01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
Guardant Health's FY2020 10-K shows a company still in hyper-growth and deep investment mode.
Total revenue rose 34% to $286.7 milliona in 2020 (from $214.4 million), driven by precision oncology testing (up 31% to $236.3 million) and development services (up 49% to $50.4 million). Clinical test volume grew to 63,254 from 49,926, while biopharma test volume fell to 15,983 from 20,643 due to clinical trial timing and COVID-19 disruption. Gross margin improved modestly to 68%.
Profitability worsened sharply. The net loss attributable to common stockholders widened to $253.8 millionb from $75.7 million, and Adjusted EBITDA was negative $85.2 million. Much of the increase came from $144.1 million of stock-based compensation, including $111.9 million tied to market-based restricted stock units granted to the CEO and President/COO.
R&D rose 74% to $149.9 millionc and G&A rose 214% to $192.8 million. The accumulated deficit reached $606.6 million. The balance sheet was strengthened substantially.
Cash, cash equivalents and marketable securities reached about $2.0 billiond after a $1.15 billion 0% convertible senior notes offering due 2027 and a $354.6 million follow-on equity raise. Management states that existing resources fund operations for at least 12 months. Key risks include heavy reliance on Guardant360 volumes, payer reimbursement and Medicare billing transitions (including the pending CDx pricing change), LDT regulatory exposure, IP litigation against Foundation Medicine, and the SoftBank joint venture put/call arrangement, which could require significant cash outflows.
02—Key points
Key Highlights
- Total revenue grew 34% to $286.7 million in 2020, with precision oncology testing up 31% and development services up 49%.
- Clinical test volume rose to 63,254 from 49,926, while biopharma test volume declined to 15,983 from 20,643 amid trial delays from COVID-19.
- Net loss attributable to common stockholders widened to $253.8 million from $75.7 million, largely driven by $144.1 million in stock-based compensation and higher R&D and G&A spending.
- Adjusted EBITDA (non-GAAP) was negative $85.2 million, compared with negative $53.3 million in 2019.
- Cash, cash equivalents and marketable securities were about $2.0 billion at year-end, following a $1.15 billion convertible notes issuance and a $354.6 million equity offering.
- Gross margin improved to 68% from 67%, reflecting higher average selling price per test.
- Guardant360 CDx received FDA approval in August 2020 as the first comprehensive liquid biopsy CDx, while the Guardant Reveal test launched in February 2021 for Stage II-III colorectal cancer recurrence monitoring.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $286.73M$214.38M | +33.8% |
| R&D Expenses | $149.86M$86.29M | +73.7% |
| Operating Expenses | $541.68M$296.75M | +82.5% |
| Operating Income | -$254.95M-$82.37M | −209.5% |
| Interest Expense | $4.77M$1.18M | +303.6% |
| Net Income | -$253.78M-$75.65M | −235.5% |
| EPS (Basic) | $-2.60$-0.84 | −209.5% |
| EPS (Diluted) | $-2.60$-0.84 | −209.5% |
| Shares Outstanding (Basic) | 97.50M90.60M | +7.6% |
| Shares Outstanding (Diluted) | 97.50M90.60M | +7.6% |
05—Questions
Frequently Asked Questions
Is Guardant Health approaching profitability?
Not yet. The company reported a net loss of $246.3 million in 2020 and an accumulated deficit of $606.6 million, and it expects continued operating losses as it invests in clinical trials, LUNAR screening development, and sales expansion. Management has not provided a profitability timeline.
Why did the operating loss grow so much in 2020?
The main driver was non-cash stock-based compensation of $144.1 million, mostly recorded in G&A, including $111.9 million tied to market-based RSUs granted to the CEO and President/COO in May 2020. Core spending also rose, with R&D up 74% and sales and marketing up 36%.
How is the company funded, and are there dilution or debt risks?
The company had about $2.0 billion in cash and marketable securities at year-end 2020, which management says is sufficient for at least 12 months. The $1.15 billion 0% convertible notes due 2027 carry a $139.82 conversion price and could dilute shareholders if converted, although the company has purchased note hedges to reduce potential dilution.
What regulatory and reimbursement risks could affect future revenue?
Medicare reimbursement for Guardant360 CDx may change following the new PLA code effective April 2021, and Medicare has told the company not to bill CDx claims until the new code and pricing are set. Other risks include possible FDA changes to laboratory developed test (LDT) enforcement discretion and continued commercial payer recoupments and non-participating-provider reimbursement pressure.
06—Continue