Guardant Health, Inc. (GH) Earnings Call Transcript

Thanks so much. You've got Liza Garcia here, UBS Life Science Tools and Diagnostics with John Sourbeer, and we are very, very fortunate. We have here AmirAli from Guardant, Co-CEO. He will be joining us for a panel on liquid biopsy and all the exciting things that Guardant is doing at the moment. And so thank you very much, and welcome.

Thanks for having me.

Well, let's start off, I guess, is kind of something top of mind, reimbursement win for Reveal at the beginning of the month. Obviously, yours has a little bit different than maybe some of the other colorectal MRD tests in the market. So I was hoping you could kind of update us on the reimbursement amount that you have with Medicare. For Reveal as the only blood-only offering and kind of where it stands, seeking the ADLT label and kind of what to expect there.

Yes. Hi, everybody. It's great to see some people here, and thanks for having us. So yes, definitely, we are very excited with this Medicare coverage that we got for our Guardant Reveal. It was in works for some time, and we are happy that for this indication that got coverage. We took it to the finish line with great collaboration with the MolDX team. So as you may know, there are a bunch of assays in the market around like tissue -- tumor tissue informed kind of assays, which uses the prior information to really look at MRD using blood test. We don't look at those tests really as liquid biopsies or just blood-only tests. When you look at the opportunity here, for instance, in colorectal cancer, some of our research has shown that even in that setting, about 30% to 40% of the patients really tissue testing or in the MRD setting is really not an option for them. When you go into other indications like, for instance, lung cancer, that percentage, in fact, goes up much, much higher. And we believe actually the clinical science and the technology advancement enables looking at MRD signals without knowing the prior information from the tumor tissue. And that's what we enabled. So the indication that based on the data package that we had, we got from MolDX in terms of Medicare coverage, is a bundled test as long as the testing starts within the 3 months of curative intent treatment or surgical resection, for instance. For a bundle test, program test, multiple tests and -- but the testing needs to start within the 3 months. The [ partite ] does not cover, is let's say, if a colorectal cancer patient is cancer survivor 2 year after surgical resection for instance. You want to look at the recurrence of the disease or the relapse of the disease in surveillance setting, our current coverage policy do not cover it. We are -- we have some data on that setting, and we are generating additional data. So in fact, beef up our clinical evidence for that specific indication. So in fact, we have an active clinical study, which is in the late innings of generating the data. So we are really hoping that in foreseeable future this coverage would be just a good start, but can get expanded to even the surveillance. Regarding ADLT, we believe actually still ADLT is an open option for us since this is the blood-only assay. It's first of its kind. It's a huge unmet need, and there's no other Medicare solution out there even like forget about the Medicare coverage requirement, there's no other solution, which is really blood-only in the marketplace at this time. So it has that innovative aspects, which we expect would qualify for ADLT status.

Great. And then just time lines surrounding ADLT, kind of how that process might shake out for you?

So we just got the coverage in a positive just a couple of weeks ago. So we need to go through that process of prepping our application and submitting it to get the feedback about this status. But please stay tuned. It's not going to be a long journey, but definitely, we have some work to do just prep our package. Now as I mentioned, it's just 2 weeks after the coverage.

Well, congratulations. Revenues on the horizon. So maybe in the next -- you talked about kind of the strategy for Reveal to kind of be multi-cancer MRD. And so kind of legging into lung and breast is the next indication of the line. I was hoping you could kind of maybe touch on time lines and discuss kind of these 2 indications.

Sure. We are very excited that we are on track to upgrade our Reveal [ test ] from a CRC-only device to also include indication for lung cancer and breast cancer by end of the year. And we are doing some clinical validation to generate the evidence to actually be our test is working in that setting. We've shared some data in different conferences around breast and lung indications, and we are generating some additional data as part of this clinical validation. But we are on track to hopefully upgrade this device to lung and verse cancer indications.

Great. And presumably, more indications to come? Is that way to think about it?

Yes. In general, our belief is with the blood test, you can do multi-cancer screening for screening that you don't have tumor tissue information. And we are excited with the progress that we made on the multi-cancer screening. And effectively, MRD is there are a lot of similarities. And if you believe you can do screening with just blood tests, whether believe that you can do MRD without the prior information of tissue. I think there is some kind of a misunderstanding in our field that for sure, tissue inform should have better accuracy, better sensitivity, better specificity. And our data, in fact does not support it based on what we've seen so far, with blood test, you can get very good specificity, you can get good longitudinal sensitivity. We've presented some of that data and we are generating more data in that setting. So we believe tumor information is in blood and just that prior information make the technology simpler, but doesn't change the science or biology. Tumor information is there, unless you cannot detect it. So just with more sophisticated technical mindset, MRD solution can be blood-only for many different indications.

Okay. Exciting stuff on the horizon, technological innovation. So maybe thinking about that. So smart liquid biopsy, you're you started that on the biopharma side, you're starting to process samples. So you've talked a little bit about differentiating there. You've talked about BRAF mutations in methylated promoters of BRAF genes as an area of interest and expanding the opportunity there for PARP. I guess just wondering how to think about the opportunity with smart liquid biopsy and kind of is it companion diagnostics or kind of just really where you see it and also just what you're seeing so far with the initial samples?

Yes. So we are -- this is a very exciting development for us at Guardant like 2022 is -- had a good start, and we are excited actually hopefully, how it's going to end throughout the year. One of the positive development this year was actually getting to this early access milestone for our smart liquid biopsy platforms for some of our biopharma partners. What we are doing just as a reminder, with this smart liquid biopsy platform is not only we are just looking at genomic changes in terms of SNV, CNV, indel, and different kind of variants that you can have in genome on the somatic side, we are also looking at epigenomics almost at a whole genome level in a very large panel setting, plus some other modules that smart liquid biopsy have. What this enables is generating some new clinical insights, which is highly valuable for our biopharma partners to further understand the mechanism of action or lack of action about an era that has been typically really a dark matter in terms of looking at some of these epigenomics, especially at a dynamic level, that the only way you can get that information is through blood testing. We are very excited with this and some of the early conversation has confirmed this level of excitement by some of our partners. Now in the clinical setting though, I think this smart liquid biopsy would really redefine what liquid biopsy can do for treatment management, treatment selection. An example that you mentioned is like straightforward example is in the PARP inhibitor setting. As you may know, PARP inhibitors, there are a bunch of them now. And typically, they are indicated for patients with somatic mutation BRCA deletions or mutation. In fact, now based on literature, it's known that a fraction of the patients do not have BRCA somatic mutation, but they have methylation change, they have hypermethylation in the BRCA promoter region. And in fact, some science is getting developed that looks like those patients are also showing activity against PARP inhibitors. So now we are going to generate a bunch of new patients, which are going to be indicators hopefully for these PARP inhibitors. And looking at these signature using a blood test needs a totally different technology stack than a bunch of computing assays that we are seeing in our field. This would change the paradigm for liquid biopsy as an example. Some additional clinical utility is going to come enabled by this smart liquid biopsy, for instance, a breast cancer patient. Is this patient metastasizing in brain or metastasizing in bone? And the treatment of the patient with brain metastasis is different and the patient who have metastasis some other places. Some classes of therapeutics may work better some classes of therapeutics may not work better anymore. We can get this kind of insights through smart liquid biopsy and looking at these epigenomic patterns that we are assaying with our platform test. We believe this is the future of liquid testing. Tissue cannot get there. because this information is just in the blood. And also, we don't believe some other activities in our field are okay. Let's just look at 20,000 genes just for the sake of looking at 20,000 genes, while 19,000 genes never have been associated with any cancer biology versus the biomarkers that we are going to add in smart liquid biopsy, potentially would be very clinically informative for treatment selection and other product pipelines that we are going to have at Guardant.

Yes. Okay. Interesting stuff. So I guess, thinking longer term, would it be potentially kind of taking some of the smart liquid biopsy, content and potentially placing it on some of the other products in the clinical setting, thinking about that kind of pathway as well once you kind of progress a little bit further?

Yes, absolutely. We look at it as a platform technology that would really take a bunch of the assets at Guardant to the next level. And this is a huge really leverage opportunity and synergistic opportunity that we have at Guardant like some of the batch bone of smart liquid biopsy has been developed as our findings and understanding some clinical insight through our screening activities, then we took it to a total and new level as a platform for our oncology. So this is really a huge leverage, and I think, synergistic value that we are getting at Guardant by being the first company who have offering and clinical and biological insight across the continuum of care. We are very excited about the potential here.

Good stuff. Okay. So maybe moving over to another exciting product that you have, Shield. So -- adherence. First 1,000 samples showed 90% adherence. Can you provide an update kind of beyond that and what you're seeing?

So one of the main promises of blood testing in the CRC screening setting is offering higher compliance to screening. That's really the big unmet need that we have in the field. That one out of 3 patients are not getting screened. 3/4 of the deaths are coming from the patients who are not up to date with their cancer screening protocol. And that has been the potential and the promise of blood test as a new modality of tests that potentially would increase the compliance of patients to testing. Effectively, what we heard from one of the former USPSTF members is one of the best tests in the CRC setting is a test that patient take at the end of the day. So what we've seen in just very early days of our commercial activity with Shield is confirmation of this promise. We talked about the adherence rate, meaning like, let's say, there are 1,000 orders that we get from physicians, how many samples at the end we get in our lab? So adherence of the patients to be part of that testing when physician orders it. And we found that number was more than 900. So more than 90%. And this is very exciting for us. It's just a first step of proving the utility of blood test in increasing compliance by increasing the adherence of the patient to getting the test. And we are getting to these adherence numbers without calling the patients 2 to 5x after the doctor orders. We are not spending millions of dollars in this patient navigation programs and a lot of mailing and texting and calling to patients and physicians to make sure the sample comes to the lab. They are just coming to the lab. So as a result, we believe blood really has the potential to increase compliance rate in colorectal cancer screening to way over 85% in 10 years. And we are very excited to see what our pivotal study would show so we can really enable this for community and deliver on this promise of blood testing for early cancer detection.

Great. So I guess you kind of hinted at that pivotal study. Can you talk a little bit more about the real-world evidence you're trying to gather on adherence?

Yes, sure. So the data that I talked about, like experience with the first 1,000 commercial is really the real-world experience that we are getting from the field coming from a few hundred physicians, a few hundred accounts, really, in the real world, what's happening. On top of this, we are also going to generate some additional clinical evidence through clinical studies, protocol-driven clinical studies. We mentioned that actually, we are launching some highest [ team ] investigator-sponsored trials with some major health systems this year. And what they're doing is they're incorporating Shield tests into their menu of colorectal cancer screening with a clinical end point of what happened to the overall compliance in their health system after they incorporated blood tests into their menu of offering to the patients and consumers. We believe that data would be very favorable, but we are going to generate that evidence and that would be, again, a confirmation of a potential that all of us believe, that the blood is going to increase the overall compliance to colorectal cancer screening.

Great. Okay. So I think everybody is kind of on the needle for this one. Very close at this point. And last week, you reiterated that you feel good about a PMA submission by year-end. I guess, kind of what gives you confidence that year end is a great target and kind of what's left to do? And obviously, your time lines. Love to kind of hear how you're thinking about that.

Yes, ECLIPSE, pretty excited actually what we are going to see in this clinical study. Finally, it just feels good to be in the position of power over the study versus sometimes studies in a position of power on you so -- and we are at the time of, I think, last week that we had our earnings call, we had 59 CRC general studies powered in the range of 60 to 70. And even since then, we are making progress. So we are really in a position to say let's just go through on blinding exercise and just see what we have. So that's one major contributing factor in our really confidence that now we can really think about the timing of this readout versus previously, although we know the prevalence, you're just dealing with few events that needs to happen. And do you get it this week, do you get it 2 weeks from today, there was some kind of variation in terms of timing. So we are in a much better shape in terms of our confidence in really this time line. The other aspect is ECLIPSE is a chapter of our PMA submission to FDA. This is not the only thing that goes to FDA. There is multiple other chapters that needs to be prepped to retain additional data that needs to get gathered about the performance of the test in analytical setting. All that is effectively the PMA. And our progress in generating the data for those studies, our progress in our modular submission to agency. Some of our earlier modules have been submitted to the agency. We are just waiting for this last module of data package effectively. All these are basically good imager for us to really show that we are on track to submit this PMA by end of the year. That I would be very proud when we do that because that was our plan for really long term. And although ECLIPSE readout had some kind of up and downs with just managing the other activities, we are really trying to get this PMA submission done before end of the year.

Great. So you presented now scenarios to think about kind of the readout and kind of where you could see a different sensitivities kind of what that would translate to in terms of what you think about test per year in the market. You've got 75%, 3 million to 4 million tests, 85%, over 10 million and then even more if you hit 90 plus. So just kind of thinking about how did you dimension the market? And what underpins these assumptions and maybe what you thought around advanced [indiscernible] here?

So let me maybe walk you through how I'm going to look at ECLIPSE data when we have that readout. There is a domain of failure, study failed. And there is a domain of success, study had a positive readout. And within that positive readout, there are different zones in terms of how successful the readout was. So the failure domain is if we find CRC sensitivity, let's say, below 75%. Probably we are not going to -- we are going to, even if there's [ epic protocol ] and with 68%. But definitely, that's not our desire -- it's -- we put it on a failed bracket. And the CMS requirement is like 74%. So those numbers, they are like in the failed bracket. Now when we go into like high 70s, 80s, 90s, that's a success domain spectrum in terms of the study being positive. Based on all the research that we've done, what we believe at this time is if our CRC sensitivity is in the lower end of the spectrum, meaning between 75% to 85%, we believe in 10 years, the opportunity for us, our forecast, is running 3 to 4 million tests annually in 10 years. We look at it as a $2 billion brand in 10 years. And we believe that would be a profitable $2 billion brand. That's why I put it as a success story. So if we see 85% and higher, which is all the data we presented in different conferences, and we talked about for early stage CRCs, we've seen sensitivities between like high 80s, low 90s. So if we end up in this bracket of 85% or higher, we are talking about a $10 million-plus annual testing in 10 years. which is at least like $5 billion to $7 billion brand. And obviously, that would be very profitable branding in 10 years too. So that's the way that we are trying around looking at the ECLIPSE data based on all the market research that we've done and how the potentially agency would look at it on how the CMS NCDs return, and how USPSTF is going to look at it. We believe, again, as long as the performance of CRC sensitivities bits like or above, which is again the 75% or above. We are going to be included in USPSTF guideline at the time when they go through the process. Now you asked about advanced adenoma. I referred to just a market research readout that, in fact, I got debriefed on a couple of days ago, which is in alignment with what we've seen before, and we've talked about it. The research was a conjoined analysis of a bunch of directors and the analysis was around the sensitivity of adoption when you change the CRC sensitivity, when you change specificity, when you change advanced adenoma sensitivity. And what we saw, again, there is a huge dependence to CRC sensitivity. We checked between 75% to 95%. And for advanced adenoma, we checked 15% sensitivity to what I believe was 40% sensitivity, a Cologuard-like sensitivity. I can tell you for advanced adenoma, you should use a magnifying glass to really see if that bar is changing. We didn't really notice. And that's what we saw before, and we continue to see. So really when we get the ECLIPSE readout laser attention for me would be on the specificity and CRC sensitivity and after that, advanced adenoma.

Great. Super helpful. So colorectal Shield is not enough. There is going to be more. You talked about adding lung to Shield, there's this data published. But if you could walk us through how to kind of think about the clinical data set readouts and the updated assay and how that would kind of -- how you're thinking about a long plus CRC kind of Shield.

Yes. So the promise of blood test is unlike, for instance, stool test that you can just use stool for CRC screening. I highly doubt with stool test, you can find breast cancer, for instance or like lung cancer, I highly doubt that. The promise of blood test is you can look at multiple diseases all at the same time in the same biospecimen. So CRC was never our only indication. CRC always was our lead and anchor indication. We've been working on the multi-cancer screening version of this test for years. Initially, actually, we started with CRC lung, breast, and ovarian. But also, we've shown some data for the performance in pancreatic cancer and bladder cancer recently. So for lung cancer, actually, we are going to upgrade our lab developed test version of the Shield to include long indication in 2023. We've shown the data already in different case control studies. In early stage line, we have sensitivity of high 80s, 87% I believe, is the last data that we've shown with very good respectable specificity. When you compare this with standard of care, low-dose CT scan, the average has 80% sensitivity, 80% specificity, with compliance rate of less than 5%. I think blood would redefine potentially how the lung cancer screening can be done. That's why we are very excited about it. We are doing some clinical studies since 2017 to collect samples for clinical validation of this test. That's part of the requirement of launching this LDT test next year. But that's just good enough for the LDT upgrade as a registrational study to add it to our FDA -- add lung cancer as an FDA-approved indication to device, we are running a pivotal study, which is our second 10,000-patient screening study called SHIELD LUNG. And that study started earlier this year. We had FPI, the first patient in that study January of this year. So still we are in the early innings of that, but the study already started.