You might think that Guardant Health's (NASDAQ:GH) strong revenue growth in the first quarter and its multiple collaboration deals announced this year would have helped make the stock a big winner. But that's not the case. As of the market close on Thursday, Guardant Health was up only 6% year to date.
The liquid-biopsy pioneer announced its second-quarter results after the market close on Thursday. Was there enough good news to provide a nice catalyst for the healthcare stock? Here are the highlights from Guardant Health's Q2 update.
By the numbers
Guardant Health announced revenue of $66.3 million in the second quarter, a 23% increase from the $54 million reported in the same quarter of the previous year. This result easily beat the average analysts' revenue estimate of $59.2 million.
However, the company's bottom line didn't move in the right direction. Guardant Health reported a Q2 net loss of $54.6 million, or $0.57 per share, based on generally accepted accounting principles (GAAP). This reflected a steep decline from the GAAP net loss of $11.6 million, or $0.13 per share, in the prior-year period. It also was worse than the consensus Wall Street estimate of a net loss of $0.38 per share in the second quarter.
Guardant Health's cash, cash equivalents, and short-term marketable securities totaled $937.8 million as of June 30, 2020. This was up from $758.3 million as of March 31, 2020, thanks to a public stock offering that raised $354.6 million in net proceeds.
Behind the numbers
CFO Derek Bertocci warned in the company's Q1 conference call in May that the company's business could be negatively affected by the COVID-19 pandemic. He was right.
Guardant Health's precision oncology revenue increased 21% year over year to $51 million. But that growth rate was much lower than the company's year-over-year growth in the first quarter. And most of the growth in precision oncology revenue in Q2 stemmed from an increase in the average selling price for its products.
The impact of the pandemic was felt especially hard with test volumes for biopharmaceutical customers. Guardant Health announced a 47% year-over-year drop in the number of tests reported to biopharma customers in Q2. In the first quarter, the company's test volume for biopharma customers jumped 40% year over year.
Guardant Health's development services revenue increased by 29% year over year to $15.3 million. However, this additional revenue was mainly related to the timing of milestones for its companion diagnostic development programs.
The company's bottom line deteriorated because of two reasons. First, gross margin fell to 66% in Q2 from 69% in the prior-year period. Second, Guardant Health's operating expenses soared 88% to $95.8 million.
Guardant Health CEO Helmy Eltoukhy is optimistic about the company's future. He said, "As we look to the second half of this year, despite the ongoing pandemic, I am more confident than ever in the strength and resilience of our team, the promise of the Guardant platform, and the significant opportunity ahead to transform patient care." However, the company didn't provide financial guidance for full-year 2020 because of the uncertainties associated with the COVID-19 pandemic.