Natera Q2 2025 Earnings Report

Natera EPS Results

• Actual EPS: -$0.74
• Consensus EPS: -$0.60
• Beat/Miss: Missed by -$0.14
• One Year Ago EPS: -$0.30

Natera Revenue Results

• Actual Revenue: $546.60 million
• Expected Revenue: $476.84 million
• Beat/Miss: Beat by +$69.76 million
• YoY Revenue Growth: +32.20%

Natera Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 4:30PM ET

Natera (NASDAQ:NTRA), a diagnostics company, develops and commercializes molecular testing services worldwide. Its products include Panorama, a non-invasive prenatal test that screens for chromosomal abnormalities of a fetus, as well as in twin pregnancies; Horizon carrier screening test for individuals and couples determine if they are carriers of genetic variations that cause certain genetic conditions; Vistara single-gene NIPT screens for 25 single-gene disorders that cause severe skeletal, cardiac, and neurological conditions; Spectrum, preimplantation genetic tests for couples undergoing IVF; Anora that analyzes miscarriage tissue from women; Empower, a hereditary cancer screening test; and non-invasive prenatal paternity product, which allows a couple to establish paternity without waiting for the child to be born. The company also provides Signatera, a ctDNA blood test for molecular residual disease assessment and surveillance of disease recurrence in patients previously diagnosed with cancer; Altera, a tissue based comprehensive genomic profiling test; Prospera to assess active rejection in patients who have undergone kidney, heart, and lung transplantation; and Renasight, a kidney gene panel test. In addition, it offers Constellation, a cloud-based software product that enables laboratory customers to gain access through the cloud to the company's algorithms and bioinformatics to validate and launch tests. The company offers products through its direct sales force, as well as through a network of laboratory and distribution partners. It has a partnership agreement with BGI Genomics Co., Ltd. to develop, manufacture, and commercialize NGS-based genetic testing assays; and Foundation Medicine, Inc. to develop and commercialize personalized circulating tumor DNA monitoring assays. The company was founded in 2003 and is headquartered in Austin, Texas.

Natera Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Revenue grew 32% year-over-year to $547 million, leading management to raise full-year guidance by $80 million to $2.1–2.2 billion in revenue and boost gross margin targets to 61–64% while keeping OpEx flat.
• Positive Sentiment: Signatera volumes hit a record with 189,000 oncology tests and 20,000 sequential growth units, driven by a surge in new patient starts and plans to pursue Medicare coverage for additional tumor types worth ~$250–300 million.
• Positive Sentiment: Fetal Focus NIPT launched for inherited conditions, backed by the EXPAND trial showing 91% sensitivity and demonstrating Natera’s proprietary SNP-based technology.
• Positive Sentiment: Prospera data published in the PEDAL study in the American Journal of Transplantation showed that serial monitoring of donor-derived cell-free DNA predicts long-term kidney transplant outcomes and can guide treatment.
• Neutral Sentiment: Company is advancing its early cancer detection program with the PROCEED clinical trial readout expected in late fall and building AI-driven foundation models (NEO Predict/Select) to power future diagnostic and therapeutic innovations.

Presentation

[Operator]

Hello. Welcome to Natera's twenty twenty five Second 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 question and answer session. As a reminder, this conference call is being recorded today, 08/07/2025.

[Operator]

I would now like to turn the conference call over to Michael Brophy, Chief Financial Officer. Please go ahead.

[Mike Brophy, CFO at Natera]

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our 2025. On the line, I'm joined by Steve Chapman, our CEO Salman Moskovich, President, Clinical Diagnostics and Al Kalashin, General Manager of Oncology and our Chief Medical Officer. Today's conference call is being broadcast live via webcast.

[Mike Brophy, CFO at Natera]

We will be referring to a slide presentation that has been posted to investor.natera.com. A replay of the call will also be posted to our IR site as soon as it's available. Starting on Slide two. During the course of this conference call, we will make forward looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook, market size partnerships, clinical studies and expected results, opportunities and strategies and expectations for various current and future products, including product capabilities, expanded 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.

[Mike Brophy, CFO 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 made as of today, 08/07/2025. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Insert claims any obligation to update or revise any forward looking statements.

[Mike Brophy, CFO 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, CEO & Director at Natera]

Thanks Mike. Let's get to the highlights on the next slide. We had a phenomenal quarter. We generated $547,000,000 of revenue which is 32% growth over Q2 of last year and ex revenue true ups our revenues grew 34% year on year. We had a very strong volume quarter as well, which included strong growth across the product portfolio and an all time record for Signatera.

[Steve Chapman, CEO & Director at Natera]

We processed 189,000 oncology tests in the quarter, which represents nearly 20,000 units of growth compared to our first quarter of this year. 20,000 sequential growth units significantly beats our previous growth record and is a new milestone for the company. Part of this growth acceleration was driven by significant increase in new patient starts, which was double our previous quarterly record. Gross margin ticked up again in Q2 at 63.4% compared to approximately 59% this time last year. Ex true ups, gross margins were consistent sequentially versus Q1 due to strong ASPs despite the fact that Signatera COGS actually went up meaningfully because we ran so many exomes for first time patients, which of course is very good news.

[Steve Chapman, CEO & Director at Natera]

Given all that momentum, we are in a position to level up the financial guide for the year. We are raising the revenue guidance by $80,000,000 at the midpoint and we now expect revenues in the range of 2,200,000,000 to $2,100,000,000 which is a full reset of the prior revenue range. We are raising the gross margin guide to 61% to 64% in recognition of the gross margin performance we saw in the first half, which still accounts for factors like growth in new patients in the second half. We are not increasing our operating expenses, which are remaining flat versus the prior guide as we get scale in the business despite being in full investment mode for the future. In addition to the financials, we have a full slate of new data and product updates to discuss today.

[Steve Chapman, CEO & Director at Natera]

We are particularly excited to launch Fetal Focus, a new NIPT for inherited conditions that leverages our proprietary SNP based method for NIPT. We've never had better momentum in organ health and the PROSPERRA data that we'll talk about today, I think shows the path we're on to transforming care for organ transplant patients. In oncology, the data pipeline continues to grow and we're going to take some time on the call today to do a deeper dive on our strong and broad data across breast cancer and new data in GI cancers beyond CRC. Finally, we've been working in the background of the next major wave of innovation at Natera. First, we'll go over the rapid progress we're making on early cancer detection where we're gearing up for a big readout of the prospective colonoscopy MATCH proceed trial for advanced adenoma late this fall.

[Steve Chapman, CEO & Director at Natera]

Next, we will introduce Natera's AI based foundation models, which are being used to develop new diagnostic biomarkers, molecular therapeutics and speed clinical trials. Okay, let's get into some of the business trends on the next slide. The first slide just shows our Q2 volume progression over prior years. This was another great quarter for us across the board as we were able to grow significantly against the Q2 twenty twenty four comparable that was elevated due to a sudden influx of Invitae units. Signatera was phenomenal with growth records in both sequential growth and new patient starts. In women's health, we saw our second best volume quarter ever coming off what was a blowout Q1 number. We saw the same Q2 seasonality trends that we always see given our large base of existing customers, but we continue to blunt that impact by winning new accounts. Our organ health products have been on a tear this year with major new account wins driving growth on the back of some very strong clinical data and there's more new data that we're going to talk about today, which I think sets us up very well for the future in that space.

[Steve Chapman, CEO & Director at Natera]

We also recently exited our legacy paternity business, which was contributing to our volume numbers historically. The next slide shows our Signatera clinical units over time. This quarter we grew by 20,000 growth units versus our average over the prior four quarters of about 13,000 per quarter. This over performance was a result of a wave of new patient starts driven by the compelling data we generated in the last year. Growth in new patient starts was about three times higher than our quarterly average and about two times higher than the previous record quarter.

[Steve Chapman, CEO & Director at Natera]

As we said before, Signatera quarterly volumes could fluctuate. So I don't think 20,000 growth units is a new normal, but clearly this strong growth is a great sign. Historically, a lot of our growth has come from colorectal cancer, breast cancer and IO monitoring. And again, we saw very strong growth in these areas. In addition, we're announcing broader adoption in many other tumor types as physicians really start to generalize the use of Signatera in their clinics, which is helping drive volume growth, but also creates a large revenue opportunity.

[Steve Chapman, CEO & Director at Natera]

We're in the process of seeking Medicare reimbursement for this longer tail of cancers. Based on our current growth trajectory, gaining Medicare coverage for these non covered histologies over the next few years should be worth approximately $250,000,000 to $300,000,000 in annual revenue and gross profit further contributing to the financial sustainability of our growth strategy and supporting our path to a $2,000 ASP. We're in an excellent position to achieve this given the significant amount of data we generated so far and of course we have over 100 clinical trials underway many of which support these types of initiatives. I mentioned we grew revenues 34% organically year over year and you'll recall Q2 of last year was a very strong quarter for us. So I'm pleased to see these strong growth numbers over some very tough 2024 comparables.

[Steve Chapman, CEO & Director at Natera]

We had about 45,000,000 in revenue true ups this quarter as we continue to improve reimbursement for covered services. Sequentially over Q1, we grew revenues 9% overall and 7% organically. Dollars

[Steve Chapman, CEO & Director at Natera]

We've already covered the very strong volume numbers driving this growth, but we also saw excellent ASPs across the board. The next slide shows our gross margin traction over time and we posted another strong gross margin quarter in Q2. Stripping out the revenue true ups, we were still able to generate gross margin steady with Q1 despite the big step up in XLM volumes this quarter. We drove that with better ASPs for Signatera, which is now roughly at eleven seventy five along with steady results in ASPs in Panorama, Horizon and growth in the Prospera ASP. We were also very pleased to see continued revenue true ups in the quarter, which means that cash collections exceeded our prior history.

[Steve Chapman, CEO & Director at Natera]

I think the speed at which we're converting receivables into cash is one of the most promising business trends we're seeing and DSOs are now down to fifty seven days, which is a record for the company by a wide margin. All of these trends allow us to generate cash while aggressively investing for future growth. Although this slide shows how much progress we've made over the last two years, I really think we are just scratching the surface of the margin improvements we can achieve. We think about margin expansion opportunities across four primary vectors: continued execution in revenue cycle operations expanded coverage for products including Signatera, further COGS reductions and AI driven efficiencies. First, we embarked on a major investment in our revenue cycle operations leadership, systems and staffing in the 2022 and that project has yielded significant returns for the company.

[Steve Chapman, CEO & Director at Natera]

Our team sees ample additional opportunities to continue to make improvements, which could drive ASPs higher and we've seen good results so far this year. One example is on appeals. Historically, it's very difficult to do an individualized appeal for each denial. But as our systems improve and we invest, we're building these types of capabilities that will allow us to get paid on a higher percent of cases. Second is expanding coverage for our products.

[Steve Chapman, CEO & Director at Natera]

We mentioned on the last call that we think $2,000 is an achievable ASP for Signatera. I mentioned the new opportunity in front of us to drive reimbursement in a number of additional tumor types and I'll stress that this opportunity has gotten much larger over the last couple of quarters as our volumes in non covered tumor types have grown and we expect to have several additional coverage decisions within the next twelve months. We continue to see positive early signs in biomarker states, which is still at the very early stages and we still have opportunity with Medicare Advantage execution. Outside of oncology, we still have major opportunities for improved coverage with expanded carrier screening 22q and broader coverage for our organ health products, which could all drive ASP improvements. The third area of improvement on margins by cutting costs.

[Steve Chapman, CEO & Director at Natera]

One of the constants for us over the last decade is our commitment to investing in R and D projects that reduce cost of goods sold for new tests that we launched. This tends to have a relatively lower technical risk compared to new product innovation and deliver high returns. We now have a full suite of COGS projects we're initiating and some that are getting close to launch. Finally, we're going to spend some time later on the call and the investments we're making in artificial intelligence. While there are some very exciting steps we're taking in AI fueled innovation, there's a whole range of areas in the business where AI is already having an impact and allowing us to scale our volumes without a one for one increase in headcount.

[Steve Chapman, CEO & Director at Natera]

Many of these opportunities hit COGS as well as OpEx, and we expect to see some significant savings from this over time. So in summary, we have several very concrete ways that we can increase the margin. Now, not all of these are under our direct control and the path won't always be linear, but it's great that we have these opportunities that we're executing across. On the next slide, as I mentioned at the top of the call, we're holding OpEx steady even as we raise top line revenue guidance by $80,000,000 So we're getting scale even as we keep our foot on the gas with growth investments. We think these growth and margin expansion opportunities clearly warrant the investment required to deliver them and this slide gives some additional color on where the incremental investments in 2025 are going.

[Steve Chapman, CEO & Director at Natera]

To be clear, the vast majority of the OpEx increase in 2025 is not yet driving revenue either because it's pointed at a longer term project like gaining reimbursement for uncovered services or completing a major clinical trial or delivering on new product launches or because our commercial hires are just coming on board and are not yet productive. I'll follow-up on that example of commercial hires. We've recently expanded our commercial footprint primarily in oncology. We added these additional oncology reps and we expect to start seeing meaningful contributions from these new people late this year and early next year. As with a lot of these investments, there's a slingshot effect where they're hitting the expense line this year, but they don't start to impact revenue and volume growth until about six to twelve months later.

[Steve Chapman, CEO & Director at Natera]

The strong growth we've seen thus far this year wasn't really driven by these new hires. In addition to the commercial team, we continue to invest in the success of the revenue cycle management. As we said earlier, investing in revenue cycle management is one of the primary opportunities we have for margin expansion, so this makes a lot of sense to pursue. Once this team is scaled up and the optimal tools and systems are in place, we can get significant scale on top of this infrastructure. We've been moving quickly here, which includes many manual processes that can be automated.

[Steve Chapman, CEO & Director at Natera]

So we don't have to keep scaling at the same pace going forward. The forecast also includes a meaningful addition of AI focused technical staff that we think is very promising. We've also shored up our ability to scale with more lab footprint and additional basic company infrastructure to accommodate our growth. The R and D incremental investment in 2025 is really driven by both the oncology clinical trial expansion and investing into new MRD products. We think this is important because there's so much opportunity in MRD to our continuing to expand our already vast set of meaningful clinical trials and effort to change guidelines, accelerate adoption and gain coverage where we don't yet have it.

[Steve Chapman, CEO & Director at Natera]

Our pace of new product launches has also increased this year. Earlier this year, we launched Signature Genome and we have many other MRD related opportunities we're working on that will be announced in the future. In addition, we're excited today to have announced another innovation within the prenatal product lines with single gene NIPT. Finally, we're continuing to make rapid progress on early cancer detection, which we now think has the potential to be a major opportunity for Nueterra. We've executed well on the PROCEED trial, which now has about 3,500 patients enrolled and we tend to read out in the late fall.

[Steve Chapman, CEO & Director at Natera]

We have also launched the FDA enabling FIND trial. We think ECD is a very significant opportunity for Natura, especially given the high ASPs that are now being established and the existing distribution footprint we can leverage. Finally, we're investing in AI and AI enabled technology, which we will outline on the call today, which we think could revolutionize care and make a big impact. We plan to stay nimble on our investment strategy throughout the rest of the year. If we see a clear opportunity to deploy capital, we're going to do that while maintaining our commitment to generating cash later this year.

[Steve Chapman, CEO & Director at Natera]

Having said that, I think we're reasonably well positioned to hold OpEx in the current range as we continue to grow. With that, I'm very pleased to hand it over to Solomon. Solomon?

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

Thanks, Steve. Let's start with the news from Women's Health where we had an exciting launch of our new fetal focus NIPT for inherited conditions. Let me walk you through some of the background first on the clinical unmet need that we're addressing with this new test, how the test works and the exceptional performance that we're seeing from our clinical validation study called EXPAND. Today, a pregnant mother is identified as a carrier of a recessive gene like cystic fibrosis, for example, medical guidelines recommend testing the biological father to assess the baby's risk of inheriting the affected gene from both parents. But in some cases, the father is not available for testing.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

So with the launch of this new test, if a pregnant mother has screened positive on Natera's Horizon carrier screen for one of the five most commonly tested genes, The fetal focus test can directly assess the baby's risk of inheriting the genetic condition just from a maternal blood sample. The test is validated to analyze five key genes as you can see outlined on the slide And it's backed by data from the EXPAND trial, a large prospective clinical trial that we've been running for nearly two years. I want to tell you more about the EXPAND trial. So far, the study has enrolled about 1,300 participants from a diverse multi ethnic population, including patients from leading academic centers and MFM clinics, as well as a decentralized trial arm that leverages Natera's nationwide base of over 1,000,000 Horizon patients per year. Because of this, Natera is uniquely positioned to enroll quickly into the trial.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

We see EXPAND as similar to the SMART study and that it's designed to be the definitive trial in this test category with all positive and negative outcomes confirmed by diagnostic genetic testing either prenatally or after birth. In the first milestone readout of about one hundred patients from EXPAND, the fetal focus test demonstrated ninety one percent sensitivity to affected pregnancies where the baby actually inherited the recessive genes from both parents. And the test successfully identified all five affected cases with homozygous variants, which are particularly challenging to detect in cell free DNA. Fetal Focus uses Natera's proprietary linked SNP technology, which enhances detection of these challenging cases across diverse ethnic populations. These early results not only highlight the clinical accuracy of Fetal Focus, they underscore the real world value of Natera's proprietary technology.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

Together, the product launch and the clinical data strengthen Natera's leadership in women's reproductive health and it reinforces our commitment to being a trusted partners to OBGYNs, MFM specialists and patients across the country. Turning now to organ health. This quarter, we announced the publication of the PEDAL study in the American Journal of Transplantation. AGT is the highest impact transplant journal, which speaks to the importance and the rigor behind the study. PETAL is a first of its kind prospective multicenter trial evaluating how donor derived cell free DNA can help predict long term outcomes after a rejection of a kidney transplant. You can think about this as similar to immunotherapy monitoring in oncology because it answers the question of whether the treatment is working or not after someone has been diagnosed with rejection. The PEDL study enrolled four eighty eight kidney transplant recipients from 28 participating U. S. And international transplant centers over four years.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

Ninety six of those patients had biopsy proven acute rejection and were monitored with Prospera during treatment every two weeks for eight weeks. And sixty six of those patients had clinical outcomes recorded at the twelve month mark. So the findings showed that transplant patients whose donor DNA levels remained high during and after treatment did poorly, with ninety seven point five percent having negative outcomes at the twelve month mark. By contrast, the patients where Prospera levels dropped and stayed low were sixty times more likely to experience positive long term outcomes. This is the first clinical evidence showing that serial monitoring with Prospera can inform patient management during treatment for acute rejection, potentially enabling earlier interventions and more tailored care.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

We've gotten incredible feedback on the data and the study quality. Doctors were really eager for this type of readout.

[Steve Chapman, CEO & Director at Natera]

It took a long time

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

to run the trial and we're very pleased with the results. This new use case for Prospera complements the existing utility in detecting rejection and surveillance. As you know, Medicare has recently released a draft LCD updating its coverage policy for surveillance, which we also believe is positive news. Turning now to oncology. We had several important events for Signatera in the past few months, continuing to fuel the adoption of this amazing technology.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

At ASCO, we presented interim results from the DARE trial, which has accrued over four hundred early stage breast cancer patients with HR positive HER2 negative disease. This trial is what we call a TOMER trial or treatment on molecular recurrence. TOMER has the potential to become the new frontline of metastatic treatment, where the recurrence is detected first by Signatera even though the scans are still negative. The DARE study has been recruiting and randomizing patients since 2021 to either receive CDK4six inhibition at time of Signatera positivity versus continuing standard of care observation. There are three key takeaways from this readout at ASCO.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

First, patients who test serially negative have extremely good outcomes with over ninety nine percent remaining recurrence free. This reflects excellent test sensitivity. Second, the test was so sensitive that seventy three percent of the recurrences detected were purely molecular with the reflex scans showing no evidence of disease and ninety three percent of those patients were then successfully randomized. So this is a major sign that the TOMER strategy is viable unlike prior attempts that resulted in lower patient randomization rates. As a reminder, the other twenty seven percent of patients in whom disease is detected on a scan also stand to benefit from early detection and treatment of metastatic disease.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

Third, we saw a twofold higher ctDNA clearance rate in one of the trial arms, providing a promising signal that early treatment intervention can make a difference at this stage. So we look forward to further readouts from the DARE trial and to doubling down on the TOMER strategy with our partners from biopharma and academia in breast cancer and other cancer types. Turning now to the neoadjuvant setting for breast cancer, where we had several important announcements. Earlier in the quarter, we presented new data from the I SPY two trial, which showed again that patients who tested Signatera negative at baseline or at diagnosis had extremely good outcomes after treatment. Entera's multi year collaboration with the I SPY two team has yielded many important insights and peer reviewed publications, systematically studying hundreds of early stage breast cancer patients and correlating Signatera dynamics with treatment response and long term outcomes.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

So this insight about the great prognosis when the baseline sample is negative has triggered many doctors to ask whether those patients might safely avoid chemotherapy and perhaps they can be treated just with endocrine therapy instead, which is much less toxic. So this approach is now being formally investigated in a new clinical trial led by ABCSG, which is the Austrian Breast and Colorectal Study Group. The trial is called TIEODAR and it randomizes patients who were Signatera negative at baseline to just receive endocrine therapy versus chemotherapy prior to surgery. The trial is open at 15 sites in Austria and it aims to recruit two fifty patients. This is a great example of how strong biobank data generated over many years can lead to a randomized clinical trial that ultimately has a chance to be practice changing.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

Our plan is to replicate this strategy as much as possible. We've built up a significant clinical pipeline in breast cancer, which we believe is hard to replicate. To date, we have 18 peer reviewed publications and by our count presented over 60 abstracts at top medical meetings. We have broad Medicare coverage across the neoadjuvant, adjuvant and surveillance settings. All of this sets the foundation for the next wave of randomized trials, many of which are currently underway and others still to be announced.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

To ultimately solidify Signatera and ctDNA monitoring as the new standard of care across all settings of this disease, we've invested heavily into the data generation strategy in breast cancer, having spent and budgeted over $150,000,000 on breast trials alone. This is going to be hard for others to replicate given the extent of the capital investment required. Now turning to gastrointestinal cancers. The adoption of Signatera has obviously been strong, especially in colorectal cancer, but it's now growing quickly in other GI malignancies, including pancreatic, liver and gastroesophageal. We had two strong peer reviewed publications in GI over the past three months.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

In gastroesophageal, the Plagast study was published in Nature Communications, validating Signatera in the neoadjuvant and adjuvant settings. This study followed sixty two patients with locally advanced gastric and GE junction cancers and showed that patients who failed to clear their ctDNA during neoadjuvant therapy had very poor outcomes. Study concluded that those patients would likely benefit from a change in therapy after surgery instead of just continuing the same treatment, which is a common strategy today with perioperative chemo or immunotherapy. Signatera also detected recurrence with a median lead time of six months ahead of imaging. Gastroesophageal cancer is a deadly disease with no good biomarkers, where Signatera has the potential to really improve patient management and outcomes.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

In liver cancer, also known as hepatocellular carcinoma or HCC, we published a great paper Precision Oncology that followed one hundred and twenty five patients. Early stage liver cancer can be treated with either surgical resection or with a liver transplant. And this study saw about half and half contribution. And contrary to esophageal cancer, there is a guideline recommended biomarker called AFP or alpha fetoprotein that simply does not work very well. So in this study, we showed that Signatera significantly outperformed AFP in detecting recurrence with approximately two times the longitudinal sensitivity and 100% longitudinal specificity and with diagnostic lead times of up to sixteen point five months.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

So we're getting positive feedback about the study and growing interest to use Signatera for recurrence monitoring in both resected and transplanted patients. Finally, looking forward, Q3 will be another important quarter for Signatera as we expect data readouts from the INVIGOR-eleven trial in bladder cancer and other studies. Now I'd like to turn it over to Alex to discuss our roadmap in early cancer detection and some of the exciting foundation models that we're building to fuel the next wave of AI based innovation. Alex?

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

Thanks, Solomon. We continue to make steady progress on our ECD program. We have now consented over 3,500 patients for our PRESEDE CRC study, which is a prospective average risk colonoscopy matched trial. This study is being conducted in a manner to closely mirror our FDA enabling FIND study to minimize the risk of performance degradation. We plan for the next readout from the study in the 2025, which will assess assay performance in over 100 advanced adenoma samples and 500 normal controls.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

Additionally, we're excited to announce the DEFINE study has now started enrollment and is on track to prospectively accrue the necessary patients to enable our FDA readout in 2027. We continue to phase gate the program and remain disciplined in our investment. We want to highlight that our investment in our ECD program is already baked in into our operating expenses. On the next slide, I want to highlight one of the most exciting areas this quarter as we continue our investment in our AI initiative, which we're deploying across the entire company to scale our operations, improve user experience and drive scientific innovation. On the operations side, for the entire history of the company, many roles have had to scale linearly with commercial volume.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

For the first time, we have an opportunity to change that relationship with AI allowing us to scale more efficiently and open up additional operating leverage worth approximately $200,000,000 in savings over time. On the UX side, we're also building a whole new suite of AI enabled user experience tools, which are intended to change the way we interact with physicians and patients. Finally, we are leveraging AI to develop new algorithms that will power the next generation of diagnostics and clinical insights. On this front, today, we're announcing our AI based discovery to care platform that is designed to support various stages of therapeutic development from early target discovery to clinical decision support. This consists of three components.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

The first is the genomic and clinical data foundation layer on which our models are trained. The second is the core model layer that powers discovery. And the third is the application layer that supports clinical decision making as well as providing genomic insights. The foundation for this effort is built on a rapidly growing set of de identified data from over 250,000 patients and over 1,000,000 longitudinal time points, along with abstracted clinical data and information on drug treatment and outcomes. Taken together, this comprises one of the largest multimodal longitudinal oncology datasets that has ever been created with over 1,000,000,000 parameters.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

Utilizing this dataset, we train a multimodal foundational model on our de identified Signatera and Ultera data to power our core AI platform. This supports several key use cases. The first, Natura can create digital twins that can virtually simulate patients for treatment optimization as well as outcome prediction. This can help make therapy recommendations such as suggesting the next line of therapy and opportunities for treatment de escalation. It can also better predict outcomes and can run virtual in silico clinical trials in order to optimize study design and reduce clinical development risk. One recent pilot demonstrated that our algorithm can accurately recommend immune therapy based on real world EHR data, while another pilot showed that it outperformed both TMB and standalone pathology based metrics in predicting immunotherapy response. Next, Natera's real time clinical trial matching software leverages molecular and clinical data to improve patients and researchers' ability to match individuals to appropriate clinical trials.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

This capability uses LLMs to interpret eligibility criteria and unstructured clinical records, which holds the potential to improve enrollment efficiency, reduce screen failures and accelerate trial timelines. Finally, Natera has developed an immune therapy response prediction algorithm and a molecular therapeutics design model, which we'll review on the next slide. NEO Predict and NEO Select are the first of many algorithms that Matera has developed to predict immune therapy response and identify potential new antigenic mutations respectively. This historically has been one of the most challenging computational problems. And Avera developed these algorithms by utilizing our foundational genomic large language model trained on our longitudinal genomic dataset and has allowed us to demonstrate market leadership in this space.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

The Tumor Neoantigen Selection Alliance or the Tesla database is a reference dataset for benchmarking neoantigen production tools. We ran our NEO Select algorithm against the Tesla database and our algorithm outperformed 25 established models and beat the second place model by around a factor of two when identifying highly prioritized neoantigens. While we continue to optimize our prediction and selection algorithms, we believe that these capabilities have very exciting potential in many areas that could improve patient care. We look forward to providing future updates on this program at both academic conferences and in publications. Additionally, Natura has created the NEO Predict algorithm to identify patients who are likely either responsive or resistant to immunotherapy treatment.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

NeoPredict leverages the neoantigen prediction capabilities we just described to identify patients who are most likely to benefit from immunotherapy. Shown on the right of the slide, NeoPredict significantly outperformed tumor mutational burden in the Teris prospective bespoke IO clinical study. There has been increasing interest in these capabilities from KOLs, hospital systems and pharma companies, and we look forward to providing additional updates in the future. Now let me hand it over to Mike to cover the financials. Mike?

[Mike Brophy, CFO at Natera]

Great. Thanks, Alex. The next page is just a summary of the financials compared to last year. We've already spent a lot of time on the revenue and OpEx trends, so I won't repeat those. A couple of the stats that stand out to me are: first, the top line revenue growth over Q2 last year, where we had the big influx from the Invitae acquisition, as Steve mentioned.

[Mike Brophy, CFO at Natera]

I was pleased to see us grow very rapidly over and above that very tough comp from last year. Second is the major ramp we've seen in gross margin jumps out. That's driven by the ASP progress we've delivered over the last year. Steve talked about several near term drivers to ASPs, and I'm cautiously optimistic that we'll be able to make more progress in the second half, particularly related to Signatera ASPs. For example, we had previously set a goal to get some ASP traction from biomarker states by Q3 twenty twenty five, and I'm pleased to see some notable progress on specific payers in several states.

[Mike Brophy, CFO at Natera]

So I feel confident that our Signatera accrual in Q3 will have some biomarker state benefit. On the quarterly trajectory of gross margins, I'm very happy to see some COGS headwinds in Signatera when that is driven by an influx of first time patients, which is what we saw in Q2, as Steve described. Finally, I was pleased to see us continue to generate cash even as we double down on the growth investments Steve described for this year. Obviously, that's driven by the revenues and the margins, but also the rapid improvements in the cash conversion dynamics that we talked about earlier in the call. This is really part of the revenue cycle operations that improve ASP, but also allow us to get reimbursed for covered services in a much more timely manner by optimizing the initial claim submission to payers with all the documentation they need to pay the claim on the first path.

[Mike Brophy, CFO at Natera]

As you can see from the bottom row, we've added approximately $47,000,000 in cash from operations to the balance sheet this year and remain extremely well capitalized with a clean balance sheet. One other comment on the bottom line. We took an accrual of approximately $30,000,000 in non cash stock based comp and legal expense accruals in the quarter, which I view as non recurring. Without that charge, we estimate EPS loss per share would have been roughly $0.53 instead of the $0.74 we showed in the press release. Okay.

[Mike Brophy, CFO at Natera]

Let's get to the guide update on the next slide. We are completely resetting the revenue guide to a new range as Steve described now ranging from $2,200,000,000 to $2,100,000,000 on the strength of the revenues and the volumes we've seen so far this year. The gross margin we are bumping the bottom into the range 100 basis points to account for the good results we've generated so far this year. This guide implies that ASP trends will continue to improve while also building in expectations for continued increased adoption in first time Signatera patients through the rest of the year. So the net impact of those drivers should be that organic gross margin will continue to tick up modestly in the second half.

[Mike Brophy, CFO at Natera]

For both revenues and gross margins, I will stress that we do not include revenue true ups in the guide because they can be lumpy and challenging to forecast. I do expect some true up revenue through the course of the year as the most recent reimbursement trends have been outpacing our historical results as you see here in Q2. On both the SG and A and R and D lines, we're holding that guide flat to the guide we set in May. I'll just reiterate the point that Steve made on the slingshot effect with respect to these investments. Very little of the 2025 growth in OpEx is driving revenues this year, but we do expect those to drive growth in 2026 and beyond.

[Mike Brophy, CFO at Natera]

We're going to remain opportunistic as it relates to OpEx. If we see a chance to fund an important clinical trial or expand a territory beyond the current plan, we're going to do that because we are seeing such steady returns come in reliably on these investments. Finally, just reiterating our cash guide to be cash flow positive this year. The cash flows can be very lumpy and it's certainly possible for variables like DSOs to bounce around, but our first half performance puts us in great position for the full year and I'm biased toward the business generating cash again in the second half here in 2025. Okay.

[Mike Brophy, CFO at Natera]

With that, let me open it up to questions. Operator?

[Operator]

Thank you. Your first question comes from Daniel Brennan with TD Cowen. Your line is open.

[Daniel Brennan, MD & Senior Equity Research Analyst at TD Cowen]

Thank you. Thanks for the question. Obviously, congrats on the quarter. Maybe just starting off with Singutera volumes given the 20,000 sequential and it was a record. Maybe you can just give us some more color on kind of what drove it.

[Daniel Brennan, MD & Senior Equity Research Analyst at TD Cowen]

Could you speak a little bit about maybe like existing docs and new docs? I think you talked about new patient starts versus maybe surveillance. I know Steve you also talked about new indications. So maybe you could just kind of give us some more flavor what drove it? And I guess the question would be, know you want to keep things conservative, but is it unrealistic to think something in the high teens or 20 could continue?

[Steve Chapman, CEO & Director at Natera]

Yes. Thanks, Dan. So I'd say first, if you look at the broad amount of data that we've been putting out over the last year and particularly the beginning part of this year, we had some really strong data at ASCO GI with the 07/2002 study around Cellcox abuse. I think that I think has filtered its way in and doctors are really starting to kind of take hold of that. So we saw excellent growth in colorectal, excellent growth in breast cancer and immunotherapy monitoring.

[Steve Chapman, CEO & Director at Natera]

And then as we said on the call, when doctors start using our product and they want to kind of expand and start to use it for other tumors. So it's a little bit of everything when it comes to the histologies. We also saw an incredible record in new patients. And that's really one of the I think one of the most important metrics to look at is, are the doctors continuing to order, not just on patients that they ordered a year ago, but when a patient walks in the door, are they choosing our tool to make a decision or are they choosing a competitor tool or are they not using MRD at all? And I mean, we saw just absolute blowout record, twice higher growth than we've ever seen before in new patients.

[Steve Chapman, CEO & Director at Natera]

So we think that's a very good sign. And of course, it's a mix of new customers that are coming in for the first time. And then customers that have started using us and are now starting to, I think broaden their use, either to more patients or, to more use cases.

[Daniel Brennan, MD & Senior Equity Research Analyst at TD Cowen]

Terrific. And maybe just as a follow-up for Solomon or Perceva, anyone on the team here. Just in terms of the clinical readouts, you went through a lot of the studies that are ongoing in breast. You talked about the treatment on molecular response. Could you just give us a sense over the next, say, twelve or eighteen months? You mentioned the Vigor-eleven, which I think could be guideline inclusive.

[Daniel Brennan, MD & Senior Equity Research Analyst at TD Cowen]

So we have that one coming up. What are some of the other ones that you would point to across the next eighteen months or two years? I'm sure they're all important, but are there any more that are important than not that could actually be either guideline inclusive or really drive some meaningful change in practice? Thank you.

[Steve Chapman, CEO & Director at Natera]

Yeah. That's a great question. I mean, I'll just make a couple of comments and then maybe, Solomon or Alex, if you guys want to comment in. I think first INVIGOR, 11, I mean, that's obviously a big one, FDA enabling trial. We believe results will be released in the future.

[Steve Chapman, CEO & Director at Natera]

We're super excited about that and a very good indication, muscle invasive bladder cancer. Hopefully, we'll have also some new data read out at ESMO this year, which I think will be good. We talked about the gastro esophageal and liver papers. Those have actually just been published, which is super exciting. That's one of the important steps to kind of putting yourself in a position to get coverage is having a peer reviewed publication.

[Steve Chapman, CEO & Director at Natera]

Solomon, do you want to walk through a couple of the other or maybe Alex? I know we talked a little bit about DARE, when the next read off of that may be. Anything else you want to highlight?

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

I think the other one that we've talked about before are the NRG sponsored, colorectal trial to circulate US and there's a few other circulate trials globally that are likely to have, either an interim or a primary readout over the next eighteen to twenty four months. And that includes, hopefully the de escalation arm Vega, from the Japan circulated trial. So I would just highlight those two in CRC that could definitely make a difference, for guidelines and beyond. And, we'll keep you everyone up to date.

[Operator]

The next question comes from Puneet Souda with Leerink Partners. Your line is open.

[Puneet Souda, Senior MD - Life Science Tools & Diagnostics at Leerink Partners]

Yes. Hi, Steve and team. Thanks for taking my questions. So first one, Signatera, congrats on the quarter and the guide raised here, Signatera volumes quarter to quarter really strong. Can you talk a little bit about was there any contribution from post ASCO pickup?

[Puneet Souda, Senior MD - Life Science Tools & Diagnostics at Leerink Partners]

There was a newfound appreciation for MRD at ASCO. Obviously, that crowd has known MRD for years, it appeared it lifted more. And then I would love to get your view and maybe from Mike as well, in terms of how should we be thinking about and how should investors think about the penetration of Signatera today and the continued room for expansion? How you're thinking about how do you calculate the penetration in various indications?

[Steve Chapman, CEO & Director at Natera]

Yes. That's a good question. So yes, mean, obviously, ASCO this year had enormous amount of oral presentations, posters on Signatera and there was a just a huge buzz at the conference around MRD. I mean everywhere you went, you were talking about MRD. So a lot of excitement coming out of that.

[Steve Chapman, CEO & Director at Natera]

I think we did see a lot of strong momentum in the kind of last month of the quarter coming out of there after a lot of the presentations. So that's a great sign, I think, going forward. And I think that buzz is continuing. From a penetration standpoint, we think this is very underpenetrated. I mean, single digit penetration when you look broadly.

[Steve Chapman, CEO & Director at Natera]

And what we're really starting to see is that this opportunity is very, very broad. You look at doctors, especially community practice, they start using for colorectal, then they kind of start with gastroesophageal, then they may order for lung, maybe order for bladder. I mean, really start to kind of go and expand throughout the practice. So as we move through those stages with the physicians, we're just realizing how underpenetrated the opportunity is, but how we have a presence in all of these offices. So we're we now have this sort of very broad footprint that is set up significant amount of data.

[Steve Chapman, CEO & Director at Natera]

We've built all this infrastructure. We have a lot of coverage in place. We have all of these studies underway. And we're in a great position to now increase volume over time based on all the infrastructure that we've put in place.

[Puneet Souda, Senior MD - Life Science Tools & Diagnostics at Leerink Partners]

Got it. And then on the proceed and find trials, I just wanted to understand your strategy, the timing. This is clearly a hard problem to crack. We saw a trial failure. Sure, it was it meet the primary endpoint, but it was below the NCD.

[Puneet Souda, Senior MD - Life Science Tools & Diagnostics at Leerink Partners]

And that company subsequently licensed that technology from another company. But just could you talk about the technology and the performance, the sensitivity, the AAs? What are you shooting for? When do you think you can when can we see the data? When can we see an FDA approval reimbursement and then launch? Obviously, this market is there's a product on the market and looks like now there is an entrant that's getting more of a boost. So just want to understand the timing and how you're thinking about this market?

[Steve Chapman, CEO & Director at Natera]

Yes. Let me make a couple of comments and then maybe hand it over to Solomon or excuse me, to Alex to talk further. But I'll just say first, we have a long history of doing in house R and D and developing products ourselves, entering into new markets successfully and also competing very well in highly competitive markets. So we think we're in a good position long term to make this a very significant component of Natera's overall business. From a timing standpoint, the first the next major readout is going to be the PROCEED trial.

[Steve Chapman, CEO & Director at Natera]

And PROCEED, if you remember, was collected exactly how you would collect samples in the FDA protocol. So, it's not some other type of protocol, it's effectively drawing the blood and then the patient goes and gets colonoscopy. So it's screening protocol that exactly aligns to what you would see in an FDA trial. So when the results from that readout, we've already enrolled 3,000 patients, we have all the samples, they're being run, it's going to be read out. I think we said, kind of late fall.

[Steve Chapman, CEO & Director at Natera]

From there, you're going to get a very, very good sense of how the test performs, particularly in I think the focus is going be in advanced adenomas and also on the specificity. So I think that's going to put us in a great position to really have much more of an acute sense of what the performance is going to be in the FDA enabling study. And I think that's a little bit different maybe than the approach that some others have taken historically. And then if you look back to the CRC data that we read out earlier this year, I think kind of shortly after JPMorgan or maybe kind of right around that timeframe. If you remember, we had a lot of screening identified asymptomatic colorectal cancer patients in those cohorts.

[Steve Chapman, CEO & Director at Natera]

So again, a little bit different from the strategy some others have taken previously where they don't really have kind of the screening detected asymptomatic patients included in the cohort. And we think that that reduces the likelihood of drop off as you move forward. So look, stay tuned for the readout. Super exciting. For FIND, that trial is already up and running.

[Steve Chapman, CEO & Director at Natera]

We've already enrolled patients and we think that can be complete enrollment potentially kind of late twenty twenty six and we can be in a position to read out the results and submit to the FDA in 2027. Alex, do want to add anything?

[Mike Brophy, CFO at Natera]

I still

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

need It's a great to question.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

Yes. The only thing I'll add is we're very aware, right, that degradation can occur. And we do believe that probably the biggest source of degradation is poorly matching the FDA study with the case control studies that are being used to assess early assay performance. So we've really taken a very thoughtful strategy of really launching the PROCEED study and using that as the basis for the FIND study, right? So the study really rolled from PROCEED into FIND.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

So the enrollment criteria, the processes for enrolling patients are very, very similar, if not the same. And this allows us to really accrue samples from PROSED, which hopefully are matched almost kind of one to one with the final FIND study. And then the last thing I'll say is that, you know, while getting enough prospectively collected colon cancers may be difficult, actually collecting enough advanced adenomas to read out, you know, a very good performance estimate is much easier, right, because the rates of advanced adenoma are between five percent to ten percent. So from PROCEED, we're going to get hundreds of advanced adenoma samples. So this allows us to actually read out with a well powered cohort and really estimate what the final performance of the assay is going to be.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

So we're doing that. We're going to read out some data end of the year. And there could be additional readouts right before the final readout for the FIND study. And then Steve mentioned, FIND is going. It's enrolling.

[Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer at Natera]

We're very, very excited. And right now, we're kind of guiding to readout of that study in 2027. But as we can get closer to that date, we'll kind of further refine our guidance.

[Puneet Souda, Senior MD - Life Science Tools & Diagnostics at Leerink Partners]

Got it. Super. And then just if I could squeeze one in, just given the number of in the balance that I'm getting very quickly. Briefly, if you could provide me a number of product launches this year, just if you could encapsulate that? And how quickly can you monetize the AI initiatives that you talked about and turn them into assays and products and start to see revenue there? Thank you.

[Steve Chapman, CEO & Director at Natera]

Yes. I'll take, I'll comment and then Alex jump in again. But yes, on product launches, I mean, we just announced fetal focus. We're excited about that. We launched Venome earlier in the year.

[Steve Chapman, CEO & Director at Natera]

As we said, we've got several other things coming, largely focused around MRD. So, we'll I think stay tuned. As those launch, we'll give you guys an update. But lots of cool stuff happening, lots of MRD related activity that's on track coming down the pike. So the vast majority of our investment there is focused on MRD.

[Steve Chapman, CEO & Director at Natera]

And then on the AI side, I think, there's we talked about a couple of different things. One is sort of efficiency improvements in UX tools. Those are going be rolled out over a period of time. Some of that work is just beginning. Some of that work has been underway.

[Steve Chapman, CEO & Director at Natera]

That's really more cost reduction and user experience. The more technical, medically focused stuff is super exciting. And we think there's a couple of different opportunities to commercialize. I mean, one is, you've seen some of these big multi $100,000,000 multi million dollar deals with pharma companies or partnerships. And we think we have an incredibly unique dataset and incredibly unique set of tools and foundation models that are going to be important, very important for pharma going forward.

[Steve Chapman, CEO & Director at Natera]

And I think this for the first time kind of puts us in a position to be doing those very large deals. And then the second is, we're going to be commercializing a lot of this stuff through, our current diagnostic platforms, either as kind of add on capabilities alongside our existing tests or as standalone biomarkers.

[Puneet Souda, Senior MD - Life Science Tools & Diagnostics at Leerink Partners]

Got it. Thanks guys.

[Operator]

The next question comes from Catherine Schulte with Baird. Your line is open.

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

Hey, guys. Thanks for the questions. Maybe first, you talked about the $250,000,000 to $300,000,000 of revenue from potential Medicare coverage of non covered indications. Can you just give us a bit more in terms of details on the timeline for some of those submissions? And how should we think about those being paced going forward?

[Steve Chapman, CEO & Director at Natera]

Yes. Good question. So yes, I mean, for that, we basically just looked at all the non covered indications and the volume that we have there that, you know, we're not billing. And we said, what would it be worth if we got covered for that, you know, basically in the next kind of twelve to eighteen months or, you know, something in that time frame. And you get $250,000,300 million dollars in revenue.

[Steve Chapman, CEO & Director at Natera]

So we're there's a lot of upside opportunity from the business that is already coming in just simply from getting these coverages. And you can believe this is a big focus of ours is to get these commissions in and get coverage. So I mean, think we said in the prepared remarks, at least seven or something in that range. Yeah. I was on a call today where we went over opportunities for 15 different submissions.

[Steve Chapman, CEO & Director at Natera]

So I think there's going be a lot coming. But I think as you've it's not always as easy as just doing a submission. You have to have the right data, and you have to make sure the trial is done the right way. And so we've developed a significant expertise in doing the right MRD trials, in submitting those and getting coverage. And that's what we're doing, again, in all these other, indications.

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

Okay. Great. And then you highlighted, I think, over 150,000,000 in breast cancer clinical trials. You know, is that signaling a a, you know, real focus on breast in terms of prioritizing additional indications? You've got a competitor potentially coming with a large presence on risk of recurrent side for breast cancer.

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

So just maybe talk through how you view your competitive position in in that cancer type.

[Steve Chapman, CEO & Director at Natera]

Yeah. I think, I think breast has always, from the very beginning, been a major focus for us, along with initially colorectal and immunotherapy monitoring, and now really pain cancer. So if you look back at some of the trials we presented, I mean, think the DARE study, which now has like 2,000 plus time points started in 2021. So four or five years ago now. So this isn't like a sort of a new thing.

[Steve Chapman, CEO & Director at Natera]

I think there's continued investments that are new, like, for example, the TIODOR study, but we've been investing heavily into breast the whole time. And like we said, we've invested and are in the process of investing over $150,000,000 in just in breast cancer alone in clinical trials. And that's in our budget and that's in forecast that we've shown. So the point is, is that it's a big effort to do these things and there's a lot of different trials that need to be done. And we're already doing it and we think it's going to be very hard for someone to come and sort of replicate that.

[Steve Chapman, CEO & Director at Natera]

But obviously breast is a big opportunity. There's a chance to really help a lot of patients and it's cancer, I think that's very near to me and many others at the company as well for personal reasons.

[Operator]

The next question comes from Doug Schenkel with Wolfe Research. Your line is open.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

Hey, guys. Thank you for taking my questions. First, on gross margin, in a period of strength, how much was gross margin actually adversely affected by the launch of Oleksome? I'm just trying to get a baseline in advance of full exome gross margin improving over the next few quarters, especially given the first half strength. So that's the first one.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

The second is on volume trajectory. You've been signaling that we should be modeling an expectation for 12,000 incremental clinical Signatera units each quarter. The trailing four quarter average is already about 16,000. At what point would you consider bumping that up? And the last one is on revenue strength and operating spend.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

So in the first quarter, on a really strong top line, you increased operating spend. This quarter, again, really strong at the top line, but you maintained your operating spend guide. Is this a sign that you are where you want to be in terms of things like headcount and number of R and D programs for the next several quarters?

[Steve Chapman, CEO & Director at Natera]

Yes.

[Steve Chapman, CEO & Director at Natera]

I think, Mike, you can probably run the table there.

[Mike Brophy, CFO at Natera]

Yes. No, thanks for the questions. Doug, remind me the first one again. I should have been writing those down, man. You gave me a good list. Can go from the back

[Steve Chapman, CEO & Director at Natera]

gross of margin.

[Mike Brophy, CFO at Natera]

Yes. Okay. So the gross margins, I think ex the big step up we had in new patients, I think it's fair to estimate that the gross margin progression sequentially would have been kind of similar to what we saw in Q1. So I think you would have had that kind of same kind of steady improvement in gross margins. And that would really would have been driven by the bump up we had.

[Mike Brophy, CFO at Natera]

Again, we had another bump up in Signatera ASPs primarily and we had another strong ASP quarter in women's health, which I was very pleased to see. I want to see those, you know, the strong ASP tracks we've had there. I want to see that see that kind of maintain, and we definitely saw that in the quarter. Alright. Give me the next one again.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

You beat by 16,000 on average the last four quarters. You've been guiding up to 12. At what point are we moving that up?

[Mike Brophy, CFO at Natera]

Yeah. I mean, I think you I think you have to move it up modestly, but I I just I would just caution you not to anchor on any one quarter. And it's the reason for that is just that there there has to be some randomness there quarter to quarter where we'll have we'll fluctuate up and down. So you you just gotta allow for that. But beyond that, I mean, in terms of kind of fundamental drivers, Steve covered them.

[Mike Brophy, CFO at Natera]

I mean, we're we're really in a in a fantastic position here where the operations are running incredibly smoothly. We're kind of on the other side of a lot of very daunting challenges that we had to undertake to launch this category, and things are rolling. The data's coming in that we that we started years and years ago, you know, is reading out. So it's a it's it's a great time, I think, for the whole space, for MRD, great time for patients. So, I mean, I think I think it I would just without kind of laying out, like, a specific number, I'd say, you know, bump it up modestly versus our prior.

[Mike Brophy, CFO at Natera]

And just look look out for fluctuations. That's that's to be expected, that's totally normal.

[Operator]

The next question comes from Rachel Bautensdahl with JPMorgan. Your line is open.

[Rachel Vatnsdal, Senior Equity Research Analyst - Healthcare at JPMorgan Chase]

Hey, thanks so much for taking the questions. So I wanted to push a little bit further on the sales rep dynamics. So you talked a bit about expanding your sales force. Can you walk us through how large is your sales force at this point? And where do you think that needs to be over the medium to long term?

[Rachel Vatnsdal, Senior Equity Research Analyst - Healthcare at JPMorgan Chase]

And then just specifically on some of the recent sales rep adds, how should we think about the productivity for those new reps as we get into later this year and into 2026 as well?

[Steve Chapman, CEO & Director at Natera]

Yes. It's a good question. So, you know, I think I think traditionally, we've we've sort of had, you know, 150, 175 oncology reps, something in that range. I think we've executed kind of a meaningful step up that was completed during Q2. So a lot of those folks are kind of just coming out of training or kind of just getting their feet wet out in the field meeting customers and so forth.

[Steve Chapman, CEO & Director at Natera]

So in our view, normally it takes six to nine months for the reps to really become productive. And that's just when you, you know, you think about, like, all the complexity of the material, you know, 100 peer reviewed publications, building relationships. So, you know, we're in this kind of dynamic now, which I think we called like a slingshot effect on the call where we have this built in expense line of these people that we've hired, but they, you know, they're not really kind of driving productivity yet at this point. As we look into when they do become productive, what are sort of some of the metrics that we look at? Obviously, we look at the number of new accounts that they're bringing on, account retention in the business, their ability to add on new doctors within the practice, their ability to expand from one tumor type to the other within a particular practice.

[Steve Chapman, CEO & Director at Natera]

So, you know, I I I would just say those are kind of the the types of things that we look at. You know, we don't really have, like, a you know, just given given kind of the growth phase that we're in, we really we we don't have, like, necessarily a, you know, immediate, like, revenue that that every rep has to hit within x number of time. But, you know, there there's certainly, you know, a lot of attention on, you know, the the growth trajectory and the amount of return that's being driven by each rep.

[Rachel Vatnsdal, Senior Equity Research Analyst - Healthcare at JPMorgan Chase]

Great. And then for my follow-up on Signatera, it sounds like you guys had another standout quarter there on new patient adds. Can you explicitly tell us how many new patients were added in the quarter for Signatera? And any color on what indication or use cases you primarily saw those in? And then as a follow-up to that, how should we think about this in terms of volume expectations for Signatera as we look into 2026? Thank you.

[Steve Chapman, CEO & Director at Natera]

Mike, do you want to comment on new patients?

[Mike Brophy, CFO at Natera]

Yes. On new patients, I mean, just as I was just covering with Doug, I mean, if you'd had just a normal kind of mix that we have, it would have been about 40 basis points. And so this was multiples of that as Steve described in the call. I don't want to get into like laying that out as a KPI that we're within kind of giving all the time because I know that that is the growth in new patient starts is a very volatile metric for the business. I mean, I think in terms of kind of looking forward into 2026, I mean, it does give me some confidence now if you just look back just look at that chart on the volume growth and the consistency of that. I'm actually surprised with like how consistent that has been.

[Mike Brophy, CFO at Natera]

That plus just the just when you go to the academic conferences now, it used to be that MRD was sort of like a new thing and it's to be examined and there's interesting data. And now it just feels like the tone has kind of shifted at those things where this is people doing MRD. You know what I mean? This is going to be something that it looks like it's inevitably part of the standard of care and that gives me a lot of confidence in the kind of the trajectory of franchise both rest of this year twenty twenty six and beyond.

[Operator]

The next question comes from Tycho Peterson with Jefferies. Your line is open.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Hey, thanks. I didn't hear you mentioned Latitude, which I think was on deck for a mid-twenty five launch tumor naive. You kind of mentioned and then a question on how many products are you launching more coming in MRD, But the latter two get pushed out. What what's the latest there? And then have you ever sized a TOMA opportunity for Signatera? You know, I think that's certainly, very interesting. Yeah.

[Steve Chapman, CEO & Director at Natera]

Solomon, you wanna take this or Alex?

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

Sure. Yes. We're thanks for those questions, Tycho. The on the tumor side or excuse me, the on the Latitude side first, we're we're very excited about the progress there.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

So we presented excellent data recently and we announced that. Sensitivity, you know, looking very good, I think at eighty one percent specificity at ninety seven percent on a per sample basis. We see that as competitive with any other tissue free tests on the market. And we're already getting a lot of inbound, you know, requests and and interest on it. So, you know, we're we're in the process of bringing that to our customers and we will, you know, we'll we'll talk more about that in the future update.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

On the tumor side, yeah, we're we're really excited about tumor. It's a concept we've been talking about with physicians and with investigators and with the investor community now for a while. I think, you know, the the way we think about the size is really the surveillance setting for all the tumor types where Signatera can be used. Because that any of those patients who are being monitored for recurrence, if they ever turn positive, which some percentage unfortunately will, you know, those patients become eligible for some intervention. And, you know, roughly between a quarter to a half of those patients will be will be negative excuse me, will will be positive on a reflex scan and will be treated according to standard guidelines for treating metastatic disease.

[Solomon Moshkevich, President - Clinical Diagnostics at Natera]

But the other half now to three quarters as we saw from the DARE study will be negative on a scan. And that means that, you know, they're gonna be looking for something else, whether that's escalated imaging, which is the current standard, you know, do some do a different type of scan, do it more frequently, or they become eligible for a novel clinical trial where they can get treated directly and look for that clearance of the ctDNA. So I think there's gonna be more and more trials coming out of this nature. And, you know, we but but we see the overall opportunity as all recurrence monitoring.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Okay. That that's helpful. And then maybe shifting over to Oregon. You know, Moldyx has proposed some changes to the transplant LCD for solid organ allograft rejection. I know this doesn't directly impact you, but a, you know, have you had communication with them?

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Are you confident it won't be an issue? And then one question we've gotten is, is there any risk that this could eventually spill over to MRD just in whole concept of capitating the number of tests they're willing to cover?

[Steve Chapman, CEO & Director at Natera]

Yeah. I'll take that. So I think, you know, first on the LCD, I mean, we see it as upside for us. You know, we're not in a position where we're kind of running two different assays, like kind of running a DNA assay, running an RNA assay and kind of billing for them separately. So our organ health test is DNA only and there's sort of one bill.

[Steve Chapman, CEO & Director at Natera]

So we're not impacted by that at all. And then the surveillance piece, we see as upside and actually when we kind of look at the cadence, see it as upside for us. So we're excited about that. And at Oregon Health, like we said on the call, I mean, we talk mostly here about oncology, but we're doing really well. And we're seeing a lot of big major academic centers switching over to us.

[Steve Chapman, CEO & Director at Natera]

That's across the board, kidney, heart and lung. We've got a ton of great data that's been published, very unique features that set us apart. So we're excited about continuing the opportunity at Oregon Health.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Risk just this concept of capitating number of tests by mold DX could spill into MRD?

[Steve Chapman, CEO & Director at Natera]

I mean, I think that already exists in many ways, right, with these sort of bundled reimbursement where it doesn't really matter how many tests they run, you're going to get paid a certain amount. Mean, that already exists in significant portion of the business. And then there's other tumor types where they have already said, hey, this is the cadence that we're going to reimburse for. So I don't think it's a risk. I think it already exists, where they kind of look at what they think the appropriateness of ordering is. And in some cases, they put specific guidance in place. But normally, what we're seeing is the doctors order the test kind of roughly around the cadence that MolDx sort of kind of is aligned with.

[Steve Chapman, CEO & Director at Natera]

So I don't really see it as we don't see that as any real risk at all.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Okay. Thank you.

[Operator]

That is all the time we have for questions. This will conclude today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• Mike Brophy, CFO
• Steve Chapman, CEO & Director
• Alexey Aleshin, GM - Oncology and ECD & Chief Medical Officer

Analysts

• Solomon Moshkevich, President - Clinical Diagnostics at Natera
• Daniel Brennan, MD & Senior Equity Research Analyst at TD Cowen
• Puneet Souda, Senior MD - Life Science Tools & Diagnostics at Leerink Partners
• Catherine Schulte, Senior Research Analyst at Robert W. Baird & Co
• Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC
• Rachel Vatnsdal, Senior Equity Research Analyst - Healthcare at JPMorgan Chase
• Tycho Peterson, MD - Global Equities at Jefferies Financial Group