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Natera Buoyed by Favorable Regulatory and Legal Decisions, Strong Research Pipeline


NEW YORK – Natera sees itself well positioned to be a market leader throughout the new year, thanks to a variety of factors that include strong sales, guideline inclusion of its women's health products, additional coverage for Signatera, and the completion of several key clinical studies.

Propelled by these tailwinds, along with strong product revenue growth, the Austin, Texas-based firm reported on Wednesday that its fourth quarter revenues grew 43 percent year over year, while its full-year 2023 revenues rose 32 percent compared to 2022.

"I don't think we've ever been in a stronger start to the year," Natera CFO Mike Brophy said on a Wednesday conference call with investors.

Natera is beginning the year with expanded Medicare coverage for its Signatera minimum residual disease test as the company announced earlier this week that the assay had met coverage requirements for CMS's Molecular Diagnostic Services Program (MolDx) for ovarian cancer in the adjuvant and surveillance settings and breast cancer in the neoadjuvant setting.

"These coverage determinations are a great way to start the year, especially as biomarker legislation kicks in across multiple states," Alexey Aleshin, the firm's chief medical officer, said on the call.

Some 14 US states have recently enacted laws mandating broad insurance coverage for biomarker tests, which Brophy called a "catalyst" for driving commercial coverage for Signatera higher in those states.

Another growth catalyst the firm pointed to was its array of ongoing clinical trials, which have been instrumental as the firm seeks guideline inclusion and builds trust and confidence among providers. The prospective SMART trial, for instance, has enrolled over 20,000 women, who have now been screened with Natera's Panorama cell-free DNA (cfDNA) test, and of whom nearly 88 percent reported confirmed outcomes. Throughout the trial, Panorama has demonstrated approximately 83 percent sensitivity and overall positive predictive value of close to 53 percent, rising to 100 percent among cases with accompanying ultrasound findings.

"We think this SMART trial represents the gold standard in clinical validation," said Solomon Moshkevich, president of clinical diagnostics at Natera, adding that he believes the trial will eventually result in 22q11.2, the biomarker for the 22q11.2 deletion syndrome, getting accepted into clinical guidelines.

Meanwhile, Natera's women's health business got an additional boost from the company's recent acquisition of certain reproductive health assets from Invitae, which declared bankruptcy last week.

"We're finding that quite a few of the new transitioning Invitae accounts have a strong mix of broad [carrier] panels," Moshkevich said, adding that Natera plans to launch a 613-gene carrier screening panel in the near future.

Brophy said that the Invitae accounts that Natera has assumed have contributed only modestly to the firm's testing volume, but that things are picking up and Natera should have more clarity on account retention in the coming months.

In the hereditary cancer arena, Natera will report on the ALTAIR study, which evaluates Signatera's utility in colorectal cancer patients as part of the broader CIRCULATE-Japan trial. The company expects to read out top-line results of its ALTAIR study in the third quarter of this year and to publish it before the year's end.

"If the study is positive," Brophy said, "we expect it to be practice changing."

Natera has been investing heavily in its R&D with respect to these and other clinical studies over the past few years, and now with so many underway and beginning to be completed, the firm anticipates smaller operating expenditures moving forward.

"We invested heavily to build the critical infrastructure needed to rapidly scale the business," Brophy said, "and we believe we're positioned to drive significant future innovation with relatively modest increases in operating expenses from our current levels."

Added Natera CEO Steve Chapman, "One of the reasons why we're in a leadership position today is because we've done that hard work. We generated these studies. We've spent now five or six years working on some of these trials."

The net result of those investments, Chapman said, "is that we cut our Q4 loss per share by more than half compared to Q4 2022 and now have clear line of sight to a cash flow breakeven quarter."

Full-year net loss fell to $434.8 million, or $3.78 per share, from $547.8 million, or $5.57 per share, in 2022. Analysts' average estimate was a loss per share of $3.86.

Finally, Chapman noted that Natera's successful defense of its patent portfolio over the past year has contributed to the firm's continued position of strength in a highly competitive market.

"As we look to the future," he said, "we think the tumor-informed MRD companies are the real competitors here."

One of those competitors is NeoGenomics, whom Natera sued in July, alleging that the company's Radar MRD assay infringes two of Natera's patents related to its own Signatera MRD assay. A judge in the US District Court for the Middle District of North Carolina last week enjoined NeoGenomics from "making, using, selling, or offering for sale in the US" the Radar assay.

Natera won additional judgements in patent litigation cases against CareDx, Invitae, and ArcherDx. Nonetheless, a federal court determined last month that Natera had infringed on patents owned by Ravgen and related to prenatal screening assays, and awarded Ravgen $57 million in damages.

In response to a question about whether Natera felt concerned about competitors planning multiple product launches over the year, Moshkevich stated that it is "extremely unlikely" that once an individual has a personalized assay designed specifically for them, they would then move to another company or lab to have a new personalized assay designed.

"Once a Signatera patient, always a Signatera patient," he said.

Nonetheless, Moshkevich stressed that the company is not resting on its heels and intends to continue "pushing the boundaries with clinical validity and utility."

"We're planning to put out multiple new features and enhancements and MRD-related products over the next 12 to 24 months" he said, "and we've got a ton invested in clinical trials."

Q4 and FY2023 financial results

The company's rosy assessment moving forward comes on the heels of robust financial results it reported on Wednesday. In the fourth quarter, Natera's revenues rose 43 percent to $311.1 million compared to $217.3 million for the same quarter in 2022, exceeding the analysts' average estimate of approximately $285.6 million. 

Product revenues were the main growth driver, rising approximately 44 percent to $307.3 million for the fourth quarter, compared to $212.9 million in the same quarter last year. The company said it performed about 97,500 oncology tests during Q4 2023 compared to 64,000 a year ago.

Natera's Q4 total operating expenses, including R&D and SG&A rose approximately 5 percent to $244.4 million from $231.7 million a year ago.

Its fourth quarter net loss fell to $78 million, or $.65 per share, from $142.6 million, or $1.37 per share, in the same quarter a year ago. It beat the consensus Wall Street estimate of a loss per share of $.73.

Full-year revenues rose approximately 32 percent, reaching $1.08 billion, compared to $820.2 million in 2022 and above the analysts' average estimate of $1.06 billion. During 2023, it performed about 340,700 oncology tests, up from 196,400 in 2022.

The company's full-year R&D spending rose approximately 1 percent to $320.7 million from $316.4 million in 2022, while its SG&A expenses rose approximately 5 percent to $618.3 million from $588.6 million a year earlier.

Full-year net loss fell to $434.8 million, or $3.78 per share, from $547.8 million, or $5.57 per share in 2022. The analysts' average estimate was a loss per share of $3.86.

Natera finished the year with $642.1 million in cash and cash equivalents and $236.9 million in short-term investments.

The company said it anticipates full-year 2024 revenue within the range of $1.32 billion to $1.35 billion.