Guardant Health, Inc. Q2 2025 earnings call

Thank you. Earlier today, Guardant Health released financial results for the quarter ending June 30th, 2025. 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 materially differ 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 the non-GAAP financial reconciliations 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 new information, future events, or otherwise, except as required by law. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the live call over to Helmy.

Thanks, Zarak. Good afternoon, and thank you for joining our second quarter 2025 earnings call. Starting on slide three. Q2 marked another exceptional quarter for Guardant. We continued to build momentum across Oncology, Biopharma, and Screening business lines, including accelerating therapy selection and MRD volume growth, record Biopharma sales, and quickly scaling Shield volumes and revenues. Product innovation built in Smart Liquid Biopsy, combined with strong commercial execution, were integral to the strong performance in the second quarter. I'll walk through some of the key highlights of the quarter in just a moment. First, as always, I would like to start with a powerful story that demonstrates the impact our tests can have on patients around the world. Last August, a 46-year-old woman was diagnosed with Stage 3 endometrial carcinoma.

Once it became clear that her cancer was progressing, her oncologist ordered a Guardant360 Tissue test to help identify potential treatment options beyond the standard of care. Guardant360 Tissue had just gone through a major upgrade to incorporate comprehensive DNA and RNA, and oncologists ordered both results. The test identified a RET fusion, an actionable biomarker that made her eligible for a targeted therapy she likely would not have received based on her initial diagnosis alone. I'm glad to be able to share that she has responded positively to this treatment and is doing well today. This case is a powerful example of how comprehensive molecular profiling through our recently upgraded Guardant360 Tissue test can help guide treatment decisions and improve patient outcomes. Turning to top-line performance in slide four.

Q2 revenue grew 31% year-over-year to $232 million, with strong performance across our Oncology, Screening, and Biopharma & Data businesses. Starting with our Oncology business in slide five. Roughly 1/2 of the overall year-over-year revenue growth in Q2 came from the Oncology business, with revenue increasing 22% to $159 million. Oncology volumes increased 30% year-over-year to approximately 64,000 tests in the second quarter, with the majority of growth driven by Guardant360 Liquid, again closely followed by strong contribution from Reveal. Looking more closely at some of the recent highlights within our Oncology business on slide six. We saw continued volume growth across all oncology tests this quarter, with particularly strong performance from Guardant360 Liquid, where year-over-year growth accelerated for the fourth consecutive quarter and was over 20% in Q2.

We continue to believe that the steady cadence of new app introductions powered by Smart Liquid Biopsy has been instrumental to the accelerating growth profile of Guardant360 Liquid. In late May, as part of the lead-up to ASCO 2025, we introduced 11 groundbreaking Smart Liquid Biopsy applications for Guardant360 Liquid, significantly expanding the clinical utility and further extending our technical leadership in the liquid CGP market. I'll walk through some of these applications in more detail shortly. Guardant360 Tissue continues to be our second fastest-growing oncology product and is even better positioned today to accelerate following the major upgrade in April, which we believe make it a best-in-class product.

As a reminder, the recent improvements expand the panel to include RNA and broad methylome analysis powered by our Smart Liquid Biopsy platform and enable readouts with 40% less slides than the industry norm, which we believe is an important differentiator. We are also excited to report for the first time that Guardant360 Tissue ASP was approximately $2,000 in Q2, achieving our 2028 target three years ahead of schedule. For Reveal, we made great progress with data generation and publications. We recently submitted our Reveal breast cancer data package to MolDX for Medicare reimbursement, and the first publication of immuno-oncology therapy monitoring data on Reveal was published this week. In May, we continued to augment our offering with the launches of Guardant Hereditary Cancer testing and a suite of immunohistochemistry or IHC tests.

These additions bring us closer to becoming a one-stop shop for oncologists, providing insights across the patient journey. Turning to slide seven. At the annual ASCO meeting in early June, results from the landmark SERENA-6 trial were sponsored by AstraZeneca, were featured in a high-profile plenary session. This was the first pivotal trial to use a ctDNA-guided approach to detect and treat emerging resistance in first-line therapy ahead of disease progression in breast cancer. Guardant360 was the exclusive companion liquid biopsy used in the trial for this monitoring application. Feedback from KOLs during and after ASCO was incredibly positive, and we look forward to camizestrant potentially becoming a new option for breast cancer patients. This important new paradigm involving frequent Guardant360 testing in order to quickly detect the emergence of resistance mutations has potential to change clinical practice and improve outcomes for patients with advanced breast cancer.

With a prevalent pool of approximately 40,000 patients in the U.S., this new application of Guardant360 has the potential to drive significant incremental Guardant360 revenue in 2026 and beyond. Moving on to slide eight. We have built a powerful real-world evidence platform utilizing over 100,000 genomic and broad epigenomic profiles across more than 50 cancer types. By combining the multi-omic profiling capabilities of our Infinity platform with the analytical power of our InfinityAI learning engine, we are driving the development of first-of-their-kind clinical applications that are setting a new standard in precision oncology. Turning to slide nine. Since July of last year, Guardant360 has delivered accelerating growth each quarter, fueled by our Guardant Infinity Smart Liquid Biopsy platform. In Q2 alone, we launched nearly a dozen groundbreaking new apps, greatly expanding the utility of Guardant360 Liquid.

The latest wave of new apps include complementary genomic features, which add an even higher resolution view of tumor biology, helping healthcare providers to make smarter, more personalized treatment decisions even when tissue isn't available for analysis. Among the many newly launched applications are cancer subtype classification using tumor-specific methylation signatures to complement enhanced standard testing methods; cancer site of origin identification when the primary site is unknown, guiding better diagnosis and therapy; advanced negative prediction to confidently identify wild-type patients; and pharmacogenomic profiling to identify genetic variations that impact the safety and efficacy of commonly used anti-cancer therapies. Shifting gears to Reveal in slide 10, where we are the leader in tissue-free MRD. Over the last few months, we have continued to generate and publish compelling data on Reveal across a number of cancer types.

As I mentioned earlier, the Reveal breast reimbursement submission has been made to MolDX, and the IO monitoring study just published will support reimbursement submission for this application in the near future. Starting with slide 11. We are excited to announce a new breast cancer publication in ESMO Open highlighting the performance of Reveal. This retrospective study evaluated 95 patients who were diagnosed with early-stage ER+/HER2- or triple-negative breast cancer undergoing chemotherapy prior to surgery. Notably, nearly 40% of patients had minimal or no residual tumor following neoadjuvant chemotherapy, demonstrating the value of Reveal's tissue-free approach. Reveal showed strong performance with 100% sensitivity for distant recurrence in patients with ER+/HER2- breast cancer, 100% specificity, and 100% positive predictive value for relapse, and an overall sensitivity of 71%.

These results, combined with the data recently published in Clinical Cancer Research, further validate Reveal's potential to transform neoadjuvant and post-treatment surveillance strategies with the ultimate goal of improving patient outcomes. Moving on to slide 12. I am proud to share the RADIOHEAD Reveal immuno-oncology monitoring study, which involved 521 Stage 4 pan cancer patients treated with standard of care immunotherapy, was published in Cancer Research Communications, a journal of the American Association for Cancer Research. This study demonstrated that any decrease in Reveal tumor fraction signal in the study was significantly associated with improved patient outcomes. Additionally, Reveal identified non-responders more than three months and as many as five months before disease progression was visible on standard imaging. Turning to slide 13. At this year's ASCO annual meeting, data from the largest study to date using ctDNA in Stage 3 colon cancer further validated the clinical utility of Reveal.

This phase III study involved over 2,000 patients evaluated with a median follow-up of 6.1 years, showed that ctDNA detected after surgery and before chemotherapy is a powerful predictor of recurrence and survival. Among patients with detectable ctDNA, 63% experienced recurrence within three years, compared to just 15% of those without detectable ctDNA. These findings strongly support the routine use of Guardant Reveal to stratify patients by risk, inform adjuvant therapy decisions, and ultimately improve outcomes. We have made strong progress over the last few months in MRD. Reveal volume growth accelerated in the second quarter on a year-over-year basis, consistent with our expectations, and we continue to have an extensive pipeline of clinical cohorts to further support clinical utility and analytical validity for Reveal. Turning now to slide 14. Our Oncology business is well-positioned for durable growth, supported by continued CGP penetration, favorable ASP dynamics, and international expansion.

Guardant360 Liquid and Guardant360 Tissue are seeing increased adoption driven by the recently expanded genomic and epigenomic breadth of our platform, which is unlocking greater clinical utility and driving share gains. With our redoubled commercial focus on Reveal following major COGS improvements in Medicare CRC surveillance reimbursement earlier this year, the business is primed for strong growth in MRD. Looking more closely at some of the recent highlights within our Biopharma & Data business in slide 15. We delivered a record quarter for our Biopharma business, achieving all-time highs in both volume and revenue, with second quarter revenue growing 28% year-over-year. We continue to deepen our relationship with large pharma and signed two new companion diagnostic deals in Q2. We continue to have a robust and growing pipeline of partnerships, and near-term revenue visibility remains high.

Thanks, Helmy. Moving on to slide 16. We delivered $15 million of Shield testing revenue in Q2, driven by approximately 16,000 tests. We are pleased to see continued strong traction for Shield in the third full quarter of commercial launch. Shield continues to generate strong enthusiasm from both patients and physicians, with high adherence rates that continue to be over 90%, meaning we receive blood samples for more than 90% of ordered cases. This demonstrates the simplicity of Shield as a routine blood test for CRC screening that can be implemented into standard PCP care. We also continue to observe strong depth of ordering per physician. Moreover, we've been encouraged with the momentum in sales rep productivity in the field, although it's still early days in our commercial journey, and the average tenure of our sales reps is less than eight months.

Given our performance this quarter across revenue, volume, and gross margin, we are further accelerating the build-out of our commercial infrastructure and now expect to surpass 250 sales reps by year-end to support this growth as we go to 2026. Moving on to slide 17. In late May, we were very encouraged to see National Comprehensive Cancer Network, or NCCN, update its CRC screening guidelines to include Shield. The new NCCN guidelines place Shield in Category 2A, which is the same category recommendation as the other first-line screening modalities. This represents the first national guideline recommendation for Shield and, in our view, paves the way for improved commercial coverage and patient access. This also supports our confidence that Shield will be included in other national CRC screening guidelines in the future. Now, turning to slide 18 to take a closer look at Screening highlights for the second quarter 2025.

Starting with Shield CRC. As I mentioned earlier, we are very pleased with the high patient adherence, strong depth of ordering per physician, and the productivity of our reps in the field. We are also very excited to see Shield is now a guideline-recommended screening test by the NCCN. Along with this strong momentum, Shield was recently named a winner of Fast Company's 2025 World Changing Idea Awards, an award that recognizes innovative companies and projects addressing the world's most urgent challenges. Beyond CRC, we made meaningful progress with Shield multi-cancer detection, MCD, in the second quarter. As a reminder, we presented the clinical validation of Shield MCD test at AACR and ASCO this year. This momentum continued when Shield MCD received breakthrough device designation from the FDA, making an important milestone for us. Moving on to slide 21.

As a reminder, our goal has always been to detect cancer early, when it's most treatable. We developed our Shield as a platform capable of multi-cancer detection, with CRC screening representing just the first indication for Shield, given it has an established regulatory and reimbursement pathway. While we are encouraged by the strong traction we are seeing for Shield CRC, we are even more excited about broadening the impact of Shield across multiple cancer types. Moving on to slide 22. In early January, we announced Shield's selection for inclusion in the National Cancer Institute's Vanguard Study, which is a 24,000-patient pilot study to evaluate the use of MCD tests. As a reminder, Shield was one of only two technologies selected through a highly-competitive process.

We are pleased to share the commencement of NCI Vanguard Study just a few weeks ago, and we have already started delivering MCD results to physicians and their patients through this trial. The initiation of this study establishes the clinical and operational readiness for Shield MCD and marks an important milestone for the Shield platform. We are looking forward to broadening access to Shield MCD beyond the scope of the Vanguard Study in the near future. Looking ahead, Shield V2 continues to be a very active program for us, and we remain confident about the potential inclusion of Shield in American Cancer Society or ACS guidelines. With that, I will now turn the call over to Mike for more detail on our financials.

Thanks, AmirAli. Turning to slide 23. I'll now discuss some select financial highlights for the quarter ending June 30th, 2025. I'll refer to year-over-year growth rates unless otherwise noted. Second quarter total revenue grew 31% to $232.1 million, driven by strong performance across all our key revenue lines: Oncology, Biopharma & Data, and Screening. Starting with our Oncology business. Oncology revenue grew 22% to $158.7 million, primarily driven by another quarter of accelerated volume growth.

As a reminder, Oncology volume consists of our Guardant360 Liquid and Tissue therapist selection test and our Reveal and response monitoring test. Oncology volume grew 30% to approximately 64,000 tests in Q2, with the majority of growth driven by Guardant360 Liquid, closely followed by strong contribution from Reveal. Guardant360 Liquid year-over-year volume growth accelerated for fourth consecutive quarter and was over 20% in Q2. Reveal year-over-year volume growth also accelerated in Q2 and continues to be our fastest-growing Oncology product. We also continue to see strong Oncology ASPs in Q2. Guardant360 Liquid ASP was in the range of $3,000-$3,100 in the second quarter of 2025, in line with the prior quarter. Guardant360 Tissue ASP increased to approximately $2,000 in Q2, which means that we have reached our 2028 Tissue ASP target three years ahead of schedule.

This has been driven by the increase in Medicare pricing from $3,140 to $3,500 at the start of the year, good progress with commercial payers, and incremental reimbursement related to the recently launched tissue RNA feature. We've been very encouraged by the attachment of RNA to our Guardant360 Tissue test, and we want to highlight that we do not count tissue RNA separately from Guardant360 Tissue in our reported volumes. Reveal ASP continues to be in a range of $600-$700 following Medicare CRC surveillance coverage earlier in the year. After sales revenue was consistent with normal expected levels in Q2 and did not provide a material upside in the quarter. Finally, note that we do not include Guardant Hereditary Cancer test or IHC volumes in our reported volumes, and we expect minimal revenue contribution from these new offerings throughout 2025.

Our Biopharma & Data business performed incredibly well again in the second quarter, with record revenue totaling $56 million, an increase of 28%. Our Biopharma pipeline continues to shape up solidly, driven by Guardant Infinity and additional companion diagnostic partnerships signed in the quarter, all of which add to our confidence in both the short-term and long-term business. Finally, we continue to see increasing revenue contribution from Shield, with Screening revenue totaling $14.8 million in Q2, generated from the 16,000 Shield tests that we reported in the quarter. Turning to slide 24. We're extremely pleased to report that we're making great progress with Shield non-GAAP gross margin, which increased to 48% in Q2 compared to 18% in Q1 2025, and 2% in Q4 2024. This was driven by continued improvements in both ASP and COGS.

Shield ASP was over $900 in Q2, which represents a significant increase over the ASP of approximately $600 in Q1. The main drivers of ASP improvement were the increase to our Medicare rate from $920 to $1,495, following the receipt of ADLT status, which became effective on April 1, and the continued high mix of reimbursable test volumes. It should also be noted that the Shield ASP reflects the strong reimbursement that we're receiving from Medicare Advantage payers. Equally pleasing is that Shield non-GAAP cost per test further reduced in Q2 and is now less than $500. This continued improvement is driven by increased Shield volume and the excellent performance of our operations team in maintaining rigorous cost controls and driving efficiency gains.

Similar to last quarter, we plan to reinvest the incremental Shield gross profit we generate back into the sales and marketing line to accelerate the Screening commercial infrastructure build-out. We continue to be very proud of the financial profile that Shield has demonstrated in such a short period of time. Turning to slide 25. Our non-GAAP gross profit was $153.8 million, an increase of $47 million or 44% year-over-year. Our non-GAAP gross margin of 66% was above our expectations in the second quarter of 2025 and was a significant improvement compared to 60% in the second quarter of 2024. The improvement in gross margin is primarily a result of improved Oncology ASP, as well as the significant turnaround in gross margins for Reveal and Shield, which were both gross margin negative in Q2 2024 and which are now both gross margin positive.

As we noted last quarter, Reveal cost per test has reduced from over $1,000 in 2024 to less than $500 in 2025. Non-GAAP operating expenses were $215.3 million in the second quarter of 2025, an increase of 20% and in line with our expectations. Both non-GAAP R&D and G&A expenses in the quarter were approximately flat compared to prior year, which reflects the operating leverage that we're achieving throughout the business. Non-GAAP sales and marketing expense increased 45% to $107.8 million in the second quarter of 2025. This increase was due to the ongoing Screening commercial build-out, as well as continued investment in Oncology sales and marketing. Adjusted EBITDA loss was $51.9 million for Q2 2025, an improvement of $10 million compared to a loss of $61.9 million in Q2 2024.

We continue to be focused on cash management and reducing our burn in 2025 versus 2024. Q2 2025 free cash flow burn was $65.9 million, compared to $99.1 million in the prior year period. We ended the quarter with approximately $735 million in cash and cash equivalents, and restricted cash. Moving to slide 26 for our outlook and assumptions for the full year 2025. We're increasing our full year 2025 revenue guidance for the second time this year to be in the range of $915 million-$925 million, representing growth of approximately 24%-25% compared to 2024, and an increase of $35 million compared to our prior range of $880 million-$890 million. We now expect Oncology revenues to grow approximately 20% year-over-year in 2025, compared to our prior guidance of 18%.

The increase is based on stronger than expected Guardant360 Liquid and Reveal volumes in Q2 2025, as well as higher Oncology volume now projected for the remainder of the year. For the full year 2025, we now expect total Oncology volume to grow greater than 27%, versus our prior expectation of greater than 25%. We continue to expect our Biopharma & Data business to perform well throughout 2025, and now expect mid-teens revenue growth compared to our prior expectation of low double-digit growth. We are also raising our full year 2025 Shield revenue guidance again this quarter to $55 million-$60 million from our prior guidance of $40 million-$45 million. This increase is largely driven by higher volume, where we now expect 68,000-73,000 tests versus our prior guidance of 52,000-58,000 tests.

Our Shield revenue guidance assumes an ASP of approximately $800 for the second half of 2025, slightly lower than our Q2 ASP, as we anticipate potential changes to the mix of Medicare and commercial pay tests as we scale the business. With the significant improvements to gross margins that we've generated during the first half of the year, we're raising our full-year non-GAAP gross margin guidance to be in the range of 63%-64%, compared to the previous range of 62%-63%. As we've previously outlined, we plan to reinvest any incremental Screening gross profit we generate throughout the year back into the business to accelerate our commercial infrastructure build-out.

As a result of improved Shield volume and gross margin, we're increasing our sales and marketing efforts and now expect 2025 non-GAAP operating expenses to be in the range of $840 million-$850 million, representing an 11%-12% increase compared to 2024. We continue to expect full-year non-GAAP R&D and G&A expenses to be relatively flat compared to 2024. Lastly, our commitment to cash burn reduction each year in order to reach company-wide cash flow breakeven in 2028 is unchanged. For full-year 2025, we still expect free cash flow burn to be in the range of $225 million-$235 million, an improvement compared to $275 million for 2024. We continue to expect our cash burn in 2025 to consist of approximately $200 million related to Screening as we scale our Shield business and maximize our first-mover advantage.

Significantly excluding Screening, we continue to expect the remainder of the business to burn approximately $25 million-$35 million during the year, and to reach free cash flow breakeven in the fourth quarter of 2025. Moving on to slide 27. At the start of the year, we outlined an ambitious pipeline of catalysts, it's a testament to our team's strong execution that we've delivered on nearly all of them just halfway through the year. Finally, turning to slide 28. We'll be hosting an Investor Day on Wednesday, September the 24th in New York City. We look forward to sharing a deeper dive across our business. Please reach out to investors@guardanthealth.com for more information. With that, we'll now open the call to questions.