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Natera Revenues Climb 16 Percent in Q2 Driven by Reproductive Health Business

NEW YORK – Natera reported after the close of the market on Wednesday that its second quarter revenues grew 16 percent year over year, driven by sales of its Panorama noninvasive prenatal and Horizon carrier screening tests.

For the three months ended June 30, Natera had $86.5 million in revenues, up from $74.4 million a year ago and beating the average Wall Street estimate of $73.1 million.

"The business was very resilient in the second quarter," said CEO Steve Chapman in a statement. "We posted another very strong volume and revenue result despite the COVID-19 impact, and we achieved major milestones across the oncology and transplant businesses. We are very proud of the team's performance during this challenging time."

Product revenues for Q2 were $80.4 million, up 24 percent from $65.1 million a year ago, while license and other revenues were $6.1 million, down 34 percent from $9.3 million a year ago.

The company processed approximately 234,100 tests in Q2, 21 percent more than in Q2 2019, during which it processed 194,200 tests.

The firm reported a Q2 net loss of $59.6 million, or $.75 per share, compared to a net less of $32.4 million, or $.48 per share, a year ago, and worse than the average Wall Street estimate of a $.58 per share net loss.

During the quarter, Natera's R&D expenses climbed to $23.0 million, almost double the $12.1 million in Q2 2019, while SG&A costs increased 45 percent to $68.2 million from $47.0 million a year ago.

On a conference call to discuss the quarterly results, company executives pointed to a number of recent developments in the firm's reproductive health, transplant, and oncology business areas.

Chapman said test volumes dropped about 15 percent in the last two weeks of March and first few weeks of April but quickly started to recover toward Q1 levels after that. The company was able to win a number of new customers over the past quarter and is "cautiously optimistic about the second half of the year," he added.

Aetna has extended its temporary coverage of NIPT for all-risk pregnancies until the end of this year, he said, a plus for Natera's prenatal testing business.

The firm recently completed enrollment for the SMART study, a 20,000-patient multi-site prospective clinical trial to evaluate the Panorama test that focuses on fetal aneuploidy and microdeletions. Chapman said he expects data from the trial to be presented at the Society for Maternal-Fetal Medicine meeting annual meeting early next year.

"Although we can't comment on the performance, because this is the largest prospective, average-risk aneuploidy and microdeletion trial to be completed, we think SMART could have a positive impact on society guidelines and coverage policies for both indications," Chapman said. "We also expect to generate additional demand for Panorama, given our leadership in clinical validation data that extends further with the SMART trial completed."

In its oncology business, Natera is seeking reimbursement for its Signatera cancer liquid biopsy test for two new indications, which Chapman said could add approximately 900,000 additional tests per year: immunotherapy monitoring and oligo-metastatic colorectal cancer.

Earlier this week, a team led by investigators at Princess Margaret Cancer Center in Toronto published a study in Nature Cancer demonstrating the ability of Natera's Signatera test to monitor immunotherapy response in 25 cancer types.

The company has already submitted a dossier for a local coverage decision for this indication to Medicare, Chapman said. For oligo-metastatic colorectal cancer, it plans to submit an LCD dossier soon to expand the previous colorectal cancer indication.

Natera also started enrollment for the CIRCULATE-IDEA trial in Japan and the BESPOKE CRC clinical trial, which are studying clinical outcomes of colorectal cancer patients who received molecular residual disease testing with Signatera.

Solomon Moshkevich, general manager of Natera's oncology and transplant business, said that Natera's collaboration with Foundation Medicine to design personalized assays to monitor cancer patients' circulating tumor DNA is progressing nicely. "The co-development effort is going well and we remain on track for Foundation Medicine to be engaging with pharma customers this year," he said.

Likewise, Natera's partnership with BGI to bring Signatera to China remains on track, with an initial launch planned by the end of this year. "We have already signed deals with leading biopharmas that are just waiting for the service to launch," he said.

Following a positive coverage decision for its Prospera transplant rejection screening test from Medicare Administrative Contractor Noridian in May, Natera has now fully launched the test, and Chapman said the company has been "paid as expected by CMS," consistent with the $2,841 test price assigned to it by the MolDx program.

In June, the company also launched a multi-site prospective study, called PEDAL, to validate a new algorithm for Prospera. That trial plans to enroll about 500 patients at several transplant centers. Recently, Natera also enrolled the first patients into the PROACTIVE trial for Prospera.

Natera ended the quarter with $77.3 million in cash and cash equivalents and $493.9 million in short-term investments.

The firm also reinstated its guidance for the year. For full-year 2020, Natera anticipates total revenues between $345 million and $365 million.

Shares of Natera were up 6 percent at $54.14 in morning trade on the Nasdaq.