Guardant Health, Inc.

Hello and welcome to the Guardians House first quarter 2023 financial results call. My name is Lauren and I'll be coordinating your call today. There'll be an opportunity for questions at the end of the presentation. If you would like to ask a question, then please press star followed by one on your telephone keypad. Please also kindly limit yourself to one question and one follow-up. I will now hand you over to your host, Alex Cleban, Vice President of Investor Relations to begin. Alex, please go ahead.

Thank you. Earlier today, Garden Health released financial results for the quarter ended March 31st, 2023. Joining me today from Garden are Helmi Altuke, co-CEO, Amir Ali Talasaz, co-CEO, and Mike Bell, Chief Financial Officer. Craig Eagle, Garden's Chief Medical Officer, will join for Q&A. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meeting of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. This call will also include a discussion of non-GAAP financial measures which are adjusted to exclude certain specified items. Additional information regarding material risks and uncertainties, as well as reconciliations of the most directly comparable GAAP financial measures, are available in the press release card issued today, as well as in our Form 10-K and other filings with the SEC. The card disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events, or otherwise. Information in this conference call is accurate only as of the live broadcast. With that, I'd like to turn the call over to Helmi.

Thanks, Alex. Good afternoon, and thank you for joining our first quarter 2023 earnings call. I will start off today's call today for providing an update on our progress so far in 2023 and go into more detail on our progress in therapy selection and MRD. I will then turn the call over to Amir Ali for an update on screening. And finally, Mike will provide a more detailed look at our financials and outlook for 2023. At Gardens, we have built one of the fastest growing platforms in diagnostics, coupled with what we believe is the most exciting pipeline in the industry to fuel long-term growth. Today, we are the market leader in therapy selection and technology innovators at the forefront of MRD and cancer screening. All of this enables us to help patients at all stages of cancer live longer and healthier lives. In line with this, I would like to start off with a patient story. A 43-year-old woman with no history of smoking went to her physician with chest pain. A CT scan ruled out a pulmonary embolism, but showed a 3.5 centimeter mass. Following additional tests, she was diagnosed with stage three lung adenocarcinoma. Further testing from other modalities indicated the tumor was negative for EGFR, ALK, and ROS1. However, a GARDEN-360 liquid biopsy revealed several somatic mutations, including a ROS1 fusion, making her a candidate for the targeted therapy Entrectinib. Following treatment, her oncologist ordered imaging to confirm whether or not she was responding to therapy, which came back inconclusive. A GARDEN response test was ordered and detected no ctDNA, indicating she was responding to therapy. One year into treatment, she continues to do well with an over 50% reduction in the primary tumor mass and complete resolution of other nodules. Her story illustrates the power of the combined GARDEN 360 and response testing regimen to assist doctors in making these crucial decisions to deliver better patient outcomes. Turning to slide four. We started the year off strong with our first quarter revenue growing 34% to $128.7 million. Garden360 continues to be the main growth driver with increasing contributions from Reveal and TissueNext. Our team continues to focus on delivering superior execution, operations, and customer service. All in all, we accelerated our growth in the quarter amidst stable market conditions, driving market expansion and a backdrop of notable retrenchments by competitors. Turning to slide five. We are pleased to report that in mid-April, we received Medicare reimbursement for garden response. This is our fifth assay to receive Medicare reimbursement. It is the first blood-only liquid biopsy for immunotherapy response monitoring, representing a major step forward for patients. The overall testing program will consist of a Garden360 tested treatment initiation, followed by a response test in the appropriate time frame. Our rate for response has been finalized at $1,943, and we are exploring an ADLP pathway for this test in the medium term, which should increase pricing further. Turning to slide six, after another record quarter in which we continue to significantly grow market share, we want to take a moment to spotlight our core therapy selection business. Over the years, we have built on the foundation of the first FDA-approved comprehensive liquid biopsy to create what we believe is the strongest platform in oncology diagnostics. Our entire therapy selection portfolio is now reimbursed by Medicare We've reached over 300 million covered lives when we include commercial payers. We have established ourselves as technology and market leaders with a greater than 300-person commercial team across clinical and biopharma, over 12,000 ordering oncologists, more than 150 biopharma customers, all supported by hundreds of patents and clinical publications. Achieving scale is not a long-term vision, but at our doorstep. For therapy selection, which represents more than 95% of our total revenue, we expect to generate more than 500 million in sales this year with clinical revenue growth of greater than 25%, gross margins above 60%, and reach cash flow break even in six to nine months. Moving on to slide seven. Clinical test volume reached over 39,100 tests in the first quarter, up 45% compared to the prior year quarter. Garden 360 continues to be the main driver with continued strong growth in lung cancer with a significant uptake in breast cancer following our CDX approval for ESR1 mutations early in the quarter. Garden Reveal and Tissue Next added to the growth as we rapidly onboarded patients in MRD and also gained market share driven by the recent launch of our AI-powered Garden Galaxy tissue offering. We continue to execute in building account depth with more oncologists ordering more garden tests again in the quarter. This is due in large part to the leverage we are gaining from past investments in EMR integration processes and systems. We saw a nice upward move in our Garden360 ASPs, supported by mixed and positive momentum from commercial payers. We are closing in on coverage from all major commercial payers in the U.S. for Garden360, given the addition of United during Q1, Aetna Humana expected in Q2, and others that are in advanced discussions. Our ESR1 CDX has been a major driver and is helping us to address remaining coverage limitations. All of this is providing a tailwind for ASP. Turning to slide eight, we had another solid quarter of biopharma growth with volumes of 21%. Our partnerships continue to rise, and we have now converted more than 20% of our mix to GARDEN Infinity, our epigenomic or smart liquid biopsy-based panel, and also continue to see strong utilization of GARDEN 360 CDX In addition, we announced another ESR1 collaboration and are on target to start seeing China sales ramp up later in 2023. Turning to slide nine, with our strongest quarter yet in breast cancer, I would like to highlight the transformational potential that our CDX can have for breast cancers that develop an ESR1 mutation. Between 65% and 80% of breast cancers in women are estrogen receptor or ER-positive. and up to 40% of patients with ER-positive HER2-negative cases will develop an ESR1 mutation, which qualifies them for a new class of targeted therapy. ESR1 mutations can emerge months or years after initial tissue or liquid biopsy, demonstrating a real need for liquid biopsy testing. With six biopharma partnerships focused on ESR1 already, this will be a key focus area for CDX programs where our partners can leverage garden technical and regulatory capabilities. I'd like to take a moment to thank our team who worked tirelessly to ensure we live up to our most important value to put the patient first. Everything we do is led by that North Star. At Gardens, we have built one of the most transformative platforms in diagnostics, and we think extensively about how we get our work done more efficiently from development through delivery to fulfill our primary mission of helping patients. In line with that goal, we recently made some key additions to our leadership team in an effort to further improve our ability to operate effectively while balancing our need to innovate quickly. Inez Donsuber joined Gardens as our new Chief Operating Officer. Inez brings more than two decades of broad diagnostics experience, including overseeing operations for labs, running millions of tests per year. Under her leadership, we will bring further efficiency, leverage, and scale to the way we operate as a company. Daria Shadova was promoted to Chief Technology Officer. With this newly created role, we are bringing together our research and development efforts for oncology and screening to leverage our products across a single platform and allow us to scale more quickly and efficiently. I look forward to the contributions and strategic leadership to help GARDEN continue to scale for this next exciting chapter of our journey. I'm very proud of our team and our products and look forward to the opportunities ahead. With that, I will now turn the call over to Amir Ali to provide an update on our screening business.