Q1 2025 Natera Inc Earnings Call
Welcome to Natera is 2025 first quarter financial results conference call. At this time all participants are in a listen only mode. Following management's prepared remarks, we will hold a Q&A session to ask a question at that time. Please press star followed by one on your Touchtone phone if anyone has difficulty.
During the conference. Please press Star Zero for operator assistance as a reminder, this conference call is being recorded today may eight 2025, I would now like to turn the conference call over to Michael Brophy Chief Financial Officer. Please go ahead.
Thanks, operator, good afternoon. Thank you for joining our conference call to discuss the results of our first quarter of 2025 on the line I'm joined by Steve Chapman, Our CEO and solid Moskovitz, President clinical diagnostics as a lesson and general manager of oncology will be available for Q&A.
Today's conference call is being broadcast live via webcast, we will be referring to a five presentation has been posted to investor Natera Dot com a replay of the call will also be posted to our IR website as soon as it's available.
Starting on slide two during the course of this conference call, we will be making 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 and expected results of 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, those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in our suggested by the forward looking statements forward looking statements made during the call are being made as of today may eight 2025. If this call is replayed or reviewed after today. The information presented during the call may not contain.
Our accurate information and hair 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 updates on our performance during the quarter unless we do so in a public forum, we will quote a number of numeric or growth changes as we discuss our financial performance and unless otherwise noted each such reference represents a year on.
Steve: Your 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 we generated $502 million in revenue this quarter compared to $368 million in Q1 of last year, which represents approximately 37% growth.
Steve: We had an outstanding volume quarter across the board with 855000 units processed in the quarter. This included a big step up in women's health volumes over Q4 of last year and a record volume quarter for Cigna Tara.
Steve: Signet Tara clinical volumes grew 52% year on year and increased by roughly 16 5000 units compared to Q4, which is our best sequential unit quarter, yet for Cigna Terra.
Steve: Gross margins were 63% in the quarter when you back out true ups grew more than 110 basis points, just compared to Q4. So we're feeling great about the margin expansion. We are still seeing in the business. We also generated $23 million in cash even as we doubled down on growth investments as discussed on the Q4.
Steve: Four call in February with all this momentum we are in a position to substantially raise the revenue guide for the remainder of the year. We now expect revenues to be in the range of $1 94 billion to $2.02 billion. This year.
Steve: <unk> of $70 million from the midpoint of our prior guidance given just a few months ago. This implies about 26% revenue growth year on year ex true ups, which is really strong.
Steve: First strategic highlights in the business starting off most recently that I S. H L. T. We shared a positive readout of the prospective defined study in heart transplantation, which demonstrated <unk> ability to predict clinical outcomes in heart transplant remarkably prospera outperform biopsy.
Steve: And predicting graft dysfunction, one year after transplant study.
Steve: The study also testing <unk> or donor quantity score, which is a novel feature unique to prosperity cross-bearer with <unk> outperformed donor fraction alone and predicting graft dysfunction.
Steve: <unk> outperformance over fractional alone was also published this week in a separate study in the American Journal of transplantation. The paper reviewed the head to head performance of donor quantity score <unk> versus donor fraction alone and founded <unk> performed with higher accuracy.
Steve: Then we will discuss this further later in the call.
Steve: Next week, we will attend the ESMO breast annual meeting most notably we look forward to a presentation on the I spy two trial, which is a great collaboration has produced strong data on cigna Terra in different settings in breast cancer.
Steve: This particular trial will report on the ability of signature to predict outcomes for metastatic recurrence in high risk early stage breast cancer.
Steve: Especially novel as it looks at the Neo adjuvant setting and measure Cte DNA levels at diagnosis prior to treatment. In this study signature is unique method goes beyond just positive or negative results to categorize positive patients by tumor quantity and then shows the five year recurrence free survival, which correlates with.
Steve: At quantity, while serial testing in Cte DNA dynamics will certainly help further refine a patient's trajectory we are seeing a significant amount of clinical information coming from this single blood draw prior to any treatment beginning.
Steve: Later this month at <unk>, we will have the largest and broadest set of data that we've ever had with more than 25 presentations on a wide range of tumor types, including six oral presentations.
Steve: Each in breast cancer alone several in colorectal and <unk> to real World evidence studies based on our proprietary database and a large scale readout of our signature genome test.
Steve: And finally, we're pleased to see critical findings in sarcoma from a Stanford led study presented at the society of surgical oncology conference last month with more than 2100 samples. This is the largest sarcoma study and Cte DNA analysis to date and the results were excellent.
Steve: <unk> is an important indication was 17000, new diagnoses per year in the United States. So this is similar in size to ovarian cancer and it's a very important cancer type because there are significant unmet needs that need to be addressed and it's a tough cancer to treat.
Steve: While we are extending our lead in breast colorectal muscle invasive bladder lung and the other initial histology as we're making significant progress in other tumor types sarcoma is just one example of many where this type of data will be reading out.
Steve: Okay. So let's jump into some of the volume highlights on the next slide.
Steve: As you can see we processed 850000 tests in the quarter with strong growth across the business. This represents a sequential increase of 8% over Q4 of 2024, which is one of the best quarters, we've ever had.
Steve: Women's health had an outstanding quarter growing more than 40000 units sequentially in Q1 versus Q4 alone. This excellent growth extends what was a very strong 2024, where women's health grew hundreds of thousands of units year over year, even when excluding the impact of the veto.
Steve: Oregon Health was also very strong in the quarter, we saw north of 50% year on year growth in Oregon Health and a lot of interest in our donor derived cell free DNA in Germline tests.
Steve: Okay moving on to oncology.
Steve: The next slide shows the progression of signature of clinical units over the last eight quarters.
We're excited to see record growth quarter was 16500 growth units over Q4.
Steve: This is the fastest that we've ever grown and a testament to the strength of our technology.
Steve: The breadth and quality of our clinical data and a great user experience, we built to help patients with cancer.
Steve: We estimate that over 45% of oncologists in the United States ordered his signature test last quarter.
Steve: We think the next two years, and especially especially critical period for MRV as we evolve towards becoming the standard of care and we are continuing to invest to expand clinical utility and to innovate to help as many patients as possible.
Steve: Okay. The next slide shows our revenue progression over the last six quarters, we're excited to cross the $500 million of revenue threshold for the first time in a single quarter. Despite the scale at which we're now operating we still grew revenues, 37% over Q1 of last year. In addition to the volume momentum and the investments we've.
Steve: Aid in our reimbursement operations continued to improve average selling prices and we're seeing ASP strength across the board in women's health, Oregon Health and oncology.
Steve: Terry Asps moved above a $100 in the quarter driven primarily by continued execution on securing Medicare advantage reimbursement all of this effort is allowing revenue growth to outpace volume growth.
Steve: Of course, ESP growth has been a major driver of our margin expansion over time as well as this chart shows how we've moved from 39% to 63% in the last several quarters.
Steve: The 63% includes about $30 million $34 million in true ups, and we're really pleased to see our underlying gross margin improvement again about 110 basis points from 59, 3% in Q4, 2024% to 64% Q1 of 2025 that gross margin improvement came from all the positive trends.
Steve: On Asps.
Steve: Cogs were excellent again in the quarter across the business as we continue to get scale efficiencies from the robust volume growth.
Steve: We feel great about our gross margin trajectory as we look out over the next several years in the near term, we expect signature asps to increase as we improve on our Medicare advantage reimbursement and we also hope to see some green shoots in biomarker states with commercial plans later this year as we've previously discussed long.
Steve: The term we've got some significant potential opportunities that could further drive margin improvements guidelines in the United States and Japan for Cigna Terror have the potential to move asps above $2000 per test.
Steve: Made a ton of progress on the women's health side as well on Asps.
Steve: But we still have carrier screening guidelines and <unk> guidelines ahead of us.
Steve: As we continue to grow share in Oregon Health prosperity Arena side can also both be accretive to gross margins as well.
Steve: We previously described a longer term goal to get gross margins above 70% over time, and I think we remain very well positioned to reach that target.
Steve: We started this year with a guide to remain cash flow breakeven and we were pleased to now generate $23 million for cash or cash in the quarter.
Steve: We demonstrated in the second half of 2024, we are capable of generating much more free cash flow right now, but we see 2025 is a crucial investment year for us, particularly around Cigna Tara given the potential size of the market, we think cigna, Eric could eventually generate more than $5 billion in revenue annually. So it makes sense to <unk>.
Speaker Change: Funny high ROIC investments in commercial operations clinical trials and product improvements on that topic, we've never had a more exciting slate of data reading out across the business. This summer and I wont Solomon to walk you through all of that data now Solomon.
Solomon: Thanks, Steve and good afternoon, everyone.
Solomon: I'll start off with Oregon Health <unk>.
Solomon: We've mentioned that we just published an important manuscript in the American Journal of transplantation, the Premier Scientific journal in the field.
Solomon: Paper demonstrated the excellent results of our Q threshold algorithm for prospera, which combines donor fraction with the donor quantity score also called <unk>.
Solomon: I think that's unique to threshold algorithm, the sparrow with <unk> delivered better sensitivity and specificity than donor fraction alone, including a 37% reduction in false positives.
Solomon: The same algorithm was also evaluated in our defined Hearts trial, which was presented last week at the Ias <unk> LTE conference. As a reminder, the defined trial is a large scale prospective multicenter longitudinal study of donor DNA and heart transplant patients.
Solomon: <unk> of the study was to assess cereal cell free DNA dynamics and its association with clinical outcomes in the first year after a heart transplant.
Solomon: We evaluated more than 100 patients in more than a thousand samples utilizing for spirit with EQM measure levels of donor DNA in blood.
Solomon: The results showed that patients with at least one elevated prestero results were significantly higher risk for experiencing an adverse event in the first year, which is defined as graft rejection graft dysfunction re transplantation or death.
Solomon: In this trial for Spero also outperform serial biopsy by threefold and predicting graft dysfunction.
Solomon: For Prospera Endo myocardial biopsy used to be performed every month as part of standard surveillance in many heart transplant centers, obviously are highly undesirable seizure carries inherent risks, but more and more we are starting to see physicians replace biopsy prospera.
Solomon: Turning now to oncology, where we continue to make excellent progress.
Solomon: At this month's ESMO breast Congress coming up in Munich, We're excited to present, new data from multiple studies, including the I spy two trial that will highlight <unk> ability to predict long term outcomes in early stage breast cancer patients.
Solomon: The data from over 700 patients will show that testing signature at negative at diagnosis is an extremely good prognostic market after.
Solomon: They're being treated with surgery and chemotherapy.
Solomon: Not only with Cigna <unk> status at diagnosis highly significant predictor of outcomes regardless of disease subtypes.
Solomon: The quantity of tumor burden.
Solomon: As measured by <unk> was also correlated with options. This reflects signatures differentiated quantification capabilities and it's the first time to our knowledge that anyone has demonstrated the clinical value of <unk>.
Solomon: Absolute Cte DNA quantity at time of diagnosis. These.
These findings opened new therapeutic strategy, including the potential for signature negative patients to skip chemotherapy another intensive forms of treatment.
Solomon: <unk> was evaluated definitively upcoming prospective trials.
Solomon: This data also highlights the benefit of starting <unk> testing at the earliest stage of a patient's treatment journey right at diagnosis.
At this time, we believe <unk> will become a standard component of the diagnostic work out for a breast cancer patient much like testing for her two status for hormone receptor status today.
Solomon: Beyond our data generation efforts in the core indications, we continue to pursue expansion into new histology that a rapid pace.
Solomon: On such indication in sarcoma with over 17000, new cases diagnosed in the U S every year.
Solomon: Because of the heterogeneous nature of this disease.
Solomon: Both adjuvant and surveillance strategies tend to be highly individualized surveillance that can include frequent imaging for up to 10 years highlighted concerns for radiation exposure in such patients.
Solomon: There is a strong clinical unmet need here, which we think is ideal for Cigna Tara.
Solomon: So we're very pleased about the recently presented sarcoma study out of Stanford University, showing the validity and utility of serial Sigma Sara and over 200 sarcoma patients and more than 2000 plasma centers representing to our knowledge. The largest study to date of Cte DNA monitoring in sarcoma.
Solomon: The findings showed exceptional cost performance, including overall recurrent sensibility of 89% and specificity of 100%.
Solomon: These numbers were strong across subtypes, including some of the more clinically difficult to treat histology like leiomyosarcoma.
Solomon: Or the sensitivity was 93%.
Solomon: We look forward to these results being published and working more closely with the sarcoma community.
Solomon: Great example of <unk> strategy to introduce validates signal Clara across all cancer types.
Solomon: Looking ahead now this will be a busy and exciting Astro conference sort of tariff with nearly 30 abstracts and presentations planned across multiple tumor types, including as Steve noted six oral presentations.
Solomon: Four of those or will be in breast cancer alone.
Solomon: Two of which are in the neo adjuvant setting building off the momentum with <unk> II trial.
Solomon: One of them.
Solomon: We will have interim results from our perspective randomized <unk> trial.
Solomon: And the fourth breast cancer oral presentation will demonstrate the utility of treatment monitoring in the metastatic setting which is something there.
Solomon: The study started years ago, and the result will serve to further expand our data leadership in MRV. We also look forward to presenting posters with clinical performance data in Merkel cell carcinoma, and other cancer types and the readout from our new signature genome assay.
Solomon: As we announced previously the genome version of Cigna, Sarah is now broadly available.
Solomon: The test Leverages <unk> patented multiplex PCR technology, and our targeted a deep sequencing approach.
Solomon: <unk> at frequencies as low as a single tumor copy per million.
And it is being offered alongside the Cigna, Sarah Exome assay, which itself regularly detect in the ultra sensitive range and can get down to the low single digit parts per million as well.
Solomon: At <unk>, we will present, our first clinical data was to deter genome.
Solomon: Encompassing hundreds of patients and thousands of plasma samples across multiple tumor types.
Solomon: The assay performance looks very strong with longitudinal sensitivities ranging from the nineties up to 100%, depending on histology and with specificity approaching 100%.
Solomon: We believe the specificity is very important and we're pleased to see what segments or it's high specificity is maintained even with the improved sensitivity of the genome.
Solomon: This is something where we have seen other MRV labs struggle with clinical specificity data that low or simply not reported at all.
Solomon: We have generally seen competing MRV labs struggle with translating extreme analytical claims into clinical performance.
Solomon: Furthermore, we've developed a research version of our genome assay, that's available to our academic and pharma collaborators.
Solomon: That will improve detection for levels, even below a single part per million.
Solomon: <unk>, we believe even more research opportunities. So we're really excited about what lies ahead. We've got a lot of incredible data reading out in the near future as you can see from our continued strong volume growth the.
Solomon: The medical community has responded positively to the utility of signature and we expect that trend to continue as the Nevada.
Solomon: So with that I'll turn it over to Mike to cover the financials in the guide.
Solomon: Mike.
Mike: Great. Thanks Aman.
Mike: The first slide is just a summary of our Q1 financials. If you look at the year on year change column to the right you'll get a sense of the progress we've made across every metric of the business.
Mike: I'll cover that <unk> been on with respect to revenue growth driven by both volumes and Asps.
Mike: It was particularly pleased to see women's health unit step up as strongly as they did just given the scale at which we are now operating and of course, the Oregon Health and oncology just continue to ramp if you strip out all true ups from the gross margin line, we expanded gross margins by more than 800 basis points.
Mike: From roughly 52% this time last year to north of 60% today.
Mike: All of that progress allowed us to generate cash and actually reduce our loss per share even as we significantly ramped R&D and SG&A to take advantage of the growth opportunities. We have ahead of us, particularly in oncology, we maintain a pristine balance sheet with nearly $1 billion in cash and no debt outside of the relationship on credit.
Mike: We have with UBS.
Mike: Okay, let's get to the updated 2025 guidance on the next slide.
Mike: <unk> described we are raising the revenue guide by about $70 million at the midpoint.
Mike: Our standard approach. The guide does not include any true up revenues in future periods. So the $70 million bump implies rapid revenue growth for the full year just as Steve described we are holding the gross margin guide at 60% to 64% for the full year and the Q1 results put us in great position to land in that range.
Mike: Given the organic gross margin was about 64% in Q1 I think this guide again shows we are confident in the ASP and Cogs trend. We saw in Q1 are sustainable and we kept the hedge in the gross margin guide to account for possible short term headwinds, we could get from the new products. We're launching that we haven't really seen much of.
Mike: Penalty just yet.
Mike: For both revenue and gross margins. The guide does not require for growth improvements in the business trends versus Q1, but rather steady execution on the targets in front of us.
Mike: We're also bumping SG&A and R&D modestly higher as we look to maximize out your revenue growth.
Mike: We expanded our commercial operations in Q4, and Q1 and those investments are on track to drive additional growth in 2006 and beyond the bump here in Q1 accounts for some noncash expense accruals and noncash charges related to stock based comp along with some additional staffing we are putting into areas of the business, where we are.
John: Seeing high returns for example, as John described in February we've made a number of key hires focused on delivering AI supported solutions in the revenue cycle operation and we are already seeing results that merit further investment.
John: On the R&D side, we are seeing additional opportunities to accelerate data generation. Some of the recent datasets. We presented has fond significant interest from the academic community and we are running as hard as we can to make sure. We have the key clinical trials needed to unlock more indications along the lines of what Simon described.
This section these clinical trials have delivered extremely high ROIC in the past because they form the bedrock for broader adoption and allow us to drive reimbursement across an ever wider range of tumor types. The net of all of this is that we are holding steady with our plans to remain cash flow breakeven. We're obviously off to a great start with $23 million in cash flow.
John: Generation in Q1, it will be opportunistic with future investments for the balance of the year.
John: Okay with that let's open it up to questions.
Speaker Change: We will now begin the question and answer session in order to ask a question press star followed by the number one on your telephone keypad. Our first question comes from the line of Dan Brennan with PD Cowen. Please go ahead.
Dan Brennan: Great. Thanks for the questions maybe the first one obviously the sequential volume growth and seeing the Teva really solid a bit above even what Mike and Steve you guys kind of pointed to as we get into 'twenty. Five can you just give a little flavor of what's going on in the market kind of what drove it it just kind of volume growth sustainable as we go through the year and then I have a follow up.
Speaker Change: Yeah. Thanks, Dan So obviously, we're really pleased.
Speaker Change: Record sequential quarter in growth and that's off the back of a couple of really strong quarters in a row.
Speaker Change: We're just seeing that the data that we generated.
Speaker Change: The performance of the test the very strong clinical utility is resonating with physicians and that combined with.
Speaker Change: The large commercial presence that we have plus the very significant scale and user experience focus that we have whether it's quick turnaround time EMR capability.
Speaker Change: Mobile phlebotomy all of those things are working and the volume is increasing.
Speaker Change: <unk> is kind of the rest of the year ago, we're not we're not sort of <unk>.
Speaker Change: Changing the previous quarter over quarter sequential growth, which we said was around like 10 to 12000 units roughly.
But obviously we are pleased with what we saw now and we're seeing a lot of.
Speaker Change: A lot of utilization, but a lot of excitement as we move forward.
Speaker Change: Great and then just as a follow up a lot of clinical evidence coming up at ESMO in ESCO.
Speaker Change: I know you guys went into a few of the studies what you're most excited about on the Neo adjuvant side, which of these do you think I know, Mike you're talking about investment stepping up in R&D because the community wants to see these studies report out which of these do you think we should focus in on.
Speaker Change: Say over the next year or so but that could really begin to move the needle on actually volumes in the marketplace. Thanks.
Speaker Change: Yes.
Speaker Change: Just make some general comments and then maybe Alex settlement, if you want to comment.
Speaker Change: First I think we're incredibly excited to have more than 25 presentations at <unk>, including six oral presentations.
Speaker Change: And that's really remarkable and a testament to the team.
Speaker Change: And the academic Pis that we've worked with.
Speaker Change: Certainly we've got a very strong presence.
Speaker Change: In breast cancer gastrointestinal cancers.
Speaker Change: Two of the largest areas I mean breast I spy, two which we announced today.
Speaker Change: The <unk> study, which is a randomized study looking at the concept of treatment on molecular relapse, that's generating a lot of excitement.
Speaker Change: So theres a lot of good data reading out Pan cancer.
Speaker Change: I think continuing the <unk>.
Speaker Change: Trend of having a data driven approach and remember a lot of these trials started.
Speaker Change: Five years ago right. So these aren't these aren't studies that you can sort of just dropped in at the last second and run a prospective randomized study.
Speaker Change: It takes a long time to get to this point and we think this just continues.
Speaker Change: The leadership position that we have in the space.
Alex: Our Alex do you want to add anything.
Speaker Change: Yes.
Speaker Change: We're looking forward to the readout of the.
Speaker Change: And bigger <unk>, one trial, which were done in partnership with Genentech and Thats their trials, so they're going to read that out, but we do expect that to be mid year.
Speaker Change: And that we think that will has the potential to really move the needle in.
Speaker Change: <unk>.
Speaker Change: With muscle invasive bladder cancer, and if successful that will be the first companion diagnostic label.
Speaker Change: But we take your FTA.
Speaker Change: Alex.
Alex: No I think Thats, a great summary, and I would also just highlight I think there are more and more smaller histology as like we've highlighted sarcoma, where we are starting to see data mature and even though each indication by itself may be only.
Alex: 10, 15, 20000 patients a year in combination that is a significant growth opportunity and so I think when you have data coming out in pancreatic melanoma grassroots Salford Gilles. So we're really excited to kind of share some of those data sets and really keep growing kind of the.
Alex: The number of patients that Sigma Terry can help through kind of market, leading evidence generation strategies.
Speaker Change: Our next question will come from the line of Tejas Savant with Morgan Stanley. Please go ahead.
Tejas Savant: Hey, guys.
Speaker Change: Good evening.
Speaker Change: A couple of ones on saying that they are actually so maybe just to kick things off.
Speaker Change: One question that we've been getting a little bit is is there a delta in terms of the number of deaths reimbursed for breadth versus CRC in the recurrent setting and if so do you have any studies underway to appoint on more studies in response to physician and Kols sort of opinions I guess that could help define the optimal frequency of <unk>.
Speaker Change: Testing in the breast recurrent setting.
Speaker Change: Yes so.
Speaker Change: As we kind of go through the process of getting reimbursement with multi yes part of that.
Speaker Change: <unk> is to sort of look at what the cadence is in the studies and what the standard kind of imaging cadences are and those aren't always necessarily going to be the exact.
Same time points in each tumor site, so I would say without getting into kind of the details on each particular tumor type.
Speaker Change: You can just expect that theres going to be differences I think.
Speaker Change: Sometimes it's.
Speaker Change: Two times a year in the surveillance settings, sometimes it's four times a year in the surveillance setting.
Speaker Change: Sometimes it's two times a year for the first I'm sorry, if you are fortunate that figure for the first three years and then it's two times a year thereafter.
Speaker Change: So of course, as we read out sort of the ASP.
Speaker Change: Currently that includes tests that may be performed that may be intermediate between one of the.
Speaker Change: One of the reimbursed.
Speaker Change: Nine points, where we're not getting paid and those were areas, where we see opportunity. So of course as Mike has talked about we think the signature ESP over time can be up to $2000 and part of that is getting covered for tests that today, we're not getting paid for.
Speaker Change: That includes tumor types, where we're not covered but that also includes some of the fill in.
Speaker Change: For maybe time points that arent necessarily covered today that we think could be covered.
Speaker Change: Got it that's helpful. And then a couple of quick cleanups for Mike Taylor.
Speaker Change: Did you guys see any disruption from either like weather or calendar day dynamics in the first quarter. Clearly you had a very strong quarter. So I'm wondering if it could have been even better if that.
Speaker Change: If those dynamics were in play at all and then secondly, just in light of the strong sequential growth acceleration in <unk> volume. How are you thinking about revenue seasonality in the second quarter is flattish a fair assumption or do you think we could get a little bit of a dip in light of what you guys typically see in women's health.
Speaker Change: Yes, thanks for the questions I mean, certainly weather was a huge challenge in the quarter, particularly.
Speaker Change: With respect to the wildfires.
Speaker Change: In Southern California.
Speaker Change: That's a very important.
Speaker Change: Area of the country for us very important territory.
Speaker Change: Hard pressed to see it.
Speaker Change: In the volumes, however, and that kind of harkens back to our experience.
Speaker Change: who looked at our quarterly volume progression, you would be very difficult to determine that there was a massive lockdown and a huge societal disruption.
Speaker Change: The reason for that is that these are time-sensitive, kind of urgent things.
Speaker Change: Tess, the patient's need on a tight time horizon. And so what we have seen over and over again is that while weather can disrupt us for a period of time.
Speaker Change: Ultimately, you know, these patients need their NIPP's. They need their terrorist cronies test, they need their significant terrorist test, and they find a way to get back and relatively short order back to the physician's office.
Speaker Change: and get that testing done. I think that concept has massive implications.
for how efficient.
Speaker Change: The commercialization model is for Natera, relative to a lot of players, even within the molecular
Speaker Change: So, you know, whether it was a huge issue in the quarter but we were able to kind of power through it [inaudible]
Um, um, [inaudible]
as it relates to-
You know, pacing through the rest of the year? [inaudible]
Speaker Change: I think the women's health pacing is holding up true to form. We generally expect Q1 to be a very strong.
Speaker Change: Volume Quarter for Women's Health, then your same store volumes drop off in Q2 and then they recover in Q3 and Q4, and that's just a function of when people show up in their OBGYN's office to get the NIPT in the background.
Speaker Change: of that. The new account wins are not really seasonal. I mean, those are kind of happening in the background, but we have such a big book of existing business. The same store volumes, if you will, do have a noticeable impact on volumes. [inaudible]
Speaker Change: and ultimately revenues. And if you've seen a little bit of that in prior years, although we've had some acquisitions and other things that have kind of, that have obfuscated that trend, I expect that trend to be more noticeable here in 2025, because it's a fairly, you know, there's not a lot of. [inaudible]
Tejas Savant: Exogenous factors, kind of driving a difference for us for women's health. And then the other, you know, Signitaria is getting bigger and bigger and that just continues to ramp prosperity. I was getting bigger, you know, the transplant business getting bigger and bigger and that just continued to ramp. We haven't really identified that there's some, you know, marked seasonality there, other than the point that I think you mentioned Tejas and we've tried to bring up in the past is that
Tejas Savant: I wouldn't be too precious about the exact number of growth units.
Tejas Savant: Per Quarter, particularly for Signitaria, just because we're operating a scale where a couple of days here or there in terms of number of days in the calendar.
Tejas Savant: Four-quarter holidays, things like that. That can throw that off. But overall I'd say I expect the standard seasonality in women's health to affect the pacing and then the other businesses to continue to ramp.
Fair enough. Appreciate the color, Mike. Thank you.
and many others. Thank you. Thank you.
Speaker Change: Our next question comes from the line of Rachel Botanstal with JP Morgan, please go ahead.
Rachel Bottenstall: Tycho, great. Thanks for taking the questions. We can grasp on another great corner of you guys.
Rachel Bottenstall: So, first up, I just want to add from the Cignotera volume strength in the quarter, can you walk us through which indication did you see the greatest sequential growth for Cignotera volumes? And then kind of how did we see that road map from here in terms of indication contributing to growth for the rest of the year?
Speaker Change: Yeah, that's a great question, so we're really pan-cancer at this point, so obviously we're seeing a lot of interest across the board, that includes polorectal breast
Rachel Bottenstall: Long, Muscle, Vase, Bladder, Avarian, Standard Immunotherapy, monitoring across all different
Rachel Bottenstall: You know, I think everyone sort of knows, you know, the colorectal is the largest indication, you know, but certainly there's several others that are really seen a lot of interest and we're doing well across the board. We're seeing a very strong growth.
across all the tumor types, and I think that that just...
Rachel Bottenstall: Again, helps us recognize how big of an opportunity this is. We're really at the very early stages.
Rachel Bottenstall: but there's a lot of room for continued growth. And we put ourselves in a position where we're now deep in the offices and as they start to order expanded indications.
Rachel Bottenstall: You know, we're right there to partner with the physician to help more patients [inaudible]
Speaker Change: Great, and then just for my follow-up, I wanted to ask on screening, didn't really talk about that it's hunting it prepared in Mark, so can you walk us through, what are you assuming on the screening front, you increase the R&D guide, is any of that to be tied to getting some data on the colorectal screening front as well?
Speaker Change: Yes, good question. So, you know, as we said before, we have the perceived study where that's actually now met the goal of enrolling more than 3000 patients.
Speaker Change: So that's basically gone. We're now going to be reading that out toward the end of the year. So that's exciting. That was the big perspective of colonoscopy match study that we had talked about previously.
John Fesko,
Speaker Change: I would say we're at the end of the year. You'll get that big read out. And then the other main update is the FDA enabling study, the Find study. We're actually expecting the first patient in on that this month, which is exciting. So, as a reminder,
That's basically designed [inaudible]
Speaker Change: In the same way as the Proceed trial, Proceed was designed.
Speaker Change: You know, itself to exactly match what you would do in an FDA enabling trial so that data is super reliable. So we're just sort of picking up from there.
Speaker Change: You know, and the fact that we're already, you know, already at first patient end targeted for this month is pretty exciting. You do see some of the R&D expense you're trickling in. [inaudible]
Speaker Change: throughout 2025, but that's also going to be kind of built in in 2026 and you know that's in the models and in the guidance and the way you know kind of Mike is talking about the future of the business worry accounting for that.
John Fesko, John Fesko, John Fesko, John Fesko
Speaker Change: Our next question will come from the line of Tycho Peterson with Jeffries. Please go ahead. Hey, this is no on for Tycho. Thanks for taking our question. I wanted to start by asking about ASPs for the year specifically. Yeah, I get about it. I'm going to put some digs with binials and truth and things like that. We can wrap people around like this. Thanks. Thank you.
John Fesko, John Fesko, John Fesko,
And Mike, do you want to take that?
Mike: It was a big garbled on my and I can someone just repeat it for me just question was what's our sort of trajectory on ASP for the rest of the year and what are the puts and takes on you know denial true of coverage you know how should we be thinking about them. Thank you very much.
Speaker Change: Yeah, I mean, I think, you know, the guide taught some play, it's kind of stable ASPs.
Speaker Change: in the women's health business and in the organ health business. And then some modest improvement coming from from signeterra, really areas where we feel like we've got very clear line of sight on. This is things like increasing, modestly increasing the percentage of...
Speaker Change: Sometimes we get allowed from Medicare Advantage for tumor types that are already objectively covered and we should be getting paid 100% of the time. We're going to continue to grind that higher.
Speaker Change: through the course of the year. So I feel pretty good about that. As I mentioned, prepare for marks.
Speaker Change: I think like the ASP kind of revenue guide for the year does not require, requires good execution but it doesn't require some heroic change in the conditions of the business. [inaudible]
Speaker Change: You know, that we saw in Q1. As it relates to tropes, I mean, look, the, I think on a percentage basis, you're seeing that the tropes kind of feather down as expected as, you know, percent of total revenue. Thank you.
Speaker Change: in terms of absolute dollars. It's kind of a little bit hard to predict because the volume in the business is growing so rapidly. That's the reason why we don't guide with troupes in the future periods. So the guide, you know, for the rest of this year, it includes a 34 million and actual troupes.
Speaker Change: from Q1 obviously because those are in the books but for the remainder of the year just presume zero and that goes for the gross margin guide as well. If you ask me will we have some troops yes we will they're just hard to predict and I think they make it harder for you guys to model it so we leave it out.
Speaker Change: Great, super helpful, and then for my follow-up, I just get a quick update on tissue3MRD or what the timeline is like there and what reception has been like in the research environment.
Speaker Change: Good question. Yeah, we've outlined the forthcoming launch of Tumornaive MRD testing in Colorectol.
Speaker Change: You know, that sort of on track with what we had said previously, you know, I think the data looks really strong, you know, not as good as tumor informed as expected, but we feel really good about that, and you know, we'll give you an update as that rolls out.
Speaker Change: Thank you for watching. We hope you enjoyed the video. If you did, please subscribe and turn on notifications.
Speaker Change: Our next question will come from the line of Doug Schenkel with Wolf Research. Please go ahead.
Thank you.
Speaker Change: Hi, this is Colleen on For Doug, thanks for the question. We have a few questions first on your prenatal business. Can you give a bit of color on the over 40k test sequentially on the split between NIPT and carrier screening?
Speaker Change: Also, we haven't seen anything in the green journal, Table of Contents from May or June , in terms of ACOG guidelines for microdulations or expanded carrier screening. Should we assume that this might be coming in the late summer at the earliest? And can you remind us?
Speaker Change: What the Revenue and ASP impact would be if favorable guidelines are published?
Speaker Change: Yeah, that's great questions. So, you know, when you look at sort of the prenatal business, we usually see kind of consistent growth.
Speaker Change: Proportional to the size of the product portfolio within the Women's Health Business. So, NIPK is the number one product.
Speaker Change: Followed closely by carrier screening, you know, followed by the other products in the portfolio. So, you know, the growth kind of trajectory is sort of similar to
Speaker Change: to what we see there. So, carrier screening and IPT both growing real nicely. And I mean, 40,000 quarter of a quarter is a really strong growth number, and I think that it's just a testament again to the strength of the technology.
Speaker Change: that continued execution by our team, all the peer-review data that we've published. That's off the back of, you know, in 2024, what was a really strong growth here where we had, you know, several hundred thousand units of growth, even, you know, when you sort of...
Speaker Change: and I will exclude anything related to a VTA. Women's health is growing really nicely. With regards to the micro deletion guidelines and carrier screening guidelines, these are things that we believe are coming.
We don't have
Um, any insight on the trainings, but... [inaudible]
Speaker Change: There have been some references recently in articles where they're talking about the forthcoming guidelines.
Speaker Change: You know, they're sort of referencing them, you know, so we think that's a positive sign. The other good news about them not being out yet is that they remain upside for us. So you know, we're actually doing incredibly well as a business. [inaudible] you know, you know,
Speaker Change: and we have this huge upside opportunity ahead of us built in on our core business.
Speaker Change: Yeah, so I think that's sort of a positive, when you look at microdells...
Speaker Change: You know, we see a pretty high attachment rate. I think we said previously, it's something like...
Speaker Change: We're going to do something like a million, 222 tests this year or something in that range. And, you know, those aren't reimbursed.
Speaker Change: that has a good ASP. We've contracted with payers for the test. It's just not reverse. So, you can imagine if you flip on reimbursement.
Speaker Change: Let's say at $200 or $500 for a million unreinverse test a year, that's going to have a pretty significant impact.
But of course we'll have to see how that [inaudible]
Speaker Change: Hands out. I think the CPT code is priced on the CMS fee schedule around $750, something in that range.
Speaker Change: You know, but of course, you know, we're not putting that in our models, but even at a few hundred dollars in reimbursement, the upside could be very significant for us.
Thank you. Thank you.
Speaker Change: All right. Thank you. And then just one quick follow-up on indication mix for Signetara is breast above 25% of total volume now and is there anything you can share on how a potential increase in breast as a percentage of total volume volume impacts your pay or mix given breast cancer patients tend to be a bit younger than colorectal cancer long, etc. And relatedly, how have biomarker bill wins impacted your no pay rate with commercial plans? Yeah.
Thanks
Speaker Change: Yeah, those are good questions as well. I think we're doing really well. We're seeing, I mean, we've generated a lot of data in breast cancer. The physicians are, they really like the, or tests, they like the performance of our tests. [inaudible]
we've got great genome data in breast cancer.
Speaker Change: So we're seeing a lot of excitement there. The dare randomized study that's going to be reading out. You know, that's obviously generating a lot of buzz. Icefai data that we just announced today plus what's coming to Asco is generating a lot of buzz.
Speaker Change: So, I think it's definitely one of the man's. [inaudible]
Tumortides, we don't see
The sort of... Daniel.
Speaker Change: I think the dynamic of maybe that burning the reimbursement or anything like that, it's actually reimbursed very nicely.
Speaker Change: with Natera, given our current structure. We think breast is a good opportunity. It's one of the main cancers and one of the ways we're going to help millions of patients as we move forward.
The second question about biomarker, I think that's the bigger...
Speaker Change: you know, question is, when are we going to start getting reimbursed from commercial plans? And, you know, really what you're seeing largely today, you know, at the ASPs, you know, Mike outlined around that $1,100 price point. There's still a lot of upside in the commercial opportunity and, you know, the biomarker.
Speaker Change: States were starting to see some positive signs there, but there's a lot of opportunity. And we think, as we said over time, the ASC for Signature can be around $2,000.
Speaker Change: which is a significant increase from today. So when you look across, you look at women's health, you look at oncology, revenue growth in the next five years is not just gonna come from volume.
Speaker Change: It's going to come from significant improvements in AFT from coverage wins and from turning on commercial payers and from getting paid on more tumor types. And we think that's exciting because...
Speaker Change: Revenue Growth is gonna be accelerating above the level of volume growth.
Speaker Change: Our next question comes from the line of Catherine Schulte with Beard, please go ahead [inaudible]
Katherine Schulte: Hey guys, thanks for the questions. Maybe just first on Japan since you brought that up, getting your $2,000 signature ASP, can you just remind us the timeline and password we're there and what kind of updates we could expect to hear this year on that topic?
Solomon: Yeah, that's great. Let me have Solomon take that for an update on Japan's Solomon.
Yes, we're excited about the...
The program in Japan, we are on track there.
Solomon: So it's been submitted to the Regulatory Authorities, the Japanese version of the FDA, it's called the PMBA
They're reviewing our application, our submissions.
Solomon: If everything stays on track, we would expect that to be approved towards the end of the year maybe as late as early next year and that would trigger then the next submission to the health ministry for reimbursement which happens.
Solomon: Sequentially, that probably takes another, you know, six to nine months.
Solomon: and brings us towards late next year when we start expecting this to impact top line, and we know there's really significant demand for this technology in Japan as a reminder.
Solomon: There's approximately the same number of colorectal cancer diagnoses per year in Japan as there are in the United States.
despite there being a massive difference in overall population.
Solomon: and they're very eager to do biomarker driven MRD guided treatment decisions. And it's already in the guidelines. MRD's already mentioned in the society guidelines in Japan as well. So we're looking forward to that. We're on track.
Speaker Change: About it, and then maybe at this point in the launch for Signitarra, I mean, guys are continuing to put up pretty incredible sequential volume growth.
Speaker Change: even with competitors coming out. We've got a new one entering the market now. One competitor got surveillance Medicare coverage and you know you guys still seem to be pretty dominant in in where you are. So I guess is there any change to how you go about that commercially in the current competitive landscape or and maybe what are you hearing from customers around your value proposition? Thanks.
Speaker Change: You know, we're obviously pleased with our growth. There's been a lot of competitors that have been out for a long time, you know, selling tests, very present.
doing early access programs.
Speaker Change: You know, talking to doctors. So, you know, we don't really think there's a change necessarily.
Speaker Change: happening right now in the competitive environment. Certainly, there's been some larger companies that have gotten coverage.
Speaker Change: You know, maybe six to nine months ago that have been out there. You know, we're just focusing on delivering and what we're seeing is that physicians really like the performance of our test.
Speaker Change: We've delivered, now we have over 100 peer-reviewed publications. We have long-term overall survival data. We have data with physicians acting on the results of our test.
Speaker Change: and I think they put a lot of emphasis on that, not necessarily some of the analytical validation studies that are easily manipulated or aren't necessarily...
Speaker Change: You know, we're not really able to kind of dig into the details as much so we think we're doing very well. We're excited about what we're hearing from physicians about our product and the growth trajectory. Thank you very much.
Speaker Change: Our next question comes from the line of Puneet Souda with Learing Partners, please go ahead.
and many more. Thank you. Thank you.
Speaker Change: John Fesko, John Fesko, John Fesko, John Fesko
Speaker Change: Yeah guys, thanks for the questions here and come rats on another strong quarter.
Speaker Change: and then Mike, maybe on the ASP side. We're seeing commercial pairs being under pressure. We're just wondering what sort of gives you the confidence that ASP remains flat to maybe just slightly up in that segment in women's health.
Speaker Change: Yeah, great. No, thanks for the question, Puneet. Yeah, at first, you know, on the volumes, you know, we, as you guys will remember, we took on the NCAA accounts, really a Q1 of last year, so we've got almost a full year now.
Speaker Change: of integrating the Invitate Volumes into our business, and that was a very successful-
Speaker Change: We're really pleased to be able to just kind of provide that kind of continuity of care to a large swath of what we're then new customers, but now I've been with us now for some time. So, you know, as you kind of go through the rest of the year that the cops are reasonably clean relative to. You are.
Speaker Change: Relative to last year, and that's just kind of integrated in the volumes to the extent that it's a little bit hard to kind of separate out what was the VTA volume versus what was Natera volume.
Speaker Change: at the time, so it just continues to kind of add to the platform.
Speaker Change: The reason why deals like that in addition to volume and the like for example the growth we had a Q1 is so valuable to us.
Speaker Change: Two years. So, you know, that team obviously scales perfectly with the volumes. They're happy to, you know, add a dollar of ASP across a bigger and bigger base of prative.
Speaker Change: of Panorama Volume, for example, and you get perfect synergies on that. That operation Puneet is what gives me the confidence that...
Speaker Change: that the guide, you know, you can actually kind of fold the result steady through the rest of the year and feel good as a guide.
Speaker Change: You know, that's not the commercial goal. That's not the goal that the team has internally. I mean, the the internal team has a, you know, a buildup of all kinds of situations where we've got, you know, coverage policies in place. These are standard of care tests and yet, you know, for one administrative reason or another. We're still not getting reimbursed as we should. And the team, you know, takes that personally and that goes from Steve on down and we work extremely hard to try and improve that situation. So. [inaudible]
Speaker Change: I hear you that there will be some, there can be some pressures and there have been, and that can come and go. But I think underlying that is, I think we've got a good path to hopefully grow ASPs, even as the guide holds a study for now.
Okay, super, that's great. And then on...
Speaker Change: You know, Signitarra, maybe just a broader question. I just want to understand that going forward.
over the next two quarters and into 2026.
Speaker Change: Could you elaborate sort of what are the, you know, critical drivers for strong growth? Is it NCCN? Is it getting deeper into the community setting?
Speaker Change: Is it getting into maybe other tier accounts beyond the tier one and two? Is it...
Speaker Change: You know, is it indication growth? Just maybe walk us through how you see the stack of drivers that are going to continue to drive this signatory growth because obviously that's an important question every quarter for us and for investors.
Speaker Change: Yeah, thanks. That's a good question. So, you know, I think first you just start off with kind of the fundamentals, you know, which is that this market is very, very
at a very, very low level of penetration.
Speaker Change: and although there's a lot of excitement around the volume that we've done and the growth that we've had, we're still in the very low single digits when you look at the broader opportunity.
Speaker Change: You know, which I think is important. And so, the way that it works is it's, you know, like we said, we're already working with 45% of oncologists right now. 45% are actually ordering signature. Sure.
Speaker Change: So, you know, it's not like 3% of oncologists are ordering signature and we've got to go figure out how to get the other 97% to order. We already have half the oncologist in the country placing orders.
Speaker Change: Now, as data comes out, as they get used to the test, as they see the value in their practice, they start to order it on more patients within their practice, and I think that's really the main driver
Speaker Change: of growth combined with bringing new NPIs and new physicians into the fold. So, we focus on those two things. New doctors coming in that haven't used before, or taking doctors that are using the product and showing them clinical data that allows them to use in other patients.
Speaker Change: And remember, the vast majority of physicians in volume is in the community setting.
So, you know, it's it's not [inaudible]
Speaker Change: Good enough to just have one indication. I think if you come out and you have one indication reimbursed, it's going to be very, very difficult to go to the community setting and say hey, do you mind just carving off like this one particular subtype of patient and sending that to me. Thank you.
Speaker Change: But we can't really do all the other stuff. Yeah, so we're in this unique position where we have a pan cancer offering. We're broadly covered. We're connected in the EMRs. We have a very large medical affairs team, customer service team. The turnaround time is very fast. [inaudible]
Speaker Change: You know, and I think that puts us in a unique position. So, you know, we're generating as much data as we can. We think that drives utilization.
Speaker Change: We're focusing on obviously the big cancer opportunities but also not ignoring the smaller opportunities we're innovating.
Speaker Change: You know, as you can see, we've now launched the Signature Genome product, and you know, there we're getting down to one park per million. You know, we we do see there are some physicians that are interested in that although it's I think it's. [inaudible]
Speaker Change: You know, the vast majority of doctors are very pleased with the performance of the exome test, which itself gets down into the ultra sensitive range
Down to very low single digit per per million.
Speaker Change: but there are some that want genome and we're making that available to them. So there's not really a reason at this point to use any of the competitive tests and we think that puts us in a competitive. [inaudible]
Speaker Change: a position going forward to grow with the market. We're certainly investing a lot in clinical
Speaker Change: clinical research, and we think we're in an excellent position. Actually, we've never felt stronger than we do right now about the growth trajectory of the business, and you can see right in the face is...
Speaker Change: Competitive launches where they're putting a lot of energy in. There's a lot of energy right now from competitors. We're putting up record numbers like we'd never seen before. [inaudible]
Speaker Change: And I think that really speaks to the strength of our technology and the way physicians feel about our data and the way they feel about the performance of signature [inaudible]
All right, thanks guys, I appreciate the details [inaudible]
Speaker Change: Our next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.
Will: You guys, thank you for taking our questions. This is Will on for Matt.
Will: I just want to touch on the gross margin. It was really strong this quarter. Can you talk a little bit more about the COGS improvement initiatives? And longer term, how much room is left for COGS reduction or is gross margin improvement largely going to come from the higher ASPs? Thank you.
Will: Yeah, I'll comment on that briefly, and then maybe Mike, if you want to, you want to add something, you know, so there, there's certainly, you know, room for room for Cox improvements, we do have a handful of
Larger scale projects that are underway right now.
Will: You know, a lot of the projects that we had announced previously, like, you know, building tissue sequencing labs.
Will: You know, those are largely completed, but they're still there's still opportunity and we're working on those opportunities now. There's also just Cod's reductions that come with scale. [inaudible]
Will: You know, a lot of, a lot of, if you look all across the workflows and just at the operations in general, as we continue to scale up, you know, I think that provides some additional leverage, which, which really helps us, but of course,
There's huge upside-off opportunities on...
Will: in improving ASP, in improving reimbursement, and I can't emphasize that enough that-
Will: when you look at the ASPs today, that really takes into account the fact that there's a lot of tests where we're not getting coverage from insurance companies. And...
Will: A lot of the investment that we've been making is to change that and you are going to see that changing over the next five years.
Will: and that's why we're saying, look, we think we can effectively double the ASP of Signature, we can really increase the women's health and organ health ASP going forward which can drive a significant revenue growth that can outpace [inaudible]
Volume Growth [inaudible]
Speaker Change: That's helpful. Thank you. And then maybe building on the last question.
Speaker Change: You launched the whole genome, product-based quarter. Just curious, any color on initial uptake and building on your previous common flunger term, how do you see the whole genome fitting into your portfolio?
Speaker Change: Yeah, that's a good question. So, you know, we've watched the genome tests. It's broadly available now, pan cancer. We get down to one part per million. We are seeing, you know, some interest, but, you know, I think, I think largely.
Speaker Change: Physicians are really supportive of the peer review data that they've seen with the exome based test where you have a lot of clinical outcomes. And one of the things that we're hearing from physicians is that ...
They're just not seeing that translate into improved clinical performance.
Speaker Change: And they're also raising concerns about specificity problems with some of the other genome-based laboratories, so we think we're in a good position. We have great performance on the X-Hum.
Speaker Change: Doctors are telling us that they like the performance of the test, they like all the peer review data, they like the long-term data sets [inaudible]
Speaker Change: They're raising concerns about extreme analytical claims, not necessarily translating into clinical performance and they're raising concerns about specificity from some of the other companies and we're seeing a Solomon pointed out. [inaudible]
Speaker Change: You know, in some cases, the competitors are actually not even disclosing their specificity. I think we saw that recently the genome competitor that talk about their colorectal data. They actually didn't disclose their specificity. [inaudible]
Speaker Change: So, you know, that raises questions. And, you know, Dr. Seeda. So, we think we're in a good position. You know, long-term, we have both products available. The doctor to look at the data and they can choose which tests they want, they want to go with.
Appreciate the color and congrats on the quarter, guys.
Speaker Change: That will conclude our question and answer session and our conference for today. Thank you all for joining. You may now disconnect.
Speaker Change: Yeah.