Good day, ladies and gentlemen, and welcome to the GRAIL Second Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that this conference call is being recorded. GRAIL Investor Relations, please begin.

Thanks, operator, and thanks, everyone, for joining us today. On the call are Bob Ragusa, our Chief Executive Officer; Aaron Freidin, our Chief Financial Officer; Dr. Joshua Ofman, our President; Sir Harpal Kumar, our President, International Business and Biopharma; and Andy Partridge, our Chief Commercial Officer. We'll be making forward-looking statements on this call based on current expectations. It's our intent that all statements other than statements of historical fact made during today's call, including statements regarding our anticipated financial results and commercial activity will be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 as amended, and Section 21 of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon currently available information and GRAIL assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ. We refer you to the documents that GRAIL files with the SEC, including the Risk Factors section in GRAIL's most recent quarterly report on Form 10-Q. This call will also include a discussion of GAAP results and certain non-GAAP financial measures, including adjusted gross profit or loss, which are adjusted to exclude certain specified items. Our non-GAAP financial measures are intended to supplement your understanding of GRAIL's financials. Reconciliations of the non-GAAP measures to the most directly comparable GAAP financial measures are available in the press release issued today, which is posted to our website. And with that, we turn to Bob.

Thank you. Good afternoon, everyone, and thank you for joining us to review second quarter results. For nearly a decade, GRAIL has made key investments to advance our vision for population scale, multi-cancer early detection and establish a durable advantage in a growing field. The time frame to establish evidence in this space is long, and we are setting the evidence bar high. We started population scale clinical studies years ago and now have several years of follow-up data. Our pivotal implementation and clinical utility studies in the intended use population are beginning to read out, and we are delighted to see results not only confirm earlier studies, but actually improve certain performance measures as we evaluate Galleri in larger populations. We plan to submit detailed results from the prespecified analysis of the first 25,000 patients in our registrational PATHFINDER 2 study for presentation at the ESMO Congress 2025 in October. As a reminder, we announced positive top line performance and safety results from this data set in June, namely that we observed substantially greater additional cancer detection and a substantially higher positive predictive value in PATHFINDER 2 compared to the first PATHFINDER study, and Josh will describe these results further shortly. We've been working with advocates and stakeholders to deploy MCED, and we are finding aggressive cancers in real-world commercial setting, many of which are in early stages. Galleri test orders continue to grow at a strong clip with more than 45,000 Galleri commercial tests sold in the second quarter. As of June 30, more than 370,000 Galleri tests have been prescribed by more than 15,000 health care providers since we launched Galleri commercially in 2021. We continue to drive provider and patient awareness of the MCED opportunity and Galleri's ability to detect cancer earlier when it is more…

Thanks, Bob, and hello, everyone. We've spoken in the past about key performance metrics, features and capabilities for multi- cancer early detection tests, which are quite different from those for single cancer screenings. Most critically, any test developer must confirm clinical validation in the intended use population of asymptomatic adults eligible for screening before they introduce those tests into clinical practice. This critical criteria was the reason that GRAIL did not introduce Galleri into clinical practice until we saw the results from the PATHFINDER trial in these screening population. Even test with strong results in observational case- controlled studies, may fail to confirm those results in the actual screening population. Full clinical validation requires demonstration of compelling performance in the intended-use population. It is simply not possible to know the benefits and potential harms of any test before being adequately studied in the intended use population. It is also important to note that any multi-cancer test seeking FDA approval will need to demonstrate this as well. So in terms of performance metrics, we've discussed what we consider to be most clinically important for MCEDs, positive predictive value, or PPV, which tells us among positive test results, how many cancers are found or how many are actually true positives. And the specificity, critically important, which defines the false positive rate, as well as the cancer detection yield when added to standard of care screening and the ability to localize where in the body a cancer signal is coming from. After hundreds of thousands of commercial tests performed, we've now confirmed how essential it is for any MCED test to report a predicted CSO or cancer signal origin to guide an efficient and effective clinical workup. We believe that any other approach, such as relying on whole-body imaging with its radiation exposure,…

Thanks, Josh, and good afternoon, everyone. I'm pleased to present our results for the second quarter. Overall, second quarter results were strong. Revenue for the quarter was $35.5 million, up $3.5 million or 11% as compared to the second quarter of 2024. Total revenue for the quarter is comprised of $34.4 million of screening revenue and $1.1 million of development services revenue. Development service revenue includes services we provide to biopharmaceutical and clinical customers, including support of clinical studies, pilot testing, research and therapy development. We see continued demand for our Galleri test and sold more than 45,000 tests in the second quarter. We have historically observed seasonal fluctuations over the course of the year, in particular, relatively high volume in the second and fourth quarters and lower in the first and third, and we would expect these seasonal trends to continue. Repeat test volumes have trended higher over time, including year-to-date. Today, more than 25% of Galleri's volume is repeat testing. Screening revenue of $34.4 million in the second quarter was up 22% as compared with the second quarter of 2024. U.S. Galleri revenue was $34.2 million, up 21% compared to the second quarter last year. The second quarter has been a strong quarter for U.S. Galleri revenue historically. We are on track relative to our full year guidance of U.S. Galleri revenue growth between 20% to 30%. As stated last quarter, we do not expect a major impact for tariffs on our current business as our laboratory is located in the U.S. and a significant majority of our suppliers are located and manufacturer in the U.S. Cost of screening revenue, exclusive of amortization of intangible assets as a percent of revenue decreased in the second quarter of 2025 compared to the same period in 2024, primarily due to…

Thank you, Aaron. To close, we are highly encouraged by the demand we are seeing today, both for new patients and for returning patients who are repeat testing. Our strategic priorities are seeking FDA approval of Galleri and pursuing broad reimbursement. We are advancing Galleri today toward near-term key clinical and regulatory catalysts to achieve broad access while maintaining our disciplined cost management. We plan to submit 4 presentation at ESMO in October, detailed performance and safety results from the first 25,000 participants enrolled in the PATHFINDER 2 study. This is a registrational data set that will go through the FDA. Soon into 2026, our key milestones are the completion of our modular PMA submission to the FDA in the first half and full clinical utility results from our 140,000 participant NHS Galleri study, which we expect to read out midyear. This longitudinal data set will be reviewed by the NHS to determine Galleri's potential deployment within the U.K. population. As I mentioned earlier, we look forward to seeing many of you at our 2025 Analyst Day in November. With that, we'll turn the call over to Q&A. Operator, please go ahead.

[Operator Instructions] our first question will come from Kyle Mikson with Canaccord Genuity.

This is Alex Vukasin on for Kyle Mikson. I just take a step back here. So the first quarter cash run came a bit higher than we expected especially due to the bonuses that you have pay out in the prior year period in 1Q, but that's obviously not repeated in future quarters. You modestly improved the burn target for 2025. Can you just comment on 2Q free cash burn? And then just given how integral the burn is to your story, can you elaborate on any other dynamics that could impact cash burn in second half '25, whether that be additional R&D increases to head count or any other one-offs?

Yes, Aaron, do you want to take that one?

Yes, happy to. Yes, thanks for the question. So I think we've -- first 6 months, it was about $160 million of burn. And it is important for us to, again, as Bob said, manage the business as efficiently as possible. We do see that coming down in the next couple of quarters as you can get into the $310 million, no more than guide that we just updated, really driven by increased volumes in the back half of the year and increased revenue. And also, we'll be working on -- working through some of the -- getting more volume on our new automated platform.

Yes, I'd maybe just add a little color to that too. One of the things when we did the restructuring, we wanted to make sure that we gave ourselves lot of flexibility in the go-forward state and recognizing that MCED being a new field, we undoubtedly face a number of new and interesting challenges. So that flexibility was a key element. And I think by doing the restructuring, getting us cash into 2028, has provided that. And I think being able to guide down a little bit to $310 million shows we're -- we think we're on track to be able to hit that more aggressive number.

Our next question will come from Subbu Nambi with Guggenheim.

Just to clarify, do you not need full longitude clinical utility data that is expected mid-2026 for PMA submission, one? And then when you say significantly higher PPV in PATHFINDER 2, I had a basic question. Are you normalizing for cancer prevalence in both these studies just because shouldn't cancer prevalence impact PPV?

Yes. Maybe I'll start off. Thanks for the questions. So on the clinical utility question, so the FDA, if you go back to their advisory board meeting, they're really going to be looking at benefits, harms, view of the world. And so they are not going to be looking at clinical utility and typically don't for the approvals. That gets more -- much more into the payer discussion. So the payers would more typically look at that -- but that -- and that's what the NHS Galleri data will provide. Josh, do you maybe want to take the PPV question on PATHFINDER 2?

Sure. So again, on the FDA, they're going to be focused on clinical validation rather than clinical validity -- utility, excuse me, clinical validation, not clinical utility. And they will -- and they've said that in their own advisory board, as Bob said. On the PPV, right now, we are not normalizing that for the standard population. We're reporting it out within each study's population. As we mentioned earlier, these are much broader, more diverse and more representative populations than has been studied previously. And so we're expecting that there will be a more diverse cancer risk in that population and cancer incidents, which may be driving the higher PPV. And so we will ultimately normalize all of this for cancer incidents and the cancer case mix, which is the distribution of cancers within each population, which is enormously important for performance reporting. We will ultimately do that. But today, we're just reporting them within the study population themselves.

And then 1 follow-up. Non sequitur. Based on other prior integrations with more concierge type testing platforms like Function and Superpower, how long is the typical growth ramp? And do you expect Everlywell to drive similar volumes?

Yes. So we have seen good consistent performance out of groups like Function and have been very good partners. We anticipate that Everlywell will add -- add an important dimension to the channel with whole another outlet given their subscriber base. Maybe, Andy, do you want to -- Andrew Partridge, CCO, you want to add some color to that?

Yes, absolutely. So yes, we're definitely anticipating these telemedicine, longevity-based platforms like Function Health, like Everlywell to really give us a tailwind in terms of growth going forward. When we look at Everylywell, they've had millions of customers order through that platform and Everylywell in terms of the Everly 360 launch that they announced offering Galleri as an add-on, and they've e-mailed hundreds of thousands of their customers about the Galleri multi-cancer early detection test. So we're excited to partner with groups like Function health, like Everlywell as they really amplify our education around Galleri and multi- cancer early detection.

Our next question will come from Yuko Oku with Morgan Stanley.

With time lines for PMA submission approaching, could you elaborate on customer support infrastructure in place to help integrate MCED testing in cancer care today. And then outside of sales reps, what are areas you intend to bolster as you get closer to the timing of anticipated FDA approval?

Yes. So the time line for our PMA submission is first half of next year, 2026. We're anticipating beyond that for FDA approval about a 1-year process since we believe this is the first MCED that we'll go through the FDA, we believe it will be about a 1-year process due to having an advisory board. So that puts you out into kind of mid first half 2027. And with that, we've been consistently ramping our customer support, both size as well as capability in line with the growth of the business. So we would assume that we would continue to do that. We're obviously looking for efficiencies in the way we deliver that customer support going through that process. In terms of other elements, we -- at that point, we'll be looking at from a -- certainly from a sales and marketing perspective, how much effort we're going to be putting in as well, and also looking at from a cost perspective, we expect some step downs in costs in other areas of the business as we get through those important milestones. Andy, anything you want to add on the customer support side?

Yes. I think you covered it, Bob, we're really looking at what are those opportunities to expand our customer-facing teams. We're going to do that to capture those growth opportunities. We're also going to continue to keep an eye on expenses. As you outlined, Bob, as we really want to drive to kind of a commercial breakeven kind of going forward. So...

Great. And if I could squeeze 1 more in, if I may. Could you elaborate on the statistical powering of the NHS Galleri study? What difference is the [ trial powered ] to detect on the primary endpoint of reduction in the incidence of late-stage cancer versus the control arm? And what result will be viewed as meaningful benefit?

Yes, Harpal, you maybe want to take that one?

Yes. Sure. So I mean the study is powered to show a significant reduction in late-stage cancer. So we -- the primary endpoint is a reduction in Stage III and IV cancers. And we look first at the 12 cancers that represent about 2/3 of all cancer mortality and then we go on to look at all cancers from there. So we will be looking at that late-stage reduction. We don't have a specific reduction in mind, but it's -- but the size of the study was set to be able to deliver a statistically significant result in terms of that reduction. So we will see what that reduction ends up being. We're interested, obviously, both in reduction of Stage III and IV cancers, but also Stage IV cancers because ultimately, people primarily die of Stage IV cancer. So if we can see significant reductions in those late-stage cancers, we believe this will provide substantial benefit to the population.

Our next question will come from Douglas Schenkel with Wolfe Research.

This is Colleen on for Doug. As the NHS data reads out next year, we think that could serve as a strong evidence package for other international opportunities with single-payer systems. How are your conversations with territories across the globe looking deploy Galleri? Also, if international volume grows sufficiently, will you have to do a tech transfer to international labs?

Yes, it's a great question. So we get a tremendous amount of inbound interest, as you can imagine, from around the globe. And with that, we've had numerous conversations. We also believe, as you rightly pointed out that in middle of next year, from an efficiency standpoint, effectiveness standpoint, in the middle of next year when we read out the NHS Galleri study, we think that's going to be a great calling card to really have significant discussions with a lot of countries around the globe, both due to just the sheer size of the study, but also the rigor and reputation those studies done on the NHS. I think that reputational advantage will go a long way as we have those conversations. Harpal, anything you want to add with that?

I think you've largely covered it, Bob. I mean as you said, this is a very large study conducted extremely well in a health system that is very well respected around the world. So we fully expect that the results from this study will be and are being observed by countries right across the world. We're getting, as Bob said, a lot of inbound interest from pretty much every country around the world, and we expect that the results in the middle of next year will provide us with the data to really turn those conversations into meaningful opportunities as we look forward. And as you alluded to, should give us a substantial growth opportunity as we look forward.

Our last question will come from David Westenberg with Piper Sandler. Please ask your question. David Westenberg with Piper Sandler. Please ask you question. I'm not sure if David is having audio issues. Can you hear us, David?

This is Jon on for Dave. Can you hear me?

Yes.

This is Jon on for Dave. Can you hear me?

Yes. We can.

Great. So just first off, Quest integrated Galleri into their ordering system earlier this year. It's still early days, but could you just give us any color on what you're seeing in terms of orders coming through at the Quest platform at this point? And any thoughts on what's driving it?

Yes. So maybe I'll answer in reverse. So part of integrating with Quest is we've -- what we found is every time you remove friction from the system, we see an uplift in sales. And so we believe that Quest with their -- the Quest integration we'll be able to give that significant kind of friction reduction in the system. What we've seen so far year-to-date, it's about 500 health care professionals have ordered the Galleri test via the Quest system. And in Q2, we saw about 7% of the orders actually came through the Quest platform. And so we're pretty excited about the uptake on Quest being relatively quick. And as we try to onboard more practitioners, some of them can just go in immediately in order the Galleri tests on the Quest integration, while others need to specifically enable the Galleri tests, that enablement typically takes a few weeks to occur. And so we do anticipate that we'll continue to grow that channel. And then another nice part about it is what we're finding is the Quest providers, people going through that system tend to be higher prescribers. And so we look at the ordering depth by prescriber and they tend to be some of the higher ones. So we're seeing that get enabled definitely drives increased volumes.

Great. And just a little more broadly, could you give any color on how do you interpret the repeat test rate for Galleri? Are you pleased with it? Do you have a target in mind? And just any general thoughts on the directional trend for repeat testing?

Sure. So first, we're pretty pleased with repeat testing. Last quarter, we over at -- over 20% this quarter, we went to 25%. We've seen a continued step-up in repeat testing, which I think is really a testament to the -- both the product as well as the medium. We think a blood-based test is going to have a better adoption capability than some of the other medians. And -- we also think the fact that it compares very favorably to other tests, given that it's not a non-reimbursed test generally to have repeat test rates above 25% at this stage of the game is something we're pretty happy with. And it's also something we're looking to continue to do efforts to make sure we continue to drive that higher.

Thank you. There are no further questions at this time. I will now turn the call back to GRAIL for closing remarks.

I just want to thank everybody for the questions, and I look forward to talking to you at the next call.

Ladies and gentlemen, this concludes the call. You may now disconnect.