Earnings call transcript: Grail's Q4 2024 revenue rises, stock surges

Grail Inc., with a market capitalization of $1.85 billion, reported a significant 26% year-over-year increase in revenue for the fourth quarter of 2024, reaching $38.3 million. Despite a net loss of $97.1 million, the company showed improvement in its financial health, reducing its quarterly loss by 48%. Following the earnings announcement, Grail's stock surged 12.61% in after-hours trading, reflecting positive investor sentiment. According to InvestingPro data indicates the stock is currently in overbought territory based on RSI indicators. Subscribers can access 12 additional ProTips for deeper analysis.

Outlook & Guidance

Grail maintained its 2025 guidance, with no revisions reported during the earnings call. The company expects its cash burn to be no more than $320 million in 2025, representing a reduction of over 40%. Grail plans to complete its registrational studies and submit a modular PMA to the FDA by the first half of 2026.

Executive Commentary

• Bob Ragusa, CEO, emphasized the company's strong financial position, stating, "We believe we are in a strong financial position."
• Dr. Josh Hoffman, President, highlighted the scalability of the Galleri test, noting, "GALLERI was designed to be utilized at population scale."
• Bob Ragusa also mentioned, "We are in the final stages of data collection for our registrational studies," indicating progress in their strategic initiatives.

Risks and Challenges

• Potential delays in regulatory approvals could impact timelines.
• Market competition remains intense in the multi-cancer early detection space.
• Economic pressures may affect consumer spending on healthcare.

Grail's Q4 2024 earnings call showcased the company's progress in reducing losses and increasing revenue, alongside strategic advancements in product development and market positioning. The positive market reaction underscores investor confidence in Grail's future trajectory.

Full transcript - Grail Inc (GRAL) Q4 2024:

Conference Operator: Good day, ladies and gentlemen, and welcome to the GRAIL fourth quarter twenty twenty four earnings call. At this time, all participants are in listen only mode. After the speaker's presentation, Please be advised that this conference call is being recorded. Grel Investor Relations, please begin.

Investor Relations, GRAIL: Thank you, and thank you all for joining us today. On the call are Bob Ragusa, our Chief Executive Officer Aaron Frieden, our Chief Financial Officer Doctor. Joshua Hoffman, our President and Sirhope Kumar, our President, International Business and Biopharma. Before we get underway, I'd like to remind everyone that 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.

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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 Grails' most recent quarterly report on Form 10 Q and the company's upcoming annual report on Form 10 K. This call will also include a discussion of GAAP results and certain non GAAP financial measures, including adjusted gross profit and adjusted EBITDA, which are adjusted to exclude certain specified items, including accounting impacts related to Illumina (NASDAQ:ILMN)'s acquisition of Grails.

Our non GAAP financial measures are intended to supplement your understanding of Grails financials. Reconciliations of the non GAAP measures to most directly comparable GAAP financial measures are available in the press release issued today, which is posted to our website. And with that, I'll turn the call to Bob.

Bob Ragusa, Chief Executive Officer, GRAIL: Good afternoon, everyone, and thank you for joining us to review results for the fourth quarter and full year 2024. '20 '20 '4 was a transformative year for GRAIL as we separated from Illumina and began publicly trading in June. In July, we completed final study visits for our two registrational studies, the NHS GALLERY study and PATHFINDER II. In the third and fourth quarters, we implemented a significant restructure intended to extend our capital runway past some major anticipated milestones, including the completion of our modular PMA submission for FDA approval of Galleri. In addition, we grew U.

S. Galleri revenue 45% year over year, selling more than 137,000 Galleri tests. We are pleased with Galleri's commercial momentum and are excited to progress initiatives to make it easier for physicians to order the test, including our recent integration into Quest Diagnostics (NYSE:DGX) test ordering system. This integration enables easy ordering for more than 500,000 physicians and allows patients to access the Galleria test at 7,400 Quest locations nationwide without needing to bring along a test kit. To discuss some additional recent highlights, I'll hand it over to GRAIL's president, Doctor.

Josh Hoffman.

Dr. Joshua Hoffman, President, GRAIL: Thanks, Bob. As you may know, GALERI was designed to be utilized at population scale, And we've continued to enhance our technology and our laboratory infrastructure to enable all this future growth. Over the past several years, we've been working on an updated version of Galleri, which will enable efficient growth and support testing at scale. At the end of twenty twenty four, we roll this enhanced version out, which includes a reduced panel size, allowing us to lower sequencing costs and to run approximately four times the number of samples on every flow cell. Additionally, the testing workflow is now both fully automated and integrated, meaning we've been able to eliminate numerous manual steps in the lab, allowing for much greater efficiency.

The implementation of these updates has substantially expanded our lab capacity and we do not anticipate any additional CapEx investment will be needed to support our expected volume for the foreseeable future of the next several years. We began offering this version of the test in December and expect to see COGS improvements as we continue to scale. We're also really pleased that the U. S. Military's TRICARE health insurance program has added the Galleri test to the approved list of lab developed tests as a covered benefit for patients who are 50 years or older with an elevated risk of cancer.

This addition came after the Defense Health Agency reviewed GLORY to determine if it met TRICARE requirements for both safety and effectiveness. We're currently working with TRICARE's carriers to implement this new offering. We're really pleased with the progress we've made since GROW was founded in 2016. The GALLOWAY test is identifying deadly cancers in asymptomatic adults in clinical care today. We continue to demonstrate our scientific leadership in this emerging field to completely transform how we screen for cancer and to dramatically improve the cancer detection rate in the population.

We continue to make progress on our modular FDA submission, and we're looking forward to continuing to help individuals and their families detect cancer early when it can be cured. To discuss our fourth quarter financial results, I'll hand it over to Grail's Chief Financial Officer, Aaron Frieden.

Aaron Frieden, Chief Financial Officer, GRAIL: Thanks, Josh, and good afternoon, everyone. I'm pleased to present results for our fourth quarter and the full year of 2024. Fourth quarter results were strong with revenue of $38,300,000 up $7,900,000 or 26% as compared to Q4 twenty twenty three. Total revenue for the quarter is comprised of $31,600,000 of screening revenue and $6,700,000 of Development Services revenue. Development Services revenue includes services we provide to biopharmaceutical and clinical customers, including support of clinical studies, pilot testing, research and therapy development.

Full year revenue was $125,600,000 up 35% from full year revenue in 2023. '20 '20 '4 full year revenue was comprised of $108,600,000 screening revenue up 45% over full year 2023 and in line with our narrowed guidance in the fall of 40% to 50% growth. Revenue also included $17,000,000 of development service revenue, a decrease of 6% from 2023. We see continued demand for our Galleri test and sold more than 40,000 tests in the fourth quarter and a total of approximately 137,000 tests throughout the year. Screening revenue of $31,600,000 in in the fourth quarter was up 39% as compared with the fourth quarter of twenty twenty three, primarily based on increased sales volumes.

Development service revenue in Q4 twenty twenty four was $6,700,000 a decrease of 13% as compared with the fourth quarter of twenty twenty three. Net loss for the quarter was $97,100,000 an improvement of 48% as compared to Q4 twenty twenty three. Net loss for the full year was $2,000,000,000 an increase of $561,000,000 or 38% as compared to full year 2023. Net loss was primarily driven by goodwill and intangible asset impairments. Non GAAP adjusted gross profit for the fourth quarter of twenty twenty four was $17,900,000 an increase of $2,600,000 or 17% as compared with Q4 twenty twenty three.

Primary drivers of the increased margin were revenue mix and efficiencies of scale related to increased gallery volume. Full year non GAAP adjusted gross profit was $57,800,000 an increase of $17,600,000 or 44% as compared with full year 2023. Adjusted EBITDA for the fourth quarter of twenty twenty four was negative $84,000,000 representing an improvement of $39,400,000 or 32% as compared to Q4 twenty twenty three. Adjusted EBITDA for the full year 2024 was negative $483,500,000 an improvement of $40,300,000 or 8% as compared to full year 2023. We ended the year with a cash position of $766,800,000 We are focused on driving growth efficiently and reducing our spending profile.

In 2024, we made significant strides here, and we plan to continue to reduce burn in 2025. In January, we guided that we expect cash burn for the full year of 2025 to be no more than $320,000,000 a projected decrease of more than 40% over our cash burn in 2024. As we've shared before, our cash runway extends into 2028, enabling us to achieve major milestones such as readouts of our registrational studies and completion of of our modular PMA submission. I'll turn it back to Bob for concluding remarks.

Bob Ragusa, Chief Executive Officer, GRAIL: Thank you, Aaron. Since the separation from Illumina in June of last year, we have made great progress as a public company. We have seen strong growth for Galleri, improved our cost efficiency and recently completed a major initiative to launch the new version of the test preparing us for scalability. We believe we are in a strong financial position and are pleased with the momentum we are seeing as we continue to drive multi cancer early detection from an idea towards becoming a new standard of care. We are in the final stages of data collection for our registrational studies and are looking forward to readouts from the Pathfinder II and NHS Galleries studies as well as completion of our modular PMA submission with the FDA in the first half of twenty twenty six.

We are grateful to our employees for their incredible commitment and dedication to our mission to detect cancer early when it can be cured. We'll now turn the call over to Q and A. Operator, please go ahead.

Conference Operator: Thank you. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. You may remove yourself from the queue at any time by lowering your hand.

Question Moderator: The first question is from Doug Schenkel at Wolfe Research. Please unmute yourself and begin with your question.

Bob Ragusa, Chief Executive Officer, GRAIL: Okay. Good afternoon. And thank you for taking my questions. And I'll just, I think I have two and I'll just throw them out there and get out of the way. First, I think it's a Josh question regarding essentially the new gallery, if you will.

Would you be able to share a little more detail on how the lower COGS per test allows you to be more flexible from a pricing standpoint? And maybe more importantly, I'm just wondering if in the early going, you're seeing anything to suggest that lower pricing will actually result in actual true elasticity for the test in terms of demand. So really a question about how low COGS can go, how much it allows you to change pricing and whether you're seeing any evidence of elasticity in the market. And then the second topic is more of a current events question on MCED. And our understanding is

Aaron Frieden, Chief Financial Officer, GRAIL: that

Bob Ragusa, Chief Executive Officer, GRAIL: essentially that the bill was reintroduced in the House a couple of weeks ago. I'm wondering if you could share anything in terms of what you're hearing and what might come next there. Thank you very much.

Dr. Joshua Hoffman, President, GRAIL: Great. Thank you, Doug. Yes, Josh.

Bob Ragusa, Chief Executive Officer, GRAIL: Let me take it first and I'll go over to you.

Dr. Joshua Hoffman, President, GRAIL: Go ahead, Bob.

Bob Ragusa, Chief Executive Officer, GRAIL: Yes. So I appreciate the questions. So on the new version of the test, as Josh mentioned in his prepared remarks, we're able to put significantly more samples on. So 4x the number of samples due to a more focused panel. So clearly, we have a near term reduction in variable reduction in COGS.

In terms of the longer term and any price elasticity, we really look at this platform to be able to build out the scalability and the long term cost structure that we'll need in order to meet what we think kind of population scale pricing and margins we'll get to. And so we won't see the fixed cost leverage on the automation that Josh referred to for a period of time until volumes really build. So we haven't done the elasticity testing with it. And so, we'll you know, it's really a future proofing and to get us to the scalability and cost structure that we know we'll need over the long term. Josh, any pieces to add on that?

Dr. Joshua Hoffman, President, GRAIL: No, just that, you know, we'll be it's early days and, as volumes increases, we'll be able to take advantage of that scalability, but not, you know, not today.

Jason, Analyst, Morgan Stanley (NYSE:MS): Yeah.

Bob Ragusa, Chief Executive Officer, GRAIL: And then on the legislation, so we remain encouraged by the reintroduction, by the momentum. The stakeholder groups that have been advocating for this remain very strong and vocal. We continue to have bipartisan, bicameral support for the bill. So, you know, a lot of good good momentum really looking for, you know, the right vehicle and to be able to move it forward. But again, you know, I would say no no real change in the level of support for it.

And Josh, maybe I don't know if you have any other color you can add.

Dr. Joshua Hoffman, President, GRAIL: No, I think that's right. We're, you know, it's got great support, bicameral, bipartisan, it's been reintroduced. And we're hopeful that, in one of the moving vehicles either the first spending bill or in reconciliation that it'll get seriously considered.

Question Moderator: The next question is from Tejas Savant from Morgan Stanley. Please unmute yourself and begin with your question.

Jason, Analyst, Morgan Stanley: Sorry. Hi. This is Jason on for Tejas. Congratulations on the quarter, and thank you for taking our questions. So maybe just starting off on the recent collaboration with Quest Diagnostics.

Can you share what's embedded in your 2025 guide regarding this collaboration and confirm if it was incorporated in your preannouncement from mid January? And, similarly, on a similar note, the TRICARE news, was this incorporated in your mid January twenty twenty five guide or do they represent such as the website? Thank you.

Aaron Frieden, Chief Financial Officer, GRAIL: Yeah. Aaron, you wanna take that? Yeah. Definitely. Yeah.

So we're excited about both these opportunities as Josh, you know, really elaborated on for both Quest and TRICARE. Quest is gonna make the test directly available to be ordered through their system. Patients won't need to pick a kit to go with their blood drawn and so on. And TRICARE, as Josh said, very excited in working with the payers to implement coverage. As far as guidance goes, we contemplated several things and opportunities for the U.

S. Gallery next year. And right now, there's no change to our '25 guidance.

Jason, Analyst, Morgan Stanley: Got it. Thank you. And then I guess just following up on Doug's question on the MSAT legislation. So I believe there was a December bill that mentioned reimbursement beginning in 2029 and then a more recent bill from February in the senate, which had reimbursement beginning in 2028. Could you share your thoughts on how these timelines align for expectations?

And then on a related note, I believe the bill in February also mentioned reimbursement in line with multi target stool screening tests. So does that potential reimbursement rate for MSAT tests, also align with your expectations? Thank you.

Bob Ragusa, Chief Executive Officer, GRAIL: Yes. So on the first piece in terms of the timeline, the piece in December was what was kind of negotiated back and forth. And you know, what's currently in there is just kind of resetting back to the beginning position. So as it gets reintroduced, it's kind of back into the beginning starting position for the bill. The pricing is referenced in that as well similar to the current market for stool based testing.

So that seems to be accurate.

Jason, Analyst, Morgan Stanley: Great. I appreciate it.

Aaron Frieden, Chief Financial Officer, GRAIL: And just to tie it back sorry, just to tie it back to the conversation on COGS and margins, we were saying we've implemented this new version in contemplation of population scale. So we've contemplated that pricing in that endeavor.

Jason, Analyst, Morgan Stanley: Thank you. Appreciate the color.

Question Moderator: The next question is from Subbu Nambi from Guggenheim Partners. Please unmute yourself and begin with your question.

Thomas, Analyst, Guggenheim Partners: It's Thomas on for Subbu. Thanks for taking our questions. Just to start, maybe one on pathfinder two. I'm curious to know what success looks like for you guys for that study. Any color on what sort of readout you're looking for, maybe any endpoints as well?

And then obviously acknowledging its early days, when would you call it, say, if it wasn't playing out to expectations?

Bob Ragusa, Chief Executive Officer, GRAIL: Josh, you want to jump in on that one?

Dr. Joshua Hoffman, President, GRAIL: Sure. So as you remember, PATHFINDER II is a U. S. Study, single arm interventional trial where we're really evaluating the safety and the performance of GLERI in an adult U. S.

Population over the age of 50 with elevated risk for cancer. So, really, the main endpoints of that study are

Bob Ragusa, Chief Executive Officer, GRAIL: going to

Dr. Joshua Hoffman, President, GRAIL: be traditional measures of test performance, the diagnostic evaluation, the workups, the specificity, sensitivity, predictive values. And then on the safety issue, obviously, the traditional safety measures of complications associated with workups and whether individuals continue to get their standard of care screening. And that's all very similar to what was in Pathfinder one as well. And so, you know, we will read that study out, and it will be part of our final modular submission to the FDA in the first half of 'twenty six. And so, I guess that probably answers your question.

Thomas, Analyst, Guggenheim Partners: Great. That's helpful. And then just one follow-up on a separate note, on cash. You know, as you closed out 2024, can you speak to, you know, what cash preservation initiatives may have done to efforts to get more payer coverage? I know there's the recent announcement that you've said on the call, but any new color on longer term impacts there?

Thanks.

Aaron Frieden, Chief Financial Officer, GRAIL: Yes. No change from what we communicated at JPMorgan and prior. The restructuring we completed last year, performed last year, gives us cash runway to 28 with cash burn decreasing over the coming years as we get there.

Thomas, Analyst, Guggenheim Partners: Awesome. Thanks, guys.

Question Moderator: And the final question is from Carl Mixon from Canaccord. Please unmute yourself and begin with your question.

Alex, Analyst, Canaccord: Hi, everyone. This is Alex on the line for Carl Mixon. So obviously, a major topic of discussion has been the company's spending and burn profile. You know, obviously, there continues to be a lot of uncertainty related to MSIP legislation, which was noted earlier in the call. So if your internal FDA submission and approval timelines are ultimately either meaningfully elongated or shortened, How could this impact your cash burn?

Thanks.

Aaron Frieden, Chief Financial Officer, GRAIL: Yes. So currently our plans for FDA PMA submission are the first half of twenty twenty six. We see cash runway into 2028. So we believe we've built in some cushion and some flexibility there to cover any sort of delay if that were to happen. Today, sitting here confidently though with our first half of twenty twenty six timeline.

And Bob, Josh, anything else you guys want to add?

Bob Ragusa, Chief Executive Officer, GRAIL: Yes. No, I'd just like the as Aaron mentioned, we have built in some buffer. We wanted part of choosing to do the restructure and drive our cash runway into 2028 was to give us some level of flexibility. So we believe that's built in.

Alex, Analyst, Canaccord: Got it. Thank you. And one quick follow-up. So in January 2025, President Trump announced Oracle (NYSE:ORCL) OpenAI and SoftBank (TYO:9984), joint force to launch Stargate. Essentially, a lot of funding going towards AI.

And Larry Ellison actually noted early cancer detection and AI could kind of team up, join forces over time. I was curious if any of this news impacted results in 1Q at all thus far? Thank you.

Bob Ragusa, Chief Executive Officer, GRAIL: Yes. So we think that's more about longer term opportunity. It was great to see it was great to see cancer in the forefront as the killer kind of a killer application for AI that was called out in that press conference. But in terms of Q1 impact, I don't think we'll see anything there.

Alex, Analyst, Canaccord: Got it. Thank you.

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

Bob Ragusa, Chief Executive Officer, GRAIL: So thank you everyone for joining the call today.

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

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