Good day, ladies and gentlemen, and welcome to the GRAIL Fourth Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that this conference call is being recorded. GRAIL Investor Relations, please begin.

Thank you, and thank you all for joining us today. On the call are Bob Ragusa, our Chief Executive Officer; Aaron Freidin, our Chief Financial Officer; Dr. Joshua Ofman, our President; and Sir Harpal Kumar, our President, International Business and BioPharma. Before we get underway, I'd like to remind everyone that we'll be making forward-looking statements on this call based on current expectations. It's our intent that all statements other than statements of historical fact made during today's call including statements regarding our anticipated financial results and commercial activity will be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 as amended, and Section 21 of the Securities Exchange Act of 1934 as amended. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon currently available information, and GRAIL assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that GRAIL files with the SEC, including the Risk Factors section in GRAIL's most recent quarterly report on Form 10-Q and the company's upcoming annual report on Form 10-K. This call will also include a discussion of GAAP results and certain non-GAAP financial measures, including adjusted gross profit and adjusted EBITDA, which are adjusted to exclude certain specified items, including accounting impacts related to Illumina's acquisition of GRAIL. Our non-GAAP financial measures are intended to supplement your understanding of GRAIL's financials. Reconciliations of the non-GAAP measures to most directly comparable GAAP financial measures are available in the press release issued today, which is posted to our website. And with that, I'll turn the call to Bob.

Good afternoon, everyone and thank you for joining us to review results for the fourth quarter and full-year 2024. 2024 was a transformative year for GRAIL as we separated from Illumina and began publicly trading in June. In July, we completed final study visits for our two registrational studies, the NHS-Galleri study and PATHFINDER 2. In the third and fourth quarters, we implemented a significant restructure intended to extend our capital runway past some major anticipated milestones including the completion of our modular PMA submission for FDA approval of Galleri. In addition, we grew U.S. Galleri revenue 45% year-over-year selling more than 137,000 Galleri tests. We are pleased with Galleri's commercial momentum and are excited to progress initiatives to make it easier for physicians to order the test, including our recent integration into Quest Diagnostics test ordering system. This integration enables easy ordering for more than 500,000 physicians and allows patients to access the Galleri test at 7,400 Quest locations nationwide without needing to bring along a test kit. To discuss some additional recent highlights, I'll hand it over to GRAIL's President, Dr. Josh Ofman.

Thanks, Bob. As you may know, Galleri was designed to be utilized at population scale. And we've continued to enhance our technology and our laboratory infrastructure to enable all this future growth. Over the past several years, we've been working on an updated version of Galleri, which will enable efficient growth and support testing at scale. At the end of 2024, we rolled this enhanced version out, which includes a reduced panel size, allowing us to lower sequencing costs and to run approximately four times the number of samples on every flow cell. Additionally, the testing workflow is now both fully automated and integrated, meaning we've been able to eliminate numerous manual steps in the lab, allowing for much greater efficiency. The implementation of these updates has substantially expanded our lab capacity, and we do not anticipate any additional CapEx investment will be needed to support our expected volume for the foreseeable future of the next several years. We began offering this version of the test in December and expect to see COGS improvements as we continue to scale. We're also really pleased that the U.S. Military's TRICARE health insurance program has added the Galleri test to the approved list of lab-developed tests as a covered benefit for patients who are 50 years or older with an elevated risk of cancer. This addition came after the Defense Health Agency reviewed Galleri to determine if it met TRICARE requirements for both safety and effectiveness. We're currently working with TRICARE's carriers to implement this new offering. We're really pleased with the progress we've made since GRAIL was founded in 2016. The Galleri test is identifying deadly cancers in asymptomatic adults in clinical care today. We continue to demonstrate our scientific leadership in this emerging field to completely transform how we screen for cancer and to dramatically improve the cancer detection rate in the population. We continue to make progress on our modular FDA submission, and we're looking forward to continuing to help individuals and their families detect cancer early when it can be cured. To discuss our fourth quarter financial results, I'll hand it over to GRAIL's Chief Financial Officer, Aaron Freidin.

Thanks, Josh and good afternoon, everyone. I'm pleased to present results for our fourth quarter and the full-year of 2024. Fourth quarter results were strong with revenue of $38.3 million, up $7.9 million or 26% as compared to Q4 2023. Total revenue for the quarter is comprised of $31.6 million of screening revenue and $6.7 million of development services revenue. Development services revenue includes services we provide to biopharmaceutical and clinical customers, including support of clinical studies, pilot testing, research, and therapy development. Full-year revenue was $125.6 million, up 35% from full-year revenue in 2023. 2024 full-year revenue was comprised of $108.6 million, screening revenue up 45% over full-year 2023 and in line with our narrowed guidance in the fall of 40% to 50% growth. Revenue also included $17 million of development service revenue, a decrease of 6% from 2023. We see continued demand for our Galleri test and sold more than 40,000 tests in the fourth quarter and a total of approximately 137,000 tests throughout the year. Screening revenue of $31.6 million in the fourth quarter was up 39% as compared with the fourth quarter of 2023, primarily based on increased sales volumes. Development service revenue in Q4 '24 was $6.7 million, a decrease of 13% as compared with the fourth quarter of 2023. Net loss for the quarter was $97.1 million, an improvement of 48% as compared to Q4 2023. Net loss for the full-year was $2 billion, an increase of $561 million or 38% as compared to full-year 2023. Net loss was primarily driven by goodwill and intangible asset impairments. Non-GAAP adjusted gross profit for the fourth quarter of 2024 was $17.9 million, an increase of $2.6 million or 17% as compared with Q4 2023. Primary drivers of the increased margin were revenue mix and efficiencies of scale related to increased Galleri volume. Full-year non-GAAP adjusted gross profit was $57.8 million, an increase of $17.6 million or 44% as compared with full-year 2023. Adjusted EBITDA for the fourth quarter of 2024 was negative $84 million, representing an improvement of $39.4 million or 32% as compared to Q4 2023. Adjusted EBITDA for the full-year 2024 was negative $483.5 million, an improvement of $40.3 million or 8% as compared to full-year 2023. We ended the year with a cash position of $766.8 million. We are focused on driving growth efficiently and reducing our spending profile. In 2024, we made significant strides here, and we plan to continue to reduce burn in 2025. In January, we guided that we expect cash burn for the full-year of 2025 to be no more than $320 million, a projected decrease of more than 40% of our cash burn in 2024. As we've shared before, our cash runway extends into 2028, enabling us to achieve major milestones such as readouts of our registrational studies and completion of our modular PMA submission. I'll turn it back to Bob for concluding remarks.

Thank you, Aaron. Since the separation from Illumina in June of last year, we have made great progress as a public company. We have seen strong growth for Galleri, improved our cost efficiency and recently completed a major initiative to launch the new version of the test, preparing us for scalability. We believe we are in a strong financial position and are pleased with the momentum we are seeing as we continue to drive multi-cancer early detection from an idea towards becoming a new standard of care. We are in the final stages of data collection for our registrational studies and are looking forward to readouts from the PATHFINDER 2 and NHS Galleri studies as well as completion of our modular PMA submission with the FDA in the first half of 2026. We are grateful to our employees for their incredible commitment and dedication to our mission to detect cancer early when it can be cured. We'll now turn the call over to Q&A. Operator, please go ahead.

Thank you. The first question is from Doug Schenkel at Wolfe Research. Please unmute yourself and begin with your question.

Good afternoon and thank you for taking my questions. I have two questions to ask. First, could you provide more details on how the reduced cost of goods sold per test gives you flexibility in pricing? Additionally, are you seeing any indication that lower pricing could lead to increased demand for the test? I'm interested in understanding how low the cost of goods can go, the extent of pricing changes, and any evidence of market elasticity. My second question is about the recent reintroduction of the MCED bill in the House a couple of weeks ago. Can you share what you’ve heard and what might be coming next? Thank you.

Great.

Hey, Josh, let me take it first, and I'll go over two.

Go ahead, Bob.

I appreciate the questions. Regarding the new version of the tests, as Josh mentioned, we can now process significantly more samples—four times the previous amount—thanks to a more focused panel. This leads to a near-term reduction in variable costs. Looking at the long term and considering price elasticity, we see this platform as crucial for achieving scalability and establishing the cost structure necessary to support population-scale pricing and margins. However, we won’t experience fixed cost leverage from the automation Josh highlighted until volumes increase significantly. We have not yet conducted elasticity testing. This development is about future-proofing to ensure we have the scalability and cost structure needed in the long run. Josh, do you have anything to add?

No, it's still early days. As volumes grow, we will be able to leverage that scalability, but that won't happen today.

The legislation. So we remain encouraged by the reintroduction, by the momentum, the stakeholder groups that have been advocating for this remain very strong locally. We continue to have bipartisan bicameral support for the bill. So a lot of good momentum really looking for the right vehicle to be able to move it forward. But again, I would say no real change in the level of support for it. And Josh, maybe I don't know if you have any other color you can add?

No, I think that's right. We've got great support bicameral, bipartisan it's been reintroduced. And we're hopeful that in one of the moving vehicles, either the first pending bill or any reconciliation that it will get seriously considered.

Thank you again guys.

The next question is from Tejas Savant from Morgan Stanley. Please unmute yourself and begin with your question.

Sorry. Hi, this is Jason on for Tejas. Congratulations on the quarter. And thank you for taking our questions. So maybe just starting off on the recent collaboration with Quest Diagnostics, can you share what's embedded in your 2025 guidance regarding this collaboration and confirm if those incorporated in your pre-announcement from mid-January? And similarly, on a similar note the TRICARE news, was this incorporated in your mid-January 2025 guide? Or do they represent sources of upside? Thank you.

Hey, Aaron, do you want to take that?

Yes, definitely. Yes. So we're excited about both these opportunities as Josh really elaborated on for both Quest and TRICARE. Quest is going to make the test directly available to be ordered through their system. Patients won't need to take a kit to go to their blood drawn and so on. And TRICARE, as Josh said, very, very excited and working with the payers to implement coverage. As far as guidance goes, we contemplated several things and opportunities for the U.S. Galleri next year. And right now, there's no change to our '25 guidance.

Got it. Thank you. And then, I guess, just following up on Doug's question on the MCED legislation. So I believe there was a December bill that mentioned reimbursement beginning in 2029. And then a more recent bill from February in the Senate, which had reimbursement beginning in 2028. Could you share thoughts on how these timelines align for expectations? And then on a related note, I believe the bill in February also mentioned reimbursement in line with multi-target stool screen tests. So does that potential reimbursement rate for MCED tests also align with your expectations? Thank you.

Yes. So on the first piece in terms of the timeline, the piece in December was what was kind of negotiated back and forth. And then what's currently in there just kind of resetting back to the beginning position. So as it gets reintroduced, it's kind of back into the beginning starting positions for the bill. The pricing is referenced in that as well, similar to the current market for stool-based testing. So that seems to be accurate.

Great. Appreciate the color.

Just to connect back to the discussion on COGS and margins. We mentioned that we have implemented this new version with the expectation of scaling for a larger population. Therefore, we have factored that pricing into our plans.

Thank you. Appreciate the color.

The next question is from Subbu Nabi from Guggenheim Partners. Please unmute yourself and begin with your question.

Hey guys, it's Thomas on for Subbu. Thanks for taking our questions. To start, I'm curious about PATHFINDER 2. What does success look like for you in that study? Can you share what kind of readout you're aiming for and any endpoints? And while I understand it’s still early, when would you consider it not meeting expectations?

And Josh, do you want to jump in on that one?

Sure. So as you remember, PATHFINDER 2 is a U.S. study, single-arm interventional trial where we're really evaluating the safety and the performance of Galleri in an adult U.S. population over the age of 50 with elevated risk for cancer. So really, the main endpoints of that study are going to be traditional measures of test performance, the diagnostic evaluation, the workups specificity, sensitivity, predictive values. And then on the safety issue, obviously, the traditional safety measures of complications associated with workups and whether individuals continue to get their standard of care screening. And that's all very similar to what was in PATHFINDER 1 as well. And so we will read that study out, and it will be part of our final modular submission to the FDA in the first half of '26. And so I guess that probably answers your question.

Great. That's helpful. And then just one follow-up on a separate note on cash. As you closed out 2024, can you speak to what cash preservation initiatives may have done to efforts to get more payer coverage? In otherwise the recent announcement that you said the call, but any new color on longer-term impacts there? Thanks.

Yes. No, no change from what we communicated at JPMorgan and prior. The restructuring we completed last year gives us cash runway to 2028 with cash burn decreasing over the coming years as we get there.

Awesome. Thanks guys.

And the final question is from Kyle Mikson from Canaccord. Please unmute yourself and begin with your question.

Hi, everyone. This is Alex on for Kyle Mikson. So obviously, a major topic of discussion has been the company's spending and burn profile. Obviously, there continues to be a lot of uncertainty. We'd like to answer that legislation, which as you noted earlier in the call. So if your internal FDA submission and approval timelines are ultimately either meaningfully elongated or shortened, how could this impact your cash burn? Thanks.

Yes. So currently, our plans for FDA and PMA submission are the first half of '26. We see cash runway into 2028. So we believe we've built in some cushion and some flexibility there to cover any sort of delay if that were to happen. Today, sitting here confidently though, with our first half '26 timeline. And Bob, Josh, anything else you guys want to add?

Yes. I believe that, as Aaron mentioned, we have built in some buffer. One of the reasons for choosing to restructure and extend our cash runway into 2028 was to provide us with a degree of flexibility. We feel confident that this cushion is in place.

Got it. Thank you. And one quick follow-up. So in January 2025, President Trump announced Oracle Open AI and SoftBank joint forces to launch Stargate, essentially a lot of funding going towards AI and Larry Ellison actually noted early cancer detection and AI could kind of team up, joint forces over time. I was curious if any of this news impacted results in Q1 at all thus far? Thank you.

Yes, we see this as more of a long-term opportunity. It was encouraging to see cancer highlighted as a key area for AI during the press conference. However, in terms of the impact on Q1, I don't anticipate any noticeable effects.

Got it. Thank you.

Thank you. There are no further questions at this time. I will now turn the call back to GRAIL for closing remarks.

So thank you, everyone, for joining the call today.

Ladies and gentlemen, this concludes the call. You may now disconnect.