Guardant Health, Inc.

Good afternoon. Thank you for standing by. Welcome to the Gardent Health Second Quarter 2021 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, we will have a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. Please be advised today's conference is being recorded. If you require operator assistance, just press star 0. I would now like to turn today's conference over to Carrie Mendeville, Investor Relations.

Thank you. Earlier today, Garden Health released financial results for the quarter ended June 30th, 2021. If you have not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investors at gardenhealth.com. Joining me today from Garden are Helmi Altuke, Amiralee Talazov, and Mike Fell. Before we begin, I'd like to remind you that management will make statements during this call that are 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 Garden Issue today. For a more complete list and description, please see the Risk Factors section of the company's annual report on Form 10-K for the year ended December 31, 2020, and its other filings with the Securities and Exchange Commission. This call will also discuss certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP financial measure may be found in today's earnings release submitted to the SEC. Except as required by law, GARDEN disclaims any intention or obligation to 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, August 5, 2021. With that, I would like to turn the call over to Helmy.

Thanks, Keri. Good afternoon, and thank you for joining our second quarter 2021 earnings call. Our mission at GARDI has always been to ensure patients have access to innovative oncology products. Today, the vision is clearer than ever, and I have never been more excited about the opportunity ahead of us. This afternoon, we announced a new leadership structure which will allow us to aggressively move and scale into new areas of growth across the continuum of cancer care. We have created two focused areas within Garten, oncology and screening. Amir Ali and I will serve as co-CEOs, with Amir Ali leading our screening efforts and me leading oncology. We believe this leadership structure will provide the focus and strategic attention required to continue as the liquid biopsy leader in oncology while aggressively pursuing the massive opportunity in cancer screening. This structure will also allow for scalability to address new areas across healthcare beyond screening and oncology. Everything we do at Barton is motivated by our commitment to serve patients. We are dedicated to bring the absolute best products to market that will provide clinically actionable information to inform patient care. We believe that This new focused leadership structure will allow us to more rapidly address the unmet need to serve patients. And in line with these commitments, I will start off today with a patient story. Last March, a 68-year-old woman was diagnosed with colorectal cancer. Shortly after her diagnosis, surgery was performed, followed by adjuvant therapy. In follow-up, her oncologist detected elevated levels of CEA, but she scanned negative for evidence of disease. At another follow-up, just over a year after the initial diagnosis, her oncologist ordered a garden reveal test, which showed she was CT DNA negative. Garden reveal directly measures tumor-derived DNA in the blood, while CEA is a nonspecific biomarker and can be elevated in multiple cancer types, for example, in smokers and in patients with various benign diseases. Garden reveal has a sensitivity of 91% compared to the CEA test with a sensitivity of 69%. With a higher sensitivity than CA in the surveillance setting, Gardner Reveal showed the patient was not actively progressing. This story highlights how Gardner Reveal can provide confidence and reliability in recurrence testing for cancer. Now, turning to our second quarter performance. Revenue grew 39% to a profit of $92 million. Second quarter clinical volume grew to 20,830 tests, representing 52% growth over the prior year period, and up 13% from the first quarter of this year. While patient visits and office access are still not fully back to pre-COVID levels, we are pleased with how well our commercial team is continuing to execute in this environment and still achieve healthy volumes. International clinical volumes were impacted by the resurgence of COVID cases, especially in countries where the vaccination rates remain low. During the second quarter, we saw strong growth in U.S. clinical volumes as oncology offices gradually reopened throughout the quarter. However, in recent weeks, we have seen a reduction in oncology office visits and sales force access in the United States and across our global business, which may have an adverse impact for the remainder of the year. Although we have started to see some impact globally, we have not seen much yet in the United States. We are monitoring the situation closely as it evolves. Our portfolio is growing quickly, and we have launched a record number of new products and product upgrades in the last year alone, but we are nowhere close to done. Two of these new product launches were announced in the second quarter, Garden360 TissueNets and Garden360 Response. Both products expand the trusted Garden360 portfolio to offer oncologists end-to-end testing solutions. TissueNets supplements our blood-first approach. Our TissueNext test provides an integrated solution for oncologists to use liquid first ahead of tissue, ensuring patients receive guideline-complete testing with the fastest turnaround time. An oncologist orders an integrated product and begins with a GARDEN360 liquid biopsy test. If there is no biomarker detected, he or she is able to quickly reflex the tissue with TissueNext. This integrated approach has a significantly higher biomarker detection rate than tissue alone. In this flipped study in non-small cell lung cancer, CGP liquid testing using GARDEN360 identified 81% of patients with an informative test result, and tissue testing found informative biomarkers in the remaining 19% of patients. On the other hand, standard of care tissue testing alone identified just 57% of the patients with an informative test result in this study. This study is one of many that highlight the blood-first, tissue-next approach offers a clinically superior paradigm. The early response to tissue-next has been very encouraging. The reimbursement path for tissue is well-defined, and we expect to submit the technical assessment application to MOL-DX this year. We believe this offering will serve as a stepping stone for those who continue to rely solely on tissue testing to move towards the blood-first testing paradigm. Garden 360 Response is the first commercially available blood-only liquid biopsy test that detects changes in ctDNA levels to provide oncologists an early indication of a patient's response to treatment, such as targeted immunotherapies. Our comprehensive product portfolio essentially enables oncologists to perform profiling for treatment selection in both blood and tissue, as well as response monitoring. Feedback for both new products is very positive. We do not expect either product to be a significant revenue contributor in the near term as we work to establish reimbursement. Turning to our occurrence monitoring opportunity with GardenReveal. We are pleased by the encouraging feedback and reception from oncologists. Based on the early success we are seeing in the market around Reveal, we have expanded this dedicated commercial team. More than 9,000 oncologists have ordered a Garden360 test, And we are leveraging these existing customers as well as our relationship with KOL for their launch of Reveal. Beyond CRC, we're also making great advances in other cancer types with compelling data on bladder, lung, and now breast as well. Moving on to biopharma. Biopharma volumes grew to 3,653 tests, up 30% year over year, and up 4% from the first quarter. We continue to experience some pressure in biopharma sample volumes, given the lag in many of the samples coming to us for analysis due to slower enrollment during COVID peaks. Q2 development services and other revenue was approximately $19.5 million, up 27% year over year. We are pleased by the growth of our overall pharma business and continue to serve an increasing number of biopharma customers with more than 80 active partnerships. As our biopharma business matures, we expect growth to be underpinned by sample volume, including new product introductions, for example, multi-indication reveal, as well as companion diagnostics. This quarter, we announced two new companion diagnostic approvals with Janssen and Amgen, both for use in advanced small cell lung cancer. The FDA has approved the GARDEN360 CDF test as the first and only liquid biopsy companion diagnostic for comprehensive genomic profiling to identify patients with locally advanced or metastatic non-small cell lung cancer who harbor the KRAS G12C mutation and who may benefit from Amgen's Lamacris or who harbor an EGFR exon 20 insertion mutation who may benefit from Janssen's ribavent. Moving on to Gardner and Forbes. a real-world evidence platform featuring an extensive clinical genomic liquid biopsy data set of advanced cancer patients. We have signed more than a dozen biopharma collaborations for GARDEN Informed since its launch just over a year ago. We are pleased with the success and growing interest from our biopharma partners in this offering. At GARDEN, our sites are set not only in providing solutions for patients with advanced and early-stage cancer, but early cancer detection as well. We are focused on establishing ourselves as a best-in-class company in these large markets while maintaining a culture of fast execution as the organization continues to scale. Since founding Garden, Amir Ali and I have always had a strong partnership and we've been laying the groundwork for these two focus areas of oncology and screening for quite some time. This co-CEO leadership structure is a continuation of our current strategy and supports the evolution of our business. We are scaling the team to support the growth of both businesses and recently brought on Chris Freeman as our new Chief Commercial Officer of Oncology. We expect to bring on several more key leaders in the near future and have started building a dedicated commercial organization for us creating business. Having leadership teams dedicated to each opportunity will give us the focus and velocity to rapidly scale in each of these areas to drive both near-term and long-term success. We have also continued to invest in our governance and made recent changes and additions to our board of directors. I will now be serving as chairman of the board and Amir Ali will continue to serve on the board as a director. We believe this rotation and responsibility adds a fresh perspective and is in line with our overall focus to scale our organization. In addition, Megan Joyce has been appointed to our board of directors. Megan is the chief operating officer and executive vice president of platform at Oscar Health a high-growth health tech and health insurance company, where she leads operations, technology, clinical, marketing, and new business lines. Prior to joining Oscar Health, Megan had several leadership roles at Uber, most recently as regional general manager of the United States and Canada. Her expertise in scaling high-growth organizations will be invaluable to our next phase of growth. We look forward to her contributions and guidance. We are committed to continue to develop a portfolio of breakthrough products across all stages of cancer and ensure these innovations are not only available but readily accessible for all patients. We look forward to continuing to expand our product portfolio, attract and develop top talent, and improve patient outcomes as we conquer cancer with data across the continuum of care. I will now turn the call over to Amir Ali.

Thanks, Salmi. I want to start by echoing Helmy's excitement for what is ahead at Guardian. Early cancer screening has the potential to significantly transform patient outcomes. A successful readout of our ECLIPSE trial will potentially open up a $20 billion screening opportunity in colorectal cancer. And future studies will open up opportunities in additional cancer types. paving the way towards a total addressable screening market of more than $50 billion. We are confident that we will become the leader in screening, not just in CRC, but across many cancer types. That said, it is clear that this opportunity requires a dedicated and focused effort. I'm thrilled to assume the role of co-CEO as we position ourselves for the launch of our screening business. We are encouraged by the progress in the CRC indication, and this is just the first of many indications we will pursue for screening. I'm excited to announce that we have recently enrolled the 10,000 patients in our ECLIPSE trial. I'm proud of the progress our clinical team made in running this study during the pandemic when enrollments in many clinical trials were heavily impacted. Now, based on the CRC prevalence that we've seen eclipsed so far, we plan to enroll an additional 3,000 patients in these studies for a total of 13,000 to ensure we reach the required number of CRC-positive patients. We are confident that we will have total enrollment completed by November of this year, the same 24-month timeframe that we announced when we launched the Eclipse study. In parallel to running Eclipse, we are also making great progress building our commercial infrastructure to launch our screening product. I am pleased to announce that we are planning to launch the LDT version of our CRC screening assay in the first half of 2022, and we expect to launch the IBD version of the assay in 2023, pending successful FDA review and approval. The initial version of our screening test will be for CRC, and we expect over time more indications will be added to the assay. We have presented data and are continuing to see good technical performance in detecting early stage lung bladder, pancreatic, and a few other cancer types in pilot cohort studies. Part of our strategy is to invest in adjacent areas or emerging trends that are synergistic to our efforts in screening. To that end, we have recently partnered with Lunet, a company focused on AI-powered radiology and pathology solutions, with the vision of streamlining the screening journey for patients. We believe that a multimodal and integrated screening paradigm can offer tremendous value to the healthcare system and patients. This is an important aspect of our overall strategy, and we will continue looking for strategic opportunities over the coming quarters. Turning to clinical data. At this year's ASCO annual meeting, we presented about 20 abstracts covering our full suite of products. I would like to highlight a few of these abstracts today. In an MRD study led by UCSF in oligometastatic CRC patients, Gardner's reveal was used to analyze post-procedure ctDNA in serial blood samples in 46 patients. Positive predictive value of positive post-procedure ctDNA to predict recurrence was 96%. And on average, ctDNA was detected 28 weeks before radiographic recurrence, mean of 17 versus 45 weeks, respectively. Pfizer also presented data leveraging Guardian 360 to assess ctDNA dynamics as a predictor of airway response. In newly diagnosed advanced non-small cell lung cancer patients treated with lorlatinib, Guardian 360 was able to discern molecular responders from non-responders four weeks after the start of therapy, and molecular responders had significantly longer progression-free survival. We also reported clinical outcomes from patients in the NILES study. Patients who received target therapy based on their GARDEN360 results had comparable outcomes to those treated based on tissue results. Importantly, time to treatment in ctDNA cohort was significantly shorter compared to the tissue cohort, 18 versus 32 days respectively. Lastly, In another abstract covering early-stage cancer management using cancer-specific genomic and epigenomic signals, we showed the performance of our liquid assay for detecting the presence of ctDNA in early-stage non-small cell lung cancer and bladder cancer patients. The assay performance was tested using 175 pretreatment clinical samples from patients with early-stage disease and 171 self-declared healthy donors. Sensitivity for non-small cell lung cancer was 70%. Stage 1, 56%. Stage 2, 80%. And stage 3, 83%. And sensitivity for bladder cancer was 51%. In non-muscle invasive, 36%. In muscle invasive, 69%. with 95% specificity. These abstracts demonstrate the value and utility of liquid biopsy across the continuum of cancer care. With that, I will now turn the call over to Mike for more detail of our financials.

Thanks, Amir Ali. Total revenue for the second quarter of 2021 from $66.3 million in the prior year quarter. This growth was driven by a year-over-year increase in both our precision oncology testing revenue and our development services and other revenue. Total precision oncology testing revenue for the second quarter was $72.6 million, a growth of 42% compared to $51.0 million in the prior year quarter. Precision oncology revenue from clinical tests in the second quarter was $61.1 million, or 54% from $39.6 million for the prior year quarter. Second quarter clinical test volume, which primarily consisted of garden 360 tests, was $20,830, which is an increase of 52% from the prior year quarter. In the second quarter of 2021, The average estimated ASP for Gardner 360 CDX and LDT tests was approximately $2,600, which was in line with our expectations following the April 1 increase to $5,000 of the Medicare reimbursement rate for Gardner 360 CDX and the partial offset from potential payment delays or denials of the new Gardner 360 CDX ADLT code from private payers. For the remainder of 2021, we expect the estimated ASP regarding 360 CDX and LDT tests to continue to average approximately $2,600. Note that the clinical revenue recognised in the second quarter of 2021 consists of accrued revenue for tests performed in the period based on the estimated ASP, as well as cash collected for tests performed in prior periods, where the cash collected was greater than the previously accrued revenue. As our ability to estimate the ASP for Ghana 360 continues to improve due to our growing historical collection data, we expect clinical testing revenue for the second half of 2021 to be primarily derived from accrued revenue for tests performed in the period based on estimated ASPs. And therefore, the amount of revenue recognised from cash collected for tests performed in prior periods will be significantly lower than in the first half of 2021. Precision oncology revenue from biopharma tests in the second quarter totaled $11.6 million, up 2% from $11.4 million for the prior year quarter. Second quarter biopharma tests totaled $3,653, up 30% from the prior year quarter. Biopharma test ASP was $3,163, down 22% from $4,054 in the prior year period. primarily due to the mix between our OMNI and G360 tests. Development services and other revenue continue to be a strong growth driver, and in the second quarter, totaled $19.5 million, up 27% from the prior year quarter. Development services revenue included milestone payments for the two FDA companion diagnostic approvals we received in the second quarter of 2021. Gross profit for the second quarter of 2021 was $62.2 million compared to a gross profit of $43.9 million in the same period of the prior year. Gross margin was in line with our expectations and in the second quarter was 68% compared to 66% during the second quarter of 2020. Operating expenses for the second quarter of 2021 were $159.8 million an increase of 62% compared to £98.5 million in the second quarter of 2020. Non-GAAP operating expenses include stock-based compensation and related employer payroll tax payments, acquisition-related expenses, amortisation of intended assets and changes in fur value of contingent consideration. Non-GAAP operating expenses for the second quarter a 71% increase from $72.9 million in the second quarter of 2020. We expect operating expenses to continue to accelerate in 2021 as we invest in our lunar program, eclipse study, and other development activities, as well as expand our commercial organization within our oncology business, where we have launched several new products so far this year. and in our screening business as we prepare for the planned launch of the LBT version of our CRC screening essay in the first half of 2022. Net loss was $97.6 million, or $0.96 per share, for the second quarter of 2021, compared to $54.6 million, or $0.57 per share, in the second quarter of 2020. Non-GAAP net loss was $61.4 million or $0.61 per share for the second quarter of 2021, compared to $23.5 million or $0.25 per share for the second quarter of 2020. Adjusted EBITDA was a loss of $56.4 million in the second quarter of 2021, compared to a $25.1 million loss in the second quarter of 2020. We define adjusted EBITDA as non-GAAP net loss adjusted for interest, income tax, depreciation, amortization, and other income and expense. We ended the second quarter of 2021 with $1.8 billion in cash, cash equivalent, and marketable securities. Now turning to our revenue outlook for the full year 2021. While we feel bullish about the trajectory of our business and again saw record revenue this quarter, We want to be cautious given the uncertainty around the impact of COVID-19, and in particular the Delta variant, on oncology office visits, clinical study enrolment, and Salesforce access in the US and across our global business. Therefore, we are maintaining our guidance of $360 to $370 million, representing growth of approximately 27% over 2020 at the midpoint of the range. we continue to expect clinical sample volume for 2021 to be greater than 90,000 tests, representing growth of at least 42% over 2020. At this point, I would like to turn the call back to Helmi for closing comments.

Thanks, Mike. Before closing, I want to thank our team for their incredible work this quarter as we work to establish ourselves as a leader in cancer across the continuum of care. We have made great strides this year as we continue to expand our product portfolio and establish our solutions as class in cancer testing. We are looking forward to bringing this momentum into the second half of the year. With that, we'll now open it up to questions.

Thank you. At this time, we'll open the line up for questions. If you would like to ask a question, please press star, then one on your telephone keypad. To withdraw your question, press the pound key. And our first question will come from the line of Tycho Peterson with JP Morgan.

Hi, good afternoon. This is Julia on for Tycho. To start off, maybe you can spend a little bit more time on the new leadership structure. Obviously, we all understand that, you know, the screening is a different animal. oncology in terms of reimbursement timeline, go-to-market channel, et cetera. So will this leadership structure change? What specific operational changes can we expect for the cancer screening business, especially in terms of resource allocation and financial reporting? I know you touched on commercial team expansion as a major part of it, but are there any meaningful changes in the office outlook or the long-term strategy we should be thinking about? And Helmi, I think you mentioned in the beginning that there are potential opportunities beyond screening and oncology, so just wondering if you could elaborate a little bit more what specific opportunities you could be seeing.

I'm sorry that we're only kind of still on the screening side, but

You know, this is really a culmination of changes and an evolution of the organization that has been ongoing for the last several years. And I think it really is a testament to the confidence we have, you know, around screening, around, you know, our separate businesses, and the scalability of the future that, you know, we want to set up. I'll let Amirali talk a little bit about the screening side of things. Yeah, thank you, Elmi.

So I'm thrilled with this additional responsibility and ability to generate actually additional focus, additional share of attention for both of us to, you know, run oncology and screening while there are a bunch of, you know, corporate matters that are, you know, beyond these two businesses that we are going to continue to, as always, be very close partners and still operate under one garden entity, you know, business operation that we have, just trying to make sure we have more focus and dedication across different business lines that we are going to run.

I think, you know, in terms of the second part of your question, I think in terms of the second part of your question, you know, I think this structure also allows for scalability beyond the areas that we're targeting today. We're not making, obviously, any announcements around those areas, but we do know that our platform really has the legs and, I think, the capabilities of addressing other areas of healthcare, but more to come in the future.

All right. I guess we'll stay tuned. And then, separately, I have a question on the G360 response test. Just curious, you know, since you already have Reveal, what's the rationale for launching response as a separate test instead of, you know, having a single quantitative MRD test? And then a related note, I've got several clients asking this, you know, does the response test cause any cannibalization on G360?

So the response is really, I think, a very well-targeted product. If you think about therapeutic response, most targeted immunotherapies are really targeted towards the advanced cancer patient market. And so you're really conflating two different animals that don't belong, MRD and therapeutic response. So this is absolutely the right product for the field. We're seeing really a lot of excitement in terms of the launch of this test. We have a wealth of data, over 40 publications that really support the science and the clinical utility and clinical validity of this application. And it's really part and parcel to, I think, you know, what we laid the groundwork for now I think over five years ago in terms of our tumor response map. You know, you make a decision, a physician makes a decision in terms of which treatment to put an advanced cancer patient on. For many reasons, you know, the current standard of care is less than stellar in terms of determining and understanding whether that patient will respond or not, especially to therapies like immunotherapies. And regard and response can come in, and just a few weeks later, essentially that test is able to help with adjudication determination of that patient that is indeed responding or not. So it's a fantastic product that sits squarely in kind of the unmet need that exists today in the advanced cancer patient market. So we actually see it as an amplification of our current products, not a cannibalization in any way.

Great, thank you. Our next question will come from the line of Doug Shankle with Kellan & Company.

Hey, good afternoon. Thanks for taking my questions. Just going back to the leadership structure change, clearly the opportunities are large here and complex. Even acknowledging that, this leadership change is a bit unusual, especially in this space. Again, I know the opportunities are big, but, I mean, we could get on the list of bigger, more diversified growth companies in life science tools and diagnostics, and none of them have this structure. And this includes very successful companies like Thermo, Danaher, Agilent, just to name three, you know, and I could probably name 15 to 30 more. Recognizing part of leading a company is being decisive and nimble and ultimately having one person at the helm, what precedent can you point to that supported this decision? How did the board make a decision that this was the right thing to do when no one else in the space has? Often, and this is really important, co-CEO structures lead to eventual single CEO structures. Usually these are temporary, you know, when we've seen them in other areas. Helmy, this seems like it could be a sign that you're likely to leave the CEO role at some point relatively soon. Are you committed to this current role through 2022? This seems very, very important given how many clinical readouts and how many product launches you plan for that time period.

Yeah, just to put it kind of bluntly, I'm not going anywhere. I'm firmly committed to the garden that is Amir Ali. You know, it would be crazy to leave, you know, when we have so much opportunity to address so many patients. I don't see another opportunity, frankly, in existence that could really match what we have on our plate. I think this is really an acknowledgment of how much focus and how much mind share it really takes to win this. to succeed in these ambitious areas where, you know, we're addressing. I mean, we're addressing three areas of oncology that have been grandstanding challenges for, you know, outstanding challenges for decades. And it takes, you know, really singular focus to really open up these, you know, these huge TAMs that exist in each one, you know, $30 billion TAMs, $50 billion TAMs, And, you know, with due respect to some of the companies you listed, I don't think, you know, they're necessarily solving some of these, you know, complex challenges we're addressing here. You know, no one thought that liquid biopsy was a viable, you know, technology when we started Gardens. And, you know, there is a lot in terms of how we've succeeded in the past. That is bucking, you know, it's about bucking the trend and doing what is right for the business. and is what is right for patients, regardless of tradition or what has been done in the past.

Okay, super helpful, and I appreciate you giving us a little bit more on the thinking behind this. Now maybe just for a couple more near-term questions, and I'm sorry if I missed this in your prepared remarks. I understand that guidance factors in the reality of the environment we're in, that there is still some uncertainty as it relates to what's going on with COVID and specifically the Delta variant. And recognizing that, I'm wondering if you can say anything about what you saw over the course of the quarter and what you've seen in the early part of the second half of the year in terms of ordering activity and your ability for the sales force to actually get in and detail clinical practices.

Yes, I think as we mentioned in our remarks, we actually saw improvement during the quarter. We saw offices opening up. We saw more access, which I think is part of the driver in terms of the strong quarter that we had in Q2. I think what we've started to see, especially in the last few days, is some of these offices starting to restrict access, starting to close back up. And, you know, that's not surprising given where really the number of cases are per day now in the United States, you know, how fast things are rising. And so it's, you know, it's certainly something that despite, you know, the strong progress, you know, we're seeing, the momentum we're seeing, we wanted to be, you know, I think, cautious in terms of, you know, the second half of the year because, you know, we're still in the summer months and who knows what will happen, especially in the winter.

Mike, is there anything? Well, maybe just also to reiterate what we did see in certainty internationally as well. So again, just another reason why we've maintained the guidance where it is.

Thank you. And our next question is going to come from the line of Tejas Savant with Morgan Stanley.

Hey, good afternoon, guys. Thanks for taking the time. This is Edmund on for Tejas. The first question I had was on MRD, and given the debate around the tumor-informed and tumor-agnostic assays, Helmi, can you provide us with some quantitative color on how the mind-share battle is progressing? I guess in a simpler term, is there any way you can give us some information on how many of your new ordering physicians for VBL in response have formerly been using other MRD tests?

Yeah, you know, I think we continue to see good traction. very logistically straightforward test that really fits in to how physicians currently order tests like CEA and how they practice medicine. It's something that I think that I'm very pleased by the traction we've seen with the reveal. We continue to be pleased. There are a number of KOLs who I think have talked publicly in various forums both in the U.S. and internationally about the challenges with tissue acquisition, even in the early stage cancer setting, and how having a really tissue-independent approach is one that is, you know, I think really simplifies some of those and addresses some of those challenges that exist. In terms of, you know, it's obviously hard to get exact, you know, numbers, but we really do not see... you know, a lot of pushback, you know, whether or not, you know, physicians have been existing or are new users to these types of tests. And so we're very pleased by the traction that Reveal is seeing, by the reception that we're seeing with really all classes of physicians that we've been in front

Got it. And I'm sorry if I missed this, but can you remind me on the timeline for reimbursement and the plans to launch and indications beyond CRC?

So I think we've mentioned before that we expect reimbursement by end of the year for at least on the Medicare side. Private payer I think will take some time as some of the utility studies read out most likely. In terms of multiple indications, it's something that should happen relatively soon. We have data that we've presented at ASCO that shows, I think, the progress we've made and the excellent results that we're seeing with the platform beyond CRC. We've presented data in bladder and lung that's very compelling and I think we've mentioned in the prepared remarks a data run for us as well. So expect to see those in the coming quarters.

Got it. And one last one from me on Eclipse. Amir, you guys have showed data on cancer patient populations at ASCO. And first, is it still right to think about readout timings for early next year? In terms of the bogey for the Eclipse real world data, how should we think about this in terms of the cat sufficient population data presented at ASCO?

Yeah, so as you mentioned, the script, we expect that we will finish the enrollment by November, the original time frame that we had from the beginning with all the up and downs that we had in this running this traveling pandemic. I'm very pleased with that, given this additional 3,000 patients. And right after that, I think after a few months, we're going to have to read out the pick lists, as we mentioned before. So we are on track to be ready to run those samples when study ends. In terms of data, we presented an absolutely really pleased with continued data generation, you know, additional cohort to get access to additional CRC cohort, you know, cancer screen cohort, negative or positive findings. We're content to be pleased with the data. I think we updated our data like across multiple cohorts for a total of like over cases are around 1,300 patients that we showed in ASCO. Data holds up. But, you know, there is some kind of uniqueness in the eclipse in terms of being a prospective screening study, you know, 13,000 patients that, you know, we find 67 in CRC. Nothing can replace that. You know, we continue to always you know, technically de-risk actually the finding of Eclipse. But at the end of the day, we have to run Eclipse and see what we're going to see there. But, you know, we feel good about it, and I think I would say we feel pretty good about it.

Got it. Super helpful. Thank you, guys.

And our next question will come from the one of Brian Weinstein, Morgan Stanley.

Hey, just in case anybody's curious, I'm still William Blair. It's all good. So a couple questions for you guys. Going back to the new leadership structure here, I definitely heard the questions from Tycho and Doug, but just kind of wanted to dig in a little bit here. You know, I get why you want to do this, but I am curious about things like decisions on deployment of capital, right? decisions on, you know, other kind of corporate matters. Who's in charge, really? I mean, at the end of the day, where does the buck stop on, you know, kind of setting that broader strategic decision-making? And, you know, with the co-CEO structure, it's not clear to me kind of, you know, who's at the end of the day really held accountable for broader corporate performance.

We've always had a strong partnership between myself and Amir Ali since the founding of GARDEN. I think it's pretty clear, things are on screening, Amir Ali will be in charge of decisions around oncology, I will be in charge of And we're still having essentially combined leadership structure around other areas, and obviously some of those decisions rise to the board level as well, which is heavily engaged at Cardin. So I really see no issues. where things were in terms of business structures. We're very confident that a lot of those strategic decisions will continue to be made in the context of one garden and really one mindset.

Okay. And then as it relates to the CRC screening product, you know, the LDT approach, we haven't really seen that before. Can you talk about, you know, obviously you get in the market a little sooner, but is there any other kind of strategic rationale in terms of data collection or other things? that would cause you to kind of go with that LDT approach? And then are you willing to kind of talk about what your updated expectations are for performance of the assay in terms of an early stage detection as well as advanced antinomal where you think you guys could potentially come in on both of those? Thank you.

Thank you for asking about the LDT and the rationale behind it. Actually, we – you're still expecting actually, you know, as the approval of this does, hopefully if the crystal's done, we go through the positive review in 2023, and, you know, that would be the major commercial push for us. But, you know, a couple years before that, it would be very important for us to go into the market, start shaping the market the way that we believe blood-based screening could add, you know, social impact and impact, you know, outcomes for patients in the right way, sharing experience for the field, integrate our tests with right health networks, share the experience for people, and really add this blood-based screening into a bunch of PCP workflows and, you know, in some of our key accounts. So it's a very strategic move for us. On the CRC side, I don't believe some of the real world evidence would maybe add much into really, I don't see any data gap that that real world evidence would fill in terms of the CRC data. I think Eclipse would be very comprehensive by itself. A bunch of other ISDs that we've done and we are continuing to do are really sufficient. you know, incidental findings for other cancer types and generate some evidence for non-CRC findings for us. For CRC, we feel comfortable. In terms of performance, you know, all the data that we've seen different cohorts independent or in partnership with different cancer centers and KOLs and PIs, we have published them in different conference, you know, presentations. We are going to continue to do so. You asked about advanced adenoma. That's an area that actually we look into extensively. While we believe that maybe the performance of advanced adenoma is not required for FDA approval of potential, like, you know, Medicare reimbursement based on the NCB, but we do believe that performance is important for commercial adoption of the test and expansion of the TAM. And as a result, we looked into, you know, finding surrogate biomarkers and a lot that can have a good sense of security for advance. Please stay tuned. In the right conference setting, we are going to show some performances hopefully there. But it's an area that we have looked at for some time.

Thank you. And our next question will come from the line of Derek Dubrun with Bank of America.

Hi, this is John on for Derek. I wanted to ask about the ASPs, the clinicals. With all these new product launches, do you see the ASPs for clinical going up in 2022?

Yes, it's Mike here. You know, I think when we look at the clinical ASP and, you know, we were very explicit in the first remarks to talk about the ASP for Garmin 360 and so-called Garmin 360 CDX and LVT. Now, this quarter, there's 2,600 on the back of the ADLP change. And we expect that to be the same for the remainder of the year. volume and revenue, then the ASP overall is probably going to go down because we're not getting paid for some of the tests. But for down to 360, it should at least remain where it is. And if we can collect better

Gotcha. Thank you. And then you mentioned that the international market, the sequential decline in revenue, that was Delta. But going forward, how do you see that growing? And back in the domestic, what percentage of the visits are in person? You mentioned last quarter that it was around 30, 40. I'm wondering how much improvement there's been.

Yeah, maybe just on the international. I don't think we said it was sequentially down. What we said is that we saw an impact, and I think we were more referring to the impact on the growth rather than a decline. So, you know, we're still at It's varied, and again, it's making an impact on our ability to grow the business. But yeah, it's not a sequential decline.

Yeah, I think things improved from that 30%. Probably reached at least 50% or more that started opening up and was going in the right direction. But obviously we're seeing things now close back up. I mean, I think yesterday there were 150,000 new cases in the U.S. So clearly, you know, I think there's a lot of justified risk on the part of clinicians given the impact on the cancer patients and advanced cancer patients of this disease.

Thank you. Our next question will come from the line of Patrick Donnelly with Citi.

Great, thanks. Amir Ali, I just wanted to follow up on one of the prior questions there. I think it was Brian talking about the LDT launch. Have you guys kind of carved out a type of population you think will be addressable with this launch relative to the overall pie coming with the IBD launch? I know other companies that have done LDT launches have carved out a tranche where they feel is addressable with the LDT. I'm just curious your guys' perspective on that.

Yeah, so, you know, still our population, even for LDT launch would be average risk population. Having said that, you know, we don't expect, like, major adoption before FDA approval. You know, we believe that staff of FDA approval, we believe getting multiple coverage policies would continue to help with the adoption of the test, especially on the mainstream adopter. But we do believe there are a lot of opportunities with early adopters and people who are really interested in a bunch of people that we are working with. They really want to use our test even sooner than later. So we are kind of responding to, to some extent, some of the market demand, too. But not that we are carving out and going just after, let's say, high-risk patient population We don't have that strategy. At this time, we're kind of going to markets with average risk indication with the offerings that we have, but we are kind of seeing that the way market would react to the data package that we're kind of putting on top on all the evidence that we have generated during the last few years.

Okay, that's helpful. I know you mentioned you've seen some offices closing back up over the last couple of weeks. Do you feel better prepared to weather another, let's say, partial shutdown? I mean, are there learnings from the first time around that will help you guys insulate volumes better if this continues to worsen and offices close up? I'm just curious if you think the impact this time around would be less, given we all learned something from the first time around.

Yeah, I mean, certainly, you know, our ability to interact remotely with clinician offices, we've really built a lot of capabilities in that area, built that muscle. I think the question would be more kind of speed of growth and so on and how that could be impacted. And, you know, obviously, it all depends on the severity. of Delta and there's other variants that come around, but yeah, I don't expect, you know, kind of what happened in Q2 last year around the industry where people got, you know, paralyzed and would happen again. I think we're all living to, we're all learning to live, I think, with the disease in the background to some extent.

Thank you. And our next question will come from the line of Dan Arias with Stiefel.

Good afternoon, guys. Thanks for the questions. Amira Lee on Eclipse and just expanding the study to 13,000 enrollees. Anything you can touch on there just in terms of the need for that move? You guys aren't the first company to pick the population up for a trial like this. So, you know, just kind of curious if it's total overall colorectal cancer patients that you need to increase the number of. Is it related to subpopulations by stage or is it something else altogether?

Yeah, it's related to the number of CRCs that we need to find in that study. You can think about it more like an event-driven study, that there are some certain number of CRCs we need to find in this patient population that we're screening in order for a study to be powered to make the claims that we have as part of the acceptance criteria. So there is a minimum number of CRC patients that we need to find. When we started the study, based on the prevalence of CRC that we knew at that time, our calculation shows in our data-powered study we need 10,000 patients. And as we enrolled more and more patients and we started actually getting some reports on the number of events that we had, we are effectively fine-tuning the number based on the most recent study. That's why this study is going from 10,000 to 13,000 to find the additional CRCs that we need to find. That's the driver of enrolling more patients. Yeah, but we see it as still certainly in line with where we thought things could

initiated when we first started. So, you know, I think we're very pleased by where we are. We couldn't be more thrilled.

Yep. Okay. Thank you. And then just maybe, Mike, on the mix between Omni and G360 on the pharma side, what direction do you think that split heads in the coming quarters? Obviously, that's got an implication on the ASPs there going forward.

yeah you know in this quarter we definitely saw it pointed more towards the 360 you know I think as we look for the remainder of the year we'll probably double correct a little bit and I think you know our forecast is probably coming back more on the omni side. And so, you know, we're expecting the ANC to improve a little bit because it was a bit of an outlier this quarter. But, you know, a lot also depends on the pipeline and the samples that we get through the door as well. But that's how we're looking at it.

Okay. Thank you, guys.

And our next question will come from the line of Matt Sykes with Goldman Sachs.

Hey, guys. This is Dave on for Matt. Congrats on hitting 10,000 patients in Eclipse. Very exciting, as well as the Lunar 2 launch next year. You've been very successful in oncology testing. Screening is an even bigger opportunity, of course. Could you tell us more about your strategy for ramping sales and marketing to reach the hundreds of thousands of PCPs out there?

Yeah, sure. So we talked about it a little bit before, too. We started actually building the leadership of our commercial channel and screening site a few quarters ago. And now I'm happy that actually we have a couple layers of that leadership already in place. It's a dedicated leadership on screening site at the highest level. It was our internal executives that we had on oncology site that took the responsibility of leading the commercial efforts on screening site. Very talented individuals that we are really excited about having. And now we have you know, next layers of leadership in place too. As we speak, we are building the next layers to be ready for this LDT launch, and we believe we are going to have commercial and all operational infrastructure that we need to support this LDT launch first half of next year.

Fantastic. And could you tell us a little bit more about the AI-powered pathology partnership you announced for multimodal screening?

Yeah, so the company that we have partnership with is called Donet. They're an AI company in radiology and pathology. Very strong team with very heavy experience on AI side, especially on the image processing. And they already have some regulated products in radiology side that helps with the productivity and improved productivity of the radiologists in reading different kinds of scans from different kinds of scanning modalities. And when you think about what would be the future of screening, we believe definitely blood-based assays are very important, but cannot be the only... you know, assets there to really streamline screening journey for the patients. So we envision, obviously, a multimodal solution out there that starts with, you know, the anchor point would be blood-based screening, but there would, you know, we need to put some kind of additional solution on the front end and back end to really have a great experience and workflow for patients and providers to really take, you know, open up the opportunities that blood-based screening can offer in the field. So we are very excited about that partnership. We are going to work with them to see how much we can shape actually the future activities for them to really help us on the screening side.

Thank you. And our next question will come from the line of Jack Meehan with Medfront.

Thank you. Good afternoon. I was wondering if you could comment on how much current reveal added in the quarter in terms of volumes. And we're waiting on the Medicare final LCD for MRD. Do you think there's a chance it could be included in that? So, yeah, I mean, there is a final LCD for CRC, and I think the one that is still in draft is the one that expands that and extends that to applications of molecular response as well.

And so, yeah, that, you know, is hopefully going to happen later this year in terms of the finalization, but that's obviously up to, you know, up to them in terms of their timelines Yeah, on the volumes, obviously we're not splitting out the specific revealed volumes for competitive reasons amongst other things. And we did say in there for perfect margin that the vast majority of the samples in the volume that we reported for Dynatrace that the reveal launch has gone as well as we could have expected, and we're really pleased with it. So the volumes that are coming through the door are as good as we expected, and we continue to see them grow.

But, yeah, we're not going to be breaking that distribution.

Great. Thank you. And then just one math question. Sorry, juggling a few earnings tonight, so sorry if this is a dumb question, but You had $61 million of clinical sales, 20,830 tests. My math was getting a $2,900 price point. I know you quoted $2,600. Is there some other dynamic that I missed?

Yeah, I tried to explain that in both remarks, but maybe it's the grocery shopping others. The way that we recognize revenue in the past, there's always been a large sort of revenue. We're moving more and more to having our revenue just purely based on the crew revenue from the samples in that quarter. So there's still some cash in the Q2 number from prior periods. And that's where your math is off a bit.

And our last question will come from the line of Andrew Cooper with Raymond James.

Hey, guys. Thanks for speaking to me. And a lot's been covered. But I Maybe just first, when we think about the screening commercial sales force you intend to build and the sort of timeline on LDT to FDA, you know, can you help us a little bit more think about, obviously it's early today, but where you want to be in the first half when you're launching that LDT and then where you want to be again when we think about the timing for the FDA approval. So just sort of what the stage gate looks like would be helpful.

So a lot of success metrics for us during this LBP period is making sure that actually we can build strategic relationships, get into workflows, and really build a bunch of power metrics more than volume metrics. And we would be ready that once the approval comes, in fact, all the infrastructure and Workflow integrations actually we have built during this period of time would take us to the maximum opportunity that blood-based screening can offer much faster than, you know, without this LDT experience. Having said that, we think there is a good opportunity with early adopters and really these technology enthusiasts that, based on the data that they've seen, in fact, they want to get their hands on this device and start using it clinically. But our main goal, as I mentioned, is for this LDT early launch program is to build much of our matrix and make sure we are well integrated into PCP workflows and many network systems.

OK, great. And maybe just one more, if I could. On Lunit, again, just thinking about sort of the multimodality, I just want to make sure you're kind of thinking about the way you are viewing this appropriately. They've got ScopeIO that's is more on the immuno-oncology side and then more of the kind of traditional radiography type tools as well. So is this something you envision on the front end with the IO piece or maybe the back end in terms of reflexing from a multi-cancer test? How do we think about where this fits into the GARDEN pipeline?

I would maybe encourage you to maybe stay tuned a little bit and, you know, excited about this partnership and we have our vision of how this multimodal integrated radiology blood testing could really shape the future. Let us go through that process and we will keep you posted about the progress that we make. I can just tell you that we are very excited about this future and the way screening can get streamlined for the patients in oncology and potentially on other diseases.

Thank you. And with that, we have no further questions, and we would like to thank everyone for participating on today's Garden Health, the second quarter 2021 earnings conference call. This concludes today's conference call, and you may now disconnect. Thank you.