Q4 2024 Natera Inc Earnings Call
Welcome everyone to Natera's 2024 fourth quarter financial results conference call. At this time all participants are in a listen-only mode.
As a reminder, this conference call is being recorded today, February 27th, 2025. I would now like to hand the call over to Mr. Michael Brophy, Chief Financial Officer. Please go ahead, sir.
and many more. Thank you. Thank you.
Speaker Change: Thanks, Operator. Good afternoon. Thank you for joining our conference call to discuss the results of our fourth quarter of 2024.
Speaker Change: On the line, I am joined by Steve Chapman, our CEO, Solomon Moshkevich, President, Clinical Diagnostics, John Sesko, President and Chief Business Officer, and Alex Aleshin, General Manager of Oncology.
Speaker Change: Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor.natera.com. A replay of the call will also be posted to our IR site as soon as it's available.
Speaker Change: Starting on slide two, 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, partnerships, clinical studies, expected results, opportunities and strategies, and expectations for various current and future products, including product capabilities.
Speaker Change: 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 refile 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.
Speaker Change: Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forelooking statements.
Speaker Change: Forward-looking statements made during the call are being made as of today, February 27, 2025. If this call is replayed or reviewed after today,
Speaker Change: The information presented during the call may not contain current or accurate information. The terrorist claims any obligation to update or revise any forward-looking statements.
Speaker Change: We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.
Speaker Change: We will quote a number of numerical growth changes as we discuss our 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 Steve
Steve: Thanks, Mike. Let's get to the highlights on the next slide. 2024 was a transformational year for Natera, and I think the Q4 results demonstrate that we ended the year with a lot of momentum coming into 2025.
Steve: Revenues in the quarter were $476 million, up 53% year-on-year, and $4 million above our January pre-announcement of $472 million.
Steve: volumes were up 26% compared to Q4 of last year included an excellent showing for signatory unit growth
Steve: I'm pleased to report that gross margins in the quarter were 63%, which is significantly above the 51% we posted just one year ago, and highlights the progress we made on both COGS and realized pricing in 2024.
Steve: Finally, we generated roughly $46 million of cash flow in Q4, wrapping up the full year with about $86 million in total cash flow generation.
Steve: On top of the financials, we discussed a series of milestones across the business in the last few months.
Steve: We announced our innovation roadmap and shared several impressive datasets at the ASCO GI conference in January.
Steve: Most notably, we announced the 80702 data in colorectal cancer that underscores the predictive abilities of signataria. We also had our first readout in early cancer detection, and we are excited to share some additional data on that program on today's call.
Steve: In women's health, the Green Journal published our clinical validation study for our fetal RHD test, which demonstrated excellent test results. We also have two meaningful novel studies coming out in organ health later this year that we look forward to discussing today.
Steve: We are also pleased to see NCCN strengthen its position on cell-free DNA testing across several tumor types, as well as an expansion of the Medicare coverage for patients with stage 1 through 3 lung cancer.
Steve: This makes Signatarium more accessible to a population with a significant unmet need for risk stratification and recurrence monitoring.
Steve: Great. Let's jump into some of the business trends on the next slide. As discussed in the pre-announcement, volumes exceeded expectations in Q4 with strength across the portfolio. These longer-term slides really highlight the progress we've made in just a few years with Q4 volumes up more than two and a half times since 2020.
Steve: In Women's Health, we delivered very strong organic growth as we continued to deliver a stream of new features and data sets. This was augmented by the Invitae win, which helped as well.
Steve: Organ health volumes were up almost 50% year-on-year as volumes continue to ramp across the portfolio.
Steve: Of course, Signataria had a transformational year, with clinical volumes up approximately 60% versus Q4 2023, and nearly 15,000 units of growth over Q3 of 2024.
Steve: Looking back over 2024, we can see in retrospect that the 24-month overall survival data presented at ASCO-GI early last year proved to be a critical catalyst for broader adoption, and early returns suggest that the three-year overall survival data presented at ESMO is having a similar impact.
Steve: We will spend more time on the 702 data later in the call, but the feedback has been positive and in Q1 we're once again tracking to one of our strongest volume quarters ever for Signatera.
Steve: Total revenue growth continued to accelerate as well in Q4, which came in above our pre-announcement as I mentioned at the top of the call.
Steve: Volume growth has also been strong, but revenues grew almost twice as fast as volumes as our ASPs continue to improve across the board. Signataria clinical ASPs improved to roughly $1,100 in Q4, and we continue to see steady progress for both Panorama and Horizon ASPs.
Steve: We launched a significant effort in late 2022 to better secure reimbursement for all the coverage services we provide, including significantly increasing staffing and automation tools. Those efforts continue to bear fruit in Q4 and give us confidence in modeling ASPs for the 2025 Guide, as Mike will discuss later in the call.
Steve: We're excited about our ASP increases thus far, but looking several years out, we think we have the potential to double the revenue from the volumes we are already running today as we expand coverage and reimbursement.
Steve: While ASDs have continued to climb, the cost of goods sold per unit has continued to fall, driving a significant improvement in gross margins in 2024. We had about a 3% true-up benefit to margins in the quarter, which represents excellent execution from our team in driving receipts above prior estimates.
Steve: Even stripping out those true ups yields a gross margin of 59% in Q4, which is another record for the company.
Steve: While we do have a number of initiatives on tap to reduce COGS further in 2025, I'm very pleased that the major COGS projects that have consumed significant R&D resources over the last few years are now launched, which frees up resources to focus on delivering new products, features, and clinical evidence.
Steve: As we ramp revenues and gross margins, we've been able to generate cash even as we began to increase investments in our platform.
Steve: This longer term slide shows the evolution of the company since early 2022, when we were making investments that are now generating significant benefits for both our patients and shareholders.
Steve: While the $46 million in cash flow represents a significant new record for Natera, it's worth noting that we actually made an approximately $20 million asset acquisition during the quarter. So I'd argue the operational cash flow in the quarter was approximately $65 million in Q4.
Steve: On our current trajectory, we could begin to generate meaningful cash flows in 2025.
Steve: I think the last two quarters have been a critical case study in the efficiency of our business model and the ROICs we are now seeing on investments in R&D and SG&A.
Steve: The major clinical trials we are running, the new features we are launching, and the investments we are making to further refine our service to patients and physicians are translating to additional volume growth and our traction on gross margins makes every new unit increasingly valuable.
Steve: So, we want to take advantage of our position by taking the cash flows we are generating and reinvesting them in the business in 2025. We feel strongly that this approach has the potential to enhance the growth profile of the business in 2026 and beyond.
Speaker Change: Part of these investments have been in teams tasked with expanding payer coverage and unlocking new insights from the massive amounts of data we generate every day. I'd like John Sesko to now expand on each of these initiatives. John?
John Sesko: Thanks Steve. Within our core business we have a significant potential opportunity to unlock reimbursement from test volumes that were already running and we've had several promising wins on this front recently.
John Sesko: Many of you have seen that we secured a strong increase in our Medicare ADLT rate this year, which was driven by strong pricing achieved in our commercial contracts.
John Sesko: Steve also touched on the new Moldex decision to cover signatarian NSCLC.
John Sesko: Based on the written requirements of the ADLT regulations, we believe no other MRD test is eligible to receive ADLT status unless they obtain FDA approval.
John Sesko: We are also now seeing formal policies from commercial health plans announcing coverage for state-mandated biomarker legislation.
John Sesko: Effective January 1, 2025, a leading benefits management company who supports a large number of health plans across the country, published a formal policy detailing cancer biomarker mandates across 20 different states.
John Sesko: Additional plans have also begun coverage and we're hopeful that others will follow suit.
John Sesko: I will caution that we still expect ASP improvements from biomarker loss to flow in gradually over time, but these are early wins that we can build on.
John Sesko: Within our women's health business, we also saw numerous plans to add policy coverage for expanded carrier screening, including a large national payer and several large blues plans.
John Sesko: We also saw the first meaningful Medicaid coverage in expanded carrier screening, with a published policy in one of the largest state Medicaid programs.
John Sesko: Many other states have added expanded carrier codes to their fee schedules.
We're excited about the momentum we're seeing here.
John Sesko: Steve touched on the time and investment we've put into our operations to get reimbursed for covered services and the positive impact that's had on revenues, margin, and cash flow.
John Sesko: We are now deploying new tools based on artificial intelligence to drive further improvement. Netera has developed AI tools to identify errors on claims, to spot patterns in denials and take corrective action, to scan payer response letters, and to develop custom patient-specific appeal letters.
John Sesko: We're spending significant time and effort to refine these AI tools with an initial focus on driving quality. We are very excited about what's possible here.
John Sesko: This is just one of many examples of how our team is deploying cutting-edge AI and large language models to optimize productivity and business operations.
John Sesko: It's only scratching the surface of how we are deploying AI to improve our customer experience, to optimize the performance of our core products, and to identify new prognostic and predictive signatures from our vast trove of clinical and genomic data.
John Sesko: We believe we have one of the largest cancer exome databases in the world, with over 200,000 cancer exomes and genomes sequenced, many of which are in early-stage cancer patients, both tumor and germline. So we have a great opportunity to leverage that database to further improve patient care.
John Sesko: 2024 was a good year from that perspective. We generated meaningful revenue from our data initiatives, and we expect to build on this effort in 2025. We are pleased to report that we've already signed over $10 million in data-related contracts this year, so we have some positive early momentum.
John Sesko: Okay, with that, let me hand it over to Solomon to review some recent clinical trial results and product updates. Solomon. Thanks, John, and good afternoon, everyone.
Solomon: First, I would like to provide an update from the women's health side on our non-invasive fetal RHD test, where we continue to see growing demand and adoption.
Solomon: We were pleased to see the publication of our clinical validation study in the Journal of Obstetrics and Gynecology in November. This was the largest study of its kind performed in the U.S. to date.
Solomon: It demonstrated excellent performance with sensitivity of 100% and specificity of 99.3%.
Solomon: This study provides compelling scientific evidence on the ability of our tests to identify fetal RHD status and demonstrates its potential to assist patients and clinicians in the prevention and management of RHD alloimmunization.
Solomon: Thanks to the growing base of evidence, together with guidelines from ACOG supporting the use of fetal RHD testing in certain patients, adoption among eligible patients has been strong and we were pleased to see commercial coverage initiated by one of the largest payers in the country.
Solomon: This new policy, which became effective last month, expands access to fetal RHD testing that can significantly improve precision medicine during pregnancy. Building on this successful launch from last year, we look forward to additional product and feature announcements later this year in women's health.
Solomon: Transitioning now to organ health, I want to share some details on two unique studies on Fosfera that we expect to read out in the coming months and we believe will have a meaningful impact on the field.
Solomon: The first is the PETAL study, which is a first-of-its-kind prospective clinical trial of kidney transplant patients. It is designed to evaluate the dynamics of donor DNA monitoring during treatment of a rejection event.
Solomon: This is similar to the cancer setting, where circulating tumor DNA monitoring with Signatera for immunotherapy response has become an important use case.
Solomon: We expect that PROSPERA-based therapy monitoring will also have utility for organ transplant recipients dealing with a rejection event.
Solomon: Incomplete resolution of projection remains a significant risk factor for long-term grass survival, and up until now there has been limited research into this area.
Solomon: Ultimately, understanding how each patient is molecularly responding to treatment may allow physicians to make dynamic adjustments to the treatment plan.
Solomon: Enrollment in the study included more than 580 patients across 28 leading sites in the U.S. and internationally, including UCLA, Cleveland Clinic, Wash U, Mayo, and more.
Solomon: Patients were monitored with PROSPERA for eight weeks following rejection, with tests performed at two-week intervals in the rejection cohort, and clinical outcomes assessed at 12 months. We've submitted the results for peer-reviewed publication, and we look forward to sharing those results once they're available.
Solomon: We are also outlining here a second novel study for PROSPERA, this one for heart monitoring.
Solomon: The DEFINE study is a large-scale, prospective, multi-center, longitudinal study of donor DNA in heart transplant patients that evaluated more than a hundred patients and over a thousand time points.
Solomon: The objective for DEFINE is to assess serial donor DNA dynamics.
Solomon: along with serial endomyocardial biopsies and their association with clinical outcomes in the first year after heart transplant.
Solomon: It's the first-of-its-kind longitudinal study, we believe, and the first to evaluate the dynamics of Ferspera's unique two-threshold color using the donor quantity score in conjunction with serial biopsies, and all compared to outcomes at one year.
Solomon: The defined study is being submitted for publication, so we look forward to a readout later this year. We believe this can make a meaningful impact on the standard of care in heart transplant monitoring.
Turning now to oncology.
Solomon: The first big news is that we announced Medicare coverage of Sigma Tera for serial recurrence monitoring in non-small cell lung cancer.
Solomon: including stages 1, 2, and 3, and including both resectable and non- resectable diseases.
Solomon: This coverage was secured based on three peer-reviewed public stations showing the validity and utility of Signatera in lung cancer.
We think the coverage is important for several reasons.
Solomon: First and foremost, there's a significant unmet need for lung cancer patients in this surveillance setting.
Solomon: Timely detection of recurrence is a core principle of care, but serial imaging has limitations in sensitivity and specificity. And it's often hard to interpret, especially after surgery and radiation.
Solomon: Additionally, this is the first time we have secured reimbursement in stage one disease.
Solomon: based on the strength of our data in that setting. Lung cancer is a lethal disease, hard to treat, where even stage one patients have a five-year rate of recurrence that is higher than the rate of recurrence in stage two and three colorectal cancer.
Solomon: Finally, this coverage expands on CignaTerra's pre-existing coverage for immunotherapy monitoring.
Solomon: where immunotherapy is already commonly prescribed in the adjuvant setting as well as in the neoadjuvant and metastatic settings for non-small cell lung cancer.
Solomon: We look forward to working more closely with the thoracic oncology community to improve care and outcomes for patients with lung cancer.
Looking beyond lung cancer now to the NCCN guidelines.
Solomon: We were pleased by the recent guideline updates, which for the first time included ctDNA in the management guidelines of colorectal cancer as well as Merkel cell carcinoma.
Solomon: These updates are a significant validation of our Signatara clinical data strategy, as well as the core strength of our technology.
Solomon: The inclusion of Signatera every three months for surveillance of Merkel cell carcinoma is a big step forward for the management of this rare but aggressive form of skin cancer.
Solomon: The guidelines specifically referenced a peer-reviewed publication about Signatera from a study that was initiated several years ago and published last year. Adoption in Merkel cell carcinoma has been strong.
Solomon: Additionally, we were pleased to see signatory included in the guidelines, colon and rectal cancers.
Solomon: specifically acknowledged as a high-risk prognostic marker in the adjuvant setting.
Solomon: Based on the initial positive feedback from physicians, we believe these recent guideline updates will support the use of Signataria in more CRC patients than before, and likely to support adoption by new physicians.
It's worth noting that this language in colorectal cancer
Solomon: was discussed and voted on by the committee in the early fall of last year before the publication of key data sets including the overall survival data from the GALAXY study, the surveillance data from the BESPOKE study, and the predictive data from the CalGB SWOG 8702 study.
Solomon: We believe this recent data has the potential to support further guideline updates in the not-too-distant future.
Solomon: Now, I will turn it over to Alex to discuss the data in greater detail and our product roadmap in oncology.
Solomon: Alex. Thanks, Solomon. I want to start by highlighting the CalGB SWOG 80702 study, the results of which were presented in an oral session of this year's ASCOGI conference.
Solomon: Sigma Tera was utilized to examine in a pre-specified manner the tumor and plasma from around 1,000 stage 3 colorectal cancer patients in this randomized cohort.
Solomon: The results found that in signatory positive patients, the addition of cellococcip to standard adjuvant chemotherapy resulted in a three-year DFS improvement and a reduction in all-cause mortality of over 40 percent.
Solomon: Syngentara-negative patients, by contrast, had no significant improvement in overall survival from receiving Cellocoxib.
Solomon: The results were very well received by the scientific and clinical community, with multiple leading GI oncologists already telling us that they have started discussing cellotoxin with their stage 3 patients who test signataire positive.
Solomon: This also represents another major proof point, along with the Invigor 010 data in bladder cancer published back in 2021, that signoterra can be predictive of therapy benefit across multiple cancer types and drug classes.
We look forward to publishing the study later this year.
Solomon: We expect 2025 to be a pivotal year for oncology business, with multiple significant clinical readouts, as well as expansion of our product portfolio. Before reviewing our new product launches, I wanted to spend a minute discussing the underlying technology that powers and differentiates our MRD product offerings.
Solomon: Over the past 15 years, Matera has developed, patented, and optimized a multiplex PCR NGS technology that allows for deep and targeted detection of tumor-derived mutations in plasma, resulting in exquisite sensitivity and specificity while controlling costs.
Solomon: While our technology can multiplex thousands of targets simultaneously, as we do with Tanorama and IPT, for example, we believe the best approach for tumor-informed MRD detection is to select a targeted set of the highest quality clonal variants.
where Natera has significant experience using proprietary methods.
Solomon: Also, to optimize the primer design and the amplification protocols to sequence these targets at extreme high depth of over 100,000 reads per target, and then to deploy a calling algorithm based on our proprietary error model.
Solomon: Some competitors have tried to replicate this approach, but have been enjoined from using our patented multiplex PCR technology, and so have been forced to go a different route, for example, by using hybrid capture technology.
Solomon: MRD labs who use hybrid capture typically track hundreds or thousands of targets, but sequence them at a shallower NGS depth to control COGs.
Solomon: This is why MRD test performance depends on much more than simply the number of targets tracked. The technology truly matters. This is why Signataris clinical performance remains outstanding for detecting recurrence in published clinical studies.
Solomon: a SNP-based strategy based on multiplex PCR NGS competing with shallower shotgun sequencing techniques.
and we all see how that played out.
Solomon: While Signataria Design on Exome continues to be the assay of choice for the vast majority of oncologists with over 100 peer-reviewed studies,
supporting its broad clinical utility.
Solomon: and Emerging Predictive Claims. We are also now receiving positive feedback on our genome-based product launched at the end of last year.
Solomon: Early interest from both the pharma and academic community has been strong for the role this product can play in clinical trials in certain clinical situations. We'll be presenting clinical data from our genome assay this year.
Solomon: Furthermore, we're excited to make progress on our tissue-free assay, with launch expected mid-2025, and with promising data presented to ASCO GIs several weeks ago showing competitive performance.
Solomon: Right now, in the lab, we're processing a large-scale, prospectively collected study of over 1,000 samples that will support the launch of the tissue-free assay in the adjuvant and surveillance settings.
Solomon: We believe the evidence will support reimbursement by Medicare and will follow quickly with applications and other cancer types. With that, let me turn it back to Steve to discuss early cancer detection. Steve?
Steve: Thank you, Alex. As we previously shared at J.P. Morgan, we presented our first prospective validation of our ECD technology showing 95% sensitivity and 91% specificity with minimal degradation of performance in the asymptomatic screen-detected population.
Steve: We continue to make rapid progress on this program, and I'm happy to announce that we've confirmed our CRC sensitivity in another independent data set where the majority of patients were stage 1 and 2.
Steve: We are encouraged by these results in CRC and look forward to reporting at a more definitive study later this year for the PRECEDE trial.
Steve: The big announcement for today is a readout of our prospective advanced edenoma trial.
Steve: As a reminder, we've collected roughly 3,000 patients using a protocol similar to what we would use in an FDA-enabling trial. All samples were in asymptomatic patients and collected prior to a screening colonoscopy.
Steve: We're pleased to report that in the patients analyzed for the study, we found an 18% sensitivity for advanced adenoma with a specificity of 91%. Because of the manner in which these samples were collected, we don't expect to see the type of performance degradation that's been observed in other ECD trials.
Steve: Based on the excellent results in CRC and advanced entoma, we've decided to kick off the FDA-enabling FIND study, which is expected to enroll over the next 18 months.
Steve: The preceded study has allowed us the opportunity to better estimate both the possible enrollment rate and the cost of the definitive study. We believe this improves the chances for executing the study on schedule and within budgeted costs. This is already baked into our guidance for the year and has limited impact on our CAS trajectory.
Steve: Finally, as we look at the overall opportunity, we're pleased to see the Medicare rate confirmed at 920, and given that we will seek FDA approval for this test, we believe ADLT pricing at a higher level is possible.
Steve: This elevates the opportunity for Natera, which is exciting, given our mission to help as many patients as possible.
Steve: For distribution, we're considering partnering with a national distributor or using our direct sales channel or a combination of both. Directly, we believe today we are already covering nearly all female patients through our OB-GYN channel and all major hospital systems through our strategic accounts team.
Steve: We can augment this with sales reps in select markets for a solid distribution strategy. We also think the idea of partnering is enticing as well, either as a standalone strategy or alongside our direct team. In either case, we can do this without significantly impacting our operating expenses.
Steve: With that, I'll pass it back to Mike to review the financials.
Mike: Great. Thanks, Steve. The first slide is just a summary of our Q4 financials.
Speaker Change: If you look at the year-on-year change column to the right, you'll get a sense of the progress we made across every metric of the business.
Speaker Change: As Steve covered at the top of the call, the large increase in revenues with even faster growth in gross margins moved the P&L to a different level in 2024.
Speaker Change: Even as we made substantial investments in future growth, our loss per share narrowed significantly and we generated a meaningful amount of cash.
Speaker Change: You'll recall that we retired the convertible notes early in Q4, so that leaves us with just under $1 billion in cash and effectively no debt on the balance sheet, aside from the relationship line of credit from UBS.
Speaker Change: Okay, let's get to the 2025 guidance on the next slide. Steve touched on the revenue guide at the top of the call. We are pleased to be guiding to $1.87 billion to $1.95 billion in revenues to start the year off.
Speaker Change: Our base assumption for this guide is really just having the positive trends we've been seeing the last few quarters continue rolling into 2025.
Speaker Change: That means steady volume growth and stable ASPs in women's health, continued market share capture and in-market growth in organ health, and of course we expect Signataria to continue to grow sequentially.
Speaker Change: We've also obviously seen signataria clinical volume now grow consistently above the 8,000 to 10,000 sequential unit growth threshold we've previously set as a target.
Speaker Change: The guide presumes we will modestly outpace that $8,000 to $10,000 level in 2025.
Speaker Change: The guide does not attempt to forecast any revenue true-ups. While we think the true-ups represent good execution on cash collections, the fact that they can be lumpy and unpredictable means that we will just guide based on what we think the underlying business can deliver.
Speaker Change: Consistent with our philosophy, we are setting this guide at the beginning of the year, acknowledging that we have several meaningful sources of upside potential.
Speaker Change: For example, those of you that have followed us for a long time know that for us to guide to stable ASPs in women's health is a fairly bullish signal.
Speaker Change: and we are cautiously optimistic that we could actually see continued growth in women's health ASPs this year through our own organic efforts as John described.
Speaker Change: We haven't spent a lot of time dwelling on ACOG guidelines recently, but of course, if we get either a 22Q or expanded carrier screening, that would be another great upside outcome, and the feedback we get on both continues to be positive.
Speaker Change: Solomon covered some of the extremely impactful clinical trial results we have on TAP and organ health and accelerated adoption of both RENOCYTE and PROSPERA on the back of those data readouts would be upside to the guide.
Speaker Change: Of course, the pace of adoption and realized pricing of Signatera in the clinical setting offer the largest potential sources of upside to the model this year.
Speaker Change: Between the three-year overall survival data from Circulate, the Celebrex readout at ASCO GI, sales and operations currently executing at a very high level, and significant additional investments flowing into the business, we've never been in better position to change the way cancer is treated in the United States.
Speaker Change: The guide presumes some modest ASP growth for Signatara consistent with better allowed rates in Medicare Advantage, but does not require any significant level of traction with either NCCN guidelines or with biomarker state reimbursement.
Speaker Change: We remain cautiously optimistic. We could see some green shoots in the results in the second half from biomarker laws. And, of course, we will do everything we can to broaden Signatera adoption.
Speaker Change: The Gross Margin Guide presumes continued progress above the 59% gross margin we posted in Q4, X the True Ops.
Speaker Change: The margin growth can come from several sources, and much like the revenue, we believe there are several sources of upside to the guidance, for example, better-than-expected realized pricing in any of our major products.
Speaker Change: A note of caution on the gross margin is that we are launching these two complementary products in the MRD menu, neither of which have optimized unit economics.
Speaker Change: Our model presumes some modest uptake of both tumor-naive MRD and the genome backbone product, and we expect this volume to be largely additive to core Signatera volumes as existing customers avail themselves of the menu from us on a broader set of their patients.
Speaker Change: If uptake from either offering exceeds our expectations, that would create a short-term headwind for margins, but I would argue that uptake is a very healthy signal for the longer-term development of the Signatera franchise.
Speaker Change: As Steve covered, the SG&A and R&D lines demonstrate that we are not taking our foot off the gas in pursuit of innovation. Great clinical trial results.
and customer service across our business.
Speaker Change: We could hold expenses completely flat in 2025, and it wouldn't affect our growth at all in 2025 or 2026. Indeed, if you look back to 2023, we held expenses approximately flat that year and still grew revenues 32%.
Speaker Change: We are already seeing high ROACs from investments we made in early 2024, and we think every dollar we invest in our platform now puts us further ahead of the field for years to come.
Speaker Change: Steve unveiled some very promising ETD data today, but the spend in early cancer detection this year and next year is incremental to the core mandate we have to deliver the best possible offering to our patients and our core products.
Speaker Change: We will remain focused on ensuring we are getting excellent returns on these investments.
Speaker Change: And we are going to manage the business with the goal to deliver a cash flow positive result again in 2025.
and many more. Thank you. Thank you.
Speaker Change: Okay, one more slide just to put the revenue guide in its proper context.
Speaker Change: As I mentioned, we are not guiding to any true-ups in the 2025 guidance.
Speaker Change: Although we will likely have some true-ups as we continue to drive reimbursement from appeals on older test volumes,
Speaker Change: As ASP Growth Moderates, I do expect TrueUps to moderate as well. And I think the simplest framework for understanding quarterly progress is to review the results with the TrueUps stripped out.
Speaker Change: Accordingly, when you remove the true-ups from the 2024 results and then evaluate the guide on an apples-to-apples basis, you'll note that the implied revenue growth rate is roughly 24% at the midpoint.
Speaker Change: While this growth is much faster than most other businesses operating at our current scale, we are setting this guide as a starting point with the goal of exceeding this target through the course of the year.
Okay, with that, let's open it up for questions. Operator?
Speaker Change: Thank you. And everyone, if you would like to ask a question, please press star 1. We'll go to Doug Schenkel, Wolf Research.
Thank you. Thank you.
Hey, good afternoon and thank you for taking my questions.
Thank you.
Speaker Change: I think a couple of questions following up on your prepared remarks. So Steve, in your prepared remarks, you talked about, I think it was the ability to double signature revenue at the current level of volume over the next few years.
Speaker Change: Just, you know, maybe dumbing it down for me as a as a math person, cutting through all of that, does that mean that you would expect to potentially get signatory ASPs up to around $2,000 over the balance of the decade?
Speaker Change: And then I guess one for Solomon, you talked about the rationale behind, you know, why more targeted approaches have resonated on the clinical side with Signatura. Obviously, that continues to resonate. You know, that said, some pharmaceutical companies have indicated they want a broader panel.
Speaker Change: How is the introduction of your genome-based products resonating with pharmaceutical and biotech customers in the early going and how is that factored into guidance? Thank you.
Speaker Change: Thanks, Doug. This is Steve. So, yeah, just first on the ASP or on the revenue per test, I think the idea is today there's a significant number of tests that we process where we don't get paid by the insurance companies.
Speaker Change: And that's sort of baked into the average ASP that we show you guys, you know, when we're talking about ASPs. So as time goes on, as we get more coverage policies in place for things like...
Thank you.
It's been a CARES screening, other...
tumor types.
Speaker Change: as we start to get paid for some of the tests that we run today that are already baked into our cogs we're not getting paid on. And so that you know the comment I made was more general about the business overall but it also really does hold true for Signataria and I think your math is
Speaker Change: They're reasonable, you know, as you sort of look out into the future.
Speaker Change: Then on, I'll briefly comment on the genome side and then turn it over to Solomon. You know, certainly there's some interest from PhRMA and, you know, in a select...
areas, some clinical providers.
Speaker Change: I think the product's been received very well, you know, largely with the idea of kind of clinical, you know, using it for clinical research, but, you know, at this point, you know, if the doctor wants a genome, if the pharma company wants a genome, we have it available, and the product performs exceptionally well.
Speaker Change: So we're excited about it. Solomon, you want to make any further comments?
and many more. Thank you. Thank you.
Score.
Speaker Change: academic consortia where they seek to answer more translational or researchy questions of interest.
Speaker Change: and we routinely run custom versions of our technology that can include hundreds of targets if that's something that the customer wants.
Speaker Change: Generally, we think about building a product for the clinical setting that's going to become a workhorse and highly scalable and also cost efficient. So, I think that's where you're seeing
Speaker Change: levels of adoption in the clinical setting. So we do think about these.
, , , , , ,
Speaker Change: we think provide the advantages across both of those settings depending on the application type.
And increasingly, we're able to add.
Genomic Insights from
Speaker Change: from our analysis of the tissue, whether that's with a genome or an exome.
Speaker Change: and from the normal DNA and being able to run additional side assays like RNA-seq, for example. So there's a lot that we're able to do. Hopefully that answers the question.
Yep, that was great. Thank you guys
The next question is Rachel Vattenstall, J.P. Morgan.
Rachel Vattenstall: Okay, thank you. Good afternoon you guys and thanks for taking the questions.
Rachel Vattenstall: First up here, just on Signatara, if we look at the volume growth that you saw throughout 2024, you did roughly 14,000 sequential unit growth throughout last year. You said you're going to do above that 8,000 to 10,000 per quarter or sequential per quarter in 2025, but can you just give us some more color on how much above you could do versus that 8,000 to 10,000, kind of like the old long-term plan that you guys had had? And then could it be something in that range of 14,000 like we saw last year?
And then I have a follow-up as well.
Speaker Change: Yeah, thanks for the question. So I'll let Mike comment a little bit on the guide, you know, but first I'll just say, you know, we're very underpenetrated. This is a very large market.
We generated over 100 peer-reviewed papers, and we're seeing
Speaker Change: very significant interest from physicians and that interest is accelerating as we generate data like the 702 study that really provides an actionable predictive use case for the product. So as we said in the prepared remarks,
Speaker Change: Q1 volume growth in Signataria is looking, you know, to be one of the best quarters that we've ever had in the history of the company. So we're feeling very good about volume growth in Signataria. Mike, do you want to comment on sort of how we do the guide?
Speaker Change: The guide, I mean, we covered the philosophy kind of in detail in the prepared remarks. So the guide...
Speaker Change: presumes that we can do better than the 8 to 10, it's not necessarily anchored at 14.
Speaker Change: It's going to be, it wouldn't surprise me if you just look at last year, you know, averaging it out, you're kind of in that 13-14 range, but obviously the lumping, you had, you know, 15,000, you've got 11,000. It wouldn't surprise me if you have those types of kind of typical fluctuations.
Speaker Change: The spirit of the guide is that the momentum continues, and it's a
Speaker Change: strong but but still an achievable target as a starting point for the guys here
Speaker Change: Great, thanks for that color. Then I just wanted to dig into the concept of true ups here as well.
Speaker Change: So you mentioned that you're not including true-ups within the current guide for 2025. You've also talked about how the magnitude of those true-ups are going to come down as you guys continue to do better on collections and have more visibility in that.
Speaker Change: So could you just level set for us, what should we expect in terms of that true-up, you know, getting more standard as we go forward in the trajectory there over the next few years? Thanks.
and many others. Thank you. Thank you.
Yeah, I mean, I think that the...
Speaker Change: The reason why we have true-ups is that the historical cash collections are exceeding the historical accruals.
Speaker Change: And as we get history with better and better cash collections per test, obviously the accrual increases in sympathy, okay? And so invariably, you know, that's going, the change in the ASPs in these products is going to moderate. And when it does, for a period of time, you'll have.
Speaker Change: You'll have the tropes kind of decline kind of on a glide slope.
Speaker Change: So I do think that they'll kind of moderate over time back to kind of what we saw historically, which was sort of like a, you know, five.
Speaker Change: five million kind of troop number every quarter. The reason why we don't guide to it though, is that that's hard to predict quarter to quarter. So I'll just give you an example. I mean, you know, we're working very hard to win appeals on cases that we ran in the
Speaker Change: fourth quarter of 2023. So we've already kind of collected 100% of the revenue that we needed to collect.
Speaker Change: for 2023 Q4. But if we win more of those appeals, if the cash arrives in Q1 or arrives in Q2, then we'll book revenue in that period. So fully expected to be lumpy. But you've seen the ASPs go up quite a bit. And I expect over time, on average, those to moderate down on a more or less linear glide slope.
Next up from Morgan Stanley is Tejas Savant.
Hey guys, good evening and thanks for the time here.
Tejas Savant: Just to start, maybe one for Alex here. You know, I know in the deck you talked about the number of targets only being one variable impacting tumor-informed MRD assay performance.
Tejas Savant: How many markers do you anticipate tracking for your personalized whole genome panels? Is it 16 like the current version of Signatera? And how did you think about that choice in terms of cost considerations versus, you know, optimizing for, you know, perhaps higher sensitivity? And can you just share some early color on feedback from the oncologist community?
Speaker Change: Yeah, let me make a couple comments and then throw it over to Alex. So, so yeah, the genome product we're tracking 64 variants
Tejas Savant: And, you know, remember, we're using the same multiplex PCR NGS approach that we used with the 16-variant assay. So, the philosophy is to go extremely deep.
Tejas Savant: at a very highly curated, targeted set of variants, and we think that's the best approach.
We could do 2,000 variants. We actually do 30,000 variants.
Tejas Savant: a single reaction when we run certain tests. We do that all the time in the laboratory. But we chose specifically to do 16, and now in this case of genome, 64.
Tejas Savant: because we think that's the right approach where you're optimizing sensitivity.
Tejas Savant: and specificity. And I think that's proving to be the right decision. If you look at our clinical performance data, you know, you look at our very strong data that we published for recurrence monitoring, you know, it's really good. So this looks like to be the right approach and we're excited about it.
Alex, you want to comment further?
and many more. Thank you. Thank you.
Speaker Change: Yeah, maybe just one or two quick points. You know, I think the first is, you know, we've seen...
Tejas Savant: Really very positive and very strong feedback with this launch, both from the broader academic
Speaker Change: community, the consortia community, as well as the pharma community. So, we're very pleased with that. And the way we think about it, as Steve mentioned, is there's a few factors that go into assay performance. Number of variants is just one of many.
Speaker Change: So error model is super important, the quality of the variant selected.
Speaker Change: and then the ability to sequence and call those variants very, very deeply. And, you know, I think when we did the math...
Speaker Change: 16 was really kind of the optimal number for exome, and kind of when we did the math for genome, you know, at least initially, the number is 64. That kind of optimizes performance across those metrics while kind of keeping COGs contained.
Speaker Change: Got it. That's helpful. And Mike, a quick follow-up on the guide for you. So first, how are you thinking about any potential benefit from the Novacek X transition? And second, on the Medicare lung reimbursement for Cignadera, any color you can share in terms of, you know, pair, mix, Medicare versus commercial and non-small cell lung, and how many deaths will be covered in the surveillance setting?
Let me comment on...
Go ahead!
Speaker Change: Let me comment on Lung, Mike, and then you can maybe jump in on the COGS projects that we've executed on. But obviously, we're really positive on Lung.
Speaker Change: We're seeing a lot of interest there from providers. That's an area where, you know, historically, we did really well engaging with.
the KOLs and some of the top centers.
Speaker Change: But we weren't reimbursed, so it wasn't necessarily, I think, the first thing that our sales representatives and medical team were talking about when they were out in the field.
Speaker Change: But nevertheless, we still have a lot of volume coming through. There's a lot of interest. So this is a big opportunity for us as we look at just the number of patients that are diagnosed.
Speaker Change: I think the clinical importance of this type of testing and the value that we can provide from surveillance.
Speaker Change: So, I think this represents, you know, a new vector of growth for doTERRA that could, you know, potentially even help us, you know, push significantly past maybe some of the record volume quarters that we saw in 2024.
Mike, you want to talk on CARS projects?
Mike Lung: Yeah, so just first as we're on long, I mean, I think the Medicare mix is going to be broadly similar to the average that we see kind of across the business there. So I do think it'll be kind of a.
Mike Lung: kind of a contributor, you know, as similar to the, you know, the rest of the tumor types. There's not like a very meaningful skew, I think, within that Medicare mix.
Similarly, I mean, I presume that there will be...
Mike Lung: Now that we have the coverage, we'll go back and just confirm on the pricing decisions with Moldex, but I think it's safe to presume that the similar kind of setup in terms of a bundle pricing would be the standard there for the adjustment setting. In terms of the
Mike Lung: In terms of the COGS project, yeah, I mean, we definitely were going to have some improvements to COGS.
Mike Lung: here in 25, and that's part of the guide. That's part of the kind of the gross margin improvement that's contemplated in the guide. It's a pretty meaningful gross margin improvement versus the underlying, you know, 59% we just posted.
Mike Lung: and Q4. I think Steve's comments in the preparatory remarks were more, you know, it used to be up until the middle of last year it was really the overwhelming thrust of the R&D effort was we were forced to kind of
Mike Lung: You know, prioritize just getting these COGS projects out the door, and now we can be a lot more nimble and focused on
Mike Lung: Some interesting product launches and features and datasets. So it's a much more kind of balanced portfolio
We got it. Appreciate the call, guys. Thank you.
and many more. Thank you. Thank you.
The next question is Tycho Peterson, Jeffries.
Mike Lung: and many more. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Hey, this is Nolan for Tyco. Thanks for taking our questions. I wanted to start by asking about the 702 study and particularly interested in what the initial reaction has been like there. Anything you would point out as an indicator that this will lead to broader use from clinicians?
Yeah, thanks for the question. So, I guess.
Speaker Change: I'll make a comment and then maybe hand it over to Alex or Solomon if they want to comment further, but
Speaker Change: Anytime you have something like this that's very actionable for the doctors, there's going to be significant interest.
particularly when it has that predictive...
Speaker Change: impact as well. And I can just say from from my view
Speaker Change: you know, coming out of the conference, one of the leading colorectal physicians.
Speaker Change: came up and said, hey, look, I've already started prescribing Tocostin in my practice to MRD-positive patients based on this data. So I think to hear that really gave us confidence that this is very important and it's going to change practice.
So Alex or Solomon, you guys want to comment further?
Speaker Change: No, I think the initial feedback is overwhelmingly positive, I think.
Speaker Change: There's also additional data that was presented at ASCO-GI about the benefit of aspirin in some early-stage colorectal cancer patients. I think that further kind of reinforced this concept that cuts to inhibition, especially when biomarker-directed, can be very very impactful for
Speaker Change: these patients. And, you know, just to put this in the context, there's not been a new therapeutic development.
Speaker Change: in the adjuvant management of colon cancer for over 20 years since the Mosaic study.
Speaker Change: patient advocacy groups, physicians. I think there's just broad excitement across the board.
and we'll see how this translates into...
Speaker Change: You know, further guideline changes, you know, we can't predict that, but we're looking kind of forward to see what the NCCM committee kind of may weigh in on this data.
Okay, that's helpful. Thanks.
Speaker Change: Thanks and then one more from us. On MRD, obviously a number of competitors will be launching in the next year, so just wondering what your competitive strategy is in order to try to maintain the marketing position there. Thanks.
Speaker Change: Yeah, so, you know, there's always been competitors coming in. I think, you know, a couple of them have...
Speaker Change: sort of been enjoying, you know, because of our IP position, but, you know, for the last...
Speaker Change: Several years there's been competitors selling MRD testing in the market marketplace clinically.
Speaker Change: So, we feel like we're in a good position. You have to just do the fundamental things. You have to deliver high-quality clinical data. You have to have an amazing customer experience.
You have to have a strong medical and commercial team.
Speaker Change: This is innovation, and I think we're in a very strong position because we're able to invest.
Speaker Change: very significantly in R&D, and you can see, you know, we're not burning cash.
Speaker Change: new versions of products, and most importantly, big, large-scale, market-moving clinical trials.
Speaker Change: So we're doing all those things and we think we're doing the right things, but look competition is a good thing, too It's you know, it's it's great to see That this market is is very meaningful and that it's growing
Speaker Change: And, you know, I mean, it's what, like 3% penetrated or something like that? So this is...
Speaker Change: This is probably the largest molecular diagnostic opportunity in the history of oncology and molecular diagnostics, so certainly there's going to be a lot of competitors coming in.
and many more. Thank you. Thank you.
And the next question is Puneet Suda, Lee Rink Partners.
Puneet Suda: Is that largely ASP or how much sort of COGS reduction are you thinking about? Again, looking at both oncology and women's help and I'll have a follow up to this later.
Yeah, Mike.
Mike Lung: Yeah, thanks. I think it's a good question on the cadence. Typically, in the women's health business, I actually think that we will return to our normal form there, where Q1 is a very strong quarter for women's health.
Mike Lung: Just seasonally, Q2 tends to be softer, and then you kind of return to Q1 levels and beyond.
Mike Lung: in Q3 and Q4. Last year, the cards were kind of scrambled a little bit just because we added those in vitae units and that was kind of straddled between Q1 and Q2, so you didn't quite see that trend in the financials this year, but this is a pretty clean year.
from ads.
as far as that's concerned, so I think...
Mike Lung: Women's Health returned to the normal seasonality we've seen over the last decade.
Mike Lung: Signatara and Prospera, there's not really a seasonal component there, other than the dynamic that I mentioned earlier in the call, which is just a number of receiving days will vary, and where to scale, particularly in Signatara, where every receiving day is worth a lot of units, and so you've just got to keep that in mind.
Mike Lung: So holidays, you know, will impact you. But that's the main thrust is kind of Q1 bigger because of women's health.
Mike Lung: Q2 software because of, again, seasonality, women's health, and then kind of returning to form in the second half of the year, and not much seasonality in the Oregon Health and Cigna Tariff.
Speaker Change: Sorry, you asked about gross margins. Yeah, so yeah, I agree with you. I mean, look, the, I think that's important to think about the gross margins. The guy's actually...
It does imply...
Speaker Change: You know, very bullish outlook as it relates to continued gross margin.
improvement.
Speaker Change: And I do think, you know, as Tej just asked, you know, there are some projects that are going to deliver in 2025 that I think will be useful. We're also just going to get some benefits on the cog side, just from the scale efficiencies as you kind of grow.
Speaker Change: Unis, the way that we're growing them, you do get a linear benefit to all the facilities and all the equipment and the people and things like that, and we're getting more and more efficient there. So that's a component of it. I do think that weighting them, there's more of a weighting toward benefits in ASPs.
Speaker Change: and also just, you know, steady execution kind of women's health ASPs.
Speaker Change: Continuing on where we left them in Q4, and then annualize them for a full year would get you a strong uplift. But that does leave you room for upside, and John kind of alluded to some of the potential sources of upside we have, particularly in women's health ASPs.
and many more. Thank you. Thank you.
Speaker Change: Got it. And then, if I could, I'll try my best with this question on NCCN, but we're also getting questions on the advanced adenoma data that you provided in the slide deck. So, NCCN, ctDNA is prognostic but not predictive, and then they also said ctDNA is not recommended for surveillance.
I appreciate the Mercosur support that you're getting there.
Speaker Change: But could you elaborate on the oncologist feedback and, you know, one side there's the traction with pairs potentially, but on the other side, you know, there's also the offset, maybe in the community setting, they might, I mean, the oncologists are still going to be looking for NCCN. So maybe just help us capture the NCCN and, you know, how you're thinking about that. And just on advanced adenoma, why should we not see any?
degradation there. Thank you so much.
Speaker Change: Yeah, yeah, let me let me just comment briefly and then maybe you know Alex you can make a couple comments on this and Emma But on NCTN, it's being received very positively You know, there's been a lot of a lot of good feedback on the calls that we've done in meetings We've had over the last two weeks
Speaker Change: I think certainly an adjuvant was an enhancement, and as Solomon pointed out in the prepared remarks, some of the data that I think is very meaningful, like for example the 702, couldn't be considered.
where maybe you would have received that predictive claim.
Speaker Change: But certainly, that's an enhancement. And surveillance, we think it's sort of just administrative language cleanup. That's kind of some of the feedback we've been getting is there was no real intention there.
Speaker Change: And that makes sense and that's kind of in line with what we're hearing out in the field as well. So, you know, we don't think it will have any impact.
Speaker Change: You know, there's also great surveillance data in Intercept, which is more and more people are talking about that now, out of N.B. Anderson, a very significant trial. And then the Bespoke study was received very positively at ASCO GI.
Speaker Change: So certainly we think that's going to have an impact as well. But I would say NCCN readout was very positive for us.
I'll turn it over to Alex on Advanced Thetanoma.
Thanks Steve, and you know, Puneet.
Speaker Change: I think this is our first readout. I think one makes us more comfortable.
Speaker Change: to really think that we're minimizing the chance for degradation as much as possible is that, you know, these are samples that are collected prospectively colonoscopy matched in the screening population kind of really following the same ethos as our perspective, you know FDA enabling study
But Steve announced that we're launching shortly.
Speaker Change: And again, this is the first of what we hope to be multiple readouts also for advanced adenoma. I think we're planning an additional readout later this year.
Speaker Change: again, following the same ethos of only running prospectively collected colonoscopy matched samples.
following a very similar protocol to the FDA study.
Speaker Change: And the good news is that, you know, we still have a little bit more time before the algorithm has to be completely locked, right? So we do also think there could be room for further improvement beyond the number that we initially read out.
Speaker Change: So those are the things we're doing to try to minimize the chance of degradation as much as possible.
and many more. Thank you. Thank you.
Got it. Helpful. Thank you.
Speaker Change: Hey guys, thanks for the questions. Maybe first on biomarker bills, is there any way to frame what your success rates have been in getting paid in those states to date? How has that evolved once the bill becomes effective? And then, I know you aren't baking anything into guidance, but how do you think those success rates could realistically evolve over the course of the year?
Speaker Change: Yeah, that's a good question. So I think the outlook on biomarker is positive and it's great to see that we're, you know, we're seeing I think the first signs of, you know, the ship turning here. So let me turn it over to John Fesco to talk just briefly on what's happening there.
John Sesko: Thanks, Steve. Catherine, we've been cautious on the impact of biomarkers because we didn't know the pace at which it would flow through and it's taken a little longer than we had hoped for.
John Sesko: But, you know, with these formal publications, we think that creates ammunition to go press other plans.
John Sesko: And we have heard from other plans that they want to come into compliance with the law. So we think that we will see conservative positive improvement over the course of this year and next year.
John Sesko: Okay and then maybe on R&D, just given the magnitude of the increase you're calling for this year, can you just talk through the spend buckets within that, you know, oncology versus women's health versus early detection, how much is the FDA enabling study, and then just how should we be thinking about R&D growth over the next couple of years or where that might settle out as a percent of revenue over time?
John Sesko: yeah just make you know what one more comment on the biomarker bill I mean this goes back to you know this goes back to I think Doug's question at the beginning around our prepared comments that
All the revenue per tusk.
John Sesko: So, you know, biomarker bill is a great example because today, you know, we'll receive a test from a commercial payer and a lot of times they don't pay us.
and you know this is an opportunity as a biomarker
John Sesko: Bill comes in, where we can actually get paid on some of the tests that we're already running. So, not only are we accelerating volume growth as time goes on by getting things like...
John Sesko: R&D so yeah sorry I just had to remember what the second question was yeah the R&D side look the vast majority of the R&D is going to be on MRD
John Sesko: and that's clinical trials and that's product line extensions, product line enhancements, that's COGS and scaling related projects, and that's UX related projects.
John Sesko: When you look at other areas of the business, certainly we think women's health and organ health are very important. We've got some pretty exciting launches happening there.
John Sesko: those businesses you know in the future but and also some great clinical studies as we went over PEDDLE and DEFINE. These are these are really the first
John Sesko: time these these specific things have ever been studied in this very rigorous perspective manner And we think they can be very meaningful for the field
But yeah, the main focus is MRD in oncology.
John Sesko: And, you know, we think that's where we should be putting our investment now. Of course, the ECD opportunity.
John Sesko: although traditionally you know our investment there has been been very targeted and we'll continue with that philosophy you know now we're launching the FDA enabling study.
John Sesko: You know, that's already worked into the budget, already worked into the guidance for the year, but there will be some spend there. And we think that that's warranted, given what we think is really, really strong performance.
John Sesko: on the ECD product, and given the ASP, you know, I think the $900 plus
John Sesko: Medicare clinical fee schedule rate, plus the opportunity to have an ADLT rate that could be in the $1,500 range. You know, I think that that's actually, that makes it a very significant opportunity for Niterra. And, you know, given our ability to develop these types.
John Sesko: work through the regulatory framework, our historical success with distribution, and actually the built-in channel that we already have for distribution.
John Sesko: We think we can be a very major player in that space. And we think we can...
John Sesko: we can do it without really significantly increasing the operating expenses and have a very high gross margin product. So certainly that's worth investing, and that's why we're putting money behind that.
Great, thank you.
Up next is Daniel Brennan, T.D. Cowan.
John Sesko: Great, thanks for the questions. Maybe just starting on price, Mike.
John Sesko: Mike, you want to take that? Yeah, go ahead. Thanks. Thanks, Dan, for the question. So, yeah, just on Cigna-Terra, we just expect kind of steady, kind of continued improvement in the ASPs.
Women's Health, as you mentioned, is stable.
John Sesko: What's going to drive the improvement in Signatara, at least in the base model, is just going to be continued execution on reimbursement for our Medicare Advantage volumes for covered services. So that's been an important driver for Signatara ASPs over the last 12 to 18 months.
Speaker Change: Yeah, you know high 60s range, and so we're going to make steady improvement on that We fully expect in 25, and that's what gives us confidence actually guide to improving cement air ASPs
in a year.
Speaker Change: And I just thought that, again, I mean, the women's health ASPs have been really strong. We've been very encouraged by the results we've gotten from all the hard work there. So that's certainly a potential source of upside, if we can continue to see improved ASPs, particularly in expanded carrier screening.
That would represent upside to what we've guided today.
and many more. Thank you. Thank you.
Speaker Change: Great, and then maybe just to follow up on lung, so can you remind us of what percent of the lung indication you have today like wasn't covered by IO?
Speaker Change: So of the 200 plus thousand incidents, how many of those patients are already, you know, applicable for IO? So what's, like, the expansion that you see? And any other approvals we could expect this year, you know, which tumor types are kind of high on the list?
Speaker Change: Yes, Solomon, you want to comment on sort of how things are parsed out between maybe the adjuvant indication in lung where, you know, we were already covering, you know, quite a few of the patients with with IO monitoring and then, you know, what is this kind of very large surveillance opportunity that we just received coverage for?
Solomon: Sure, thank you. In lung cancer, immunotherapy is already very commonly prescribed, even in early stages of disease.
Solomon: in many patients in the adjuvant setting in the early stages and some patients also in the neoadjuvant setting, so that's before surgery, and some patients get both.
So, Signatario was already.
Solomon: covered for immunotherapy monitoring in those patients, and that would be a single-bundle payment.
Solomon: when a patient is starting monitoring for immunotherapy. The new coverage, it provides...
Solomon: The new Medicare determination provides coverage in the surveillance setting. So this is for patients who complete their definitive therapy, who will have no more evidence of disease, and in line with NCCN.
Solomon: recommendations for monitoring in the surveillance setting, Signatari can now be used as well and and paid for by Medicare. So you know we think that's a big deal. We think it's in line with the evidence and in line with
the opportunity for greatest impact for those patients.
Thank you.
Solomon: In terms of other disease types, you know, we've published now in many additional cancer types. We have several submissions that are currently in progress and others that are being prepared that draft off of.
Solomon: the evidence that's been established and published. So, looking forward to provide further updates there. And thank you for the question.
Great, thank you.
and many more. Thank you. Thank you.
The next question is Dan Leonard, UBS.
Thank you very much.
Dan Leonard: Great, thank you for running along. I'll ask a two-parter on early cancer.
Solomon: First off, can you clarify the timing? I think you mentioned 18 month trial. So does that mean
Speaker Change: You know, we'll get data by the end of 2026 and you'd hope for a 2027.
Speaker Change: FDA approval, if all goes well, so that's the first part.
Speaker Change: And the second part, can you touch on the platform capability? Is this a platform where you could add other cancers as well on the same format, or would any future multi-cancer offering be a different technology platform entirely?
Speaker Change: Yeah, it's a great question. So, yeah, let me, let me, you know, I think the timing is probably about right. You know, Alex or Solomon, if you want to.
Speaker Change: to provide any more specifics there, but I think roughly, you know, kind of in the right ballpark. The good news is, you know, with the trial, we set up this entire infrastructure
Proceeds study.
Speaker Change: So, as you know, we already have collected prospectively 3,000 samples there. We worked with
Speaker Change: different vendors to run the trial and so we're basically just sort of flipping a switch.
Speaker Change: and moving into the new trial with the same infrastructure and I think that's going to allow us to get it done.
Speaker Change: I think quickly and efficiently, and as Alex said, we learned a lot through the 3,000 patient
Speaker Change: proceed trial. You know on the on the platform that we built I think you're exactly right. We spent two years building a discovery platform that allows us to identify novel markers.
Speaker Change: And, you know, we're just sort of pumping new data through that and, you know, using that to design.
You know, assays now and this sort of...
pan-cancer approach. Now ...
You know, we're still assessing our strategy.
Speaker Change: for the next version of where we want to go after CRC. And we think that the right approach is focusing on CRC initially.
Speaker Change: But, you know, certainly, as we said, in tumor-naive MRD, we're already moving to other tumor types. And you know, I think in the field of early cancer detection, there's going to be that opportunity to do the same thing based on the strength of the platform that we've built.
Thank you.
and next we'll hear from Subbu Nambi Guggenheim.
Speaker Change: Hey guys, thank you for taking my question. Two questions. One, could you elaborate on why you believe no one else will receive ADLT status?
One could argue a first-in-class tumor nine test, for example.
Speaker Change: Yes, so, look, I think if you go through, you know, I would just point you to go kind of go through the ADLT regulation. There's multiple tumor-naive MRD tests on the market, and that's one of the disqualifiers.
for an ADLT without FDA approval.
So, you know, I think there's several...
commercial CLIA validated on market
Speaker Change: Tumor Naive products and you know if you if you go through the specific legislation
That itself is a sort of disqualifier.
Speaker Change: for a new new ADLT approval. Now of course there's the FDA path but that you know that that takes time. You know from a sample collection standpoint I mean this is this is one of the real values of Natera and you start to see remember we've been at this since
Speaker Change: In 2015, we started collecting biobanks, we started doing prospective clinical studies, we started collecting samples. So when it comes to launching new products in the MRD space, we're very excited to be working with you. Thank you. Thank you. Thank you. Thank you. Thank you.
Speaker Change: new versions of the product, we have a real advantage because we've published over a hundred peer-reviewed papers and we have over a hundred ongoing clinical trials and biobanks.
Speaker Change: in studies that we're participating in. So we're in, you know, like we said, in tumor naive.
Speaker Change: for colorectal, we already have a prospective 1,000 patient sample covering surveillance and the adjuvant setting. It's already running in the lab today. So you know I think that just gives you gives you a sense of you know how quickly we can execute on things.
That's great. Thank you, guys.
Speaker Change: And everyone, that does conclude our question and answer session, as well as our conference for today. We would like to thank you all for your participation. You may now disconnect.