Guardant Health Inc

NASDAQ:GH

Earnings Call Analysis

Guardant Health reports robust growth and raises 2024 revenue guidance.

Guardant Health reported a 29% revenue increase for Q2 2024, driven by 33% growth in precision oncology revenue. The company saw a record 49,400 clinical tests, pushing full-year revenue guidance to $690-$700 million, representing 22-24% growth over 2023. Despite a slight decrease in gross margin from 64% to 62%, cost management led to a $23.3 million reduction in EBITDA loss. With continued strong demand and strategic advancements, including the successful launch of Shield IVD, Guardant is confident in achieving cash flow breakeven by 2028.

Overview of Financial Performance

In the second quarter of 2024, Guardant Health reported impressive financial results, with total revenue increasing by 29% to reach $177.2 million. This growth was primarily fueled by the precision oncology revenue, which surged by 33% to $166.5 million, and clinical test volumes grew to a record 49,400 tests. The company made significant strides in their biopharma sector, where precision oncology revenue increased by 45%, totaling $36.2 million, driven by rising test volumes and the launch of their GuardantINFINITY platform.

Guardant360 and ASP Improvement

The Guardant360 average selling price (ASP) also improved during this quarter, now ranging between $2,950 and $3,000, reflecting a notable increase from the previous quarter’s range of $2,900 to $2,950. This positive trend in ASPs is attributed to enhanced cash collections, driven by improvements in both Medicare Advantage and commercial reimbursements. Management expressed confidence that these ASPs would remain stable for the rest of the year.

Strategic Cost Management

Despite increasing revenues, Guardant Health successfully reduced their non-GAAP operating expenses by 1.7 million, totaling $178.8 million. This decrease came from lower clinical study costs and reduced general and administrative expenses, although there was a rise in sales and marketing expenses in preparation for the upcoming Shield IVD commercial launch. Looking ahead, the operating expenses are expected to stabilize in the second half of 2024, with an anticipated total of between $720 million and $730 million for the year.

Cash Flow and Financial Guidance

Guardant Health reported a lessening adjusted EBITDA loss of $61.9 million, which is a $23.3 million improvement from the previous year. The company finished the second quarter with over $1 billion in cash and negative free cash flow of $99.1 million, slightly down from $100.5 million in the same quarter of 2023. They expect the maximum cash burn for the year to be around $175 million, while aiming for a considerable improvement in free cash flow losses for 2024, estimated between negative $275 million to negative $285 million, leading to greater operational flexibility.

Revenue Growth Outlook

For the full year of 2024, Guardant Health raised their revenue guidance to a range of $690 million to $700 million, equating to growth of approximately 22% to 24% over 2023. This boost reflects strong cash collections in Q2 and an optimistic outlook for their biopharma business. It’s important to note that this guidance does not factor in revenues from their recently launched Shield IVD, which is still in its early phases.

New Product Launches and Market Impact

A key highlight of this quarter was the FDA approval of the Shield blood test for colorectal cancer (CRC) screening, which is expected to significantly enhance the company's market influence. Shield has already been recognized as a viable primary screening option and covers an average-risk population between the ages of 45 and 84, addressing a $15 million annual testing opportunity, part of an expansive multibillion-dollar diagnostic market.

Clinical Studies and Future Expectations

Guardant Health is also making substantial progress with their clinical studies and aims to enhance their reimbursement prospects further, especially in the colorectal cancer surveillance space. With expected publications and clinical validity studies planned for additional cancers, their trajectory appears promising. Furthermore, they aim to achieve gross margins exceeding 60% for their MRD business by 2025, attributing various enhancements in cost management initiatives towards this goal.

Significance of Market Position

The company positioned itself as a leader in the tissue-free MRD space, emphasizing their proprietary technologies and innovations. The recent upgrades to the Guardant360 test enhance its capabilities, allowing for a more comprehensive view of cancer treatment and improved patient outcomes. Guardant believes their technology and first-mover advantage will solidify their competitive position in the emerging market.

Concluding Remarks

In summary, Guardant Health’s performance in Q2 2024 highlights a robust growth trajectory supported by strategic cost management, product innovation, and a favorable market landscape. The company is strategically placing itself for future success through guided revenue enhancement, continuous product development, and a commitment to improving patient outcomes in cancer care.

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon. Thank you for attending today's Guardant Health Q2 2024 Earnings Call. My name is Tamia, and I will be your moderator for today's call. [Operator Instructions]

I would now like to pass the conference over to your host, Zarak Khurshid, Vice President of Investor Relations. You may proceed.

[Zarak Khurshid, executive]

Thank you. Earlier today, Guardant Health released financial results for the quarter ended June 30, 2024. Joining me today from Guardant are Helmy Eltoukhy, Co-CEO; AmirAli Talasaz, Co-CEO; and Mike Bell, Chief Financial Officer.

Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated.

This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. Additional information regarding material risks and uncertainties as well as reconciliation to most directly comparable GAAP financial measures are available in the press release Guardant issued today as well as in our 10-K and other filings with the SEC. Guardant disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of or new information, future events or otherwise. The information in this conference call is accurate only as of the live broadcast.

With that, I would like to turn the call over to Helmy.

[Helmy Eltoukhy, executive]

Thanks, Zarak. Good afternoon, and thank you for joining our second quarter 2024 earnings call. We founded Guardant Health with a bold mission to conquer cancer with data. With our comprehensive suite of tests, we are now truly transforming patient lives across the continuum of care. It has always been our belief that the best way to conquer cancer is to catch it in its earliest stages when patients have the best chance of survival. We have spent the last decade developing a blood-based test that we believe will launch cancer screening into a whole new era with vastly improved screening rates, earlier cancer detection and ultimately, a significant increase in the number of lives saved. We have reached a pivotal moment on this journey and to commemorate this important milestone, AmirAli will start us off with an update on our screening business.

[AmirAli Talasaz, executive]

Thanks, Helmy. Starting on Slide 3. As we announced last week, I am thrilled to share that FDA has approved our Shield blood test for colorectal cancer screening in adults ages 45 and older for an average risk for the disease. Shield is the first blood test to be approved by FDA at the primary screening option for CRC. Many health care providers can offer our tests in a manner similar to noninvasive methods recommended in screening guidelines. Shield is also the first blood test for CRC screening that meets the requirements for Medicare coverage. This FDA approval of Shield is an incredibly significant milestone in our mission to conquer cancer with data, and more importantly, a huge victory for patients.

Moving on to Slide 4. We have developed a suite of clinical evidence supporting the value of Shield. We believe this robust evidence will pave the path for inclusion of shielding guideline recommendations. I highlight a few publication that exemplifies this. The data from our pivotal ECLIPSE study was published in the New England Journal of Medicine, the world's leading peer-reviewed medical journal. A randomized study at Kaiser permanent demonstrated that when individuals who hadn't completed this were offered Shield, the proportion of screening completed was 3x higher. And just last week, we announced that our CAN-SCREEN Health outcome model was published in the Journal of Medical Economics. This outcome model considers both clinical efficacy and longitudinal accurate when assessing the impact of Shield on CRC incidents and mortality rates and confirms the public health importance of blood-based testing.

Specifically, Shield outperforms 2 guideline recommended to base test, fit and multi-target still DNA. When considering live -- CRC cases averted and prevention of CRC deaths.

Turning to Slide 5. Post FDA approval with first-line indication with 83% sensitivity and 90% specificity in detecting CRC, Shield now raises the bar required for blood test performance. And going forward, we believe test falling below this bar will not be viable. This achievement did not happen overnight and came on the heels of more than a decade of world-class innovation and learnings as the liquid biopsy later, hundreds of millions of dollars of investment, conducting a 20,000 patient registrational study, publishing results in a leading peer review journal, engaging in a rigorous 16-month review process with FDA, and receiving a successful advisory committee panel vote. We believe we have incredible lead ahead of any other company that buying to enter this market.

Now turning to Slide 6. I am proud that we are able to launch this test just a few days after receiving FDA approval. Shield IVD is now commercially available, and we have already begun processing samples in our lab. At Guardant, we are committed to educating physician patients on the risk benefit of Shield so that they will be empowered to make informed shared decision when selecting a CRC screening option.

Moving on to Slide 7. At the launch, with a first-line indication, Shield is already addressing an enormous opportunity with 120 million average risk individuals between the age of 45 to 84. Of this average population, 45 million lives are covered by Medicare. This represents a $15 million annual testing opportunity at a multibillion dollar market. With Medicare coverage, Shield already addresses one of the largest ever diagnostics opportunities.

Moving on to Slide 8. Existing stool-based screening methodologies have been around for a decade or more and steel, we have not seen a material change in screening compliance over the last several years. There are [ 15 ] million people who remain on screen. And for those that are screened, the rescreening rate has been poor. 7 out of 10 surveyed individuals who have been previously screened for CRC with the stool-based test said they would not choose to screen with still a yet. On the other side, under-screen individuals were survey had a strong preference 5:1 for blood over stool. As of use of a blood test and the ability to screen patients during routine care can change this.

Blood testing is already entrenched into routine patient care. 87% of people aged 50 and above, have seen their doctor during the last 12 months and 91% of that group has had a blood draw in the last 12 months. Our real-world experience with Shield LVT providing over 20,000 tests during the past 2 years confirms that Shield has a clear fit into existing chair with PCPs enthusiastically ordering the test. And when they do, patients complete the test.

We continue to see an incredibly strong adherence rate of more than 90%. At our Investor Day last fall, we shared our target to exceed 1 million Shield tests in 2028. Now following FDA approval with first-line indication, we are even more confident that we will reach our goal.

Moving on to Slide 9. We are very pleased to see that CMS is proactively removing barriers to blood-based CRC screening and acknowledging its unique benefits. Through its recently proposed physician fee schedule, CMS is taking steps to close a loophole and remote patient out-of-market costs for follow-up colonoscopy after a positive blood based test. CMS originally eliminated cost sharing for the follow-up colonoscopy after a noninvasive stool-based test in its 2023 physician fee schedule. But many years after stool-based test entered the market. We are encouraged by the great inclusion of blood in the proposed 2025 physician fee schedule. We look forward to the finalization of this fee schedule in the fall.

Turning to Slide 10. Mid-way through 2024, we are well on track with models within our screening business and look forward to ramping adoption throughout the remainder of this year. In 2025, we look forward to sharing Shield multi-cancer data. Also, we expect to receive ADLT status indication. ADLT was established to incentivize innovation and support investment in diagnostic development, all to benefit of patients. It provides new and innovative test burden, not based on historical precedent, but based on the unique value they bring to part health system.

Our pricing strategy is intended to establish a sustainable ASP that recognizes the value of Shield, enables us to build a best-in-class profitable business and also future-proof Shield reimbursement for its expansion to multi-cancer. As Helmy said at the start of this call, this is truly a historic moment for Guardant. The liquid biopsy field and cancer screening. Our team has worked tirelessly to reach this milestone. I'd like to thank them for their hard work during the last 10 years and especially during the last 3 years to bring us here. I also like to acknowledge and thank the FDA and their review team for their collaboration and partnership.

With that, I will now turn the call over to Helmy for an update on therapy selection and MRD.

[Helmy Eltoukhy, executive]

Thanks, AmirAli. Turning to Slide 11. While we are excited for the next chapter in screening, we continue to make excellent progress with our oncology business. We have a robust suite of precision oncology products addressing both late- and early-stage cancers as well as recurrence monitoring for cancer survivors.

Now I would like to share a story highlighting value our liquid biopsy test bring to late-stage cancer patients. In 2023, a 33-year-old woman went to our doctor for noticing a progressive neck mask during her third pregnancy. She initially received a CGP Tissue test to diagnose the cause of the mass, but the test did not identify any actionable biomarkers. The patients then received a Guardant360 liquid biopsy test, which identified the patient was ELK positive and she was diagnosed with thyroid carcinoma. As a result, the patient was put in alectinib for therapy. And I am very pleased to report that after about a year of being on treatment, the patient no longer has evidence of disease. She also successfully gave birth to her third child. Given there are minimal side effects to a therapy, she will remain on alectinib for another year with a Guardant360 test every 3 months to monitor. This is just one patient stories that highlight the superior ability of Guardant360 identify actionable biomarkers and informed cancer care over other approaches.

Turning to top line performance on Slide 12. We had a robust second quarter with total revenue growing 29% to $177 million. This is driven by another quarter of very strong Precision Oncology revenue, which increased 33% in the quarter, supported by significant Guardant360 reimbursement tailwinds as well as strong growth in volumes, particularly within biopharma.

Turning to Slide 13. Clinical test volume for the second quarter grew 14% year-over-year, reaching 49,400 tests with continued progress in Guardant360 volumes, reveal also continued to grow strongly, even with our ongoing management of volumes ahead of broader reimbursement.

Biopharma volumes were exceptionally strong in the second quarter, growing 56% year-over-year to a record 10,475 tests. We continue to see a lot of excitement for GuardantINFINITY, our newest biopharma offering powered by our smart liquid biopsy platform with growing contributions in the second quarter. This is an important leading indicator for future demand for our clinical tests.

Moving on to Slide 14. Last, we launched a major upgrade of Guardant360 LVT under our Smart liquid biopsy platform. Guardant360 is a leading liquid biopsy test for patients with advanced cancer, and this upgrade gives oncologists a much more complete view of cancer by utilizing novel genomics and epigenomics sequencing technology. With a 10x larger panel, including 739 genes, the upgraded test covers both currently and emerging biomarkers not available in any other liquid biopsy tests. In addition, the test quantifies tumor burden with 10x more sensitivity, further extending its best-in-class performance. Guardant360 LVT is covered by Medicare and major private payers for CGP of all advanced solid tumors. This upgrade marks the beginning of a new chapter of compensive genomic profiling, helping to identify novel targets for the current and next generation of target therapies and immunotherapies, unlock new clinical applications and access genotype and phenotype from the blood. We are excited by the ability to better inform cancer care teams out the optimal treatment strategy for their patients and give them more precision treatment options that can help improve their outcomes. Over time, we will quickly add even more exciting first-of-their-kind capabilities to the test.

Turning to Slide 15. In early June, we introduced an upgraded Guardant360 TissueNext test featuring an expanded panel of 498 clinically relevant actionable markers to identify more peaking options for patients with advanced cancer and further improve best-in-class turnaround time.

As a reminder, TissueNext is differentiated as it leverages our AI-powered scoring algorithm and is the only Tissue CGP test that improves PD-L1 detection by over 20% in non-small cell lung cancer. Importantly, the TissueNext test is covered by Medicare for all advanced solid tumors. With these 2 significant upgrades to our portfolio, we are looking forward to continued progress with our therapy selection business for the remainder of 2024 and beyond.

Now shifting gears to Reveal on Slide 16, where we are the leader in Tissue-free MRD. I'm excited to share that our Cosmos CRS manuscript with data from our COSMOS colon study looking at Stage II and Stage III patients was accepted for publication in the preview journal Clinical Cancer Research. This study was also submitted to MolDX for Medicare reimbursement TRC surveillance on MRD indication.

Cosmos, our largest MRD study to date, evaluated CTD detection using a Tissue-free approach and included 1,900 longitudinal surveillance samples from 342 patients representing a median of 6 samples per patient. All patients in this study were able to undergo evaluation without the need for Tissue testing. This study demonstrated 98% specificity with 81% longitudinal sensitivity for occurrence in Stage II or higher colon cancer and more than a 5-month meeting lead time from ctDNA detection to recurrence. This data validate utility of review in predicting recurrence in CRC.

Turning to Slide 17. Beyond CRC surveillance, we have an extensive pipeline of clinical cohorts for establishing validity and utility for Guardant Reveal. This will be instrumental in building compelling evidence that not only supports efforts to expand reimbursement, but also has the potential to influence changes in practice guidelines. Looking ahead to the remainder of the year, we anticipate publications that will support submissions to Medicare for potential coverage in breast cancer. Next year, we have important clinical validity studies for additional cancers such as lung, pancreatic and gastric.

Moving on to Slide 18. We are excited by the demand we are seeing in the Tissue-free emerging market and there are multiple near-term inflection opportunities in 2025. As I just discussed, we are making good progress towards CRC surveillance reimbursement, which will improve our ASP. We are also continuing to make very good progress in our COGS reduction initiatives for Reveal. As a reminder, these 2 milestones will be a significant step towards our long-term goal of achieving greater than 60% gross margins for our MRD business.

While we are seeing strong growth and strong market appetite for reveal, we continue to manage volumes to minimize cash burn and will continue to do so until the Reveal is gross margin positive, which we anticipate in 2025.

With that, I will now turn the call over to Mike for more detail on our financials.

[Michael Bell, executive]

Thanks, Helmy. Turning to Slide 19. I'll discuss our revenue results for the 3 months ended June 30, 2024 and refer to year-over-year growth rates, unless otherwise noted. Total revenue grew 29% to $177.2 million, driven by precision oncology revenue, which increased 33% to $166.5 million. Precision oncology revenue from clinical tests increased 30% to $130.2 million. Clinical test volume grew to a record 49,400 tests in Q2 2024. Clinical volume growth of 14% is in line with our expectations, which factored in the uptick in volume we experienced in the second quarter of 2023 following the Guardant360 CDx approval for ESR1.

For the second quarter of 2024, we again saw year-over-year volume growth for Guardant360 in the U.S., increased Guardant360 volume contribution from Japan and the U.K. and strong volume growth for both Reveal and TissueNext. For the full year 2024, we continue to expect clinical volume growth to be approximately 20%.

Our biopharma business performed incredibly well in the second quarter with precision oncology revenue from biopharma tests, totaling $36.2 million, increasing 45%. This exceptional growth was fueled by a record number of tests in the second quarter, 10,475 which was up 56%. We even to expect our biopharma business to perform well and have increased our biopharma revenue growth expectation for the full year 2024 to now be in the high teens compared to our previous expectation of low teens revenue growth. Finally, Development Services and other revenue totaled $27 million.

Turning to Guardant360 ASPs on Slide 20. We're very pleased to report that we again saw strong cash collections for Guardant360 in the second quarter of 2024, driven by continued improvements in both Medicare Advantage and commercial reimbursement. These improvements led to a step-up in the Guardant360 ASP range to $2,950 to $3,000, an increase from the range of $2,900 to $2,950 in Q1 2024, and from approximately $2,650 in Q2 2023. These improved trends also give us confidence that the Guardant360 ASP have remained in this new range for the remainder of 2024.

In Q2 2024, we also had a revenue upside of approximately $8 million related to cash collected for Guardant360 tests performed in prior periods. This was similar to the upside we recorded in Q1 2024 and reflects the continued tailwind of improved collections. Although it's early days, we believe we will achieve the long-term ASV targets we presented at our Investor Day earlier than originally anticipated, which could potentially bring forward our time line to reach company-wide cash flow breakeven.

Moving on to non-GAAP financial measures on Slide 21. Our non-GAAP gross margin, excluding screening, which reflects our therapeutic and MRD businesses was 62% in the second quarter of 2024 and was in line with our full year guidance of 61% to 63%. Compared to Q2 2023, non-GAAP gross excluding screening decreased to 62% from 64% due to test and revenue mix. Specifically, in Q2 2024, we saw an increase in the mix of negative gross margin reveal test in the precision oncology revenue line as well as a decrease in the mix of 100% gross margin milestone and royalty revenue in the development services and other revenue line.

Non-GAAP operating expenses were $178.8 million, a reduction of $1.7 million compared to the prior year quarter. This decrease was primarily driven by lower clinical study costs following the completion of Eclipse enrollment in Q3 last year and a decrease in G&A expense. These decreases were offset by an increase in sales and marketing expense in preparation for the Shield IVD commercial launch and in support of the continued growth of our therapy selection and MRD revenue. We continue to tightly control our operating expenses by leveraging the infrastructure we've built to support all of our businesses and by gauging our commercial spend on specific milestones.

For the second half of 2024, we expect R&D and G&A expenses to be similar to the first half of the year and expect sales and marketing expense to increase, now that we're firmly in those launch phase for Shield and we'll be ramping up the number of field sales reps to 100 by the end of the year. As a result of our increased revenue and reduction in operating expenses, our adjusted EBITDA loss was $61.9 million in Q2 2024, a decrease of $23.3 million from $85.2 million in Q2 2023.

Free cash flow for the second quarter of 2024 was negative $99.1 million compared to negative $100.5 million in Q2 2023. The year-over-year change reflects a decrease in operating cash burn and equipment purchases, offset by an increase in the annual bonus payout, which is made in April each year. We ended the second quarter of 2024 with over $1 billion in cash, which we continue to believe is sufficient to enable us to achieve our goal of reaching cash flow breakeven by 2028 or potentially earlier.

Now turning to our outlook and for the full year 2024 on Slide 22. We're pleased to be able to increase our revenue guidance and now expect full year 2024 revenue to be in the range of $690 million to $700 million, representing growth of approximately 22% to 24% compared to 2023. This increase reflects the cash collection upside we had in the second quarter, the increase in the Guardant360 ASP that we expect for the remainder of the year and the increased full year expectation for our biopharma business. As a reminder, this revenue guidance does not include any contribution from screening. Although we've now successfully launched Shield IVD, obtain Medicare coverage and started to receive samples into the lab. It's still very early days, and the Medicare all rate is yet to be established. As such, we'll begin to provide screening revenue guidance at a more appropriate time in the future. We continue to expect non-GAAP gross margin excluding screening to be in the range of 61% to 63% and non-GAAP operating expenses to be in a range of $720 million to $730 million representing a flat to 1% decline year-over-year. Finally, we continue to expect free cash flow for 2024 will be in the range of negative $275 million to $285 million, an improvement of $60 million to $70 million compared to 2023 and that our therapy ciliation business will deliver positive free cash flow for the full year 2024.

We also continue to expect the maximum in cash burn this year to be $175 million. Our increased revenue expectation enables us to maintain this free cash flow range for providing us with further flexibility to manage potential working capital fluctuations in the back half of the year as well as the potential to bring forward capital purchases to accelerate our capacity expansion and automation efforts.

Finally, turning to Slide 23 to review our catalysts. We've already made significant progress on Masters across each of our business areas in the first half of the year. As we look ahead to the rest of 2024, we're very excited by the potential opportunities across therapy selection, MRD screening.

With that, we'll now open the call to questions.

[Operator]

[Operator Instructions] The first comes from Mark Massaro with BTIG.

[Mark Massaro, analyst]

The first one is for Helmy. Good to see the COSMOS study come out and submit for publication. Can you just discuss perhaps what your expectations are on Medicare coverage in the CRC surveillance space? Obviously, Natera has an indication there. They are tumor informed your blood. Do you think you can sort of effectively just talk to that particular coverage? Or do you think you might need a new -- net new Medicare coverage decision?

[Helmy Eltoukhy, executive]

Yes. No. So we -- thanks for the question, Mark. As a reminder, we already do have coverage in the adjuvant setting for Guardant Reveal. And so essentially, the aim of this publication and this data is to get us the sort of second half of the indication, which is a surveillance setting in terms of testing patients that are further out at multiple time points. Right now, we're covered for 3 time points if they within the first -- at least the first is within the first 12 months of treatment -- and so yes, we -- this study was designed essentially with Medicare coverage in mind. And so we're very pleased with the outcome of the study. Very pleased with the publication, and it has already -- we said in the prepared remarks, and we believe it qualifies under the current LCD that exists.

[Mark Massaro, analyst]

And then I wanted to ask about the potential for ADLT status on Shield. Many of the lab tests today that have ADLT status are not for asymptomatic screening tests. So I'm just curious if you think that your ADLT application might follow a similar time line as some of the other tests that have obtained it. And I'm just curious if you've had any dialogue that could give you a sense for the timing expectation there.

[AmirAli Talasaz, executive]

Yes. Thank you, Mark. So in terms of the ADLT criteria to get the designation, it's very clear. It's -- the criteria for that is very clear, unmet need, the FDA approval. We get the designation. We have to just go through the process to get it in terms of time line, our best estimate is going to be sometime within 2025. We get our code and get the ADLT status and activates that favorable Medicare pricing enabled by that ADLT designation.

[Operator]

The next question comes from Dan Brennan with TD Cowen.

[Daniel Brennan, analyst]

Congrats on the quarter. Maybe the first one, AmirAli, I think you discussed in the prepared remarks, how given the first mover advantage that you have with Shield, do you think other blood tests will not be viable if they don't meet your performance? Maybe could you just expand on that a little bit? Are you referring to? I mean, the NCD is obviously 74 and 90. So are you thinking lack of FDA approval. Or are you contemplating you think the first mover is going to afford you this really penetrable kind of position because obviously, exact, I think, spoke recently about their own performance or what they expect on their blood test and they're expecting similar performance and possible superiority in AI. So maybe just unpack a little bit, this won't be a viable comment and the competitive profile of Shield.

[AmirAli Talasaz, executive]

Yes. So interesting, we are hearing in this market, a lot of talk to see a slide of the presentation of the data. But I think -- now with our first-line indication, FDA approval with the performance of CRC that we have with a long lead time advantage that we have relative to anybody else in this marketplace. I think -- we believe this performance RC would be the barrier in our viable product in order to get favorable FDA approval, getting first-line indications similar to us. And then making sure that the test would be commercially successful eye of the physician when you look at all of the pieces that need to fall into the place. It's hard for us to sit here and imagine a device with a lower performance we'd even be able to get any of these milestones achieved. So -- but we will see, I think, at some point, that feel needs to go from just talking the type to the reality of what kind of the data people have. We are very confident with the position that we are setting right now.

[Daniel Brennan, analyst]

Great. And then maybe one just more tactically, just on the strength in the quarter with biopharma. It was a really healthy beat. I think you updated your guidance from low teens to high teens. Can you just speak to kind of what you saw in the quarter that kind of drove the extent of that beat? And their updated guide, Mike, I think reflects a pretty material -- obviously, you're not going to grow 56%, but to get to high teens, I think we like a pretty steep slowdown in the back half of the year. So anything you can comment on what's going on biopharma what the back here for your guidance wise?

[Helmy Eltoukhy, executive]

I'll start, and Mike, you can fill in the rest. Yes. Now a lot of this has to do with Infinity. Infinity whether it sort of epigenomic footprint, whether it's modularity in terms of being able to do monitoring or comprehensive profiling. We've seen a lot of uptake of that test and that platform by biopharma. And so that -- I think what you're seeing is the fruits of that investment we've made over the last few years, other elements are just the scope of our offering, not only the sort of regulatory competency that we have in terms of bringing essentially regulated products to market on behalf of biopharma such as companion diagnostic products, but also our global reach. We are really seeing a healthy pipeline build up in China right now that's, I think, of high interest to a lot of the major global biopharma companies. And then I'll let maybe Mike talk about the sort of ramp up. .

[Michael Bell, executive]

Yes. we've had a really strong first half. I think we're really pleased to be able to increase our guide for the full year now to go from low teens to high teens. And I think as we look in the second half of the year, we still got a strong pipeline. It's a very lumpy business. It depends a lot on the timing of the samples that we get we get through the door. And so we've had yes, really strong volume in the first half. I wouldn't call it a real slowdown in the second half of the year, but I think we've had a bolus in Q2. So we think we'll still have a very strong very strong second half of 2024. And yes, again, we're really pleased to be able to increase the guidance to high teens revenue growth.

[Operator]

The following comes from Puneet Souda with Leerink Partners.

[Puneet Souda, analyst]

Congrats on the strong beat here. Maybe first one for AmirAli. I mean, look, congrats on the FDA approval and then you received CMS coverage as well. I mean, you continue to win on things that were generally question the investors Shpere. I mean, the first line in FDA approval and then CMS cover. So wanted to address something that is coming up more in questions lately. And that's really the cash pay price here, 1,495. I assume you're going to be pursuing that into an ABLT. But just help us understand this is significantly above the non-screening -- I mean noninvasive CRC screening products in the market. So what's your rationale behind what's the rationale behind this elevated pricing.

[AmirAli Talasaz, executive]

Thank you, Puneet. So maybe I can share with you the rationale behind our pricing strategy for Shield. First and most important thing is based on the value this 1,495 in our view, adequately reflects the value of Shield in the marketplace, how? Just by the health outcome benefits that we are going to see like we just published our health outcome modeling results. You can see the amount of life year gains. And the value that we are putting on the table is calculatable at what's the economical value of that, bringing on the screen patient population to the screening table and adding those life years, reducing the costs associated with treating and managing CRC is going to have tremendous value to the system. So that's why we think that price is totally justifiable. Attractive hiring model shows not more than that not there.

The other one is about ADLT, like ADLT pathway is really put in place as a mechanism to innovative tests like Shield in a fair way, based on their value, not necessarily based on the precedent and that's the way the mechanism works. And we would be beneficiary of that pathway, which is enacted in law for today's act same purpose.

Now look, yes, there are other companies which with multibillion dollar kind of the top line. Still, I'm not sure how they're going to get exactly to a profitability business. We have a different mentality. We are going to build a sustainably profitable business here. That's what we are after. And I think maybe the last one I'd add is maybe a futuristic thing, a, Shield is a multi-cancer screening test. ADLT price is not going to be activated now, it's sometime next year. And by the time that, that pricing gets activated, we expect to have some exciting updates related to the multi-cancer for Shield. So I think that's the way you are saying about our pricing strategy. And we think this price is very well justified.

[Puneet Souda, analyst]

Got it. That's helpful. And another question is USPSTF now that you have FDA and CMS behind you. Could you take a step back and give us your thoughts on what's needed in terms of modeling the studies, next steps, things that need to happen over the next 2 years to get Shield into USPSTF because I think that is still a lingering question in the space?

[AmirAli Talasaz, executive]

We are very optimistic about inclusion of Shield into the guidelines, starting from ACS and then USPSTF. We are ahead of the plan that we had in terms of clinical evidence generation to show the value of Shield. This FDA approval, any I mentioned in the prepared remarks, the randomized prospective study to show the rate of screening in on-screen patient population would, in fact, would go up, not marginally by like Chad in on screen patient population, we have randomized study to support it. We have publications around the reality of adherence to completing blood test. It's not just a promise. It's proven. The outcome models finally got appropriately model and publish in terms of when you look at longitude an adherence, really a blood-based cancer screening, especially with Shield performance and really add significant value to the society. And we are very excited just with the suite of clinical evidence that we have today. I don't think we are missing anything for the package and some by the design. We expect the research plan to get drafted and their review process to get started very soon. And we are ready for it in terms of the evidence that we have in peer-reviewed publications.

[Operator]

And the next question comes from Tejas Savant with Morgan Stanley.

[Tejas Savant, analyst]

So maybe I'll start one with -- on the Shield side, and then I have a follow-up on Gardant360 as well. So AmirAli, could you just walk us through in your mind, as you think about the pros and cons of an NGS approach versus a lower-cost PCR-based approach, which could enable potentially a lower sort of price point for some of your competitors for their screening assays, based screening assays. How do you think about sort of that choice. And then on a related note, just any thoughts on this exact instant licensing agreement, the implications of that, not necessarily related to Shield, but to the broader sort of portfolio?

[AmirAli Talasaz, executive]

Yes. So low-cost kind of old class 1-year old technology of PCR solved the problem of cancer screening, if the science was that easy, maybe this problem would have been solved 8 years ago. Look, we're looking at thousands of features with our technology, we can just look at the top 10, 20 features that we have and we can just tell you what the performance would be. I wish the science was easier maybe in terms of then we didn't need 10 years of active research investment in this area, but this is a hard field.

In terms of pricing, look at scale, we mentioned that once we get to like about 1 million sample, our card is $200. And frankly, a good traction of that $200 is not even because lab processing of the sample. It's like the reality of logistics of getting the kids, samples, blood tubes, shipment, bunch of stuff, which is the upfront of many, many different kind of tests versus just the cost of running a sequencing assay at least an experience and like us. We know how to have high throughput NGS operation with low cost. We have some of the best automation gurus who have done high throughput, low cost operation for. We are NGS experts. So -- we are very confident with the tech stack that we picked and the long-term viability of the technology stack. About Twin strand actually, I cannot comment on it imply not to top levels for Shield and some other products that we have mentioned that the future of some of these products are going to be genomics only. So but I don't want to put my legal hat on because I cannot say anything we make per opinion. I don't know I think that the

[Michael Bell, executive]

No, I don't think anything more to add. Yes.

[Tejas Savant, analyst]

Okay. Fair enough. All right, guys. So on G360, Helmy, one for you. I mean, as you look at that sort of tenfold expansion, are there any sort of gross margin implications from it that we should be thinking about. Do you envision a greater shift perhaps from this new version of the assay from Tissue to liquid? And then can you share some color on just U.S. volumes year-over-year? Do you see any uptick there, including from the U.K. Royal Marson program, OUS as well? Or was it really a U.S.-led uplift this quarter?

[Helmy Eltoukhy, executive]

Yes. So I'll maybe take the sort of 360 sort of a smart liquid biopsy upgrade first. And -- this is something like we're super excited about. Obviously, it's early days right now. We're seeing a lot of physician excitement. You can see the leading indicator from biopharma in terms of uptake that has happened, and they are some of the most discriminating customers out there. And so the fact that we have biomarkers that really, no one else can see, I think, is going to help us really accelerate our growth in liquid as well as obviously take share from other products such as the Tissue project. So we're very, very excited about that transition. And then I'll let maybe Mike talk about gross margins.

[Michael Bell, executive]

On the gross margin side, yes, there's a little bit of uptick in the costs now with the Guardant LDT because of the additional features. But it's not making, I'd say, any sort of significant impact on our overall gross margins. And it's well manageable within the 61% to 63% gross margin range that we've set for the business, excluding screening. I think that answered the question, as anything else.

[Helmy Eltoukhy, executive]

Just last thing in terms of volumes. I think we're seeing really broad growth both in the U.S. and internationally.

[Operator]

The following comes from Bill Bonello with Craig-Hallum.

[William Bonello, analyst]

Switching back to Shield, a couple of things I'm hoping to be able to ask. But just first, can you talk about sort of where you're at to date with your primary care sales force build and give a little bit of color on your sort of near-term marketing plans?

[AmirAli Talasaz, executive]

So we are on track. So actually, we finished the year with 100 salespeople buyer trained in the field, actively promoting Shield. We made a very good progress in second quarter, in fact. And we have a bunch of actually a new class, which is higher, and we just put them in the training class. So I have very high confidence that we're going to have this 100 people by the end of the year. In terms of sharing any specific KPIs and numbers, I can tell you, we are very early days of this -- I'm very pleased with what we see. But again, it's just very few days. We just need to see how it goes. And also, we need to wait for this gap rate by Medicare to set any specific guidance and expectation of what Shield can deliver for us in terms of top line.

[William Bonello, analyst]

Yes. I probably wasn't clear. I was just asking any color around your marketing plans, not your revenue-generating plans.

[AmirAli Talasaz, executive]

Marketing plans, this is mainly physician less kind of ordering. And so we do a lot of actually direct personal commercialization effort. Interestingly, this FDA approval got a tremendous amount of media attention and some interesting facts that we are dealing with is although it was not funded by Guardant in any material way. Many of our new reps going to new accounts and frankly, a good fraction of PCPs have heard about Shield through the media coverage that we got to here. in with some kind of interesting phenomena. But again, it's very early days. We're going to try things in our marketing program to just see which funds are going to scale better. But again, the main strategy is focused on direct sales force promotion to PCPs.

[Operator]

The next question comes from Jack Meehan with Nephron Research.

[Jack Meehan, analyst]

I wanted to talk about Shield for the questions. First one is for AmirAli. So this $1,500 cash pay price for the IVD version of the test. Can you just talk maybe about the marketing plans when you go into a physician office for the sales team, just how you address concerns around potential for out-of-pocket bills that non-Medicare covered patients might get?

[AmirAli Talasaz, executive]

Yes, sure. So at a high level, we are very upfront and we make sure both physicians and patients are well informed when they agree to use this test. So first of all, for patients like 65 and above, obviously, the Medicare beneficiary, they have good access to this test, many of them $0 out of pocket or minimal cost. But as you mentioned, Jack, when we go to a younger patient population, the fact that access is not as equitable in terms of the financial responsibility for patients until we go to the guidelines. And we are very transparent about it. The cash rate price of shield out to market costs are shared with both physicians and patients, as I mentioned. Because at Guardant, we never want to have any surprise by physician and patients down the road. So we are very upfront about it. And we are learning and we have learned a lot, frankly, through 10 years of virtualization of with Guardant360 Reveal, toward oncologists, PCPs are a bit different, but there's a lot of learnings and skill set that we have gathered that we are leveraging in marketing of Shield in terms of the financial responsibility, that's actually something interestingly. I look at some of this in a very positive way. We expect this dynamic would help us to get more reimbursable volume in our mix. And that's really our focus. At this time, we really prefer to just on the reimbursable volume for Shield, which are the 65 and above. and some of this out conversation would suppress the use case in younger patient population. And that's a good thing.

[Operator]

The next question comes from Dan Arias with Stifel.

[Daniel Arias, analyst]

Maybe just one for me, a follow-up on the sales and marketing side, but more on the clinical oncology piece. Helmy or Mike, how do you see the size of the commercial team evolving there over time? And I don't necessarily ask in the context of OpEx. Obviously, that's an important part, but I'm thinking more just from the competitive standpoint, as we think about the therapy selection market and the MRD market, and there's just a number of players that are trying to stake their claim to business there. Does it become more of a feet on the street game at any point or on level just the way that the PC market does at points I'd love to get your thoughts on just how you see the evolution of the sales force?

[Helmy Eltoukhy, executive]

Yes. I mean I think it's always been promotionally sensitive to some extent in terms of oncology market. I think pharma reps have sort of trained the market in that vein. And diagnostic companies now for the first time are building fairly sizable sales team in the oncology channel. And I think we're in a very enviable position given where our gross margins are, given where the revenue per rep we have right now. And so we typically see the sort of marginal improvement that sales reps can add to our volumes and we adjust accordingly, in terms of -- it can help us drive more volume and we can do it in an efficient way. We'll continue to add reps. But at some point, the market saturates and that's where we have built out other channels in terms of EMR digital, obviously, other marketing channels as well, top-down partnerships. And so it really is a surround sound methodology in terms of how we continue winning share of voice in the market. We have #1 share of voice in the market. We've had that for last few years, and we'll continue to maintain that accordingly. I don't know if, Mike, if there's anything you want on?

[Daniel Arias, analyst]

No.

[Operator]

The following comes from Doug Schenkel with Wolfe Research.

[Douglas Schenkel, analyst]

A couple on field. I was surprised you took such a strong stance on the topic of test viability for emerging competitors. And I think it's a fair point, like let's see how the data shakes out and if it sounds as good as it's been described when we get to prospective randomized studies. But what happens if a test has better sensitivity than 83% blended? Or what have some of these essentially equivalent blended, but have Stage I detection that is better than your 55% Stage I sensitivity and/or better than your 13% advanced autonomo detection. With that using the same logic, call into question the viability of Shield? So that's my first question. And then why does the increased ASP up change your breakeven targets? What else changes -- is there an offset in terms of your market penetration assumptions or your COGS assumptions?

[AmirAli Talasaz, executive]

Yes. So I think for a first point and thanks Doug for asking, it's an important one. So wearers and the biology of cell-free DNA very, very well kind of biomarkers that are associated with cell-free DNA absolute the science and biology of it very, very well. So I think we can kind of some science fiction, which doesn't like biology, there is no biology for it versus the reality of what different technologies can do as long as they are looking at cell-free DNA kind of biomarkers that, again, we know the biology So in science, we can never say it's mission impossible, but I can tell you, like I think some of the scenarios you mentioned cannot happen really in a probabilistic way like with very, very high probability. So like Stage II, III, IV is going to be better. We sell 3 DNA than Stage I. And the performance matrix as long as the team is capable, frankly, that kind of a response care is what cell-free DNA can do with some kind of upgrades that I think, hopefully, we are going to see in our Shield B2, but response care would be similar.

I think it's a different topic. Like if somebody thinks they can have just a 70% plus or 70 and change CRC, but they can detect, but materially more AA. We just let them learn some lessons through biology. In terms of, I think, profitability target, I'm more confident than ever about the targets that we shared in our Investor Day last fall, a 1 million sample $500 million revenue with a $200 cost at the time. But there are some stuff that went better than our base case like this first-line indication is better. The way we are doing the ADLT pricing is higher than before. But it's still, again, too early for us to adjust any of the expectation, frankly, we cannot get ahead of our skis. We will not get ahead of our skis. We just need to see how the volume ramp is going to look like how the payer mix is going to look like as we go through this launch and the first few months after. And then maybe we can talk about long-term perspectives with better data.

[Operator]

The next comes from Patrick Donnelly with Citi.

[Patrick Donnelly, analyst]

I guess maybe just one on the G360 volume, clinical volume broadly. Can you just talk about -- I know you talked a little bit about the drivers. It sounds like it was pretty broad-based. Is that still a little bit more of kind of a depth game given the EMR integrations? Is that the biggest opportunity? And then again, it sounds like still 20% for the year. Is the confidence higher on that in terms of potential upside as we work our way relative to 3 months ago? Just curious how you're thinking about the back half and any potential changes to that volume number?

[Helmy Eltoukhy, executive]

Yes. I mean, obviously, a lot of it is depth at this point. We have, I think, something probably close to 90% of U.S. -- have order a test from us or a Guardant360 test. And so it's all about driving deeper into accounts. And I think as the -- I think the patient story kind of showed that this idea that we can go from a single test per patient to testing patients as their cancer comes back or as they get progressed, I think is one that we're just scratching the surface of in terms of response monitoring and then obviously testing as the cancers come back. And then obviously, that's even more so in the RD setting outside of G360.

In terms of the contours for the year, we're very excited about the product upgrades we've had. We have TissueNext with much, much bigger panel and obviously, the smart liquid biopsy upgrade that everyone has been waiting for, I think, are going to be a really important catalyst for us this year. I don't know if Mike, you want anything to add?

[Michael Bell, executive]

Yes. I think we did on the prepared remarks, just reiterate for the full expectations of 20% year-over-year clinical volume growth. And we know that we had a very difficult comp in Q2 because in the first half of last year, we had the ESR1 approval for Guardant360 CDx, and that led to a rapid increase in breast volumes than we saw in Q2 of last year, a bolus effect. And so we were really pleased with the clinical volume growth this quarter. Again, we saw growth in the U.S. on Ghana but also outside in Japan and the U.K., but also across TissueNext and Reveal. And so we're really pleased with Q2. And yes, as we look ahead for the full year, we're still very confident on the 20% clinical volume growth for the reasons that we just outlined.

[Operator]

The final question comes from Tycho Peterson with Jefferies.

[Tycho Peterson, analyst]

So really two questions. One on Medicare, specifically Medicare Advantage, right? It's over 50% of Medicare, heads scores matter. They actually feed into star ratings and reimbursement. And Medicare Advantage plans let someone get a non-guideline test, it puts the reimbursement at risk, and it feels like they actively until you have USPSTF. So do you agree with that view? And then what's the time line for HEDIS scores? I know it took exact about 2 years.

And then the second question was just I want to confirm on G360. Were the volumes down sequentially in 2Q. -- clinical ASPs were down sequentially. G360 ASPs are up sequentially per our slides. So that would seem to imply that G360 volumes are down sequentially as unpaid tests are obviously driving a lot of the volume.

[AmirAli Talasaz, executive]

That actually, it's true that Medicare fee for service would be likely easier to collect from and Medicare Advantage plans are supposed to play -- to pay us because NCDs brought no restriction. Our label is brought, no restriction. So they're supposed to pay -- but as we've seen sometimes plans are notorious for some kind of road blocks and stuff. But we needed to deal with it before, too. We have experienced working with advantage plants for both 360 and Reveal, and we've been very successful and had great success, great strides, dealing with them and looking forward to outline those earnings now to Shield them.

[Michael Bell, executive]

Yes, on the clinical volume, the Guardant360 volume. Overall, on the clinical volume, we saw sequential growth of about 2,500 tests. And yes, I can confirm Guardant360 grew, sequentially. As did River did TissueNext and Guardant360 grew in the U.S. sequentially and outside the U.S. sequentially. And I think there was a comment on ASPs as well. Guardant360 ASP. We've seen a significant tailwind over the last sort of 12, 18 months with the Guardant360 ASP. So that improved significantly year-over-year, but they also improved sequentially as well. So we're up now to 2,950 to 3,000. So I think we -- again, we're really pleased with the quarter from a volume perspective year-over-year and sequential from an ASP perspective. And so yes, for us, it was a very strong second quarter 2024.

[Operator]

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.