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Guardant Health Q4 Revenues Up 91 Percent

NEW YORK – Guardant Health's reported after the close of the market on Monday that its fourth quarter 2019 revenues rose 91 percent year over year, driven by continued growth in its precision oncology business.

The blood-based cancer testing firm said its revenues for the three months ended Dec. 31, 2019 were $62.9 million compared to $32.9 million in the same quarter of 2018, beating the $54.8 million that Wall Street analysts, on average, had predicted. The firm further noted that without the adoption this January of the ASC 606 revenue reporting standard, its Q4 2019 revenue would have been $61.6 million, an 87percent increase over the prior-year period.

Precision oncology revenues for the quarter rose 104 percent to $57.4 million from $28.1 million in Q4 2018. The company said it performed 15,270 clinical tests and 6,316 biopharmaceutical tests during the fourth quarter.

Development services revenue increased 15 percent to $5.5 million from $4.8 million in the year-ago quarter, primarily reflecting new 2019 projects in companion diagnostic development and regulatory approval services for biopharmaceutical customers.

Guardant added that its total revenue for the quarter also included $1.3 million in payments received from successful appeals of payor reimbursement denials for certain samples processed back in 2018.

On a call with analysts and investors, Guardant CEO Helmy Eltoukhy emphasized the firm's intention to establish its test within a "blood-first paradigm", that it believes can increase the number of cancer patients who get guideline-recommended genotyping.

"The unfortunate reality is that for the 700,000 patients living with metastatic [cancer], the majority are not receiving guideline-recommended [care]," he said. Eltoukhy highlighted as an example a recent study published in JCO Clinical Oncology in which academic researchers working with data analytics firm Cota Healthcare calculated that less than 40 percent of colorectal cancer patients are in compliance with NCCN guidelines for biomarker testing.

According to Eltoukhy, Guardant believes that the tailwind for this paradigm shift will come from its recently finalized pan-cancer Medicare LCD, which provides not just for expansion of coverages to a variety of solid tumors other than lung cancer, but also a provision for repeat testing in patients progressing after initial treatment.

Guardant also expects to receive approval of its test from the US Food and Drug Administration this year, and though executives said that there has been some unpredictability in that process, their earlier projections that this should be finalized in the first half of 2020 still stand.

Eltoukhy said that the bigger driver for clinical adoption will remain Medicare coverage, and hopefully also new private payor contracts for the pan-cancer LCD going forward. But as the field begins to pick up speed toward closing the gaps in guideline-recommended testing, having the FDA's stamp will be an important factor in maintaining confidence in Guardant360 among later, more cautious adopters.

Guardant's Q4 net loss was $25.2 million, or $.27 per share, compared to $25.1 million, or $.30 per share, in Q4 2018. Analysts were expecting a loss of $.32 per share for the quarter.

The firm's R&D costs for the quarter rose 55 percent to $25.9 million from $16.7 million year over year, while its SG&A expenses rose 39 percent to $41.2 from $29.7 million.

For full-year 2019, total revenues spiked 137 percent to $214.4 million from $90.6 million in 2018, beating the average Wall Street estimate of $206.2 million.

Without the adoption of ASC 606, Guardant said its full-year revenues would have been $214.0 million, a 136 percent increase over the prior year.

Precision oncology revenues for the year rose 130 percent to $180.5 million from $78.4 million, driven by both higher test volume and greater per-test income. The company said it performed 49,926 clinical tests and 20,643 biopharmaceutical tests over the course of the year.

Its 2019 development services revenues were $33.9 million, up 177 percent from $12.2 million the year before. And $6.8 million came from successful payor denial appeals for 2018 tests.

Guardant's 2019 net loss narrowed to $75.7 million, or $0.84 per share, from $85.1 million, or $2.80 per share, in 2018. Analysts were expecting a loss per share of $.88 for the year.

The firm's full-year R&D costs jumped 70 percent to $86.3 million from $50.7 million, while its SG&A expenses rose 56 percent to $139.7 from $89.7 million in 2018.

Guardant ended the year with $143.2 million in cash and cash equivalents, and $379.6 million in short-term marketable securities.

For 2020, the company expects full-year revenues in the range of $275 million to $285 million, and a net loss in the range of $155 million to $160 million. Analysts, on average, have predicted revenues of $273.8 million.

Several analysts on the company's call questioned the potential conservatism of its projections for the comping year, but Eltoukhy reminded that the firm is ramping up existing efforts and beginning several new pivotal studies this year to advance its LUNAR 1 and LUNAR 2 monitoring and early-detection tests. These registrational and interventional trials are "not inexpensive," he said.

Finally, Guardant also announced the planned retirement of its CFO Derek Bertocci, who will leave his post during the second quarter. Bertocci plans to continue to serve in his current role until a successor is hired, and to support the company during the transition of his replacement.

In Tuesday morning trade on the Nasdaq, shares of Guardant were down 9 percent at $76.73.