Guardant Health predicts its net loss will more than double in 2020 as it ramps up spending on studies of its rival offering to Exact Sciences’ Cologuard colorectal cancer stool test.
In fourth quarter results posted Monday, Guardant told investors to expect a net loss in 2020 of as much as $160 million, up from $76 million last year. Sales and earnings during the quarter beat analyst expectations.
Guardant thinks the “significant market opportunities” the studies could open up justify the spending. However, with the surge in spending coinciding with an anticipated deceleration in sales growth, shares in Guardant traded down 7% after the release of the results.
Guardant introduced its Lunar liquid biopsy early in 2019 but limited access to researchers and drug developers. Since then, the company has presented early data on the use of the test in colorectal cancer and initiated studies to gather data on its application in screening and residual disease detection.
Those studies are driving up costs at Guardant. Helmy Eltoukhy, co-founder and CEO of Guardant, acknowledged “it’s not inexpensive” to run the trials on a fourth quarter results conference call with investors but defended the decision to bet big on Lunar.
“We're going to open up significant market opportunities as a result over the medium to longer term,” Eltoukhy said.
Exact Sciences shed some light on the current size of the opportunity earlier this month when it forecast its sales will rise to more than $1.6 billion in 2020. Cologuard, the colorectal cancer test Guardant is gunning for, is central to Exact Sciences’ sales forecast. Exact Sciences has since filed to raise $850 million to support the continued growth of its business.
While Guardant sees Lunar playing a big role in its future, for now the company is reliant on its first liquid biopsy, Guardant360, for growth. That product drove a 137% rise in Guardant sales last year, bringing the total to $214 million, as the company benefited from reimbursement decisions, a shift in product mix and other changes that drove up its average selling price and test volumes.
The performance far exceeded Guardant’s expectations, causing full-year sales to come in $79 million above the top end of its original range. That helped Guardant post a far smaller net loss than forecast but also reset analyst expectations for growth.
Guardant expects sales to grow more than 30% in 2020, a figure that analysts compared unfavorably to 2019 growth on the fourth quarter results conference call. Eltoukhy framed the deceleration as a consequence of the one-off boosts, such as reimbursement decisions, that Guardant benefited from last year not being repeated in 2020.
The coming year should feature some triggers for further growth, such as the adoption of a pan-cancer local coverage decision that Eltoukhy contends will double the volume of Guardant tests reimbursed by Medicare. However, with Guardant predicting it will have to wait until the third quarter for the full impact of that change to take effect, the coverage decision is not expected to trigger the triple-digit growth seen in 2019.