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Guardant Health (GH) Q4 2018 Earnings Conference Call Transcript

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Guardant Health (NASDAQ: GH)
Q4 2018 Earnings Conference Call
March 12, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the Guardant Health fourth quarter and full year 2018 earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session toward the 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 Carrie Mendivil from the Gilmartin Group for a few introductory comments.

Carrie Mendivil -- Investor Relations, Gilmartin Group

Thank you. Earlier today, Guardant Health released financial results for the quarter ended December 31st, 2018. If you have 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 remind you that management will make statements 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 from the press release Guardant issued today.

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For a more complete list and description, please see the risk factors section of the company's fourth quarter report on Form 10-K, which the company will file with the Securities and Exchange Commission. Guardant disclaims any intention or obligation to update or revise any financial projections or 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, March 12th, 2019.

With that, I would like to turn the call over to Helmy Eltoukhy, Guardant's Chief Executive Officer. Helmy?

Helmy Eltoukhy -- Chief Executive Officer

Thanks, Carrie and thank you, everyone for joining us this afternoon. I am pleased to welcome you to Guardant Health's fourth quarter and full year 2018 earnings call. 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 and this mission is fueled by our commitment to the patients we serve. Accordingly, I would like to begin our call today with a brief patient story.

We recently tested a 61-year old nonsmoking female patient diagnosed with metastatic lung cancer. Tissue testing for only the most common gene mutations, known as hot spot testing, at her community hospital failed to identify any targetable alterations. She was referred to an academic cancer center in the Midwest for further testing, where she was immediately hospitalized. Because her health was declining, there was little to no hope of her ever leaving the hospital.

At the academic cancer center, her oncologist immediately ordered Guardant360 because the test is the most rapid means of comprehensive testing for all targetable mutations, including rare ones not commonly tested for. Just four days following the blood draw, the Guardant360 results came back. A pair of rare EGFR mutations that are treatable were found. The patient was immediately placed on neratinib, a targeted therapy with a response rate two to three times higher than chemotherapy or immunotherapy. As a result of this information and its corresponding therapy, she was discharged from the hospital just a few days later.

This patient's story illustrates how rapid and comprehensive genomic results can be critical to a good outcome when treating advanced cancer patients. Tissue-based genomic testing currently has a turnaround time of two to four weeks as samples physically have to be sent from the hospital where the biopsy was performed or stored to an outside laboratory capable of doing next generation sequencing.

In contrast, Guardant360 is a simple blood test with a seven-day turnaround time from any location in the US. Often, oncologists have to initiate treatment within a week to ten days and unfortunately, about one-third of patients do not get a second chance for another treatment after the first one fails. This case demonstrates the necessity of a blood-first genomic testing paradigm predicated in a highly sensitive and well-validated comprehensive testing platform with rapid turnaround time.

This story tangibly illustrates our belief that with better tools better information up front, clinicians can apply and more effectively utilize precision oncology to better conquer cancer, not only for advanced cancer patients today, but even at the earliest stages of cancer in the future, where intervention may be considerably more effective.

With this goal in mind, we have developed a proprietary platform that enables far greater access to a tumor's underlying information and are developing tools based on this platform to address the three main buckets of cancer care -- therapy selection, recurrence monitoring, and early detection. To date, we have launched three products -- Guardant360 and GuardantOMNI for the therapy selection market, and most recently in December of 2018, the LUNAR assay for research applications related to recurrence monitoring and residual disease detection.

Guardant360 is today the market-leading liquid biopsy used over 80,000 times by more than 6,000 oncologists in over 50 pharma companies, leveraging data and deep biological insights we are gathering from these commercial programs, we are continuing to make important progress with our LUNAR research targeting residual disease recurrence monitoring and early detection. We are making exciting advancements in these programs and estimate the market opportunity for our commercial and pipeline products is over $35 billion in the United States alone.

During 2018, we have made significant progress on multiple fronts, driving continued adoption of our liquid biopsy platform by providers, biopharmaceutical customers, and payers and exiting the year with 82% year over year revenue growth or $90.6 million. Revenue for the fourth quarter totaled $32.9 million, representing growth of 64% over the prior year quarter. Clinical volumes grew 24% year over year in the fourth quarter to 8,596 clinical tests and pharmaceutical volumes grew 14% year over year to 3,009 tests.

Despite our position as the market leader and encouraging progress in the comprehensive liquid biopsy setting, we are still in the very early innings of this exciting opportunity. Looking ahead in 2019, we are committed to advancing our entire product platform. On the therapy selection front, we will accomplish this by building out proof points in order to move toward a blood first paradigm for genotyping of advanced cancer patients, which we believe will further accelerate adoption of testing.

As was evident in our patient story, delay in care that may result from tissue testing could be detrimental to the patient's treatment options, not to mention the average lung biopsy costs over $14,000 and has a 19% complication rate. This is part of the reason why only a staggeringly low 8% of lung cancer patients are tested to the standards recommended by guidelines. On our last earnings call, we outlined three elements which would be key drivers for this shift.

The first is the readout from our NILE study, a prospective multi-center clinical trial measuring Guardant 360 head-to-head versus tissue and approximately 300 non-small cell lung cancer. The second is FDA approval of Guardant360 with a pan-cancer profiling label. Finally, the third is pan-cancer Medicare coverage based on FDA approval that would granted under the recently finalized national coverage determination or NCD for next generation sequencing tests.

In late February, we were very proud to announce the abstract detailing the readout from our NILE study was published ahead of its presentation at the American Association for Cancer Research or AACR annual meeting in late March. In this study, landmark data demonstrated that Guardant360 detected terminable genomic biomarkers at a similar rate to tissue, meeting the study's primary endpoints and supporting the use of blood-based biomarker testing ahead of tissue-based testing for all newly diagnosed advanced non-small cell lung cancer patients.

Investigators found that Guardant360 identified guideline-recommended biomarkers in 77 patients. Tissue testing identified them in 60. Importantly for each patient in whom Guardant360 identified a target of an FDA-approved drug, EGFR out, BRAF, or RAS1. Tissue also detected the same alteration. Importantly, the median time to results for Guardant360 was much shorter than for tissue testing, a key component as time to treatment is a critical factor in the care of a lung cancer patient that typically has a median survival of less than one year.

Guardant360 results were reported in an average of 9 days versus 15 days per tissue. The NILE data indicates that it is a compelling option to use liquid first ahead of tissue from likelier testing in newly diagnosed advanced non-small cell lung cancer patients given that Guardant360 finds mutations at a similar rate to tissue-based testing while ensuring patients receive guideline complete testing with a faster turnaround time.

This data marks a big step forward in establishing a blood first paradigm. This is an important new data set for oncologists. Taken together with other recent independent investigations into Guardant360 in this clinical setting, support the first line use of Guardant360 for treatment selection ahead of tissue testing.

Even ahead of the other two elements, FDA approval and pan-cancer Medicare coverage, the sheer volume of analytical and clinical data that we have generated to date combined with our support from clinicians has led to what we believe is an unparalleled number of positive coverage decisions in this space from commercial payers. Guardant360 is covered by Medicare and many private payers, including Cigna and many of Blue's plans, which have all adopted reimbursement policies that specifically cover Guardant360 for non-small cell lung cancer.

In the fourth quarter of 2018, we were endorsed by the Blue Cross Blue Shield Association, which has led to a sharp step function increase in the number of Blue's plans adopting positive policies for Guardant360, such as Blue Cross Blue Shield of Florida, Horizon Blue of New Jersey, and Blue Shield of California, to name a few. As a result, we are pleased to update the number of covered lives to over 115 million, up from 77 million lives at the end of Q3.

Looking ahead to 2019, we aim to take advantage of these tailwinds and upcoming potential catalysts by continuing to invest in areas of substantial growth. Specifically, as we mentioned in our last earnings call, we are in the process of expanding our commercial team to approximately 60 sales representatives and are already seeing early return on investments there. We are making tremendous progress with our LUNAR program and intend to further accelerate our research and development efforts toward earlier cancer detection.

Finally, we are making excellent progress with our Softbank joint venture and will accordingly accelerate some of our regulatory and commercial activities there to capitalize on the large market opportunity for liquid biopsy in Japan.

In sum, we are very encouraged by this strong growth across our business and as a result are projecting 2019 revenue of $130 million to $135 million.

With that, I will now turn the call over to AmirAli Talasaz for more details on our recent progress of our business and product portfolio. AmirAli?

AmirAli Talasaz -- President and Chief Operating Officer

Thanks, Helmy. In parallel to our efforts of accelerating adoption of clinical testing, we are also deepening our relationships across more than 50 pharma partnerships, which use our services in drug discovery and development programs. In the fourth quarter, we continue to make progress on our companion diagnostic pipeline and announced a multi-year agreement with AstraZeneca to develop blood-based companion diagnostic tests supporting the commercialization of AstraZeneca's oncology portfolio based on our industry-leading comprehensive liquid biopsy platform.

The first component of this partnership is the collaboration around Guardant360 to utilize it as a companion diagnostic for identification of EGFR mutant patients eligible for Tagrisso in the first line setting and at the time of progression. Today, Tagrisso is the leading target therapy by revenue in the non-small cell lung cancer space. We are excited to leverage our Guardant360 technology to help find more eligible patients who could benefit from this breakthrough therapy.

The second component is a collaboration around AstraZeneca's lead immuno-oncology asset, Imfinzi. Under this collaboration, GuardantOMNI would be used as a companion diagnostic to identify patients that may more likely respond to immuno-oncology agents based on tumor mutational burden or TMB.

At the European Society for Medical Oncology or ESMO Immuno-Oncology 2018 Congress, AstraZeneca presented TMB data using GuardantOMNI from the Phase 3 MYSTIC trial. In an exploratory analysis, GuardantOMNI was able to successfully cull TMB from blood on almost twice as many patients versus tissue-based TMB approaches. Our proprietary method of calling TMB resulted in a dramatic improvement in overall survival of AstraZeneca's combo IO regimen over standard chemotherapy for those patients that were TMB-high, 39% overall survival at two years compared to only 18% overall survival for chemotherapy.

The data presented at ESMO's IO Congress builds on other recent data that shows Guardant's liquid biopsy technology can increase the number of patients who are tested for important biomarkers relative to tissue. AstraZeneca's working target therapy on immuno-oncology has already benefited thousands of advanced cancer patients and we are proud to support the expansion of the impact of AstraZeneca's assets.

GuardantOMNI will be the second test that we are taking through the FDA and as a result, we'll be eligible for Medicare coverage under the NCB. In support of these efforts, we recently received breakthrough device designation for Guardant OMNI, which will enable and accelerated review process. Between Guardant360 and GuardantOMNI, we are building a highly differentiated and broad companion diagnostic liquid portfolio. We believe this portfolio will streamline the clinical development and commercialization process for new drugs and increase the adoption rates of new biomarker-driven therapies post-approval.

Accordingly, we are continuing to see growing interest from many of our biopharmaceutical partners in leveraging our companion diagnostic development capabilities for their programs. We also believe that the significant increase in companion diagnostic opportunities we are pursuing, including those around GuardantOMNI, should only minimally impact the previously mentioned first half of 2019 timeline for our FDA submission of Guardant360.

Finally, turning to our LUNAR program, we are excited about the progress toward recurrence monitoring for cancer survivors and early detection. In early 2019, we announced the launch of the LUNAR assay for research used by biopharmaceutical and academic researchers. Through our first two commercial products, Guardant360 and GuardantOMNI, we have captured data over a number of years that provides us with deep insight into the circulating tumor DNA biology of cancer patients.

The LUNAR assay leverages these insights in order to overcome a variety of challenges that have confounded prior approaches for the detection of early stage cancers, including inadequate tissue, biological noise, and the limited sensitivity of genomic-only tests.

With a single blood draw, the assay is simultaneously able to detect both genomic alteration and epigenomic signatures which are combined and reported as a single quantitative measure of tumor burden. Using somatic genomic alteration alone has issues with clinical sensitivity of detecting cancer in early stage patients. We believe that the incorporation of biologically relevant epigenomic signatures is critical in increasing the sensitivity of the assay.

Multiple top tier academic research networks on biopharma companies will utilize the LUNAR assay in studies involving adjuvant therapy decision making, recurrent monitoring, and minimal residual disease detection.

The clinical version of the test for investigational use in prospective studies is expected to launch in the second half of 2019. Earlier intervention using precision medicine in oncology could potentially improve outcomes for a substantial number of cancer patients. Based on the LUNAR technical performance we are seeing through the addition of epigenomics, we've been exploring the use of the assay for screening in early stage cancers.

We are encouraged by the early promising LUNAR clinical data and look forward to presenting further details on its performance in detection of early stage colon cancer at the AACR annual meeting in late March.

With that, I will now turn the call over to Derek Bertocci for more detail on our financials. Derek.

Derek Bertocci -- Chief Financial Officer

Thank you, AmirAli. Revenue for the fourth quarter of 2018 totaled $32.9 million, up 64% from $20 million in the same period in the prior year. This growth was driven by precision oncology testing revenue which increased 98% due to a combination of higher testing volume and increased revenue per test.

Fourth quarter clinical precision oncology volume totaled 8,596 tests, up 24% from 6,940 tests in the prior year quarter, due mainly to an increase in the number of physicians ordering Guardant360 tests. Average revenue recognized per test in the fourth quarter was more than double the fourth quarter of the prior year due to higher payments from commercial payers that were beneficially affected by the Protecting Access to Medicare Act of 2014 plus payments that we began to receive in the fourth quarter from Medicare under our LCD.

Of the $4.3 million we received from Medicare in the fourth quarter, $2.1 million was paid for samples tested in the third quarter of 2018. Excluding this $2.1 million, ongoing precision oncology revenue from clinical tests in the fourth quarter totaled $15.1 million, up 124% from $6.8 million for the prior year quarter.

Fourth quarter biopharmaceutical precision oncology volume totaled 3,009 tests, up 14% from 2,630 tests in the prior year quarter due to an increase in demand for GuardantOMNI tests. Precision oncology revenue from biopharmaceutical tests in the fourth quarter totaled $10.8 million, up 46% from $7.4 million from the prior year quarter due to an increase in volume and the higher price for GuardantOMNI tests.

Development services revenue in the fourth quarter totaled $4.8 million, down 18% from the prior year quarter, which included $5.1 million of revenue recognized from completion of the laboratory development project in 2017.

Development services revenue from biopharmaceutical customers is subject to quarter to quarter variability as drug discovery and development programs start and complete. Development services revenue of $12.2 million for the full year 2018 was up 58% from $7.8 million in the prior year, along with the high-growth in biopharmaceutical precision oncology revenue. This demonstrates the increasing demand from biopharmaceutical customers for Guardant Health tests and services.

Gross profit is total revenue less cost of precision oncology testing and cost of development services. Gross profit for the fourth quarter of 2018 was $18.9 million, compared to a gross profit of $10.9 million in the same period as the prior year. The gross margin or gross profit by divided by total revenue in the fourth quarter was 57.6% as compared to 54.3% during the fourth quarter of 2017.

Gross margin improvement was primarily due to extra revenue booked from Medicare payments as well as an increase in precision oncology ASP and a nominal decrease in precision oncology cost per sample. Total operating expenses for the fourth quarter of 2018 were $46.3 million or a 75% increase from $26.5 million in the fourth quarter of 2017 with significant progress in several areas, including improving reimbursement for clinical precision oncology testing, growing demand from biopharmaceutical customers, and encouraging early results from our LUNAR assay.

We have increased our investment in key functions to optimize Guardant Health's ability to capture the leadership position in our target markets and provide the best benefits to patients, customers, and our shareholders. We have approximately doubled R&D spending to drive our LUNAR programs, prepare for a Guardant360 submission to the FDA and continue to improve our Guardant360 and GuardantOMNI products.

In sales and marketing, staff and programs have been increased to pursue opportunities in several areas. First, in our joint venture with Softbank, we have established the initial teams to pursue opportunities in Asia, the Middle East, and Africa, with particular emphasis on Japan, where we are already involved in large clinical studies. Second, given our significant improvements in reimbursement, we increased our staff in programs to drive clinical adoption in the US.

Third, we are expanding our biopharmaceutical commercial team to handle the significant increase in demand for testing and more recently companion diagnostic services from biopharmaceutical customers.

General and administrative expenses were increased as a result of additional requirements, our international joint venture Softbank, and to support our overall growth. Net loss for the period was $25.3 million compared to a net loss of $15.1 million in the fourth quarter of 2017. Net loss per share attributable to Guardant Health common stock holders was $0.30 in the fourth quarter of 2018 as compared to $1.27 in the corresponding period of the prior year.

Turning to the full year 2018, revenues were $90.6 million, an 82% increase from $49.8 million in 2017. Precision oncology revenue increased $36.3 million or 86% with clinical and biopharmaceutical each contributing similar amounts to the growth.

Clinical volume for the year grew to 29,592 tests, up 15% year over year from 25,626 tests due mainly to an increase in the number of physicians ordering Guardant360 tests. The average revenue recognized per test in 2018 rose 54% from the prior year as a result of factors noted previously for the fourth quarter.

Combined, volume and price increases drove a 78% increase in clinical testing revenue in 2018 to $43.7 million from $24.5 million in 2017. Biopharmaceutical volume grew 65% year over year to 10,370 tests due to introduction of GuardantOMNI at the end of 2017 plus an increase in the number of biopharmaceutical customers and their contracted projects.

Precision oncology testing revenue for biopharmaceutical customers increased 98% in 2018 to $34.7 million from $17.6 million in 2017 due to the increase in test volume plus the higher price charge for GuardantOMNI. Development services revenue grew 58% to $12.2 million due to new projects in 2018 mainly earned from biopharmaceutical customers for companion diagnostic development and regulatory approval services, plus, completion of a live installation project, which was primarily performed in 2017.

Gross profit for 2018 was $47.4 million compared with gross profit of $18.2 million in 2017. The gross margin or gross profit divided by total revenue in 2018 was 52.3% as compared to 36.6% in 2017. Gross margin improvement was due to several factors. One, we began to be paid in the fourth quarter for testing Medicare patients as a result of the issuance of our LCD in late August 2018. Two, commercial payers made higher payments that we believe were beneficially affected by the Protecting Access to Medicare Act of 2014.

Three, the average selling price of biopharmaceutical tests increased due to introduction at the end of 2017 as the GuardantOMNI test, which has a higher selling price, and four, the overall increase in volume of tests, which supports more efficient use of our production facilities.

Total operating expenses in 2018 were $140.4 million, up 48% from $94.8 million in 2017. R&D expenses for 2018 were $50.7 million compared to $25.6 million in 2017. Net loss for the period was $84.3 million compared to the loss of $83.2 million in 2017. Net loss per share attributable to Guardant Health common stock holders was $2.80 in 2018 as compared to $7.07 in 2017.

We ended the fourth quarter of 2018 with $496.5 million in cash, cash equivalence, and marketing securities. For the full year 2019, we forecast revenue to be in the range of $130 million to $135 million, representing growth of 43% to 49% over 2018.

We expect this growth to be more heavily weighted to the first half of 2019 as a result of revenue contributions from companion diagnostic programs. We expect net loss in the range of $126 million to $129 million. We also expect clinical sample volume for 2019 to be in the range of 35,000 to 37,000 tests.

At this point, I would like to turn the call back to Helmy for closing comments.

Helmy Eltoukhy -- Chief Executive Officer

Thank you, Derek. In closing, we believe we have a unique opportunity at Guardant to expand unprecedented access to cancer's molecular information throughout all stages of the disease. We are making significant progress on our goals and look forward to presenting data from our NILE study and LUNAR program at AACR.

With that, we will now open it up to questions. Operator?

Questions and Answers:

Operator

Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press * then the 1 key on your touch-tone telephone. If your question has been answered and you wish to remove yourself from the queue, please press the # key. Again, if you have a question, please press * then the 1 key on your touch-tone telephone.

Our first question is going to come from Tycho Peterson from JP Morgan. Your line is now open.

Tejas Savant -- JP Morgan -- Analyst

Hey, guys. This is Tejas on for Tycho. Thanks for the questions here and congrats on the quarter. I just wanted to get a better understanding how your 2019 guidance -- I believe I just heard Derek say it's going to be weighted toward the first half to do companion diagnostic milestones. Is the upside relative to where most Street numbers were driven more by the companion diagnostic piece or is it sort of fundamental clinical strength? If you could talk a little bit about your underlying volume assumptions for clinical versus biopharma, that would be super helpful as well.

Helmy Eltoukhy -- Chief Executive Officer

I'll start and then maybe Derek can jump in. I think we're seeing very good progress in all aspects of our business. I think if you think about the numbers we're guiding toward in terms of 35,000 to 37,000 clinical tests, I think we're seeing good progress with some of the clinical data releases, some of the investments we've made on the commercial team.

So, we're fairly encouraged by the early signs that we're seeing in our business. I think we see similar growth to that on the biopharmaceutical side as well. I would say that both sides are seeing that backbone of growth. Then overlaid onto that are some of these companion diagnostic deals that we believe will be front-half weighted in terms of the revenue contribution.

Derek Bertocci -- Chief Financial Officer

Yeah. As Helmy said, we are seeing good growth in both. He mentioned the development services deal that we announced. We are accelerating our growth in that area. That would be what we're expecting to particularly impact the first half of the year.

Tejas Savant -- JP Morgan -- Analyst

Got it. And then a quick follow-up here on the NILE study. Helmy, over what timeframe should we start thinking about an upside or a list in volumes based upon some of this concordance data and any color you can share on outcomes here, comparing liquid versus tissue? I remember in the past, you've spoken about clinical outcomes being the true gold standard. So, beyond just concordance, any efforts along those lines that you have in the pipeline here?

Helmy Eltoukhy -- Chief Executive Officer

Yeah. Both good questions. Maybe I'll start with the second one. Secondary endpoint of the study is clinical outcomes. That will read out and that's still ongoing. We will get that as part of the NILE study. But we believe that a lot of importance of NILE is really this idea that can you trust liquid at the first line setting? Can you sequence it before tissue testing? I think the positive readout and the meeting of the primary endpoint of NILE, I think, proves that out.

So, we believe there are a couple of steps that are needed. NILE is obviously the first critical catalyst, we believe, to initiating and establishing a blood first paradigm and liquid. But we think that needs to be paired up with FDA approval to have that stamp of quality and that third-party stamp of approval by an agency that clinicians trust in.

And the third piece and equally important is the expansion of Medicare coverage from lung cancer that we currently have to pan-cancer. This is why we are building up the commercial team. At this time, we make good progress there, but we believe to fully realize, I think, a true acceleration adoption, all those three catalysts are coming in. That being said, I think we saw some positive uplift from the general oncology study in Q4 of last year. You can see that we had a fairly strong Q4 in terms of clinical volume.

So, some of these things will help. How much each one helps individually, I think, is hard to predetermine, but we do believe the combination of all three. We have very high confidence that that would lead to a turning point, an infection point in terms of adoption of liquid testing.

Tejas Savant -- JP Morgan -- Analyst

Got it. Then one final one for me -- perhaps AmirAli -- I think, AmirAli, toward the end of your comments, you mentioned some exciting data in colon. One of the AACR apps jumped out, showed that in this retrospective analysis you had a 95% detection rate in Stage 1 and 2 colon. I think it was a little bit higher in Stage 3, if you include Stage 3. So, could we see you, perhaps, launch a stand-alone assay for early detection in colon given some of the success others have had with alternatives to colonoscopy? Do you have any plans for a prospective cohort that looks at the performance of the assay in this setting as well?

AmirAli Talasaz -- President and Chief Operating Officer

Sure. We are excited with some of the earlier and promising data that we are seeing in our LUNAR R&D activities. You highlighted this LUNAR abstract, which is going to get presented in an oral setting in AACR. It's promising early data for us that really shows the potential of liquid biopsies in impacting early cancer management, specifically like early cancer detection. Based on that, we are basically increasing our investments and R&D activity around LUNAR.

Still, it's a small number of patients that are basically tested in that abstract. Definitely, we are over time increasing the number of patients and also match control patients to better understand the performance of the assay that we have developed, but we believe it's a very unique differentiated assay and early promising data shows that, really, liquid biopsy could have that potential.

So, we are going to give it its course and in the future, we will keep you guys posted to whole field about how LUNAR can play a role in early cancer detection. Now, prospective studies is definitely a part of it.

Tejas Savant -- JP Morgan -- Analyst

Got it. Thanks so much, guys.

Operator

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

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

Hello. Good afternoon. A couple of questions -- so, the pan-cancer label, obviously, an important milestone coming up. Can you walk us through like what the FDA needs to see to make sure that you get the pan-cancer label? Just the question being is there some sort of -- what's the risk around not getting that designation?

Helmy Eltoukhy -- Chief Executive Officer

I'll let AmirAli jump in and answer that.

AmirAli Talasaz -- President and Chief Operating Officer

So, Derek, as you may know, in the FDA packages, there are different kinds of documents that you have to provide to FDA in terms of your quality system, in terms of the analytical validation of the assay and clinical validation of the assay. So, we are well into those programs, both in terms of quality system, analytical data, and clinical validation.

The partnership that we announced with AstraZeneca around Guardant360 and Tagrisso is related to that FDA package, which is basically on the clinical validation running the retrospective patient samples that have been part of that clinical trial before. So, everything is retrospective testing or model samples that we have to test and submit the data to FDA.

Since we have breakthrough device designation, we are projecting that review cycle would take six months post-our PMA submission later in the first half of 2019 or with some minimal impact right after that.

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

Is there anything specific, though, anything included in the assay that you have to show specifically to get the pan-cancer? It's pretty obvious you'll get a late stage non-small cell lung cancer approval given the data is very strong. I'm curious if there's something incremental you need to show for pan-cancer.

AmirAli Talasaz -- President and Chief Operating Officer

Yes, in terms of studies, they're kind of all pre-agreed with the agency. There are a lot of similarities with types of analytical studies that they want to see even for tissue-based testing. So, effectively, many different cancer types are going to get tested as part of the analytical validation in order to get the tumor profiling claim across pan-cancer types. All of those kinds of studies are already planned and ongoing.

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

Great. In the Japan, the Softbank and that expansion of that market, when should we start to see a contribution to that? I think we have some pickup in that program contributing in the second half of 2019. Is that still a good way to look at this pickup in sales to Japan?

Helmy Eltoukhy -- Chief Executive Officer

I think we obviously are seeing some growth there in terms of volume. A lot of that is working with a lot of the hospitals there. I would say for a real pickup, it's going to come after regulatory approval and the MHLW reimbursement. That's going to take some time. The review cycle is long, but we're making very good progress on that. There is a lot of excitement in Japan around this type of testing and providing this type of testing for cancer patients there.

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

A question on when you sort of think about using liquid biopsy as a first line in the lung cancer, how do you think about the market on that? If it did go first line, how should we think about the number of biopsies? Obviously, there's also the recurrence of the use of this assay. I'm just sort of curious how you think about the TAM and how you think about the modeling of the first line non-small cell lung cancer for Guardant360.

Helmy Eltoukhy -- Chief Executive Officer

As you know from the drug space, getting the first line is the biggest market opportunity. That's why we see this jumping over from progression use case that we first launched in to really totally showing that this could be used in the first line setting without compromising patient care. That being said, there are 700,00 metastatic or advanced cancer patients in the market. Those are the first line setting. So, I think it's consistent with our TAM, the $6 billion opportunity in the therapy selection market. We believe this is part of the roadmap of realizing that TAM is moving toward first line use of Guardant360 testing. Amir will jump in and add something.

AmirAli Talasaz -- President and Chief Operating Officer

Just to make one comment, NILE has been focused on lung cancer and really trying to make the statement of a blood-first paradigm in non-small cell lung cancer. But we don't believe this blood-first paradigm is just applicable to lung cancer. That's definitely what NILE proves today.

If you just look at our publication now, about half of our publications are outside lung cancer and there are many different cancer types that standard care based on tissue testing are not the best diagnostic paradigm of choice as the first testing modality. We are expecting the same kind of finding and blood-first paradigm can get expanded into other cancer types as well.

Helmy Eltoukhy -- Chief Executive Officer

We're seeing that same gap between clinical guidelines and clinical factors in other cancer types, so, stay tuned for that.

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

Great. Just a quick one for Derek -- the revenue split, just sort of thinking about buckets between the clinical and biopharma split and the 130 to 135 guide.

Derek Bertocci -- Chief Financial Officer

Yeah. So, in terms of that split, it is going to be probably getting close to similar revenue numbers. While we have more samples in the clinical side, we still have not full reimbursement there. On the pharma side, we have OMNI. So, I'd say they're close to similar.

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

Thank you very much.

Derek Bertocci -- Chief Financial Officer

That's in the precision oncology, of course. Development services is an entirely different revenue stream.

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

Yes, of course.

Operator

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

Puneet Souda -- Leerink Capital Partners -- Analyst

Hi. Congrats on the quarter. So, maybe just the first question, I just wanted to clarify -- for the approval in NCD, OMNI and G360 are going to be filed together and should we expect both at the same time now with BTD also for OMNI?

Helmy Eltoukhy -- Chief Executive Officer

The answer is no, Puneet. So, the Guardant360 is the IVD program that we've been working on for a while. We disclosed the timeline for that PMA submission. GuardantOMNI is a new IVD development activity for us. So, for sure it's going to be at a later time. Still, it's still too early for us to project a PMA submission timeline for that program, but there is a lot of learning and experience and infrastructure which is scalable here when we did the first IVD program developed by Guardant in order to go through the second development project.

Puneet Souda -- Leerink Capital Partners -- Analyst

If I could touch on NILE data again, I know it's been talked about, but we saw the data -- 17 samples had liquid, where liquid picked up versus the tissue ahead of the tissue, but there were 12 samples where there was tissue-only detection. I just wanted to get a sense of how do you position the test after that data in terms of what data sets that you need beyond this in order to convince the oncologist longer-term the liquid-first paradigm is the way to go. Should we just expect that when the final NILE data is completed for 300+ patients or should there be more and more studies here to sort of convince the oncologists longer term?

Helmy Eltoukhy -- Chief Executive Officer

Let me start with that and I'll let others chime in. It's a good question. Let me unpack that in terms of multiple aspects of that question. The first is neither testing modality is perfect. Liquid misses some. Tissue misses some as well. But what the NILE data shows is there's an ideal sequence to how you position these tests. If we think about what we're trying to establish, it's a blood-first paradigm, not a blood-only paradigm.

So, what we find is because of the shorter turnaround time, the ease of use, and the completeness of our liquid solution, by sequencing liquid ahead of tissue and reflexing the negative tested patients to tissue, you actually get more complete biomarker testing faster in first line non-small cell lung cancer. So, that's really the punchline of NILE.

Secondly, NILE shouldn't be taken into a vacuum. It will be over 100 publications we have around Guardant360 once the full publication comes out. So, if you think about that, what has proceeded NILE? Obviously, studies from University of Pennsylvania that recently read out in JAMA Oncology, our complete study with concordance of over 7,000 lung cancer samples, and many others looking at concordance, looking at outcomes, and no one data set can really move the needle, but NILE is not just one data set.

It's the culmination of a steady stream of data supporting use of this type of testing in first line lung cancer. So, obviously, it's something that we are in the process of and intending to repeat for other cancer types to transition this further. Is this going to be enough to completely move the needle? I think we feel very confident that this is going to go a long way. That being said, committed to continued investment and showing where our tests can move the needle and how they can add value.

Puneet Souda -- Leerink Capital Partners -- Analyst

Great. Then if I could just touch on OMNI, now, it seems to be gaining more traction in the market among the biopharma. You obviously have plans for SDA and NCD approval for the product. Given the features you're getting out of it, could you, first of all, give a sense of overall what features are getting demanded? Obviously, this is a 500-gene panel via fusions. You have other product features there. What are you seeing customers asking for, especially biopharma customers. What's your view here longer term for product features like TMB, MSI, and other things that you're getting out of the product?

AmirAli Talasaz -- President and Chief Operating Officer

Sure. So, the excitement around GuardantOMNI has been amazing. Unlike some opportunities for us, especially with biopharma companies with strong IO programs, but its impact is not limited to the IO programs. We are even seeing some uptick in the targeted therapy areas and some other kinds of drug assets. It's a comprehensive way of looking at all kinds of biomarkers, which there are many pipeline activities around it.

The interest has been ranging from translation medicine sites. We kept some biomarker research and discovery all the way to the clinical development companion diagnostic as shown by the partnership that we announced with AstraZeneca that GuardantOMNI is going to be used as a blood-based TMB caller. There are some interests around TMB features around GuardantOMNI, which in order to accurately call TMB, you need to have large panels.

Also, the fact that the TMB calling that we are using in Guardant OMNI, it's not just a simple mutation counting. It's a proprietary way of calling TMB that we filter out biological noises. We filter somatic cure end line variance. We discriminate against each other. Also, we correct for the level of the tumor shedding in circulation, which is critical in order to have an accurate way of TMB assessment using GuardantOMNI.

So, for different kinds of reasons and different kinds unmet needs. With our biopharma customers, we are seeing huge uptake for GuardantOMNI.

Operator

Thank you. Our next question comes from Brian Weinstein from Willian Blair. Your line is now open.

Andrew -- William Blair & Company -- Analyst

Hi, guys. Good afternoon. This is actually Andrew on for Brian. Maybe we could start and take a step back, given this is your first call guiding to a full year. Maybe you guys could talk a little bit about the process you guys went through in order to set your full year guidance.

Derek Bertocci -- Chief Financial Officer

So, our full year guidance is obviously based on our annual planning process, which is a comprehensive look at our customers and markets. We come up with our best understanding of what we think the potential is and then we put that together into a plan. Our goal in providing guidance is to provide what we believe to be a realistic assessment of our opportunities. As you can see, it's close to a 50% increase. So, it's still a very high bar that we're targeting to go after.

Andrew -- William Blair & Company -- Analyst

Great. Maybe just a little bit more specific on that on the clinical volume side, what's implied in terms of new clinician adds versus increase in utilization within that group.

Derek Bertocci -- Chief Financial Officer

That's a good question. If we think about the current adoption that we've seen, before the last couple of quarters, we've had a relatively undersized salesforce at 20 to 30 sales reps. It takes about 60 reps to really get to full coverage of the 10,000 to 12,000 oncologists in the United States. That's obviously something we're making good progress in terms of ramping up toward. So, new edition adds is going to continue to be an important component in the volume growth, knowing that it will only be in the coming quarters that we will have adequate coverage of those oncologists.

That being said, data such as NILE, such as the JAMA Oncology study and others, we're also seeing that data is very valuable in terms of deepening our penetration into more intermittent users of comprehensive testing. So, we see both factors, actually, contributing to upcoming growth in the quarters and years to come.

Andrew -- William Blair & Company -- Analyst

Great. Thanks. Maybe just the last one on guidance, maybe on the development services side, could you talk about what's baked in there? Do you guys factor in any sort of new contract sign throughout the year? How do you think about that? Thank you.

Derek Bertocci -- Chief Financial Officer

So, for development services, because they are large individual agreements, we do look at what we see as prospects, but given that we're still fairly new in this area and it takes a long time for pharmaceutical companies to get to the point of moving forward, we are cautious about our forecasting and provide and apply a fairly rigorous discounting, if you will, in terms of probability.

That being said, we obviously find some very large agreements with AstraZeneca, which provides a very solid base. We are seeing very strong interest from pharmaceutical companies. So, we expect it to grow in the long run, but we're trying to be measured about how much we expect in the near term.

Andrew -- William Blair & Company -- Analyst

Great. Thanks.

Operator

Thank you. I'm showing no further questions. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.

Duration: 57 minutes

Call participants:

Carrie Mendivil -- Investor Relations, Gilmartin Group

Helmy Eltoukhy -- Chief Executive Officer

AmirAli Talasaz -- President and Chief Operating Officer

Derek Bertocci -- Chief Financial Officer

Tejas Savant -- JP Morgan -- Analyst

Derik De Bruin -- Bank of America Merrill Lynch -- Managing Director

Puneet Souda -- Leerink Capital Partners -- Analyst

Andrew -- William Blair & Company -- Analyst

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