Natera Q1 2025 Earnings Call Transcript

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May 8, 2025
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Operator

Welcome to Natera's twenty twenty five 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 and A session. As a reminder, this conference call is being recorded today, 05/08/2025. I would now like to turn the conference call over to Michael Brophy, Chief Financial Officer.

Operator

Please go ahead.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our first quarter of twenty twenty five. On the line, I'm joined by Steve Chapman, our CEO and Salman Moskovich, President, Clinical Diagnostics. As Salishin, General Manager of Oncology will be available for Q and A.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor.matera.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, 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 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.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Please refer to the documents we file from time to time with the SEC, including our most recent Form 10 ks or 10 Q and the Form eight ks 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 or suggested by the forward looking statements. Forward looking statements made during the call are being made as of today, 05/08/2025. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Lidair disclaims any obligation to update or revise any forward looking statements.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

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 year comparison. And now I'd like to turn the call over to Steve. Steve?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Thanks, Mike. Let's get to the highlights on the next slide. We generated $5.00 $2,000,000 in revenue this quarter compared to $368,000,000 in Q1 of last year, which represents approximately 37% growth. We had an outstanding volume quarter across the board with 855,000 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 Signatera.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Signatera clinical volumes grew 52% year on year and increased by roughly 16,005 units compared to Q4, which is our best sequential unit quarter yet for Signatera. Gross margins were 63% in the quarter and 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're still seeing in the business. We also generated $23,000,000 in cash even as we doubled down on growth investments as discussed on the Q4 call in February. With all this momentum, we are in a position to substantially raise the revenue guide for the remainder of the year.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We now expect revenues to be in the range of $1,940,000,000 to $2,020,000,000 this year, a raise of $70,000,000 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. For strategic highlights in the business, starting off most recently at ISHLT, we shared a positive readout of the prospective DEFINE study in heart transplantation, which demonstrated Prospera's ability to predict clinical outcomes in heart transplant. Remarkably, Prospera outperformed biopsy in predicting graft dysfunction one year after transplant. The study also tested DQS or donor quantity score, which is a novel feature unique to Prospera.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Prospera with DQS outperformed donor fraction alone in predicting graft dysfunction. Prospera with DQS's outperformance over fraction 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 DQS versus donor fraction alone and found that DQS performed with higher accuracy. Solomon will discuss this further later in the call. Next week we'll attend the ESMO Breast Annual Meeting.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Most notably, we look forward to a presentation on the I SPY two trial, which is a great collaboration that has produced strong data on Signatera in different settings of breast cancer. This particular trial will report on the ability of Signatera to predict outcomes for metastatic recurrence in high risk early stage breast cancer. It's especially novel as it looks at the neoadjuvant setting and measures ctDNA levels at diagnosis prior to treatment. In the study Signatera's unique method goes beyond just positive and negative results to categorize positive patients by tumor quantity and then shows the five year recurrence free survival, which correlates with that quantity. While serial testing and ctDNA 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 Chapman
Steve Chapman
Chief Executive Officer at Natera

Later this month at ASCO, we'll 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. We have eight in breast cancer alone, several in colorectal and GU, two real world evidence studies based on our proprietary database and a large scale readout of our Signatera genome test. 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 2,100 samples, this is the largest sarcoma study in ctDNA analysis to date and the results were excellent. Sarcoma is an important indication with seventeen thousand new diagnoses per year in The United States.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

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. While we're sending our lead in breast, colorectal, muscle invasive bladder, lung and the other initial histologies, 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. Okay, so let's jump into some of the volume highlights on the next slide. As you can see, we processed 850,000 tests in the quarter with strong growth across the business.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

This represents a sequential increase of 8% over Q4 of twenty twenty four, which is one of the best quarters we've ever had. Women's Health had an outstanding quarter growing more than 40,000 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 Uvetaic. Organ health was also very strong in the quarter. We saw north of 50% year on year growth in organ health and a lot of interest in our donor derived cell free DNA and germline tests.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Okay, moving on to oncology. The next slide shows the progression of Signatera clinical units over the last eight quarters. We're very excited to see record growth quarter with 16,500 growth units over Q4. This is the fastest that we've ever grown and a testament to the strength of our technology, the breadth and quality of our clinical data and the great user experience we've built to help patients with cancer. We estimate that over forty five percent of oncologists in The United States ordered a Signatera test last quarter.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We think the next two years is an especially critical period for MRD as we evolve toward 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. Okay. The next slide shows our revenue progression over the last six quarters. We're excited to cross the $500,000,000 in 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.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

In addition to the volume momentum, the investments we've made in our reimbursement operations continued to improve average selling prices and we're seeing ASP strength across the board in women's health, organ health and oncology. Signatera ASPs moved above $1,100 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. Of course, ASP 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. The 63% includes about $34,000,000 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 to 2024 to 60.4% Q1 of twenty twenty five.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

That gross margin improvement came from all the positive trends on ASPs and COGS were excellent again in the quarter across the business as we continue to get scale efficiencies from the robust volume growth. We feel great about our gross margin trajectory as we look out over the next several years. In the near term, we expect Signatera 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. Longer term, we've got some significant potential opportunities that could further drive margin improvements. Guidelines in The United States and Japan for Signatera have the potential to move ASPs above $2,000 per test.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We've made a ton of progress on the women's health side as well on ASPs, but we still have carrier screening guidelines 22q guidelines ahead of us. As we continue to grow share in Oregon Health, Prospera and Arenacite can also both be accretive to gross margins as well. 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. We started this year with a guide to remain cash flow breakeven and we were pleased to now generate $23,000,000 of cash in the quarter. We demonstrated in the second half of twenty twenty four, we are capable of generating much more free cash flow right now, but we see 2025 as a crucial investment year for us, particularly around Signatera.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Given the potential size of the market, we think Signatera could eventually generate more than $5,000,000,000 in revenue annually. So it makes sense to continue funding 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 want Solomon to walk you through all of that data now. Solomon?

Solomon Moshkevich
President of Clinical Diagnostics at Natera

Thanks, Steve, and good afternoon, everyone. I'll start off with Organ Health. Steve mentioned that we just published an important manuscript in the American Journal of Transplantation, the premier scientific journal in the field. This paper demonstrated the excellent results of our two threshold algorithm for Prospera, which combines donor fraction with the donor quantity score, also called DQS. Using this unique two threshold algorithm, Prospera with DQS delivered better sensitivity and specificity than donor fraction alone, including a 37% reduction in false positives.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

The same algorithm was also evaluated in our DEFINE HEART trial, which was presented last week at the ISHLT conference. As a reminder, the DEFINE trial is a large scale perspective, multicenter, longitudinal study of donor DNA in heart transplant patients. The objective of the study was to assess serial cell free DNA dynamics and its association with clinical outcomes in the first year after heart transplant. We evaluated more than 100 patients and more than 1,000 samples utilizing Prospera with DQS to measure levels of donor DNA in the blood. The results showed that patients with at least one elevated Prospera results were at significantly higher risk for experiencing an adverse event in the first year, which is defined as graft rejection, graft dysfunction, retransplantation or death.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

In this trial, Prospera also outperformed serial biopsy by threefold in predicting graft dysfunction. Before Prospera, endomyocardial biopsies used to be performed every month as part of standard surveillance in many heart transplant centers. Obviously, a highly undesirable procedure that carries inherent risk. But more and more, we are starting to see physicians replace biopsies with Prospera. Turning now to oncology, where we continue to make excellent progress.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

At this month's ESMO Breast Congress coming up in Munich, we're excited to present new data from multiple studies, including the I FIGHT two trial that will highlight Signatera's ability to predict long term outcomes in early stage breast cancer patients. The data from over 700 patients will show that testing Signatera negative at diagnosis is an extremely good prognostic market after being treated with surgery and chemotherapy. Not only was Signatera's status at diagnosis a highly significant predictor of outcome regardless of disease subtype, but the quantity of tumor burden as measured by ctDNA was also correlated with outcomes. This reflects Signatera's differentiated quantification capabilities. And it's the first time to our knowledge that anyone has demonstrated the clinical value of absolute ctDNA quantity at time of diagnosis.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

These findings open new therapeutic strategies, including the potential for Signatera negative patients to skip chemotherapy and other intensive forms of treatment, questions that Natera will evaluate definitively in upcoming prospective trials. The data also highlights the benefit of starting Signatera testing at the earliest stage of a patient's treatment journey, right at diagnosis. The time we believe Signatera will become a standard component of the diagnostic workup for a breast cancer patient, much like testing for HER2 status or hormone receptor status today. Beyond our data generation efforts in the core indications, we continue to pursue expansion into new histology that are rapid pace. One such indication is sarcoma with over seventeen thousand new cases diagnosed in The US every year.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

Because of the heterogeneous nature of this disease, both adjuvant and surveillance strategies tend to be highly individualized. Surveillance that can include frequent imaging for up to ten years, highlighting concerns for radiation exposure in such patients. There's a strong clinical unmet need here, which we think is ideal for Signatera. So we're very pleased about the recently presented sarcoma study out of Stanford University, showing the validity and utility of serial Signatera in over two hundred sarcoma patients and more than 2,000 plasma samples, representing to our knowledge the largest study to date of ctDNA monitoring in sarcoma. The findings showed exceptional test performance including overall recurrent sensitivity of 89% and specificity of 100%.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

These numbers were strong across subtypes including some of the more clinically difficult to treat histology like leiomyosarcoma where the sensitivity was ninety three percent. We look forward to these results being published and working more closely with the sarcoma community, a great example of the Natera strategy to introduce and validate Signatera across all cancer types. Looking ahead now, this will be a busy and exciting ASCO conference for Entera with nearly 30 abstracts and presentations planned across multiple tumor types, including, as Steve noted, six oral presentations. Four of those orals will be in breast cancer alone, two of which are in the neoadjuvant setting building up the momentum with the iSLIDE two trial. One of them will have interim results from our prospective randomized DARE trial And the fourth breast cancer oral presentation will demonstrate the utility of treatment monitoring in the metastatic setting, which is something new.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

These studies started years ago

Solomon Moshkevich
President of Clinical Diagnostics at Natera

and the results will serve to further expand our data leadership in MRD. We also look forward to presenting posters with clinical performance data in Merkel cell carcinoma and other cancer types and a readout from our new Signatera genome assay. As we announced previously, the genome version of Signatera is now broadly available. This version of the test leverages the Terra's patented multiplex PCR technology and our targeted and desequencing approach. It detects ctDNA at frequencies as low as a single tumor copy per million And it is being offered alongside the Signatera exome assay, which itself regularly detects in the ultra sensitive range and can get down to the low single digit parts per million as well.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

At ASCO, we will present our first clinical data with Tegintera genome, encompassing hundreds of patients and thousands of plasma samples across multiple tumor types. The assay performance looks very strong with longitudinal sensitivities ranging from the ninety percent up to one hundred percent depending on histology and with specificity approaching one hundred percent. We believe the specificity is very important and we're pleased to see that Signatera's high specificity is maintained even with the improved sensitivity of the genome. This is something where we have seen other MRD labs struggle with clinical specificity data that is low or simply not reported at all. We've generally seen competing MRD labs struggle with translating extreme analytical claims into clinical performance.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

Furthermore, we've developed a research version of our genome assay that's available to our academic and pharma collaborators that will improve detection to levels even below a single part per million, opening, 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 medical community is responding positively to the utility of Signatera and we expect that trend to continue as we move ahead. So with that, I'll turn it over to Mike to cover the financials and the guide.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

Mike?

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Great. Thanks, Solomon. 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. Steve covered the tear we've been on with respect to revenue growth driven by both volumes and ASPs.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

I was particularly pleased to see women's health units step up as strongly as they did just given the scale at which we are now operating. And of course, organ 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 from roughly 52% this time last year to north of 60% today. All of that progress allowed us to generate cash and actually reduce our loss per share even as we significantly ramp R and D and SG and A to take advantage of the growth opportunities we have ahead of us, particularly in oncology. We maintained a pristine balance sheet with nearly $1,000,000,000 in cash and no debt outside of the relationship line of credit we have with UBS.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Okay. Let's get to the updated 2025 guidance on the next slide. As Steve described, we are raising revenue guide by about $70,000,000 at the midpoint. This is our standard approach. The guide does not include any true up revenues in future periods.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

So the $70,000,000 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. Given the organic gross margin was about 60.4% 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've kept a hedge in the gross margin guide to account for possible short term headwinds we could get from the new products we're launching. So we haven't really seen much of that penalty just yet. For both revenue and gross margins, the guide does not require heroic improvements in the business trends versus Q1, but rather steady execution on the targets in front of us.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

We're also bumping SG and A and R and D modestly higher as we look to maximize out year revenue growth. We expanded our commercial operations in Q4 and Q1 and those investments are on track to drive additional growth in 2026 and beyond. The bump here in Q1 accounts for some non cash expense accruals and non cash charges related to stock based comp along with some additional staffing we are putting into areas of the business where we are seeing high returns. For example, as John Cesco 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. On the R and D side, we are seeing additional opportunities to accelerate data generation.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Some of the recent data sets we presented have spawned 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 Salma described in this section. These clinical trials have delivered extremely high ROICs 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 this is that we are holding steady with our plans to remain cash flow breakeven. We are obviously off to a great start with 23,000,000 in cash flow generation in Q1 and we'll be opportunistic with future investments for the balance of the year. Okay.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

With that, let's open it up to questions.

Operator

We will now begin the question and answer session. Our first question comes from the line of Dan Brennan with TD Cowen. Please go ahead.

Daniel Brennan
Daniel Brennan
Analyst at Cowen

Great. Thanks for the questions. Maybe the first one, obviously, the sequential volume growth in Signatera really solid, a bit above even what Mike and Steve you guys kind of pointed to as we get into 2025.

Daniel Brennan
Daniel Brennan
Analyst at Cowen

Can you just

Daniel Brennan
Daniel Brennan
Analyst at Cowen

give a little flavor what's going on in the market, of what drove it? Just kind of volume growth sustainable as we go through the year? And then I have a follow-up.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yes. Thanks, Dan. So obviously, we're really pleased. Record sequential quarter in growth, and that's off the back of a couple of really strong quarters in a row. We're just seeing that the data that we generated, the performance of the test, the very strong clinical utility is resonating with physicians.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And that, combined with the, you know, 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, mobile phlebotomy, all of those things are are working, and, the volume is, you know, increasing. As far as kind of the rest of the year goes, you know, we're not we're not sort of changing the previous quarter over quarter sequential growth, which we said was around like 10,000 to 12,000 units roughly. But obviously, we are pleased with what we saw now, and we're seeing a lot of utilization a lot of excitement as we move forward.

Daniel Brennan
Daniel Brennan
Analyst at Cowen

Great. And then just as a follow-up, lot of clinical evidence coming up at ESMO and ASCO. I know you guys went into a few of the studies, what you're most excited about on the neoadjuvant side. Which of these do you think I know, Mike, you're talking about investment, stepping up in R and D because the community wants to see these studies report out. Which of these do you think we should focus in on, say over the next year or so that could really begin to move the needle on actually volumes in the marketplace?

Daniel Brennan
Daniel Brennan
Analyst at Cowen

Thanks.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yes. I'll just make some general comments and then maybe, Alex, Solomon, if you want to comment. First, I think we're incredibly excited to have more than 25 presentations at ASCO, including six oral presentations. That's that's really remarkable and, you know, a testament to the team and the academic PIs that we've worked with. Certainly, we've got a very strong presence in breast cancer, gastrointestinal cancers, two of the largest areas.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

I mean breast, I SPY two, which we announced today, the DARE study, which is a randomized study looking at the concept of treatment on molecular relapse, that's generating a lot of excitement. So there's a lot of good data reading out. Pan cancer, I think continuing the trend of having a data driven approach. And remember, a lot of these trials started five years ago, right? So these aren't studies that you can sort of just drop in at the last second and run a perspective randomized study.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

You know, it takes a long time to get to this point, and and we think this just continues, you know, the the leadership position that we have in the space. Solomon or Alex, you want to add anything?

Solomon Moshkevich
President of Clinical Diagnostics at Natera

Yeah. We're looking forward to the readout of the INVIGR 11 trial, which we're done in partnership with Genentech. That's their trial, so they're going to read that out. But we do expect that to be mid year. And that, you know, we think that will has the potential to really move the needle in in GU with muscle invasive bladder cancer.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

And if successful, you know, that'll be the first companion diagnostic label that we take through FDA. Alex?

Alexey Aleshin
Alexey Aleshin
GM of Oncology and ECD & Chief Medical Officer at Natera

No. I think that's a great summary. I would also just highlight, you know, I think there are more and more smaller histologies, like we've highlighted sarcoma, where we are starting to see data mature. And even though each indication by itself may be only ten thousand, fifteen thousand, twenty thousand patients a year, in combination, that is a significant growth opportunity. So I think we have data coming out in pancreatic, melanoma, gastroesophageal.

Alexey Aleshin
Alexey Aleshin
GM of Oncology and ECD & Chief Medical Officer at Natera

So we're really excited to kind of share some of those data sets and really keep growing kind of the number of patients that Signatera can help through kind of market leading evidence generation strategies.

Operator

Our next question will come from the line of Tejas Savant with Morgan Stanley. Please go ahead.

Tejas Savant
Tejas Savant
Executive Director & Senior Healthcare Equity Analyst at Morgan Stanley

Hey guys. Good evening.

Tejas Savant
Tejas Savant
Executive Director & Senior Healthcare Equity Analyst at Morgan Stanley

A couple of ones on Signatera actually. So maybe just to kick things off, one question that we've been getting a little bit is, is there a delta in terms of the number of tests reimbursed for breast versus CRC in the recurrent setting? And if so, do you have any studies underway, to your point on more studies in response to physician, and KOL sort of opinions, I guess, that could help define the optimal frequency of testing in the breast recurrent setting?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yes. So as we kind of go through the process of getting reimbursement with MolDX, part of that process 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, you can just expect that there's going to be differences. I think sometimes it's two times a year in the surveillance setting, sometimes it's four times a year in the surveillance setting, Sometimes it's two times a year for the first sorry, four times a year for the first three years, and then it's two times a year thereafter.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

So, of course, as we read out sort of the AST currently, you know, that includes tests that may be performed that that may, you know, be intermediate between one of the, you know, one of the the reimbursed, time points where we're not getting paid, and those are areas where we see opportunities. So, you know, of course, as as Mike has talked about, we think the signature ASP over time can be up to $2,000. And, you know, part of that is getting covered for tests that today we're not getting paid for. That includes tumor types where we're not covered, but that also includes some of the fill in for maybe time points that aren't necessarily covered today that we think could be covered.

Tejas Savant
Tejas Savant
Executive Director & Senior Healthcare Equity Analyst at Morgan Stanley

Got it. That's helpful. And then a couple of quick cleanups for Mike here. Mike, did you guys see any disruption from either like weather or like calendar day dynamics in the first quarter? Clearly, had a very strong quarter.

Tejas Savant
Tejas Savant
Executive Director & Senior Healthcare Equity Analyst at Morgan Stanley

So I'm wondering if it could have been even better if that if those dynamics were in play at all. And then secondly, just in light of the strong sequential growth acceleration in Signatera volume here, 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?

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Yes. Thanks for the questions. I mean, certainly weather was a huge challenge in the quarter, particularly with respect to the wildfires in Southern California. That's a very important area of the country for us, very important territory. You'd be hard pressed to see it in the volumes, however.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

And that kind of harkens back to our experience in the pandemic where if you just looked at our quarterly volume progression, you you it would be very difficult to determine that there was a massive lockdown and a huge societal disruption. The reason for that is that these are time sensitive kind of urgent tests that the patients 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, ultimately, you know, these patients need their NIPTs. They need their carrier screening test. They need their Signatera test, and they find a way to get back in relatively short order, back to the physician's office, and get that testing done.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

I think that that concept has massive implications for how efficient, the commercialization model, is for Natera relative to a lot of players, even within the molecular diagnostic space. So weather was a huge issue in the quarter, but we were able to kind of power through it. As it relates to pacing through the rest of the year, I think the women's health pacing, I think, is kind of holding up true to form. You know, we we generally expect q one to be a very strong, volume quarter, for women's health. Then your same store volumes drop off in q two and then they recover in q three and q four.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

And that's just a function of, you know, when people show up in their OBGYN's office to, to get the NIPT. You know, in the background, of that, the, you know, the the the new account wins are are not really seasonal. I mean, those are kind of happening in the background, but we have such a big book of existing business. You know, the same store volumes, if you will, do have an you know, a noticeable impact on volumes ultimately revenues. And 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.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

I I expect that trend to be more noticeable here, in 2025 because it's a it's a fairly you know, it's a there's not a lot of exogenous factors kind of driving a a difference for us for women's health. And then the other, you know, Signatera is getting bigger and bigger, and that just continues to ramp. Prospero is getting bigger. You know, the transplant business is getting bigger and bigger and that's continuing to ramp. We haven't really identified that there's some, you know, marked, seasonality there.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Other than the point that I think you mentioned, Tejas, and we've tried to bring up, in the past is that, you know, I I wouldn't I wouldn't be too precious about the exact number of growth units per quarter, particularly for Signatera just because we're operating at scale where, you know, a couple of days here or there in terms of number of days in the calendar for a quarter, holidays, things like that, that can that can throw that off. But, you know, overall, I'd say I expect, you know, the the standard seasonality in women's health, to kind of affect the pacing and then the other businesses to continue to ramp.

Tejas Savant
Tejas Savant
Executive Director & Senior Healthcare Equity Analyst at Morgan Stanley

Fair enough. Appreciate the color, Mike. Thank you.

Operator

Our next question comes from the line of Rachel Botenstahl with JPMorgan. Please go ahead.

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

Hi, great. Thanks for taking the questions and congrats on another great quarter you guys. So first up, I just wanted to

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

ask on the Signatera volume strength in

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

the quarter. Can you walk us through which indication did you

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

see the greatest sequential growth for Signatera volumes? And then kind of how do we see that roadmap from here in terms of indication contributing to growth for the rest of the year?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yes, 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 colorectal, breast, lung, muscle invasive bladder, ovarian, standard immunotherapy monitoring across all different tumor types. I think everyone sort of knows the colorectal is the largest indication, but certainly there are several others that are really seeing a lot of interest.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And we're doing well across the board. We're seeing very strong growth across all the tumor types. And I think that just, again, like helps us kind of recognize how big of an opportunity this is. We're really at the very early stages, but there's a of room for continued growth and we've put ourselves in a position where we're now deep in the offices and as they start to order an expanded indications, we're right there to partner with the physician to help more patients.

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

Great. And then just for my follow-up, I wanted to ask on screening. Didn't really talk about that a ton in your prepared remarks. So can you walk us through what are

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

you assuming on the screening front? You increased the

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

R and D guide. And is any of that to be tied to getting some data on

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

the colorectal screening front as well?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yeah. It's a good question. So, you know, as we said before, we have the, proceed study where that's actually now, met the the goal of, enrolling more than 3,000 patients. So that's basically done. We're now going to be reading that out, toward the end of the year.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

So that's exciting. That was the big, prospective colonoscopy match study that we had talked about previously. And I would say toward the end of the year, you'll get that that big readout. And then the other main update is is the FDA enabling study, the FIND study. We're actually expecting the first patient in on that this month, which is exciting.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

So, you know, as a reminder, that's basically designed, in the same way as the PRESIDE trial. PRESIDE was designed, you know, itself to 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. And the fact that we're already at first patient end targeted for this month is pretty exciting. You do see some of the R and D expense trickling in throughout 2025, but that's also going to be kind of built in 2026.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And that's in the models and in the guidance in the way kind of Mike is talking about the future of the business, where are you accounting for that?

Operator

Our next question will come from the line of Tycho Peterson with Jefferies. Please go ahead.

Noah Kava
Noah Kava
Equity Research Associate at Jefferies

Hey, this is Noah on for Tycho. Thanks for taking our question. I wanted to start by asking about ASPs for the year, specifically, how are talking about if you want to put some takes with denials and true ups and things like that? Can have few more links. Thanks.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And Mike, do want to take that?

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

It

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

was a big garbled on my end. Can someone just repeat that for Yes.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

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 denials, true ups, coverage,

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

how should we be thinking about that?

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Yeah. I mean, I think the guide contemplates kind of stable ASPs in the women's health business, in organ health business, and then some modest improvement coming from Signatera, 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 times we get allowed from Medicare Advantage for tumor types that are already objectively covered and we should be getting paid a % of the time. We're gonna continue to grind that higher through the course of the year. So I feel pretty good about that.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

As I mentioned in the prepared remarks, I think like the the ASP guide and the kind of the revenue guide for the year does not require requires good execution, but it does not require some, know, heroic change in the conditions of the business that we saw in Q1. As it relates to true ups, I mean, look, the I think on a percentage basis, you're seeing the true ups kind of feather down as expected percent of total revenue. In terms of absolute dollars, it's kind of a little bit hard to predict because the the volume in the business is growing so rapidly. That's the reason why we don't guide with true ups in the future periods. So the guide, you know, for the rest of this year, it includes a 34,000,000 in in actual true ups from q one, obviously, because those are in the books.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

But for the remainder of the year, presumes zero and that and that, you know, that goes for the gross margin guide as well. If you ask me, will we have some true ups? Yes, we will. They're just hard to predict and I think they're they make it harder for you guys to model it, so we leave it out.

Noah Kava
Noah Kava
Equity Research Associate at Jefferies

Okay. That's great. Super helpful. And then for my follow-up, can I just get a quick update on tissue free MRD? What the timeline is like there?

Noah Kava
Noah Kava
Equity Research Associate at Jefferies

And what reception has been like in the other research environment? Thanks.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yes. Good question. So yes, we've outlined the forthcoming launch of tumor naive MRD testing in colorectal. You know, that's sort of on track with with what we had had said previously. You know, I think that the data looks really strong, you know, not as good as as tumor informed, as expected, but we feel really good about that.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And we'll give you an update as that rolls out.

Operator

Our next question will come from the line of Doug Schenkel with Wolfe Research. Please go ahead.

Colleen Babington
Equity Research Associate at Wolfe Research LLC

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 40,000 tests sequentially on the split between NIPT and carrier screening?

Colleen Babington
Equity Research Associate at Wolfe Research LLC

Also, we haven't seen anything in the Green Journal table of contents for May or June in terms of ACOG guidelines for microdeletions or extended carrier screening. Should we assume that this might be coming in the late summer at the earliest? And can you remind us what the revenue and ASP impact would be if favorable guidelines are published?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yeah. That's great questions. So, you know, when when you look at at sort of the prenatal business, we we usually see kind of consistent growth, proportional to the the, you know, the size of of the product portfolio within the women's health business. So, you know, NIPT is the number one product followed closely by carrier screening, you know, followed by the the other products in the portfolio. So, you know, the growth kind of trajectory is sort of similar to, you know, to what we see there.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

So carrier screening, NIPT, both both growing really nicely. And, I mean, 40,000 quarter over quarter is a really strong growth number, and I think that, you know, it's just a testament again to the strength of the the technology, the continued execution by our team, all the peer reviewed data that we've published. And that's off the back of, you know, in 2024, what was a really strong growth year where we had, you know, several hundred thousand units of growth even, you know, when you when you sort of exclude any anything related related to Avitae. So women's health is, you know, growing really nicely. With regards to the microdeletion guidelines and carrier screening guidelines, these are, these are things that we believe are coming.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We don't have any insight on the timing, but there have been some references recently in articles, where they're they're talking about the forthcoming guidelines as, you know, they're sort of referencing them. You know, so we think that's a positive sign. But, you know, the the other good news about them not being out yet is that they remain upside for us. So, you know, we're we're actually doing incredibly well as a business, and we have this huge upside opportunity ahead of us built in on our core business. Yeah.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

So I think I think that that's sort of a positive. When when you look at micro deals, you know, we we see a pretty high attachment rate. You know, I think we've said previously, it's, you know, something like this. We're gonna do something like a a million, 22 q test this year or something in that range. And, you know, the the those aren't reimbursed.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Right? So, you know, they're built into our, COGS. They're built in, you know, to, the infrastructure that we're running today. There's a code in place, that has a good ASP. We've contracted with payers for the test.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

It's just not reimbursed. So, you know, you can imagine, you know, if you flip on reimbursement, let's say, you know, $200 or $500 for a million unreimbursed tests a year, that's gonna have a pretty significant impact. But, of course, we'll have to see how that pans out. I think the CPT code is priced on the CMS fee schedule around, $750, something in that range. You know?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

But, of course, you know, we're not putting that in our models. But, you know, even even at a few hundred dollars in reimbursement, the upside could be very significant for us. All

Colleen Babington
Equity Research Associate at Wolfe Research LLC

right. Thank you. And then just one quick follow-up on indication mix for Signatera. 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 impacts your payer mix, given breast cancer patients tend to be a bit younger than colorectal cancer, lung, etcetera?

Colleen Babington
Equity Research Associate at Wolfe Research LLC

And relatedly, how have biomarker bill wins impacted your no pay rate with commercial plans? Thanks.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yeah. Those are good questions as well. You know, I think breast, we're we're doing really well. We're seeing I mean, we generated a lot of data in breast cancer. The physicians are, they really like the our test.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

They like the performance of our test. We've got great genome data in breast cancer. So we're seeing a lot of excitement there. The DARE randomized study that's going to be reading out, that's obviously generating a lot of buzz. I SPY data that that we just announced today, plus what's coming to ASCO is generating a lot of buzz.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

So, you know, I think I think it's it's definitely one of the main, tumor types. We don't see this sort of, I think, dynamic of maybe that hurting the reimbursement or anything like that. It's actually, like, reimbursed very nicely, with Natera given our current structure. And we think for us, this 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.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

The second question about biomarker, I think that's the bigger question is when are we going to start getting reimbursed from commercial plans? Really, what you're seeing largely today at the ASPs, Mike outlined around that $1,100 price point, there's still a lot of upside in the commercial opportunity. And and, you know, the biomarker states are we're starting to see some positive signs there, but there's a lot of opportunity. And we think, as we said, over time, the ASP for Signatera can be around $2,000, you know, 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 going to come from volume, right?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

It's going to come from significant improvements in ASP, from coverage wins and from turning on commercial payers and from getting paid on more tumor types. And we think that's exciting because revenue growth is going to be accelerating above the level of volume growth.

Operator

Our next question comes from the line of Kathryn Schulte with Baird. Please go ahead.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Hey guys, thanks for the questions. Maybe just first on Japan since you brought that up getting your $2,000 Signatera Can you just remind us the timeline and path forward there and, you know, what kind of updates we could expect to hear this year on that topic?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yeah. That's great. Let let me have Solomon take that for an update on Japan. Solomon?

Solomon Moshkevich
President of Clinical Diagnostics at Natera

Yes. We're excited about the the program in Japan. We are on track there. So it's been submitted to the regulatory authorities, the Japanese version of the FDA. It's called the PMDA.

Solomon Moshkevich
President of Clinical Diagnostics at Natera

They're reviewing our application, our submissions. If everything stays on track, we would expect that to 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 sequentially. That probably takes another, you know, six to nine months and brings us towards late next year when you start, you know, when we start expecting this to impact top line. And we know there's really significant demand for this technology in Japan. You know, as a reminder, 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 Moshkevich
President of Clinical Diagnostics at Natera

And they're very eager to to do biomarker driven MRD guided treatment decisions. And it's already in the guidelines. MRD is already mentioned in the society guidelines in Japan as well. So we're looking forward to that. We're on track.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Got it. And then maybe at this point in the launch for Signatera, I mean, you guys are continuing to put up pretty incredible sequential volume growth even with competitors coming out. We've got a new one entering the market now. One competitor got surveillance Medicare coverage and you guys still seem to be pretty dominant in where you are. So I guess is there any change to how you go about that commercially in the current competitive landscape or maybe what are you hearing from customers around your value proposition?

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Thanks.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yeah. We're, you know, we're obviously pleased with our growth. There's been a lot of competitors that have been out, you know, for a long time, you know, selling tests, very present, you know, doing early access programs, you know, talking to doctors. So, you know, we don't really think there there's a change necessarily happening right now in the in the competitive environment. You know, certainly, there's been some, larger companies that have gotten coverage, you know, maybe six to nine months ago that have been out there.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

You know, we're just focusing on, delivering. And, you what we're seeing is that physicians really like the performance of our test. They like the clinical data that we've delivered. You know, now we have over a hundred peer reviewed publications. We have long term overall survival data.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We have data with physicians acting on the results of our test. I think they put a lot of emphasis on that, not necessarily some

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

of the

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

analytical validation studies that are easily manipulated or, you know, aren't necessarily you know, we're 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.

Operator

Our next question comes from the line of Puneet Souda with Leerink Partners. Please go ahead.

Puneet Souda
Senior MD at Leerink Partners

Yes. Hi, guys. Thanks for the question here and congrats on another strong quarter. First one on the women's health business, the 40,000 units came in ahead of our expectations as well. And just trying to understand, how are you lapping the Invitae comps there?

Puneet Souda
Senior MD at Leerink Partners

Could you remind us how much of that growth was there in 2024 from Invitae? How does that comp affects your expectations for the year? And then Mike, maybe on the ASP side, we're seeing payers, commercial payers being under pressure. I was 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?

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

Yes. Great. No, thanks for the question, Puneet. Yes. First, on the volumes, we as you guys will remember, we took on the NZTA accounts really in q one of last year.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

So we've got almost a full year now of integrating the Invitae volumes into our business, and that was a very successful transaction for us. We're really pleased to be able to just kind of provide that kind of continuity of care to a large swath of what were then new customers, but now have been with us now for some time. So as you kind of go through the rest of the year, the comps are reasonably clean 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, hey, what was the Vitae volume versus you know, what was, you know, the Terra volume at the time. So it just it just continues to kind of add to the platform.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

The reason why deals like that in additions to volumes and the like, for example, the growth we had in q one is so valuable to us is that we've got a, you know, fantastic operation to to drive ASPs that we've really shown a lot of strong results on now over the last two years. So, you know, that team obviously scales perfectly with with the volumes. They're happy to, you know, add a dollar of ASP across a bigger and bigger base of of of Panorama volume, for example. I mean, you get you get perfect synergies on that. That that operation, Puneet, is what gives me the confidence that that the guide, you know, you can actually kind of hold the hold the results steady through the rest of the year and feel good as a guide.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

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, you know, from Steve on down, and and we work extremely hard to to try and improve that situation.

Mike Brophy
Mike Brophy
Chief Financial Officer at Natera

So, I I I hear you that, you know, there there will be some 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 good path to, to hopefully grow ASPs, you know, even as the guide holds us steady for now.

Puneet Souda
Senior MD at Leerink Partners

Okay. Super. That's great. And then on Signatera, maybe just a broader question. I just want to understand going forward over the next two quarters and into 2026, could you elaborate sort of what are the critical drivers for strong growth?

Puneet Souda
Senior MD at Leerink Partners

Is it NCCN? Is it getting deeper into the community setting? Is it getting into maybe, other tier accounts beyond the tier one and two? Is it indication growth? Just maybe walk us through how you see the stack of drivers that are going to continue to drive this Signatera growth?

Puneet Souda
Senior MD at Leerink Partners

Because obviously that's an important question every quarter for us and for investors.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yes. Thanks. That's a good question. So I think first, if you you just start off with kind of the the fundamentals, you know, which is that this market is is very, very, you know, at a at a very, very low level of penetration. 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, you know, in the in the very low single digits when you look at the the broader opportunity, you know, which which which I think is important.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And so the way that it it works is it it's you know, like we said, we're we're already working with 45% of oncologists right now. 45% are actually ordering Signatera. So, you know, it's it's not like 3% of oncologists are ordering Signatera, and we've got to go figure out how to get the other 97% to order. We already have half the oncologists in the country placing orders. 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.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And I think that's really, you know, the main driver 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, we're taking doctors that are using the product and showing them clinical data that allows them to use in other patients. And remember, the vast majority of physicians and volume is in the community setting. So it's not good enough to just have one indication.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

You know, I think if if you come out and you have one indication reimbursed, gonna 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? But we can't really do all the other stuff. You know? So we're in this unique position where we have a pan cancer offering.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We're broadly covered. We're connected in the EMRs. We have a very large medical affairs team and customer service team. The turnaround time is very fast. You know?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

I and I think that's that puts us in a in a unique position. So, we're generating as much data as we can. We think that drives utilization. We're focusing on obviously the big cancer opportunities, but also not ignoring the smaller opportunities. We're innovating.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

As you can see, we've now launched, the signature genome product. And there we're getting down to one part per million. We do see there are some physicians that are interested in that, although it's I think it's 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 part per million. But there are some that want genome, 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 position going forward to grow with the market.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We're certainly investing a lot in clinical data, 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 of 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've never seen before.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

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 Signatera.

Puneet Souda
Senior MD at Leerink Partners

Got it. Alright. Thanks, guys. Appreciate the details.

Operator

Our next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.

Analyst

Hey guys, thank you for taking our questions. This is Will on for Matt. Just want to touch on gross margin. It was really strong this quarter. Can you talk a little bit more about the COGS improvement initiatives?

Analyst

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.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yeah. I'll comment on that briefly and then, maybe, Mike, if if you wanna you wanna add something. Yeah. So there's there's certainly, you know, room for, room for cost improvements. We do have a handful of larger scale projects that are underway right now.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

You know, a lot of the, a lot of the projects that we had announced previously, like, you know, building building the tissue sequencing labs, You know, those are largely completed, but there's still there's still opportunity, and, you know, we're working on those opportunities now. There's also just COGS reductions that come with scale. You know, a lot of a lot of if you look all across the 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 opportunities on, in in improving ASP and improving reimbursement. And I, you know, I can't emphasize that enough that, when you when you look at the ASPs today, you know, that that really takes into account the fact that we're there's a lot of tests where we're not getting coverage from insurance companies.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

And 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. And that's why we're saying, look, we think we can effectively double the ASP of Signatera. We can really increase the women's health and organ health ASP going forward, which can drive significant revenue growth that can outpace volume growth.

Analyst

That's helpful. Thank you. And then maybe building on the last question, you launched the whole genome product this quarter. Just curious any color on initial uptake And building on your previous comments longer term, how do you see the whole genome fitting into your portfolio?

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

Yes. That's a good question. So we've launched the genome test. It's broadly available now. Pan cancer, we get down to one part per million.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

We are seeing, you know, some interest, but, you know, I think I think largely, physicians are really supportive of, the peer reviewed data that they've seen with the the exome based test where you have a

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

lot of, you know, clinical outcomes. And, you know,

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

one of the things that that we're hearing from physicians is that, you know, some of these sort of extreme performance claims that are coming out of analytical studies, they're just not seeing that translate into improved clinical performance. 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 exome. Doctors are telling us that they like the performance of the tests.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

They like all the peer reviewed data. They like the long term data sets. They're raising concerns about, you know, extreme analytical claims, you know, not necessarily translating into, clinical performance, and they're raising concerns about specificity, from some of the other companies. And, we're seeing, as Solomon pointed out, in some cases, the competitors are actually not even disclosing their specificity. I think we saw that recently, a genome competitor, they talked about their colorectal data.

Steve Chapman
Steve Chapman
Chief Executive Officer at Natera

They actually didn't disclose their specificity. So, you know, that raises questions, and, you know, doctors see that. So we think we're in a good position. You know, long term, we we have both products available. The doctor can look at the data, and they can choose which test they want to go with.

Analyst

Appreciate the color, congrats on the quarter, guys.

Operator

That will conclude our question and answer session and our conference for today. Thank you all for joining. You may now disconnect.

Executives
    • Mike Brophy
      Mike Brophy
      Chief Financial Officer
    • Steve Chapman
      Steve Chapman
      Chief Executive Officer
    • Alexey Aleshin
      Alexey Aleshin
      GM of Oncology and ECD & Chief Medical Officer
Analysts
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Key Takeaways

  • Revenue & Guidance: Generated $502 million in Q1, up 37% year-over-year, and raised 2025 revenue outlook by $70 million to $1.94–2.02 billion, implying roughly 26% growth ex true-ups.
  • Volume Momentum: Processed 855,000 tests this quarter, including a record 52% year-over-year increase in Signatera units (+16.5 K sequential) and a 40 K unit sequential lift in women’s health, while organ health grew over 50% YoY.
  • Margin Expansion & Cash Generation: Achieved 63% gross margin (60.4% ex true-ups), up 110 basis points from Q4, generated $23 million in cash despite increased growth investments, and reiterated a 60–64% full-year margin guide.
  • Clinical & Strategic Highlights: Prospera’s donor quantity score outperformed biopsy and donor fraction in heart transplant trials, Signatera data showcased at ESMO and ASCO (I-SPY2, DARE, sarcoma study), and launched an ultra-sensitive genome assay with up to 100% specificity.
  • Reimbursement & Long-Term Targets: Signatera average selling prices topped $1,100 driven by Medicare Advantage coverage, with upcoming U.S. and Japan guideline wins expected to lift ASPs above $2,000 and move gross margins toward a >70% long-term goal.
A.I. generated. May contain errors.
Earnings Conference Call
Natera Q1 2025
00:00 / 00:00

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