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Natera Q4, Full-Year Revenues Rise on Increased Product Sales, Test Volume

NEW YORK – Natera reported after the close of market Tuesday year-over-year revenue gains of approximately 26 percent for the fourth quarter of 2022 and 31 percent for the full year.

The Austin, Texas-based company finished the three months ended Dec. 31 with $217.3 million in revenues compared to $173 million for the same quarter of 2021, narrowly beating analysts' average estimate of approximately $215.6 million.

The firm attributed most of the increase to greater product sales, which rose approximately 28 percent in Q4 2022 to $212.9 million from $166.1 million in Q4 of 2021. Test volumes rose by nearly 28 percent year over year to approximately 559,700 tests in Q4 2022 compared to approximately 438,800 tests in the same quarter of 2021.

In a conference call with analysts and investors following the release of the results, Natera General Manager of Oncology Solomon Moshkevich attributed the growth in test volume to new patients, follow-on tests for existing patients, and new ordering providers.

He suggested that Signatera, the firm's minimal residual disease test, may enjoy a "unique competitive advantage," adding, "We think a Signatera patient with an existing personalized assay is unlikely to switch to another [minimal residual disease] test." In addition, "since our ordering providers will usually have a cohort of existing Signatera patients who are doing ongoing monitoring, it makes it challenging to bring another MRD lab into the physician's practice."

Just a couple of weeks ago, Natera received expanded Medicare coverage for Signatera for adjuvant and recurrence monitoring in patients with stage IIb or higher breast cancer. But while Moshkevich said that 3.5 million tests per year are now addressable and covered by Medicare, Natera is now focused on expanding private coverage.

Moshkevich also said that although the firm expects greater physician adoption of Signatera in colorectal cancer, following the firm's publication of the CIRCULATE-Japan study in January of last year, the timing of publication is such that the company does not know if its evidence has been incorporated by the NCCN committee this round.

Moshkevich added that the prospective and predictive nature of the CIRCULATE-Japan study takes the evidence in favor of Signatera beyond sensitivity and specificity into improved outcomes.

The firm's net loss for the quarter rose to $142.6 million, or $1.37 per share, from $140.6 million, or $1.48 per share, in the fourth quarter of 2021. It beat the average Wall Street estimate for a loss of $1.42 per share.

Natera reported approximately $820.2 million in revenues for 2022, up 31 percent from $625.5 million in 2021 and edging past analysts' consensus estimate of $819.1 million. It processed nearly 2.1 million tests during the year versus around 1.6 million the previous year.

The company's full-year R&D spending shot up nearly 20 percent to $316.4 million from $264.2 million in 2021, while its SG&A expenses rose approximately 16 percent to $588.6 million from $511 million a year earlier.

Its full-year net loss rose to $547.8 million, or $5.57 per share, from $471.7 million, or $5.21 per share, in 2021. Analysts, on average, had expected a FY 2022 net loss of $5.63 per share.

CFO Mike Brophy commented on the call that the firm expects to reduce its 2023 operating expenses by roughly $45 million. "We've built strong leadership positions in each of our areas of focus that can now drive sustainable future growth without continuing to increase operating expenses," he said.

He added that Natera expects to reduce its 2023 cash burn by roughly $150 million.

In early morning trading on the Nasdaq, Natera's stock was up approximately 6 percent, at $51.34 per share.

"We've also been making good progress and collecting on some of the accounts receivable generated during the rapid growth we experienced last year," Brophy said, noting that the firm has already collected approximately $40 million of $50 million in cash collection backlogs.

Natera CEO Steve Chapman said on the call that despite an injunction against the California Department of Public Health that enables Natera to continue offering trisomy screening to California residents, the firm still sees the pending legal case as a significant headwind with respect to Natera's margins. "As we progress through the year, we'll continue to give you updates," he added.

Natera finished the year with approximately $898.4 million in cash, cash equivalents, short-term investments, and restricted cash.

The company said it anticipates full-year 2023 revenue in the range of $980 million to $1 billion.

"This will require us to continue to deliver strong volume growth across all of our focus areas; that includes some caution on advancing average selling prices," Brophy said.