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.
00:24:03 · Mark Jacobstein
[00:24:03] S1: I think another interesting example there was actually the pharma business. Daniel Simon says hello. He could not be here today. But in the very early days, there was no pharma business, right? It was a consulting project to see if there was even any pharma demand. And obviously, I don't know if you want talk about how that played out, but that felt like a pretty innovative strategy as well.
00:24:25 · Helmy Eltoukhy
[00:24:25] S0: Yeah, I would say that that's something that a lot of companies struggle with. We did, too. We said, pharma market's an important market, but it's not a $10,000,000,000 it's not a $50,000,000,000 TAM. It's a much smaller TAM. So we said, is that a distraction? Should we just focus on the clinical markets, which are the sort of bogey that we're going after, is everything else a distraction? You know we actually straddled the fence between the two and we found that working with pharma made us better. It was frankly a nice source of high gross margin sort of non dilutive funding in some ways, but we learned a lot. If you think about the market, it's, you know, you think about pharma and clinical trials, it's sort of the pre commercialization, pre commercial drug sort of side of things. So it became a leading indicator for us if we knew that they were buying signals on the pharma side, they were likely to be sort of buying signals on the clinical side as well. It allowed us to test other things much more quickly as well, so it's become, I think, a strong component of how we develop new products, how we sort of validate them, and so on. And, you know, we work with 200 pharma companies now, and yeah, they've made us, I would say, their partnership has made us better.