01—Abstract
Summary
Summary of the 10-K filed March 19, 2019. Cited figures are marked; the original filing is the authoritative source.
Guardant Health's first 10-K as a newly public company (IPO October 2018) shows rapid top-line growth alongside continued heavy losses.
Total revenue rose 82% to $90.6 milliona in 2018 from $49.8 million, driven by a 86% increase in precision oncology testing revenue ($78.4 million) and 58% growth in development services ($12.2 million). Clinical test volume reached 29,238 and biopharmaceutical test volume 10,370. Gross economics on testing improved as revenue scaled, but the company still posted a net loss of $84.3 million (EPS of -$2.80), with an accumulated deficit of $280.8 million.
Operating expense growth outpaced revenue. R&D rose 98% to $50.7 millionb, sales and marketing rose 65% to $53.5 million, and G&A was roughly flat at $36.2 million after a large 2017 stock-repurchase compensation charge. Medicare coverage became a meaningful catalyst: a July 2018 MolDx LCD for Guardant360 in NSCLC led to first Medicare payments in October 2018 at $3,500 per test.
Medicare represented about 38% of U.S. clinical test volume, and the company's largest commercial payer and largest biopharma customer concentration remain material risks. Balance sheet strength is a key positive. Cash, cash equivalents and marketable securities totaled $496.5 millionc at year-end, following net IPO proceeds of about $249.5 million and a $41 million SoftBank contribution to the Japan-focused joint venture.
Management states current resources fund operations for at least 12 months. Risks investors should weigh include revenue recognized largely on a cash basis for clinical customers, a single laboratory in Redwood City, dependence on Illumina as sole sequencer supplier, a July 2018 phishing-related security incident affecting about 1,700 individuals with an open HHS OCR inquiry, and pending patent litigation against Foundation Medicine and Personal Genome Diagnostics.
02—Key points
Key Highlights
- Revenue grew 82% year-over-year to $90.6 million, with precision oncology testing up 86% to $78.4 million and development services up 58% to $12.2 million.
- Net loss widened modestly to $84.3 million from $83.2 million; loss per share improved to -$2.80 from -$7.07 due to a larger weighted share count after the IPO and preferred conversion.
- Medicare began paying for Guardant360 in October 2018 at $3,500 per test under the MolDx LCD covering NSCLC, a key reimbursement milestone.
- Cash, cash equivalents and marketable securities of $496.5 million at year-end 2018, following October 2018 IPO net proceeds of about $249.5 million at $19.00 per share.
- Test volume grew strongly: 29,238 clinical tests (up from 23,759) and 10,370 biopharma tests (up from 6,286), with the GuardantOMNI test adding higher average pricing for biopharma work.
- Operating expenses rose sharply, with R&D up 98% and sales and marketing up 65%, reflecting investment in LUNAR early-detection programs and commercial expansion.
- Concentration and legal risks remain significant: top five biopharma customers were 36.1% of revenue, the largest commercial payer was 9.4%, and a July 2018 security incident is under HHS OCR review.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed March 19, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $90.64M$49.84M | +81.9% |
| R&D Expenses | $50.71M$25.56M | +98.4% |
| Operating Expenses | $183.58M$126.45M | +45.2% |
| Operating Income | -$92.94M-$76.61M | −21.3% |
| Interest Expense | $1.25M$2.70M | −53.7% |
| Net Income | -$84.26M-$83.22M | −1.3% |
| EPS (Basic) | $-2.80$-7.07 | +60.4% |
| Shares Outstanding (Basic) | 30.40M12.58M | +141.6% |
05—Questions
Frequently Asked Questions
How much revenue did Guardant Health generate in 2018, and how fast is it growing?
Total revenue was $90.6 million in 2018, up 82% from $49.8 million in 2017 and $25.2 million in 2016. Growth came mainly from higher precision oncology testing volumes and new development services projects, including companion diagnostic work.
Is Guardant Health profitable, and how much cash does it have?
No. The company reported a 2018 net loss of $84.3 million and an accumulated deficit of $280.8 million. It ended 2018 with $496.5 million in cash, cash equivalents and marketable securities, and management believes this covers at least the next 12 months of anticipated requirements.
What drove the Medicare opportunity and when did reimbursement begin?
Palmetto GBA issued a local coverage determination for Guardant360 in NSCLC in July 2018, and Noridian later adopted it for California. Claims were submitted from September 2018 at $3,500 per test, and payments began in October 2018. Medicare accounted for about 38% of U.S. clinical tests in 2018.
What are the main risks investors should consider?
Key risks include continued losses, dependence on Guardant360 for most revenue, limited commercial payer contracting (most payers treat the company as non-participating, with retroactive offsets possible), sole-supplier reliance on Illumina, a single Redwood City laboratory, customer concentration in biopharma and Medicare, a July 2018 phishing incident affecting about 1,700 individuals with an open HHS OCR inquiry, and ongoing patent and arbitration disputes including KeyGene.
06—Continue