Guardant Health, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strong Q2 Performance: Q2 revenue grew 31% year-over-year to $232 million, with strong performance across oncology, screening, biopharma, and data businesses.
• Oncology Growth: Guardant360 Liquid saw over 20% year-over-year volume growth for the fourth consecutive quarter. Guardant360 Tissue ASP reached approximately $2,000 in Q2, achieving a 2028 target 3 years ahead of schedule. Reveal, the leader in tissue-free MRD, continued to generate and publish compelling data.
• Biopharma and Data: Record biopharma sales in Q2, with second quarter revenue growing 28% year-over-year. Deepened relationships with large pharma and signed 2 new companion diagnostic deals.
• Screening Progress: Shield testing revenue grew, with 16,000 tests generating $14.8 million in Q2. NCCN updated CRC screening guidelines to include Shield in Category 2A. Shield was selected for the National Cancer Institute's Vanguard study, and the study commenced with MCD results being delivered to physicians and patients.
• Product Innovation: Launched nearly a dozen new apps for Guardant360 Liquid, expanding its utility. SERENA-6 trial results using Guardant360 in breast cancer were positively received, with potential to drive incremental revenue in 2026 and beyond.

Segment Performance

• Oncology: Q2 revenue was $158.7 million, up 22% year-over-year. Oncology volume grew 30% to approximately 64,000 tests, with Guardant360 Liquid driving the majority of growth. Revenue contribution from oncology was significant, with roughly half of the overall year-over-year revenue growth in Q2 coming from this segment.
• Biopharma and Data: Second quarter revenue totaled $56 million, an increase of 28% year-over-year. The biopharma pipeline is strengthening with new companion diagnostic partnerships, contributing to confidence in short-term and long-term business.
• Screening: Shield testing revenue was $14.8 million in Q2, generated from 16,000 tests. Non-GAAP gross margin for Shield improved to 48% in Q2, driven by increased ASP and reduced COGS. Shield ASP was over $900 in Q2, and cost per test was less than $500.

Guidance

• Revenue: Full year 2025 revenue guidance raised to $915 million to $925 million, representing 24%-25% growth compared to 2024. Oncology revenue expected to grow ~20% year-over-year, biopharma and data mid-teens growth.
• Shield: Shield revenue guidance raised to $55 million to $60 million from $40 million to $45 million, with expected 68,000 to 73,000 tests. ASP for Shield expected to be ~$800 in the second half of 2025.
• Gross Margin: Full year non-GAAP gross margin guidance raised to 63% to 64% from 62% to 63%.
• Cash Burn: Full year 2025 free cash flow burn expected to be $225 million to $235 million, an improvement from 2024. Excluding screening, the remainder of the business expected to reach free cash flow breakeven in Q4 2025.

Risks

• Regulatory Challenges: Uncertainties around FDA review timelines for Shield V2 and potential impact on market launch.
• Payer Contract Issues: Challenges in contracting with private payers and ensuring favorable reimbursement rates.
• Competition: Potential impact from competitive products in oncology, biopharma, and screening segments.
• Medicaid Cuts: Minimal exposure to Medicaid volume, but broader impact on cancer testing market could pose risks.

Question and Answer

• Q: Mark Anthony Massaro from BTIG asked about the benefit of SERENA-6 publication in Q2 and likelihood of continuing to drive interval of testing in G360 in breast cancer. A: Helmy Eltoukhy responded that while SERENA-6 impact in Q2 was minimal, the product market fit with Infinity Smart Liquid Biopsy platform is strong, and there's significant potential for growth as the monitoring paradigm evolves.
• Q: Puneet Souda from Leerink asked about drivers of Shield growth, ASP, and V2 data timing. A: AmirAli Talasaz mentioned strong market demand and sales force productivity driving Shield growth. Michael Bell noted Shield ASP increased to over $900 in Q2 due to Medicare rate increase, and AmirAli stated V2 is an active program with ongoing work but no specific timing for data release.
• Q: Daniel Gregory Brennan from TD Cowen asked about growth drivers for G360 and resonance of Smart Liquid Biopsy at oncologist level. A: Michael Bell replied that growth is from broad-based utilization, higher depth of testing, and share gains. Smart Liquid Biopsy features resonate with oncologists at both academic and community levels, with more exciting apps to come.
• Q: Tycho Peterson from Jefferies asked about next steps for Shield as an MCED test, inducement concerns, and USPSTF risk. A: AmirAli Talasaz stated Shield is clinically validated and operationally ready for patient testing, with plans to broaden access. Acknowledged inducement concerns and monitored USPSTF situation closely.
• Q: Subhalaxmi T. Nambi from Guggenheim asked about Reveal's CRC surveillance reimbursement impact and ADLT status. A: Michael Bell said Reveal is seeing higher volume due to CRC surveillance reimbursement, and ADLT submission is pending with positive expectations.