Good day, ladies and gentlemen, and welcome to the GRAIL Second Quarter 2025 Earnings Call. Please be advised that this conference call is being recorded. GRAIL Investor Relations, please begin.

Thanks, operator, and thanks, everyone, 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; Sir Harpal Kumar, our President, International Business and Biopharma; and Andy Partridge, our Chief Commercial Officer. 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. This call will also include a discussion of GAAP results and certain non-GAAP financial measures, including adjusted gross profit or loss, which are adjusted to exclude certain specified items. Our non-GAAP financial measures are intended to supplement your understanding of GRAIL's financials. Reconciliations of the non-GAAP measures to the most directly comparable GAAP financial measures are available in the press release issued today, which is posted to our website. And with that, we turn to Bob.

Thank you. Good afternoon, everyone, and thank you for joining us to review second quarter results. For nearly a decade, GRAIL has made key investments to advance our vision for population scale, multi-cancer early detection and establish a durable advantage in a growing field. The time frame to establish evidence in this space is long, and we are setting the evidence bar high. We started population scale clinical studies years ago and now have several years of follow-up data. Our pivotal implementation and clinical utility studies in the intended use population are beginning to read out, and we are delighted to see results not only confirm earlier studies, but actually improve certain performance measures as we evaluate Galleri in larger populations. We plan to submit detailed results from the prespecified analysis of the first 25,000 patients in our registrational PATHFINDER 2 study for presentation at the ESMO Congress 2025 in October. As a reminder, we announced positive top line performance and safety results from this data set in June, namely that we observed substantially greater additional cancer detection and a substantially higher positive predictive value in PATHFINDER 2 compared to the first PATHFINDER study, and Josh will describe these results further shortly. We've been working with advocates and stakeholders to deploy MCED, and we are finding aggressive cancers in a real-world commercial setting, many of which are in early stages. Galleri test orders continue to grow at a strong clip with more than 45,000 Galleri commercial tests sold in the second quarter. As of June 30, more than 370,000 Galleri tests have been prescribed by more than 15,000 health care providers since we launched Galleri commercially in 2021. We continue to drive provider and patient awareness of the MCED opportunity and Galleri's ability to detect cancer earlier when it is more amenable to treatment. GRAIL has established several partnerships with health care systems to make Galleri available to patients, and we were very pleased to add Rush University System for Health in July. Rush is one of the largest health systems in the U.S. and the first in the Chicago area market to offer the Galleri test. Additionally, we recently entered into a new collaboration with Everlywell, a digital health company pioneering the next generation of biomarker intelligence, and Galleri is now available for requests directly on Everlywell's website via prescription. We remain on track for continued commercial growth in 2025. We are also encouraged by increasing Galleri volume via the Quest Diagnostics test ordering platform at midyear which follows Galleri integration into the platform earlier in 2025. In late 2024, we began the use of a new version of Galleri for which we are submitting our PMA in commercial channels. This new version incorporates an industrial scale platform with significant automation intended to enable us to scale more efficiently with future demand. As a result of the scale and complexity of the system, there are certain new processes to sort through with a large-scale rollout. For example, for a small proportion of samples, we've experienced increased turnaround times with higher reprocessing costs. We are now working to implement the fix to this issue. Before I hand it over to Josh, I'd like to notify the group that we will host our 2025 Analyst Day in November. Featured speakers will detail key study results in clinical surveillance findings, frame our upcoming longitudinal clinical utility data, and describe firsthand customer experience with Galleri. Event details will be announced at a later date.

Thanks, Bob, and hello, everyone. We've spoken in the past about key performance metrics, features and capabilities for multi-cancer early detection tests, which are quite different from those for single cancer screenings. Most critically, any test developer must confirm clinical validation in the intended use population of asymptomatic adults eligible for screening before they introduce those tests into clinical practice. This critical criteria was the reason that GRAIL did not introduce Galleri into clinical practice until we saw the results from the PATHFINDER trial in this screening population. Even tests with strong results in observational case-controlled studies may fail to confirm those results in the actual screening population. Full clinical validation requires demonstration of compelling performance in the intended use population. It is simply not possible to know the benefits and potential harms of any test before being adequately studied in the intended use population. It is also important to note that any multi-cancer test seeking FDA approval will need to demonstrate this as well. So in terms of performance metrics, we've discussed what we consider to be most clinically important for MCEDs, positive predictive value, or PPV, which tells us among positive test results, how many cancers are found or how many are actually true positives. And the specificity, critically important, which defines the false positive rate, as well as the cancer detection yield when added to standard of care screening and the ability to localize where in the body a cancer signal is coming from. After hundreds of thousands of commercial tests performed, we've now confirmed how essential it is for any MCED test to report a predicted CSO or cancer signal origin to guide an efficient and effective clinical workup. We believe that any other approach, such as relying on whole-body imaging with its radiation exposure, costs and lack of any performance or safety data, is simply not practicable. Our first clinical implementation study, PATHFINDER, which was presented at ESMO in 2022, showed that Galleri more than doubled the number of cancers identified when added to standard of care screening. About half of the MCED detected cancers were at early stage. And about 70% of the MCED detected cancers had no recommended screenings at all. The positive predictive value for Galleri in the study population was 43%, which, as you recall, is an order of magnitude higher than leading single cancer screening tests, whose PPVs remain in the single digits. Galleri specificity was 99.5% and its cancer signal of origin accuracy was 88%. We have subsequently undertaken PATHFINDER 2, similarly designed as a prospective multi-center interventional study of Galleri added to standard of care screening designed to assess the performance and safety of Galleri in an even larger and more representative intended-use population. As Bob said, we observed a number of very promising results in the prespecified analysis of the first 25,000 participants enrolled with 12 months follow-up and shared top line results in June. First, adding Galleri to standard of care screening in PATHFINDER 2 demonstrated substantially greater additional cancer detection than that observed in the first PATHFINDER study. That is substantially greater than the more than doubling of the overall number of cancers detected when added to standard of care in the first PATHFINDER study. Second, data showed a substantially higher positive predictive value than that observed in the first PATHFINDER study, which was 43%. Third, specificity and CSO accuracy were consistent with that observed in the first PATHFINDER study. And finally, there were no serious safety concerns reported in PATHFINDER 2. We are enormously pleased with the top line results from both of our registrational studies, PATHFINDER 2 and the NHS Galleri randomized clinical trial. You will recall in May that we completed a review of Galleri test performance results in the intervention arm from the prevalent screening round of the registrational NHS Galleri trial. Data from the prevalence screening round showed a substantially higher positive predictive value than that observed in the first PATHFINDER study. Specificity and CSO accuracy were consistent with that observed in the first PATHFINDER study. And again, there were no serious safety concerns observed in PATHFINDER 2, also consistent with the first PATHFINDER study. These top line findings from NHS Galleri and PATHFINDER 2 confirm and extend what we already know about our multi-cancer early detection technology. The technology has been validated through many robust studies, including intended-use populations and through hundreds of thousands of commercial and clinical study test results showing very consistent results. Data presented at the ASCO Annual Meeting 2025 in May included a 5-year follow-up analysis of The Circulating Cell-free Genome Atlas study, which demonstrated Galleri's preferential detection of aggressive and clinically meaningful cancers. These findings were consistent with earlier analysis assessing the prognostic importance of Galleri's cell-free DNA-based methylation approach. Between case-controlled studies and prospective implementation studies in the intended use population, we have not seen deterioration in the key performance metrics. Many of you will know, this is not always the case. Case-control performance often doesn't carry over into the real world, but we saw no deterioration in specificity, positive predictive value or cancer detection yield. And now we're moving into readouts of much larger registrational studies in the intended use groups as well as analyses performed by large health systems who have actual clinical experience with Galleri, and we're seeing a body of results with substantially improved PPV figures and substantially higher cancer detection numbers while other key figures like specificity and CSO accuracy remain consistent. Earlier in GRAIL's development phase of our MCED technology, we deployed a very rigorous, unbiased and comprehensive discovery approach to identify the effective genomic features for early cancer screening. Out of those approaches evaluated, methylation patterns exhibited the strongest performance for both sensitive and specific cancer signal detection and accurate prediction of the cancer signal origin. Adding other analytes or DNA features did not improve the performance. What we are seeing today from our growing data set strengthens our conviction in our targeted methylation approach, which is focused on highly informative and low-noise methylation regions known to be informative for cancer. Through hundreds of thousands of samples run in both clinical studies and commercially, we're seeing very strong positive predictive values in cancer detection rates and a highly accurate cancer signal aversion prediction, all of which critically is achieved at a very low false positive rate of 0.5%, which befits population scale testing. Remember, if another test developer is operating at a lower specificity, a difference in specificity of 99.5% to 98.5% is actually a threefold higher false positive rate. That's really important to remember. We reported top line results from PATHFINDER 2 in order to preserve detailed results for a major medical meeting, and we hope to present the full data set at ESMO in October. We look forward to discussing detailed results from PATHFINDER 2 with you potentially very soon. I'll now hand off to Aaron for a review of the financials.

Thanks, Josh, and good afternoon, everyone. I'm pleased to present our results for the second quarter. Overall, second quarter results were strong. Revenue for the quarter was $35.5 million, up $3.5 million or 11% as compared to the second quarter of 2024. Total revenue for the quarter is comprised of $34.4 million of screening revenue and $1.1 million of development services revenue. Development service revenue includes services we provide to biopharmaceutical and clinical customers, including support of clinical studies, pilot testing, research and therapy development. We see continued demand for our Galleri test and sold more than 45,000 tests in the second quarter. We have historically observed seasonal fluctuations over the course of the year, in particular, relatively high volume in the second and fourth quarters and lower in the first and third, and we would expect these seasonal trends to continue. Repeat test volumes have trended higher over time, including year-to-date. Today, more than 25% of Galleri's volume is repeat testing. Screening revenue of $34.4 million in the second quarter was up 22% as compared with the second quarter of 2024. U.S. Galleri revenue was $34.2 million, up 21% compared to the second quarter last year. The second quarter has been a strong quarter for U.S. Galleri revenue historically. We are on track relative to our full year guidance of U.S. Galleri revenue growth between 20% to 30%. As stated last quarter, we do not expect a major impact for tariffs on our current business as our laboratory is located in the U.S. and a significant majority of our suppliers are located and manufactured in the U.S. Cost of screening revenue, exclusive of amortization of intangible assets as a percent of revenue decreased in the second quarter of 2025 compared to the same period in 2024, primarily due to a 6% decrease in ASP and additional sample reprocessing costs, partially offset by the reduction in variable costs of Galleri testing performed on our automated platform. Net loss for the quarter was $114 million, an improvement of 93% as compared to the second quarter of 2024. Net loss in the second quarter includes impairment of Illumina acquisition-related intangible assets of $28 million and stock-based compensation of $14.2 million. While we focus on advancing Galleri, we remain committed to our ongoing work with pharma partners, and we have confidence in the potential application of our technology. Non-GAAP adjusted gross profit for the second quarter of 2025 was $16.1 million, an increase of $0.1 million or 1% as compared with the second quarter of 2024. We ended the quarter with a cash position of $606.1 million. In January, we guided that we expect cash burn for the full year 2025 to be no more than $320 million, and we are updating the guidance to cash burn of no more than $310 million for the full year of 2025, which represents a decrease of more than 40% compared to 2024. Our cash runway extends into 2028, enabling us to achieve major planned clinical and regulatory milestones. I'll turn it back to Bob for concluding remarks.

Thank you, Aaron. To close, we are highly encouraged by the demand we are seeing today, both for new patients and for returning patients who are repeat testing. Our strategic priorities are seeking FDA approval of Galleri and pursuing broad reimbursement. We are advancing Galleri today toward near-term key clinical and regulatory catalysts to achieve broad access while maintaining our disciplined cost management. We plan to submit our presentation at ESMO in October, with detailed performance and safety results from the first 25,000 participants enrolled in the PATHFINDER 2 study. This is a registrational dataset that will go through the FDA. Soon into 2026, our key milestones are the completion of our modular PMA submission to the FDA in the first half and full clinical utility results from our 140,000 participant NHS Galleri study, which we expect to read out midyear. This longitudinal dataset will be reviewed by the NHS to determine Galleri's potential deployment within the U.K. population. As I mentioned earlier, we look forward to seeing many of you at our 2025 Analyst Day in November. With that, we'll turn the call over to Q&A. Operator, please go ahead.

Our first question will come from Kyle Mikson with Canaccord Genuity.

This is Alex Vukasin on for Kyle Mikson. I just take a step back here. So the first quarter cash run came a bit higher than we expected, especially due to the bonuses that you have to pay out in the prior year period in 1Q, but that's obviously not repeated in future quarters. You modestly improved the burn target for 2025. Can you just comment on 2Q free cash burn? And then just given how integral the burn is to your story, can you elaborate on any other dynamics that could impact cash burn in the second half of '25, whether that be additional R&D increases to headcount or any other one-offs?

Yes, Aaron, do you want to take that one?

Yes, happy to. Yes, thanks for the question. So I think for the first six months, it was about $160 million of burn. And it is important for us to, again, as Bob said, manage the business as efficiently as possible. We do see that coming down in the next couple of quarters as you can get into the $310 million, no more than guide that we just updated, really driven by increased volumes in the back half of the year and increased revenue. And also, we'll be working on getting more volume on our new automated platform.

Yes, I'd maybe just add a little color to that too. One of the things when we did the restructuring, we wanted to make sure that we gave ourselves a lot of flexibility in the go-forward state and recognizing that MCED being a new field, we undoubtedly face a number of new and interesting challenges. So that flexibility was a key element. And I think by doing the restructuring, getting us cash into 2028 has provided that. And I think being able to guide down a little bit to $310 million shows we think we're on track to be able to hit that more aggressive number.

Our next question will come from Subbu Nambi with Guggenheim.

Just to clarify, do you not need full longitudinal clinical utility data that is expected mid-2026 for PMA submission, one? And then when you say significantly higher PPV in PATHFINDER 2, I had a basic question. Are you normalizing for cancer prevalence in both these studies just because shouldn't cancer prevalence impact PPV?

Yes. I’ll begin by addressing the questions. Regarding clinical utility, the FDA, during their advisory board meeting, will primarily consider benefits and harms rather than clinical utility, which is often examined in payer discussions. The NHS Galleri data will support that. Josh, would you like to address the PPV question related to PATHFINDER 2?

Sure. So again, regarding the FDA, their focus will be on clinical validation instead of clinical utility, as mentioned by Bob during their advisory board. Currently, we are not normalizing the Positive Predictive Value for the standard population; we are reporting it within each study's specific population. As previously noted, these populations are much broader, more diverse, and more representative than those studied in the past. We expect to see a wider range of cancer risk and incidence in these populations, which may be contributing to the higher Positive Predictive Value. Ultimately, we will normalize this data to account for cancer incidents and the distribution of cancers within each population, which is crucial for performance reporting. However, for now, we are reporting the data within the individual study populations.

And then one follow-up. Non sequitur. Based on other prior integrations with more concierge type testing platforms like Function and Superpower, how long is the typical growth ramp? And do you expect Everlywell to drive similar volumes?

Yes. We have observed strong and consistent performance from groups like Function, which have been excellent partners. We expect that Everlywell will add an important dimension to the channel by providing another outlet due to their subscriber base. Maybe, Andy, would you like to provide additional insights on that?

Yes, absolutely. So yes, we're definitely anticipating these telemedicine, longevity-based platforms like Function Health, like Everlywell to really give us a tailwind in terms of growth going forward. When we look at Everlywell, they've had millions of customers order through that platform and Everlywell in terms of the Everly 360 launch that they announced offering Galleri as an add-on, and they've emailed hundreds of thousands of their customers about the Galleri multi-cancer early detection test. So we're excited to partner with groups like Function health and Everlywell as they really amplify our education around Galleri and multi-cancer early detection.

Our next question will come from Yuko Oku with Morgan Stanley.

With timelines for PMA submission approaching, could you elaborate on customer support infrastructure in place to help integrate MCED testing in cancer care today? And then outside of sales reps, what are areas you intend to bolster as you get closer to the timing of anticipated FDA approval?

The timeline for our PMA submission is set for the first half of 2026. We anticipate that the FDA approval process will take about a year, as this will be the first MCED to go through the FDA and will involve an advisory board. This means we are looking at mid-2027 for that approval. In the meantime, we are steadily enhancing our customer support in both size and capability to align with our business growth, and we will continue to focus on improving the efficiency of our customer support during this process. Additionally, from a sales and marketing perspective, we will assess how much effort to dedicate and expect some reductions in costs across other areas of the business as we reach these significant milestones. Andy, do you have anything to add regarding customer support?

Yes. I think you covered it, Bob. We're really looking at what are those opportunities to expand our customer-facing teams. We're going to do that to capture those growth opportunities. We're also going to continue to keep an eye on expenses. As you outlined, Bob, as we really want to drive to kind of a commercial breakeven kind of going forward. So...

Great. And if I could squeeze one more in, if I may. Could you elaborate on the statistical powering of the NHS Galleri study? What difference is the trial powered to detect on the primary endpoint of reduction in the incidence of late-stage cancer versus the control arm? And what result will be viewed as a meaningful benefit?

Yes, Harpal, you maybe want to take that one?

Yes. Sure. So I mean the study is powered to show a significant reduction in late-stage cancer. So we look first at the 12 cancers that represent about two-thirds of all cancer mortality and then we go on to look at all cancers from there. So we will be looking at that late-stage reduction. We don't have a specific reduction in mind, but the size of the study was set to be able to deliver a statistically significant result in terms of that reduction. So we will see what that reduction ends up being. We're interested, obviously, both in the reduction of Stage III and IV cancers, but also Stage IV cancers because ultimately, people primarily die of Stage IV cancer. So if we can see significant reductions in those late-stage cancers, we believe this will provide substantial benefit to the population.

Our next question will come from Douglas Schenkel with Wolfe Research.

This is Colleen on for Doug. As the NHS data reads out next year, we think that could serve as a strong evidence package for other international opportunities with single-payer systems. How are your conversations with territories across the globe looking to deploy Galleri? Also, if international volume grows sufficiently, will you have to do a tech transfer to international labs?

Yes, it's a great question. So we get tremendous amount of inbound interest, as you can imagine, from around the globe. And with that, we've had numerous conversations. We also believe, as you rightly pointed out that in the middle of next year, from an efficiency standpoint and effectiveness standpoint, in the middle of next year when we read out the NHS Galleri study, we think that's going to be a great calling card to really have significant discussions with a lot of countries around the globe, both due to just the sheer size of the study, but also the rigor and reputation those studies done on the NHS. I think that reputational advantage will go a long way as we have those conversations. Harpal, anything you want to add with that?

I think you've largely covered it, Bob. I mean as you said, this is a very large study conducted extremely well in a health system that is very well respected around the world. So we fully expect that the results from this study will be and are being observed by countries right across the world, and we expect that the results in the middle of next year will provide us with the data to really turn those conversations into meaningful opportunities as we look forward. And as you alluded to, should give us a substantial growth opportunity as we look forward.

Our last question will come from David Westenberg with Piper Sandler.

This is Jon on for Dave. Can you hear me?

Yes.

Great. So just first off, Quest integrated Galleri into their ordering system earlier this year. It's still early days, but could you just give us any color on what you're seeing in terms of orders coming through at the Quest platform at this point? And any thoughts on what's driving it?

Yes, I'll address this in reverse order. Through our integration with Quest, we have discovered that eliminating friction from the process leads to increased sales. We believe that the Quest integration will greatly reduce friction in the system. So far this year, approximately 500 healthcare professionals have ordered the Galleri test through the Quest system. In the second quarter, about 7% of orders came via the Quest platform, and we are excited about the rapid uptake. As we onboard more practitioners, some can immediately order Galleri tests through Quest, while others require specific enablement, which usually takes a few weeks. We expect to continue growing this channel. Additionally, we have found that providers using the Quest system are more likely to write prescriptions, as they tend to order more, driving increased volumes.

Great. And just a little more broadly, could you give any color on how do you interpret the repeat test rate for Galleri? Are you pleased with it? Do you have a target in mind? And just any general thoughts on the directional trend for repeat testing?

Sure. So first, we're pretty pleased with repeat testing. Last quarter, we were over 20%, this quarter we went to 25%. We've seen a continued step-up in repeat testing, which I think is really a testament to the product as well as the medium. We think a blood-based test is going to have a better adoption capability than some of the other mediums. And we also think the fact that it compares very favorably to other tests, given that it's not a non-reimbursed test generally to have repeat test rates above 25% at this stage of the game is something we're pretty happy with. And it's also something we're looking to continue to do efforts to make sure we continue to drive that higher.

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

I just want to thank everybody for the questions, and I look forward to talking to you at the next call.

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