We see a lot of other companies being impacted by biopharma spend. And so, I think this sort of low double digit expectation, we’re on the conservative side. And if you sort of put all those together, it implies clinical revenue growth of at least 20% So, we still look at that as being very really strong with plenty of upside that could come on that clinical revenue growth. And maybe just one other thing on the cadence of the growth, I think it’s important to know that we always have this seasonality in Q4 where we have very strong biopharma revenue. And then that always – as companies or customers push through their budgets at the end of the year, and we know that, sequentially, biopharma revenue is always lower in Q1. So even though we’ll have an uplift of G360 ASP in Q1, we still expect the overall revenue sequentially to be lower in Q1 versus Q4 of 2023.
And then throughout the year, we expect to sort of sequentially grow each quarter. So, yeah, hopefully, that’s given some additional color on that guide.
Helmy Eltoukhy: In terms of MRD, we’re preparing publications, as we speak, at least in CRC and then we’ll get the breast publication out, at least submit it as soon as we can. And really, the gating item is going to be tight time to getting those published and the sort of back and forth with MULTI-X in terms of submitting that data. Obviously, we haven’t really baked much in this year in terms of this additional reimbursement. That is certainly upside if we manage to sort of get through the gauntlet there quickly. I would also say that I think we feel very good about the core business in general. We built, I would say, a lot of potential catalysts over the last 18 months into the business. We have the partnerships with large group practices like US oncology, the EMR integration, smart liquid biopsy transition, some of the upgrades to TissueNext.
And a lot of that, I think, is potential upside in terms of where we are. So, we feel very good, including around the competitive landscape that’s there.
Operator: The next question comes from the line as Jack Meehan with Nephron Research.
Jack Meehan: I had a couple of gross margin questions first for Mike. If you include the dilution from Shield, what does the guide assume for gross margins for the year and any implications for Shield volume growth embedded? And for Helmy, I was wondering if you could talk about your sequencing strategy. Are there any changes you’re planning to make in the lab, either with Nova X or something just to help drive savings on the COGS side?
Michael Bell: Jeff, on the gross margin side, I think we really want to focus where the gross margin is going to be on the business excluding screening. In 2023, we saw something like a 2 percentage point impact overall from running the Shield LDT tests and, again, we get very minimal revenue for those. And so, for 2024, we’ve given the guidance of the gross margins without screening at 60% to 62%. So, hopefully, people can then start to really understand the performance of the business without screening. It’s going to be difficult for us to say what the impact is going to be throughout 2024 on screening. Obviously, it’s going to depend on the volume. It’s going to depend on the timing of FDA approval and launch and then what that volume ramp is going to be.
And it’s also going to be dependent on when we get the initial Medicare gap fill rate and what that rate is going to be at. So that’s why we really want to focus on gross margin without screening because it’s difficult to measure. But, again, I think our aim at excluding screening is to be at least 60% gross margins. And I think we feel comfortable with all of the mix impacts across the core business that we can manage to that level.
Helmy Eltoukhy: In terms of sequencing, I would say, just in general, we have a pretty robust program around COGS production. And I think there’s going to be some, I think, good opportunities over the next couple of years, especially with some of the investments we’re making in terms of Shield and really the infrastructure there that is going to, I think, pay dividends on the oncology side as well. And we’re certainly pursuing some of the sort of lower cost sequencing instruments, such as NovaSeq X and others that may lower our overall COGS of running our tests.
Operator: The next question comes from the line of Doug Schenkel with Wolfe Research.
Doug Schenkel: With wolf research, your line is now open. I want to ask a high level question and then kind of a related follow-up as it relates to Shield. So there’s clearly questions in the investor and medical community about how Guardant is managing trial design timelines, how you describe complexity of moving from things like V1 to V2, the level of attenuation we see in post case control studies, etc. Fair or not, this is out there. And I think it’s fair to say this is a big reason why your stock price is where it is. A new year is a good time for new resolutions. What do you think you can do better? And what steps are you taking to get back that management premium that used to exist in the stock? My follow-up on Shield.
There’s a range of outcomes for Shield in terms of how things go with the FDA, how things go with CMS and private payers, how you’re viewed by USPSTF, how you’re viewed by the folks that set guidelines. Even in better scenarios, this is a very expensive program with a really long runway. Under what scenario would you consider discontinuing or spinning off screening?
Helmy Eltoukhy: It’s a fair question, frankly. I accept that. And you’re right. I think a bunch of people out there are right. I think the reality is we’re going to focus on execution and show that hopefully this FDA approval would come and ADLT status would come and a successful commercial launch would come. Over time, I think that performance is going to generate confidence that, hey, when these guys – AmirAli was talking about blood-based CRC screening has huge potential even with the performances that we’ve seen with V1. That becomes more of a reality versus just betting on what this guy is talking about. That said, there are some kind of feedback that I accept in terms of – there were some bars of what a successful CRC screening would be to make a multibillion dollar brand.
And that bar versus the data that we’ve seen before unblinding the database was – the delta was very big and we ended up somewhere in the middle. So I think that expectation management can be done in a different way. So I accept that. Shield, in terms of our commitment with Shield, I will tell you, we are not here to waste our life doing something that we don’t believe in and just burn the money because we have the optionality of burning that money. I will tell you, if we figure out that this brand is not going to have the commercial impact that we believe it will have, there will be no Shield. So we mentioned always that we have milestones and gateways. The first one for us is this FDA approval and getting this FDA approval. That’s just the first.
The second one is trying that – we can generate this business in a proper way by showing commercial success and so forth. So we have all these milestones that we are going to meet. And as long as we meet those, Shield would continue and would generate multibillion dollar opportunity to Guardant P&L in the years to come. So we are not here to waste our time or your time just playing with Shield here. We have better things to do in life, frankly. [Multiple Speakers] is very, very strong. We’re very [indiscernible] (00:03:55 p15) potential here.
Operator: The next question comes from the line of Rachel Vatnsdal with J.P. Morgan.
Casey Woodring: This is Casey on for Rachel. Just can you guys talk about where things stand on the EMR integration front. You noted 475 accounts now integrated, which was above your goal 400 to end the year. Can you contextualize that number as a percentage of total accounts or total accounts that were eligible for integration? And then maybe walk us through how you see those 475 accounts scaling up volumes over the course of the year?
Helmy Eltoukhy: I don’t think we’re going to break out certain number of sort of percentage of volume, but it is a significant percentage of our volume right now. So we’re very pleased in terms of where we are. What we’re seeing is really, I think, significant uplift in those accounts as they turn on. There’s a lot of engagement that happens at the account level, a lot of retraining. And it just makes life so much simpler when they can essentially use their existing EMR system of record to just order the tests and get the results back. And so, we think we’re very pleased with the progress we’ve made. We’re seeing really a significant jump in terms of ordering rates in those accounts. But it is also early days. It’s something that we sort of got to at the end of last year, and I think we’re going to see the dividends of that work we’ve done pay off over this year and next.
We’re still making very good progress in terms of the rest of the accounts. Epic is a sort of slower process where each one of the hospitals and sort of accounts has to be turned on at their level. And we’re increasing our pipeline there, so that we can go as fast as possible. But I’m very pleased with the progress the team has made. And it’s certainly one of the I think potential upside drivers of volume this year.
Operator: Our final question comes from the line of Andrew Cooper with Raymond James.
Andrew Cooper: Just one more on MRD and the breast data you disclosed in preparation there. Just would love your thoughts, given kind of how we think about different subsets of that breast cancer population and some lower shedding sort of subsets in terms of the ctDNA, how do we think about that in context of some of the numbers we see out there, whether from others when it’s a certain subset or not, and how that 97% specificity in the – I think it was 82% or 84% sensitivity sort of stack up? And then lastly, you say that data is going to be included in your eventual submission. Is there any additional data you think you need before you submit to CMS for coverage? Or do we just need to see kind of the current studies published?
Helmy Eltoukhy: I’ll maybe start with the second one. No, we believe this is more than sufficient in terms of data for sort of clinical validity from a Medicare perspective. It’s a fairly sizable cohort. I think much larger than other publications we’ve seen and has a good number of sort of time points. It does have I think very good diversity across subtypes of breast cancer. You’re right. Different cancer types in breast cancer, different subtypes have different shedding levels. And when we looked at the breakdown there in terms of triple negative, HER2 positive, HER2 negative, and so on, we’ve seen very a good performance as well there. So even on a sort of subtype by subtype level, we see, I think, really, industry leading kind of performance.
It’s the same thing on the CRC side. Depending on site of metastases, there’s different shedding rates. And no method really solves that. That is the factor of the biology in terms of the tumor type. And so, that’s why these results typically hold – performs well in one subtype, potentially performs well in other subtypes just because of the fact that you’re detecting more alterations or detecting those alterations at lower levels. But right now, there’s not a way to solve the sort of different shedding levels. That’s a factor of the biology of the tumor.
Operator: Thank you for your question. That concludes today’s call. Thank you for your participation and enjoy the rest of your day.
