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Guardant Health Q4 Revenues Up 64 Percent

NEW YORK (GenomeWeb) – Guardant Health's stock surged in Wednesday morning trading after the company reported that its fourth quarter revenues rose 64 percent year over year, driven by a 98 percent increase in revenues from its precision oncology business.

The cancer diagnostics company reported after the close of the market on Tuesday that revenues for the three months ended Dec. 31, 2018 rose to $32.9 million from $20.0 million a year earlier, significantly beating the average Wall Street analyst estimate of $24.9 million. Q4 revenues included $2.1 million in Medicare payments from samples tested in prior periods.

Precision oncology revenues rose to $28.1 million from $14.2 million in Q4 2017, driven by higher testing volume and increased revenue per test. The company said it performed 8,596 clinical tests and 3,009 biopharmaceutical tests during the fourth quarter.

Development services revenues, however, fell 17 percent to $4.8 million from $5.8 million in the year-ago quarter.

"During 2018, we made important headway on key initiatives and are continuing to see strong adoption of our liquid biopsy platform, which has driven increased revenue of more than 80 percent over the prior year," Guardant CEO Helmy Eltoukhy said in a statement. "We believe the recent NILE readout is an important catalyst supporting a blood-first paradigm for first-line use of Guardant360 testing for treatment selection ahead of tissue testing, offering lung cancer patients improved care with a faster time to treatment."

Eltoukhy also said the company is encouraged by the progress it's making with its LUNAR program for minimal residual disease and recurrence monitoring and early detection screening. Guardant recently launched the LUNAR assay to academic and biopharmaceutical researchers to support the investigation of clinical applications, and will be presenting pilot data from LUNAR at the annual American Association for Cancer Research conference next month.

"As a result of these developments, we are ramping up investment to accelerate our research and development efforts toward earlier cancer detection," he added.

On a conference call with analysts following the release of the earnings, Guardant Cofounder and President AmirAli Talasaz said that the clinical version of LUNAR for investigational use in prospective studies is expected to launch in the second half of 2019.

"Based on the LUNAR technical performance we are seeing through the additional epigenomics, we've been exploring use of the assay for screening in early stage cancers," he added. "We are encouraged by the early promising LUNAR clinical data and look forward to presenting further details on its performance in detection of early stage colon cancer at the AACR annual meeting in late March."

Eltoukhy told analysts that Guardant estimates that the market opportunity for its commercial and pipeline products is more than $35 billion in the US alone.

"Despite our position as the market leader and encouraging progress in the comprehensive liquid biopsy setting, we're still in the very early innings of this exciting opportunity," he noted, adding that the company is committed to advancing its entire product platform in 2019. On the therapy selection side, Guardant plans to build evidence to move oncology to a "blood first" paradigm for genotyping of advanced cancer patients, "which we believe will further accelerate adoption of testing," Eltoukhy said.

The company is also aiming for US Food and Drug Administration approval of Guardant360 with a pan-cancer tumor profiling label, and plans to apply for pan-cancer Medicare coverage based on FDA approval. Further, Eltoukhy said that the analytical and clinical data that Guardant has generated has led to a large number of positive coverage decisions from commercial payors.

"Guardant360 is currently covered by Medicare and many private payors, including Cigna and many Blues plans, which have all adopted reimbursement policies that specifically cover Guardant360 for non-small cell lung cancer," he said. "In the fourth quarter of 2018 we were endorsed by the Blue Cross Blue Shield Association, which has led to a sharp step-function increase in the number of Blues plans adopting positive policies for Guardant360 such as Blue Cross Blue Shield of Florida, Horizon Blue New Jersey, and Blue Shield of California, to name a few. As a result, we are pleased to update the number of covered lives to over 115 million up from 77 million lives at the end of Q3."

Talasaz also noted that GuardantOMNI is the second test that Guardant plans to take through the FDA approval process, and then to apply for Medicare coverage for.

"In support of these efforts, we recently received breakthrough device designation for GuardantOMNI, which will enable [an acceleration of its] review process. Between Guardant360 and GuardantOMNI, we are building a highly differentiated and broad companion diagnostic liquid portfolio," Talasaz said. "We believe this portfolio will streamline the clinical development and commercialization process for new drugs and increase the adoption rate of new biomarker treatment therapies post-approval."

Guardant's Q4 net loss widened to $25.3 million from $15.1 million in Q4 2017. However, its net loss per share narrowed to $.30 per share from $1.27 per share, as the number of weighted-average shares used in computing net loss per share rose to 84.1 million in Q4 2018 from 11.9 million in Q4 2017. Analysts were expecting a loss per share of $.35.

The firm's R&D costs for the quarter rose 106 percent to $16.7 million from $8.1 million year over year, while its SG&A expenses rose 61 percent to $29.6 million from $18.4 million. Guardant CFO Derek Bertocci said on the call that the increase in R&D spending is due to Guardant's investments in its LUNAR assay, preparation for the Guardant360 submission to the FDA, and continued improvements to Guardant360 and GuardantOMNI.

For full-year 2018, total revenues rose 82 percent to $90.6 million from $49.8 million in 2017, beating the average Wall Street analyst estimate of $81.7 million.

Precision oncology revenues rose 86 percent to $78.4 million from $42.1 million year over year, driven by an increase in test volume and an increase in average price, which was itself driven by reimbursement from Medicare starting in Q4 and an increase in testing volume for the GuardantOMNI 500-gene comprehensive liquid biopsy targeted therapy and immuno-oncology assay. The company said that testing for clinical customers increased 15 percent and testing for biopharmaceutical customers increased 65 percent in 2018, and that it performed 29,592 clinical tests and 10,370 biopharmaceutical tests during the year.

Development services revenues rose 56 percent in 2018 to $12.2 million from $7.8 million the year before.

Guardant's 2018 net loss widened slightly to $84.3 million from $83.2 million in 2017. However, its net loss per share narrowed to $2.80 per share from $7.07 per share, as the number of weighted-average shares used in computing net loss per share rose to 30.4 million in 2018 from 12.6 million in 2017. Analysts were expecting a loss per share of $1.59 for the year.

The firm's R&D costs for the year rose 98 percent to $50.7 million from $25.6 million year over year, while its SG&A expenses rose 29 percent to $89.7 million from $69.3 million.

Guardant ended the year with $140.5 million in cash and cash equivalents, and $278.4 million in short-term marketable securities.

For 2019, the company expects full-year revenues of $130 million to $135 million, and a net loss of $126 million to $129 million. "We expect this growth to be more heavily weighted to the first half of 2019 as a result of revenue contributions from companion diagnostic programs," Bertocci said.

He also noted that Guardant expects to see clinical sample volume of 35,000 to 37,000 tests in 2019.

Analysts are expecting revenues of $116.9 million for the year.

Guardant's shares rose 14 percent to $84.35 in Wednesday morning trading on the Nasdaq.