Guardant Health, Inc.

Thank you. Earlier today, Garden Health released financial results for the quarter ended September 30th, 2024. Joining me today from Garden are Helmi Iltuki, 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 specified items. Additional information regarding material risks and uncertainties, as well as the non-GAAP reconciliation to most directly comparable GAAP financial measures, are available in the press release Garden issued today, as well as in our 10K 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, except as required by law. 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 third quarter 2024 earnings call. Starting on slide three, 12 years ago, we embarked on our mission to conquer cancer with data. Roughly two years later, we launched into the late-stage cancer market with our first version of Garden 360 in 2014. In 2021, we launched Garden Revealed for cancer occurrence and monitoring. And this past quarter, on August 1st, we were thrilled to launch our first test into the asymptomatic cancer screening market with Shield, unlocking an exciting opportunity to potentially impact millions more individuals across the cancer continuum. As is our practice, I would like to start our call off with a story illustrating the important impact our tests can have on improving patients' lives. A woman was initially diagnosed with left breast cancer when she was 50 years old. With a family history of cancer, she opted for an aggressive treatment and underwent a double mastectomy. A few years later, she began experiencing hip and lower back pain. After a doctor determined the breast cancer had metastasized, a Garden 360 liquid biopsy test was ordered to determine if the metastasis had any actionable biomarkers. An ESR1 mutation was revealed, and she was placed on elastist strand for therapy. The Garden 360 test report also noted a BRCA2 variant, which was later confirmed to be a germline mutation after further testing in a specialized lab. As a result, her family underwent genetic testing, and her sister was found to carry the same BRCA2 germline mutation, but had not experienced a cancer diagnosis to date. Her sister chose a prophylactic double mastectomy and oophorectomy as treatment, and was found to have a cult of varian cancer. This case highlights the remarkable ability of Garden 360 to provide life-saving information, both for patients with symptoms and for those without. Turning to top-line performance in slide 4, we continued our strong momentum into the third quarter with total revenue growing 34% to a record $191.5 million. This was driven by another quarter of robust precision oncology revenue, which increased 35% in the quarter, supported by significant Garden 360 reimbursement tailwinds and broad-based volume growth, fueled by our smart liquid biopsy transition. Turning to slide 5, clinical test volume for the third quarter grew 21% year over year and 7% quarter over quarter, reaching 53,100 tests, driven by strength across the portfolio. In particular, Garden 360 performed extremely well in Q3 and grew mid-single digits sequentially. Furthermore, Reveal continues to see strong growth, even with our ongoing careful management of volumes ahead of broader reimbursement. As a reminder, our clinical test volume is specific to our oncology tests, which are Garden 360, TissueNext, Response, and Reveal, and does not include screening test volumes from SHIELD. Q3 was another standout quarter for biopharma, with volumes up 40% year over year to a record 10,500 tests. I will share some more details in our biopharma progress shortly. Looking more closely at some of the recent highlights within our therapy selection business in slide 6. In late July, we launched our upgraded Garden 360 LVT and smart liquid biopsy, representing the most significant upgrade to our flagship precision oncology product. Garden 360 is the leading liquid biopsy test for patients with advanced cancer, with industry-leading turnaround time, and the improved platform positions us for continued robust growth and share gain. The Garden 360 upgrade expands the number of genes by nearly tenfold, includes all guideline recommended genomic markers for solid tumors, improves the sensitivity for tumor burden detection by a factor of 10, and introduces the first feature enabled by our methylation tech stack and therapy selection. As the performance and richness of the Garden 360 LVT product evolves, and we continue to generate clinical data and add features, oncologists will gain an unparalleled view of cancer that we believe will quickly become a new standard of care in the clinical management of advanced cancer patients. Due to this compelling upgrade, we are very pleased that we are already seeing an increase in both breadth and depth of accounts and believe this will continue to drive growth as additional capabilities are unlocked over time. In particular, Garden 360 LVT and smart liquid biopsy was the strongest contributor to year over year and sequential volume growth in the third quarter. We also saw continuing improvements in Garden 360 ASPs, which reached $3,000 in the third quarter. Last quarter, we shared the upgrade of our TissueNext test to identify more treatment options for patients with advanced cancer. We have seen strong interest in the expanded panel and are excited to share that effective January 1st, 2025 Medicare pricing will increase from $3,100 to $3,500. Following these great updates, I'm excited to share that we again generated positive free cash flow in our therapy selection business in the third quarter. We also announced a partnership with Polyclinico Giamelli in Rome, a leading European oncology center to implement on-site processing of Garden 360 CDX tests for therapy selection in advanced cancer patients. This will mark one of the first dedicated liquid biopsy testing facilities housed within a hospital system in Italy. This partnership is significant given there are approximately 400,000 new malignant tumor cases recorded annually across Italy. When implemented, oncologists in Italy will be able to access our tests to make more informed treatment decisions for patients with solid tumor cancers. Finally, results from the Scrum Japan Godzilla study were recently published in Nature Medicine, demonstrating the significant survival benefits of using Garden 360 CDX to test patients with advanced gastrointestinal cancer. Of the 4,037 patients in the study, 24% received personalized targeted treatment based on Garden 360 CDX, and this subgroup survived nearly twice as long as those who did not receive Garden 360 match therapy. This study further solidifies the clinical utility of Garden 360 in guiding effective treatment decisions for advanced cancer patients. Turning to our biopharma business in slide seven. As I mentioned earlier, we had another record quarter of reported biopharma samples growing 40% year over year. Biopharma revenue grew 34% year over year in the third quarter. We continue to see a lot of excitement for Garden Infinity, our newest biopharma offering powered by our smart liquid biopsy platform, driven by applications such as improved performance, novel biomarker discovery, and signature development. Smart liquid biopsy now represents over 50% of reported samples and new contracts. Importantly, this strengthened biopharma is driven by our smart liquid biopsy upgrade, and we are still in the early endings of this exciting upgrade cycle. We have recently seen an acceleration of our clinical Garden 360 LDT volume, demonstrating how biopharma R&D testing is an important leading indicator for demand of our clinical oncology tests, and in turn, clinical patient testing is a driver for increasing biopharma interest. Taking together, these elements create an important virtuous cycle in the precision oncology space. Finally, we are also seeing increased momentum in China with a strong and growing pipeline of samples. Now shifting gears to reveal on slide eight, where we are the leader in tissue-free MRD. Last quarter, we shared that data from our COSMOS colon study looking at stage two and stage three patients was published in the peer-reviewed journal, Clinical Cancer Research. This study was also submitted to Moldex for Medicare reimbursement for the CRC surveillance MRD indication, and review is ongoing. Beyond CRC surveillance, we have an extensive pipeline of clinical cohorts for establishing validity and utility for garden reveal. This will be instrumental in building compelling evidence that not only supports efforts to expand reimbursement, but also has potential to influence changes in practice guidelines. Looking ahead to the remainder of the year, we anticipate submissions for publications that will support potential Medicare reimbursement for coverage and breast cancer. Next year, we have important clinical validity studies for additional cancers, such as lungs, pancreatic, and gastric. Moving on to slide nine, we are excited by the demand we are seeing in the tissue-free MRD market, and there are multiple near-term inflection opportunities in 2025. We continue to make good progress towards CRC surveillance reimbursement, which will improve our ASP. We also remain on track on our COGS reduction initiatives for reveal. As a reminder, these two milestones will be a significant step towards our long-term goal of achieving greater than 60% gross margins for our MRD business. While we are seeing strong growth and strong market appetite for reveal, we continue to manage volumes to minimize cash burn, and we'll continue to do so until reveal is gross margin positive, which we anticipate in 2025. Overall, we are seeing tremendous growth and opportunity around Garden 360, TissueNext, and reveal, largely driven by our recent Smart Liquid Biopsy Platform transition. As a result of the great progress we have made this year and are continuing to make, we are more confident than ever that our oncology business will continue to see strong growth over the next few years. With that, I will now turn the call over to Amir Ali for an update on screening.

Thanks, Helmi. Moving on to slide 10. As we have previously announced, we are thrilled that FDA has approved our SHIELD blood test for colorectal cancer screening in adults ages 45 and older who are at average risk for the disease. SHIELD is the first blood test to be approved by FDA as a primary screening option for CRC, and also the first blood test for CRC screening that is now covered by Medicare. Turning to slide 11. Just a few days after FDA approval, we brought SHIELD IVD to market with a successful launch in August. Our initial strategy is to focus on the covered patient population. This approach will help us establish a strong foundation for industry-leading long-term scalability and profitability. I'm excited to share that we have had very positive reception and seen strong demand from physicians and patients in the first few months of the test being commercially available. To highlight this positive impact of SHIELD, I'd like to share an example of a primary care provider in rural South Carolina who had previously been facing challenges keeping patients up to date with colorectal screening guidelines. With the introduction of SHIELD blood tests, he has seen his screening rates skyrocket. And in just the last few months alone, four of his patients received positive SHIELD tests, quickly went through colonoscopy procedures, and ultimately were diagnosed with early-stage colorectal cancer. In all four of these cases, the disease was cut early enough that these patients only required partial colorectomy, avoiding any further treatment, and most importantly, were able to quickly resume their lives. Turning now to slide 12 to share some more exciting details on the launch reception. Early post-launch volume was ahead of our expectations, and we exited the quarter with strong momentum, which we continue to see in the fourth quarter. The majority of our volume is coming from covered patients. We saw robust steps of ordering by prescribing physicians. We continue to see an incredibly strong adherence rate of over 90%, which means over 90% of the patients completed the blood draw. And we are on track to have a trained sales force of over 100 people in the field by end of this year. Moving on to slide 13. We are very pleased to report that SHIELD received a Medicare price of $920, recognizing SHIELD as an important new class of first-line CRC screening. This Medicare price makes us more confident that our ASP will be approximately $500 even prior to an advanced diagnostics laboratory test or ADLT designation. We continue to expect to obtain ADLT designation and secure an even more favorable Medicare price of $14.95 in 2025. Turning to slide 14. CMS has finalized the policy to remove cost sharing for a follow-on colonoscopy after blood-based screening test for Medicare beneficiaries. This ruling proactively removes barriers to blood-based CRC screening and acknowledges its unique benefits to promote access to cancer prevention and early detection, particularly for individuals within rural communities and communities of color that are especially impacted by the incidence of CRC. We are encouraged by the quick inclusion of blood in the final 2025 physician fee schedule. This rule will go into effect on January 1, 2025. Moving on to slide 15. We are proud of our team's execution throughout 2024, starting with publishing our pivotal study results in the New England Journal of Medicine, followed by positive advisory panel voting, receiving FDA approval with the first line screening label, and finally securing a favorable reimbursement rate and successful commercial launch. We look forward to executing our commercial scale-up and ramping adoption throughout the remainder of this year. We are excited about our upcoming milestones in 2025 and making SHIELD one of the most impactful products in the history of diagnostics. We are optimistic about the potential inclusion of SHIELD in American Cancer Society or ACS guidelines and expect to secure ADLT status, which enables improved ASV. We are pleased with the progress and indication expansion for SHIELD to become a leading multi-cancer detection blood test and expect to present our multi-cancer data. We are also planning to upgrade our CRC screening test with SHIELD V2. With that, I will now turn the call over to Mike for more detail on our financials.

Thanks, Amirale. Turning to slide 16, I'll discuss our financial results for the three months ended September 30th, 2024 and refer to -over-year growth rates unless otherwise noted. Total revenue grew 34% to $191.5 million, primarily driven by precision oncology revenue, which increased 35% to $180.6 million. Precision oncology revenue from clinical tests increased 36% to $141.2 million. Clinical test volume grew to a record 53,100 tests in Q3, 2024. Clinical volume growth of 21% was in line with our expectations and was primarily driven by Garmin 360. As Hamli mentioned, we have seen very strong uptake of our upgraded Garmin 360 LBT, which we launched on our smart liquid biopsy platform at the start of Q3. And we've led Garmin 360 to grow sequentially in the mid-single digits. We also saw continued strong growth of revealing tissue during the third quarter of 2024. For the full year 2024, despite the weather impacts we experienced at the end of Q3 and during October, we continue to expect total clinical volume growth to be approximately 20%. Once again, our biopharma business performed incredibly well in the third quarter, with precision oncology revenue from biopharma tests totaling $39.4 million, increasing 34%. This exceptional growth was fueled by a record number of tests in the third quarter, 10,500, which was up 40%. With good line of sight to the end of the year, we now expect biopharma revenue growth to be in the high 20s for the full year 2024. Finally, development services and other revenue totaled $10.9 million. As a reminder, precision oncology clinical test volume does not include SHIELD tests, and we currently include SHIELD screening revenue in the development services and other lines. We'll start to separately report SHIELD revenue and volume in the fourth quarter of 2024 as they become material to our numbers. Turning to Garden 360 ASPs on slide 17. In the third quarter of 2024, we again saw very strong reimbursement and ASP trends for Garden 360. At our investor day in September 2023, we stated our goal was to reach an ASP of $3,000 for Garden 360 by 2028. Since our investor day, we've received an increase to our Garden 360 LBT Medicare rate from $3,500 to $5,000. And have seen significant improvements in both the amounts we've been paid for our tests and the speed at which we've been paid by commercial payers. As a result, we're very pleased to report that we achieved our long-term Garden 360 ASP goal of $3,000 in Q3 2024, roughly four years ahead of target. Achieving this milestone so quickly is a testament to the strategic and operational excellence of our reimbursement team. In addition, the significant improvement in commercial reimbursement has led us to collect more cash than expected for our tests, which in turn has resulted in out of period revenue upsides throughout the year. In Q3 2024, cash collected regarding the 360 tests performed in prior periods was $12 million above our expectations. It's worth noting that of this $12 million upside, more than half relates to tests performed in the first half of 2024, which illustrates how quickly and consistently we're now being reimbursed for our tests. Going forward, although we don't anticipate similar future out of period revenue upsides, we believe our new Garden 360 ASP of $3,000 is sustainable and that we have the opportunity to further improve it over the next few years. Moving on to non-GAAP financial measures on slide 18. Our non-GAAP gross margin excluding cost of screening continues to be very strong, almost 65% in the third quarter of 2024. Non-GAAP operating expenses were $187.3 million, an increase of $10 million compared to the prior quarter. This was primarily driven by a planned increase in sales and marketing expense to support the commercial launch and expansion of Shield. The increase is partially offset by savings in R&D expense due to the reduction in Eclipse clinical trial spend, which completed enrollment towards the end of 2023. We continue to tightly control our operating expenses by leveraging the infrastructure we've built to support all of our businesses, by focusing our R&D spend on projects that will drive future growth, and by directing our incremental investments towards the sales and marketing line to accelerate revenue across both screening and oncology. As a result of our increased revenue and operating leverage, both our adjusted EBITDA and free cash flow improved year over year in Q3 2024. Adjusted EBITDA loss was $56.2 million in Q3 2024, a decrease of $23.5 million from Q3 2023. Free cash flow for the third quarter of 2024 was negative $55.3 million, an improvement of $24.9 million from $80.2 million in Q3 2023. We ended the third quarter of 2024 with approximately $1 billion in cash, which we continue to believe is sufficient to enable us to achieve our goal of reaching cash flow breakeven by 2028. We also believe that achieving a garden 360 ASP of $3,000, well ahead of our target of 2028, will reduce our total cash burn over the next few years and could help bring forward our cash flow breakeven target date. Now, turning to our outlook and assumptions for the full year 2024 on slide 19. We're pleased to be able to increase our revenue guidance for the third time this year and now expect full year 2024 revenue to be in the range of $720 to $725 million, representing growth of approximately 28 to 29% compared to 2023. This compares to our initial revenue guidance of 16 to 19% that we provided in February of this year. This latest increase reflects the further improvement in garden 360 ASPs. The cash collection upside we had in the third quarter. Our higher expectation for full year biofarm revenue and revenue contribution from SHIELD. We continue to expect non-GAAP gross margin excluding screening to be in the range of 61 to 63% and non-GAAP operating expenses to be in the range of $720 to $730 million, representing the flat to 1% decline year over year. In addition, we now expect free cash flow for 2024 to be in the range of negative $265 to $275 million, an improvement of 70 to 80 million compared to 2023, and an improvement compared to our prior expectations of negative $275 to $285 million. We continue to expect that our therapy selection business will deliver positive free cash flow for the full year 2024 and screening cash burn this year will be approximately $175 million. Finally, while we typically reserve granular out year commentaries to our Q4 earnings in February, we would like to share some initial considerations as you think about next year. With the positive traction we're seeing from our launch of garden 360 LDT on smart liquid biopsy, we expect an acceleration in garden 360 volume growth in 2025. As a result of this and continued expected strong growth across both reveal and tissue next, we expect oncology clinical volume growth to accelerate to both 20% in 2025, even without including contributions from SHIELD, which we will report separately. Finally, turn to slide 20 to review our catalysts. We've made significant progress on milestones across each of our business areas this year. As we look ahead to the rest of 2024, we are very excited by the potential opportunities across therapy selection, MRD and screening. With that, we will now open the call to questions.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When the parent ask your question, please ensure your phone is muted locally. We ask you please limit yourself to one question. Our first question goes to Bill Bonello of Craig Hallam. Bill, please go ahead.

Congratulations on a great quarter, guys. Question on the SHIELD plans, sort of two parts on it. One, with the initial Medicare pricing, even before ADLT looking pretty strong, I'm curious if that makes you think differently at all about how aggressive you might be sort of early on in terms of your sales and marketing efforts. And then the second part of that is just conventional wisdom is obviously that you need USPSPF recommendations to secure commercial reimbursement. I'm just curious if, to what degree you think that's the case universally or if you've had conversations at all where people, with payers, where you think you might actually be able to secure reimbursement even without that.

Thanks, Bill, for the question. So I want to reiterate our commitment that we made that we under all kind of scenarios, the level of investments that we are going to have for SHIELD in terms of this spend would be around that maximum $200 million for the following years and this year $175 million, as you see in our reiterated guidance. And even that level of investment is assuming we are going to meet the milestones, the business milestones that we are going to have. I'm very pleased about 2024 and many milestones that we have achieved, but we are still in the early innings, very, very early innings of commercialization. We need to continue to monitor our volume ramp and meeting revenue milestones that we have to continue that level of investment. But obviously I'm very pleased with this Medicare pricing that we got. It gives us a lot of opportunity when you think about now our ASPs, approximately $500 effectively even before ABLT, we can get to a reasonable actually gross margin for this test very soon as the volume starts to scale as we go to 2025. So we are very, very pleased with where we are sitting, but it doesn't mean that these positive developments are going to change our financial discipline of the level of investment. In terms of USPSTF, yes, we continue to look at USPSTF as a major milestone for us that would enable a lot of commercial accessibility for the patient on the younger side in a 45 to 64. Having said that, this segment of the market which is now covered today is very deep. We have a lot of business to mind while we are waiting for guideline inclusion and USPSTF. There is a very, this is a very deep market. So it's not that we are going to be just waiting for that guideline. There is a lot of business to mind here, especially now that we have, we are going to have an LT gross margin in near future. And also keep in mind there is American Cancer Society guidelines on some of the impact that that guideline inclusion could have on select state based on state level mandates that they have.

Thank you. The next question goes to Mark Massaro of BTIG. Mark, please go ahead.

Hey guys, thanks for the questions. Congrats on the quarter. I think some of us were hoping to perhaps hear how SHIELD was doing in the field. I think most people thought somewhere in the low to mid thousands of tests. I know, I think I heard you say you plan to report that out next quarter. But maybe a mirror, can you just give us a sense, any metrics like ordering providers or just feedback that you are hearing in the field? I think that would be helpful. And then a question for Mike about the SHIELD target for 500 million plus by 2028 on a million tests. This is at your analyst day. Assumed a price of 500 plus. Your Medicare price is already set at 920 and may go up to 1500. So just making sure you guys likely see some upside to that initial target that you provided at the analyst day.

Yeah, sure. Mark, thanks for a good question. So we are not breaking out like SHIELD volume at this time. So I can tell you, we are very pleased with the progress. The initial volume post launch is ahead of our expectation. We are now three months into it. We had a good couple of months last quarter, exited last quarter with good momentum. And that momentum continues to build in this quarter for us. We had a good October, but still 3Q was not a full quarter for us. It's a good thing. We do fully intend to report the volume and revenue contribution of SHIELD in our Q4 numbers and Q4 call. So looking forward to sharing more details at the time. The market feedback, as we expected actually, has been very positive. The target primary care physician that we are going after are very enthusiastic about adding this option to patients and giving them the choice. As I mentioned in the preferred remarks, like the depth of ordering is very healthy for us for this blood test, which frankly is just an endorsement of how deep this market is more than our commercial execution. I'm proud of what we've done, but the reality is this market of on-screen patient population and the people who are ready for re-screening is a very, very deep market. So we are seeing very constructive ordering at this time too. I'm looking forward to sharing more details in our Q4 results. Yeah.

And Marco, your comments on our investor target. Yeah, we set the target in 2028 to have revenue of $500 million with a million tests. And so yeah, applying an ASP of $500. I think since our investor date, quite a few things have gone positively for us versus the assumptions we had. I mean, firstly, I think the ASP, getting this Medicare rate of 920, now we already have ASPs around the $500 mark. When we get the ADLT rates, then it's going to depend on the pay and mix, but I think we're confident that we can increase that ASP above $500. So that's one thing. I think the other two assumptions that we had at that investor date was one that we were assuming something more akin to a second line label. And of course, that's gone in our favor now and we have a first line label. And then secondly, we assumed that competition would be on the market about approximately a year after we launched. And I think now we look at where potential competition is, it's probably at least two and a half years to be on the market after our launch back in August. So I think things are going very well for us. We don't want to sit here today and give out some new long-term guidance, but I think that $500 million and one million tests we're feeling very confident about.

Thank you. The next question goes to Sabu Nambi of Guggenheim. Sabu, please go ahead.

Hey guys, thank you for taking my question. Our recent cable checks indicate that therapy selection time may be larger than what we previously anticipated. Even during your IPO, the 700,000 late-stage metastatic solid tumor patients for a test like Garden360. And given repeat testing opportunity, could you comment on what you see as the time in maybe the number of tests for Garden360 and with respect to repeat ordering for the same patient?

Yeah, no, thank you for the question. It's something that we outlined and raised up at our investor day last year. It's essentially that right now the marketing therapy selection has been focused on what we call zero to one, just getting patients to one test per patient for a lifetime. And you see that now there are first line, second line, third line therapies. There needs to be adaptive management of patients as their therapies stop working and they get cycled to a new therapy. And so, yeah, we see the market growing by orders of magnitude. We can see a future where patients are getting three, four, five therapy selection tests over their lifetime, which obviously grows the market considerably. And that's why I think we're very excited about the future that is before us. We're seeing with our biopharma partners that they're testing their patients multiple times or testing samples multiple times for some of these new drugs. And just like we've seen, we saw record biopharma volume over the last few quarters in a space where people were struggling with biopharma. We are an outlier there. And now that's translating to the clinical side. And I think you're going to see that further translate to further momentum in clinical testing. So, yeah, we see this as a really important growth driver that frankly only liquid biopsy can really hit because you can take tissue biopsies multiple times from patients in an easy way. And this is really where having what we consider to be the best performing and I think really sort of most complete liquid biopsy on the market with our new upgraded panel puts us in full position to capture that market.

Thank you. The next question goes to Tycho Peterson of Jeffreys. Tycho, please go ahead.

Hey, thanks. On the back of Cosmos, I'm just wondering if you can help us size, you know, potential upside from reveal surveillance coverage next year. I know you talked at September conferences of about 12 or 15 million potential, you know, patients being cancer survivors, but what could it do next year? Any more framework you can put around ASP? You obviously have talked about the 2000 ASP when you're paid by Medicare, but how do we think about ASPs next year? And then did you give a G360 number? I know last quarter was 2500. Can you give us the number there? And are you reiterating your 20% target for the year?

Yeah, I mean, I can maybe take the 20% target for next year Tycho. So one, we, yes, we were reiterated just on the call and that 20% clinical volume growth, you know, we still expect that for this year. And, you know, we've seen an acceleration in Gartner 360 volume growth, particularly driven by the LDT. And so as we go to 2025, you know, we talked about volume acceleration with Gartner 360, but then also we're seeing, you know, good traction with tissue next and reveal as well. And, you know, driving reveal acceleration and we've, you know, we've said this many times is going to be focused or driven by the fact that we get additional reimbursements on the CRC surveillance side and that we bring our cost per test down. So we move reveal from being a negative gross margin to positive gross margin. So we're making good traction on all of those things. And so, you know, as we go into 2025, assuming we get the CRC surveillance reimbursement from all the X, I think, you know, we'll have an uptick to our ASP. It's a bit difficult to quantify that uptick yet. It's going to depend on the reimbursement rate that we get from Medica. But yeah, we'll have an uptick in the volume. And again, with gross margins being positive, it's going to allow us to put the foot on the accelerator and push reveal to significantly accelerate next year.

Thank you. The next question goes to Paneet Suda of Larrinc Partners. Paneet, please go ahead.

Yeah. Hi, I'm Errol Lee, thanks for taking my question. And Mike, you know, it's great to see the Medicare at $920 for shield and it'll be material in fourth quarter. I mean, a bigger question here is that you're ahead of any other liquid biopsy CRC screening test in the market. A competitor could potentially emerge in 2026. But I think you're going to have V2 data before that. So could you please provide a timing on that V2 data? And also, what is your assumption of market penetration for shield CRC now since having this in the market since August? Thank you.

Yeah, thanks, Paneet. So in terms of shield V2, we continue to expect having that data. And, you know, if data is positive, potentially upgrade our shield to that V2 in 2025. So we are making progress there. In terms of market share today, our blood test, you know, we are just two months into it, so we don't have really any material market share in terms of CRC screening. Yes, in terms of our kind of long-term projection, what we shared in last fall in the investor data, you know, assumption that one million at a time, we assume we are going to have 60% market share in blood-based CRC screening at a time. And as Mike mentioned earlier, we assume there would be more progress by some of our competition than what we have observed. So, but we'll see how the market would shape out. We don't expect to see any other competing tests to get FDA approval and Medicare reimbursement for at least the next two years, not two and a half years.

So very good

change. Thank you. The next question goes to Kyle Mixon of Canaccord. Kyle, please go ahead.

Hey, thanks for the question. Congrats on the quarter. For Mike, the growth implied by the updated guidance is 20 to 29% over 23. That compares to 16 to 19% in the initial guide for 24. How much of that 11 percentage point delta in growth has been from these, like, prior period collections and the Medicare pricing updates for G for 60? Like, essentially, what's the core revenue growth? And quickly for Amirali, SHIELD has been available as an LDT since May of 2022. How many of those early patients have retaken the test? What are those reordering rates looking like so far with your expectations? Thanks.

Yeah, Kyle, from the sort of prior period cash-out side that we've had, you know, we reported 8 million in Q1 and then 8 million in Q2 and then 12 million. So 28 million in total. But of that 28 million, 8 million of that is within 2024, so coming from Q1 and Q2. So effectively, from these out of period upsides, it's roughly around 20 million. So, you know, the other obviously drivers of growth have been on the clinical volume side. Primarily, that's Garden 360 volume growth. It's been increased to the Garden 360 ASP. You know, we reiterated again that that's now at $3,000. And then, of course, the incredible performance that we've seen in the biofarm business. So, you know, growth drivers really across all of the business on top of the, you know, the additional $20 million that we've got from prior year

upsides. Regarding reordering rate, Kyle, like as you mentioned, we launched the LDT in May of 2022. So, and I recommend it interval is every three years. So, we haven't reached to that time window for to see what fraction of those patients would get retested. That would be probably something towards like later part of next year maybe you can have some.

Thank you. The next question, go to Tejas Sivant of Morgan Stanley. Tejas, please go ahead.

Hey, guys. Good evening. Maybe I'll start with one on G360 and then one on screening. So, Mike, one for you on that sort of growth rate and clinical volume next year exceeding 20%. You know, you've got the SmartLB upgrade, you've got the ESR1 dynamic now sort of squarely behind you. You called out a little bit of weather impact as well weighing down, you know, recent volume and you've got the surveillance reimbursement for a wheel coming through which should have volume in the back half of next year, right? So, any sort of finer point you can put on how much, you know, the quantum of the acceleration versus that 20% floor for next year. And then on the shield side of things, Amirali, can you share some lessons on what you've learned in terms of, you know, the initial lab setup and the ordering process for these new accounts that have come on board post-August? And have you had any sort of push back from health systems, et cetera, around quality scores, just trying to get a sense for what that could mean for the shield volume ramped into 25 as we, you know, try and benchmark it versus the early days of stool-based testing?

Yeah, I'll take the first one on the point, Tejas. Yeah, I think, you know, I think you laid out, you know, what we've seen in 2024 with the, you know, difficult ESR1 comps with weather impacts, but, you know, we're still on track to be approximately 20% growth this year. And, that clinical volume growth will accelerate in 2025, above 20%. And again, you know, I laid out in the prepared remarks, but that's going to be driven by growth across all the products on the oncology side. So yeah, GARN and 360, again, you know, we're seeing really good traction with the LDT and the Smart Liquid Biopsy Upgrade. So we know that that volume is going to accelerate into 2025. Again, TissueNext, we had an upgraded product launch just recently, and we've seen nice, nice traction there. And so that growth is accelerating. And yeah, again, you laid out the upsides that we can have on reveal once we can start to accelerate the volumes and some points in 2025. So I think, you know, we don't want to be more specific than accelerating above 20%, but I think we saw here, very confident across all the products on the side of the business.

Burning Sheetwork front experience since August 1, you know, definitely just being in market, the LDT to, you know, those kind of experimentation, you know, getting feedback from market, we really incorporated a lot of those learnings in this successful launch in terms of digital solutions that we have workflows that we have connection to blood draw services that we have, even on EMR integration, you know, still it's very, very early days, but about, you know, 15% of our orders even these days are coming from the accounts that we have full EMR integration. We are in very early innings of it, but I'm very pleased with this strong foundation that we built to support this strong launch. In terms of quality score, that's very relevant. That's very relevant parameter. As part of our targeting, we are kind of not going a lot after the health system accounts or the ones that, you know, have higher sensitivity around quality score. We continue to believe actually shield testing has potential to even improve quality score without inclusion of blood-based TRC screening as a modality based on the fact that on screen patient come around the table and then a fraction of them go through colonoscopy after getting the blood data, but we are kind of not targeting those accounts which have high sensitivity toward quality matrix till we get to the guidelines and either scores gets adjusted, but that's a very material parameter in terms of the adoption of this over time.

Thank you. The next question goes to Dan Brennan of TD Cohen. Dan, please go ahead.

Great. Thank you. Thanks for the questions. Maybe I'll just ask on reveal. Could you provide any color on the contribution in the quarter and kind of what's assumed in 4Q? For Cosmos, I think you submitted maybe three or so months ago. Could you give any color on how the process is going, when you expect to hear back? And then I know you put in the slide the breast publication, I think is expected before year end. Could you just provide some more color in terms of the indication and what would that portend for a moldic filing?

Thanks. I think the second half, and I might take the first. Yeah, in terms of the process around reimbursement for the TRC surveillance indication, we're making good progress. There's been a couple back and forth some clarification of data, but in the end, we're still hopeful that sometime early next year, we should be able to get over the finish line. We've made good progress with the breast data. We expect to submit that soon for publication. And then it'll depend on how fast it sort of comes out and gets accepted by the relevant journal. But yeah, we think next year should be a very important year for us in terms of getting early the two largest indications and MRD breast and CRC under our belts. And then obviously that coupled with the major conceded action initiative we have should put us in good shape.

Yeah, maybe on the reveal. We're not breaking out the volumes or the revenue contribution for reveal. I can tell you that in the sequential growth, the biggest driver of that sequential growth and the majority of the sequential growth was from Garden 360. But coming to second place was reveal. So it's still growing very nicely, even though we're managing those volumes. And so we saw nice year over year growth on reveal and nice sequential growth. So it's going well. And again, we're really looking forward to 2025 being a pivotal year for reveal.

Thank you. The next question goes to Dan Arias of Stifle. Dan, please go ahead.

Hi, guys. Thanks for the questions. Mike, on the acceleration that you're talking about for clinical volumes next year, how much are you attributing to international growth Japan and UK? What's the contribution like there? And then to your point on just reveal, I guess a clarification maybe, does that acceleration depend on getting surveillance on board as reimbursed by a particular day? Do you have less confidence in it if that process gets dragged out of it into 2025?

Yeah, I would say, again, the main growth driver, as we see the acceleration next year, is still going to be Garden 360 in the US. And again, that's what we see in the main traction with Garden 360 LVT on smart liquid biopsy. So, you know, international, it's still a relatively low percentage of our overall volume. So I think we still expect to see growth internationally, and particularly in Europe and the UK. But really, it's going to be dwarfed by what we see in the US. And for reveal, yeah, I think, again, we see good growth. We're managing that growth on reveal. We're making really good progress on reducing the cost per test for reveal. So we hope that that can be implemented and put in place relatively in the relatively near future. So even without CRC surveillance reimbursement, I think we'll be at a place where our cost per test of reveal is at the low end that we can start to push on or reveal and accelerate volumes even without a CRC surveillance reimbursement. And when that comes, then obviously, you know, we'll move to being gross margin positive, and we can really push a lot harder. So I think, yeah, regardless of the CRC surveillance reimbursement, I think we still expect to see an acceleration reveal. But that reimbursement is going to allow us to just really push a lot harder.

Thank you. The next question goes to Eve Burstein of Bernstein Research. Eve, please go ahead.

Hi there. Thanks so much for taking the question. Maybe just following up actually on that international question. You said big drivers of CRISPR-T360 will be in the US and then primarily in Europe. And in late October, a new source indicated that you actually shut down your Shonan Research Center in Japan before the full release of that site and attributed it to slow uptake of G360 in Japan specifically. So is that a fair characterization of why you shut that down? And can you add more color on the commercial traction that you are seeing in Japan and what your expectations are for G360 there in the short and the medium term?

Yeah, I mean, the lab closure we had there really had no relationship to sort of any other progress in Japan. It was just something that we had thought would make sense a number of years ago, especially when we had the sort of South Bank KV and it's not something that made sense at this point going forward. And so we took the opportunity to really cut some costs over there. That being said, you know, the ramp has been a little bit slower than we expect in Japan, but that has mostly to do with the way that reimbursement works there and the fact that potentially these therapy selection tests are only reimbursed once for a lifetime, regardless if it's tissue or liquid. And so tissue has more of a role there in terms of preferences right now. But we're very encouraged by some of the new programs we have there and we think over time we can start sort of moving forward and displacing some of the tissue volume that's there in Japan. So I think it's still going reasonably well. It'll just take a little bit more time given the structural nature of the market there in Japan.

Thank you. The next question goes to Doug Schenkel of Wolf Research. Doug, please go ahead.

Hey, good afternoon, guys. A quick one on guidance and then I want to just try to do some shield math and see if you'll bless it. On guidance, you increased full year guidance, as you know, at the revenue line by almost 20 million dollars. That's at the midpoint. Just wondered if you'd talk through the bridge. You know, is this essentially just the Q3 beat or is there more to it than that? Because if it's just the Q3 beat, I'm wondering if, you know, that really doesn't capture shield momentum, you know, G360 momentum with the new version and, you know, ASP bump. Not to mention trends on more rapid collections. It just seems like, you know, the arrow bars might skew to the upside there. So I just want to see if you'll comment on that. And then on shield, I'm going to take a shot at this. Development service gross margin was about 22%. That's about 40 points below trends. So, you know, that suggests cogs in that category were maybe 4 million higher than you would have expected pre-shield. So if we assume cogs per test of like 6 to 700 bucks, you know, which is higher than your goal, but given the early stage of the ramp seems reasonable. It seems like you probably did 5 to 6,000 tests in the year. Thank you.

Yes, Doug, actually, I think, you know, there's a few factors in us increasing our guidance. And so previously it was 690 to 700 and now it's 720 to 725. So yes, something like a 27 million step up at the midpoint. There's a few things in that. You know, one of them, of course, is the cash upside from out of period payments that we saw and that I talked about in the prepared remarks. The other is, you know, gardener 360 ASPs and they've gone up consistently throughout the year and now they're at, you know, now they're at $3,000. So we've got an uplift on the gardener 360 ASP. And then biofarmers revenue, you know, previously we were guiding to sort of high teens revenue growth. Now we're guiding to high 20s revenue growth. So they're the real drivers, of course, on top of that. We start now to have some revenue contribution from Shield. So that's also included there. You know, the one thing that stayed consistent over the last few quarters has been our projection of clinical volumes being at 20%. And again, we reiterated that we're, you know, expecting to come in at with approximately 20% clinical volume growth. So that's where we are with that. I think, yeah, on your trying to back into sort of some of the Shield volumes, I think some of that's a bit off. You know, one thing that we can talk about or want to talk about is the cost per test. And so, you know, prior to the launch, that cost per test was over $1,000. And a lot of that built into the cost was the fixed cost. And so as we've gone into launch now, as we've started to see traction with the volume, we've seen that cost per test come down pretty rapidly. So now it's, you know, it's below $1,000. And we expect that to continue to reduce over the next few quarters. And again, you know, we've set this target for to be gross margin neutral, gross margin positive when we get the ADLT rate. And so I think we're well on track with the cost reduction on Shield together.

Thank you. That's all the questions that we have time for today. This now concludes today's call. Thank you for joining. You may now disconnect your lines.