Guardant growth slows in Q2 but still beats expectations

Dive Brief:

Guardant Health's second quarter sales bump of 23% to roughly $66 million beat analysts' estimates as both its precision oncology and development services units posted double-digit growth. The results, shared Thursday, show the cancer detection company came in around 10% above the analyst consensus collated by Zacks.
While growth slowed in the quarter, costs did not. An 88% rise in operating expenses contributed to Guardant’s adjusted earnings per share falling short of analyst estimates.
Guardant refrained from reinstating its full-year guidance amid ongoing uncertainty about the impact of COVID-19. At the midpoint of the year, the company is almost halfway to the sales forecast target it shared before the pandemic hit.

Dive Insight:

Guardant grew its sales 84% in the first quarter but joined many other medtech companies in pulling its guidance in light of the pandemic. While Guardant expressed uncertainty about the impact of the coronavirus, investors backed it and rivals such as Exact Sciences to ultimately benefit from the disruption caused by the coronavirus.

Shares in Guardant rose more than 50% in the two months after the World Health Organization declared COVID-19 a pandemic. Shares in other liquid biopsy companies also rose, potentially due to a belief their products would be in increased demand at a time of social distancing.

Guardant shared an early look at whether that prospect is playing out on Thursday. Sales fell slightly sequentially but were well up on the second quarter of last year. Guardant’s precision oncology and development services businesses both posted sales growth in excess of 20%.

The sales growth exceeded even the most optimistic of analyst forecasts but represents a slowdown compared to the start of the year, when a triple-digit jump in precision oncology revenue drove 84% growth. Guardant attributed the first-quarter precision oncology sales to increases in both volume and price.

In the second quarter, Guardant said precision oncology growth of 21% was “driven predominantly by an increase in average selling price.” Tests to clinical customers increased 15% but the volume sold to biopharma clients fell 47%. The biopharma business is smaller than the clinical operation.

Guardant is investing in its business to add new revenue streams. Before pulling its 2020 guidance in response to the pandemic, Guardant outlined plans to ramp up spending to support its attempt to challenge Exact Sciences’ Cologuard for the colorectal cancer screening market. Guardant shared data on its progress toward that goal in May.