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Natera Q1 Revenues Grow 41 Percent

NEW YORK – Natera said after the close of the market on Wednesday that its first quarter revenues increased 41 percent over Q1 2019.

Last month, the company said it expected a 35 percent year-over-year increase in revenues for the quarter.

For the quarter ended March 31, Natera reported $94 million in revenues, up from $66.8 million a year ago and beating analysts' consensus estimate of $85 million.

These results represent "by far the best quarter we have ever had as a company," said CEO Steve Chapman in a conference call to discuss the firm's financial results, adding that "Q1 saw the largest sequential quarter-on-quarter unit growth in the company's history despite the disruption in March from COVID-19."

Product revenues totaled $87.0 million, up 37 percent from $63.4 million last year, and license and other revenues were $7.0 million, doubling from $3.5 million a year ago.

The company processed approximately 235,500 tests in Q1, including 222,400 tests accessioned in its own laboratory, compared to 200,200 tests processed in Q1 2019, including 186,500 tests accessioned in its own lab.

Chapman said that following the start of the COVID-19 pandemic, Natera quickly implemented safety protocols in its laboratory, which has operated without disruptions, and increased remote ordering capabilities for patients and physicians. Doctors can order tests online and patients can have their blood drawn at home. "The ability to maintain high-quality monitoring of patients away from medical facilities expands the clinical utility of our suite of tests to help patients get the care they need during this crisis," he said.

While test orders, in particular from in vitro fertilization clinics, dropped about 15 percent in the last two weeks in March compared to the average of the previous 10 weeks, orders have been increasing again in April, he said.

Chapman noted that in response to the pandemic, the Society for Maternal-Fetal Medicine released updated practice guidelines suggesting that physicians could consider noninvasive prenatal cell-free DNA testing instead of ultrasounds for pregnant women. Following that, he said, Aetna started temporarily covering NIPT for all pregnancies, adding more than 20 million covered lives for Natera's Panorama test.

The firm has also enrolled 145 patients so far in its ProActive registry trial for its Prospera transplant test for kidney transplant rejection. In addition, 45 percent of the top 50 transplant centers and 37 percent of the top 100 centers have placed orders for the test, Chapman said.

Natera's R&D expenses climbed to $18.2 million, up 60 percent from $11.4 million in Q1 2019, while SG&A costs increased 50 percent to $65.7 million from $43.8 million a year ago.

Natera reported a net loss of $35.4 million, or $.45 per share, for the quarter compared to a net less of $34.1 million, or $.54 per share, last year, beating the Wall Street average estimate of a net loss of $.56 per share.

In April, the company raised $278.9 million in net proceeds from issuing convertible senior notes due 2027. It used about $79 million of this to repay its obligations under the 2017 term loan with OrbiMed Advisors.

Natera ended the quarter with $74.1 million in cash and cash equivalents and $331.7 million in short-term investments.

On Thursday, investment bank JP Morgan upgraded Natera's stock to an Outperform rating from a Neutral rating. In a research note, analysts Tycho Peterson and colleagues wrote that Aetna's decision to temporarily cover NIPT in all pregnancies decreases Natera's risk in that market, adding that they are "increasingly optimistic on the early, but promising, pipeline" of products Natera has in transplant and cancer diagnostics.

In Thursday morning trading on the Nasdaq, Natera shares were up 16 percent at $41.56.