Good afternoon. Thank you for joining today's Guardant Health Q2 2024 Earnings Call. My name is Tamiya, and I will be your moderator. All lines will be muted during the presentation, with a chance for questions and answers afterward. I will now hand the call over to your host, Zarak Khurshid, Vice President of Investor Relations. You may begin.

Thank you. Earlier today, Guardant Health released financial results for the quarter ended June 30, 2024. Joining me today from Guardant are Helmy Eltoukhy, Co-CEO; AmirAli Talasaz, Co-CEO; and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that, during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specific items. Additional information regarding material risks and uncertainties, as well as reconciliation to the most directly comparable GAAP financial measures are available in the press release Guardant issued today, as well as in our 10-K and other filings with the SEC. Guardant disclaims any intention or obligation to update or revise financial projections and forward-looking statements whether because of new information, future events or otherwise. The information in this conference call is accurate only as of the live broadcast. With that, I'd like to turn the call over to Helmy.

Thanks, Zarak. Good afternoon, and thank you for joining our second-quarter 2024 earnings call. We founded Guardant Health with a bold mission to conquer cancer with data. With our comprehensive suite of tests, we are now truly transforming patient lives across the continuum of care. It has always been our belief that the best way to conquer cancer is to catch it in its earliest stages when patients have the best chance of survival. We have spent the last decade developing a blood-based test that we believe will launch cancer screening into a whole new era with vastly improved screening rates, earlier cancer detection, and ultimately a significant increase in the number of lives saved. We have reached a pivotal moment on this journey, and to commemorate this important milestone, AmirAli will start us off with an update on our screening business.

Thanks, Helmy. Starting on slide 3, as we announced last week, I am thrilled to share that the 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 the FDA as the primary screening option for CRC, meaning healthcare providers can offer our tests in a manner similar to non-invasive methods recommended in screening guidelines. Shield is also the first blood test for CRC screening that meets the requirements for Medicare coverage. This FDA approval of Shield is an incredibly significant milestone in our mission to counter cancer with data, and more importantly, a huge victory for patients. Moving on to slide 4. We have developed a suite of clinical evidence supporting the value of Shield. We believe this robust evidence will pave the path for inclusion of Shield in guideline recommendations. I highlight a few key publications that exemplify this. The data from our pivotal ECLIPSE study was published in The New England Journal of Medicine, the world's leading peer-reviewed medical journal. A randomized study at Kaiser Permanente demonstrated that when individuals who hadn't completed a FIT were offered Shield, the proportion of screening completed was three times higher. And just last week, we announced that our CAN-SCREEN health outcome model was published in the Journal of Medical Economics. This outcome model considers both clinical efficacy and longitudinal adherence when assessing the impact of Shield on CRC incidence and mortality rates and confirms the public health importance of blood-based testing. Specifically, Shield outperforms two guideline-recommended stool-based tests, FIT and multi-target stool DNA when considering life years gained, CRC cases averted, and prevention of CRC deaths. Turning to slide 5. Post-FDA approval, with a first-line indication with 83% sensitivity and 90% specificity in detecting CRC, Shield now raises the bar required for blood test performance. And going forward, we believe tests falling below this bar will not be viable. This achievement did not happen overnight and came on the heels of more than a decade of world-class innovation and learning as the liquid biopsy leader. Hundreds of millions of dollars of investment, conducting a 20,000-patient registration study, publishing results in a leading peer-reviewed journal, engaging in a rigorous 16-month review process with the FDA, and receiving a successful advisory committee panel vote. We believe we have an incredible lead ahead of any other competitor vying to enter this market. Now turning to slide 6. I am proud that we were able to launch this test just a few days after receiving FDA approval. Shield IVD is now commercially available, and we have already begun processing samples in our lab. At Guardant, we are committed to educating physicians and patients on the risk and benefit of Shield so that they will be empowered to make informed shared decisions when selecting a CRC screening option. Moving on to slide 7. At launch, with a first-line indication, Shield is already addressing an enormous opportunity with 120 million average-risk individuals between the age of 45 to 84. Of this average-risk population, 45 million lives are covered by Medicare. This represents a 15 million annual testing opportunity and a multi-billion dollar market. With Medicare coverage, Shield already addresses one of the largest diagnostics opportunities ever. Moving on to slide 8. Existing stool-based screening methodologies have been around for a decade or more, and still, we have not seen a material change in screening compliance over the last several years. There are 50 million people who remain unscreened, and for those that are screened, their re-screening rate has been poor. Seven out of ten surveyed individuals who have been previously screened for CRC with a stool-based test said they would not choose to screen with stool again. On the other side, unscreened individuals who were surveyed had a strong preference, 5 to 1, for blood over stool. The ease of use of a blood test and the ability to screen patients during routine care can change this. Blood testing is already entrenched in routine patient care. 87% of people aged 50 and above have seen their doctor during the last 12 months, and 91% of that group has had a blood draw in the last 12 months. Our real-world experience with Shield IVD providing over 20,000 tests during the past two years confirms that Shield has a clear fit into existing care, with PCPs enthusiastically ordering this test. And when they do, patients complete the test. We continue to see an incredibly strong adherence rate of more than 90%. At our Investor Day last fall, we shared our target to exceed 1 million Shield tests in 2028. Now, following FDA approval with a first-line indication, we are even more confident that we will reach our goal. Moving on to slide 9, we are very pleased to see that CMS is proactively removing barriers to blood-based CRC screening and acknowledging its unique benefits. Through its recently proposed physician fee schedule, CMS is taking steps to close a loophole and remove patient out-of-pocket costs for follow-up colonoscopy after a positive blood-based test. CMS originally eliminated cost-sharing for the follow-up colonoscopy after a non-invasive stool-based test in its 2023 physician fee schedule, but many years after stool-based tests entered the market. We are encouraged by the quick inclusion of blood in the proposed 2025 physician fee schedule. We look forward to the finalization of this fee schedule in the fall. Turning to slide 10. Midway through 2024, we are well on track with milestones within our screening business and look forward to ramping adoption throughout the remainder of this year. In 2025, we look forward to sharing Shield multi-cancer data. Also, we expect to receive ADLT status designation. ADLT was established to incentivize innovation and support investment in diagnostic development, all to the benefit of patients. It provides new and innovative tests not based on historical precedent, but based on the unique value they bring to the health system. Our pricing strategy is intended to establish a sustainable ASP that recognizes the value of Shield, enables us to build the best-in-class profitable business, and also future-proofs Shield's reimbursement for its expansion to multi-cancer screening. As Helmy said at the start of this call, this is truly a historic moment for Guardant, the liquid biopsy field, and cancer screening. Our team has worked tirelessly to reach this milestone. I'd like to thank them for their hard work over the last 10 years and especially during the last three years to bring us here. I also would like to acknowledge and thank the FDA and their review team for their collaboration and partnership. With that, I will now turn the call over to Helmy for an update on therapy selection and MRD.

Thanks, AmirAli. Turning to slide 11. While we are excited for the next chapter in screening, we continue to make excellent progress with our oncology business. We have a robust suite of precision oncology products addressing both late and early-stage cancers as well as recurrence monitoring for cancer survivors. Now I'd like to share a story highlighting the value our liquid biopsy tests bring to late-stage cancer patients. In 2023, a 33-year-old woman went to her doctor after noticing a progressive neck mass during her third pregnancy. She initially received a CGP tissue test to diagnose the cause of the mass, but the test did not identify any actionable biomarkers. The patient then received a Guardant360 liquid biopsy test which identified that the patient was ALK positive and she was diagnosed with thyroid carcinoma. As a result, the patient was put on alectinib for therapy, and I am very pleased to report that after about a year of being on treatment, the patient no longer has evidence of disease. She also successfully gave birth to her third child. Given there are minimal side effects to the therapy, she will remain on alectinib for another year with a Guardant360 test every three months to monitor. This is just one of many patient stories that highlight the superior ability of Guardant360 to identify actionable biomarkers and inform cancer care over other approaches. Turning to top-line performance on slide 12. We had a robust second quarter with total revenue growing 29% to $177 million. This is driven by another quarter of very strong precision oncology revenue, which increased 33% in the quarter, supported by significant Guardant360 reimbursement tailwinds as well as strong growth in volumes, particularly within biopharma. Turning to slide 13. Clinical test volume for the second quarter grew 14% year-over-year, reaching 49,400 tests with continued progress in Guardant360 volumes. Reveal also continues to grow strongly even with our ongoing management of volumes ahead of broader reimbursement. Biopharma volumes were exceptionally strong in the second quarter, growing 56% year-over-year to a record 10,475 tests. We continue to see a lot of excitement for Guardant Infinity, our newest biopharma offering powered by our smart liquid biopsy platform with growing contributions in the second quarter. This is an important leading indicator for future demand for our clinical tests. Moving on to slide 14. Last week, we launched a major upgrade of Guardant360 LVT on our smart liquid biopsy platform. Guardant360 is the leading liquid biopsy test for patients with advanced cancer, and this upgrade gives oncologists a much more complete view of cancer by utilizing novel genomics and epigenomics sequencing technology. With a 10 times larger panel including 739 genes, the upgraded test covers both currently actionable and emerging biomarkers not available in any other liquid biopsy test. In addition, the test quantifies tumor burden with 10 times more sensitivity, further extending its best-in-class performance. Guardant360 LVT is covered by Medicare and major private payers for CGP of all advanced solid tumors. This upgrade marks the beginning of a new chapter of comprehensive genomic profiling helping to identify novel targets for the current and next generation of targeted therapies and immunotherapies, unlock new clinical applications, and access genotype and phenotype from the blood. We are excited by the ability to better inform cancer care teams about the optimal treatment strategy for their patients and give them more precision treatment options that can help improve their outcomes. Over time, we will quickly add even more exciting first-of-their-kind capabilities to the test. Turning to slide 15. In early June, we introduced an upgraded Guardant360 TissueNext featuring an expanded panel of 498 clinically relevant actionable biomarkers to identify more treatment options for patients with advanced cancer and further improve best-in-class turnaround time. As a reminder, TissueNext is differentiated as it leverages our AI-powered scoring algorithm and is the only tissue CGP test that improves PD-L1 detection by over 20% in non-small cell lung cancer. Importantly, the TissueNext test is covered by Medicare for all advanced solid tumors. With these two significant upgrades to our portfolio, we are looking forward to continued progress with our therapy selection business for the remainder of 2024 and beyond. Now shifting gears to Reveal on slide 16 where we are the leader in tissue-free MRD. I'm excited to share that our COSMOS CRC manuscript with data from our COSMOS colon study looking at stage two and stage three patients was accepted for publication in the peer-reviewed journal Clinical Cancer Research. This study was also submitted to MolDx for Medicare reimbursements for the CRC surveillance MRD indication. COSMOS, our largest MRD study to date, evaluated ctDNA detection using a tissue-free approach and included 1,900 longitudinal surveillance samples from 342 patients representing a median of six samples per patient. All patients in this study were able to undergo evaluation without the need for tissue testing. This study demonstrated 98% specificity with 81% longitudinal sensitivity for occurrence in stage two or higher colon cancer and more than a five-month median lead time from ctDNA detection to recurrence. This data validates the utility of Reveal in predicting recurrence in CRC. Turning to slide 17. Beyond CRC surveillance, we have an extensive pipeline of clinical cohorts for establishing validity and utility for Guardant Reveal. This will be instrumental in building compelling evidence that not only supports efforts to expand reimbursement, but also has the potential to influence changes in practice guidelines. Looking ahead to the remainder of the year, we anticipate publications that will support submissions to Medicare for potential coverage in breast cancer. Next year, we have important clinical validity studies for additional cancers such as lung, pancreatic, and gastric. Moving on to slide 18. 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. As I just discussed, we are making good progress towards CRC surveillance reimbursement, which will improve our ASP. We are also continuing to make very good progress in 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 will continue to do so until Reveal is gross margin positive, which we anticipate in 2025. With that, I will now turn the call over to Mike for more detail on our financials.

Thanks, Helmy. Turning to slide 19. I'll discuss our revenue results for the three months ended June 30, 2024, and refer to year-over-year growth rates unless otherwise noted. Total revenue grew 29% to $177.2 million, driven by precision oncology revenue, which increased 33% to $166.5 million. Precision oncology revenue from clinical tests increased 30% to $130.2 million. Clinical test volume grew to a record 49,400 tests in Q2 2024. Clinical volume growth of 14% was in line with our expectations, which factored in the uptick in volume we experienced in the second quarter of 2023 following the Guardant360 CDx approval for ESR1. For the second quarter of 2024, we again saw year-over-year volume growth for Guardant360 in the US, increased Guardant360 volume contribution from Japan and the UK, and strong volume growth for both Reveal and TissueNext. For the full year 2024, we continue to expect clinical volume growth to be approximately 20%. Our biopharma business performed incredibly well in the second quarter, with precision oncology revenue from biopharma tests totaling $36.2 million, increasing 45%. This exceptional growth was fueled by a record number of tests in the second quarter, 10,475, which was up 56%. We continue to expect our biopharma business to perform well, and have increased our biopharma revenue growth expectation for the full year 2024 to now be in the high teens compared to our previous expectation of low teens revenue growth. Finally, development services and other revenue totaled $10.7 million. Turning to Guardant360 ASPs on slide 20. We are very pleased to report that we again saw strong cash collections for Guardant360 in the second quarter of 2024, driven by continued improvements in both Medicare Advantage and commercial reimbursement. These improvements led to a step up in the Guardant360 ASP range from $2,950 to $3,000, an increase from the range of $2,900 to $2,950 in Q1 2024, and from approximately $2,650 in Q2 2023. These improved trends also give us confidence that the Guardant360 ASP can remain in this new range for the remainder of 2024. In Q2 2024, we also had a revenue upside of approximately $8 million related to cash collected for Guardant360 tests performed in prior periods. This was similar to the upside we recorded in Q1 2024, and reflects the continued tailwind of improved collections. Although it's early days, we believe we will achieve the long-term ASP targets we presented at our Investor Day earlier than originally anticipated, which could potentially bring forward our timeline to reach company-wide cash flow breakeven. Moving on to non-GAAP financial measures on slide 21. Our non-GAAP gross margin excluding screening, which reflects our therapy selection and MRD businesses, was 62% in the second quarter of 2024 and was in line with our full-year guidance of 61% to 63%. Compared to Q2 2023, non-GAAP gross margin excluding screening decreased to 62% from 64% due to test and revenue mix. Specifically, in Q2 2024, we saw an increase in the mix of negative gross margin Reveal tests in the precision oncology revenue line, as well as a decrease in the mix of 100% gross margin milestone royalty revenue in the development services and other revenue line. Non-GAAP operating expenses were $178.8 million, a reduction of $1.7 million compared to the prior-year quarter. This decrease was primarily driven by lower clinical study costs following the completion of ECLIPSE enrollment in Q3 last year and a decrease in G&A expense. These decreases were offset by an increase in sales and marketing expense in preparation for the Shield IVD commercial launch and in support of the continued growth of our therapy selection and MRD revenue. We continue to tightly control our operating expenses by leveraging the infrastructure we've built to support all of our businesses and by gating our commercial spend on specific milestones. For the second half of 2024, we expect R&D and G&A expenses to be similar to the first half of the year and expect sales and marketing expense to increase now that we're firmly in those launch phases for Shield and we'll be ramping up the number of field sales reps to 100 by the end of the year. As a result of our increased revenue and reduction in operating expenses, our registered EBITDA loss was $61.9 million in Q2 2024, a decrease of $23.3 million from $85.2 million in Q2 2023. Free cash flow for the second quarter of 2024 was negative $99.1 million compared to negative $100.5 million in Q2 2023. The year-over-year change reflects a decrease in operating cash burn and equipment purchases, offset by an increase in the annual bonus payout, which is made in April each year. We ended the second quarter of 2024 with over $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 or potentially earlier. Now turning to our outlook and assumptions for the full year 2024 on slide 22. We're pleased to be able to increase our revenue guidance and now expect full-year 2024 revenue to be in the range of $690 million to $700 million, representing growth of approximately 22% to 24% compared to 2023. This increase reflects the cash collection upside we had in the second quarter, the increase in the Guardant360 ASP that we expect for the remainder of the year, and the increased full-year expectation for our biopharma business. As a reminder, this revenue guidance does not include any contribution from screening. Although we've now successfully launched Shield IVD, obtained Medicare coverage, and started to receive samples into the lab, it's still early days, and the Medicare gap fill rate is yet to be established. As such, we'll begin to provide screening revenue guidance at a more appropriate time in the future. 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 a range of $720 million to $730 million, representing a flat to 1% decline year-over-year. Finally, we continue to expect free cash flow for 2024 to be in the range of negative $275 million to $285 million, an improvement of $60 million to $70 million compared to 2023, and that our therapy selection business will deliver positive free cash flow for the full year 2024. We also continue to expect the maximum screening cash burn this year to be $175 million. Our increased revenue expectation enables us to maintain this free cash flow range while providing us with further flexibility to manage potential working capital fluctuations in the back half of the year, as well as the potential to bring forward capital purchases to accelerate our capacity expansion and automation efforts. Finally, turning to slide 23 to review our catalysts. We've already made significant progress on milestones across each of our business areas in the first half of the year. As we look ahead to the rest of 2024, we're very excited by the potential opportunities across therapy selection, MRD, and screening. With that, we'll now open the call to questions.

The first question comes from Mark Massaro with BTIG.

The first one is for Helmy. Good to see the COSMOS study come out and submit for publication. Can you just discuss perhaps what your expectations are on Medicare coverage in the CRC surveillance space? Obviously, Natera has an indication there. They are tumor-informed, your blood. Do you think you can sort of effectively crosswalk to that particular coverage or do you think you might need a net new Medicare coverage decision?

As a reminder, we already do have coverage in the adjuvant setting for Guardant Reveal. Essentially, the aim of this publication and this data is to get us the second half of the indication, which is for a surveillance setting in terms of testing patients that are further out at multiple time points. Right now, we're covered for three time points, at least if the first is within the first 12 months of treatment. This study was designed essentially with Medicare coverage in mind. We're very pleased with the outcome of the study, and very pleased with the publication. It has already been submitted to MolDx, as we said in the prepared remarks, and we believe it qualifies under the current LCD that exists.

I wanted to ask about the potential for ADLT status on Shield. Many of the lab tests today that have ADLT status are not for asymptomatic screening tests. I'm just curious if you think that your ADLT application might follow a similar timeline as some of the other tests that have obtained it. I'm just curious if you've had any dialogue that could give you a sense of the timing expectation there.

In terms of ADLT criteria to get the designation, the criteria is very clear. Unmet need, FDA approval would get the designation. We have to just go through the process to get it. In terms of timeline, our best estimate is that we will achieve this sometime within 2025. We'll get our code and receive the ADLT status and activate the favorable Medicare pricing enabled by that ADLT designation.

The next question comes from Dan Brennan with TD Cowen.

Congrats on the quarter. Maybe the first one, AmirAli, I think you discussed in the prepared remarks how, given the first mover advantage that you have with Shield, do you think other blood tests will not be viable if they don't meet your performance? Maybe could you just expand on that a little bit? Are you referring to – the NCD is obviously 74 and 90. So are you thinking lack of FDA approval or are you contemplating you think the first mover is going to afford you this really unpenetrable kind of position? Because, obviously, Exact, I think, spoke recently about their own performance or what they expect on their blood tests and they're expecting similar performance and possible superiority in AA. So maybe just unpack a little bit, 'this won't be viable' comment in the competitive profile of Shield.

Interesting, we are hearing a lot of talk versus event in this market. But I think now, with our first-line indication of FDA approval with the performance of CRC that we have and the long lead time advantage that we have relative to anybody else in this marketplace, we believe this performance of CRC would be the barrier in order to have a viable product, in order to get favorable FDA approval, getting first-line indications similar to us, and then making sure that the test would be commercially successful in the eye of the physician. When you look at all of the pieces that need to fall into place, it's hard for us to imagine a device with lower performance would even be able to get any of these milestones achieved. But we'll see. I think at some point the field needs to go from just talking the talk to the reality of what kind of data people have. We are very confident in the position that we are in right now.

Maybe one just more tactically, just on the strength in the quarter with biopharma, it was a really healthy beat. I think you updated your guidance from low teens to high teens. Can you just speak to kind of what you saw in the quarter that drove the extent of that beat and their updated guide, Mike? I think it reflects a pretty material – obviously, you're not going to grow 56%, but to get to high teens, I think would reflect a pretty steep slowdown in the back half of the year. So anything you can comment on what's going on in biopharma and what the back half of your guidance implies?

Maybe I'll start and Mike, you can fill in the rest. Yeah, no, a lot of this has to do with Infinity. Infinity, with its epigenomic footprint, with its modularity in terms of being able to do monitoring or comprehensive profiling, we've seen a lot of uptake of that test and that platform by biopharma. I think what you're seeing is the fruits of that investment we've made over the last few years. Other elements are just the scope of our offering, not only the regulatory competency that we have in terms of bringing essentially regulated products to market on behalf of biopharma, such as companion diagnostic products, but also our global reach. We are really seeing a healthy pipeline build up in China right now that's of high interest to a lot of the major global biopharma companies. And then I'll let maybe Mike talk about the ramp-up.

We've had a very strong first half. I think we're really pleased to be able to increase our guidance for the full year now to go from low teens to high teens. And I think as we look in the second half of the year, we've still got a strong pipeline. It's a very lumpy business. It depends a lot on the timing of the samples that we get through the door. So we've had really strong volume in the first half. I wouldn't call it a real slowdown in the second half of the year, but I think we've had a bolus in Q2. So we think we'll still have a very strong second half of 2024. And again, we're really pleased to be able to increase the guidance to high teens revenue growth.

The following comes from Puneet Souda with Leerink Partners.

Congrats on the strong beat here. Maybe first one for AmirAli. Look, congrats on the FDA approval. And then you received CMS coverage as well. You continue to win on things that were generally questioned in the investors' fair. The first line in FDA approval and then CMS coverage. So I wanted to address something that is coming up more in questions lately. And that's really the cash pay price here, $14.95. I assume you're going to be pursuing that into an ADLT. But just help us understand, this is significantly above the current non-invasive CRC screening products in the market. So what's your rationale behind it? What's the rationale behind this elevated pricing?

Maybe I can share with you the rationale behind our pricing strategy for Shield. First and most importantly, based on the value, this $14.95, in our view, adequately reflects the value of Shield in the marketplace. How? Just by the health outcome benefits that we are going to see. Like we just published our health outcome modeling results. You can see the amount of life year gains and the value that we are putting on the table is calculable in terms of the economic value of that. Bringing unscreened patient populations to the screening table and adding those life years, reducing the cost associated with treating and managing CRC is going to have tremendous value to the system. So that's why we think that price is totally justifiable. In fact, the economic model shows even more than that number. The other point is about ADLT. The ADLT pathway is really put in place as a mechanism to price innovative tests like Shield in a fair way based on their value, not necessarily based on precedent. And that's the way the mechanism works. And we would be beneficiaries of that pathway which is enacted in law for the exact same purpose. Look, yes, there are other companies that with multi-billion dollar top lines are still, I'm not sure how they're going to get to their profitability business. We have a different mentality. We are going to build a sustainably profitable business here. That's what we are after. And I think maybe the last thing I could add is a somewhat futuristic perspective. Shield is a multi-cancer screening test. ADLT pricing is not going to be activated now. It's sometime next year. And by the time that pricing gets activated, we expect to have some exciting updates related to multi-cancer for Shield. So I think that's how we are thinking about our pricing strategy. And we think this price is very well justified.

And another question is USPSTF, now that you have FDA and CMS behind you, could you take a step back and give us your thoughts on what's needed in terms of modeling studies, next steps, and things that need to happen over the next two years to get Shield into USPSTF? Because I think that is still a lingering question in the space.

We are very optimistic about the inclusion of Shield into the guidelines, starting from ACS and then USPSTF. We are ahead of the plan that we had in terms of clinical evidence generation to show the value of Shield. The safety approval, NEJM, I mentioned in the prepared remarks, the randomized prospective study to show the rate of screening in an unscreened patient population would go up, not marginally, but by like 3x in the unscreened patient population. We have randomized study to support it. We have publications around the reality of adherence to completing blood tests. It's not just a promise. It's proven. The outcome models have finally been appropriately modeled and published in terms of when you look at longitudinal adherence. Blood-based cancer screening, especially with Shield's performance, adds significant value to society. We are excited about the suite of clinical evidence that we have today. I don't think we are missing anything for the package. And some of this was by design. We expect the research plan to get drafted and the review process to get started very soon. And we are ready for it in terms of the evidence that we have in peer-reviewed publications.

The next question comes from Tejas Savant with Morgan Stanley.

Maybe I'll start one with on the Shield side, and then I have a follow-up on Guardant360 as well. So, AmirAli, can you just walk us through – in your mind, as you think about the pros and cons of an NGS approach versus a lower COGS PCR-based approach, which could enable a potentially lower price point for some of your competitors for their screening assays, blood-based screening assays, how do you think about that choice? On a related note, just any thoughts on this Exact TwinStrand licensing agreement, the implications of that, not necessarily related to Shield, but to the broader portfolio?

Low cost, kind of an old class 20-year-old technology of PCR solved the problem of cancer screening, if the science was that easy, maybe this problem would have been solved ages ago. Now, look, we are looking at thousands of features with our technology. We can just look at the top 10, 20 features that we have, and we can just tell you what the performance would be. I wish the science was easier maybe in terms of—then we didn't need 10 years of active research and investment in this area, but this is hard. In terms of pricing, look, at scale, we mentioned that once we get to about 1 million samples, our COGS is going to be $200, and frankly, a good fraction of that $200 is not even the cost of lab processing the sample; it's the logistics of getting the kits, samples, blood tubes, shipment, and other upfront costs of many different kinds of tests versus just the cost of running a sequencing assay. At least in expert hands like us, we know how to handle high-throughput NGS operations with low costs. We have some of the best automation experts who have done high throughput low cost operations before. We are NGS experts, so we are very confident with the tech stack that we picked and the long-term viability of the technology stack.

No, I don't think there's anything more to add.

On the G360, Helmy, one for you. As you look at that sort of tenfold expansion, are there any gross margin implications from it that we should be thinking about? Do you envision a greater shift perhaps from this new version of the assay from tissue to liquid? And then can you share some color on just US volumes year-over-year? Do you see any uptick there including from the UK Royal Marsden program or US as well, or was it really a US led uplift this quarter?

I'll maybe take the 360 smart liquid biopsy upgrade first, and this is something that we're super excited about. Obviously, it's early days right now. We're seeing a lot of physician excitement. You can see the leading indicator from biopharma in terms of uptake that has happened, and they are some of the most discriminating customers out there. And so, the fact that we have biomarkers that really no one else can see is going to help us really accelerate our growth in liquid as well as obviously take share from other products such as the tissue products. So we're very excited about that transition. I'll let maybe Mike talk about gross margins.

On the gross margin side, there's a little bit of uptick in the costs now with the Guardant LVT because of the additional features, but it's not making, I'd say, any sort of significant impact on our overall gross margins, and it's well manageable within the 61% to 63% gross margin range that we've set for the business excluding screening. I think that answered the question.

Just the last thing in terms of volumes. I think we're seeing really broad growth both in the US and internationally.

The following comes from Bill Bonello with Craig-Hallum.

Switching back to Shield, could you talk about sort of where you're at to date with your primary care sales force build and give a little bit of color on your near-term marketing plans?

We are on track to actually finish the year with 100 salespeople hired, trained, and in the field actively promoting Shield. We made very good progress in the second quarter, and in fact, we have a number of new hires who have just gone through our training class. I have very high confidence that we are going to have these 100 people by the end of the year. In terms of sharing any specific KPIs and numbers, I can tell you we are very much in the early days of this IVD launch. I'm very pleased with what we see. But again, it's just very few days. We just need to see how it goes. And also, we need to wait for this gap fill rate by Medicare to set any specific guidance and expectation of what Shield can deliver for us in terms of top line.

I probably wasn't clear. I was just asking any color around your marketing plans, not your revenue-generating plans.

Marketing plans, this is mainly physician-led ordering. We do a lot of direct personal commercialization efforts. Interestingly, this FDA approval got a tremendous amount of media attention, and some interesting facts that we are dealing with is, although it was not funded by Guardant in any material way, many of our new reps going to new accounts and, frankly, a good fraction of PCPs have heard about Shield through the media coverage that we received. So we are dealing with an interesting phenomenon. But, again, it's very early days. We are going to try a few different things in our marketing program to see which ones scale better. But again, the main strategy is focused on direct sales force promotion to PCPs.

The next question comes from Jack Meehan with Nephron Research.

I wanted to talk about Shield for the questions. The first one is for AmirAli. So this $1,500 cash pay price for the IVD version of the test, can you just talk maybe about the marketing plans when you go into a physician's office for the sales team, just how you address concerns around the potential for out-of-pocket bills that non-Medicare covered patients might get?

At a high level, we are very upfront, and we make sure both physicians and patients are well-informed when they agree to use this test. For patients aged 65 and above, obviously, the Medicare beneficiaries, they have good access to this test, many of them at $0 out-of-pocket or minimal cost. But as you mentioned, Jack, when we go to a younger patient population, the access is not as equitable in terms of the financial responsibility for a patient until we go to the guidelines. And we are very transparent about it. The cash pay price of Shield and the out-of-pocket costs are shared with both the physician and patient because at Guardant, we never want to have any surprises for physicians and patients down the road. So we are very upfront about it. We are learning a lot, frankly, through 10 years of commercialization with Guardant360, with Reveal, toward oncologists. PCPs are a bit different, but there's a lot of learning and skill set that we have gathered that we are leveraging in the marketing of Shield in terms of the financial responsibility. In fact, I look at some of this in a very positive light. We expect this dynamic would help us to get more reimbursable volume in our mix. And that's really our focus. At this time, we really prefer to just scale the reimbursable volume for Shield, which are the 65 and above, and some of this out-of-pocket conversation would suppress the use case in younger patient populations. And that's a good thing.

The next question comes from Dan Arias with Stifel.

Maybe just one for me, follow up on the sales and marketing side, but more on the clinical oncology piece. Helmy or Mike, how do you see the size of the commercial team evolving there over time? And I don't necessarily ask in the context of OpEx. Obviously, that's an important part. But I'm thinking more just from the competitive standpoint as we think about the therapy selection market and the MRD market. And there's just a number of players that are trying to stake their claim to business there. Does it become more of a feed on the street game at any point or on any level, just the way that the PCP market does at points? I'd love to get your thoughts on how you see the evolution of the sales force effort.

I think it's always been promotionally sensitive to some extent in terms of the oncology market. I think pharma reps have sort of trained the market in that vein. And diagnostic companies now, for the first time, are building sizable sales teams in the oncology channel. I think we're in a very enviable position, given where our gross margins are, and the amount of revenue per rep we have right now. So we typically see the marginal improvement that sales reps can add to our volumes, and we adjust accordingly in terms of helping us drive more volume efficiently. We'll continue to add reps, but at some point, the market saturates. And that's where we have built out other channels in terms of EMR, digital, and other marketing channels as well, top-down partnerships. It really is a surround sound methodology in terms of how we continue to win share of voice in the market. We have number one share of voice in the market. We've had that for the last few years, and we'll continue to maintain that accordingly. I don't know if Mike has anything to add.

No, I think that covers it.

The following comes from Doug Schenkel with Wolfe Research.

A couple on Shield. I was surprised you took such a strong stance on the topic of test viability for emerging competitors. And I think it's a fair point. Like, let's see how the data shakes out, if it sounds as good as it's been described when we get to prospective randomized studies. But what happens if a test has better sensitivity than 83% blended? Or what if somebody's essentially equivalent blended but has stage one detection that is better than your 55% stage one sensitivity and/or better than your 13% advanced adenoma detection? Would that, using the same logic, call into question the viability of Shield?

I think for the first point—and thanks, Doug, for asking this important one—so we understand the biology of cell-free DNA very well. The biomarkers associated with cell-free DNA. We have studied the science and biology of it very well. So I think we can distinguish some science fiction from the reality of what different technologies can do as long as they are looking at cell-free DNA biomarkers that we know the biology very well. In science, we can never say it's mission impossible, but I can tell you that some of the scenarios you mentioned cannot happen really probabilistically, with very high probability. So, like, stage two, three, four is going to perform better with cell-free DNA than stage one. And the performance metrics, as long as the team is capable, that kind of response curve is what cell-free DNA can do with some upgrades that I think we're going to see with our Shield V2. But response curves would be similar. Advanced adenoma is a different topic. If somebody thinks they can have just a 70% plus or 70% and change CRC, but they can detect materially more advanced adenoma, we just let them learn some lessons through biology. In terms of profitability target, I'm more confident than ever about the targets that we shared in our Investor Day last fall. So, 1 million samples, $500 million revenue with a $200 COGS at a time. But there are some things that went better than our base case. This first-line indication is better. The way we are doing the ADLT pricing is higher than before. But it's still too early for us to adjust any of our expectations. We cannot get ahead of our skis. We will not get ahead of our skis. We just need to see how the volume ramp is going to look like and how the payer mix is going to appear as we go through this launch and the first few months after. And then, maybe we can talk about long-term perspectives with better data.

The next comes from Patrick Donnelly with Citi.

I guess maybe just one on the G360 volume, clinical volume broadly. Can you just talk about—I know you talked a little bit about the drivers; it sounds like it was pretty broad-based. Is that still a little bit more of a depth game given the EMR integrations? Is that the biggest opportunity? Again, it sounds like still 20% for the year. Is the confidence higher on that in terms of potential upside as we work our way relative to three months ago? I'm just curious how you're thinking about the back half and any potential changes to that volume number.

Obviously, a lot of it is depth at this point. We have, I think, something—probably close to 90% of US oncologists have ordered a test from us or a Guardant360 test. And so, it's all about driving deeper into accounts. I think the patient story kind of shows that this idea that we can go from a single test per patient to testing patients as their cancer comes back or as they get progressed, I think is one that we're just scratching the surface of in terms of response monitoring and then obviously testing as their cancers come back. And then, obviously, that's even more so in the MRD setting outside of G360. In terms of the contours for the year, we're very excited about the product upgrades we've had. We have TissueNext with a much larger panel, and the smart liquid biopsy upgrade that everyone has been waiting for are going to be really important catalysts for us this year. I don't know if Mike, you want anything to add?

We did, on the prepared remarks, just reiterate, for the full year, expectations of 20% year-over-year clinical volume growth. We know that we had a very difficult comparison in Q2 because, in the first half of last year, we had the ESR1 approval for Guardant360 CDx and that led to a rapid increase in breast volumes. We saw in Q2 of last year a bolus effect. So we were really pleased with the clinical volume growth this quarter. Again, we saw growth in the US on Guardant360, but also outside in Japan and the UK, but also across TissueNext and Reveal. So we're really pleased with Q2 and we look ahead for the full year. We're still very confident on the 20% clinical volume growth for the reasons that Helmy just outlined.

The final question comes from Tycho Peterson with Jefferies.

Really two questions. One on Medicare, specifically Medicare Advantage, right? It's over 50% of Medicare. HEDIS scores matter. They obviously feed into star ratings and reimbursement. And if Medicare Advantage plans let someone get a non-guideline test, it puts the reimbursement at risk, and it feels like they actively block them until you have USPSTF. So do you agree with that view? What's the timeline for HEDIS scores? I know it took Exact about two years. The second question was just – I want to confirm on G360. Were the volumes down sequentially in 2Q? Clinical ASPs were down sequentially. G360 ASPs were up sequentially per your slides. So that would seem to imply that the G360 volumes are down sequentially as unpaid tests are obviously driving a lot of the volume.

Actually, it's true that Medicare fee-for-service would be likely easier to collect from. And Medicare Advantage plans are supposed to pay us because the NCD is broad, with no restriction. Our label is broad, with no restriction. So they're supposed to pay. But as we've seen, Medicare Advantage plans are notorious for putting some kind of roadblocks and stuff. But we need to deal with that before too. We have experience working with Medicare Advantage plans for both 360 and Reveal, and we've been very successful. We've made great strides dealing with them and looking forward to applying those learnings now to Shield.

On the clinical volume, the Guardant360 volume, we saw sequential growth of about 2,500 tests. Yeah, I can confirm Guardant360 grew sequentially, as did Reveal, and Guardant360 grew in the US sequentially and outside the US sequentially. And I think there's a comment on ASPs as well. Guardant360 ASP, we've seen significant tailwind over the last 12 to 18 months with the Guardant360 ASP. So that improved significantly year-over-year, but also improved sequentially as well. So we're now up to $2,950 to $3,000. So I think, again, we're really pleased with the quarter from a volume perspective, year-over-year and sequential from an ASP perspective. For us, it was a very strong second quarter of 2024.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.