GRAIL, Inc. (GRAL) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the GRAIL Second Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that this conference call is being recorded. GRAIL Investor Relations, please begin.

Thank you, and thank you all for joining us today. On the call are Joshua Ofman, our Chief Executive Officer; Aaron Freidin, Chief Financial Officer; -- sir Harpal Kumar, Chief Scientific Officer and President, Global Clinical and Medical Affairs; and Andrew Partridge, Chief Growth Officer. I'll remind you that we'll be making forward-looking statements based on current expectations. It's our intent that all statements other than statements of historical fact, including statements regarding our anticipated financial results and commercial activity will be covered by the safe harbor provisions for forward-looking statements under federal securities laws. 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 Securities and Exchange Commission, including the Risk Factors section in GRAIL's most recent annual report on Form 10-K and the quarterly report on Form 10-Q we plan to file for the second quarter of 2026. This call will also include a discussion of GAAP results and certain non-GAAP financial measures, including adjusted gross profit and adjusted EBITDA, which 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 most directly comparable GAAP financial measures are available in the press release issued today, which is available on our website. With that, we turn to Josh.

Thank you. Good afternoon, everybody, and thanks for joining us to review the results of the second quarter 2026 and discuss recent business updates. GRAIL continues to execute across our clinical and commercial priorities. We launched the Galleri test in 2021 after our approximate 6,000 participant interventional PATHFINDER study, which was conducted under an FDA-approved investigational device exemption and read out and demonstrated strong performance and safety in a screening population. For several years, PATHFINDER was the only interventional study that clearly demonstrated the benefits and evaluated the potential harms of deploying an MCED test in the intended use population. Since then, we've read out 2 additional large studies, our 35,000 participant PATHFINDER 2 study in North America and the groundbreaking 140,000 participant NHS-Galleri trial in England, which included 3 annual tests. We recently presented detailed performance, safety and clinical utility results from these studies at the 2026 American Society of Clinical Oncology Annual Meeting, and they are currently under review for publication, further establishing Galleri as the only MCED with extensive clinical validation from interventional studies. These data in the asymptomatic screening population are critical for physicians and patients to understand test performance as case-controlled studies can fail to replicate performance when tests are rolled out in an intended use population. We're extremely proud of the unparalleled performance demonstrated in these studies in the screening population, and we're focused on driving to FDA approval and subsequent Medicare and commercial reimbursement. Galleri test performance is highly differentiated with a false positive rate of less than 0.5%, resulting in at least 3x to 6x fewer false positives than other MCED tests in development. Our technology at GRAIL was designed specifically for population scale MCED screening. Our extensive research published in top-tier journals concluded that methylation holds the highest biological information density, which is why GRAIL's proprietary methylation platform, the largest of its kind, is uniquely capable of delivering high accuracy detection and precise localization. We have published to our knowledge, the largest head-to-head genomic feature comparison study in the entire field. And we showed that combining other approaches considered did not improve performance over our proprietary methylation technology. Adding these other features only introduced additional complexity, cost and biological noise. And the field is increasingly moving to methylation as the technology of choice, further validating our approach. Today in the market with Galleri, we continue to expand access through new and existing partnerships, and we are accelerating our international expansion activities. Related to that, in the second quarter, we completed the previously announced $110 million financing with Samsung. Alongside that closing, we began work with Samsung C&T Corporation on our strategic collaboration. As a reminder, we and Samsung C&T Corporation will work together to commercialize the Galleri test in South Korea with the potential to expand into additional Asian markets, including Japan and Singapore. The $110 million investment in GRAIL represents a long-term investment to support our growth and international goals. We were very pleased to complete this financing, and we look forward to moving forward with Samsung to introduce our MCED technology to patients throughout Asia. In the U.S., we continue to see growing physician adoption of the Galleri test. We sold over 61,000 Galleri tests in the second quarter, a 35% increase in volume year-over-year. Total Galleri screening revenue was $42.6 million, up 24% over the year prior. For the first half of 2026, we saw Galleri test revenue growth of 30% year-over-year to more than $80 million and Galleri test volume growth of 42% to more than 117,000 tests. We announced early in 2026, the planned expansion of our field sales and medical teams based on the positive performance and clinical utility results observed in our PATHFINDER 2 and NHS-Galleri trials. This expansion was substantially complete at the end of the second quarter. New personnel have been onboarded and trained and are now in the field and initial feedback from sales force engagements with physicians since ASCO has been really positive. Last month, we announced a collaboration with Priority Health to enable its employer groups to add the Galleri test to their existing screening coverage. Priority Health is a nationally recognized nonprofit health plan with more than 1.4 million members in Michigan and nearby states. Priority Health launched coverage for Galleri within certain plans in 2025, and our collaboration announced in July marks a promising expansion of this partnership. Moving to our clinical evidence base. We recently shared strong clinical utility, performance and safety results from our NHS-Galleri trial and PATHFINDER 2 studies at the recent ASCO Annual Meeting in May. Although the primary endpoint for the NHS-Galleri trial of a combined reduction of Stage III and IV cancers was not met, we believe the other results of the study demonstrated very strong performance, safety and utility. Across both studies, adding Galleri to standard of care increased the cancer detection rate by 4x to 6.5x. The Galleri test demonstrated very consistent performance with a false positive rate of less than 0.5% and positive predictive values ranging from 50% to 60% Galleri also demonstrated high accuracy in predicting cancer signal of origin, enabling efficient and patient-centered diagnostic evaluations. Today, standard of care screening finds only about 14% of cancers in the U.S. and about 6% of cancers in the U.K. By adding Galleri, we estimate that those figures can increase to 50% or more. And indeed, in PATHFINDER 2, this number was 60%. This represents a substantial improvement that expands detection of clinically meaningful cancers that otherwise lack recommended screening. Across these 2 studies, approximately 40% to 50% of the Galleri detected cancers were found at Stages 1 and 2 and approximately 70% were found at Stages 1 through 3. Remarkably, in the NHS-Galleri study, Galleri detected 366 Stage I and II cancers, many more than the 290 cancers detected at any stage by the entirety of the U.K.'s standard of care screening program in the control arm. This is truly remarkable. The promise of multi-cancer early detection is not just in finding cancer, but in finding it early enough to open the door to curative treatment options for as many people as possible. What is clear across these groundbreaking trials is that the Galleri test detects a large number of asymptomatic cancers in stages 1 through 3, the majority of which have the opportunity for curative intent treatments. Together, these findings underscore the consistency and actionability of the Galleri test results and demonstrate that adding Galleri to standard of care screening has the potential to improve the effectiveness and efficiency of our current national screening program. This is critical for providers, regulators and payers as they evaluate the clinical and economic value of Galleri alongside standard of care screening. These data support the potential of MCED screening at population scale to identify cancers at earlier stages when treatments are more effective and are potentially curative. Turning now to our regulatory process. We submitted our premarket approval application to the FDA in early '26, and we remain in an ongoing iterative review process. We are very confident in the data package that's been submitted. Galleri's performance has been validated and replicated in multiple rigorous intended use population level studies. We have consistently shown that Galleri can detect asymptomatic cancers well over and above the standard of care, and the evidence clearly demonstrates that Galleri can be useful and safe when implemented at scale. Our PMA for Galleri is focused on test performance and safety results from the first approximately 25,000 participants in the PATHFINDER 2 study with 1 year of follow-up and the prevalent screening round for the first year of the NHS-Galleri trial. The submission also includes a bridging analysis to compare performance of the version of Galleri used in these clinical studies to the updated version that has been submitted to the FDA for premarket approval. As Galleri is a first-of-its-kind technology and multi-cancer early detection represents a potential paradigm shift in cancer screening, we do expect the FDA to convene an advisory committee for Galleri in the fall. The FDA will announce specific timing of an advisory committee. Turning now to the evolving market environment. As additional MCED tests have launched, a few things are very critical to mention. Other MCED products have been introduced based only on observational case control data and have yet to evaluate the benefits and harms in an actual screening population. First, that means it is unknown how the purported benefits of these tests shown in case control data will translate, if at all, into performance when deployed into an asymptomatic screening population. And without interventional studies, it's not clear whether the diagnostic pathways and procedures have been developed to support physicians and patients after a positive test. Second, MCED tests with high false positive rates may expose patients to significant risks of radiation exposure and invasive diagnostic tests, which carry potential for complications and increased morbidity. Until these tests have been robustly studied and validated in the intended use screening population, they represent an unknown benefit risk profile and should be considered experimental screening tests at this stage. When we launched Galleri, we deliberately chose to do so only after reporting results from a prospective interventional study under an FDA-approved investigational device exemption in the screening population. We believe that patients deserve and the field demands this level of robust evidence because the true litmus test performance, both benefits and harms is demonstration in interventional clinical studies in the actual intended use population. Now why do I say this? This is because case-control data will not always replicate in interventional studies. For example, after a very strong performance for the CancerSEEK assay was observed in a case-controlled study published in a top-tier journal of science, the DETECT-A study failed to replicate performance and safety in an interventional study. And as you know, this test is currently not available or on the market. Beyond study rigor, Galleri test characteristics stand apart in the field. Based on data from observational studies that are case controlled, experimental MCED tests are operating at a 3x to 5x higher false positive rate. They detect a smaller number of cancer types and some have no ability to predict a cancer signal origin, which we believe is necessary for safety and performance of any MCED test. In a field where hope and hype can easily collide, GRAIL is defined by rigorous science and validated by the most extensive evidence base. We believe we chose the right biological signature of cancer after unbiased comparisons. We have built the most advanced proprietary technology to interpret that signal, and we have proved its performance in the real world on an unprecedented scale. I'll now hand off to Aaron for a review of our second quarter financials.

Thanks, Josh, and good afternoon, everyone. Second quarter results were strong with revenue of $44.7 million, up $9.1 million or 26% as compared to the second quarter of 2025. Total revenue for the second quarter consisted of $42.6 million of screening revenue and $2 million of development services revenue. Screening revenue was up 24% as compared with the second quarter of 2025, with test volumes of more than 61,000, an increase of 35% over the second quarter of 2025. Net loss for the quarter was $110.2 million, a decrease of 3% as compared to the second quarter of 2025. Non-GAAP adjusted gross profit for the second quarter was $21.6 million, an increase of $5.4 million or 34% as compared with the second quarter of 2025. Primary drivers of the increased gross margin were improved fixed cost leverage from higher volumes and a decrease in sample reprocessing costs, partially offset by a decrease in ASP. Adjusted EBITDA for the second quarter was negative $90.3 million, an increase in adjusted EBITDA loss of $11.9 million or 15% as compared to the second quarter of 2025. We ended the second quarter with a cash position of $861.6 million, which includes $110 million strategic investment by Samsung, which closed in June. Our cash balance today provides us with financial flexibility as we advance key priorities, including securing regulatory approval and reimbursement for Galleri in the United States. Back to you, Josh.

Thank you, Aaron. We're really pleased with the continued growth for Galleri and the progress we're making towards FDA approval and broad-based access, and we anticipate continued progress over the next year. With ASCO behind us, our expanded field teams are now fully equipped to educate clinicians about our groundbreaking trial results and continue market development. And initial feedback from the field has been really positive. We look forward to potential FDA approval of Galleri. Expanding distributor partnerships internationally, progressing R&D on Gallery improvements and cost of goods reduction and publication of the NHS-Galleri and PATHFINDER 2 studies as well as additional analyses from our extensive clinical program. Operator, we can now go to Q&A.

[Operator Instructions] Our first question will come from Subbu Nambi with Guggenheim.

As you anticipate an FDA AdCom in the fall, where do you think the FDA will focus on? Like what type of questions? And how are you preparing for those questions?

So we are obviously getting ready and preparing internally. We don't know the nature of any of that information at this time, but we should -- obviously, we'll be informed about that as the time approaches. We're waiting to hear something from the FDA as it relates to timing.

Okay. That's helpful. And then given all the leadership changes at the FDA and the delays we have seen recently when it comes to finding the right panelists for AdComs, is there a risk this meeting pushes into next year at all? I know it's an unfair question.

Well, it's fine. We don't know the answer to that question. We know that the division that we're working with has been fairly stable at the FDA, which has been very, very positive and productive. And we continue our iterative review with them. But I couldn't really comment on their ability to find experts.

Okay. Can I squeeze one more? Would you expect CMS to wait for an FDA approval before better defining the NCD criteria for an MCED test?

Again, it's a good question. I'd be speculating if I try to answer it. We do know that CMS' coverage authority is only for FDA-approved products. So our assumption has been that they would only undertake a national coverage analysis upon an FDA approval. Whether they're going to set specific coverage criteria is unknown.

Our next question will come from Kyle Mikson with Canaccord Genuity.

Yes, following up on Subbu's questions about FDA. So maybe, Josh, like it wasn't clear to me what the specific communication with the FDA was for you to now anticipate the meeting AdCom in the fall. So if you could talk about that, that would be helpful. And then additionally, in the past, you've talked about like an early '27 sort of approval time line. Let's say this is like mid-fall or something. How would that affect your new time line for FDA approval?

No. We have long stated publicly that we would anticipate that a groundbreaking technology like an MCED test like Galleri that is really changing the potential cancer screening paradigm would get an advisory panel. And we continue to believe that. There's no specific information that's been made public yet from the FDA about that, but we certainly are anticipating that an AdCom would occur. The timing of it has not been made public yet. So that's still to come. And our current anticipation for potential approval as it relates to timing remains unchanged. We would expect it to occur in the first part of 2027.

Perfect. And then on competition, you called that out, that's interesting. It doesn't seem like there's been a volume impact, but how is that impacting your pricing? It looks like ASP in the quarter was $700 or something around there. And then kind of on that note, I think USPSTF is meeting later this month. Could they possibly talk about MCED at that meeting? Or how do you think that progresses given it's more noise in the marketplace than some of these other entrants recently?

Yes, it's a fair question. Let me take your second question, and then I'll have Andy address your first. As it relates to U.S. PSTF, I think there's just a lot that's unknown right now about the USPSTF. It's unknown what its composition is going to be, what its focus will be. And I think without -- before there's an FDA-approved product on the market, it's, in my mind, less likely that they're going to take MCEDs up irrespective of the amount of noise that's in the market or not. But there's just a lot of unknown about the USPSTF and its mandate at this time. Your first question, which was about the impact of competition on our pricing, I'm going to let Andy discuss that.

Yes. I think the -- first of all, the ASP decrease in second quarter '26 was the result of expansion of digital health volume and also lower employer pricing, which was planned. That reduced employer pricing has come along with the benefit of strengthened partnerships with those employers such as specific marketing commitments and blood draw events. In terms of competition, there's definitely been some active competition that we've seen that has been stepped up, as I'm sure you've also seen. It has been causing some customer confusion in the market, given, as Josh outlined earlier, these what we would call experimental MCEDs do not have data in the screening population. So many of their performance characteristics are unknown to those prescribing physicians. They also have higher false positive rates. So what we're seeing with physicians that have experimented with some of these MCEDs is quite a bit of confusion due to these higher false positive rates and unclear performance characteristics. That's something that our sales team are following up with those customers to reinforce Galleri's extensive clinical program that we've conducted and the clinical results that we've presented and published. And as Josh said, the initial reactions from these conversations where we followed up with our customers with the data that was presented at ASCO for both PATHFINDER 2 and NHS-Galleri has been very promising and very favorably received.

That's great, Andy. I would just add one other thing. The noise that's been interjected into the market, we expect that our anticipation is that we will have an FDA approval, and that will create a bifurcation in the market and clear up a lot of that noise. We expect the market really to evolve one side with Galleri as a well-validated and potentially FDA-approved MCED and then the other side of the market with the other MCEDs that are still, quite frankly, in development with unknown risk-benefit profiles in the intended use population. And so they'd be considered very experimental. So we see that bifurcation coming, and we look forward to executing upon it.

Our next question will come from Bradley Bowers with Mizuho.

Maybe just wanted to click on the sales force expansion, obviously, a pull forward of some of the costs. Just wanted to hear about why the timing is right. Seemingly the first part of 2027 timeline seems coincident with expected productivity ramp. But also just wanted to hear about if you knew about the AdCom scenario from the FDA kind of when you allocated the size and if this is kind of the max sales force used up?

Yes, we pulled forward the sales force expansion really on the back of the NHS-Galleri and PATHFINDER 2 data that we announced earlier in the year. given how excited we were with both sets of that data. That sales force expansion is essentially complete now. Those sales members are now in the field. We expect to see the true benefit of that additional sales force horsepower as we go through the rest of the year. And the other reason that we did this is to have those new salespeople in territory, all trained so that they can truly meet the moment of FDA approval, as Josh outlined, as this is going to be a landmark event for GRAIL, really establishing Galleri as the gold standard MCED.

Got it. And just real quick, would you give a number just because of competitors we do know a lot of them. And then just actually totally switching gears. On the panel, do you think this would make it may be easier or harder for the incremental MCED test, asking just because the government initiative right now seems to be just trying to ease the pathway towards getting MCED tests, adding more to the market. But obviously, the panel would be kind of differentiated. So I wanted to hear if you think it would be kind of a competitive advantage, kind of an extra barrier to entry or if it might have the adverse effect of making it easier for other MCEDs down the line?

Just to clarify, when you say a panel, do you mean an advisory committee panel?

Sorry, I apologize. Yes, this fall, the meeting this fall.

Yes. No, an AdCom, look, the reason we expect an AdCom is because typically, when the FDA reviews a kind of groundbreaking pioneering type of technology, particularly one that could have this kind of impact on public health that is really paradigm changing. They typically hold an AdCom because they want to get advice from other experts. The AdCom will be completely about Galleri. It will not be about the field of MCEDs. It won't be about other MCEDs. It will be just about our data package that we submitted to the FDA. So we don't really view it as a competitive advantage or disadvantage. We view it as part of the FDA approval process for a groundbreaking technology like Galleri. I mean to your further question, I don't think that, that has necessarily any bearing on whether there will be AdComs for future MCEDs. And I don't see any MCEDs right now even on the horizon and doing registrational trials or anything like that. So it's really hard to say.

Yes. And I think just building on Josh's point, what the AdCom and the FDA approval is going to do is establish that approval bar for future MCEDs. And that's why we're excited for this panel and for the anticipated FDA approval that it is going to set that bar for future MCEDs coming forward.