The board has not shown much interest in the company. Since I am benefited from this group, I feel I should contribute my followings on the company.
Here is the summary of its positive development comparing this quarter and the previous quarter based on the call transcripts. Perhaps, the new data will help our board members to make informed decisions.
Addressable Market Increase:
Quarter 1 report: We are making exciting advancements in these programs and estimate the market opportunity for our commercial and pipeline products is over $35 billion
Quarter 2 report: Initially, the target population associated with LUNAR-2 included only high-risk individuals and encompassed a market opportunity of approximately $18 billion. In recent months, we have identified average-risk colorectal cancer screening as a viable application for technology and we believe the addressable market opportunity for our products in this program has grown considerably. We now estimate that the total addressable market associated with our products from our LUNAR-2 program at over $30 billion. This brings the combined total addressable market for our current pipeline of products to over $50 billion.
Raise the guidance twice in a row:
Quarter 1 report: In sum, we are very encouraged by the strong growth across our business. As a result of this progress, we now expect revenue for 2019 to be in the range of $145 million to $150 million, up from previous – our previous forecast of $130 million to $135 million. This updated guidance reflects growth of 60% to 65% year-over-year.
Quarter 2 report: Guardant Health now expects full year 2019 total revenue to be in the range of $180 million to $190 million, representing 99% to 110% growth over the full year 2018. This compares to the company’s previous full year 2019 total revenue guidance of $145 to $150 million. So we are expecting that the pan-cancer Palmetto LCD would be issued in the fourth quarter and that it would have some benefit to us in the fourth quarter. The increased revenue guidance did not reflect any increase in your full year development services revenue.
Guardant360 expansion will happen:
Quarter 1 report: This draft LCD (The coverage includes the vast majority of all solid tumors.) is an important development for us as it gives Guardant360 another pathway towards pan-cancer reimbursement coverage. Such a policy could be finalized in the late Q3 to Q4 time period
Quarter 2 report: . Our team continues to make very good progress in our FDA application for Guardant360 and we believe that a final Medicare pan-cancer LCD could be issued later this year.
y-to-y and sequential Margin improvement:
Quarter 1 report: The gross margin in the first quarter was 63.1% as compared to 44.6% during the first quarter of 2018. Gross margin improvement was primarily due to higher clinical ASP and growth in development services revenue.
Quarter 2 report: The gross margin in the second quarter was 68.8% as compared to 48.6% during the second quarter of 2018. Gross margin improvement was primarily due to higher ASP and growth in development services revenue.
Competitive advantage against Grail:
https://www.bloomberg.com/news/articles/2019-06-07/liquid-bi…
Canaccord analyst Mark Massaro called Grail’s results mixed. “Lots of questions remain,” he wrote in a note to clients. A 55% overall detection rate for multiple cancer types no matter what stage looks too low to be used by doctors and too uncertain to secure reimbursement from insurers, he said. “Grail may have to redirect its ‘pan-cancer screening’ strategy and take more targeted approaches,” Massaro said. Guardant Health is already planning its own targeted approach, recently announcing plans to enroll more than 10,000 patients in a study later this year to screen for colon cancer.
Advantage over Stool-based testing deficiency:
Beyond these factors, we also assess other parameters such as compliance of the existing screening methodologies. For colorectal screening about one-third of average-risk patient, who should get screened based on USPSTF guidelines, do not comply or fully follow through with the available stool-based tests. This means that, even with available technologies that can detect colorectal cancer with high degrees of sensitivity and/or specificity tens of millions of individuals are still not getting screened.
Our early conversations with providers suggest that the logistical ease of a blood-based test would have significant impact to reach the third of individuals, who are not compliant. A high-performance blood-based screening test could be added to a regular menu of tests that a patient gets during an office visit. Therefore, we believe that blood-based tests can pave the way to improve screening compliance, and add significant value to the market.
Potential significant uplift of 2020 revenue again after this massive revenue increase:
we continue to focus on shifting the market to a blood-first paradigm for genotyping, which we believe will be key to further accelerating the adoption of liquid biopsies. At the beginning of this year, we outlined three proof points that we believe were critical to such adoption. As a reminder those were: First, the readout from our NILE study; second, FDA approval of Guardant360 with a pan-cancer tumor profiling label; and finally, pan-cancer Medicare coverage.
Certainly, NILE has been very positive for us. We’re seeing some early uplift. also we’re I think seeing some of the benefits of those sales reps coming in. I would say that a lot of this uplift we’re seeing is probably earlier than we anticipated. 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.
And so what FDA now provides is that stamp of quality. that’s where FDA approval, I think will be helpful in terms of the kind of final stages of adoption in terms of getting some of the more in-transition segments on board to a blood-first paradigm.
So, I think you can look at – from a 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. We don’t know exactly what it would be, but it would probably be up significantly. 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.
International market: So the OUS revenue is still relatively small. The ramp will be driven by will be in the near-term. The progress we make in the Japan market, as you know the joint venture is pursuing both two clinical trials in the Japan market, which we hope overtime will lead to approvals and ultimately reimbursement in the Japan market, which we think would be necessary to have substantial growth.
Quarter 1 report: We are making exciting advancements in these programs and estimate the market opportunity for our commercial and pipeline products is over $35 billion
Thanks for that. I was wondering as a “$6b” was thrown around earlier, and as this is already a very expensive P/S and nearly $10b mkt cap on a $200m forward revenues, you need to be able to see the upside longer-term to justify investing now.
The other question I have, and perhaps they are just sandbagging or perhaps it is just difficult in biotech to more accurately forecast, if they just did over $50m this Q (which is a $200m runrate using napkin math) they must not be expecting much sequential growth the next 2 Q’s if they are calling for $190m for the year.
6 billion is for guardant 360 and omni…they have already upped that to 8 billion a YEAR and are adding use cases each quarter. On top of that LUNAR is a ~45 billion opportunity and they keep upping that as the technology matures. End of last year they thought their pond was ~30 billion now they think >50 billion.
a 200 million dollar run rate leaves them TONS of room to grow just into their guardant360/OMNI market. Even if they only can service 20% of that 8 billion that is still pretty close to 10x revenues from here. Let’s not forget the Softbank partnership as well as the AstraZeneca partnerships which just expand that further.
So personally I see huge potential for upside here. Revenue growth has been accelerating. Even if you don’t count the potential from LUNAR they still can grow 10x and right now they are doing that at >100% (178%) YOY with dramatically expanding margins. I’ll take those possibilities any day. Having said that, lots of moving parts so GH is a small allocation for me.
Any thoughts on competition…I feel like that came up as an issue earlier in the year.
But on guidance…are they just sandbagging?
They are about 90m thru 1H of the year, and their full year forecast is $190m, which implies they will have to average less revenue per Q in Q3 and Q4 than they did in Q2.
I’m not sure if they are sandbagging so much as liquid biopsy is truly revolutionary and they have a commercial product. Yes there is competition. Foundation medicine and Grail are probably the two most serious competitors. It is a huge market though, like really really huge. Grail is years away from a commercial product as far as I can tell. Not sure what is going on with foundation medicine. I think they were bought by roche. They have a few commercial products that could be seen as competitors. I’m following the money right now though,GH is growing like gangbusters… EV/S isn’t terrible… DRopped from 100 to 60 over the last 8 months.
GH has irregular growth spurts. I wouldn’t spend much time on trying to guess rates for one or two quarters. It’s simply too dynamic to try to nail down. Guardant honestly probably has just about no idea themselves.
Last year when I first was interested, if you extrapolated what they were guiding for Q4 (full year guidance minus Q1-3 results) it came out to like 26% expected growth. Kept me out. Then they actually grew like 65% that quarter. Not even close. Then Q1 came in at 120% and now Q2 with 180%. Beating by miles and miles.
Not sure what is going on with foundation medicine. I think they were bought by Roche.
Correct. Probably a lot tougher to get direct info on FMI now that they’re within the much larger umbrella of Roche.
I remember when bulwnkl brought FMI to the board here. I made some nice money with that one.
When I first heard about Guardant, I didn’t immediately jump in because it sounded so similar to FMI that I figured they weren’t all that novel.
Subsequently, however, I have jumped in with a GH position, and I am quite glad that I have. I look forward to letting the position continue growing as GH hopefully continues to make early cancer detection via liquid biopsy more widespread.
GH has irregular growth spurts. I wouldn’t spend much time on trying to guess rates for one or two quarters. It’s simply too dynamic to try to nail down. Guardant honestly probably has just about no idea themselves.
This is key and central to the investing thesis in Guardant. The current revenue(s) from Omni and 360 are essentially the icing and sprinkles on the cake. The “cake” will be Lunar 1 and Lunar 2 which may be up to two years away. But as long as 360 and Omni continue to gain traction in the meantime, even better since they are both cool products!
They did mention they will submit their application to the FDA in Q3, and expect pan-cancer approval from Medicare in Q4 (and also expect to recognize some revenue) so those should be the 2 near term drivers.
The Colorectal Screening study garnered alot of analyst attention (as it did last CC as well) and they sure tried to find out from management when we could expect to hear results or even updates. With 10,000 people to be enrolled they expect somewhere between a few dozen and maybe up to 60 people to test positive so they will need the full 2 years (approx) to see all the data.
at this growth rate I would guess potential risk (short term) might have more to do with capacity to do tests, than the demand. any info on potential capacity?
Doing some research in this field and it seems to me the most interesting companies are still private. The big market is for a liquid biopsy test that finds cancers early, before they have metastasized.
GH might seem to be the leader, because of their market cap. And yet I wonder if that’s the case, as far as the science is concerned. In particular there are two big competitors to worry about, Grail and Thrive, both private.
Grail was spun out of Illumina. It is currently valued at $3.2 billion, and might IPO later this year.
The author says that they Thrive science “is the best thing of its kind that I’ve seen.” And yet it’s clear that there’s a long way to go in this area.
There are false positives (people told they have cancer, when they don’t).
And there are way more false negatives (people told they don’t have cancer, when they do).
In terms of competition, GH is a very capable competitor compared to Grail at least. Data point 1 below is telling us that Grail’s technology is still far from mature and GH seems to be ahead of them.
Data point 2 makes us wonder why more and more researchers are supporting Guardant Digital Sequencing platform if the GH platform is not one of the best. (GH currently has 60 patents issued for their Digital Sequencing Platform plus additional 140+ pending patents in application.)
Data point 3 shows GH is almost getting closer to profitable if the company is not investing a large colon cancer program.
Data point 1: https://www.bloomberg.com/news/articles/2019-06-07/liquid-bi…
Canaccord analyst Mark Massaro called Grail’s results mixed. “Lots of questions remain,” he wrote in a note to clients. A 55% overall detection rate for multiple cancer types no matter what stage looks too low to be used by doctors and too uncertain to secure reimbursement from insurers, he said. “Grail may have to redirect its ‘pan-cancer screening’ strategy and take more targeted approaches,” Massaro said. Guardant Health is already planning its own targeted approach, recently announcing plans to enroll more than 10,000 patients in a study later this year to screen for colon cancer.
Data point 2:
Qtr 2 report: As Helmy mentioned, we are continuing to deliver on this commitment as demonstrated by the growing number of peer-reviewed publications and scientific abstracts in support of our platform.
Data point 3:
Qtr 2 report: Obviously, if you were to strip out the cost of the CRC screening program, we could potentially be talking about achieving profitability in the not-too-distant future.
GH has the technology to be successful, generates decent revenue with tremendous growth through their technology, and more importantly it executes extremely well as far as we can see from their quarterly reports. So, it would be reasonable to predict that the future market is likely split among GH, Grail, and others. Let’s say GH take 20% of $50 billion opportunity in long run, ignoring the fact that the addressable market is still expanding and GH has the first mover advantage. GH does look like a high probability stock and won’t be a shabby investment after all.