Guardant Health, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. The interim financial statements are unaudited. Guardant Health develops and commercializes precision oncology tests and related services.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $109.1 million | $92.1 million | $205.2 million | $170.8 million |
| Operating loss | $130.3 million | $97.6 million | $253.7 million | $205.5 million |
| Net loss | $229.4 million | $97.6 million | $352.7 million | $204.9 million |
| Net loss per share | $2.25 | $0.96 | $3.46 | $2.05 |
| Operating cash used | Not separately presented | Not separately presented | $140.6 million | $78.9 million |
- Q2 precision oncology testing revenue increased 27% to $92.1 million; development services and other revenue fell 12% to $17.1 million. Six-month revenue increased 20%, with testing up 29% and development services and other down 16%.
- Q2 gross profit was approximately $72.4 million, or 66.4% of revenue, compared with $62.2 million, or 67.5%, a year earlier. Six-month gross profit was approximately $136.5 million, or 66.5%, versus $112.1 million, or 65.6%.
- Q2 research and development expense rose 34% to $85.5 million and sales and marketing expense rose 54% to $73.6 million. Six-month increases were 40% and 68%, respectively, reflecting product, clinical-study, commercial infrastructure and marketing investment.
- Net loss included a $99.8 million fair-value charge related to the SoftBank joint-venture buyout. The company paid $177.8 million in June to acquire SoftBank’s interest in Guardant Health AMEA; the acquisition also ended noncontrolling-interest liability accounting.
- At June 30, cash and cash equivalents were $215.2 million, and short- and long-term marketable securities totaled approximately $1.021 billion. Operating cash use increased year over year; investing activities provided $37.9 million and financing activities used $172.1 million for the first half, including the joint-venture acquisition payment.
- Convertible notes had $1.15 billion principal and a $1.136 billion net carrying value. The notes bear 0% interest and mature in November 2027. Stockholders’ equity was $319.1 million and accumulated deficit was $1.36 billion.
Material changes, outlook and risks
- Clinical-customer test volume increased to approximately 29,300 in Q2 from 20,830 a year earlier; biopharmaceutical-customer volume rose to approximately 6,000 from 3,653. Management attributed testing revenue growth mainly to higher sample volume and newer products.
- Guardant launched Shield LDT for colorectal cancer screening in May 2022. Management cited ongoing screening and clinical-study programs, including ECLIPSE, ORACLE and SHIELD LUNG, and expected testing to begin at its San Diego laboratory in Q3 2022, subject to accreditation. Japan operations were also subject to further certification and reimbursement approval.
- No specific revenue or earnings guidance was provided in the supplied filing text. Management said cash, cash equivalents, marketable securities and anticipated operating cash flows were expected to fund requirements for more than 12 months from the report date, while noting that additional capital might be needed if results fall short of the operating plan.
- Key operating risks include uncertain payer coverage and reimbursement, dependence on test volumes and biopharmaceutical customers, continued losses and cash use, and possible supply constraints for laboratory materials and equipment. The filing also discusses COVID-19 impacts and international expansion risks, including geopolitical tensions affecting China-related activity.
- Legal matters include patent litigation with TwinStrand Biosciences, Illumina’s trade-secret and intellectual-property claims, a false-advertising dispute with Natera, and a U.S. Attorney investigation concerning Guardant360 billing to government-funded programs. The company said it was cooperating with the investigation and could not predict its outcome; loss estimates for the described matters were generally unavailable.
- One customer represented 29% of Q2 revenue and 30% of first-half revenue. Management reported disclosure controls were effective and no material changes to previously disclosed risk factors during the quarter.
Important facts for investors to verify
- Whether testing volume growth translates into improved gross margins and a path to lower operating losses as R&D and commercial spending increases.
- How reimbursement rates, payer coverage and collection experience affect clinical-testing revenue, including Medicare’s Guardant360 CDx rate and coverage for newer tests.
- The cash-burn trajectory and liquidity available after the $177.8 million joint-venture acquisition, alongside the $1.15 billion convertible-note principal and future capital needs.
- Progress, costs and timelines for Shield and other clinical studies, laboratory expansion, and required regulatory, accreditation and reimbursement approvals.
- Developments in the disclosed litigation and False Claims Act investigation, and any resulting financial, operational or commercial effects.