Grail, Inc.(GRAL) - 2024 Q2 - Quarterly Results

Financial & Business Highlights GRAIL reported strong Q2 2024 revenue growth and significant clinical trial progress, despite a substantial net loss due to impairment charges Q2 2024 Financial Performance GRAIL reported strong revenue growth of 43% year-over-year to $32.0 million for the second quarter of 2024, but recorded a significant net loss of $(1.59) billion primarily due to a $1.42 billion impairment charge Q2 2024 Financial Highlights (vs. Q2 2023) | Financial Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $32.0 million | $22.4 million | +43% | | Gross Loss (GAAP) | $(17.9) million | $(24.3) million | +26% improvement | | Net Loss (GAAP) | $(1.59) billion | $(193.0) million | +721% increase | | Adjusted Gross Profit (Non-GAAP) | $16.0 million | $9.6 million | +66% | | Adjusted EBITDA (Non-GAAP) | $(139.4) million | $(136.5) million | -2% | - The significant increase in net loss was primarily driven by a goodwill and intangible impairment charge of $1.42 billion[3] - As of June 30, 2024, cash and cash equivalents totaled $958.8 million[3] - This is the company's first quarterly report as an independent public company following its separation from Illumina on June 24, 2024, with over 215,000 Galleri® tests sold as of June 30[2] Recent Business Highlights GRAIL has achieved significant milestones in its major clinical trials, including commencing enrollment for REACH and completing enrollment for PATHFINDER 2 and final visits for NHS-Galleri - Began enrollment in the REACH (Galleri-Medicare) study, which will enroll 50,000 individuals from the Medicare population to provide clinical validation and utility data[4] - Completed enrollment of over 35,000 participants in the registrational PATHFINDER 2 study, evaluating Galleri's safety and performance in individuals aged 50 and older[4] - Completed final study visits for the NHS-Galleri trial, a large-scale randomized controlled trial with over 140,000 participants in the UK[4] Strategic Update & Outlook GRAIL is implementing a corporate restructure to prioritize core MCED initiatives, reducing costs and extending its financial runway into 2028 Portfolio Prioritization and Corporate Restructure Following a portfolio review, GRAIL is implementing a corporate restructure to focus resources on its core multi-cancer early detection (MCED) priorities, particularly the Galleri test - The company is reducing overall spending to focus on core MCED priorities, including completing registrational studies and the premarket approval (PMA) application submission for Galleri[5] - Restructuring includes a reduction of approximately 30% in existing headcount and planned hires for 2024[6] - Commercial operations will be refocused on the most productive provider territories, with streamlined investments in the enterprise business (employer and life insurance)[6] - Investment in biopharmaceutical partnerships will continue, leveraging GRAIL's methylation technology for precision oncology applications[6] Financial Outlook The strategic cost reductions are projected to significantly improve GRAIL's financial runway, extending it from the second half of 2026 into 2028 - The cost reduction measures are expected to extend the company's cash runway from H2 2026 into 2028[7] - The company anticipates reducing its cash burn to $325 million in 2025[7] - Expected savings in 2024 are $27 million, net of anticipated severance and benefits costs[7] Financial Statements & Reconciliations This section provides detailed financial statements including balance sheets, income statements, cash flow statements, and reconciliations of GAAP to non-GAAP financial metrics Condensed Consolidated Balance Sheets As of June 30, 2024, GRAIL's total assets were $3.27 billion, a decrease from $3.91 billion at the end of 2023, largely due to the complete impairment of goodwill Selected Balance Sheet Data (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $958,845 | $97,287 | | Intangibles assets, net | $2,086,056 | $2,687,223 | | Goodwill | $0 | $888,936 | | Total assets | $3,269,640 | $3,913,814 | | Total liabilities | $574,513 | $267,627 | | Total stockholders' equity | $2,695,127 | $3,646,187 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2024, GRAIL generated $32.0 million in total revenue, a 43% increase, but reported a net loss of $(1.59) billion primarily due to a $1.42 billion impairment charge Statement of Operations Summary - Three Months Ended (in thousands, except per share data) | Account | June 30, 2024 | July 2, 2023 | | :--- | :--- | :--- | | Total revenue | $31,970 | $22,414 | | Goodwill and intangible impairment | $1,420,936 | $0 | | Loss from operations | $(1,641,291) | $(204,367) | | Net loss | $(1,585,337) | $(193,044) | | Net loss per share | $(51.06) | $(6.22) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash used in operating activities was $(379.1) million, with a net increase in cash of $861.3 million primarily from financing activities, ending with $962.8 million in cash Cash Flow Summary - Six Months Ended (in thousands) | Activity | June 30, 2024 | July 2, 2023 | | :--- | :--- | :--- | | Net cash used by operating activities | $(379,085) | $(309,391) | | Net cash used by investing activities | $(3,934) | $(5,923) | | Net cash provided by financing activities | $1,244,300 | $303,775 | | Net increase (decrease) in cash | $861,251 | $(11,282) | | Cash, cash equivalents and restricted cash — end of period | $962,763 | $234,846 | Reconciliation of GAAP to Non-GAAP Financial Measures This section details the adjustments made to arrive at non-GAAP metrics, such as Adjusted Gross Profit and Adjusted EBITDA, by excluding specific non-cash or non-recurring expenses for comparable operational performance assessment - Adjusted Gross Profit is used by management to assess operational performance by excluding indirect costs, amortization, and stock-based compensation from the cost of revenue[16][17] - Adjusted EBITDA is used to assess financial performance and for internal planning, providing a comparable overview by excluding items like capital structure, tax rates, and certain non-cash or non-recurring expenses[18][19] Reconciliation to Adjusted Gross Profit For Q2 2024, a GAAP gross loss of $(17.9) million was reconciled to a non-GAAP Adjusted Gross Profit of $16.0 million, representing a 66% increase from Q2 2023 Reconciliation to Adjusted Gross Profit - Three Months Ended (in thousands) | Line Item | June 30, 2024 | July 2, 2023 | | :--- | :--- | :--- | | Gross loss (GAAP) | $(17,912) | $(24,278) | | Amortization of intangible assets | $33,472 | $33,472 | | Stock-based compensation | $463 | $450 | | Adjusted Gross Profit (Non-GAAP) | $16,023 | $9,644 | Reconciliation to Adjusted EBITDA For Q2 2024, the GAAP net loss of $(1.59) billion was reconciled to a non-GAAP Adjusted EBITDA of $(139.4) million, with the largest adjustment being the exclusion of the $1.42 billion impairment charge Reconciliation to Adjusted EBITDA - Three Months Ended (in thousands) | Line Item | June 30, 2024 | July 2, 2023 | | :--- | :--- | :--- | | Net loss (GAAP) | $(1,585,337) | $(193,044) | | Goodwill and intangible impairment | $1,420,936 | $0 | | Benefit from income tax expense | $(53,144) | $(9,796) | | Amortization of intangible assets | $34,583 | $34,583 | | Stock-based compensation | $25,947 | $25,548 | | Other adjustments (Interest, D&A, etc.) | $17,624 | $6,162 | | Adjusted EBITDA (Non-GAAP) | $(139,391) | $(136,545) |