00:15:14 · Mark Jacobstein
[00:15:14] S1: cool that it's actually happened and sort of remarkable that it essentially happened, I think, on the timelines that you guys laid out in 2012. Some other things didn't actually happen. We just... We were just talking about in there, I'd I'd never heard this story before that the first version of this was gonna be with Amplicons, and you decided that that's that's not good. Talk about some of the early choices you made that were the wrong choices and pivots that you had to make along the way to sort of rescue the business. Because, I mean, there's always some really important things that happen, I think, in the first few years that you look back on them and things could have gone the other way.
00:15:45 · Helmy Eltoukhy
[00:15:45] S0: Yeah, mean, as you said, the first version of the technology we developed was one that we realized, I think, a little bit too late that it wasn't going to scale to where we wanted it to go, and so we made the difficult decision of scrapping it, starting over, and you have investors, you have dwindling cash, you have all these things, and I think it was a hard decision, but one that, in the end, ultimately proved to be the right decision. So that was one for sure that was not easy. There's one that where things were going right, and this is probably something that a lot of companies deal with, that where you have product market fit, you see things scaling. So this is 2015. We had launched just in 2014 the 360, the first test, and things were scaling really rapidly. The volumes were amazing. We were essentially, I think, taking our largest competitor at the time was Foundation Medicine. They were on the tissue side. We were on the blood side. We heard an earnings call that, they missed because of competitive noise, so we were very flattered that we were considered competitive noise in the space, and unfortunately, we didn't have the strength in our reimbursement team that we did now. So we were missing our numbers in terms of the sort of reimbursement amounts that we're getting. So we're doing too much volume, we weren't getting paid enough, and so our burn was sort of increasing, and so we made the difficult decision to sort of have a rift in our sales team, so we said, Let's pull back. This is growing too fast, and I would say that that decision probably lost us at least eighteen months of market share in terms of where we could have been if we hadn't stopped. It's very hard to sort of turn things off and turn them back on, and you end up losing a lot more than I think. And it basically gave competitors time to come in, the market froze a little bit. So in retrospect, it was probably the wrong decision.
00:18:00 · Mark Jacobstein
[00:18:00] S1: Although, in some ways, actually, maybe I actually think of that as an entrepreneur. It's actually, you made a really hard but important and right decision, which was like not to burn the cap. I mean, you guys had demonstrated the ability to raise a lot of money, but not an infinite amount of money. Points to something else I wanna talk about in Guardant's business. For better or for worse, it's an incredibly complicated business. I love businesses like a WhatsApp where you have to do like a single thing right. In healthcare, as we were talking about in the other room, you need the right science, but you also need to execute on the product side and on the lab ops side and on the marketing side and on the sales side and on the reimbursement side. And I'm curious how you none of that is related to building a business like Guardant. So I'm curious, like, how'd you learn that? Regrets or anything along the way, lessons along the way for people in this room? Most of the people in this room are like frontier builders. There's a lot of PhD, a lot of scientists in the room, a lot of frontier builders, many trying to build their first businesses. And I'm sort of curious, how'd you learn how to run all these other parts of the business? Any important lessons along the way?
00:19:07 · Helmy Eltoukhy
[00:19:07] S0: Yeah, so the healthcare, I mean, diagnostics is a tough business. It's in most other areas that are not regulated, the consumer side, tech side, build it and you ship it. It's kind of pretty simple. Here, I mean, it's not saying it's simple, obviously there's complicated stuff that goes into that, but here you have to build it, you have to validate it, you have to there's turnaround time like concerns, there's regulatory approvals, reimbursement, there's physician education, then there's selling it, and it's a weird sort of space too in the sense that the person deciding to use your device doesn't pay for it. So like health economics doesn't work the same way in terms of like demand supply or like price elasticity, and so a lot of people come into this market and they say, Oh, I'm gonna price it 10x lower than everyone else. Every one of those companies that has done that doesn't exist anymore because they basically have just imploded their gross margins, have no money for R and D, and can't compete with the other companies. So you have to kind of understand the space you're playing in. So I think a lot of it comes from just not sort of taking cookie cutter principles from one field and applying them to another. It's really understanding from first principles what drives the specific areas, like what drives consumer adoption, what drives payer adoption, all those pieces. And then it's hiring the best people in each of these areas. Don't know half as much as my teammates and colleagues at the company in each one of those domains, but look, it's common sense. Everyone's a smart person here. You can tell who knows something and who doesn't. And so it's building that really strong team and understanding that you do need that expertise in five or six different areas. That's why these are expensive companies because you need that expertise in six or seven different areas to be around the table to be able to understand things. And maybe the last thing I'll say is that I don't think enough credit is given to the importance of sort of business model innovation in healthcare. I would say it is maybe more important than sort of technological innovation.
00:21:30 · Mark Jacobstein
[00:21:30] S1: I always thought that was actually true at Guardant. I mean, it was interesting because we had the best tech I'm not a public company CEO, so I can say these things definitively. But like, Guardant definitely had the best technology. It also didn't matter that much. Like, it mattered a little, and it helped with our KOL relationships and meta fairs. But the reason Guardant One was pushing on six or seven or eight different axes, not just on the technical innovation side, including the sort of business model. So I'm curious actually, are the business model innovations that you would describe, for example, that happened in the early years that were successful?
00:22:04 · Helmy Eltoukhy
[00:22:04] S0: I would say that a lot of it I think we sort of inherited in some ways. It wasn't that long before us that essentially whole mechanisms for reimbursement for these more expensive precision medicine tests sort of came into being, and so without sort of that happening or that foundation, like, you know, Guardant wouldn't exist, and we are sort of beneficiaries of all that work that had been done by Genomic Health and other companies like before us. I would say that maybe the area where we have innovated is sort of international expansion where, just like The US has its own model, I think the mistake that companies make is sort of taking The US model and applying it to every other country in a cookie cutter kind of way. And what we found in Europe, something that actually works really well, is this public private partnership model where essentially we go in and we say, Okay, here are the keys to the technology. You guys help us run it. We partner with the top sort of cancer center there. Because they're also part of the of the national health system in some ways, they're able to sort of go to bat and say that, okay, this is great technology, let's try to get it reimbursed, let's do all the pilot data, all the clinical studies. And so from, even though the prices may be different in terms of how those prices, those tests are reimbursed, from a sort of P and L perspective, it's still, I think, sustainable and very viable for a business model. And so it's finding out how to take the technology and fit it in different ways so that it fits the healthcare system there. I think that is something that, you know, it wasn't obvious from day one. It took us probably five or seven years to figure out, but is working really well now.