Hi, welcome to the Canaccord GUDD Growth Conference. I'm Kyle Mixon. I cover life science, tools, and diagnostics for Canaccord. Please welcome you to a fireside chat with Grail here with us today. The company offers the first of its kind commercialized multi-cancer early detection test called Gallery. With the company, we have Aaron Frieden, CFO. Thanks, Aaron, for joining us today. Yeah, Kyle, thanks for having us. All right, so starting with the second quarter results, I think you reported about a week ago. Congrats on the 35% test volume growth. Just comment on how the volume progressed in the quarter, anything, you know, external that affected impact volume or pricing, anything like that in the quarter that helped you guys have that solid revenue output.

Yeah, no, thanks for the questions, and again, thanks for having us. Yeah, so we're really happy with the first half. We had a revenue growth of about 30% and volume growth of about 42%, over 117,000 tests now in the first half. You know, we've been really focused on building this market in this pre-reimbursement space. whether it's through digital health or self-insured employers, in addition to your brick-and-mortar physician offices. And we continue to see growth, really, in the digital health and the employer channel space. You know, we've expanded our sales force. That effort really started this quarter in Q2, and it completed by the end of it. We had everybody up and trained by the end of it, and we'll see those sales folks out in the field here shortly. Actually, they are out there now. And we also released data at NHS Gallery Data at ASCO. We've trained the sales force on that now, and they're out having really good conversations with physicians. You know, a pretty significant clinically meaningful stage four reduction for a screening test, like an MSED. No one's demonstrated that before. That's pretty important. So, you know, I think the things really driving growth right now are traction in those channels and then the education of the sales reps now having NASCO data in hand.

Okay, helpful. And then maybe just touching on the, you know, the Quest Diagnostics Partnership, the Athena Health kind of integration and anything else that helps you sort of streamline the ordering and the, you know, enablement of all this testing. Anything like that in the quarter or is that more of a second half impact?

So Athena Health and Quest have been in place now for over a year. And what we've found is once a physician is bought in and they are detecting cancers, that really removes the friction from the system. It makes it much easier for them to order. So physicians who use that and are bought in are ordering more tests. What we're excited about is by the end of the year, we'll have Epic integrated, which will be even further friction removing for physicians.

Can you just double click on the digital health kind of channel and your partners like Function and these others, but maybe how material is that sort of a partner and could that almost expand and grow further?

Yeah, I mean, digital health is a really big opportunity for us and we've seen that really through Function. You know, these digital health platforms are built to go out and find customers who are proactive about their health, which lines up very nicely with our test, people who want to, you know, find cancer before their symptoms. And so, you know, as they make it available, it's very efficient for us from a sales perspective. They drive the marketing. They drive the selling and retention of the customer. And it's also, but we've also learned that it's very impacted by their level of investment in the marketing, in whatever products that they're pushing. So Function has been a very, very good partner. Our digital health channel overall volumes have grown, doubled a quarter over a quarter compared to last year, which is nice to see. But we're really just beginning that journey into the digital health channel. We'd had a launch with HIMSS and HERS earlier this year. Their attention has been focused on their GLP-1 business, not so much on their labs business. so their investment hasn't really been made currently. But that's upside when that happens.

Right, that could accelerate me going forward at some point. All right, and then that's volume, I guess, on the ASP side of things. You know, it's the test has like a patient pay price of $9.50 or so. You're kind of getting that down lower as we kind of get towards the Medicare reimbursement, which is eventually going to be maybe $500. So you're at an ASP now of, I believe, $700 per test. Again, probably due to some negotiations with some of these, you know, one-off customers and so forth. But, you know, you talked about, I believe it's like low single-digit decline sequentially in ASP, quarter-for-quarter. So is that the right framework to think about basically going forward and, you know, just triangulate what the volume has to be to get your guidance, essentially? Is that correct?

Yeah, so we, you know, we've been built for population scale from day one. We've got a lab that can run over a million tests. So, you know, we have a lot of fixed cost leverage to grow into to drive our margins. And we learned last year there's definitely price elasticity in the market. Last year we started to contract with physicians, health systems, employers that based on volumes, the price comes down. And we've seen that happen. And so, you know, we'll be opportunistic. And as we see, you know, more confidence in that elasticity, you know, the price will come down over time. You know, at the end of the day, the CMS reimbursement rate will be around $500, which with the current version of the test, we're comfortable operating at 50% to 60% margins at scale.

Right.

Okay.

Yeah, I mean, maybe just walk through the COGS at this point. I mean, you had that basically second version that helped COGS with automation, but has anything further happened basically to help?

So the version that we're running now, which is the version we launched last year, actually the end of 24, is the version that is related to those 56% margins at $500 ASP. We're really just growing into the fixed cost leverage. We've ran 117,000 tests in the first half, so call it 240 for the year if you averaged it. The platform could do a million. So there's a lot of fixed cost leverage there to grow into. It's highly automated. I mean, you've been to our lab. It's got like a racetrack that just takes samples all over through the different machines, and then somebody finally puts it on a sequencer. It's really not touched after the tubes come out of a box.

Awesome. So one of the key accelerators or maybe to this point of bottleneck has been, you know, the FDA approval of the test gallery. So the U.S. submitted the test to the FDA for PMA approval back in January 2026. The key question, well, I guess since then, like you said, you had some data readouts, introduce some new information on the social situation. The key question was going to be if there has to be another, if there has to be an advisory committee meeting from the FDA to evaluate this, like, really novel product. I guess the one, the reason why that was a question is because, you know, there was sort of like a generally like kind of an adcom meeting, I believe, like, three years ago or so. So, you know, there was just, we didn't know if it had to be done again. And that seems now it's, you know, it's confirmed. It's going to be, I believe, it's September 23rd. So, like, in roughly a month or so. So, again, I think most should have expected that to have happened. It's a super novel test. We saw this for the last blood-based cancer screening test that was approved for the first of that wave that was approved. You know, what kind of questions could be asked? I know there was a good point of, like, maybe it could be, you know, some of these get... When I just wouldn't garden had its shield adcom that that was delayed. I believe I mean that could that could that happen? I just what are some of the circumstances that you guys are thinking about as you, you know, kind of get ready and prepare for that?

Yeah, it's a great question. You're right. They had an adcom in 23, which really focused on instead as a product, you know, not not so much a specific company, specific data, specific performance. And so we believe this adcoms could be focused on the performance, the efficacy of the test based off the data we've submitted. You know, we've had a very iterative and collaborative, you know, PMA review with the FDA. It's progressed very, very well, and we're looking forward to really showing everybody in the world all the data that sits behind this product that the FDA is reviewing at the adcom. You know, it's a paradigm-changing test, and, you know, the first one should be evaluated to really establish what good performance looks like with a product like this. And, you know, since we're the only company on the market with a clinically validated in the intended use population data set, again, we think it's really important in differentiating. So we expect the questions to be around the performance and the efficacy, which we don't know for sure yet at this point. Well, I'm sure as you guys know, we'll know. It'll become public soon.

So you think it will not, it will obviously not really, you know, super focused on clinical utility. However, will they, you know, focus on things such as sensitivity and specificity and that sort of? That's the test performance.

So, I think, yeah, they'll focus on the performance metrics, PPV, specificity, cancer signal detection rate.

The last one, that's when they kind of talked about how PPV and CSO are important aspects. So, you know, just there is a, I've heard from certain stakeholders that probably aren't as educated that the false positive rate is high. I guess that means when you're screening many people, maybe the number of false positives is like non-zero. I think that's high to people. But the fact of the matter is it's extremely low. It's the lowest it could possibly be, right?

So that shouldn't be able to. Yeah, I mean, we accept a very high false positive rate with the single cancer screening paradigm we have today. You know, those false positives are, you know, what's what, 10% plus false positive rate. The standard of care only finds 14% of cancers currently. And we accept a very high false positive rate for that. You know, that meaning something like a mammogram, you know, 95 out of 100 women who get a positive mammogram don't actually have breast cancer, but it's a false positive. Our test, you know, still sounds high, but it's 50% of the people would have a false positive because the false positive rate is 0.5%, not 10%, the way the incidence works. So, you know, it is a paradigm change. It's a different way of thinking. But I always think about when you compare it to what we've accepted today, 14% of cancers are found through screening. In Pathfinder 2, we, you know, more than 4 or 6x, that number. So you could find over 50% of the cancers if you added gallery to the standard of care.

Yeah. Do you happen to have any, maybe, like, insight on how they choose this panel, these committee members, because... It's not my job.

No. I mean, I imagine they're going to go survey a balanced, you know, So a non-conflicted group of people.

Yeah, well, they'll slice and dice all this data, and maybe it won't be a unanimous decision kind of a thing, but this is just a recommendation, right? So I will say, based on you guys have communicated with the FDA over the years, you've kind of constructed your studies to get to this point, basically, and had a modular submission. Right. You know, generally, directionally, you think like this will go in your favor, the whole recommendation. I mean, I think you're obviously expecting approval, but this is quite the event to sort of have to have a almost like a decision months before approval would even happen.

So, yeah, I mean, we're we're preparing for any outcome. Right. We're we're preparing for it to be bumpy. We're preparing for it to be smooth. You know, lots of different thinking around the types of questions and responses. You know, I think it's part of our job is to be paranoid and to make sure that we're prepared for that. I hope it's just unanimously positive, but you never know.

And then on the data, let's rewind to ASCO. And let's not rewind to February when you first announced the NHS, because now we know so much more about the full study results, right? Right. So maybe, you know, the NHS, Valerie, let's just start there and then Pathfinder 2 later. NHS did not meet the primary endpoint. However, I think if you, you know, look further into the data, it's actually not as, you know, bad as the service level might imply. So, you know, what were the key kind of debates around that and afterwards, you know, why are stakeholders actually looking at it from a more positive perspective? You know, maybe just, for example, the stage four impact was pretty solid, actually. Stage three, you know, not as much, but that's because there was this initial round, prevalent round, that caused some noise, I suppose. So any comments on that?

Yeah. I mean, at the end of the day, the study found a lot of asymptomatic cancer walking around in the population. Of course, when we modeled these endpoints, it was based off of the known history of cancer and what we thought would be walking around the world at any point in time, specifically in the UK. And what we found was there was a lot more stage 3 cancer just walking around in the population than people ever were aware of, which makes sense just based off the way that we find cancer through screening asymptomatically versus how it just shows up symptomatically. So at the highest level, it kind of made sense, but there's no way to know that at the time. So what we did is we found, you know, more than 20% reduction in stage 4 cancer, which I think is larger than any other intervention that you could be looking at in the last 15 to 20 years for a single product. We found more stage 3 cancer, but we also found more stage 1 and 2 cancer. You know, just looking at stage 1 and 2 cancer, we found, you know, more than twice as many stage 1 and 2 cancers, I believe, than total cancers found by screening in the NHS. So just think about that. That's at any stage. So, you know, an asymptomatic test finding cancer in the population found a lot of early-stage cancer. And I think what people wrestle with is we might only be finding early-stage cancers at some of those at 20%, 30% rates and whatnot, but we're looking at across all cancers. So you get to add up each of those cancers with one test to get to that doubling of that cancer detection that we found. You know, we've reduction in emergency room presentation, of course, because you're finding it asymptomatically or asymptomatically. You know, a lot of really good data in there. And what the physicians really resonate with them is it's an opportunity to treat somebody with curative intent most times. You know, stage one, two, and three, you can treat with curative intent these days. and that's what they want. They want to be able to give somebody a shot and not just be thinking about palliative care or extending life by months. So that resonates with physicians.

Were there any clinicians or physicians that you were on the sidelines to order and recommend gallery to their patients and maybe now that there's more information?

So the biggest, actually, I don't think very many oncologists said nice things about us until we actually, they saw this data. You know, I've been at Grail for 10 years. When the oncologist community saw this data and they saw the stage four reduction, a lot of them were like, okay, this is meaningful. This is real. And it's ready. It's finding cancers today. So the physicians, I mean, probably still too early. I mean, there's a half a million physicians out there. We've got a sales horse of about 150-ish, 130-ish people out there on the streets. So we can't get to all of them.

Okay. And then next steps with, let's just say like in the UK or like with NHS in general. So I believe there was talk to extend and get like maybe like a year of follow-up on that one. So does that still exist as well as maybe even extending it further because there was some chatter about maybe if you had a longer range study, you could really simulate mortality impacts possibly. So what remains to be seen on that kind of end of things?

Yeah, so we are doing that 12 months of additional follow-up. We'd expect that data to read out sometime in the first half of 27. Extending beyond that, I think it's always an option to. At a certain point, though, because you're no longer offering the screening test, the intervention arm, the arms start to look more alike because you're not intervening every year, there will still be a difference. But I don't know if it's going to be meaningfully different after three or four years than after four or five years. But we will be, one of the other endpoints was a nested mortality study and then a cancer mortality study. I think the nested mortality will read out sometime in 2028.

All right. Yeah, I mean, it wouldn't really impact the, so the FDA is looking at that first year, the prevalent round of the NHS study. Probably wouldn't impact that, assuming that you get the approval. Maybe there's like future iterations of the product that maybe go for approval. Maybe that'll impact things. So, all right. And then the other data piece that was submitted to the FDA was the PET-502 results. It's like 35,000 patients or so. I think, like, you know, that was a very, you know, safety and efficacy and some performance metrics. PPV was nicely above 60%, which was good, which is just, like, putting in context, like, you know, colonoscopy. A lot of these other first-line screens today have less than 10% PPV. And adherence, obviously, with this is going to be, it should be much higher because it's blood-based. So that was great. Anything else from Pathfinder 2 that, you know, kind of will matter to the FDA that we should remember? Because it was obviously went fine, quote-unquote, compared to the NHS, which was more nuanced, I would say. So anything on that study?

Yeah, I mean, the Pathfinder 2 study was, you know, another version of the first Pathfinder study, which was almost 7,000 patients. And, you know, what's really reassuring to the clinician community and likely the FDA is our performance in the intended use population has stayed consistent or gotten better. Most times you've got case control data, which looks really good, and then you go put it in an intended use population, a screening population, and the performance degrades. Ours did not. Therefore, you know, we've got confidence in re-performability of the test across, you know, various populations in the U.S. But all the metrics, I believe, improved from the first version of Pathfinder.

Then internationally, what steps remain to either scale or kind of enter on this? I think you have a U.K. business sort of in a way. It can be smaller, but how do you scale there just given you had the study, but it's not sure what happens next? And then in Asia, you have this Samsung partnership, which, again, And maybe it's not a super near-term thing, but how does that scaling look in those countries that are associated with the agreement?

Yeah, so starting with the NHS, you know, we're in discussions with them about what we do next. You know, they've got the data, they're excited about the data, and we'll figure out, you know, how to partner going forward. But there's a lot of variables in that beyond just the study performance. There's politics, there's budget, and so on. But, you know, we'll keep everybody updated as those discussions progress. but I don't expect it to move quickly given it's the NHS and there's a lot of other things going on in the NHS right now. For Samsung, we've just executed that agreement and closed $110 million financing in June of this year. That was extended in a long period of time from when we actually announced it due to CFIUS review. So during that time of CFIUS review, we weren't interacting with them given that it was under review by CFIUS. Now we are. That agreement will originally start with a distribution type agreement where Samsung sets up a sales force in Korea and sells tests and sends them back here basically from the self-pay market in Korea. That goes well. And as we get FDA approval, then we'll look at another phase of the agreement, which would be much broader and more expansive, including them moving to Japan, potentially building a lab, and so on. But getting, you know, we believe having the data we set we have plus an FDA approval will help a lot of, you know, foreign governments move quicker on making pay, you know, national rollout decisions.

Okay. Back to the studies in the U.S. So some of the ones that may be more important would be reach, maybe some of the registries simplify some of these. is when is the next kind of data-related catalyst or milestone for you guys? And I think, you know, I just referenced REACH, that's pretty important for the Medicare kind of population and so forth. You know, could that be a 27 sort of event where we find out some interim data from that study? Yeah, it's a great question.

So, you know, we're focused on FDA approval. We're, you know, in the early days of our discussions with CMS and getting up to speed, And, you know, the REACH study will be important to CMS discussions around an NCD. You know, now that CMS has the authority to cover the test once FDA approved, they can take up an NCD. You know, we've got the NHS Gallery data. We've got Pathfinder 2 data. We've got all of our real-world data. I mean, we've got over a million samples ran now between clinical and commercial data. And REACH will be in another important part of that because it will be in the Medicare population. and it's really designed around looking at, you know, utility stage four and so on, reduction. So I believe there'll be likely readouts as CMS wants to see data as we're having those discussions and timeline on that. I don't have that currently. But I think the REACH studies are originally designed to read out, I think in 2030 or 2031, but we can read data out along the way.

Yeah, do you think that CMS isn't going to, you know, will likely not establish this NCD prior to the adcom, for example, which is happening in a month or two? So that's not going to happen. But, like, I'm sure that, you know, they either would probably wait for the FDA approval to occur to be successful for you guys or maybe see some interim data from some of these studies. I'm not sure. Which one do you think would happen?

I think they'll be, I mean, we're already talking to them. You know, we've been working with the FDA for seven years, six, seven years now, to get that, the FDA program to where we are, because it is a new paradigm-changing technology. It'll likely be a similar, hopefully shorter road with CMS. Having an FDA stamp should make us a little bit CMS questioning less around the performance of the data, the efficacy, the quality of the data, and focus more on the clinical utility aspects, which we have a lot of data on. I mean, we've got, it's just between Pathfinder 2 and HS Gallery, it's 175,000 people worth of data, including a randomized controlled trial.

Yeah. There's three or four competing tests that are commercially available that maybe not Not all of them are said, but generally just blood-based cancer screening tests that have potential to be for multi-cancer, but to varying degrees of commercial adoption and all that and just support in general. How does that impact maybe CMS or other bodies being a little bit slower and evaluating the full group rather than just, obviously, you guys really have the pack by far, but I mean, they could hold you back perhaps these other entrants.

Possibly. I mean, I can't predict the future, but I'm not aware of any other market entrant having an FDA registrational program even started. Some have even said that they're not going to go the FDA route. So it'd be hard for if I was CMS to wait for something that other companies say they're not going to do or haven't said they're going to do. But, you know, what we're most proud of is our data has actually been demonstrated in the asymptomatic screening population. No one else's has. We consider those tests like unproven because they haven't shown any data in that population. And I think we'll learn more about what the impacts of that are over time and hopefully it doesn't hurt the sector or hurt the product category. But our test is designed to find a cancer floating through your blood. We find a signal and if there is, we tell you where it's coming from. We don't restrict that for any specific cancer types to make Our numbers look better. There are other companies out there that are only releasing data on 8 or 16 cancers. But they've got higher false positive rates, and what you might end up finding is there's cancers that they're not reporting that are sitting in that false positive rate. And that's, again, my view that makes me pretty uncomfortable if I was a physician relying on that type of result.

So much earlier, you referenced the Salesforce expansion which took place kind of earlier this year. I mean, maybe with all this, like, you know, more material competition, maybe you market a bit more or a bit differently, a discount or something. You know, so that's going to obviously impact your cash burn. Your cash burn for this year, you're expecting less than $300 million for the year, which is a large number, obviously. But you do have, you know, you had the influx of $110 million. You had, you did, you have, you raised some last year as well. I mean, there's a scenario in which you probably, you may not have to raise again in the future. It's possible, maybe, depending on how successful you are on the top line. So maybe just talk about the runway and ways to mitigate cash burn and scenarios in which maybe cash burn doesn't matter as much because it's all just going so well in terms of all this reimbursement and things like that. That would be really nice and easy, Kyle.

We've got about $900 million on the bank at the end of the quarter, and that gives us a pretty decent war chest to go out and deploy. You know, as we did the Salesforce expansion, as we see demand, we'll deploy capital to meet that burden. That might mean burden stays a little bit higher in the near term, and then it brings in revenues faster. You know, but we also have the opportunity to just hold on to the capital and drive growth more efficiently. It's really, we're at this place now where we're trying to really figure out, you know, is that demand going to be there and sustainable in this pre-rembursement space? And if it is, then we're going to continue to lean into it. Aaron, anything that we didn't touch on that we should know before walking away? I mean, again, I think it was really a discussion. We're really proud of the growth that we've had. You know, we've got our sales force out there trained, the data out there. This test can find a lot of cancer out there in the population. Our publications for NHS Gallery and Pathfinder 2 should be out shortly, which would be another inflection point, you know, peer-reviewed publications. So, other than that, I think you nailed it all, Kyle. Yeah, thank you.