Good afternoon and welcome to our Guardant Health Third Quarter 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards end of today’s call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Lynn Lewis from the Gilmartin Group, for a few introductory comments.

Thank you, Armani. Earlier today Guardant Health released financial results for the quarter ended September 30, 2018. If you’ve not received this news release or if you’d like to be added to the Company’s distribution list, please send an email to investors@guardanthealth.com. Before we begin, I’d like to remind you that management will make statements today during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appear in the section entitled Forward-Looking Statements in the press release Guardant issue today. For a more complete list and description, please see the Risk Factors section of the Company’s third quarter report on Form 10-Q which the Company has filed with the Securities and Exchange Commission. Guardant disclaims any intention or obligation to update or revise any financial projections are forward-looking statements whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast November 19, 2018. With that, I’d like to turn the call over to Helmy Eltoukhy, Chief Executive Officer. Helmy?

Thanks, Lynn. And thank you everyone for joining us this afternoon. I’m pleased to welcome you to Guardant Health’s first earnings call as a public company to review our third quarter 2018 results. Joining me today is AmirAli Talasaz, my Co-Founder and Guardant’s President; and Derek Bertocci, our Chief Financial Officer. The mission of Guardant Health is to conquer cancer with data. The mission is fueled by our commitment to the patients we serve. Our impact on patient care access both [indiscernible] to blaze our path forward in a yardstick by which we measure our progress. Accordingly, I would like to begin our call with a brief patient story. We recently came across this 74-year old breast cancer patient, who was unfortunately at the end of her treatment road. She was in palliative chemotherapy and basically out of options. Just a week before, we had launched a new feature in Guardant360 that enables us to determine which tumors exhibit the property known as microsatellite instability or MSI-High; her clinician ordered our test and to his surprise found out that her tumor was indeed MSI-High. Why is that important? It turns out that MSI-High tumors are much more likely to benefit from a new class of breakthrough treatments known as immunotherapy, because of her physician and Guardant360 she now has a renewed potential of treatment path forward, which can have prolonged and life-changing impact. Additionally, since launching this new feature, we now have identified MSI-High patients across 10 different cancer types. This is important because immunotherapies such as pembrolizumab are approved for all types of MSI-High solid tumors. This type of broad pan-cancer impact brought on by matching the right molecular information with the right intervention at the right time wouldn’t have been possible just a few years ago. As was…

Thanks, Helmy. As Helmy mentioned, we are continuing to build out proof points that we believe will serve as catalysts for continued adoption and frontline usage of liquid. The first proof point is movement for the blood-first paradigm for genotyping of advanced cancer patients. Traditionally, tumor tissue samples are used to capture the molecular information necessary to appropriately target a patient's cancer. We believe that shifting to this new blood-first paradigm will require a drumbeat of robust clinical data demonstrating the utility of Guardant360 as an option to be used first, ahead of tissue sequencing. Some of these proof points have taken shape with encouraging data from the SLLIP study, which was presented at the European Society for Medical Oncology or ESMO, and recently compelling results from a landmark study published in JAMA Oncology. In that study, researchers at the University of Pennsylvania published the results of a prospective study describing the real world use of Guardant360 in the care of 323 consecutive metastatic non-small cell lung cancer patients at their institution, approximately half of which were tested at diagnosis versus at progression of therapy. This study was important for several reasons and compromised many interesting observations. But, there are three key points we'd like to highlight here. First, in nearly a third, 29% of these patients that treating physician chose to use Guardant360 as the sole genotyping tests, which represents real world scenarios in which Guardant360 was able to obvious and invasive tissue acquisition procedure by providing the genotyping information necessary. Second, tissue genotyping failed in nearly half, 44% of the remaining 71% of the patients in home that physician elected to use tissue genotyping, which represents real world use of Guardant360 to provide genotyping and target therapy opportunities to patient that would have otherwise not benefited. And third,…

Thank you, AmirAli. Revenue for the three months ended September 30, 2018 was $21.7 million, 95% increase from $11.1 million in the same period of prior year. Revenue in the quarter increased strongly in clinical testing, biopharmaceutical testing and development services. Precision oncology testing revenue increased 78%, driven by higher testing volume and increases in revenue per test. In addition, increases in payments from commercial insurance payers were beneficially affected by the protecting access to Medicare Act of 2014. Furthermore, the average selling price of biopharmaceutical tests increased in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 due to the introduction at the end of 2017 of the GuardantOMNI test which has the higher selling price than the Guardant360 test. As Helmy mentioned, we received our first Medicare payment in Q4, and we expect to continue to book Medicare payments throughout the remainder of the quarter which will contribute to our revenues for Q4 2018. Third quarter clinical volume grew 14% year-over-year to 7,027 tests due mainly to an increase in the number of physicians ordering Guardant360 tests. In calculating the period-over-period increase in clinical volume, we excluded tests in the third quarter of 2017 from a customer that began processing tests in-house in March 2018 based on a joint development agreement. Third quarter biopharmaceutical volume grew 67% year-over-year to 2,505 tests due to an increase in the number of biopharmaceutical customers and their contracted projects. Development services grew to $3.4 million from $0.9 million due primarily to increased work with biopharmaceutical customers on companion diagnostic development and regulatory approval services. Gross profit is total revenue less cost of precision oncology testing and cost of development services. Gross profit for the third quarter of 2018 was $11.6 million compared to a gross…

Thank you, Derek. In closing, we believe we have unique opportunity at Guardant to spend unprecedented access to cancer’s molecular information throughout all stages of the disease. We are well-positioned for growth and look forward to what is ahead. I want to thank the growing team of Guardant employees for their enthusiasm and hard work, and continued drive to achieve strong and consistent patient outcomes. With that, we will now open it up to questions. Operator?

Thank you. [Operator Instructions] First question comes from Tycho Peterson with JP Morgan. Your line is now open.

Hey, guys. It’s Tejas on for Tycho. Congrats on a solid first quarter out of the gates here. I had a quick question that’s more on the housekeeping side of things. I mean, can you give us a sense of the split between clinical versus biopharma revenue for the quarter?

So, the split was $9.6 million in clinical revenue and $8.7 million in biopharma revenue.

And then, Helmy, has there been any change in sort of your conversations with private payers following the granting of the LCD? Any color you can share on that would be great.

I think you’ve seen the momentum we’ve had kind of prior to the LCD. And I can say that our conversations are still very encouraging with private payers. And certainly, the LCD has helped accelerate some of the conversations.

Got it. And then, one final one here for me and biopharma. Obviously, the testing volume seems to have been sort of significantly better than we had expected in the quarter. Were there any sort of one-off dynamics here to call out in terms of an unexpected ramp of clinical trial or just a pull forward dynamic? And can you share some sort of color and the strength in G360 versus OMNI volumes within biopharma?

Yes. So, I think if you think about the drivers for revenue this quarter -- Derek?

Sure. The revenue for pharma was strong this quarter as part of as you can see the continuing strengths that we're seeing in terms of interest from biopharmaceutical companies. We continue to have very good testing from G360 and the OMNI program continues to grow very nicely. Demand for that is -- continues to grow, and it's been stronger than probably we expected.

Got it. Thanks so much, guys.

Thanks.

Thank you. Our next question comes from Derik De Bruin with Bank of America Merrill Lynch. Your line is now open.

Thanks, guys. This is Mike Ryskin on for Derik’s line. I want a follow-up on the last point really quickly. You talked about the OMNI strength. And given the differential ASPs between OMNI and G360, we've seen pretty fast uptake in the sample mix of the OMNI in 1Q and 2Q this year. Can you talk a little bit of how that progressed as a percent of overall mix in 3Q now, and how we should think about that leveling out in the future?

So, as we mentioned before, [ph] we think that OMNI volume is growing very fast and faster than what we expected. There are multiple drivers for that. So, definitely some much more comprehensive panel for biopharma companies and some additional content in OMNI that's not in Guardant360 is generating some excitement across different kind of departments in our biopharmaceutical customers. That's frankly driving the demand.

All right, thanks. And then on the clinical side, you mentioned I think $1.1 million to $2 million from Medicare for 3Q samples that will be recognized in 4Q, and then $2 million from 4Q. At that point, will you be fully caught up? And, how should we think about that progressing forward in terms of your ability to capture revenues and the delay there into quarter?

So, we would have anticipated getting paid for most of the Q3 samples we processed in Q4. And then, some of the Q4 samples payments obviously will go into Q1 of next year. I would just note that in Q1 of 2019, we will switch our revenue recognition from a cash basis to an accrual basis. So, there will be a switch in our volume and how we recognize revenue in Q1. So, it -- we’ll include that when we go to our forecast for 2019.

Okay, great. And then, one last one, you mentioned in biopharma, you had a sizable CDx contribution. Could you break out exactly what that was this quarter?

Well, we don't actually talk about the individual programs in our revenue, but we did have very good interest. And you can see it coming through in work that we're doing with our biopharma customers. We look to that, as you know, continuing in the future, although we did want to point out that that kind of revenue is more related to individual programs we can vary from quarter-to-quarter.

Thank you. Our next question comes from Doug Schenkel with Cowen and Company. Your line is now open.

Hi there. This is Adam on for Doug. Thanks for taking my questions. You indicate you're on track to submit your application to the FDA in the first half of next year. Can you remind us what the remaining steps are before you’re able to submit that application? And then there's also two other competitors I believe that have liquid biopsy tests that also have some fast track approval by the FDA. Do you expect differentiated pricing relative to them under the CMS entity?

Yes. As we mentioned, we are expecting our PMA submission to FDA to happen in the first half of 2019. We are well on track to deliver on that milestone. The remaining activities from now till then is, there is many kind of documents that we have to generate and some additional data that needs to be captured, but everything in Guardant’s control in terms of timeline management. So, we believe we will be on track to submit our PMA package in first half of ‘19. In terms of your follow-up question about other competitors. We believe, we were the first breakthrough device designation by FDA for comprehensive liquid biopsy testing. We cannot comment on where other players are in their roadmap. In terms of pricing, we mentioned our Medicare pricing based on LCD which is $3,500 for Guardant360 and pricing under NCD I think still is to be determined after we get FDA approval.

Maybe if I can add. I believe we are the only Company that liquid biopsy with formal Medicare coverage. Secondly, we also have very good progress with the private payers for our product test. And all of that is going to help when we become ADLT, [ph] whenever FDA approval, because as you remember, the pricing is set by essentially the median of the private payer rates. And so, we believe we've really done a lot of the groundwork that's required to achieve good pricing in the future once you we do get FDA approval.

Thanks. That's super helpful. And at the AMP conference earlier this month, MD Anderson provided some initial positive results from running your test in-house. Has that gone as planned from your end as well and how are you thinking about the option to decentralize your...

Yes. It’s a great question. I think that was something that we undertook in 2017 with a very successful collaboration and partnership with MD Anderson. We went about that whole development program, and it really -- we were able to switch volumes really almost overnight once those labs became up and running. And I believe they are very I think impressed with the results. And it’s something that I think is a good foundation for when we think about continued promulgation of our testing platform globally, we're fairly agnostic to the question of centralization or decentralization. What's important for us is that essentially our testing platform is ubiquitous. Patients who need access to the critical information that we can provide with the technology actually get it and receive it. And so, we believe we have the tools and the technology and the platform and capability to be able to do that using both modalities, centralized or decentralized.

[Operator Instructions] Our next question comes from Brian Weinstein with William Blair. Your line is now open.

Can you talk a little bit about utilization? How are you specifically driving this higher? And what have the biggest hurdles been to-date to having broader uptake among the existing physicians? And alongside of that, how big of a deal is FDA approval specifically to accelerate this adoption?

So, as we mentioned in the prepared remarks. We really do believe that it’s those three components that will be anticipated catalysts for the market. I think, FDA approval traditionally hasn’t been something that has been maybe noticed by the medical community as much based on the diagnostic testing side of things. But because of the MCD, the fact that it links regulatory approval with potentially broad reimbursement the two really go hand-in-hand, in terms of the perception an FDA-approved test really breaks down the barriers of reimbursements. Secondly, we believe that the approval is more important, frankly, in the liquid biopsy space, because of the fact that liquid is a new modality, one that many physicians may not be familiar with. And so, FDA approval, having that third-party really put their stamp of quality on that type of testing, we believe is very critical. And then, finally, as we mentioned, NILE is really the third leg of the stool. where, we essentially can show that we can go head-to-head with liquid -- with tissue potentially and show that we don’t find less that we find the same number of biomarkers and that physicians can choose liquid, essentially with confidence. And the good news is, those three kind of components will read out in ‘19. And we -- even from early signs and from our interactions with physicians, we believe that those three components will indeed be very good drivers for continued adoption of liquid.

And then, so the implied fourth quarter revenue that you guys have not guided to, I just want to make sure there’s nothing kind of one-time in nature on the biopharma side in the fourth quarter, correct? I mean, I guess I’m asking, is that number, a reasonable starting point to think about building off of 2019?

As I mentioned earlier, Brian, the biopharma business in this -- especially in the clinical development area is prone to wider ups and downs business, lumpiness of those programs and the fact that some of the revenue is recognized on milestones achieved. So, while we are gratified, we don’t want you to get too carried away in terms of thinking that it’s an upward slope of that rate every quarter into the future.

But that being said, we are encouraged by most elements, almost all elements of our business right now, clinical, pharma side and so on. But, there will be lumpiness, especially in the diagnostic services component as we start companion diagnostic deals or other engagements with pharmaceutical companies.

Okay. And then, last one for me. Last week, we saw the announcement about the G360 launch in India. Can you talk about commercial plans and how they’re progressing for the larger Asian markets in places like Japan and China, and can we just have any update on that? Thank you.

So, we continue to make a lot of progress with our JV. If you remember, our joint venture with SoftBank is charged with essentially commercialization of our products in Asia, Middle East and Africa. Our focus -- our primary focus has really been Japan and China in that region. In Japan, we continue to make fantastic progress; we're working with two larger programs over there, GOZILA and SCRUM that are testing over 1,000 patients each in lung cancer and in gastrointestinal cancers. And we're seeing very good uptake of sample volume based on those programs. And we believe that data is going to be very critical to getting the right regulatory approval and reimbursement in Japan specifically, which we believe is a market that is fairly large in terms of opportunity, maybe even rivaling that for the U.S. at that some point. But now, that being said, we do have relationships with multiple distributors, multiple hospitals, globally in about 39 countries now. So India is just building on the progress we've made in many of those countries.

Thank you. Our next question comes from Puneet Souda of Leerink Partners. Your line is now open.

So, maybe let me just clarify on Medicare. Are you getting 3,500 for the billing that you're submitting in the current quarter? And I just want to make sure what is the look back, how far of a look back are you getting for G360 with Palmetto? And then I have a couple of questions.

So, the billing rate is 3,500, under Medicare law, there's a 2% holdback for the sequestration. So if actually, we receive $3,430, and the LCD was announced on July 12, just took a while to go through the sort of 45-day waiting period and then the finalization of the price. So, we're entitled to build certainly back to July 12. And there may be opportunities to possibly capture some billings earlier. But at this point, we're looking at the July 12, as the date we know we can bill back to.

Okay, got it. And then, maybe AmirAli, can you talk a little bit about the JAMA study? I just want to understand how does that data stack versus the other data sets that you've had so far and how does that translate into uptake among oncologists? What sort of confidence? Obviously this is a high impact journal. So, I just want to get a sense of how important is that and how does -- how do you think that this stacks up going into NILE?

Yes. So, we were definitely very encouraged with the results. Some of their results published in JAMA Oncology has been published in other publications that current tissue testing softwares with lack of access to high quantity or high quality tissues, and that generates problem in the field of CTPS [ph] as it's known QNS, quantity/quality not sufficient for sequencing. So, this study is in -- the finding of this study is in line with other studies. But there are some kind of unique data sets, which was published in JAMA Oncology, which is very interesting. One was really use cases of Guardant360 as the platform of choice even at the first line. So, half of the patients that they used Guardant360 was at the time of diagnosis. And as I mentioned earlier about a third of these patients, the physicians chose to use Guardant360 for genotyping. And for the ones that they did tissue testing, about half of them tissue testing failed. So, already this blood-first paradigm has been a use case at University of Pennsylvania. And this would be a good development in this field to generate some additional evidence and more comfort for the physicians who consider liquid biopsies as a first-line diagnostic test. We are waiting for our NILE readout which is going to happen first half of 2019, the study that is sponsored and specifically designed to answer this question in a multi-center trial to look at the biomarker discovery rates when you're using liquid versus when you are using tissue and show liquid biomarker discovery rates would be non-inferior to tissue testing. So, we are waiting for that readout to happen in the first half of ‘19.

Okay. Thanks for the color there. And then, Helmy, we're seeing data -- early data set I would say from OMNI and its use in TMB. I just wanted to get a sort of high level overview from you in terms of how you're viewing the use of TMB there. Obviously, there is conflicting results in terms of it useful, in some cases it is -- it is not so useful. So, just want to get a sense from you as you think about TMB overall, the future, how are you positioning OMNI as a product and what is your view on TMB?

So, we've seen, I think as we mentioned great demand for GuardantOMNI, and a lot of that has been driven by immuno-oncology programs, especially those requiring or exploring TMB as part of their studies. So, we believe that there are no perfect biomarkers right now in the immuno-oncology space but TMB certainly does provide information how prognostic or predictive it is. I think it still remains to be seen. But, it's certainly something that is gaining traction, both I think especially on the pharma side. And we're starting to see some traction, even on the clinical side in terms of at least incorporating that information into the totality of decision-making. I don’t know if there's something else you want to comment on.

Yes, sure. So, there are some additional key data that as you may know is going to come out later in 2019 and beyond, which I think is going to be key in terms of how TMB is going to be used in clinical practice. In our product portfolios, as Helmy mentioned, we have GuardantOMNI, which is well-suited for these TMB use cases. For liquid biopsy to be used in this kind of setting, you'd really need to have detection limits, which is clinically meaningful that can have decision impact on physicians at the end of the day, and we've showed that GuardantOMNI has very high sensitivity in [calling] tumor mutation burdens, very large panel, and we use our core technologies to build that product. So, it’s very well-suited to address that need.

Thank you. This concludes today’s Q&A session. I would now like to turn the call back over to the Company’s CEO, Helmy Eltoukhy for closing remarks.

Okay. Thank you everyone. And I look forward to next call.