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Natera Q3 Revenues Up 26 Percent on Increased Testing Volumes

NEW YORK – Natera said on Thursday after the close of the market that its third quarter revenues grew 26 percent year over year, driven by an overall increase in testing volumes, particularly in reproductive health.

Revenues for the three months ended Sept. 30 totaled $98.1 million, up from $77.9 million a year ago and besting the average Wall Street estimate of $87.2 million.

"Q3 was an exceptional quarter," said CEO Steve Chapman in a statement. "After years of hard work, we're now seeing the new businesses contribute to our strong revenue growth. We are very excited about our current trajectory and are significantly raising our 2020 revenue guidance."

Product revenues increased 39 percent in Q3 to $93.3 million from $66.9 million last year, while license and other revenues were down 56 percent to $4.9 million from $11.0 million a year ago.

Natera processed approximately 262,000 tests in Q3, a 31 percent increase over the 200,200 tests it processed in Q3 of 2019.

During a conference call to discuss the financial results, Chapman called Q3 a "blow-out quarter," noting that Natera is pleased with testing volumes for its Prospera transplant assay and Signatera cancer monitoring test. "Those launches are both on track and doing very well," he said.

Both the organ health and the oncology business also contributed to Q3 revenues, Chapman said. The company is not breaking out those revenues for competitive reasons "but it's exciting to see some of the green shoots in these very large markets," he added.

However, most of the testing volume and revenues continue to come from Natera's core reproductive health business, which includes its Panorama noninvasive prenatal and Horizon carrier screening tests. Following the endorsement of NIPT for all risk pregnancies by the American College of Obstetricians and Gynecologists this summer, "we're seeing an uptick in accounts ordering average-risk NIPT, and we have continued to benefit from closing new customers as well," Chapman said.

According to CFO Michael Brophy, the downturn in license and other revenues in Q3 is due to lower development-related payments from Natera's partnerships with BGI and Foundation Medicine, as these projects shift towards commercialization.

Natera's net loss in Q3 widened to $58.3 million, or $.72 per share, compared to a net less of $23.1 million, or $.33 per share, in Q3 of 2019. The average Wall Street estimate was for a net loss of $.69 per share.

The firm's R&D expenses more than doubled to $26.4 million in the quarter from $12.8 million a year ago, while SG&A costs increased 34 percent to $75.7 million from $56.7 million a year ago. Brophy said operating expenses increased in the quarter as the company is scaling up its pharma operations channel to meet increased demand.

Natera ended the quarter with $209.4 million in cash and cash equivalents and $600.2 million in short-term investments.

The company increased its revenue guidance for full-year 2020 from a previous range of $345 million to $365 million to a range between $380 million and $390 million. According to Brophy, this reflects "the strong volume performance through the first three quarters of the year and anticipates that the underlying trends in the business remain stable."

In morning trading on the Nasdaq, Natera's stock was up 8 percent, at $82.50 per share.