I brought GH to the board back in November. My initial post is here. https://discussion.fool.com/guardant-health-gh-a-new-position-34… . I did a q4 update which is here https://discussion.fool.com/gh-q4-cc-notes-and-my-take-34156311… .
GH just reported a pretty astounding q2. In my last update I did a little model of what GH would look like if they could do 100% growth…and then this quarter they turn in a 178% revenue growth quarter. Ha…they showed me!
At the beginning of the year GH identified 3 major growth drivers. They are listed below
3 major drivers for 2019.
The first: PASS GH recently reported some initial data from their NILE study which looked at using GH’s test before tissue biopsy for diagnosis. They showed non-inferiority (which is what the study was designed to do) . This, as a proof of concept, was huge because many people I had spoken to didn’t think cfDNA would work.
Second: PENDING is FDA approval of Guardant360 with a pan cancer tumor profiling label.
They said good progress is being made here.
Third PENDING is pan-cancer Medicare coverage based on FDA approval
update Guardant believes coverage could be finalized later this year.
In additional to the growth drivers listed above Guardant had a pretty impressive study readout which showed that Guardant360 can detect microsatellite instability(MSI) the same as the standard of care in 98.4% of cases. MSI testing is another biomarker used in some cancers.
They estimate that adoption of guardant 360 is in the mid single digits.
There are more than 1000 trials with greater than 100k patients on the biopharma side.
As there are more targeted therapies such as PI3K inhibitors for breast cancer and KRAS directed therapies in lung and colorectal cancers there will be even more reason to do comprehensive genomic profiling. (i.e. more need for guardant 360)
Long term growth drivers
These are probably where the biggest potential market is.
Lunar 1 - recurrence detection and residual disease detection,
Lunar 2- Early Detection. They anticipate about 20x numbers of patients for lunar-1 and lunar 2.
Guardant launched their LUNAR assay for research use at the end of 2018. They already have some early data/ pilot studies to use LUNAR to identify early stage colorectal cancer as well as help choose which chemotherapy agents to use.
They say they are on track to release a CLIA validated version of the assay for prospective clinical trials by the end of the year. To use a lab test on patients outside of research you have to be CLIA validated. I think this will allow clinicians to order the test just like they did with guardant360 before they had FDA approval for various indications.
The first target for LUNAR early detection is going to be colorectal tumors due to poor compliance with current screening, good tumor shedding, technical performance, const, reimbursement and unmet need. So basically they think they can commercial this application relatively easily.
Their first major study for LUNAR is going to be “ECLIPSE”. Patient enrollment should start q4 and the study is going to cost 70-100 million dollars. Going to be a while before this study reads out.
They were estimating a TAM of about 30 billion for the lunar programs. This quarter they updated that to 50 billion based on colorectal screening.
Revenue for the last year looks like so.
**2018** Q2 19.4 Q3 21.7 Q4 32.9 **2019** Q1 36.7 Q2 54
Clinical Volume grew 127% due to higher ASP and higher volume.
Biopharma grew 146%
The AstraZeneca program is starting to pay off with 11.9 million of revenue.
Margins have improved from 48.6% to 68.8%
OPEX increased 63%…I almost don’t even care since they have 822.9 million in cash. They have plenty of money to start to commercialize the LUNAR program.
Guidance has been increased from 140-150 million to 180-190 million for the year which would be 99-110% growth.
Conference Call Lots of paraphrasing by me here.
How such a big increase in guidance?
We should see very strong fundamentals to our business all across the board. I think you can see that clinical volume is growing very nicely. Pharmaceutical volumes, I think, a champion by OMNI specifically, are also growing.
Details on eclipse?
24 months to finish enrollment of study, some time to put data together (probably 3 years-3.5 years out)
here are already some abstracts that we have in that setting in colorectal cancer and lung cancer. You could expect that in the upcoming congresses and conferences collaborators of the assay would start showing actually their experiences using that device in even other cancer types lung and colorectal cancer. And as we mentioned during the call, we are on track to release the CLIA version, the clinical version of the assay later this year. And there are some prospective studies that are already designed and they are waiting for this assay to get online for those studies to start.
Why is driving massive inflection of clinical testing?
It’s a combination of various factors. Certainly, NILE has been very positive for us. We’re seeing some early uplift….really resonates with some of the realities of clinical practice. I think there were a lot of physicians who were on the sidelines wondering if liquid biopsy could be something that could fit in their standard of care….We think for it to be really sustained some of the other proof points need to come into play. And it’s why we’re working diligently on the pan-cancer reimbursement and the FDA process as well.
How to think about the MSI study?
It’s something that’s included as part of Guardant360 today. So it’s something that is benefiting patients, has benefited patients for the last couple of quarters…. paves the way for these tumor-agnostic biomarkers that are becoming more and more common as the drug pipeline advances.
…continue to drive clinical adoption of these comprehensive genomic profiling technologies and one that is not something that is straightforward to do in blood……
How did gross margins come in so high?
extremely strong biopharma rev this quarter. Don’t expect it to be this strong always. Long term should have higher margins. Near term my fluctuate some
~50% of guardant 360 is for lung cancer, remaining 50% other cancers. How should we think about pan-coverage being additive to rev in 2020 and beyond?
…Medicare patient standpoint, currently approximately a third of our patients are covered with the current lung Local Coverage Determination. With the pan-cancer, it would be up. …And then the national coverage determination which would be a result of the pan-cancer FDA approval would move us to about 85% of Medicare patients. And Medicare patients represent approximately 38% of our total volume
…the private payers, it will take time
Wow…I sort of expected a lot of this stuff to take longer than it has so far. Guardant is seeing huge uptake in the use of its test. I really didn’t expect them to have such a huge increase in test uptake until FDA and medicare approvals. The positive read out of the NILE study really seems to have done wonders. Early on I said they were going to have to do studies for each indication that they wanted. That remains true, but the TAM just for lung cancer is 6+ billion and GH’s revenue from that is barely scratching the surface. They potentially have a huge amount of growth just from lung cancer. They should remaining growing until their next big study read out which is ECLIPSE. If the eclipse study is successful…my oh my. I’ve upped my position of GH and will continue to do so as things become more and more sure.
P.s I forgot to mention their softbank partnership is supposedly going well. The aim of the partnership is to bring guardant to asia/japan.