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Natera Q2 Revenues Grow 64 Percent

NEW YORK – Natera reported after the close of the market on Thursday that its second quarter revenues rose 64 percent year over year, driven by an increase in test volume and product revenues.

For the three months ended June 30, the genetic testing company reported total revenues of $142.0 million, up from $86.5 million during the same period a year ago and beating the average Wall Street estimate of $127.5 million.

Product revenues for the quarter rose 71 percent to $137.2 million from $80.4 million in Q2 2020, driven by an increase in test volumes, the company said. Licensing and other revenues dropped 21 percent to $4.8 million from $6.1 million in the prior-year quarter.

"The second quarter of 2021 was the fastest year-on-year growth quarter in our history as a publicly traded company," Natera CEO Steve Chapman said in a statement. "Our volumes continued to accelerate, and we expanded our market opportunity with positive new data in both organ health and oncology. As a result of our Q2 performance and the current momentum in the business, we are increasing our revenue guidance for a second time this year."

On a conference call with analysts following the release of the earnings, Chapman said the growth in product revenues is being driven by the women's health, oncology, and transplant businesses, adding that those businesses are now large enough to meaningfully contribute to the company and "shift the growth rate upward."

He also highlighted a new Phase III study that Natera is undertaking with GlaxoSmithKline that uses its personalized, tumor-informed molecular residual disease test Signatera to identify early-stage breast cancer patients eligible for investigational treatment with GSK's PARP inhibitor niraparib (Zejula).

Based on the results of this study, the breast cancer indication could potentially be added to Signatera's label, he said. The first of 800 patients has now been screened.

Chapman also noted that the Centers for Medicare & Medicaid Services granted Advanced Diagnostic Laboratory Test status to Signatera during Q2, raising the Medicare reimbursement rate to $3,500 per test from the previous rate of $795 for recurrence monitoring.

Including all the near-term indications that Natera is currently pursuing for Signatera and in which it has generated data showing use cases for the test, Chapman said the company estimates the market opportunity to be about 4 million tests per year. He also noted that the firm is conducting testing for additional indications in the midterm that could add up to another 9 million tests per year, for a total potential market opportunity of 13 million tests per year.

Natera processed approximately 375,700 tests in Q2, a 61 percent increase compared to the 234,100 tests the company processed in Q2 2020. About 361,500 tests were accessioned in the firm's laboratory, up from 234,100 in the second quarter of 2020. Natera recognized revenue on approximately 355,700 tests in Q2 for which results were reported to customers, including approximately 342,500 tests reported from its laboratory. This was an increase of 62 percent over the 220,100 tests for which the company recognized revenue in Q2 2020, including approximately 208,400 tests reported from its laboratory.

The firm's Q2 net loss widened to $116.0 million, or $1.32 per share, from $59.6 million, or $.75 per share, in Q2 2020, missing the analyst consensus expectation for a net loss of $1.08 per share.

Natera's Q2 R&D costs rose 134 percent to $53.8 million from $23.0 million in the year-ago quarter, and its SG&A expenses rose 87 percent to $127.5 million from $68.2 million.

The company ended the quarter with $62.8 million in cash and cash equivalents, $228,000 in restricted cash, and $517.4 million in short-term investments.

Natera raised its 2021 revenue forecast and now anticipates revenues of $600 million to $620 million, up from its previous forecast of $550 million to $575 million for the year. Analysts, on average, expect revenues of $567.6 million for 2021.

On the conference call, Natera CFO Mike Brophy noted that the increased revenue guidance is a result of the growth in testing volumes that has exceeded the company's expectations.

The firm's shares fell less than 1 percent to $118.79 in Friday morning trading on the Nasdaq.

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