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Guardant Health Inc (GH) Q1 2019 Earnings Call Transcript

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GH earnings call for the period ending March 31, 2019.

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Guardant Health Inc (GH -2.62%)
Q1 2019 Earnings Call
May. 9, 2019, 4:30 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good afternoon, and welcome to Guardant Health First Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Carrie Mendivi from the Gilmartin Group for a few introductory comments.

Carrie Mendivi -- Principal

Thank you. Earlier today, Guardant Health released financial results for the quarter ended March 31, 2019. If you have not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investors at

Before I begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.

Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release Guardant issued today. For a more complete list and description, please see the risk factors section of the company's fourth quarter report on Form 10-K, which the company will file with the Securities and Exchange Commission.

Guardant disclaims any intention or obligation to update or provide any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, May 9, 2019.

With that, I would like to turn the call over to Helmy Eltoukhy, Guardant's Co-Founder and Chief Executive Officer. Helmy?

Helmy Eltoukhy -- Chief Executive Officer

Thanks, Carrie. And thank you, everyone, for joining us this afternoon. I am pleased to welcome you to Guardant Health's first quarter 2019 earnings call.

Joining me today is AmirAli Talasaz, our President and Co-Founder, and Derek Bertocci, our Chief Financial Officer. At Guardant's, we are fueled by our commitment to the patients we serve.

So, I would like to begin today's call by highlighting one patient's treatment journey. The 51-year old female, who had never smoked, presented with shortness of breath and fluid in her right lung. The needle aspiration obtained just enough cancer cells to make the diagnosis of metastatic non-small cell lung cancer.

There was unfortunately not enough tissue to test for any biomarkers, so she went -- underwent another invasive tissue biopsy. This biopsy sample was PD-L1 positive, but had only enough tissue to be tested for one of the eight guideline-recommended gene targets, ALK, which was negative. She was prescribed pembrolizumab immunotherapy, but her cancer continued to progress.

After a failed biopsy attempt, she was then transferred to an Academic Cancer Center, where she had her fourth tissue biopsy. This center performed a series of individual tests for EGFR, ALK, ROS1, BRAF and RET, which were all negative. Her health severely declined, necessitating further hospitalization. At this time, one year after her initial diagnosis, her position ordered a Guardant360 test. Just six days from receipt of her sample, Guardant360 identified a RET fusion that was missed by tissue testing.

She was then enrolled into a clinical trial with a new targeted therapy for RET fusions, to which she had a dramatic clinical response. This patient had a likely avoidable one-year delay, four separate invasive procedures and multiple hospitalizations before discovering her RET fusion with Guardant360. This story demonstrates the challenges that tissue access poses to comprehensive genotyping in subsequent treatment.

It also shows how quickly and non-invasively Guardant360 can unlock this information and can positively impact outcomes for advance stage cancer patients. It is our mission at Guardant to conquer cancer with data, and we are developing products to address three broad population segments, spanning the cancer care continuum. First, advanced stage patients; second, early stage patients and cancer survivors and third, asymptomatic individuals.

In the first segment, we have launched two products, Guardant360 and GuardantOMNI for therapy selection in advanced stage cancer centers. Since its introduction in 2014, Guardant360 has been ordered more than a 100,000 times by more than 6,000 oncologists for patients with advanced cancer to help select treatment. The best-in-class performance of the assays supported by more than 100 peer-reviewed publications, which address its analytical validity, clinical validity, clinical utility in multiple tumour types. We are similarly seeing exceptionally strong demand for Guardant nominee from our biopharma customers.

While it is helping them gain deeper insights into their clinical development programs, these commercial tests combined with their massive data streams are fueling the technology and infrastructure development of our LUNAR program, which aims to address the next two population segments with tests for managing early stage disease, surveillance for cancer survivors and screening for asymptomatic individuals.

These efforts have resulted in our third commercial test, the LUNAR assay, launched in late 2018 for research use only. Specifically, the LUNAR assay is being used for applications related to guiding new adjuvant or adjuvant decision-making and recurrence monitoring. In parallel, we have been actively exploring the performance of our LUNAR assay in initial studies related to screening and early detection in asymptomatic individuals.

We are off to a great start in 2019, as we continue to make significant progress across our business. We finished the quarter with revenue of $36.7 million, up 120% over the first quarter of 2018. Clinical volumes grew 31% year-over-year in the first quarter to 9,521 clinical tests and pharmaceutical volumes grew 61% year-over-year to 3,762 tests.

Now, I will dive into some highlights from Q1. In advanced stage cancer, we continue to focus on shifting the market to a blood-first paradigm for genotyping, which we believe will be key to further accelerating the adoption of liquid biopsies. At the end of the first quarter, our NILE study readout was presented by the study's senior author, Dr. Papadimitrakopoulou at the AACR Annual Meeting and more recently, these results were published in Clinical Cancer Research.

This landmark data demonstrated that Guardant360 detected targetable genomic biomarkers at a similar rate to tissue, meeting the study's primary endpoints and supports the use of blood-based biomarker testing, ahead of tissue-based testing for all newly diagnosed advanced non-small cell lung cancer patients.

Guardant360 demonstrated a quicker turnaround time with a median time to results of nine days versus 15 days for tissue testing. Furthermore, when results for Guardant360 and tissue testing were both available for a given patient, they were concordance in more than 90% of cases. We believe this strongly demonstrates the benefits of a blood-first paradigm, as a greater number of patients are genotype more quickly versus the current standard of care.

In fact, 87% of all NCCN recommended actionable biomarkers would have been identified in initial testing with a Guardant360 first paradigm versus only 67% of biomarkers with a tissue-first approach. This growing body of clinical evidence has led to continued momentum and securing positive payer coverage decisions for Guardant360.

At the beginning of April, Guardant360 was added as a covered benefit for the members of the health plans associated with eviCore. This test will be considered medically necessary to assist in selecting therapy for patients with advanced lung cancer. As a result, Guardant360 will have added coverage for over 38 million lives, including those associated with Health Care Service Corporation, Independence Blue Cross, Highmark Blue Cross Blue Shield, among many others. This will increase total lung cancer coverage for Guardant360 to more than 150 million Americans, up from 115 million at the end of 2018.

Not only are we seeing significant increases in Guardant360 coverage in advanced non-small cell lung cancer, we're also making progress in expanding coverage to other tumor types. At the end of Q1, Palmetto GBA posted a draft local coverage determination or LCD, which will potentially expand Medicare coverage of the Guardant360 assay to over a dozen advanced solid tumor cancer types with guideline-recommended genomic targets.

These tumor types represent the vast majority of all solid tumors. The draft LCD will apply to advanced cancer patients who are covered by Medicare for next-generation sequencing tumor tissue, but are insufficient to unavailable tissue samples. This is an important step toward ensuring all Medicare beneficiaries with advanced cancer have timely access to guideline-recommended treatment options. This draft LCD is an important development for us, as it gives Guardant360 another pathway toward pan-cancer reimbursement coverage. Such a policy could be finalized in the late Q3 to Q4 time period, moderately ahead of potential coverage under the LCD following FDA approval.

Looking ahead in 2019, we are working hard to take advantage of these positive developments and potential upcoming catalysts. We have nearly completed the expansion of our commercial team to approximately 60 sales representatives, and we are seeing early return on investments there in terms of pickup in our clinical volumes.

Our clinical volumes also continue to grow in international markets, as we advance our global commercialization, an area of particular interest to our biopharma partners. Our biopharma business continues to make significant progress both in adding new partners and deepening our relationships with current ones. Finally, the rate of technical development in our pipeline relating to our LUNAR R&D programs continues to surpass our expectations.

In sum, we are very encouraged by the strong growth across our business. As a result of this progress, we now expect revenue for 2019 to be in the range of $145 to $150 million, up from previous -- our previous forecast of $130 million to $135 million. This updated guidance reflects growth of 60% to 65% year-over-year.

With that, I will now turn the call over to AmirAli for more details on our progress with our biopharma business and our LUNAR program, AmirAli.

AmirAli Talasaz -- President and Chief Operating Officer

In parallel with our efforts to accelerate clinical adoption, we are partnering with more than 50 biopharma companies, who are using the Guardant assays to support their drug discovery and development programs. We are encouraged by the increasing demand for GuardantOMNI from our biopharma partners, especially those in immuno-oncology.

The large performance gap between our platform and other liquid biopsy approaches is even further magnified when applied to a large 500 gene panel. We believe this strong demand from a broad range of partners is driven by the highly differentiated analytical and clinical performance that GuardantOMNI offers, not only around genotyping, but also for IO specific markers, such as tumor mutational burden or TMB.

We are developing a companion diagnostic version of GuardantOMNI to identify TMB high patients. This assay has received breakthrough device designation, which will enable an accelerated review process upon submission to the FDA.

The commercial success of Guardant360 and GuardantOMNI, with the generation of their massive data sets are helping us to develop deeper insights into the biology of cell-free DNA. This data engine fuels the progress in our LUNAR program, which aims to expand precision oncology from advanced cancer treatment into early cancer management, surveillance of cancer survivors and screening of asymptomatic individuals. The LUNAR assay is able to simultaneously detect genomic alteration and epigenomic variations such as methylation changes and more recently, nucleosome positioning and fragmentomics signatures.

At this year's, the AACR Annual Meeting, we presented the exploratory data around the use of our LUNAR assay for detecting cancer in patients recently diagnosed with colorectal cancer. This data was quite encouraging, as it demonstrated detection rates exceeding 80% sensitivity, with specificity in the mid-90s for detection of colorectal cancer in early stages in a cohort of 225 patients.

We believe this initial data represents some of the most compelling performance shared to date for a blood-based approach for early colorectal cancer detection, and shows the potential of using this test for screening average risk asymptomatic individual. We are encouraged by the progress we continue to make with our technology platform and seek to further accelerate our investments to pursue this exciting market opportunity.

To this end, we are planning to start a prospective colorectal screening study of over 10,000 patients in the second half of 2019. In April, we closed on the acquisition of Bellwether Bio, a privately held company focused on improving oncology patient care through their pioneering research into the epigenomic contents of cell-free DNA.

We believe the addition of the Bellwether technology and team will further enhance our efforts, as we continue to advance our LUNAR program. The team includes Dr. Jay Shendure, who will act as a Scientific Advisor to Guardant Health.

Finally, I would like to welcome Dr. Bahija Jallal to our Board of Directors. Dr. Jallal is a talented leader with deep scientific and operational experience in immuno-oncology therapeutics. She currently serves as the Chief Executive Officer of Immunocore and previously held leadership roles at both AstraZeneca and MedImmune. She has authored more than 70 peer-reviewed publications and holds more than 15 patents.

In addition to Guardant, Dr. Jallal sits on the Board of Immunocore and Anthem. She is also a member of the Board of Trustees of John Hopkins University and UMB Health Sciences Research Park Corporation and Past President of the Association for Women in Science. Her guidance, expertise and deep commitment to patient care will help strengthen Guardant, as we advance our mission of conquering cancer with data.

With that, I will now turn the call over to Derek Bertocci for more detail on our financials. Derek?

Derek Bertocci -- Chief Financial Officer

Thank you, AmirAli. Revenue for the first quarter of 2019 totaled $36.7 million, up 120% from $16.7 million in the same period of the prior year. This growth was driven by higher testing volume for both clinical and pharmaceutical customers and increased revenue per test.

Precision oncology revenue from clinical tests in the first quarter totaled $17.2 million, up 136% from $7.3 million for the prior year quarter, due to the increased demand and higher overall ASP. First quarter clinical precision oncology volume totaled 9,521 tests, up 31% from 7,246 tests in the prior year quarter.

Average revenue recognized per clinical test in the first quarter was $1,805, up 80% from $1,003 in the prior year quarter due to revenue earned from most tests of Medicare lung cancer patients, starting in Q4 2018, and increases in commercial payer payments that were beneficially affected by the Protecting Access to Medicare Act of 2014 .

Precision oncology revenue from biopharmaceutical tests in the first quarter totaled $11.7 million, up 69% from $6.9 million for the prior year quarter due to increase demand and higher overall ASP. First quarter biopharmaceutical precision oncology volume totaled 3,762 tests, up 61% from 2,334 tests in the prior year quarter, due to the introduction of GuardantOMNI late in 2017, and an increase from customers using Guardant360 for retrospective and prospective testing.

Average revenue recognized per biopharmaceutical test in the first quarter was $3,109, up 5% from $2,966 in the prior year quarter, due to increased demand for the higher priced GuardantOMNI test.

Development services revenue in the first quarter totaled $7.8 million, up 213% from the prior year quarter, due to a ramp up of companion diagnostic development activities to support the CDx programs with AstraZeneca, which was announced in December 2018. Please remember that development services revenue from biopharmaceutical customers is subject to quarter-to-quarter variability, as drug discovery and development programs start and complete.

Gross profit is total revenue, less cost of precision oncology testing and cost of development services. Gross profit for the first quarter of 2019 was $23.1 million compared to a gross profit of $7.4 million in the same period of the prior year. The gross margin in the first quarter was 63.1% as compared to 44.6% during the first quarter of 2018. Gross margin improvement was primarily due to higher clinical ASP and growth in development services revenue.

As a reminder, effective January 1, 2019, we adopted the new revenue accounting standard ASC 606, which primarily impacted the company's recognition of precision oncology testing revenue related to claims paid by third-party commercial and governmental payers for testing samples from clinical patients.

We adopted ASC 606 using the modified retrospective method, which means that revenue reported for 2018 is not restated in our 2019 financial statements. Instead, the accumulated difference resulting from applying the new standard -- the new revenue standard to all contracts that were not completed as of adoption was recorded to opening retained earnings as of January 1, 2019.

The effect of the change was to decrease precision oncology testing revenue by $994,000 in Q1, compared to the revenues that would have been reported without adoption of ASC 606. The effect of this change is disclosed in our Form 10-Q and in our Q1 results press release.

Total operating expenses for the first quarter of 2019 were $46.8 million, a 79% increase from $26.1 million in the first quarter of 2018. R&D expenses for the first quarter of 2019 were $16.3 million, compared to $8.3 million in the first quarter of 2018. The increase was primarily attributable to work required to support our submission to the FDA for PMA, or premarket approval for Guardant360 in development and testing of assays under our LUNAR program.

Sales and marketing expenses for the first quarter of 2019 were $17.8 million, compared to $11.3 million in first quarter of 2018. The increase was due to expansion of our clinical US sales force, and increased clinical US promotional activities, additions to our biopharmaceutical commercial team in customers and programs, and expansion of teams focused on markets outside the US.

General and administrative expenses for the first quarter were $12.7 million, compared to $6.5 million in the first quarter of 2018. This increase was primarily due to incremental costs related to being a public company, as well as litigation expenses.

Net loss was $21.4 million, compared to a net loss of $13.8 million in the first quarter of 2018. A charge of $4.7 million was incurred in the first quarter of 2019, due to an increase in the fair value of the redeemable non-controlling interest in our joint venture with SoftBank, bringing the net loss attributable to Guardant Health common stockholders to $26.1 million

Net loss per share attributable to Guardant Health common stockholders was $0.30 in the first quarter of 2019, as compared to $1.16 in the corresponding period of the prior year. We ended the first quarter of 2019 with $492.8 million in cash, cash equivalents and marketable securities, compared to $496.5 million at the end of the prior quarter.

As Helmy mentioned, we are updating our revenue guidance for the full-year 2019 to be in the range of $145 million to $150 million, representing growth of 60% to 65% over 2018. This compares to our previous revenue expectations of $130 million to $135 million.

We also expect clinical sample volume for 2019 to be in the range of 39,000 tests to 41,000 tests, compared to our previous expectations of 35,000 to 37,000. We continue to expect revenue from biopharmaceutical customers to be particularly strong in the first half of 2019, based on program timetables while clinical testing should grow more steadily across the year.

Excluding the impact of investment in the planned, large prospective clinical trial for our LUNAR program, we continue to expect net loss in the range of $126 million to $129 million. We are in the planning phase for the large prospective clinical trial, and we'll be able to update our net loss guidance for the impact of this trial on our Q2 earnings call.

At this point, I'd like to turn the call back to Helmy.

Helmy Eltoukhy -- Chief Executive Officer

Thank you, Derek. In closing, we believe we have a unique opportunity at Guardant to expand unprecedented access to cancer's molecular information throughout all stages of the disease. We are making important headway in our goals, and look forward to seeing some of you next week at the Bank of America Healthcare Conference in Las Vegas.

With that, we'll now open up to questions. Operator?

Operator -- Chief Executive Officer

Thank you. (Operator Instructions) And our first question comes from Tycho Peterson of J.P. Morgan. Your line is now open.

Tycho Peterson -- Analyst

Hey. Thanks. On the CRC screening study, I'm just wondering if you can talk a little bit about what the goalpost for success might be for the assay?

Helmy Eltoukhy -- Chief Executive Officer

Yes. Hi, Tycho (ph). Yeah. As we mentioned during our earning call, we are in the planning phase of that study. And as you know, non-invasive liquid biopsy assay in CRC screening market for average risk patient population, that's really low compliance rates, is a big issue. We believe can potentially play a very big role. We are in the planning phase of that prospective study. And when we have more details about it, definitely we would keep you guys posted and hopefully in our next earning call, we can provide more information about it.

Tycho Peterson -- Analyst

Okay. And then on the draft LCD. Just curious, what fraction of Medicare volumes will get paid once this is finalized and how are you accounting for this in guidance?

Helmy Eltoukhy -- Chief Executive Officer

So, it's not in our current guidance in terms of what we've reported or what we've shared. In terms of how we think about the draft LCD, as you remember, our current LCD for lung cancer covers about 33% of our overall Medicare volume and about 75% of our lung Medicare volume. And that's because of the QNS or tissue inavailability requirement in terms of the coverage.

This draft LCD expands that same kind of coverage but to multiple cancer types. As -- if you recall, the NCD would bump our Medicare coverage to about 85%. And so we -- given that 75% number in lung cancer, we expect there'll be some percentage of samples that -- it's a fairly significant percentage of samples that will have similar issues of tissue and availability or tissue access. And so we hope that it's going to be a significant bump up, in terms of the 33% of Medicare samples we're seeing, maybe not as much as 85%, but certainly somewhere in between and most likely above 50%.

Tycho Peterson -- Analyst

Okay. And then just lastly on the regulatory front. The timelines for G360 and OMNI, have the submission timelines changed at all? Or can you maybe just talk about where you are in that process?

Helmy Eltoukhy -- Chief Executive Officer

Yeah, sure. In terms of our timeline, as we mentioned in our last call, we are working on multiple CDx project and especially, like we decided as of late Q4 of 2018 to work on two IVD programs, in parallel, Guardant360 and GuardantOMNI. And as we mentioned before, we believe this should only impact our initial timelines minimally. As of now, do we expect to submit our FDA package for Guardant360 sometime in the summertime in the Q3 timeframe.

For GuardantOMNI, still it's early days of the program. And we haven't mentioned any specific timeline for GuardantOMNI. But we would keep you posted as we make progress in the GuardantOMNI program.

Tycho Peterson -- Analyst

Okay. Thanks. Congrats on the quarter.

Helmy Eltoukhy -- Chief Executive Officer

Yeah. Thank you.

Operator -- Chief Executive Officer

Thank you. And your next question comes from Derik De Bruin of Bank of America Merrill Lynch. Your line is now open

Unidentified Participant -- Chief Executive Officer

Hi. This is (inaudible) on for Derik today. Congrats on the quarter, and thank you for taking my question. So first question, how should we think about the ASP trends given the expanded coverage? Can you just comment on that?

Derek Bertocci -- Chief Financial Officer

So the ASP that we are showing here in this first quarter, is driven significantly by the LCD that became effective in the fall for Medicare. We've also gotten some progress with private insurance payers, as we mentioned. We would expect that if we're able to get a larger coverage from the proposed draft LCD, that it could add significantly to our ASP, but we are not including that in our forecast at this time. We would expect modest continued improvement as we continue to make progress with commercial payers getting coverage decisions.

Unidentified Participant -- Chief Financial Officer

Thank you. That's very helpful. And then on the colorectal cancer study. So, I know we're still thinking about the design for this. Just wanted to see when would the design be available? And how long should we think about -- how long it would take to recruit about 10,000 patients? In our previous trials, it would take to up to a year or a year and half to fully recruit those patients.

Helmy Eltoukhy -- Chief Executive Officer

Yeah. So, as mentioned earlier, we are in the planning phase of that study actually. We believe we have a good idea of what study we have to do. It's going to be a prospective observational study that for patients who are trying to go through the colonoscopy, you are trying to get the liquid biopsy or blood draw from them. And look at the performance of that blood draw.

And when I referred, we are in the planning phases exactly for your question about the timing. So in terms of SPI (ph) and the duration of this study, it's still early for us to comment and hopefully, we would have more information for you in our next earnings call -- for Q2 earnings call.

Unidentified Participant -- Chief Executive Officer

All right. Looking forward to that. And finally, this -- the trend for the large prospective study is kind of earlier than we expected. Just wanted to get your thoughts on what's the plan to get considered in the USPSTF guidelines? Is the next (inaudible) something you would be targeting here?

Helmy Eltoukhy -- Chief Executive Officer

So, (inaudible), I think earlier for us to comment about that. Let us maybe go through this planning phase and maybe it's going to become more clear. Our focus would be to start this prospective study and maybe, I just make this statement that the reason we're studying this study much earlier than what we planned before is due to the progress that's being made in our technology platform. And some of the early data that we've seen, some data that we presented at AACR, some additional data that we think it's the right time to start doing this investment and going after this prospective observational study.

Unidentified Participant -- Chief Executive Officer

Okay. Great. Looking forward to seeing you guys at Vegas next week. Thank you.

Helmy Eltoukhy -- Chief Executive Officer

Thank you.

Operator -- Chief Executive Officer

Thank you. And your next question comes from Doug Schenkel from Cowen. Your line is now open.

Doug Schenkel -- Analyst

Hey. Good afternoon, guys, and thank you for taking my questions. Starting on guidance, Derek, can you bridge, I think it's a $15 million increase in full-year revenue guidance. How much of this is clinical testing versus biopharma testing, versus development services?

Derek Bertocci -- Chief Financial Officer

So the $15 million is correct. And we indicated that we're looking at an increase of 4,000 samples on the clinical side and our average ASP on that is $18.05, so that's $7.2 million of the $15 million. And we continue to see that clinical and pharma sample volume. We expect them to move both equally up, roughly and approximately. So there would be a modest increase left over for the development services revenue.

Doug Schenkel -- Analyst

Okay. And is there any -- based on what you're seeing year-to-date, is there any change in the mix of OMNI that you're expecting within biopharma testing, that's impacting the guidance change?

Derek Bertocci -- Chief Financial Officer

OMNI has -- it continues to be a strong product. We saw good volume from OMNI and G360 this quarter. There will be some variability quarter-to-quarter, but we see them both being continue to be strong from biopharma.

Doug Schenkel -- Analyst


Helmy Eltoukhy -- Chief Executive Officer

And guidance is pretty equal around clinical and pharma.

Doug Schenkel -- Analyst

Okay. Super helpful. And then on -- I guess just kind of recent developments. Over the past, I guess it's month and a half or so. As you noted in your prepared remarks, there was the NILE data presentation and you got the eviCore positive reimbursement decision.

Is it too early to say that you're seeing an impact on business, meaning in the second quarter? And is that part of what's driving on top of a strong Q1, the bump up in expectations for clinical volume this year.

Helmy Eltoukhy -- Chief Executive Officer

So, I think it's little bit early to comment on uptake, as catalyzed by NILE. But that being said, we are seeing, I think, anecdotal evidence from our sales force and from our medical affairs team that NILE is certainly resonating with physicians out there. And so we do -- it was something that we pre-messaged as an important catalyst in 2019. And there's really nothing we have seen that changes our view that it is going to be important to continue to uptake and continued clinical adoption of 360 throughout the year and into 2020.

Doug Schenkel -- Analyst

Okay. And I want to take one more shot at the colorectal cancer question. So, I hear you in the sense that you are just in the planning stages, but you also, to be fair, made it a point of emphasis on this call. So, I want to go back there. I mean, if we use exact science as an example and really as a baseline for what's required in the development of a colorectal cancer screening tool, it seems that to advance a successful product to market, you're going to need FDA approval. You're going to need to get into guidelines and you're going to need to garner favorable USPSTF recommendations.

So with all that out there, I guess, the first question would be, do you agree to, are you budgeting more than $50 million for the study because that's about what exact spent on deep sea fully loaded and it could be more than that in today's dollars. And then, third, would you plan on doing a second prospective study because Exact really needed that Alaska Native study in combination with deep sea to successfully get to the finish line.

Helmy Eltoukhy -- Chief Executive Officer

Yeah. I appreciate that question, Doug. So as mentioned earlier, we are in the planning phase and we would keep you guys posted about the progress that we are going to make about the Exact -- and some of the details of what we are going to do in this study. Regarding the budget requirement for this study, I think it's too early for us to give a concrete answer. But we are hoping that we can share more detailed information in our next earnings call as we go through this process.

Now, remembering your question. Yeah, in terms of what is required to have a commercially successful test, which is kind of get ASP (ph). I agree with you that FDA approval is most probably required for such kind of test. And as you could imagine with the kind of study plan that we outlaid in terms of the scope of study, we have that in our consideration.

In terms of reimbursement, I think it's still too early for us to comment about the reimbursement strategy.

Doug Schenkel -- Analyst

Okay. Thank you.

Operator -- Analyst

Thank you. And your next question comes from Puneet Souda from Leerink. Your line is now open.

Puneet Suda -- Analyst

Yeah. Hi, Helmy. Congrats on the quarter. Just first question maybe around recurrence monitoring, that's an important market. Just give us a sense of initial conversations that you've had with the product and with the biopharma companies. And in terms of sort of how much are you modeling here for the year and then just give us your sense of how that product or how early conversations are going versus the initial ones that you had with the G360, the nominee products?

Helmy Eltoukhy -- Chief Executive Officer

Yeah. Very good question. I think we're very encouraged by conversations we're having with pharma companies today. There -- many of them are thinking about how they can move their pipelines of -- and existing drugs into the adjuvant setting. And so we're involved in many of those conversations. We are also involved in terms of testing some other samples as well. And those are going well, I would say. It's going very similarly or perhaps even better than the early phases of Guardant360 when we first started. I think one of the differentiating factors of the assay is the epigenomics component that's there.

And it really is a new, I would say innovation for the field. And so it's certainly something that pharma companies kind of want to kick the tires on, but we're very encouraged by the progress we've seen. But that being said, we do not think it will be a significant contributor in 2019

Puneet Suda -- Chief Executive Officer

Okay. And just given your comments around -- and the questions -- prior questions also around just overall the CRC market. Obviously, there is a path laid out there for average risk screening indication. Wanted to really understand in terms of your preparedness going into this study. If you could give us a sense of, I know you have -- and I completely appreciate you're in the planning phases.

But just give us a sense of -- have you reached a point where you have an assay lock here? Or have you reached a point where -- are there some immediate studies that you need to conduct before you get into the second half before starting this trial? Just give us a sense of sort of the preparedness that you have at this point in time.

Helmy Eltoukhy -- Chief Executive Officer

Yeah. So maybe, I'll say a few words and then, I'll let AmirAli to chime in. I think we've gotten to the point in terms of the technical development of the assay, where we feel it's confident and we are justified both from data that we've presented, but as well as internal data that we have, that we believe the technology has an ability to provide a compelling alternative to existing screening tests for that market. We wouldn't be pulling the trigger on this study and doing the extensive planning that we are doing now, if that wasn't the case

AmirAli Talasaz -- President and Chief Operating Officer

Some aspects of it really time would tell. We have to do this (inaudible) at the end of this day when we get a read out what's going to happen. But one thing that always we had at Guardant, as our philosophy is we are committed to develop technologies that would make a difference. And we are committed to only launching products that would add value to patient care. And we believe due to the compliance issues in CRC field, as you know in terms of screening a simple blood test can add a significant role. But let us hopefully start this study and we see what would be the outcome of this study, and then the study would tell us to do we have an asset that works or no?

Puneet Souda -- Analyst

Okay. That's helpful. Okay. That's great. And if I could squeeze the last one around Bellwether Bio. What's the -- what's your near-term sort of expectations from that technology? And what could that technology do for you both in recurrence monitoring market and sort of asymptomatic screening? Longer term, how do you see this getting employed? Thank you.

Helmy Eltoukhy -- Chief Executive Officer

So, we closed the -- basically acquisition. We've gone through the integration process and Bellwether team and technologies that they have, had some kind of interesting value-add on looking at the genomics of cell-free DNA in oncology space. That was a team that could have those kind of biomarkers and that kind of information and circulating tumor DNA for years. And that was an assets in the data that we showed in AACR, as we mentioned earlier, we looked at somatic genomic alteration in parallel to epigenomic, which included fragmentomics.

So, we had some kind of early evidence about the potential that fragmentomics and the technology could have, especially with the fact that we saw that there are synergistic relationship between fragmentomics and methylation signal, which was interesting to see. And it helps us to increase the signal to noise ratio when we we're talking about detecting very tiny amounts of tumor shed material into circulation. That's what I can say about the Bellwether technology and where we are with that.

Puneet Souda -- Analyst

Great. Thank you.

Helmy Eltoukhy -- Chief Executive Officer

Thank you.

Operator -- Chief Executive Officer

And your next question comes from Brian Weinstein from William Blair. Your line is now open.

Andrew Brackmann -- Analyst

Hi, guys. Good afternoon. This is actually Andrew Brackmann on for Brian. I'll add some questions on the CRC trial as well. Could you maybe be a little bit more specific on the data that you have internally, that gives you confidence here? When will we see that? And then I guess, more broadly speaking, can you remind us at what level of sensitivity and specificity you think you need in order to be commercially competitive here? Thanks.

Helmy Eltoukhy -- Chief Executive Officer

So, you know about the data. You guys know about the public data that we showed in AACR. You could imagine that we have continued those kind of efforts and we have generated additional data in those lines, looking at the signatures of tumor ship (ph) material in patients who have been recently diagnosed with colorectal cancer and more -- control patient population and some of the patient population that we're going to share and some data to increase some of our confidence level about some of the materials that we thought potentially could interfere with the assay.

And as I mentioned in our prepared remarks, the data that we showed in AACR was a sensitivity of more than 80% in detecting Stage 1, 2, with the specificity of the mid-90s. That's what we showed in AACR. Now in terms of the primary endpoint for our prospective study, hopefully we would have more data for you guys on the field in our next earnings call when the protocol is completely frozen and we can talk about the primary endpoint of that study

Andrew Brackmann -- Analyst

Got it. Thanks. And then I guess, as it relates to that AACR data that you read out, we've gotten a lot of questions on the sort of difference between the data and the abstract, and what you guys formally presented. Can you just help us better understand what led to those differences? Thanks

Helmy Eltoukhy -- Chief Executive Officer

Oh, yes, the abstract that got published before the presentation. So the abstract data, from my best memory actually was very small in size and a number of patients size. And we continue to increase the number of patients. We showed on another cut of that data with higher number of patients samples in the oral presentation.

Specifically, we increased the number of healthy individuals. We increased number of cohorts from different sites. We got access to early stage colorectal. And we want to make sure that if there are any side-to-side variation, those variations would also be considered in our data. Still the data that we showed in AACR, where early pilot data as we repeatedly mentioned, since even before those days and after those days and we have to continue generating data for much larger cohorts and some additional cohorts of some other patient types that could introduce some non-specificity in the assay. So hopefully in next cancer conference is when we show data about LUNAR 2 in the early cancer screening for early cancer screening application. We can share more data and talk about the performance.

Derek Bertocci -- Chief Financial Officer

And if I could add more line. I think we were very encouraged by the expanded cohort we saw in the presentation itself. It was within the confidence intervals of the abstract or recent line, but the large part of it has to do with the fact that small and wide confidence intervals in the abstract versus larger in the presentation itself.

Andrew Brackmann -- Analyst

Got it. Thank you.

Helmy Eltoukhy -- Chief Executive Officer


Operator -- Chief Executive Officer

Thank you. And our next question comes from Mark Massaro from Canaccord Genuity. Your line is now open.

Mark Massaro -- Analyst

Hey guys. Thanks for the questions and congrats on the quarter.

Helmy Eltoukhy -- Chief Executive Officer

Hi, Mark.

Mark Massaro -- Analyst

Hey. My first question is -- ASCO is about three weeks away. I know it has been a large conference for you in the past. Can you just speak to what you have planned this year? And then kind of related to that, you've got the companion deals with AstraZeneca. Can you give us a sense on how active you are to advance additional companion diagnostic assays with pharma partners?

Helmy Eltoukhy -- Chief Executive Officer

Yes. So in terms of ASCO, I think we have a number of abstracts that will be presented there. Most of them will be around Guardant360, GuardantOMNI. I believe one will be around the residual disease detection in the adjuvant setting. And I don't believe we have any data on screening or early detection in terms of the LUNAR 2 application at ASCO this year.

In terms of a companion diagnostic work, it's something that I think we're very encouraged by, obviously, the partnership we have with AstraZeneca around Guardant360, GuardantOMNI. Those are both products that we believe can be really workhorses in terms of finding patients very broadly and universally, both in the clinical development setting, clinical trials setting, as well as in the commercial setting when those drugs are approved. And so we're having, I would say very many conversations. Our pipeline looks excellent in terms of continuing to add other companion diagnostic markers on to those assays. But -- so we do think that will be a continuing, I think, driving force in terms of the -- both those assays.

Mark Massaro -- Analyst

Great. I also wanted to ask a question on the colon cancer opportunity. There have been a lot of questions on this call about Exact Sciences. They've done a great job. I think you know that. Their compliance rate is at close to 70%, and they think they could do better.

So, can you maybe just frame why you're starting with colon? Is it because the data internally is superior in colon than the other assays? Or is it more because of the regulatory framework you've sort of laid out and you kind of know, based on a predecessor company, exactly how to get to the market?

Helmy Eltoukhy -- Chief Executive Officer

I think there are multiple aspects to how we think about rolling out different tests and where we decide to invest. As you remember under our LUNAR program, we're focusing on four cancer types initially, lung, colorectal, breast and ovarian cancers. Lung and colorectal have been our lead programs. And you know, I think when we see -- and we chose some of those cancer types, not just out of the blue.

But we took, I would say several considerations into account, not just the technology aspect but market aspects, reimbursement, the cost of the test, some of the dynamics in terms of the commercial scale up and so on. And so all those factors play a role and have gone into the calculus of us choosing to pull the trigger on this investment in this space and with this large prospective trial in colorectal screening.

Mark Massaro -- Analyst

Great. As a quick follow up to the colon question, Exact has seen success in part because of the call center and their compliance engine. Is this something that you think that you need to replicate? Or do you do you think that there is a way to drive strong compliance because of the ease of use of liquid?

Helmy Eltoukhy -- Chief Executive Officer

We think that's one of the major advantages of a blood-based test, is really the ease of use. If you think about it, the control and the relationship can be in the doctor's office in terms of that compliance piece. And there's no gap, there's no delay in time in terms of when a consent is given and when a test is actually administered.

And there's a large drop-off there in terms of compliance as you all know and why those call centers are needed and typically a lot of follow up is needed to ensure that compliance is high. As we've seen with -- frankly even with other tests and we've seen in the market with blood-based tests. We think that is a clear differentiator, is a compliance because if no one takes the test, then it doesn't serve much purpose despite -- regardless of its sensitivity and specificity.

Mark Massaro -- Analyst

Great. Thanks, guys.

Operator -- Analyst

Thank you. And that concludes our question-and-answer session. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.

Questions and Answers:

Duration: 53 minutes

Call participants:

Carrie Mendivi -- Principal

Helmy Eltoukhy -- Chief Executive Officer

AmirAli Talasaz -- President and Chief Operating Officer

Derek Bertocci -- Chief Financial Officer

Tycho Peterson -- J.P. Morgan -- Analyst

Unidentified Participant

Doug Schenkel -- Cowen and Company -- Analyst

Puneet Suda

Puneet Souda -- SVB Leerink -- Analyst

Andrew Brackmann -- William Blair & Company -- Analyst

Mark Massaro -- Canaccord Genuity -- Analyst

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