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.

Thanks, Elmi. We are making remarkable strides with our SHIELD blood test as we lead the way in establishing a new category within the CRC screening market. SHIELD continues to be the best-in-class blood test with significant first-mover advantage, and at this time, we do not see any credible competitor in our lineup site. Turning to slide 10, since our last earnings call, the data from our Pivotal Eclipse study was published in the New England Journal of Medicine, the world's leading peer-reviewed medical journal. This publication was a major milestone for SHIELD and a strong endorsement of the quality of the clinical data. This data meets the benchmark for Medicare reimbursement, positioning us to potentially become the first FDA-approved Medicare-reimbursed CRC screening blood test. Turning to slide 11, following the publication in the New England Journal of Medicine, we were very excited to see such an enthusiastic response from media, consumer advocacy groups, and opinion leaders. With attention from outlets such as the Associated Press, NPR, The New York Times, Colon Cancer Coalition, and many others, the interest in and potential value of this blood test is evident. Many recognize the significance of this publication as it brings us one step closer to providing a new choice for patients and helping to close the screening gap. Moving on to slide 12. Our interactive review process with FDA continues to be collaborative and positive, and we continue to make steady progress. The advisory committee panel meeting will be the next milestone of the review process and will take place on May 23rd. Our team has worked incredibly hard to get ready and we are well prepared for this panel meeting. In parallel, We are eagerly anticipating the launch of Shield IVD in 2024, shortly after expected FDA approval. Armed with two years of commercial experience from Shield LDT, we have fine-tuned our operations, including enhancements of customer experience, seamless digital ordering, and access to national full bottoming networks. After years of research and development, it's so exciting to prepare to make this test broadly available. Turning to slide 13, there are 120 million average risk individual between the age of 45 to 84, which includes 50 million on-screen individuals. Approximately 75% of CRC-related deaths occur within this on-screen population. And this is with having a broad menu of school-based tests available for over a decade. We believe that reaching this group is the most important opportunity to transform the CRC screening paradigm. And real world evidence clearly shows that the blood modality is best positioned to capture the unscreened opportunity. We believe screening these 50 million individuals is addressable by a blood test because nearly 87% of people age 50 and above have been seeing their doctor during the last 12 months based on findings from an annual national health interview survey. Interestingly, 91% of that group has had a blood draw in the last 12 months. This tells us that the majority of the on-screen population is in fact engaged with the healthcare system and routinely getting blood draws, making a blood-based CRC screening test an obvious fit into their existing care. More importantly, our real-world LDT experience with SHIELD for over 20,000 tests over the past two years confirms that PCPs are enthusiastically ordering this test, and when they do, patients complete the test. We continue to see an incredibly strong adherence rate of more than 90% for SHIELD LDT. Moving on to slide 14. A randomized prospective study result from Kaiser Permanente showed significant improvement in CRC screening rates when participants had a choice of a SHIELD test alongside other standard of care modalities. Through telephone outreach to more than 2,000 previously unscreened individuals, participants were randomized into two groups. One group was offered SIT or colonoscopy, and the second group was given the added option of SHIELD. The study demonstrated that screening compliance significantly increased by nearly threefold when the menu of screening options was expanded to include a blood test. This shows that blood has the opportunity to dramatically increase the screening rate at levels that exceeded even our initial expectations. We continue to be very excited about the near-term opportunity for SHIELD to transform the CRC screening paradigm and eventually to address the broader cancer screening landscape with the addition of more tumor types to our SHIELD assay. With that, I will now turn the call to Mike for more detail on our financials.

Thanks, Amir Ali. Turning to slide 15, I'll start by reviewing our financial results for Q1 2024. All growth rates provided will be on a year-over-year basis, unless otherwise noted. Total revenue grew 31% to $168.5 million, driven by very strong precision oncology testing revenue, which increased 38% to $156.2 million due to significant growth in both clinical and biopharma revenue. Precision oncology revenue from clinical tests increased 37% to $125.7 million. We were very pleased with our first quarter clinical test volume, which grew 20% to 46,900 tests, in line with our expectations. For GARDEN360, we saw solid year-over-year volume growth across all cancers in the US, as well as volume contribution from Japan and the UK. We also saw continued strong volume growth for both Reveal and TissueNext. Precision oncology revenue from biopharma tests in the first quarter totalled 30.5 million, up 40%. Biopharma test volume was particularly strong, totalling 8,450 tests, up 37%, which reflects the strong pipeline we entered the year with. We continue to expect our biopharma business to perform well and conservatively forecast biopharma revenue to grow in the low teens for the full year 2024, with potential upside assuming no adverse change to the biopharma macro-environment. Finally, development services and other revenue was in line with our expectations and totaled $12.3 million. Turn to slide 16. Since mid-2023, we've seen consistent improvements to clinical reimbursement and ASPs and have had an incredibly strong start to the year. Firstly, on January the 1st, our garden 360 LDT Medicare rate increased to $5,000 following the CMS crosswalk review process last year. Secondly, we're now seeing the impact of the Garden 360 commercial coverage wins we had in 2023. In Q1 2024, cash collected for tests performed last year was significantly higher than we had previously accrued, which resulted in an approximate $8 million revenue upside in the quarter. In addition, due to this improved commercial reimbursement trend, we increased our Garden 360 ASP for Q1 to be in the range $2,900 to $2,950, which is higher than the forecasted range of $2,850 to $2,900. We expect the Garden 360 ASP for the full year will be in this new higher range. Finally, we also received better than expected commercial reimbursement for Reveal to HUNEX in response in the first quarter of 2024. While we still need to see a more consistent reimbursement trend for these tests, the reimbursement received in Q1 points to potential ASP upside in future quarters. Although it's still early days, we feel we're on track to achieve the long-term ASP targets we presented at our investor day earlier than originally anticipated. This should help us achieve our top-line targets as well as potentially bring forward our timeline to reach company-wide cash flow break-even. Moving on to non-GAAP financial measures on slide 17. Our non-GAAP gross margin excluding screening, which reflects our therapy selection and MRD businesses, was 64% in the first quarter of 2024, an improvement compared to 63% in Q1 2023. As Helmi mentioned, we are carefully managing revealed test volume ahead of broad reimbursement as it currently carries a negative gross margin. Even with a larger proportion of revealed tests in Q1 2024 compared to Q1 2023, we were able to improve our non-GAAP gross margin driven by strong guidance received to ASPs and reimbursement we received in the first quarter of 2024. Non-GAAP operating expenses were 176.5 million, a reduction of 11.8 million compared to the prior year quarter. This decrease was primarily driven by lower clinical study costs following the completion of Eclipse enrollment in Q3 last year. With increased revenue, improved gross margins, and lower operating expenses, our adjusted EBITDA improved significantly from a loss of $101.0 million in Q1 2023 to a loss of $61.1 million in Q1 2024. Moving on to slide 18, cash burn. Free cash flow for the first quarter of 2024 was negative 37 million, which improved significantly year over year compared to negative 82 million in Q1 2023. As you'll see from this slide, we have revised our free cash flow guidance for the full year 2024 to be in the range of negative 275 to 285 million, which represents an improvement of 60 to 70 million compared to 2023. The key drivers of this revised 2024 guidance are the improved commercial reimbursement we are receiving for Garden360 and a reduction in screening spend. As we have mentioned many times before, our screening spend will be gated by major milestones, the next milestone being FDA approval. While we continue to expect FDA approval on commercial launch of SHIELD in 2024, The delay to the advisory committee panel meeting means that we've revised our operating plan. And as a result, now expect maximum screening cash burn this year to be $175 million, lower than our previously stated $200 million. On this slide, we've also included a breakdown of the screening cash burn for full year 2024 to provide additional color on the level of investments we're making in screening. As you can see, as well as the SG&A spend, We're incurring costs and a gross loss to run SHIELD tests prior to Medicare reimbursement coverage, and we are continuing to invest in screening research and development, including our SHIELD clinical study, making technology and automation improvements, and continuing to make progress in multi-cancer early detection development. We expect the screening cash burn profile to change in 2025, as the gross loss will become a gross profit following ADLT reimbursement. and our shield lung clinical study expense will reduce significantly once enrollment is completed. This will enable us to increase the investment in our commercial operations while not exceeding the maximum net burn for screening of 200 million per year. As we look ahead to the next few years, we're confident that by continuing to generate positive cash flow from therapy selection, driving MRV to profitability, and carefully managing the investment into screening, We can continue to lower our cash burn each year so that we reach cash flow breakeven by 2028 or potentially earlier, which is achievable with our current cash balance of 1.1 billion. Now turning to our outlook and assumptions for the full year 2024 on slide 19. We're pleased to be able to make improvements across all guidance metrics. We now expect full year 2024 revenue to be in the range of 675 to 685 million. representing growth of approximately 20% to 21% compared to 2023. This increase is primarily due to the commercial reimbursement upsides we had in the first quarter and the increase in GARNET 360 ASPs that we expect for the remainder of the year. As a reminder, this guidance doesn't include any revenue contributions from screening, which are dependent on the timing of SHIELD FDL approval and Medicare reimbursement coverage. We'll update our revenue guidance to include screening revenue when appropriate. We expect non-GAAP gross margin excluding screening to be in the range of 61 to 63%, an improvement from our previous guidance of 60 to 62%. Again, this is due to improved clinical commercial reimbursement. We've lowered our non-GAAP operating expenses to be in the range of 720 to 730 million. representing a flat to 1% year-over-year decline. This decrease is due to the reduction in screening operating expenses, as I just outlined. Finally, as previously mentioned, we expect free cash flow to be in the range of negative $275 to $285 million in 2024. Finally, turning to slide 20 to review our catalyst. As we look ahead to the rest of 2024 and beyond, We have a number of upcoming milestones in each of our key business areas, including the smart liquid biopsy upgrade for Ghana 316 therapy selection, data publications and Moldy X submission for MRD, and SHIELD FDA approval and launch. With that, we'll now open the call to questions.

Thank you. We will now begin the question and answer portion of the call. If you would like to ask a question, you may do so by pressing star followed by a 1 on your telephone keypad. If for any reason you would like to remove your question, you may do so by pressing star followed by a 2. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. In the interest of time, we do ask that you limit yourself to one question. Again, to ask a question, it is star followed by a 1 on your telephone keypad. The first question comes from the line of Mark Massaro with BTIG. Mark, your line is now open.

Hey, guys. Congratulations on the strong beat and raise. To limit myself to one question, obviously, you know, we're two weeks away from the FDA adcom. I think a lot of people are expecting the conversation to focus on the safety and efficacy as well as some of the other benefits of SHIELD, like the patient compliance or patient adherence. But I think there are some questions in the investor community that are focusing on the labeling and the topic of advanced adenomas. Do you guys have a sense for whether or not you think a label conversation will be much of a focus of this meeting? And how are you thinking about you know, the setup and the tone of questions ahead.

Yeah, thank you, Mark. You know, we are excited to get to this point of the review process in terms of the topic and agenda. All those matters actually is going to get published by agency a couple days prior to the meeting, and we are just two weeks away from it. Hopefully those materials, when they put it in the Federal Registry and, you know, become public, provide some more detailed insight about your question. And we are going to that meeting with high confidence about the quality of this study that we've done, quality of the device performance that we reported and published. And our team has been working very hard to get ready to get to this point and go to this panel. And we are excited to see how that panel conversation would go.

Thank you. The next question comes from the line of Jack Meehan with Nefron Research. Jack, your line is now open.

Thank you. Good afternoon. Wanted to focus on G360 here. I have two questions. The first is on ASP, so $2,900 to $2,950. I think that was about $50 better than you were guiding. Was curious if there was anything that stood out there or if it was kind of everything tracking the right way. And then on the volume side, was wondering if you could peel back some of the drivers to start the year. Were there any cancer indications that stood out and just how you're feeling about the durability of growth. Thank you.

Yeah, I can start on that, on the ASP, Jack and Spike. Yeah, you know, I think we had really strong ASP and commercial reimbursement in the quarter, so we're really pleased with that. You know, we knew that we were going to get the uplift from the Medicare increase to $5,000 for Garden360 LDT, but we also saw really strong reimbursement and payments from commercial payers, not just for Garden360, but also across all of the portfolio. So that had a really positive impact on our ASP. Yeah, as we said in the prepared remarks, we've now increased our expected Garden360 ASP to the range 2,900 to 2,950. So you're right, it's about a $50 per test increase. We also said in the prepared remarks You know, we had approximately $8 million upside in Q1, and that was related to commercial reimbursement that we received in the quarter that was really out of period. So it was for tests performed in the second half of last year. But even if you strip that $8 million out, you know, still really strong ASP performance and an increase that we now think for Gartner 360 will flow through for the rest of the year.

In terms of the volume, I think it was said in the prepared remarks, we saw really growth across really all indications for 360. We saw growth in terms of both breadth and depth. And depth, I would say, was obviously a bigger percentage of the growth given essentially how widespread G360 is. We've been very pleased with the start of the year. Obviously, we had a fantastic quarter, and I think it bodes well, especially for the second half, as some of our initiatives that are just getting started look to be really taking off in the right way. International volumes are picking up. We have the NHS sort of engagement with the 10,001 cancer patients. And then all the EMR work we've been doing is really just getting started. We're seeing, I think, considerable increase in depth in those accounts as they start getting engaged with our EMR integrations. And so we're picking up the pace of some of that. And I think it's going to be a really nice growth driver for the next couple of years.

The next question comes from the line of Dan Arias with Stifel. Dan, your line is now open.

Thanks for the questions here. Mike, on MRD, what do you have as a revenue target for Reveal at this point for 2024? And then can you or Helmi maybe talk to the extent to which you're holding back on Reveal because of the cost headwinds that come out of that? Is it possible that you get to the point where you know, opening up the spigot a bit and getting the test views becomes at least as important as safeguarding ASP and COGS, especially since it sounds like you're making some COGS improvement there.

Yeah, I can start on MRD revenue. We're not breaking that out for 2024, you know, we said last year that the revenue for Reveal was in the sort of low double-digit millions. And obviously we, you know, we expect it to grow this year. We are growing the volume and we are seeing nice traction with the ASP. So that revenue will grow, but I think we don't particularly want to be breaking out the revenue by all of the different products. I don't know, Helmi, if you want.

Yeah, no, I mean, I think we see, I think, tremendous volume out there. As I said in the prepared remarks, there are 12 million cancer survivors that are five years out from surgery, and so they really are an untapped population. We're seeing so much latent demand out there, especially in that population, and there really are no tests that are suitable for them today. Really, the major sort of impediment to getting that has really been the kind of sort of where ASPs are and, you know, where the COGS is. And all of that will likely be much, much improved once we get the surveillance CRC indication and once we're through some of these COGS reduction initiatives. And so we see the gross margin profile looking really, really nice in 25 and beyond. And, you know, once we're gross margin positive, we'll be taking the governor off and really putting the pedal to the metal in terms of that volume. But yeah, we feel very good in terms of our positioning now, in terms of where our volumes are. And so right now, we don't see a need to necessarily burn more cash.

The next question comes from the line of Patrick Donnelly with Citi. Patrick, your line is now open.

Hey, great, guys. Thanks for taking the questions. Helmy, maybe one of the critical volumes following up there, a nice 20% growth in the quarter. Can you talk about what you're seeing there, just the volume expectations as you work our way through the year? Certainly curious in terms of the MRD impact. I know you guys are taking some volume while at the same time holding back a little bit, just given they're not profitable volumes at the moment. So it would be great if you could just talk through the MRD balance and, again, just that critical volume. what you saw in the quarter and the outlook as we work our way through the year. Thank you.

Yeah, no, I mean, we're very pleased with the start of the year in terms of, you know, our clinical volumes across the board. We're seeing growth across all tumor types, you know, all product lines. And so we're very pleased with where that's going. I think the mix is getting nice for us, just in the sense we're managing some of those reveal volumes. And, you know, and so, like, I think the major thing for us is, I think, some of the growth initiatives we have, which are, as I said, EMR integration, some of the international stuff. And then I think what we're very excited about, you know, I think second half of this year, the smart liquid biopsy transition. We're seeing that even before that, we're doing really well in the market. Obviously, there's you know, competition that ebbs and flows, but we're still seeing that the current products we have are really best in class from a sensitivity, from a turnaround time, and that is really the major differentiator in terms of what liquid biopsies need to do to save patients' lives. But as we start transitioning to smart liquid biopsy, we've seen from the pharma demand that has been really exciting and really strong, from the conversations we've had at ACR with some of the new data around smart liquid biopsy and epigenomics, that we're really going to raise the bar considerably in terms of what physicians expect from their tests in terms of the capabilities and doing things that are even difficult to do in tissue, as I highlighted in the call. And we think that is going to sort of, you know, sort of put us into sort of overdrive once all of that is out in the market, especially in tumor types. Whereas, comprehensive genomic profiling really hasn't been that useful outside of breast, lung, and colorectal. And so, we think epigenomics and smart liquid biopsy will sort of catalyze a lot of that volume that is still out there and still in its early ending.

The next question comes from the line of Sumji Nam with Scotiabank. Sumji, your line is now open.

Hey, this is Corey Rosenbaum. I'm for Song Ji. Thanks for taking my questions. So one of your peers mentioned yesterday that the USPSTF update timing is more likely to come in 2027. Would you have additional insight into that? And would a delay in timing there materially impact your commercial strategy for Shield following DA approval? Thanks.

Yeah, actually, so we heard about that before and we tried to actually see if we can find any confirmation. In fact, the USPSCF has given no indication that they're intending to delay their process and continue to think, you know, their draft research plan or CRC screening should come out sometime this year. In fact, if you look at their website during last few weeks, you know, a couple of new research draft, you know, draft research plans got actually published on their website. But we are going to effectively monitor the field in terms of the roadmap that we talked about in terms of our expansion. We are going to look at actually some of the milestones before we go through some of the expansions. And one of the milestones for 26 is getting to the USPSCF guidelines. I also want to maybe take the opportunity and note, too, the importance of American Cancer Society guidelines that we are expecting hopefully sometime in 2025. That would be a good catalyst in this field, open a bunch of, you know, additional adoption of this test and also reimbursement ASB stories in states that they have some state-level mandates to cover CRC screening tests recommended by ACS.

Thanks for the insight.

The next question is from the line of Subbu Nambi with Guggenheim. Subbu, your line is now open.

Hey, guys. This is Brandon for Subbu. Question. In terms of therapy selection, we got some feedback that some competitors are offering a combination of immunohistochemistry or IHC in addition to NGF capabilities for other markers besides PD-L1. Do you anticipate offering this kind of combined approach at the protein level with Guard Infinity? And just any kind of general comments around the outlook there? Thanks.

Yeah, I mean, that is not a difficult thing to add to the menu. It's just something that, you know, is requested. And I think the exciting thing about Infinity is that it works in blood. Obviously, I see the tissue test and what we can do with Infinity in terms of some of the applications we're seeing are even difficult to do in tissue, frankly. And so we're, you know, what you're talking about is commodity things that anyone in the world can do. We're talking about breakthrough things that only Gartent can do in terms of what we're adding to the platform. But, you know, just like we've added tissue, we've added CDL1, we can add, you know, some of those base layers if and when the market needs it. Fairly simple exercise.

The next question comes from the line of Kyle Mixon with Canaccord Genuity. Kyle, your line is now open.

Hi, this is for Kyle Mixon. Thanks for taking my call. One quick question. So grow, you know, obviously they recently released their form 10 and their form 10 kind of revealed, you know, pretty extensive historical information regarding, you know, solid revenue growth over time. I guess one, one point here, could you just discuss, you know, besides the obvious multi-cancer versus single cancer, how you like differentiate yourself, yourself between what these different multi-cancer tests and shield. And also do you believe that, gallery is, in a way, a proof point that blood-based screening could, in fact, be successful on a wider scale. Thank you.

Okay.

So, you know, it's hard to comment on other kinds of companies' 10-Q filing, but in general, in terms of the landscape, you know, scientifically, technologically with a simple blood test, you can do a multi cancer screening and early detection. But what we do believe is you need to have a pathway to make sure those innovation would be accessible for wide set of population to really open up those markets. And I think over time, we just got more confident about our strategy to start with a single cancer, like colon cancer, that there are pathways for approval, pathways for Medicare reimbursement, pathways for task force review, and then expand from that lead indication into other cancer types, like we are doing a lung cancer screening study, and we are working on some multi-cancer early detection kind of applications. But CRC is going to be our really entrance and the pillar point of getting to this market and really making the test accessible. I think for other MSAT tests, FDA PATH reimbursement, there are many, many barriers. And we'll see over time how that strategy would pan out.

The next question comes from the line of Tejas Savant with Morgan Stanley. Tejas, your line is now open.

Hello, this is Yuko on the call for Tejas. Thank you for taking my questions. The recently finalized LDT regulation notes that FDA generally expects compliance with premarket review for currently marketed LDTs if there are certain modifications that may affect test's basic safety and effectiveness profile. Given tests like G360 go through multiple versions, improving performance over time, would changes in ALGO constitute a modification under this finalized rule? And quick follow-up. Also, as you think about future test development, would it be fair to assume 100 or 200 BIPs headwind to medium-term gross margin as the rules go into effect?

Yeah, no, I think the rules that came out from the FDA are something that I think was largely expected. And if anything, maybe the borrow is a little bit lower than what is usually telegraphed. You know, where we are is We have Garden360 CDX, which has been sort of under the framework of FDA. We've done multiple upgrades, software upgrades to Garden360 CDX under sort of that FDA framework. And so we have those capabilities. We're very familiar with it. We've successfully operated under that. And so, yeah, this is really not a change in almost any way in terms of our business. has very minimal impact.

The next question comes from the line of Dan Brennan with TD Cohen. Dan, your line is now open.

Perfect. Thank you. Thanks for the questions and congrats on the quarter. Maybe just zeroing in on my GARDEN360 clinical for a moment. Could you just give us a sense, you know, overall clinical volumes came in a little bit above our expectations. And we felt like after really strong growth last year, like you guys had set a reasonably conservative bar. Just wondering, could you speak to any color on how Gordon 360 clinical lines in the quarter and kind of what you're seeing in the marketplace and kind of how we think about the progression throughout the rest of the year?

Yeah, I can talk about the volumes for the quotes. I mean, we said the overall clinical volume at 20% came in line with our expectations The same is true for GARNET 360. So it came in very nicely. And Q1 was a difficult comp for us because in February of last year, we had the ESR1 approval, and we saw an immediate uptake in the breast volume for GARNET 360. And we know for Q2, we're going to have an even more difficult comp. So I think we were really pleased with how G360 volume came in the first quarter. Yeah, Q2 is going to be hard to come, but we still think we're going to see continued sequential growth. And I think we're looking at, you know, higher year-over-year volume growth for G360 in the back half of the year. I don't know. How many in there?

Yeah, no, I mean, like, I think we're excited for the second half because we're just seeing a lot of initiatives we have, I think, are really going to stick in terms of, as I said, EMR integration, international, and smart liquid biopsy transition. So, yeah, we started off, I think, better than we expected, and I think it's going to be a good year in general.

The next question comes from the line of Eve Burstein with Bernstein Research. Eve, your line is now open.

Hi, this is Alberto Bucciolato on for Eve, but thank you for taking my question. I wanted to ask more of a long-term question. You have more than a billion dollar in convertible debt due in 2027. And we already have seen some other companies being penalized for that. During your investor day, you shared that you don't plan to be cashflow positive before 28. We are assuming that you will need to raise money for that. So what are the options you're considering? Are you having this discussion now? And are you thinking about reducing even more of your expense profile ahead of that?

Yeah, I mean, I think the first thing we would say is, you know, our cash balance at the end of this quarter was over $1.1 billion. And, you know, I think we've been pretty consistent in saying that over the next few years, our cash fund is going to come down every year. And that to get to that sort of breakeven level in 2028, you know, the cash that we've got is more than sufficient to get us there. And in fact, you know, with the traction that we're seeing with ASPs and actually the reduction in cash burn that we've just brought down for the full year just now, you know, I think there's potential that we can get to that break even level for the company potentially earlier than 2028. So, yeah, we're really focused on how quickly we can drive to profitability. As far as the convertible, yeah, I mean, we're well aware of that. You know, at the moment, You know, it's got a 0% coupon. It's maturity is end of 2027. And so, you know, we're feeling relatively comfortable with having that on the balance sheet at the moment. But, you know, we're continually looking at what our options are. You know, we're talking to a lot of people. We want to make sure that we make the right decision and do the right thing. But I think we've got the advantage of time on our side. But yeah, it's something we're aware of, and we'll know we need to address it at some point in the future.

The next question comes from the line of Puneet Sudha with Lerink Partners. Puneet, your line is now open.

Okay, guys. Yeah, thanks for the question. So I know you're not providing much on the advisory committee, but just wondering is frequency will be frequency of assay would be a consideration there and then maybe just looking competitively across the landscape we have some seen some readouts there are some expected readouts that are coming as well later this year does that change your view at all in terms of how the shield is positioned competitively in the marketplace If there is a competitor that has maybe a larger commercial presence introducing an asset down later this year, does that change any thinking on your end as to how you're progressing with Shield?

Yeah, for me, so in terms of the adcom, you know, we are going to that meeting. very confident and excited. And in terms of really the final topic, final agenda, it's going to get released a couple days before the meeting by agency. And there are potential changes that could happen any time by then. So we are going to have all the final information very soon. We are just literally two weeks away from that ad content right now. In terms of actually competitor data, Shield is the best in class technology, the best in class performance. And now with a further extended kind of a first mover time advantage. And frankly, like, you know, I'm not sure if we are seeing any credible competing blood tests at this time so we are going to continue to monitor the field but with this time advantage performance that we have here in the very late inning of fda approval and we feel very comfortable with where we are competitively and we'll see if anybody else is going to have anything at the end of the day so we are even more excited about the opportunity right now than even a few quarters ago.

The next question comes from the line of Rachel Battenthal with JPMorgan. Rachel, your line is now open.

Great. Thank you. This is Casey Woodring on for Rachel. So BioPharma had a strong quarter. Test volumes were up 37%. I think revenue was up 40%. 1Q was obviously a strong quarter from a BioPharma funding perspective. So, can you just walk us through the rationale for reiterating your 2024 revenue forecast there for low team's growth and maybe how much upside there would be to that number if funding were to hold at current levels or even, you know, continue to improve here relative to where funding levels were when you initiated the guide? Thank you.

Yeah, I can take this. Biopharma came in incredibly strongly for us in the first quarter. We had a strong pipeline coming into the year, and so that came through. Looking at our pipeline now, it's still very strong. I think we said in their prepared remarks, we're sort of maintaining our overall guide for biopharma. Just really, we want to be conservative. We want to just ensure that There's no adverse impacts to the biopharma funding, so the macro environment that might cause a potential reduction in the back half of the year. So definitely there's upside in the back half of the year for us on biopharma. To quantify that is difficult. I think if you sort of back into um our guide where we you know we're almost sort of uh guiding to sort of flat year over year in the back half of the year so i think um yeah we feel we feel um hopeful that uh we can have upsides up again it's difficult to uh to quantify but um the pipeline is looking strong for us in the in the near term the next question comes from the line of matthew sykes with goldman sachs matthew your line is now open

Hi guys, good afternoon. Thanks for taking our questions. This is Will Ortmeier on for Matt. Great to see the gross margin raised to start the year. Sounds like the higher ASP was probably a big driver there, but can you give us some more color on any other drivers or moving pieces you're seeing? And what are your expectations for phasing on gross margin for the rest of the year? Thank you.

Yeah, no, we were really pleased on the gross margin. The real driver this course was the ASP impact. And so, you know, as we said in the prepared remarks, we raised our expectation of ASP for Ghana 360 for the remainder of the year. We also saw good commercial reimbursement on Reveal and Tissue Next as well. So if that was to continue through the year, I think there's been a potential upside there on the gross margin. You know, we sort of do want to, you know, offset that a little bit by the mix. You know, we're managing our Reveal volume mix. If we were to take the foot off the brake on Reveal, you know, that could have an impact. And there's other different mix impacts as well that we try to manage. But, you know, overall, we're really pleased because margins are improving. we see a line of sight to higher ASPs and potentially even higher gross margins. So, yeah, I think we've started the year off very well from that perspective.

The next question comes from the line of Doug Schinkel with Wolf Research. Doug, your line is now open.

Thank you so much. I appreciate you taking my questions. So, I want to talk about two things. One is SHIELD and then two is, you know, really R&D spend and prioritization as we look ahead. On Shield, maybe asking an earlier question a different way, what do you think the realistic range of outcomes is for adcom later this month? Two, recognizing that you've consistently said you believe this is a three-year testing interval product. If you happen to be wrong and this is an every one-year test, do the economics work? And then what is your expectation for USPSTF timing? As we sit here today, there's been some commentary from others that this is seemingly being pushed out a little bit. And I'll come back and ask about R&D in a second.

Yeah, so in terms of ATCOM, several questions. So, you know, kind of combined together. So in terms of ATCOM, you know, Probably the typical question in terms of safety, efficacy, and the benefits risk is going to be discussed in the panel and the range of outcomes as advisors are kind of looking into our data and everything and decide what they want to vote on in terms of those questions. But we are very confident with all the profile of the data that we have to study that we've done and the reported device performance that we reported and published. the same kind of performance as Guy had presented there. But we'll see in terms of how that outcome goes. We feel very good about it. In terms of the interval and three-year testing, I mentioned this before. If the interval test for SHIELD becomes even more frequent than every three years, in fact, it's going to be an upside for us. So in a land that FDA-approved diagnostic tests, pricing is going to get set, Medicare pricing is going to get set, you know, an ADLT process. You know, every year testing, frankly, would be even an upside in terms of our P&L. We believe, based on the modeling that we've done, it's over-utilization of SHIELD, but, you know, annual testing is an upside, not a downside. That last one was lunch. That's it. Okay.

Yeah. The final question will come from the line of Mason Carrico with Stevens. Mason, your line is now open.

Hey, guys. Thanks for the questions here. Sorry if this has been discussed jumping between a few tonight. So in terms of your expectations for SHIELD, you've talked about how A second label is still a big opportunity, your commitment to screening as long as it continues to fall in line with your expectations of the opportunity. So assuming you get a second line label, you know, as we look into next year, what is a realistic adoption hurdle for you guys? Exacted 100,000 Cologuard tests, I believe, in their first year after FDA approval. Maybe you guys are in a better position commercially than they were at that time. Maybe you're not, but is there any sort of hurdle or framework you can give for expectations next year where volumes may fall?

In general, our expectation of going through ATCOM and after that fall on F conversation with FDA is to take SHIELD to the finish line and get FDA approval. That would be the definition of success for SHIELD from our perspective to have a huge opportunity in front of us. And a failure is obviously if we cannot convince FDA to approve this test. It could be very unexpected, but we'll see what happens. In terms of second line, the biggest opportunity for blood-based CRC screening and the biggest opportunity in general for non-invasive CRC screening is this 50 million on-screen patient population, which are out there right now. And that market segment is completely open for a second line indication. So that's why we continue to be excited to go to market with SHIELD, even with the second line indication. Having said that, we have milestones. We have some assumptions in terms of volume ramp and revenue contribution. And this means we are going to monitor the commercial execution and if still the market is as exciting as what we think it is right now. In terms of setting a specific guidance for next year, we would talk about it at the right time. You know, it depends on the timing of FDA approval and some other factors. I'm pretty sure we will talk about it in the future sometime in 2024.

Thank you. That is all the time that we have for questions today. I will turn the call back over for any final concluding remarks.

Thank you so much for everybody's interest. Have a good day and night.

That concludes today's call. Thank you all for your participation and you may now disconnect your lines.