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Guardant Health Confident in 2023 Growth Despite Lower-Than-Expected Revenue Guidance


NEW YORK – Despite some recent struggles, Guardant Health assured investors this week that its fledgling products for minimal residual disease detection and colorectal cancer screening are on a path to success with continued revenue growth backed by its established Guardant360 liquid biopsy assay.

The company made its case during a call with investors on Thursday to discuss its fourth quarter financial results. Guardant reported revenues of $126.9 million for the fourth quarter of 2022, an increase of 17 percent over $108.1 million a year prior. This was in line with its preliminary projection, and above Wall Street's most recent estimate of $124.1 million. But analysts highlighted the fact that the firm's projection for 2023 revenues was lower than expected.

Guardant said Thursday that it expects 2023 revenue to be in the range of $525 million to $540 million, representing growth of 17 percent to 20 percent compared to 2022.

In a note to investors, William Blair's Andrew Brackmann wrote that this falls "a tad below recent commentary and well off from consensus," which he said had averaged $555.8 million.

Guardant's Q4 precision oncology testing revenue grew 28 percent to $113.8 million from $88.7 million, while its development services and other revenue decreased by 33 percent to $13.1 million from $19.4 million primarily due to a one-time catch-up royalty payment that was recognized in the fourth quarter of 2021.

The firm's Q4 R&D expenses were up 46 percent year over year at $106.6 million compared to $73.0 million, while SG&A spending rose 19 percent to $119.3 million from $99.9 million

Guardant's Q4 net loss was $139.9 million, or $1.36 per share, compared to $90.9 million, or $.89 per share in the prior-year period. Analysts, on average, had predicted a loss of $1.37 per share.

The firm has confronted a few challenges in recent months, most recently laying off approximately 7 percent of its workforce, or about 130 individuals in January.

But during the call, co-CEO Helmy Eltoukhy said Guardant was pleased with its strong finish to the year.

"Clinical test volume reached over 36,000 tests in the fourth quarter, up 41 percent compared to the prior year … fueled by increased depth of ordering of Guardant360," which he said continues to lead revenue growth, albeit with "increasing contribution from new products."

One of those new products is Guardant's Reveal assay, a blood-only minimal residual disease test targeted at colorectal cancer, for which it is reimbursed by Medicare, and, more recently, breast and lung cancers.

Eltoukhy cited 250 percent year-over-year growth for the Guardant Reveal assay in 2022 compared to 2021, when it first launched.

"We are going from almost insignificant revenue in 2021 … to something that is going to be in the low double-digit millions in 2023, so we're seeing that engine really kick on just like we saw with [Guardant360] when we started," he said. "We are just scratching the surface of this $20 billion opportunity."

That said, Guardant CFO Mike Bell cautioned that the company anticipates Reveal will drive test volumes more than revenue in 2023, largely because reimbursement for the test is currently limited to Medicare and to the CRC adjuvant setting.

Among recent milestones for Reveal, Eltoukhy highlighted results released from the TRACC Part B study, which showed 92 percent negative predictive value and greater than two-year residual disease-free survival in ctDNA-negative CRC patients, "supporting chemotherapy avoidance."

Based on those results, the study is set to expand to Part C, in collaboration with the Royal Marsden NHS Foundation Trust which will recruit more than 1,600 patients.

According to Eltoukhy, Guardant is also making progress on its PEGASUS and COSMOS trials — two large prospective studies of Reveal — but doesn't expect results till late this year or early next.

Another recent challenge for Guardant was overcoming a hit to its shares in December, when it announced the results of its ECLIPSE trial with reported sensitivity of its colorectal cancer screening test, Shield, coming in significantly below earlier expectations.

Nevertheless, Guardant maintained that the reported 83 percent sensitivity and 90 percent specificity demonstrated in the trial are sufficient for its planned submission to the US Food and Drug Administration.

During the call on Thursday, Guardant co-CEO AmirAli Talasaz stressed Guardant's view that "the best test is the test that gets done."

"When individuals do not complete ordinary colonoscopy or stool tests, more cancers remain undetected," he argued, adding that Guardant has seen adherence rates of over 90 percent in the first 10,000 patients offered the test clinically as an LDT.

The firm expects to collect more data on the impact of Shield on CRC screening adherence in a recently announced study with the University of Chicago that aims to enroll up to 2,400 patients from disadvantaged groups who have failed to complete other available CRC screening tests.

Talasaz predicted that evidence from prospective studies like this, in combination with Guardant's observed real-world adherence rates, will be enough to support guideline inclusion for Shield by the US Preventive Services Task Force.

FY 2022 financial results

For the full year 2022, Guardant reported total revenues of $449.5 million, a 20 percent increase from $373.7 million in 2021. Analysts, on average, had anticipated full-year revenues of $446.5 million.

The firm's precision oncology revenue grew 29 percent to $392.0 million from $304.3 million, while development services and other revenue dropped 17 percent to $57.5 million from $69.3 million.

Guardant's 2022 R&D expenses were up 42 percent year over year at $373.8 million compared to $263.2 million. SG&A spending rose 16 percent to $463.8 million from $398.5 million.

The company's 2022 net loss was $654.6 million, or $6.41 per share, compared to $405.7 million, or $4.00 per share in 2021, falling short of the Wall Street average estimate of $6.27.

Guardant ended the year with cash and cash equivalents totaling $141.6 million, and $869.6 million in short-term marketable debt securities.

In morning trade on the Nasdaq, shares of Guardant's stock were up about 6 percent at $27.43.