Q1 2021 Natera Inc Earnings Call

[music].

Welcome to Natera is 2021 first quarter financial results conference call. At this time all participants are in a listen only mode. Following management's prepared and my mom.

I would equate a question and answer session to ask a question at that time. Please press star followed by one on your Touchtone phone. If anyone has difficulty hearing the conference. Please press star zero for operator assistance as a reminder, this conference call is being recorded today may six 2000.

'twenty one.

I'd now like to turn the conference call back to Michael Brophy Chief.

<unk> Financial Officer. Please go ahead.

Thanks, operator, good afternoon, and thank you for joining our conference call to discuss the results of our first quarter of 2020 one on the line and Steve Chapman, Our CEO, Bob Shearer, and Chief operating Officer, Solomon Boskovich General manager of oncology and Paul Billings, Chief Medical Officer Today's conference call is being broadcast live.

Live via webcast, we will be referring to a slide presentation that has been posted to investor Natera Dot com a replay of the call will also be available at Investor Natera Dotcom.

During the course of this conference call, we will make forward looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook market size and partnerships clinical studies.

Opportunities and strategies and expectations for various current and future products, including product capabilities expected release dates reimbursement coverage and related effects on our financial and operating results.

We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, including our most recent form 10-K or 10-Q and the form 8-K filed with today's press release.

Documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward looking statements.

Forward looking statements made during the call are being made as of today and this call is replayed or reviewed after today. The information presented during the call may not contain current or accurate information and Terry disclaims any obligation to update or revise any forward looking statements. We will provide guidance on today's call, but will not provide any further guidance or update.

And on our performance during the quarter, unless we do so and a public forum.

We will quote a number of numeric or growth changes as we discuss our financial and financial performance and unless otherwise noted each such reference represents a year on year comparison, and now I'd like to turn the call over to Steve.

Thanks, Mike Good afternoon, everyone and thank you for joining us, let's get into the unit and financial highlights as.

As you can see from the press release, we had an exceptional quarter, we processed 348000 tests and Q1, which is 18% growth over our record Q4 performance and 47% year on year growth.

As our base business has grown substantially our growth rates have still continued to accelerate.

And acceleration is being driven by continued strong growth and the women's health business and also we are seeing some real benefit from oncology and organ health as well.

Revenues were 152 million and the quarter, which included a 28 million acceleration of revenue recognition from our deal with Qiagen, which wound down in Q1 net.

Net revenue is a noncash accounting benefit and we as we will explain later in the call, but even stripping cage and out of the results revenue growth was very strong for example, the year on year product revenue growth was 36%.

As a result from the incredible momentum, we're seeing and the business I'm pleased to significantly raise our guidance for the year by $50 million. We are now targeting 550 to 575 million, which represents a complete reset of the range.

I'll give you some of the key highlights on those trends now before giving more detail later in the call.

First we were very pleased to launch our new Panorama AI algorithm for broad use and are allowed during Q1, we built the new algorithm using data from more than 2 million cell free DNA test and we validated the performance as part of our Smart study and results of which we released in February of this year.

Phase one of the Panorama AI launch reduces cost of goods sold for Panorama and also touch on no call rate and half, while maintaining market, leading sensitivity, which dramatically improves our customers' experience.

Moving on to Oregon Health.

We're a few quarters into the press barrel launch for kidney transplant rejection, and it's going very well. We found that there was a broad based of customers eager to adopt cell free DNA testing and we're continuing to innovate and push the science forward.

Recently, Medicare issued new coverage guidance for donor derived cell free DNA testing and easily and coverage beyond kidney transplants, the technology required for detecting transplant rejections and other organs such as heart alone is essentially the same technology, we use for prosperity. So it's very encouraging to see a pathway.

The reimbursement for these other organ types.

And oncology, we're at the early stages of our signature clinical launch and we're continuing to see strong momentum and our pharma business. We have a lot of exciting updates to share with you today.

On our last earnings call and we review the results of our groundbreaking and Viger <unk> study with G&A and tech, which looked at using a teaser listen mad and adjuvant muscle invasive bladder cancer, while the drug did not meet its primary endpoint in the all comers population and there was a significant treatment benefit and those patients who are signature a pause.

And prior to receiving treatment.

Based on these results we were happy to move very quickly with Genentech to set up a second phase III trial, and vigor 011, which if successful could position us favorably and paint obtain FDA approval for <unk> as a companion diagnostic to a teaser listen bad and muscle invasive bladder cancer.

And vigor old one one has already started enrolling patients. These types of studies with pharmaceutical companies are all part of the data flywheel. We described in the past paid studies with pharma and generate high quality data. It can be later used for reimbursement approvals and guideline changes.

The powerful and Viger <unk> results have also driven additional demand with our pharma business development efforts. For example, we recently received two additional FDA breakthrough device designation for major new signature indications outside of colorectal cancer, and we look forward to providing additional information as.

Our pharma partners publicly disclose these trials.

In addition to the expansion and bladder cancer and the new FDA breakthrough device designation at ACR, a few weeks ago, we presented compelling data.

<unk> and cancer together with our collaborators from UCSF, Colombia, and U P. M C C.

Signature has significantly outperformed the standard of care serum based monitoring test for ovarian cancer CA 125, and.

And it predict and relapsed and average of 10 months before radio graphic recurrent ovarian as an indication and it's very important to us given our history and women's health and given the very high recurrence rate and low overall survival rates.

We also plan to present positive early multiple myeloma data and a few weeks and ask up we expect signatory to address a major unmet medical need and this cancer type today, MRV and testing and monitoring our already the standard of care and multiple myeloma, but the problem is that existing MRV cash required bone marrow biopsy each.

On the patient is monitored.

Non bureau biases are painful inexpensive a few thousand dollars each so many patients avoid getting tested.

After initial setup Cigna Terra offers the chance to monitor for recurrence with a simple blood sample and without the added cost and the additional bone marrow biopsy that's required for ongoing monitoring with other MRV chess.

I'm also pleased for the first time to publicly announce and ensure readout from the international perspective circulate idea trial, which has already enrolled its first 500 CRC patients as we described in the past circulate it a landmark prospective trial designed to be practice, changing and early stage share of sheet and he.

The interim readout signature and delivered longitudinal sensitivity to relapse of greater than 93%, which compares favorably to the 69% longitudinal sensitivity recently published by a tumor nave competitor.

Data on the first 400 patients from the trial will also be presented in June and scope.

So clearly our momentum continues as we build upon our leadership position in each of these business areas.

Okay now, let me move on to the business trends.

The next slide is our volume progression over time, where the Q1 each year as highlighted in green and those.

Adjusted EBITDA, followed the company know, we get some seasonal benefit and ni PT volumes during Q1, but the increase we saw on Q1. This year with significant you can visually see the acceleration of the business and the last few quarters compared to historical trends, we're benefiting from successful launches and or Oregon health and oncology businesses, which are both.

Going very well and meeting our expectations and we're also seeing continued momentum and the women's health business.

And I P T sequential quarterly growth rates accelerated once again in Q1 and <unk>.

Carrier screening test to also increase proportionately. These transfer fueled by very strong new account wins and account retention trends that were even higher than our historical averages. I also think we're starting to see the first signs of a broad average risk market penetration that we've been waiting on for a long time more on that in a moment.

The next slide shows the revenue trajectory continuing on pace as well, obviously Q1 is a bit of an outlier given the qiagen revenue recognition of $28 million. Some of you will recall, we collected a large upfront cash payment from Qiagen and returned from our commitment to offer clinical content for their sequencing program, which day.

Subsequently wound down most of that cash was non refundable. So now that the deal has been formally and did we have now recognized and remaining cash on our books as revenue from the work performed.

And you focus beyond that one time event. However, you'll see we significantly exceeded revenue expectations in Q1, with a roughly 124 million organic quarter, and a 36% product revenue growth.

Mike will spend more time on this later in the call, but we were cautious and our revenue accrual given we just recently received a lot of reimbursement decisions in our favor the outlook for asps throughout the course of the year it looks positive.

One of the reasons, we can maintain our leadership and an ITK is that we continue to invest and do improvements and the technology.

Piano and my Phase one launch is the most recent example, we showed on the smart trial and that this new algorithm booster or PPV from micro deletions to 53%, which is significantly better than what others and published any core antibody testing piano AI phase, one and achieved a 50% reduction and IP key Nokia.

Rates, while maintaining our market, leading and sensitivity and specificity.

And this allows us to more efficiently meet the rapidly growing demand for Panorama and and she had another positive talking point for the sales team.

We are not finished with improvements to panorama and I look forward to sharing additional phases of Panorama AI with you later this year.

As you can see on the next slide we think we're well positioned to take advantage of the niv market expanding and the week of the cog and SMS and practice Bulletin and posted last fall.

We continue to count wins makes sense, because we've got exciting new talking points with the launch opinion on AI and.

And we're seeing upside from the presentation of the smart trial data earlier, this year and SMS on them.

We're uniquely leveraging the power of snips and to deliver best in class performance and differentiated clinical value. We've now studied more than one 3 million patients and over 23 peer reviewed publications now with the completion of the smart trial, we have the validation data for the largest and most rigorous study covering both.

And employee and micro deletion testing.

Combine that and their season and clinical and commercial teams and we're well positioned for the increase and an ITT adoption that we expect to see over the next several years.

Okay now I'd like to spend a few minutes on our recent progress and Oregon Health and we've been pleased with the progress from her launch which is in line with our expectations and addition of growing commercial volume one of our goals has been to push the science forward and a meaningful way and we've made great progress for example, we've recently developed and method two.

Routinely check the background cell free DNA and each sample and then we inform physicians when we see exceptionally high background cell free DNA, which can potentially match transplant rejection.

The first example of this technology was just published in transplant and Iraq, showing the impact of COVID-19 on background on cell free DNA levels. It turns out that COVID-19 cause his background and cell free DNA levels, despite dramatically, which can potentially mask rejection.

If you're only looking at the donor derived cell free DNA percentage. This example, and COVID-19 is important but we believe it's not the only use case for and a terrorist technology. There are many factors that caused an increase and background cell free DNA and we think ultimately it's going to be important to be able to flag the patients where this is.

[noise] occurring.

On the next slide we were thrilled with the recent local coverage decision from Medicare, which we think could open up a pathway to reimbursement from our prosperity and a range of organ transplant settings beyond just kidney. There's no reason why our technology shouldn't work very well and other organ types and we are of course pleased to see one of the major hurdles.

And essentially removed from the equation as we evaluate these other additional expansion opportunities.

With that let me hand, the call over to Solomon to give some more detail on our efforts and oncology Solomon.

Thanks, Steve.

We have had a flurry of important milestones and announcements recently and so I'm happy to provide some further detail.

Genentech is followed up rapidly since the release of the in vigor Oh, one O results incorporating signature as a companion diagnostic for a change the lives of map and a global prospective phase III trial called and vigor or one one natural sequel.

The results from the first Phase III released last fall are on the left hand side of the page you can see that the 37% of bladder cancer patients identified as MRV positive by sickness era.

On a clear survival benefit from treatment with a T, though with a hazard ratio of <unk> five nine.

While the <unk> negative patients had no benefit.

And and vigor and one one.

She is already underway patients with muscle invasive bladder cancer will be screened after surgery to five 500, who are <unk> positive and those patients will be randomized to receive a teaser or a placebo.

If successful Natera would seek FDA approval for Cigna Terra as a companion diagnostic to a cheese on lithium app for its intended use.

This is the first of many registrational trials for signature as the invigorate Oh, one O data has been recognized as a major proof of concept with application across cancer types.

Okay now I'd like to cover the preliminary data set that we're releasing today and colorectal cancer.

As Steve described this was the first of many data Readouts, we expect from the large perspective circulate idea trial that is running now on Japan.

And with plans to expand to the U S and Europe as we've described in the past. This trial is led by the National Cancer Center East and Japan with over 150 clinical sites actively enrolling across the country.

And the primary goal of which is to definitively assess whether stage III colorectal cancer patients, who test MRV negative with Cigna Tara can be safely D escalated from chemotherapy.

Slide has the key headlines and based on the interim analysis signature showed a pre surgical sensitivity of 94%.

Which is even better than the 89% published in our validation paper with Reiner at all and 2019. This also compares favorably to the 47% sensitivity reported recently by Perique at all and using a competing <unk> called reveal which is not tumor informed the.

And the pre surgical sensitivity ought to be very high and colorectal cancer near 100% given that patients have the cancer and their body. They have not had any prior systemic therapy and CRC is known as a tumor type with a high rate of Cte DNA shed. This is a metric that can be procured relatively easily across different tests.

Furthermore out of 31 recurrence events, thus far recorded and this study Secretary has detected 29 out of 31 are 93, 5% in longitudinal testing, which again, it's better than the 88%, we published and Reiner at all and again compares favorably to.

So the 69% longitudinal sensitivity reported by Perique at all.

We are pleased to see that our performance metrics are improving and the prospective setting given all the technical improvements we've implemented since our launch in 2019.

Finally, we're seeing a sample failure rate and the study of less than 3%, including both tissue and plasma which compares very favorably to the double digit failure rate and plasma alone reported by Perique at all.

You've seen from our experienced and <unk>. These rates of success and failure have a significant impact on clinical utility and adoption.

Data from a subset of this group will be presented and a few weeks at <unk> and we look forward to continuing continuing our momentum and Japan over the coming months and years.

This next slide provides a more comprehensive comparison between the performance data available with Cigna Tara versus the data reported on the reveal test drawing.

Drawing on the breadth and depth of evidence behind signature, specifically and CRC and across other solid tumors. We believe the science is clear that personalized tumor informed and Mardi testing is the way to go.

In addition to the sensitivity advantages that I described a moment ago and both the pre surgical and post surgical settings I want to highlight the significant significant difference and diagnostic lead time with these two different products using serial longitudinal testing Reiner at all reported that Cigna Terra detected residual disease.

And on average eight seven months ahead of radiographic recurrence, whereas by our estimate.

Perique at all observed and lead time of approximately four months, we believe the more sensitive and useful test is the one that will pick up the cancer recurrence earlier before it becomes radiographically, where clinically apparent.

Beyond that there are a number of other clinical advantages with signature one important one is the ability to quantitate. The Cte DNA level. In addition to reporting presence or absence of tumor DNA signature also provides a quantitative metric that allows physicians to track tumor growth and dynamics over time, we already know that this is critical.

For treatment monitoring, which led to the draft LCD from Medicare in immunotherapy monitoring.

And we will soon report new data at <unk> with our collaborators from <unk> University showing how this quantitative signal can also be clinically useful during recurrence monitoring and CRC.

By comparison, the reveal test, which relies on a black box combination of genomic and upbeat genomic signatures does not quantitative.

As a reminder, signature is being ordered clinically now by hundreds of physicians, not only and CRC, but across many different cancer types.

To that point.

And next slide covers a couple of major new indications, where we are producing positive data on the left is the data we released at ACR in ovarian cancer.

And cancer is a highly lethal malignancy with an average five year survival rate of only 47%.

Right now a serum based biomarker called CA $125, commonly used for recurrence detection.

But it lacks sensitivity and specificity similar to CBA and colorectal cancer.

And the study we presented at ACR patients for tested with signature before surgery and then a smaller set were tested serially. After surgery, we reported that 100% of the patients who cleared their tumor DNA with surgery and treatment remained relapse free while 100% of the patients who stayed CTD.

On a positive after surgery went on to relapse.

Signet Taro provided and average diagnostic lead time of about 10 months.

We're also very excited about the data to be presented at <unk> and multiple myeloma and.

And you will incidence of this disease is about 35000.

And there are approximately 150000 people in the U S living with a prior diagnosis of multiple myeloma.

Most of these patients go into remission. After initial treatment, but then they are actively monitored for many years often for the rest of their lives the.

The big clinical opportunity here is to provide accurate and monitoring and MRV assessment using serial blood sampling instead of requiring cereal bone marrow assessments like the current labs do.

The data coming up and outgrow will be a first look at what the performance could look like and blood using signature.

Our plan and both of these indications is to continue building, our datasets to pursue reimbursement from payers, including Medicare and to enable prospective trials and partnership with pharma companies.

We believe these new indications expand our addressable market opportunity to approximately 3 million tests per year, and the U S and that does not even begin to address the global opportunity, which is real and considering our momentum and Japan, our partnership with Pgi, and China, and our clinical development activities in Europe.

We're also very pleased with the progress and our foundation Medicine partnership and we look forward to providing additional updates on this throughout the year with our strong commercial channel and the U S, calling on community and academic oncologists and we look forward to expanding access to chicken terror for more and more patients over time.

Now I'd like to hand, the call over to Mike to cover the financials Mike.

Thanks Aman.

Slide here is just a summary set of results for the quarter, Steve covered a lot of the trends on volumes and revenues and you can see revenues have expanded significantly even stripping out the onetime qiagen and revenue recognition the organic quarter significantly exceeded our internal expectations, it's worth noting.

We've had a lot of new positive reimbursement decisions across the business, both with Medicare for Cigna, Tara and major commercial payers for average risk and IBD.

And we have let history with reimbursement and these areas, we were cautious and accruing revenue for the reported volumes in Q1 at the same time volumes, obviously ramped incredibly quickly and Q1, so that caution on asps tempered the product gross margins on the quarter compared to what we think is achievable in the immediate term so based on this and.

The good underlying recent actuals, we are seeing we are optimistic that accrued asp's can improve over the next few quarters.

Cost of goods sold per unit was excellent and the quarter driven by continued Cogs progress and the women's health products, we had about 20 million and bigger ticket nonrecurring cash outflows and the quarter. For example, we did record $10 million of guidance initial $38 million cash payment. Despite that we're still on track for our.

Casper and guide as I'll discuss on the next slide.

Okay onto the next slide and the revised guidance.

Steve gave you the headline that we are resetting the guide higher as a result of our Q1 experience the change and the guidance range well exceeds the qiagen contribution and the organic driver of the guidance reset is almost entirely driven by revising the volume forecast upward.

The improved gross margin guide is driven by the Qiagen revenue and.

And reflecting the same cost of goods sold per unit assumptions. We've had previously the Cogs trends look good as we've discussed in.

In terms of quarterly revenue pacing I do think the seasonality, we've historically seen and the business is still relevant and should be taken into account generally through the volume trends and women's health lead to a slightly more muted sequential growth in Q2, and then expanding growth rates in Q3 and Q4.

Partly in response to the increased demand across the business lines, we are marginally stepping up some investments and SG&A and R&D to support the growth. For example, we are accelerating investments to lab operations and infrastructure and staffing that we had initially planned to make next year, but the volume is exceeding our initial forecast and so we are accelerating our expansion plans.

The net impact of all of these changes to the forecast is the cash burn guide remains the same we remain and are very strong cash position and we will continue to invest we talked about the women's health business getting to cash flow breakeven this year, and we feel even more confident and that goal at this point and the year.

So it's an exciting time for and the terror and we are very excited to have been able to share. These results with you now I'd like to turn the call back over to the operator for questions operator.

Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.

And their tumor informed approaches that are out there frankly, I mean, when you look at the breadth of data and the performance.

We have a very significant lead.

And a great position compared to the other groups that are coming into this space. So we're doing well we're on market the volume is growing.

Launch is successful.

And I feel like we're in a very strong position.

As far as.

Building.

Personalized approaches off of liquid exome.

That's something that we have the capability to do and.

Something that we're considering but we don't feel like it's it's required at this point just given the success that we're seeing Sullivan and would you like to add any additional points.

<unk>.

Yes, Okay. One other part of the question was related to the circulate idea trial data.

So we're very pleased with the interim results, we're seeing from that trial.

And the largest perspective.

And Marty trial of its kind and it's enrolling very well, there's a lot of excitement on the physician and patient start to be a part of this and.

The data is looking even better than what we published previously so yes, we think this.

This is an important.

And a validation of what.

What we've seen before and it sets us up to.

Two only.

Proof of.

The adoption of the tests not only in clinical use but also and other clinical trials because it's such a good feasibility demonstration of how this can work on a clinical trial. So we're very optimistic and we look forward to presenting additional data and outgrow and a few weeks.

Got it and sell them and just a quick follow up there on the <unk> multiple myeloma data that you highlighted.

How do you think the use case, you're would shape up relative to some of the immuno sequencing assays like Kronos seek from adaptive for example.

Do you essentially sort of view this as being a blood based approach and perhaps and multiple myeloma and so I'm clear, yet and whether they can be sort of bone marrow or blood based.

Is that really the angle that you're taking here.

Yeah. Thank you for your question.

Without being without being able to present the data itself at this time and it'll be shown in detail and IOSCO, yes, but the general concept here or is it just like it.

It's the same thing in the Terra product. So we start with a sample of the tumor which in this case comes from the bone marrow biopsy for that initial.

Analysis, and personalized assay design and once that's done we just analyzed the plasma going forward serially.

And that is presents a massive opportunity to improve the clinical utility and accessibility of MRV and monitoring for the 35000 and multiple myeloma patients per year and the 150000.

And had a prior diagnosis because those patients today without Sigma Tara require serial bone marrow biopsies in order to.

In order to continue their monitoring and that's a painful procedure, that's a very expensive procedure and and frankly.

<unk> simply avoid it.

Because of because of those hurdles and and so with Cigna Tara we think if we can if we can consistently show similar performance that's clinically.

Sufficient then not only will when people switch over to using signature in the setting, but we think the overall use of monitoring and MRV testing and we'll just go up because of the improved accessibility.

Our next question comes from Tycho Peterson with Jpmorgan.

Thanks.

And a couple on just sitting and Tara this and we think about kind of CRC and the Io and altera ramp have you.

And are assumptions for kind of the back half of the year ramp changed at all.

And then I just want to make sure I understand your answer to the last question.

And your competitors like a basketball moving toward a blood draw blood first approach away from bone marrow and so.

And I'm, just trying to understand competitively if that changes things and your perspective on multiple myeloma.

Yes, so I'll comment on the ramp I mean, we've we haven't broken out our signature on numbers and prospera numbers, specifically, but you can see our volume growth is is going very well and.

And that includes what we believe is a very successful launch for signet Terra and our other products. So.

It's in line with our expectations, we're seeing good adoption.

First is working very well.

And so we're pleased with the trajectory.

Yes, I think.

On the question on multiple myeloma. So currently to run the monitoring assays that are available you have to do repeat bone marrow biopsies.

Order to do that ongoing monitoring so with the test that we're working on you do one bone marrow biopsy from the setup and then all the ongoing draws are just blood draws and so there's no need for repeat a repeat bone marrow biopsy.

And Steve went to what's the latest thinking from the perspective around screening and that's probably one of the top three questions. We get and you guys can you maybe just.

Share your thoughts a little bit about how you're thinking about that opportunity either organically or inorganically over time.

Yes, you're talking about early early cancer screening correct.

Yes, yes. So we've said actually you know recently I think on our last call that we do have a program and that space and in that scenario debt that we're moving into.

Actually making progress.

We didn't announce anything today, but the program is underway. We think we have a very efficient approach to.

To go after that market both.

Both technically and from.

From a from a validation and commercialization standpoint.

And we will be providing updates and the future, but we're not going to be providing any today.

Our next question comes from Doug Schenkel with Cowen.

Hey, good afternoon, everybody and thank you for.

Taking my questions.

I just wanted to start on really volume trends and guidance.

It looks like just doing some quick math that you were doing about 25000 tests per week, and Q1, which if I got that right is pretty remarkable.

Keeping in mind, that's a big step up from where we've been.

I'm just wondering if you could comment on how that trended over the course of the quarter was it pretty steady or did it continue to improve and to the end of the quarter and then kind of building off of that and just.

Using that 25000 tests per week.

And the context of the full year guidance I can get to the low end of your range with pretty nominal improvement and that in that figure and nominal pricing improvements.

I'm not sure either of those assumptions and make a ton of sense given.

It feels like strong momentum and various things that you called out that could drive ASP improvement, including accruals.

Higher mix of Prospera, and Sigma Tara and things like that so I just want to make sure I'm not doing something wrong and assuming I'm not is the low end of guidance, just reflecting a scenario where you want to be conservative early in the year.

Hey, David and Mike. Thanks for the question, Yes, I mean, I think your summary is basically spot on the only caveat I'd habits and that I've mentioned and the prepared remarks, and it's just a reminder, on the seasonality of the business, particularly the women's health business, which is the majority of the volume so.

And that is <unk>.

Shortly we have seen a strong Q1 and then the same clinic volumes are a lot lighter and Q2 and so you see like a kind of a flattish Q2, and then that kind of growth and Q3 and Q4. So we are taking to account that kind of seasonality still even though clearly I mean.

You can see from where I think the first one the first couple of slides on the deck.

Something different is going on right now yes.

The trajectory and I think that's that's that's really positive you can you can see that in the and the week.

Weekly volumes through this call are looking looking quite strong.

But we do.

And the only other add I'd add to your summary is the seasonality point, which would I think would temper.

And typically model slightly there.

And when we guide we don't we try not to give aspirational guidance and we tried to give guidance that we think is and then.

And we're going to hit so.

I would certainly hope at the low end of any guidance. We gave is something that we thought we could do.

Okay Super helpful. And then just a couple on and I P T.

Anything you can share on how much.

Mix is evolving and and really reimbursement is evolving.

Obviously, a lot of progress last year on the average risk guideline and reimbursement front I'm just wondering if theres anything new in terms of how that is.

Impacting mix and Asps and then on micro deletions and anything new in terms of progress towards incremental reimbursement probably pretty early for that but any anything you could share would be of interest. Thank you.

Yeah.

Mike maybe I'll comment on volumes and then if you want to follow on on Asps.

Yes.

Yes.

The recent ASP trend and were quite strong for and ITT.

Happening as we've described.

Would we were contracted for and ITT COVID-19 and the.

The fraction of time are getting paid and just steadily increasing.

And it takes.

Couple of quarters for that to flow into the revenue line just based on the way that we do the accrual we really need.

A critical mass of historical actuals to kind of get more credit for that the way, we do the accrual and thats, perhaps a bit cautious, but we'd like to be a little bit careful.

No.

When we do that so.

Im cautiously optimistic as I mentioned in the prepared remarks about the ASP trend for the rest of the year.

Our next question comes from Puneet <unk> with SBB Leerink.

Hey, great. Good afternoon, and this is actually westley on for Puneet today.

I wanted to go back to <unk> briefly just from the first question and I guess I haven't been on the market for the better portion of the year and and reimbursements and so I think last October and.

And CRT at least so I guess, what I guess, what have you learned about the market itself and and what feedback from potential customers, who are kind of on the verge of boat already testing in general what are you hearing from them and what are your expectations for.

Being able to drive penetration and and stage two three Trc is still and and also and in some on the newer indications and and potential timing on multiple myeloma.

Yeah. So on.

And make some comments and install them and you can jump in so in general the feedback has been very positive I mean, if you go back four years ago. When we first started talking about this.

Nobody was talking about solid tumor.

D R.

Or <unk> testing and in the adjuvant setting and now if youre and oncology diagnostic company you have to have it.

And MRV product.

Everybody is trying to move into this space and that's really a validation of the enormous market opportunity. When you look at colorectal alone there's a million class it could be done per year. So these market sizes that we're talking about here or are orders of magnitude bigger than anything else in the special.

T diagnostic space and certainly much much bigger than the therapy selection market.

<unk> alone, where traditionally you know a lot of the energy has been focused so we're really happy about how things are going we are seeing.

Use from doctors and accelerate we're seeing.

Lots of repeat use from patients and doctors, we're seeing use in all different stages of colorectal, we're seeing use beyond colorectal.

Getting a lot of great patient stories, and great physician stories about how they tell us work as advertised and and how it and help their patients.

So we're pleased with how things are going and so all of them and do you want to jump in on that.

Thanks, Steve.

And I agree with everything that was said.

Of course, we've learned a ton about how people want to use this test and where they find it to be useful and to inform treatment I think one of the interesting things that we've seen in addition to what Steve described.

Is that a lot of the time.

There are already patients who are somewhere midstream and their course of care and many many of our touch get ordered for patients for the first time you are.

612, 18, 24 months out of surgery.

Because they had some indeterminate scan.

And some nodule showed up.

Its something that were suspicious, but it's hard to assess.

SaaS for the physician and a more and more people are coming to us to help them triage and a borderline situation.

It's you know do I treat or not or in this case do I perform a biopsy on this nodule.

And that's a determinant or not how do I proceed.

And once people see that.

See that day to come back and they start to grow comfortable with what the test can do.

The adoption and just increased significantly and the other thing I will say that Steve mentioned, but.

And we've been very impressed.

And just see how sticky the product is once a patient is on it.

On the repeat use and the frequency is frankly above our expectations and and it matches.

You know what what it should be frankly, because it's just such an informative test overtime.

And I'm sure there's more I could say, there, but I'll stop at that point.

Great Great. Thank you and then on the on the women's health side, just speaking on the the average risk market specifically on and see if you just mentioned that the boat you think it's around a 30% penetration right now.

And what's differentiating about panorama and and I guess on the terrorists combined offering that can help drive the remaining 70% of that market and and what are you seeing that's driving the competitive wins and then just finally a follow up on the last question any update on the micro deletion timing. Thanks.

Yeah. So.

One of the reasons if you look back at the terrorist history, we were the fourth company and <unk> space, but today, we're the market leader by far.

We have the most clinical differentiation we have the most peer reviewed published data and we're doing the most volume and the reason is because our test is unique and differentiated and physicians like it.

And so we're the only company out.

Out of all of the other companies that are out there that are looking at sniffs and when you use nips.

April to identify things that simply biologically you cant be identified.

By the other companies.

And things like AAA and <unk> for example that are very relevant and pregnancy, but it also allows us to get higher sensitivity and specificity on things like trisomy 21, and the standard chromosomes. When you shift over to something like 20, <unk> micro deletion disorder, and you look at the performance.

Zinc snips, there versus the shotgun sequencing method.

And it's really night and day, the difference and the performance I mean, we're talking about sensitivity and the 19th versus others that are published performance at sensitivity and the <unk>.

So the technique works exceptionally well and Thats now.

Being shown out and the volumes.

On the micro deletion standpoint.

We now have published or presented and soon to be published the largest prospective trial.

And that has ever been done in the micro deletion space the results look exceptional.

There were two key findings on micro deletions, one is that the <unk> disease is much more common than what was previously expected at approximately one and 5800.

And the second was net or test works really really well. So the sensitivity was very high and the positive predicted value was also very high and those are two of the I guess combined and those are the three things.

Disease incidence sensitivity and specificity debt.

This is how do you look at when they're deciding whether or not something meets the criteria.

And to be approved for prenatal screening test. So we think we're in a good position to at some point and the future gets into the guidelines and receive payer coverage and we're doing hundreds of thousands of these tests already every year that are not reimbursed. So as soon as reimbursement comes in.

This is gonna be and immediate very significant impact to net <unk> revenue and the bottom line.

Our next question comes from Mark Massaro and from T. I D.

Yes.

Hey, guys congrats on a great quarter I guess.

Yes, it's and it's exciting.

And to hear that you have a program in place and early cancer detection.

You guys are a women's health company.

You've shown promising data in ovarian cancer. Initially so when I think about the certainly the promise of developing and ovarian cancer screening test for breast cancer screening test.

The market has never seen that so can you maybe just talk about your plans of either going indication by indication or perhaps looking at the multi cancer screening opportunity.

Yeah, Thanks, Mark so.

The initial initial.

Initial area that we're looking at is colorectal and I think similar to some of the others in the space and.

And then ideally that would be expanding beyond.

CRT and into some of the other cancer types.

But I would just say wait till we provide the more significant update debt that will be coming.

It's not something that.

And that we included in the call today, but there will be some some solid updates coming in the future.

Okay. That's helpful and just my follow up question.

Obviously adaptive has done a great job.

In and blood cancers.

Certainly interesting that you're showing data and M M.

Do you think there are any limitations too.

And I think perhaps there is a reason why you started and solid tumors, obviously, it's a bigger market, but are there any technical limitations of addressing blood cancers. I know adaptive is looking primarily at lymphoid, but.

But not in myeloid. So I don't know if you have any thoughts on any technical limitations of your technology and blood cancers.

Yeah did you say.

The data that we have coming out.

You know I'd ask though is going to speak for itself.

It's early but.

You'll see when you when.

And when you teleconference.

It's very positive.

And of course, there's more work to be done there, but we don't think that there's technical limitations.

And this particular and vacation.

So all of them and do you want to add to that.

Okay.

Sure.

I think it's hard to speak in generalities.

Of course, there are going to be.

Yeah, and it's gonna be technical matters sort through along the way with all different types of either new indications from your specimen types are.

Yeah.

Logical variations and we're going to learn more about but just.

Sticking to the facts here, where we're going to present and great data and go.

And for myeloma.

It was a real opportunity to help a lot of patience here.

Okay.

Our next question comes from Rachel basketball with Piper Sandler.

Great. Thanks for taking my questions and we've spent a lot of time on oncology a day. So I'll just ask a few on transplant and women's health and so first on transplant can you guys just give us some color on the launch and how penetration has been with transplant centers versus community Nephrologist and then also regarding the blanket LCD for transplant and testing you mentioned heart and.

And so can you talk about your timing expectations for addressing those other organs that for Sierra.

Yeah. Thank you. So we're pleased with how the launches going on.

We've been out there now.

And the handful of quarters and things are in line with our expectations. We think we have a unique technology.

Debt that competes very well and.

Any areas that matter you know I think that.

The paper that we showed here and there and the earnings deck I think highlights.

One important factor, where we've already and a very short period of time completely move the science forward.

This issue of background cell free DNA is very important if you're looking at a metric donor derived cell free DNA percentage.

But the background cell free DNA is very very high you can mask rejection and you can have and false negative result, and so we're now incorporating that.

And and flagging cases, where there's a very high background and cell free DNA and that that was what was covered and this paper.

Would you CLA that looked at this COVID-19.

Case study and so we're doing well.

Immunity and nephrology space.

I think there is an opportunity and that's something where.

We are seeing some volume come in.

But certainly I think the transplant centers are the larger opportunity and the near term.

When you look at expansion into other organs.

We're sort of assessing what opportunities are out there for us, but there's no reason why our technology should not work.

Very very well and no heart lung and other indications and now that the reimbursement hurdle has been cleared.

Yeah.

It certainly makes it a more attractive opportunity for us.

If you look at some of our competitors and the volumes that they are presenting and and some of these other.

Areas like heart, it's compelling and we know our technology works well, we know we can get reimbursed very easily now with this new reimbursement guidelines and and so it's something we're assessing.

And we're gonna have to consider whether it makes sense for us.

Great. Thanks. Our next question from me So for Women's Health you guys had mentioned that you're taking share from competitors, which is great. So can you just spend a minute on your women's health sales force do you think their sales teams and right size to address this larger average risk market and and.

And what are your thoughts on keeping that business profitable versus expanding out to women's health efforts to take share and especially as the average rest and that potentially and macro towers and opens up that opportunity. Thanks.

Yeah. So.

We've been able to to grow the business with some incremental.

Increases in operating expenses that we.

Kind of layered in over time.

So I think we're in a good position right now as far as or kind of reach and frequency and on the women's health team.

Of course, we're always monitoring and sort of looking at things, but I don't think that theres any and any big changes at this point that we would anticipate.

When you look at and the path towards profitability.

And towards cash flow breakeven I mean that path at this point is very clear and women's health side. I mean, we are seeing so and this panel AI launched and we announced that the phase one implementation and then the remaining phases of the year and this is a big cog savings on and I P. T. We haven't talked about that on a long time, but our Cogs on NII.

And now are well below $200 per test I mean, well below.

And because of the scale that we're operating at.

Because of things like can't away on it where we're now incorporating.

Deep neural networks and and machine learning.

From over 2 million tests that we run and our lab and and we're using that to.

And reduce the cost of debt.

Work flow and of the reagents that we put into the assay so major cost reductions.

On that.

And are hitting and and I think that cash to cash flow breakeven is very clear.

He is looking out for incremental investments, but.

I think I think we're in a good position right now and women's health.

Yeah.

Yeah.

Our next question comes from Alex Nowak with Craig Hallum.

Okay.

Good afternoon, everyone on this is Kent Mccarthy and jumping on for Alex.

And just one quick question on and.

And it's been six months or so since the day Cog guidelines came out and we've heard a lot of local charters have been trending on changes and.

So are you hearing and what are you hearing in the field are more clinicians.

Embracing the guidelines and ordering more tests, I think and just give a little more color on that.

Yeah, it's definitely happening we've seen over the past six months.

On a linear shift and the percentage of our business that is average risk.

Versus high risk so that's definitely happening.

Is going to continue.

Thank debt.

And point for this is going to be around 90% penetration, 95% penetration and we think we can get there and three.

And three four years something in that range.

Maybe maybe even less.

Right now and we think the market is 30% penetrated so there's a long way to go and ITT growth is just really starting to ramp right now and we're just at the very beginning.

And we're positioned I mean, we are in and incredible position, we have a great sales team their tenured we have the most data.

We have the best performing product on the market.

So we're in great position to ride the wave of expansion and an average risk and <unk>.

Got it that's helpful and.

And the pivot over to sit on a tear out here Youre, obviously and I'll break them out and the terrorists CRC, which makes it kind of hard to gauge performance.

But.

What sort of penetration do you want to see this year next year 2023. So that you can say, yes, natera was successful here and if that makes sense.

Yeah. So when you look at a lot of the historical cancer diagnostic launches the company's debt debt had been very successful founded.

Foundation Medicine, or genomic health and you go back in and where do you see as in the first year.

Lower single digit penetration and the second you kind of a mid single digit penetration into the market and then the third year, you know maybe high single digit low double digit penetration and that's sort of what we used to kind of draft our forecasts and.

You know I think it's in line with other specialty diagnostics.

That are out there now.

The data coming out I mean, we're putting so much really compelling data out I mean, it's almost every month, there's a massive announcements coming out or every conference. We're now having multiple presentations I think things could really start to accelerate.

But that's that's kind of what we set out as the benchmark for success.

Just from a historical perspective.

And we're pleased very pleased with where we are right now on and the launch.

I'm showing no further questions in queue at this time and that concludes today's question and answer session.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes the program and you may now disconnect.

Everyone have a great day.

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