01—Abstract
Summary
Summary of the 10-K filed March 2, 2020. Cited figures are marked; the original filing is the authoritative source.
Guardant Health's FY2019 10-K (filed March 2, 2020) shows a company scaling rapidly as it pursues a precision oncology strategy built on blood-based liquid biopsy.
Total revenue rose 137% to $214.4 milliona in 2019 from $90.6 million in 2018, driven by precision oncology testing (up 130% to $180.5 million) and development services (up 177% to $33.9 million). Clinical test volume grew to 49,926 from 29,238, and biopharmaceutical test volume to 20,643 from 10,370. Net loss narrowed to $67.9 million from $84.3 million, though the company is still unprofitable with an accumulated deficit of $352.8 million.
Operating cash burn was modest at $47.1 millionb, supported by $791.6 million in cash and marketable securities after a $350.4 million follow-on offering in May 2019. The key investor debates center on reimbursement and the LUNAR early-detection pipeline. Medicare coverage for Guardant360 expanded through a December 2019 Palmetto GBA LCD, with a Noridian LCD expected but with uncertain timing.
Several large commercial payers, including Anthem, Aetna and Humana, maintain non-coverage policies, and about 44%c of U.S. clinical tests were for NSCLC. Revenue concentration is significant, with the top five biopharma customers at 38% of revenue and AstraZeneca alone at 26%. The Guardant360 PMA submission to the FDA in Q4 2019 and February 2020 is a potential catalyst for companion diagnostic status and coverage.
Risks also include the SoftBank joint venture's put-call structure, pending patent litigation against Foundation Medicine and Personal Genome Diagnostics, and the LDT regulatory environment. For investors, the thesis is a high-growth diagnostics platform with strong revenue momentum and a substantial cash cushion, against which must be weighed reimbursement uncertainty, customer concentration, continuing losses, and the long development horizon for early-cancer-detection products.
02—Key points
Key Highlights
- Total revenue grew 137% to $214.4M in 2019, with precision oncology testing up 130% to $180.5M and development services up 177% to $33.9M.
- Net loss narrowed to $67.9M from $84.3M, and operating cash used fell to $47.1M from $72.2M, though the company remains unprofitable with a $352.8M accumulated deficit.
- Test volumes rose sharply: 49,926 clinical tests (vs. 29,238) and 20,643 biopharma tests (vs. 10,370), with biopharma ASP up to $3,850 from $3,347.
- Medicare coverage expanded via a December 2019 Palmetto GBA LCD for solid tumors, but Noridian's equivalent LCD timing remains uncertain and large commercial payers (Anthem, Aetna, Humana) maintain non-coverage policies.
- Customer concentration is high: the top five biopharma customers represented 38.0% of 2019 revenue, with AstraZeneca at 26.0%.
- Liquidity is strong with $791.6M in cash and marketable securities after a $350.4M follow-on offering in May 2019, which management says funds operations for at least 12 months.
- Guardant360 PMA submitted to the FDA in Q4 2019 and supplemented in February 2020; FDA approval is viewed as a key catalyst for companion diagnostic status and broader reimbursement.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 2, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $214.38M$90.64M | +136.5% |
| R&D Expenses | $86.29M$50.71M | +70.2% |
| Operating Expenses | $296.75M$183.58M | +61.6% |
| Operating Income | -$82.37M-$92.94M | +11.4% |
| Interest Expense | $1.18M$1.25M | −5.6% |
| Net Income | -$75.65M-$84.26M | +10.2% |
| EPS (Basic) | $-0.84$-2.80 | +70.0% |
| EPS (Diluted) | $-0.84— | — |
| Shares Outstanding (Basic) | 90.60M30.40M | +198.0% |
| Shares Outstanding (Diluted) | 90.60M— | — |
05—Questions
Frequently Asked Questions
How fast is Guardant Health's revenue growing, and what is driving it?
Revenue more than doubled, rising 137% to $214.4 million in 2019 from $90.6 million in 2018. Growth came from higher test volumes across both clinical and biopharmaceutical customers, higher average revenue per test (including Medicare reimbursement for lung cancer patients starting in Q4 2018), and a 177% increase in development services tied to companion diagnostic work. The 2019 figures also reflect the adoption of ASC 606, which accelerated recognition for some clinical revenue; 2018 was not restated.
Is Guardant Health close to profitability, and how long can it fund operations?
Not yet. The company lost $67.9 million in 2019 and has an accumulated deficit of $352.8 million. However, losses narrowed and operating cash burn fell to $47.1 million. With $791.6 million in cash and marketable securities at year-end 2019, management believes existing resources are sufficient for at least the next 12 months, though it expects operating losses to continue as it invests in LUNAR, clinical studies and sales expansion.
What are the main risks around reimbursement?
Coverage is uneven. Several major commercial payers, including Anthem, Aetna and Humana, have issued non-coverage policies for comprehensive genomic profiling, and many commercial payers pay non-participating providers less or retroactively offset prior payments. Medicare coverage for NSCLC began in 2018, and a broader Palmetto LCD was finalized in December 2019, but the Noridian LCD that covers California is still pending. Medicare represented about 38% of U.S. clinical tests, so changes in these policies could materially affect revenue.
How concentrated is the business with biopharmaceutical customers?
Highly concentrated. The top five biopharma customers accounted for 38.0% of 2019 total revenue, up from 36.1% in 2018, and AstraZeneca alone accounted for 26.0%. Losing or scaling back a major partner could materially affect results, and the company's own filing notes that customers may also develop internal tests or work with competitors.
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