Guardant Health, Inc. Q2 FY2021 Earnings Call

Good afternoon. Thank you for standing by. Welcome to the Guardant Health Second Quarter 2021 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, we will have a question-and-answer session. Please be advised, today’s conference is being recorded. I would now like to turn today’s conference over to Carrie Mendivil, Investor Relations.

Thank you. Earlier today, Guardant Health released financial results for the quarter ended June 30, 2021. If you’ve not received this news release or if you’d like to be added to the company’s distribution list, please send an e-mail to investors@guardanthealth.com. Joining me today from Guardant are Helmy Eltoukhy, AmirAli Talasaz and Mike Bell. Before we begin, I’d like to remind you that management will make statements during this call that are 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. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release Guardant issued today. For a more complete list and description, please see the Risk Factors section of the company’s annual report on Form 10-K for the year ended December 31, 2020, and in its other filings with the Securities and Exchange Commission. This call will also discuss certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP financial measure may be found in today’s earnings release submitted to the SEC. Except as required by law, Guardant disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, August 5, 2021. With that, I’d like to turn the call over to Helmy.

Thanks, Carrie. Good afternoon and thank you for joining our second quarter 2021 earnings call. Our mission at Guardant has always been to ensure patients have access to innovative oncology products. Today the vision is clearer than ever, and I’ve never been more excited about the opportunity ahead of us. This afternoon we announced a new leadership structure, which will allow us to aggressively move and scale into new areas of growth across the continuum of cancer care. We have created two focused areas within Guardant; oncology and screening. AmirAli and I will serve as co-CEOs, with AmirAli leading our screening efforts and me leading oncology. We believe this leadership structure will provide the focus and strategic attention required to continue as the liquid biopsy leader in oncology, while aggressively pursuing the massive opportunity in cancer screening. This structure will also allow for scalability to address new areas across healthcare beyond screening and oncology. Everything we do at Guardant is motivated by our commitment to serve patients. We are dedicated to bringing the absolute best products to market that will provide clinically actionable information to inform patient care. We believe that this new focused leadership structure will allow us to more rapidly address the unmet need to serve patients. And in line with these commitments, I will start off today with a patient story. Last March, a 58-year-old woman was diagnosed with colorectal cancer. Shortly after her diagnosis, surgery was performed, followed by adjuvant therapy. In follow-up, her oncologist detected elevated levels of CA, but she scanned negative for evidence of disease. At another follow-up just over a year after the initial diagnosis, her oncologist ordered a Guardant Reveal test, which showed ctDNA negative. Guardant Reveal directly measures tumor-derived DNA in the blood, while CA has its own specific biomarker and can be elevated in multiple cancer types, for example, in smokers and in patients with various benign diseases. Guardant Reveal has a sensitivity of 91% compared to the CA test with a sensitivity of 69%. With a higher sensitivity than CA in the surveillance setting, Guardant Reveal demonstrated to the patient that she was not actively progressing. This story highlights how Guardant Reveal can provide confidence and reliability in recurrence testing for cancer. Now turning to our second quarter performance. Revenue grew 39% to approximately $92 million. Second quarter clinical volumes grew to 20,830 tests, representing 52% growth over the prior year period and up 13% from the first quarter of this year. While patient visits and office activities are still not fully back to pre-COVID levels, we are pleased with how well our commercial team is executing in this environment and still achieving healthy volumes. International clinical volumes were impacted by the resurgence of COVID cases, especially in countries where the vaccination rates remain low. During the second quarter, we saw strong growth in U.S. clinical volumes with oncology offices gradually reopening throughout the quarter. However, in recent weeks we have seen a reduction in oncology office visits and sales force access in the United States and across our global business, which may have an adverse impact for the remainder of the year. Although we have started to see some impact globally, we have not seen much yet in the United States. We are monitoring the situation closely as it evolves. Our portfolio is growing quickly and we have launched a record number of new products and product upgrades in the last year alone, but we are nowhere close to done. Two of these new product launches were announced in the second quarter, Guardant360 TissueNext and Guardant360 Response. Both products expanded the trusted Guardant360 portfolio to offer oncologists end-to-end testing solutions. TissueNext supplements our blood-first approach. Our TissueNext test provides an integrated solution for oncologists to use liquid first ahead of tissue, ensuring patients receive guideline-complete testing with the fastest turnaround time. An oncologist orders integrated products and begins with the Guardant360 liquid biopsy test. If there is no biomarker detected, he or she is able to quickly reflex the tissue with TissueNext. This integrated approach has a significantly higher biomarker detection rate than tissue alone. In the ECLIPSE study in non-small cell lung cancer, CGP liquid testing using Guardant360 identified 81% of patients with informative test results, while tissue testing found informative biomarkers in the remaining 19% of patients. On the other hand, standard of care tissue testing alone identified just 27% of patients with informative test results in this study. This study is one of many that highlights that a blood-first tissue-next approach offers a clinically superior paradigm. The early response to TissueNext has been very encouraging. The reimbursement pathway for tissue is well defined, and we expect to submit the technical assessment application to MolDX this year. We believe this offering will serve as a stepping stone for those who continue to rely solely on tissue testing to move towards the blood-first testing paradigm. Guardant360 Response is the first commercially available blood-only liquid biopsy test that detects changes in ctDNA levels to provide oncologists an early indication of a patient’s response to treatment such as targeted or immunotherapies. Our comprehensive product portfolio essentially enables both our oncologists to perform profiling for treatment selection in both blood and tissue as well as response monitoring. Feedback for both new products is very positive. We do not expect either product to be a significant revenue contributor in the near term as we work to establish reimbursement. Turning to our recurrence monitoring opportunity with Guardant Reveal, we are pleased by encouraging feedback and reception from oncologists. Based on the early success we are seeing in the market under Reveal, we have expanded this dedicated commercial team. More than 9,000 oncologists have ordered the Guardant360 test, and we are leveraging these existing customers as well as their relationships with KOLs for the launch of Reveal. Beyond CRC, we’re also making great advances in other cancer types for the compelling data on bladder, lung, and now breast cancer as well. Moving on to biopharma. Biopharma volumes grew to 3,653 tests, up 30% year-over-year and up 4% from the first quarter. We continue to experience some pressure in biopharma sample volumes due to a lag in many of the samples coming to us for analysis due to slower enrollment during COVID-19 peaks. Q2 development services and other revenue was approximately $19.5 million, up 27% year-over-year. We are pleased by the growth of our overall pharma business and continue to serve an increasing number of biopharma customers with more than 80 active partnerships. As our biopharma business matures, we expect growth to be underpinned by sample volumes, including new product introductions, for example, the multi-indication Reveal as well as companion diagnostics. This quarter we announced two new companion diagnostic approvals with Janssen and Amgen, both for use in advanced non-small cell lung cancer. The FDA has approved the Guardant360 CDx test as the first and only liquid biopsy companion diagnostic for comprehensive genomic profiling to identify patients with locally advanced or metastatic non-small cell lung cancer, who harbor the KRASG12C mutation and who may benefit from Amgen’s LUMAKRAS or who harbor the EGFR exon 20 insertion mutation who may benefit from Janssen’s RYBREVANT. Moving on to GuardantINFORM, a real-world evidence platform featuring an extensive clinical genomics liquid biopsy dataset of advanced cancer patients. We have signed more than a dozen biopharma collaborations for GuardantINFORM since its launch just over a year ago. We are pleased with the success in growing interest from our biopharma partners in this offering. At Guardant, our sights are set not only on providing solutions for patients with advanced and early-stage cancer but also on early cancer detection. We are focused on establishing ourselves as the best-in-class company in these large markets while maintaining a culture of fast execution as the organization continues to scale. Since founding Guardant, AmirAli and I have always had a strong partnership, and we’ve been laying the groundwork for these two focused areas of oncology and screening for quite some time. This co-CEO leadership structure is a continuation of our current strategy and supports the evolution of our business. We are scaling the team to support the growth of both businesses and have recently brought on Chris Freeman as our new Chief Commercial Officer of oncology. We expect to bring on several more key leaders in the near future and have started building a dedicated commercial organization for our screening business. Having leadership teams dedicated to each opportunity will give us the focus and velocity to rapidly scale in each of these areas to drive both near-term and long-term success. We have also continued to invest in our governance and made recent changes and additions to our Board of Directors. I will now be serving as Chairman of the Board and AmirAli will continue to serve on the Board as a Director. We believe this rotation of responsibilities adds a fresh perspective and is in line with our overall focus to scale our organization. In addition, Meghan Joyce has been appointed to our Board of Directors. Meghan is the Chief Operating Officer and Executive Vice President of Platform at Oscar Health, a high-growth health tech and health insurance company, where she leads operations, technology, clinical marketing and new business lines. Prior to joining Oscar Health, Meghan had several leadership roles at Uber, most recently as Regional General Manager for the United States and Canada. Her expertise in scaling high-growth organizations will be invaluable to our next phase of growth. We are committed to continuing to develop a portfolio of breakthrough products across all stages of cancer and ensure these innovations are not only available but readily accessible for all patients. We look forward to continuing to expand our product portfolio, attract and develop top talent, and improve patient outcomes as we conquer cancer with data across the continuum of care. I will now turn the call over to AmirAli.

Thanks, Helmy. I want to start by echoing Helmy’s excitement for what is ahead at Guardant. Early cancer screening has the potential to significantly transform patient outcomes. A successful readout of our ECLIPSE trial will potentially open up a $20 billion screening opportunity in colorectal cancer. Future studies will open up opportunities in additional cancer types, paving the way towards a total addressable screening market of more than $50 billion. We are confident that we will become the leader in screening, not just in CRC but across many cancer types. That said, it is clear that this opportunity requires dedicated and focused efforts. I’m thrilled to assume the role of co-CEO as we position ourselves for the launch of our screening business. We are encouraged by the progress in the CRC indication, and this is just the first of many indications we will pursue for screening. I’m excited to announce that we have recently enrolled 10,000 patients in our ECLIPSE trial. I’m proud of the progress our clinical team made in running this study during the pandemic when enrollment in many clinical trials was heavily impacted. Now based on the CRC prevalence that we see in ECLIPSE so far, we plan to enroll an additional 3,000 patients in this study for a total of 13,000 to ensure we reach the required number of CRC positive patients. We are confident that we’ll have total enrollment completed by November of this year, the same 24 months’ timeframe that we announced when we launched the ECLIPSE study. In parallel to running ECLIPSE, we are also making great progress building our commercial infrastructure to launch our screening products. I’m pleased to announce that we are planning to launch the LDT version of our CRC screening assay in the first half of 2022. We expect to launch the IVD version of the assay in 2023, pending successful FDA review and approval. The initial version of our screening tests will be for CRC, and we expect over time more indications will be added to the assay. We have presented data and are continuing to seek good technical performance in detecting early-stage lung, bladder, pancreatic cancer, and a few other cancer types in pilot cohort studies. Part of our strategy includes looking into adjacent areas or emerging trends that are synergistic to our efforts in screening. To that end, we have recently partnered with Lunit, a company focused on AI-powered radiology and pathology solutions, with the vision of streamlining this screening journey for patients. We believe that the multimodal and integrated screening paradigm can offer tremendous value to the healthcare system and patients. This is an important aspect of our overall strategy, and we will continue looking for strategic opportunities over the coming quarters. Turning to clinical data, at this year’s ASCO annual meeting, we presented about 20 abstracts offering our full suite of products. I would like to highlight a few of these abstracts today. In an MRD study led by UCSF in oligometastatic CRC patients, Guardant’s Reveal was used to analyze post-procedure ctDNA in serial blood samples from 46 patients. The positive predictive value of positive post-procedure ctDNA to predict recurrence was 96%. On average, ctDNA was detected 28 weeks prior to radiographic recurrence, mean of 17 versus 45 weeks, respectively. Pfizer also presented data leveraging Guardant360 to assess ctDNA dynamic as a predictor of early response. In newly diagnosed advanced non-small cell lung cancer patients treated with lorlatinib, Guardant360 was able to identify molecular responders and non-responders four weeks after the therapy began, and molecular responders had significantly aligned progression-free survival. We also reported clinical outcomes from patients in their naïve study. Patients who received targeted therapy based on Guardant360 results had comparable outcomes to those treated based on tissue results. Importantly, time to treatment in the ctDNA cohort was significantly shorter compared to the tissue cohort, 18 versus 32 days respectively. Lastly, in another abstract covering early-stage cancer management using cancer-specific genomic and epigenomic signals, we showed the performance of our liquid assay for detecting the presence of ctDNA in early-stage non-small cell lung cancer and bladder cancer patients. The assay performance was tested using 175 pre-treatment clinical samples from patients with early-stage disease and 171 self-declared healthy donors. Sensitivity for non-small cell lung cancer was 70%, stage 1 was 56%, stage 2 was 80%, and stage 3 was 83%. Sensitivity for bladder cancer was 51% in non-muscle invasive, and 36% in muscle invasive cancers, with 95% specificity. These abstracts demonstrate the value and utility of liquid biopsy across the continuum of cancer care. With that, I will now turn the call over to Mike for more detail on our financials.

Thanks, AmirAli. Total revenue for the second quarter of 2021 was $92.1 million, up 39% from $66.3 million in the prior year quarter. This growth was driven by a year-over-year increase in both our precision oncology testing revenue and on development services and other revenue. Cost of precision oncology testing revenue for the second quarter was $72.6 million, a growth of 42% compared to $51.0 million in the prior year quarter. Precision oncology revenue from clinical tests in the second quarter was $61.1 million, up 54% from $39.6 million from the prior year quarter. The second quarter clinical tests, which primarily consisted of Guardant360, totaled 20,830, which is an increase of 52% from the prior year quarter. In the second quarter of 2021, the average estimated ASP for the Guardant360 CDx and LDT tests was approximately $2,600, which was in line with our expectations following the April increase to $5,000 of the Medicare reimbursement rate for Guardant360 CDx and the partial offset from potential payment delays or denials of the new Guardant360 CDx ADLT code from private payers. For the remainder of 2021, we expect the estimated ASP for Guardant360 CDx and LDT tests to continue to average approximately $2,600. Note that the clinical revenue recognized in the second quarter of 2021 consists of revenue for tests performed in the period based on estimates made today as well as customer tests performed in prior periods, where cash collected was greater than the previously accrued revenue. As our ability to estimate the ASP for Guardant360 continues to improve, we expect clinical testing revenue for the second half of 2021 to be primarily derived from accrued revenue for tests performed during the period based on estimated ASPs. So far, the amounts of revenue recognized from cash collected for tests performed in prior periods will be significantly lower than in the first half of 2021. Precision oncology revenue from biopharma testing in the second quarter totaled $11.6 million, up 2% from $11.4 million for the prior year quarter. Second quarter biopharma tests totaled 3,653, up 30% from the prior year quarter. Biopharma test ASP was $3,163, down 22% from $4,054 in the prior year period, primarily due to the mix between our OMNI and G360 tests. Development services and other revenue continued to be a strong growth driver and in the second quarter totaled $19.5 million, up 27% from the prior year quarter. Development services revenue included milestone payments for the two FDA companion diagnostic approvals we received in the second quarter of 2021. Gross profit for the second quarter of 2021 was $62.2 million compared to a gross profit of $43.9 million in the same period of the prior year. Gross margin was in line with our expectations and then in the second quarter was 68% compared to 66% during the second quarter of 2020. Operating expenses for the second quarter of 2021 were $159.8 million, an increase of 62% compared to $98.5 million in the second quarter of 2020. Non-GAAP operating expenses include stock-based compensation and related employer payroll tax payments, acquisition-related expenses, amortization of intangible assets and changes in the fair value of contingent consideration. Non-GAAP operating expenses for the second quarter of 2021 were $124.7 million, a 71% increase from $72.9 million in the second quarter of 2020. We expect operating expenses to continue to accelerate in 2021 as we invest in our LUNAR program, ECLIPSE study and other development activities, as well as expand our commercial organization within our oncology business, where we have launched several new products so far this year and in our screening business, as we prepare for the planned launch of the LDT version of our CRC screening assay in the first half of 2023. Net loss was $97.6 million or $0.96 per share for the second quarter of 2021, compared to $54.6 million or $0.57 per share in the second quarter of 2020. Non-GAAP net loss was $61.4 million or $0.61 per share for the second quarter of 2021, compared to the $23.5 million or $0.25 per share for the second quarter of 2020. Adjusted EBITDA was a loss of $56.4 million in the second quarter of 2021 compared to a loss of $25.1 million in the second quarter of 2020. We define adjusted EBITDA as non-GAAP net loss, adjusting for interest, income tax, depreciation, amortization and other income and expenses. We ended the second quarter of 2021 with $1.8 billion in cash, cash equivalents and marketable securities. Now turning to our revenue outlook for the full-year 2021, while we feel bullish about the trajectory of our business and again saw record revenue this quarter, we want to be cautious given the uncertainty around the impacts of COVID-19 and in particular, the Delta variant on oncology office visits, clinical study enrollment, and salesforce access in the U.S. and across our global business. Therefore, we are maintaining our guidance of $360 million to $370 million, representing growth of approximately 27% from 2020 at the midpoint of the range. We continue to expect the clinical sample volume for 2021 to be greater than 90,000 tests, representing growth of at least 42% from 2020. At this point, I’d like to turn the call back to Helmy for closing comments.

Thanks, Mike. Before closing, I want to thank our team for their incredible work this quarter as we worked to establish ourselves as a leader in cancer treatment across the continuum of care. We have made great strides this year as we continue to expand our product portfolio and establish our solutions as best-in-class in cancer testing. We are looking forward to bringing this strong momentum into the second half of the year. With that, we’ll now open it up to questions.

Thank you. Our first question will come from Tycho Peterson with JPMorgan.

Hi, good afternoon. This is Julia on for Tycho. To start off, maybe you can spend a little bit more time on the new leadership structure. Obviously, we all understand that screening is a different animal from oncology in terms of reimbursement timeline, go-to-market channel, etc. So would this leadership structure change, like what specific operational changes can we expect for the cancer screening business, especially in terms of resource allocation and financial reporting? I know you touched on commercial team expansion as a major part of it. But are there any meaningful changes in the OpEx outlook or the long-term strategy we should be thinking about? And Helmy, I think you mentioned in the beginning that there are potential opportunities beyond screening and oncology. So just wondering if you could elaborate a little more on what specific opportunities you could be seeing?

I’ll start and then I’ll let AmirAli kind of fill in on the screening side. But this is really a culmination of changes and evolution of the organization that has been ongoing for the last several years. And I think it really is a testament to the constants we have around screening, around our separate businesses and then scalability of the future that we want to set up. I’ll let AmirAli talk a little bit about the screening side of things.

Yes. Thank you, Helmy. So I’m thrilled with this additional responsibility, and I believe it will generate actually additional focus, additional share of attention for both of us to run oncology and screening while there are a bunch of corporate matters that are beyond these two businesses that we will continue to best as we as always, be very close partners and still operate under one Guardant entity business operation that we have, just trying to make sure we have more focus and dedication across different business lines that we are going to run.

I think in terms of the second part of your question, I think this structure also allows for scalability beyond the areas that we are targeting today. We’re not making obviously any announcements around those areas, but we do know that our platform really has the legs and capabilities of addressing other areas of healthcare, but more to come in the future.

All right. I guess we’ll stay tuned. And then separately, I have a question on the G360 Response test. Just curious, since you already have Reveal, what’s the rationale for launching Response as a separate test instead of having a single quantitative MRD test? And then a related note, I’ve got several clients asking this, does the Response test cause any cannibalization on G360?

So Response is really, I think, a very well-targeted product. If you think about therapeutic response, most targeted immunotherapies are really directed towards the advanced cancer patient market. To really conflate two different animals that don’t belong – MRD and therapeutic response. So this is absolutely the right product for the field. We’re seeing really a lot of excitement in terms of the launch of this test. We have a wealth of data, over 40 publications that really support the science and clinical utility of this application. And it is really part and parcel, I think, of what we laid the groundwork for now, I think over five years ago in terms of our tumor response lab; the physician makes a decision in terms of which treatment to put advanced cancer patients on. For many reasons, the current standard of care is less than stellar in terms of determining and understanding whether that patient will respond or not, especially to therapies like immunotherapies. Guardant Response can come in and just a few weeks later, help with the adjudication determination of whether that patient is indeed responding or not. So it’s a fantastic product that sits squarely in the unmet need that exists today in the advanced cancer patient market. So we actually see it as an amplification of our current products, not a cannibalization in any way.

Great. Thank you.

And our next question comes from the line of Doug Schenkel with Cowen and Company.

Hey, good afternoon. Thanks for taking my questions. Just going back to the leadership structure change. Clearly, the opportunities are large here and complex, even acknowledging that. This leadership change is a bit unusual, especially in this space. Again, I know the opportunities are big. But I mean, we could get on the list of bigger, more diversified growth companies in life science tools and diagnostics, and none of them have this structure. And this includes very successful companies like Thermo, Danaher, Agilent, just to name three. I could probably name another 15 to 30 more. So recognizing part of leading a company is being decisive and nimble and ultimately having one person at the helm, what precedent can you point to that supported this decision? How did the Board make a decision that this was the right thing to do when no one else in the space has? And often, and this is really important, co-CEO structures lead to eventual single CEO structures. Usually, these are temporary; when we’ve seen them in other areas. Helmy, this seems like it could be a sign that you’re likely to leave the CEO role at some point relativamente soon. Are you committed to this current role through 2022? This seems very, very important, given how many clinical readouts and how many product launches you plan for that time period.

Yes, just to put it bluntly, I’m not going anywhere. And I’m firmly committed to Guardant. As it is – AmirAli and I – it would be crazy to leave when we have so much opportunity to address so many patients. I don’t see another opportunity, frankly, in existence that could really match what we have on our plate. I think this is really an acknowledgment of how much focus, how much mind share it really takes to win to succeed in these ambitious areas we’re addressing. I mean we’re addressing three areas of oncology that have been grandstanding challenges for outstanding challenges for decades. And it takes singular focus to really open up these huge TAMs that exist in each one, $20 billion to $30 billion and $50 billion TAMs. And with all due respect to some of the companies you listed, I don’t think they’re necessarily solving some of these complex challenges we’re facing here. No one thought that liquid biopsy was a viable technology when we started Guardant, and there is a lot in terms of how we’ve succeeded in the past that is bucking the trend and doing what is right for the business and what is right for patients, regardless of tradition or what has been done in the past.

Okay, super helpful. I appreciate you giving us a little bit more on the thinking behind this. Now maybe just for a couple more near-term questions. I’m sorry if I missed this in your prepared remarks. I understand that guidance factors in the reality of the environment we’re in, and that there is still some uncertainty as it relates to what’s going on with COVID and specifically the Delta variant. And recognizing that, I’m wondering if you can say anything about what you saw over the course of the quarter and what you’ve seen in the early part of the second half of the year in terms of ordering activity and your ability for the sales force to actually get in detail clinical practices.

Yes. I think as we mentioned in our remarks, we actually saw improvement during the quarter. We saw offices opening up. We saw more access, which I think is part of the driver in terms of the strong quarter that we had in Q2. I think what we’ve started to see is, especially in the last few days, some of these offices are starting to restrict access or starting to close back up. And that’s not surprising given really the number of cases per day now in the United States, how fast things are rising. And so it’s certainly something that despite the strong progress we’re seeing, the momentum we’re seeing, we wanted to be cautious in terms of the second half of the year because we’re still in the summer months, and who knows what will happen especially in the winter. Mike, is there anything you wanted to add?

Well, maybe just I will reiterate. Where we did see a little bit of impact was in the international business. And of course, that’s not the large piece of our business, but we saw an impact there. And again, I think we see continued uncertainty internationally as well. So again, just another reason why we’ve maintained the guidance where it is.

Thank you. And our next question will come from the line of Tejas Savant with Morgan Stanley.

Hey, good afternoon, guys. Thanks for taking the time. This is Edmund on for Tejas. The first question I had was on MRD. Given that the beta around the tumor-informed and tumor-agnostic assays, Helmy, can you provide us with some quantitative color on how the mind share battle is progressing? I guess in simpler terms, is there any way you can give us some information on how many of your new ordering physicians will be able to respond that formerly they’ve been using other MRD tests?

Yes. I think we continue to see good traction. It’s a very logistically straightforward test that really fits into how physicians currently order tests like CA and how they practice medicine. It’s something that I think we’ve been very pleased with the traction we’ve seen with Reveal. We continue to be pleased. There are a number of KOLs who, I think, have talked publicly in various forums, both in the U.S. and internationally about the challenges with tissue acquisition, even in the early-stage cancer setting and how having a really tissue-independent approach is one that is, I think, really simplifies some of those challenges that exist. In terms of – it’s obviously hard to give exact numbers, but we really do not see a lot of pushback, whether or not physicians have been – existing or new users to these types of tests. And so we’re very pleased by the traction that Reveal is seeing and the reception that we’re getting from really all classes of physicians that we have been in front of.

Got it. And I’m sorry if I missed this, but can you remind me on the timeline for reimbursement and the plans to launch indications beyond CRC?

So I think we’ve mentioned before that we expect reimbursement by end of the year or at least on the Medicare side. Private payers, I think will take some time as some of the utility studies readout most likely. In terms of multiple indications, it’s something that should happen relatively soon. We have data that we’ve presented at ASCO that shows, I think, the progress we’ve made and the excellent results that we’re seeing with the platform beyond CRC, presented data in bladder and lung that are very compelling, and I think we’ve mentioned in the prepared remarks, data on breast cancer as well. So we expect to see them in the coming quarters.

Got it. And one last one from me on ECLIPSE. Maybe Amir, you guys showed data on cancer patient populations at ASCO. And first, is it still right to think about readout timings for early next year? And second, in terms of the bogey for the ECLIPSE world data, how should we think about this in terms of the cancer patient population data presented at ASCO?

Yes. So as we mentioned in the script, we expect that we will finish the enrollment by November, the original timeframe that we had from the beginning with all the ups and downs that we had in this ongoing pandemic. I’m very pleased with that, even with the additional 3,000 patients. And right after that, I think after a few months, we will have the readout of ECLIPSE, and as we mentioned before, we’re still on track to be ready to run new samples when the study ends. In terms of data, we presented at ASCO, we’re very pleased with continue data generation, and additional cohorts to get access to additional CRC cohort and cancer screen cohort, negative or positive findings. We are continuously pleased with the data. I think we updated our data across all cohorts, where it still sounds over 1,000 cases are around 1,300 patients that we showed in ASCO, the data holds up. But there is some kind of uniqueness in the ECLIPSE in terms of being the prospective screening study and finding about 60 to 70 CRC candidates. Nothing can replace that. We continue to always technically de-risk the findings of ECLIPSE, but at the end of the day, we have to run ECLIPSE and see what we’re going to find there; we feel good about it.

Got it. Super helpful. Thank you, guys.

And our next question will come from the line of Brian Weinstein with William Blair.

Okay. Hey, now I’m a star. Just in case anybody is curious, I’m still William Blair. It’s all good. So a couple of questions for you guys going back to the new leadership structure here. I definitely heard the questions from Tycho and Doug, but just kind of wanted to dig in a little bit here. I get why you want to do this, but I am curious about things like decisions on deployment of capital, decisions on other kind of corporate matters. Who’s in charge really? I mean at the end of the day, where does the buck stop on setting that broader strategic decision-making? With the co-CEO structure, it’s not clear to me who is accountable for broader corporate performance?

We’ve always had a strong partnership between myself and AmirAli since the founding of Guardant. I think it’s pretty clear. Things around screening – AmirAli will be in charge of decisions, around oncology I will be in charge of. And we’re still having essentially combined leadership structure around other areas. And obviously, some of those decisions rise to the Board level as well, which is heavily engaged at Guardant. So I really see no issues or not a lot of deviation from where things were in terms of business structure. So we’re very confident that all of those strategic decisions will continue to be made in the context of one Guardant and really one mindset.

Okay. And then as it relates to the CRC screening product, the LDT approach, we haven’t really seen that before. Can you talk about – obviously, you get into market a little sooner, but is there any other kind of strategic rationale in terms of data collection or other things that would cause you to kind of go with that LDT approach? And then are you willing to kind of talk about what your updated expectations are for performance of the assay in terms of early-stage detection as well as advance adenoma where you think you guys could potentially come in on both of those?

Thank you for asking about the LDT and the rationale behind it. Actually, we’re still expecting the assay to go through all of this and hopefully to go through review in 2023. That would be the major commercial push for us. But a couple of years before that, it would be very important for us to branch the market, start shaping the market in the way that we believe blood-based screening could add social impact that can improve outcomes for patients in the right way. Generate experience for the field, integrate our test with the right health networks, generate experience for people, and add this blood-based screening into a bunch of PCP workflows and in some of our key accounts. So it’s a very strategic move for us. On the CRC side, I don’t believe like some of the real-world evidence will add much; I don’t see any data gap that real-world evidence would fill in terms of the CRC data. I think ECLIPSE would be very comprehensive by itself; a bunch of other ISPs that we’ve done and are continuing to do are really sufficient. It could have some incidental finding for other cancer types and generate some evidence for non-CRC findings for us. For CRC, we feel comfortable. In terms of performance, all the data that we’ve seen in different cohorts, independent or in partnership with different cancer centers and KOLs and PIs, we have published them in different conference presentations. We’re going to continue to do so. You asked about advanced adenoma; that’s an area that actually we looked into extensively. While we believe that maybe the performance of advanced adenoma is not required for FDA approval potential, like Medicare reimbursement based on the MCB, but we do believe that performance is important for commercial adoption of the test and expansion of the TAM. As a result, we’re looking for surrogate biomarkers in blood that can provide a good sense on advanced adenoma in the right conference setting. We are going to show some performances hopefully there. But it’s an area that we have looked at for some time.

Thank you. And our next question will come from the line of Derik De Bruin with Bank of America.

Hi, this is Juan on for Derik. I wanted to ask about the ASPs, the clinicals. With all these new product launches, do you see the ASP for clinical going up in 2022?

Yes, it’s Michael. No, I think when we look at the clinical ASP, and we were very explicit in their prepared remarks, we talked about ASP for Guardant360, and for Guardant360 CDx and LDT, now this quarter, it’s $2,600 on the back of the ADLT change. We expect that to be the same for the remainder of the year. Of course, we’re launching new products and reimbursement is going to take time. So we take the overall clinical volume and revenue, then the ASP overall is probably going to go down because we’re not getting paid for some of the tests. But for Guardant360, it should at least remain where it is. If we connect that from the private payers, with the new ADLT code then we previously expected, there is potential for some upside there.

Got it. Thank you. And then you mentioned that the international market, the sequential decline in revenue that was delta. But going forward, how do you see that growing? And back in the domestic, like what percentage of the visits are in person? You mentioned last quarter that it was around 30%, 40%. I’m wondering how much improvement there is in?

Yes. Maybe just on the international, I don’t think we said it was sequentially down. What we said is that we saw an impact. And I think we were more referring to the impact on the growth rather than a decline. So we’re still seeing strong performance internationally, but we’ve continued to see an impact because we’re in many different countries and the impact across those countries, it varies. And again, it makes an impact to our ability to grow the business. But yes, it’s not a sequential decline.

Yes, I think it improved from 30% and probably reached at least 50% or more as things started opening up, and it was going in the right direction. But obviously, we’re seeing things now close back up. I mean, I think yesterday, there were 150,000 new cases in the U.S., so clearly, I think there’s a lot of justified risk on the part of clinicians given the impact of the cancer patients and breast cancer patients of this disease.

Thank you. And our next question will come from the line of Patrick Donnelly with Citi.

Great, thanks. AmirAli, I just wanted to follow up on one of the prior questions there. I think it was Brian, who was talking about the LDT launch. Have you guys kind of carved out a type of population you think will be addressable with this launch relative to the overall pie coming with the IVD launch? I know other companies that have done LDT launches have carved out a tranche where they feel is addressable with the LDT. Just curious your guys’ perspective on that.

Yes. So it is still a population even for the LDT launch would be the average-risk population. Having said that, we don’t expect like major adoption before FDA approval. We believe that after FDA approval, we believe, getting multiple coverage policies would continue to help to drive adoption of the test, especially on the mainstream adopter side. But we do believe there are a lot of opportunities with early adopters and people who are really interested in a bunch of people that we are working with who really want to use our test even sooner than later. So we are kind of responding, to some extent, to the market demand too. But now that we are carving out and going after, let’s say, high-risk patient populations, of course, we don’t have that strategy yet. At this time, we’re kind of going to market still with average-risk indications with the offerings that we have, but we are going to see the way the market reacts to the data package that we are kind of putting on all the evidence that we have generated during the last few years.

Okay. That’s helpful. And then, Helmy, I know you mentioned you’ve seen some offices closing back up over the last couple of weeks. But do you feel better prepared to weather another, let’s say, partial shutdown? I mean are there learnings from the first time around that will help you guys insulate volumes better if this continues to worsen and offices close up? I’m just curious if you think the impact this time around would be less, given we all learned something from the first time around?

Yes. I mean I think certainly, our ability to interact remotely with clinician offices has improved. We’ve really built a lot of capabilities in that area. We’ve built that muscle. I think the question would be more around the speed of growth and how that could be impacted – obviously – all of it depends on the severity of Delta and whether other variants come around. But yes, I don’t expect what happened in Q2 of last year around the industry where people got paralyzed would happen again. I think we’re all learning to live with this disease in the background to some extent.

Thank you. And our next question will come from the line of Dan Arias with Stifel.

Good afternoon, guys. Thanks for the questions. AmirAli on ECLIPSE and just expanding the study to 13,000 enrollees. Anything you can touch on there just in terms of the need for that move? You guys aren’t the first company to take the population up for a trial like this. Just kind of curious if it’s total overall colorectal cancer patients that you need to increase the number of. Is it related to subpopulations by stage or is it something else altogether?

Yes, it’s related to the number of CRC patients that we need to find in that study. You can think about it like an event-driven study that there are certain numbers of CRCs we need to find in this patient population that we are screening in our first study to be powered to make claims that rehab has as part of that success criteria. So there is a minimum number of CRC patients that we need to find. When we started the study based on the prevalence of CRC at that time, our calculation showed in our study we need 10,000 patients. As we’ve enrolled more and more patients and we started getting some reports on the number of events that we had, we are effectively fine-tuning the number based on the most recent actual prevalence that we are seeing in this study. That’s why the study is going from 10,000 to 13,000 to find the additional CRCs that we need to discover. That’s the driver for enrolling more patients.

But we see it as still certainly in line with where we thought things could play out, and then certainly going to conclude in our view within the timelines we initiated when we first started. So I think we’re very pleased with where we are. We couldn’t be more thrilled.

Yes, okay. Thank you. And then just maybe, Mike, on the mix between OMNI and G360 on the pharma side, what direction do you think that split heads in the coming quarters? Obviously, that’s got implications for the ASPs going forward. Yes, in this quarter, we definitely saw risk weighted more towards the G360. I think as we look for the remainder of the year, we’ll probably double correct a little bit. I think our forecast is probably coming back more on the OMNI side. Therefore, we’re expecting the ASPs to improve a little bit because it will further analyze this quarter. But a lot also depends on the pipeline and the sums that we get through the door as well; but that’s how we’re looking at it.

Thank you. Our next question comes from the line of Matt Sykes with Goldman Sachs.

Hey guys, this is Dave on for Matt. Congrats on hitting 10,000 patients in ECLIPSE, very exciting, as well as the LUNAR-2 launch next year. You’ve been very successful in oncology testing; screening is an even bigger opportunity, of course. Could you tell us more about your strategy for ramping sales and marketing to reach the hundreds of thousands of PCPs out there?

Yes, sure. We talked about it a little bit before, too. We started building the leadership of our commercial channel and screening side a few quarters ago. I’m happy to have a couple of layers of that leadership already in place. It’s a dedicated leadership on the screening side at the highest level. It was our internal executive that we had on the oncology side who took responsibility for leading the commercial efforts on the screening side, very talented individuals that we are really excited about having in place. Now we have the next layers of leadership in place. As we speak, we are building the next layers to be ready for this LDT launch, and we believe we are going to have the commercial and operational infrastructure that we need to support this LDT launch in the first half of next year.

Fantastic. And could you tell us a little more about the AI-powered pathology partnership that you announced for a multimodal screening?

Yes. The company that we partnered with is called Lunit. They’re AI-focused in radiology and pathology. They have a very strong team with heavy experience in AI, especially on image processing. They already have some regulated products in radiology that help improve productivity of radiologists in reading different scans from different scanning modalities. When you think about what the future of screening will be, we believe this has – the blood-based assays are very important, but cannot be the only asset to really streamline the screening journey for patients. We envision obviously a multimodal solution that starts with a blood-based screening but then needs to put some additional solutions on the front end and back end to really have a great experience and workflow for patients and providers to truly open up the opportunities that blood-based screening can offer in the field. So we are very excited about that partnership. We’re going to work with them to see how much we can shape actual future activities for them to really help us on the screening side.

And our last question will come from the line of Jack Meehan with Nephron.

I was wondering if you could comment on how much Guardant Reveal added in the quarter in terms of volumes, and we’re waiting on the Medicare final LCD for MRD. Do you think there’s a chance that could be included in that?

Yes. I mean there is a final LCD for CRC, and I think the one that is still in draft is the one that extends that – to apply that to the application of the molecular response as well. And so yes, that is, of course, going to happen later this year in terms of finalization. But that’s obviously up to them in terms of their timelines.

Yes. On the volumes, obviously, we’re not splitting out the specific Reveal volumes for competitive reasons, among other things. And we did say in the prepared remarks that the vast majority of the samples in the volume that we reported were Guardant360. I think what we would say again, is that the Reveal’s launch has gone as well as we could have expected, and we’re really pleased with it. So the volume side is coming through the door as good as we expected. We continue to see them grow. But we’re not going to be breaking that out specifically.

Great. And then just one math question. Sorry, juggling a few earnings points. Sorry if this is a dumb question. But you had $61 million of clinical sales, 20,830 tests. My math was going at $2,900 price point. I know you quoted $2,600. Is there some other dynamic that I missed?

Yes. I tried to explain that in the prepared remarks. But maybe I didn’t do justice to the way that we recognized revenue in the past; there’s always been a large sort of cash collection component from samples from previous periods included in revenue. We’re moving more and more to having our revenues just purely based on accrued revenue from the samples in that quarter. So there’s still some cash in the Q2 numbers from prior periods, and that’s why your math is off a bit.

And we have no further questions, and we would like to thank everyone for participating on today’s Guardant Health Second Quarter 2021 Earnings Conference Call. This concludes today’s conference call, and you may now disconnect. Thank you.