Guardant Health, Inc.

Good afternoon, and thank you for joining the Garden Health Q1 2024 earnings call. My name is Kate and I will be the moderator for today's call. At this time, all lines are in a listen-only mode and will be until the question and answer portion of the call. I would now like to turn the call over to Zarek with Garden Health. You may proceed.

Thank you. Earlier today, Garden Health released financial results for the quarter ended March 31, 2024. Joining me today from Gartland are Helmi El-Touki, co-CEO, Amir Ali 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. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specific items. Additional information regarding material risks and uncertainties, as well as reconciliation to most directly comparable GAAP financial measures, are available in the press release GARDEN issued today, as well as in our 10-K and other filings with the SEC. GARDEN disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events, or otherwise. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the call over to Helmi.

Thanks, Eric. Good afternoon, and thank you for joining our first quarter 2024 earnings call. Starting on slide three, GARDEN is a liquid biopsy leader for therapy selection with a robust pipeline of opportunities and tissue-free MRD and cancer screening. With our comprehensive suite of tests, we are transforming patient lives across the continuum of care. We are just scratching the surface of what we believe is a massive opportunity in front of us. At Guardant, every action is fueled by our dedication to serving patients and fulfilling our bold mission to give everyone more time free from cancer. In line with that mission, I'd like to share a story of the impact our tests have on patients. In March 2022, A male in his 40s is diagnosed with stage 4 non-small cell lung cancer after he visited the hospital for gastrointestinal distress and back pain. That very same day, he was given a Garden 360 CDX liquid biopsy test at his hospital bedside, and his oncologist later followed up with a tissue test. Within days, the Garden 360 CDX test results came back, identifying an ALK genomic rearrangement. With this information, the patient was started a melectinib, a first-line TKI treatment, just 10 days after his diagnosis. Within just two weeks after starting treatment, the patient reported his back pain was resolved. Notably, the in-house tissue test results also confirmed the positive mutation, but the results were received five weeks after the patient had already started therapy. The rapid turnaround time enabled by GARDEN360 helped result in life-saving record time to treatment. I'm pleased to share that the therapy has been successful in managing his cancer and the patient continues to do well today. Turning to top line performance in slide four, we had a fantastic start to the year with total revenue growing 31% to $168.5 million in the first quarter of 2024. This was driven by very strong precision oncology revenue, which increased 38% in the quarter, supported by significant Garden360 reimbursement tailwinds, as well as strong growth in clinical and biopharma volumes. Turning to slide five. Clinical test volume for the first quarter grew 20% year over year, reaching 46,900 tests. We achieved a record number of average tests for oncologists, driven by continued growth in both breadth and depth of ordering. Garden360 continues to be the primary driver of clinical volume growth, with increasing contributions from newer products such as TissueNext and Response. Reveal also continued to grow nicely, despite our continued management of volumes ahead of broader reimbursement. Biopharma volumes were incredibly strong in the first quarter, supported by strong collaborations with our growing number of biopharma partners. We now have over 170 lifetime partners. Test volume grew 37% year-over-year, reaching 8,450 tests. Despite discussion of biopharma headwinds across the sector, biopharma continues to be a bright spot for Gardent. We continue to see a lot of excitement for Gardent Infinity, our newest biopharma offering powered by our smart liquid biopsy platform. This is an important leading indicator for future demand for our clinical tests. looking more closely at some of the recent highlights within our therapy selection business on slide six. I'm very excited to share that we generated positive free cash flow in our therapy selection business in the first quarter, supported by continuing improvements in Garden360 ASPs. We had another significant step up in Garden360 reimbursement, reflecting the new crosswatch rate for Garden360 LVT that took effect on January 1st. This increased the Medicare rate for Garden 360 LVT to $5,000. We also saw significant revenue upside from recent commercial payer coverage wins and believe that this is a tailwind that will continue to play out over the course of the year. We also saw continued progress in our EMR integration efforts with streamlined orders and workflows for physicians. Notably, more than one-third of orders in the first quarter were digital, showing the effectiveness of the integration process. We had strong growth in the quarter driven by continued Garden 360 volume growth across all cancer types, as well as contribution from Japan and the UK. At Garden, high-quality science and data have always been the driving force in our mission to transform patient care. To that end, I'm excited to share that we recently reached a significant milestone and surpassed 500 peer-reviewed publications, highlighting the data produced by our innovative suite of products. Over the years, we have deliberately made investments to develop tests based on cutting-edge science, and we are proud to have conducted some of the largest and most impactful studies ever to be performed in our field. This incredible breadth of data demonstrates the impact our technology has on both patients and the scientific community in order to improve patient outcomes and ultimately give us all more time free from cancer. We are committed to generating evidence that supports the real-world impact of our technology and its impact on patient outcomes. This will drive physician demand and favorable reimbursement as we continue to improve payer coverage, which will in turn expand volume and increase our ASPs. Now, taking a closer look at our international progress in slide seven. We recently launched a new service at the Royal Marsden in England to test advanced non-small-cell lung cancer patients using GARDEN360. This partnership is supporting a new national pilot with NHS England that is integrating liquid biopsy testing into routine care much earlier in a patient's treatment journey. It allows patients with suspected non-small cell lung cancer to receive a CT DNA blood test concurrent with their diagnostic CT scan, so they may benefit from even earlier biomarker identification and subsequent targeted treatment. We are excited about this program demonstrating the value of bringing liquid biopsy testing much earlier into the patient journey to improve outcomes. The NHS study has already enabled more than 2,000 patients with suspected advanced lung cancer to receive a CT DNA blood test concurrent with a diagnostic scan and is set to expand to an additional 10,000 patients by next March. Moving on to slide eight. At our investor day last fall, we shared an exciting vision for our smart liquid biopsy platform which is enabling first-of-its-kind capabilities across a myriad of applications. Last month, we presented exciting methylation fuel data for a few of these applications at the AACR annual meeting, highlighting the value of the Garden Infinity epigenomic signal to generate novel insights. This data shows how smart liquid biopsy technology provides information on not only boosting sensitivity for important drug classes, such as targeted therapies and immunotherapies, but for giving unprecedented biological insight into the patient's cancer and their health as a whole. For example, we presented data that demonstrated that we could do more than just detect the tumor tissue of origin in blood by unlocking the specific tumor histological subtype, which is critical given patients can often fail therapy due to transformation of the tumor subtype. And today, these transformations are often difficult to detect even in tissues. Just as exciting, we presented data showing that we can predict adverse cardiac events in patients in HER2-directed therapy, including the detectability of heart risk and damage months prior to drug-induced heart failure. These are just a handful of the profound applications that our smart liquid biopsy platform will enable, setting a new bar for what physicians will expect from their testing partner. Now shifting gears to reveal on slide nine. where we are the leader in tissue-free MRD. I'm excited to share that our COSMOS CRC manuscript with data from our COSMOS colon study looking at stage 2 and 3 patients has been submitted for publication and is under review at a peer-reviewed journal. Looking ahead to the remainder of the year, we anticipate publications that will support submissions to Medicare for potential additional coverage in colon and breast cancers. Next year, we have important clinical validity studies for additional cancers such as lung, pancreatic, and gastric, that will support advancement of additional reimbursement. We are excited by the demand we are seeing in the market, fueled by the fact that there are greater than 12 million cancer survivors more than five years out from surgery. A tissue-free MRD solution such as Reveal will be key to addressing this significant market. That said, we are not only the clear leader in this enormous market segment, but the only tissue-free MRD option in the market today. Despite our excitement, we believe it is important at this time to manage volumes very closely and hence minimize cash burn until reveal is gross margin positive. Even ahead of additional Medicare reimbursement with the impact of biomarker bills, we are starting to see improvements with the reveal ASPs. Seventeen states have now passed biomarker bills, with several other states on deck for possible enactment this year. We are still early in the process, but starting to see some tailwinds that will bode well for future commercial coverage of our tests. We are also making very good progress in our COGS reduction initiatives for review. As a result, we expect that with significant lower COGS and with improved ASPs, review will be gross margin positive in 2025. This will be an important milestone in minimizing MRD cash burn and enable us to greatly accelerate volume expansion. Furthermore, over the long term, we are confident we can achieve greater than 60% gross margins for MRD business. On April 29th, the FDA issued its final rule related to the planned oversight of LDTs. While our regulatory team continues to work through the details of the rule, it is consistent with our expectations. The rule outlined an exemption from pre-market review for tests approved by New York State. Given the fact that our key tests are New York State approved, We would expect this exemption to allow us to continue to operate largely as we do now. As a reminder, GARDEN360 CDX was the first FDA-approved liquid biopsy test for CGP across solid tumors. Our proven track record with FDA positions us to continue to offer high-quality tests when the final rule goes into effect. We look forward to the follow-on FDA guidance documents to help clarify the nuanced aspects of the final rule. With that, I will now turn the call over to Amir Ali for an update on screening.