Guardant Health, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results are compared with Q1 2023; balance-sheet figures are compared with December 31, 2023. Guardant Health develops and sells precision oncology tests, screening tests, and related services and data platforms.
Financial performance
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Total revenue | $168.5 million | $128.7 million; up 31% |
| Precision oncology testing revenue | $156.2 million | $113.4 million; up 38% |
| Development services and other revenue | $12.3 million | $15.3 million; down 20% |
| Gross profit and gross margin | $103.2 million; 61.2% | $75.6 million; 58.8% |
| Operating loss | $99.7 million | $134.1 million |
| Net loss | $115.0 million; $0.94 per share | $133.5 million; $1.30 per share |
| Net cash used in operating activities | $30.3 million | $74.4 million |
| Cash, cash equivalents and restricted cash | $1.129 billion | $1.134 billion at December 31, 2023 |
| Convertible senior notes | $1.150 billion principal; $1.141 billion net carrying amount | $1.150 billion principal |
Revenue growth was led by clinical precision oncology testing: revenue from clinical customers rose 37% to $125.7 million, with approximately 46,900 tests versus 39,100. Biopharmaceutical testing revenue increased 40% to $30.5 million, with approximately 8,450 tests versus 6,150. Cost of revenue rose 23%, slower than revenue growth. Research and development expense declined 10% to $83.8 million; sales and marketing expense increased 6% to $80.4 million; general and administrative expense declined 4% to $38.7 million.
Interest income increased to $14.9 million from $3.1 million. A $30.1 million unrealized loss on the Lunit investment drove most of the $29.1 million other expense. The net loss improved year over year despite that investment loss. Stock-based compensation was $27.0 million, up from $22.3 million.
Liquidity, debt and cash flow
Cash, cash equivalents and restricted cash totaled $1.129 billion at quarter-end, including $100.2 million of restricted cash, substantially all held as collateral for surety bond requirements related to the TwinStrand litigation. The company reported $1.029 billion in cash and cash equivalents. Current assets were $1.309 billion and current liabilities $220.0 million. Operating cash use improved by $44.2 million year over year. Investing activities provided $28.1 million, mainly from maturities of marketable securities, while capital expenditures were $6.9 million.
The company has $1.150 billion of 0% convertible notes due in 2027. Management said current cash, restricted cash and anticipated operating cash flows should be sufficient for anticipated cash needs for more than 12 months from the filing date. It also cautioned that additional financing may be needed under adverse business or reimbursement conditions and could dilute shareholders or impose restrictive terms.
Outlook, commentary and material risks
- No specific revenue or earnings guidance was provided in the supplied filing text. Management expects further operating losses and continued investment in clinical studies, new products, sales capacity and marketing; R&D and sales and marketing expenses are expected to increase in absolute dollars.
- Medicare reimbursement for Guardant360 LDT increased to $5,000 effective January 1, 2024, matching the Guardant360 CDx rate, and management cited higher commercial-payer reimbursement as a contributor to clinical revenue growth. Revenue estimates remain exposed to payer coverage, coding and collection uncertainty.
- The FDA advisory committee intended to review the Shield colorectal screening test PMA in May 2024. The filing describes the review as forthcoming; it does not report an outcome. Management also expects to pursue lung and multi-cancer screening with an investigational Shield assay.
- TwinStrand and the University of Washington obtained an $83.4 million jury award after a finding of willful patent infringement. Guardant recorded the liability in 2023 and is contesting the verdict; plaintiffs seek enhanced damages, interest and a prospective royalty. Further loss or business effects are uncertain.
- A False Claims Act investigation concerning Guardant360 billing remains ongoing; the company is cooperating and cannot predict the outcome. A false-advertising dispute with Natera, including counterclaims, had trial scheduled for August 2024.
- One biopharmaceutical customer accounted for 31% of Q1 revenue. Customer concentration, reimbursement changes, product adoption, international expansion and regulatory outcomes are material considerations. Management reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether testing volume growth and reimbursement gains continue, and how payer collections compare with revenue estimates.
- FDA review and regulatory progress for Shield, and the commercial and reimbursement implications of any decision.
- Developments in the TwinStrand post-trial motions and appeal, including potential additional damages, royalties or cash collateral needs.
- The durability of cash resources and operating cash use, including the distinction between unrestricted and restricted cash.
- Customer concentration and the timing and revenue contribution of biopharmaceutical and development-services relationships.
- The impact of Lunit share-price movements and stock-based compensation on reported results and shareholder dilution.