the utility of CGP and CRC is well established, but always there are some physicians that once the test is indicated for specific FDA-approved indication, actually, the level of confidence even goes higher and the level of utilization goes higher. So that could have some kind of interesting impact. It also drives some kind of new conversation with commercial payers to fill some of the gaps that still we have on the coverage side. after 10 years, we are in a very good position with 360 reimbursement, but there are still some cases that we are not getting good payment from the payers. And our experience has shown that once we get actually FDA approval, our conversation with commercial payers who do specific indication becomes even much more solid. So that could have some kind of a tailwind for us on the coverage and ASP front. But it's going to take some time.

Yes. It'll take time to build that out -- for that to build. On the -- as you think about the platform itself, you guys really made your bet on the methylation with Infinity a long time ago, but as you see the sequencing costs come down and the elasticity pick up was the amount of data you can put out. Talk about your -- the platform strategy and layering on more of multiomics. Or are you guys kind of just continue and adding indications for your existing technology?

So this is really the data mode that we have in Guardant story, the flywheel of data at Guardant. When we are looking at 1 million patient data that we have on the genomics side, that's very deep. When we are looking at the epigenomics side, that's something that internally, we even call it is a dark matter of biology and our understanding of cancer. We have many hundreds of thousands of patients that we have actually full epigenomic data in them. . That's a treasure that's already paying some dividend for us in terms of technology development, application development for us, like what we are doing on 360 franchise based on this epigenomic data, just to give you some example, we developed some smart apps that is generating some kind of clinical information for physicians for first time, like subtyping the patient has been enabled by this database and is one of our smart apps just as an example. We are adding some other kind of layers to our data step by step. We talked about our recent MetaSight acquisition, which is generating a new layer of complementary technology for us and that would potentially because even beyond CTD and analysis, genomic, epigenomic analysis and it was a new layer information, which has potential for improvements of our product across the whole portfolio.

Great. And then let's shift gears, I guess, when you talk about Reveal, this is the fastest growing test in your portfolio. we have somewhere around 60,000 tests. It would be great to know them in the right ballpark there. But outside of that, as you continue to land, obviously, it's really early in the launch of most of these, I assume, are on the adjuvant side, but -- how are you guys thinking about the surveillance portion, it was promise -- not promise, but the idea was that surveillance will include like 3 or 4 tests a year, and that's quickly been kind of walked back to 1 or 2. So walk me through kind of that waterfall and how you think it builds. .

Mike, do you want to take that?

Yes. I mean, first of all, we don't break out our Reveal volumes, but I think the number you said, 60,000. I mean it's broadly in the right ballpark. And yes, it's been our fastest-growing oncology product by volume for the last few years. And we expect -- it's going to continue to be so this year. We're very bullish on Reveal for 2026. On the adjuvant surveillance side, we're not sort of breaking that out. But what I would say is that on the CRC side, where we're now reimbursed for CRC surveillance since roughly 12 months ago, Yes. I mean, we're seeing good traction there. We're seeing good pull through. I think there's been a focus from our commercial operations to refocus on the surveillance aspect and making sure that we've got the mechanisms in the pull through the patient for the second, third, further test. So it's definitely an opportunity for us. It's more that way, I'd say we're improving. And that sort of test per patient is getting better. And so yes, again, Reveal on both the adjuvant and the surveillance for us is very important.

And as you think about the submitted breast to submitted I/O, [indiscernible] MolDX, how does the actual treatment paradigm change versus CRC with breast or immuno-oncology. The reason I ask is because like with CRC, if you come back, you're starting to see the signal again, you can go back in and identify and cut that out. But with breast, you've already probably done the double mastectomy or it's more about a treatment and a clinical utility question there associated with those. So how does that paradigm change as you kind of -- as you're rolling out in these new indications? Is that way off? .

So I think typically post more details in the next for a patient is to do radiographic imaging to find where that site of residual disease is or then make some kind of treatment decisions just based on that MRD finding. But what you're pointing out actually generates some kind of interesting opportunity, which -- could we actually paradigm shifter in the field of MRD. Just imagine a day that the patients who's going through MRD testing, not only you can figure out if the patient is MRD positive or negative, but also where the site of residual disease is through the same test. These are some of the applications or opportunities that platform technologies that we have has potential to deliver versus just yes, no quantification level of residual disease in body. So we are very excited to potentially see those kind of future opportunities in the field of MRD. .

Yes. So outside of the counting application, almost like tissue version like you've seen with some of the [ MSI ] side.

If they have got potential for it. .

Yes. Is that a big technology lift? Or is that just.

Look, like the science of it like already when, for instance, we have blood tests for multi-cancer detection that we do that has cancer side of origin as part of it. There are some aspects of science and technology and understanding that we have. We are also capturing some additional layers of the data. What I'm talking about is not in terms of prime time, but really like figuring out and seeing a vision for future where we could be that in this field of MRD, not only we find it, but we can also locate it and characterize it and provide additional information about that residual disease.

Got you. And then, I guess, sticking with Reveal here with the Reveal Ultra launch. You don't have this in the guide. Walk us through like I guess, why not included in the guide? And I understand that there's a healthy dose of conservatism and uncertainty with how this kind of paces out. But you already have kind of the sales force in place ready to build this out. And so early feedback from physicians and then timing of when we could start seeing this. .

So we are -- maybe just some background maybe for some of the people who are newer to the story. We are already a leader in the tumor-naive MRD side. And now we mentioned we are kind of get into a tumor-informed MRD testing with Reveal Ultra. It's a new technology stack that we are we built ground up. We believe it's going to be the best-in-class technology when we launch it. It's on track to get launched later this year. . Now in terms of the guide, it's a product that still we have not launched. And when we launch it, it's not going to -- we are kind of the data, but probably no reimbursement right off the bat. So we are not counting it as a revenue contributor in 2026, but it's definitely an interesting development for us as we go to 2027.

Right. And then from a reimbursement perspective, you kind of give us a specific number you're targeting? Or is it going to be similar to what Reveal is? Is it going to change at all? .

I think that's to be determined. CRC, we're reimbursed at $1,644. Our sort of base case assumption is that the reimbursement would be in that ballpark. But I think -- we'll have to see as we go through the MolDx process, there'll have to be sort of discussions on that, and we'll see where we come out. But yes, I mean we're hopeful for reimbursement as soon as possible, and we're hoping for the right reimbursement level. .

All right. And then lastly here on Ultra. I mean what really stood out was the limited detection to us, like how did you get it so low? I mean, how deep are you sequencing? Is it just a matter of just brute force or is there something more elegant? .

I think by now, we should have developed this confidence at Guardant, we really have very strong muscle power and innovation and going after hard problems, which if we can solve it would be a major contribution to the field. So we've shown it across multiple products and now Reveal Ultra would be the newest example. So we haven't disclosed details about the technology stack, but we are not far away from the launch when we get there. We are going to have some interesting conversations taking enough. .

All right. And then I guess moving through the portfolio as we talk about screening, and this is -- it was -- we talked about Guardant back even back in the day, 2016 and '17, like this is it, like this is this big opportunity, and now it's here. And you have G360 still go on strong and you have Reveal on MRD, right? So a lot broader portfolio, but as you think about the screening and the ramp here that you've seen, a little bit more mature market, how much of the adoption you've seen? How much of that is closing the care gap from those that haven't had some prior screening technology and I just don't want to get colonoscopy or use a stool-based test?

Maybe I just make a general comment about the whole portfolio, and then maybe I go through Shield specifically, a mature gap question. So to your point, look like we've done several things at Guardant during the last few years that all of them became kind of got ready almost at the same time to really contribute in a very meaningful growth driver. We are very excited, confident and bullish about continuity of Guardant360 growth, powered by small platform, some of the new incisions and going through early stage, a bunch of growth drivers that we are seeing on 360 that gives us a lot of content there. MRD, we talked about it earlier, had Shield. This is probably the biggest diagnostic brand ever. In the first full year of launch, we made it outside COVID testing, the best diagnostic launch, it's really an endorsement of the unmet need, which is out there. And we have a blood test that this time, we are really messaging for on-screen patient population to get tested in PCPs, that's the biggest piece of untapped opportunity, 54 million patient opportunity there. And what we've seen in some of the latest data that I've seen is about 90% of the patients who have been tested by Shield, they haven't been screened during last 5 years based on their medical information that we have, which means really our messaging is working, and we are feeling the gap of really bringing on screen patient population around the table. At the end, this is a simple routine blades that 90% of the patients age 50 and above do it on annual basis and Shield is just getting added and we are very excited of what's happening there.

And you're exiting the year with 300 reps. You guys are guiding 150% volume growth. Do you have ACS and [indiscernible] and USPSTF baked in? Just walk through the assumptions there on this growth? And is it more about just increased productivity on your existing reps? .

Effectively, that's right. We've not included been in ACS guidelines in our guidance, neither been in quality metrics or USPSTF. And we look at ACS guidelines as being in the relatively near future, and so that would be an upside. Yes, the main driver is just going to continue to be execution on the commercial side. We ended the year with -- we ended last year with 300 sales reps. We're going to add to that this year. But those 300 -- the productivity is going to be increasing throughout the year. We'll bring on new reps, we'll put them into new territories. So I think the field sales is going to be a main driver of that. We've started now a DTC campaign. We're very hopeful for that with the early days very promising. So we think that's going to be a driver of growth we announced just today a partnership with Quest. That gets us really to fasttrack our EMR connectivity. So we're assuming that that's also going to be a driver, and that's in our guidance. What we haven't included from the Quest partnership is the reps are going to be calling on their accounts to educate them about Shield. We're going to be able to utilize that to send in our reps as well and drive volume into those accounts. We haven't baked that into our guidance. If that's successful and it works well, I think that could be a potential upside of what we've guided to. So we think we've got a lot of drivers already in that guidance, but we've left ourselves some room for potential upside.

Yes, I mean, it makes sense. You guys have -- you haven't worked with them before, so you don't really know how that's going to play out. But from a coverage perspective on those 300 reps and maybe adding a few more, but how do you guys have that structured? How is that -- because there's a lot of PCPs out there and a lot of them are, let's say, not as conducive to growth as some might others be? So like how are you guys kind of segmenting the market and going after it versus [indiscernible] of the ocean, I would say.

We launched in a very targeted way. We have targeted the people who have experience with noninvasive CRC screening. In early days, we really targeted people who are super users of noninvasive CRC screening, good volume of Medicare beneficiaries since that's the reimbursement that we had at the time of launch. Now with this 300 and continuing to increase reps, we have a nationwide coverage, but still, there are 250,000 potential PCPs we have experienced with CRC screening, and we are just scratching the surface. We are just opening up this opportunity, and there is a lot of room of potential growth is left, obviously. So -- but in terms of coverage now, we have nationwide coverage. .

Yes. And I guess as from your thinking about building up the next year or 2 of the business, it's more focusing on those patients that are noncompliant, right? Or are you starting to go into the hand-to-hand combat with some of the stool-based testing? .

No, not yet, I think obviously, our coverage is broad. Our indication in terms of FDA approval, this first line is broad, but we are after screening on screen patient population. That's the vegus untapped opportunity. But we are already seeing -- although we are not promising it, we are seeing actually cases in some accounts that they have some other interesting use cases. For instance, we are seeing when the patient is due for rescreening, some of the patients are really opting out of continuing with the previous modality and blood is a great opportunity for that. Some patients are getting tested between 2 interval colonoscopy. There are some incidental CRCs that we know are getting diagnosed as interval CRC. So there are some interesting cases that we are seeing in terms of market adoption, but we are focused on the screen patient population.

All right. And I know we're over time. But just on the DTC side, so if I went on like and tried to go get screened, could I just log in and just get one sentence in there? Or -- like how is this -- is this more about just educating the consumers so that they can go to their PCP and get it...

You're targeting 45 and above and double indexing on 65 and above.

[indiscernible].

But yes, I think you're seeing some heavy kind of presence in the digital side, some presence on TV, but still, we are not doing full force DTC campaigns. But step by step, we are pleased with what we are seeing. .

Great. All right, everybody. Thank you.

Thank you.