Thank you for standing by and welcome to the Natera Inc. Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. As a reminder today's call is being recorded. I will now hand today's call over to Michael Brophy, Chief Financial Officer. Please go ahead, sir.

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our third quarter 2023. On the line, I am joined by Steve Chapman, our CEO; Solomon Moshkevich, President of Clinical Diagnostics; and Alexey Aleshin, General Manager of Oncology and Chief Medical Officer. John Fesko, President and Chief Business Officer is also on the call and will be available for Q&A. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted on 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 2. 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, opportunities and strategies, and expectations for various current and future products including product capabilities, expected release dates, reimbursement coverage, and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, including our most recent Form 10-K or 10-Q and the Form 8-K filed with today’s press release. Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward-looking statements. Forward-looking statements made during the call are being made as of today, November 8th, 2023. If this call is replayed or reviewed later after today, the information presented during the call may not contain current or accurate information. Natera disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today’s call, but will not provide any further guidance or updates on our performance during the quarter, unless we do so in a public forum. We’ll quote a number of numerical growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year-on-year comparison. And now, I’d like to turn the call over to Steve. Steve?

Thanks, Mike. I think our Q3 results demonstrate that the strategy we are employing is paying off, and I'm excited to share the highlights. We generated $215 million in total revenue and product revenues were up 33% versus last year. Volumes were stronger across the business with strong year-on-year growth in women's health and oncology versus Q3 of last year, and a nice sequential recovery quarter for organ health. Signatera volume growth particularly continues to exceed our internal forecast and this was the second-best quarter ever in terms of the absolute unit growth in the clinical panel. As good as those topline metrics are, I'm most encouraged by the margin and cash flow results. We talked about the focused effort to improve ASPs, and I think that effort started to pay off this quarter. Gross margins were 45%. You'll recall we also had 45% gross margins in Q2, but we noted it was closer to 43% on a normalized basis as it had some one-time benefits. In contrast, we think this quarter represents an organic 45% based on ASP and COGS improvements. We slashed our cash burn dramatically in the quarter as well, almost a 50% reduction compared to last quarter. Clearly, we are getting leverage as revenue grew rapidly, while operating expenses remained essentially flat and margins have improved. Our efforts to improve ASPs are also leading to getting reimbursed more quickly on average from payers. Mike will talk about this later in the call, but we think this is a good sign that more ASP improvements are in store for future quarters. These results and the continued strong trends we are seeing so far in Q4 put us in a position to significantly improve our annual guidance across the board. We are raising the revenue guide once again to a completely new range and now expect to come in between $1.035 billion and $1.050 billion in total revenue for the year. We are tightening the gross margin guide to the top end of the range and are now expecting full-year gross margins to land between 43% and 44%, which we think implies that the strong Q3 gross margins are repeatable in Q4. Finally, we are dramatically reducing our tax burn guidance for the year, now expected to be $250 million to $280 million. This represents more than a $200 million reduction in cash burn versus 2022. The momentum we are seeing leaves us even more confident that we are in a good position to achieve cash flow breakeven next year, and we do not believe we need any guideline changes to hit that milestone. The significant reduction in cash burn has largely been achieved because our core strategy is working. We are growing revenue rapidly while reducing COGS and improving ASPs; we are keeping OpEx stable at very competitive levels, allowing us to maintain a strong commercial team and continue to focus on our clinical and innovation road maps. For example, over the past few years, we've made investments into technology development, product enhancements, and clinical trials, and these investments are now resulting in an excellent pipeline of new products and new indications to pursue within our core businesses. As a result, in 2024, we expect to announce new MRD-related products and updates, along with other major innovations that empower future growth. In addition, on the clinical side, we have major randomized controlled trials that we expect will read out in 2024, some of which have taken investments over five or more years to get to this point. So we think we are positioned very nicely for the future. We’re on a rapid revenue growth path while moving quickly to cash flow breakeven, and doing so with our previous multiyear investments driving potential major near-term catalysts. On top of our financial results, we had several big wins during the quarter. I'll start with RenaCARE, which has proven to be a landmark study for us in an area that we believe can drive significant growth over time. Last week we announced the study publication in JASN, a leading nephrology journal, and also shared the results at the ASN Kidney Week conference. As a reminder, RenaCARE is a large real-world prospective study of more than 1,600 patients that looked at the impact of genetic testing within chronic kidney disease. The findings highlight a strong clinical and diagnostic utility profile for Renasight, our genetic test to identify causes of CKD. The results also exceeded clinical precedents for the implementation of genetic testing within an at-risk population, such as those with Hereditary Breast Cancer, which we think is a good proxy for comparison. I won't spend too much time on this now, as Solomon will cover it in detail later in the call, but I'll just note that we're very excited to see where we go from here. Feedback from nephrologists has been positive, and we believe these results lay a strong foundation for increased adoption and coverage. The market opportunity is potentially large and notably underpenetrated, with 37 million people affected by CKD in the United States. There's a significant need for reliable and actionable genetic information to serve these patients, and we think Renasight could be that driver backed by the strong clinical evidence we reported in the study. In oncology, we presented key colon cancer data at ESMO from the GALAXY arm of the CIRCULATE study. Notably, this analysis included 2,000 patients, which was as many as in the Nature Medicine paper, as well as significantly longer follow-up at 24 months. The data provides significant insights into the predictive and prognostic value of Signatera and colorectal cancer, with ongoing excellent performance by Signatera. Separately, while MRV has historically been focused on the initial adjuvant draw and the adjuvant chemotherapy decision-making, the initial MRD timepoint represents only a tiny fraction of the overall MRD opportunity. More and more, we are leading the way in a new area that we call treatment on molecular relapse, which is where patients can actually receive a drug upon becoming ctDNA positive with Signatera in the surveillance setting rather than waiting for radiologic evidence of recurrence. This is part of our key vision for how the serial use of Signatera can transform cancer care and ultimately save lives. We see it gaining real momentum now with sponsorship from both pharma and academic consortia. In fact, long-term, this might be the single biggest MRD opportunity and one where we believe Natera has a meaningful first-mover advantage, with multiple Phase 2 and Phase 3 trials already underway, some of which have been ongoing for several years. So Alex will describe treatment on molecular relapse a little bit later in the call, including the new SREP ctDNA study, which seeks to show the benefits of treatment on molecular relapse in early-stage breast cancer. This is a randomized Phase 3 trial conducted across 120 sites in 12 countries led by the European Organization for Research and Treatment of Cancer, otherwise known as EORTC. We also published digital data in lung cancer, strengthening our leadership position in the patient population. In 2023 alone, we publicly presented the results for four key lung cancer datasets across the neoadjuvant, adjuvant, and metastatic treatment studies, and we've seen very strong performance. Two of these were conducted in collaboration with our partners at Foundation Medicine and demonstrated strong clinical test performance for immunotherapy monitoring. These studies helped to support the broad clinical launch and Medicare coverage for FoundationOne Tracker, which we also announced in October. As many of you know, Tracker is a complimentary asset at Signatera with a focus on patients with advanced-stage cancers. We're very excited about the launch and believe this new offering will help oncologists make the best possible decisions about the pace of care through actionable and personalized data. Great. So with that, let's get into some of the business trends on the next slide. We saw continued strong growth in volumes across the major product areas as I described. In women's health, we had strong growth compared to Q3 of last year, particularly given our ongoing efforts to reduce some volume from accounts where we don't see a path to stable reimbursement over time. In Organ Health, we were pleased with the return to growth. As a reminder, earlier this year, reimbursement changes created some uncertainty for transplant centers about when they should order Vasistera. That uncertainty has now largely been resolved. And in Q3, we saw our larger customers returning to prior levels. Both Organ Health and Women's Health represent a large underserved base of population that have a critical need for the type of testing we offer. Solomon will cover the oncology volumes later in the call, where the trends continue to be positive. On the next slide, you can see that our revenue growth is getting a significant boost from improved reimbursement in addition to our volume growth. The left chart of total revenues, which grew 27% year-on-year, and I think that growth rate actually understates our good progress because we recorded a large one-time licensing payment in Q3 of last year. The product revenues on the right-hand side of the page adjust for that. And as you can see, product revenues were up 33% year-on-year. We made a decision last November to redouble our efforts on reimbursement and billing operations, making sure that we navigate all the operational hurdles required to get reimbursement for covered services. For example, improving our performance on appeals when a service is denied or chasing down missing insurance information. Since then, we've made significant investments in new processes. We've added new team members, and we've identified systems and engineering opportunities. While we're still at the very early stages, it's great to see that we're starting to see these efforts manifest in the financial results, and there's still a long way to go. Of course, these improvements benefit both revenue growth and gross margins as you can see on the next slide. Gross margin dipped to 41% in Q4 of last year and then to 39% in Q1 of this year as we executed growth on the initiatives that we've described in the past. On the Q2 call, we described that gross margins were helped a bit by some one-time factors. At that time, we estimated the organic gross margin to be about 43% on a normalized basis. In Q3, our 45% gross margin is largely organic. We are seeing modest improvements in the NIPT and carrier ASPs and have outperformed our expectations in Signatera. For each of these products, we have put in place multiple operational initiatives whose effects have not yet been fully recognized in revenue approval. So we're cautiously optimistic that we can deliver steady gains in the gross margins throughout the course of 2024. Another interesting byproduct of all these efforts is that our cap election cycle noticeably improved in Q3 compared to prior quarters, which helped drive the significant reduction in quarterly cash burn along with revenue growth and gross margin improvement. Finally, we continue to hit our marks on cost of goods sold as we've expanded our Signatera Exton laboratory and executed COGS projects across the company. We've got a full slate of these lab infrastructure projects and we expect to launch many of them during 2024. This has been a big area of investment within our R&D budget, and it will be gratifying to see that investment pay off. In addition to the above COGS projects, we've also passed some key validation and regulatory milestones with an alternative NGS provider. We validated the Signatera technology on an alternative NGS platform and, in partnership with a major pharmaceutical company, achieved a regulatory milestone using that alternate platform. In addition, we validated NIPT on an alternative NGS platform and passed the regulatory milestones, which means we may now launch a version of it in our centralized laboratory. All of these factors give us confidence that we are on track to achieve a cash flow breakeven quarter next year. And with that, let me turn it over to Solomon, who will dive deeper into the results from RenaCARE in the Oncology business. Solomon?

Thanks, Steve. I just got back from the American Society of Nephrology, ASN, Annual Conference in Philadelphia, where renal genetics was a hot topic and where the RenaCARE paper was well received. Many doctors expressed the belief that nephrology is at the beginning of a new wave of personalized medicine similar to where oncology was 15 to 20 years ago. There are about 37 million people in the US living with CKD or roughly one in seven adults. CKD is also a significant burden on the healthcare system with roughly $85 billion of Medicare spend related to its management. Natera launched the RenaCARE study back in 2019 in collaboration with leaders from Colombia, Yale, NYU, Mayo Clinic, and several other leading institutions, with the goal of determining what personalized insights can be gained from genetic testing with Natera's Renasight product with 380 disease-related genes. And how often a genetic diagnosis can be attained in treatment. More than 1,600 patients were enrolled across 31 sites in this real-world prospective study. The results were impressive. Some of the key headlines, as you can see on the slide, showed that one in five patients tested positive for a genetic cause of PKD meaning that a pathogenic or likely harmful variant was found in their germline DNA. Out of those positive results, one in two patients received a new or reclassified diagnosis, and one in three reported a change in treatment plan. At a high level, when thinking about Renasight's diagnostic yield of 20.8%, let's compare it to hereditary cancer testing, like the classic BRCA1 and 2. Where studies show a test positive rate of between 5% and 17%, including in cohorts that meet NCCN criteria for being high risk and that have received Medicare or commercial insurance coverage. We all know that germline DNA testing in oncology has become standard practice. Given the high yield we've seen for Renasight together with significant clinical utility, we see a great opportunity for changing standard practice in nephrology with strong potential for clinical guidelines and insurance coverage. To that end, we recently submitted an application to MolDx for coverage of Renasight. So we look forward to their feedback, particularly given the strength of the RenaCARE studies. Now let’s delve a little bit deeper into the study findings. One of the key stories emerging here is that genetic testing is useful not only for the 8% or 9% of patients without a diagnosis but also for patients who have already been given a clinical diagnosis. For background, CKD has a vast spectrum of underlying causes. The current diagnostic protocols generally rely on basic measurements of kidney function as well as imaging and biopsy. This approach has left significant gaps. For example, diagnoses that are nonspecific may inaccurately attribute kidney disease to diabetes or hypertension when in fact those conditions may mask the true cause of a patient with CKD. Similarly, in cystic disease, clinical management is contingent on knowing the subtype of the disease, whether it’s driven by PKD1 or PKD2, for example. In many cases, we also found that timely genetic testing could have helped avoid unnecessary invasive biopsies. There are more than 20 drugs already targeting gene-specific CKD indications on the market and approximately 270 clinical trials. So having specific diagnostic information can greatly enhance targeted treatment options, open doors to participation in clinical trials, and ultimately improve outcomes. For those who want to learn more, we just published a good white paper on our website. In summary, the RenaCARE study provides solid evidence demonstrating that Renasight testing is useful and appropriate in the vast majority of patients presenting with PKD, that it can lead to earlier and more accurate diagnoses in standard care practices, and frequently assists in refining an existing diagnosis, enabling clinicians to tailor treatment decisions. We're very enthusiastic about the future potential of this product to help millions of people with CKD. Moving to oncology now, where we had a great quarter. Clinical signature volumes shown on the right had one of the best quarters to date in terms of absolute growth. This growth reflects a strong increase in new patient initiation, continued testing of existing patients, and significant adoption by new physicians who had never ordered Signatera before. We believe over 35% of all US oncologists ordered Signatera in the quarter. The left-hand chart includes all clinical volumes and pharma units. As a reminder, we had a slight dip in pharma units in Q2, which we discussed in our call in August. So we broke out the clinical volumes separately this time relative to the pharma business, which is doing well but has more fluctuation as expected. We recently closed some big pharma projects across various cancer types, including prospective, retrospective, and real-world data studies. There continues to be significant interest so we are now expanding capacity in the RUO labs. Back to clinical Signatera, we've also continued to drive steady improvement in the average sales price, outpacing our initial expectations. In Q2, our ASP was in the 800s; in Q3, it was in the 900s, and we now see a near-term path to getting above 1,000. This roadmap is being driven by better operational execution as well as anticipated Medicare coverage of new indications and expanded coverage among private payers. Signatera is in a unique economic position with its advanced diagnostic lab status, or ADL, which is very difficult for other MRD labs to replicate. We believe all of the data we've been announcing and the studies underway will help drive ongoing volume growth over the near and long term. So with that, let me turn it over to Alex to provide a closer look at some of those studies. Alex?

Thank you, Solomon. We recently presented updated 24-month data from the Galaxy cohort at this year's ESMO 2023 conference. The data continues to support and strengthen our two Seneca hypotheses that have implications to change how colorectal cancer is managed, namely that MRD-positive patients benefit from treatment, while MRD-negative patients do not. On the right-hand side of the page, MRD-negative patients continue to show substantial disease-free survival, regardless of adjuvant treatment. No significant differences in DFS at 24 months were observed for MRD-negative patients receiving adjuvant chemotherapy compared to those without treatment. We believe this data further underscores the rationale behind the definitive randomized Vega study, which seeks to establish a de-escalation strategy as a standard of care in early-stage colorectal cancer. On the left-hand side of the page, we see MRD-positive patients treated with adjuvant therapy have significantly improved disease-specific survival compared to patients who underwent observation. This effect was observed even after correcting for all possible confounding factors. The randomized arm of this trial, known as ALTAIR, is scheduled for readout in mid-2024, which will further assess whether the addition of TAS-102 on top of chemotherapy can enhance clinical outcomes in MRD-positive patients. If the study yields positive results, it could establish a new standard of care in therapeutic treatment for patients tested with Signatera. As a reminder, the data on this page reflects outcomes based on a single segmentary time point within eight weeks post-surgery. The Delta study is a key component in the protocol that allows enrollment of patients who were initially negative but then turn positive in the surveillance setting up to 24 months post-surgery. This is a new concept in MRD, and it's what we are calling treatment on molecular relapse. The majority of trials and data in the MRD space today have been focused on diagnostic and decision-making based on the first one or two time points immediately post-surgery. However, we believe the largest market lies in treatment on molecular relapse, defined as initiating treatment based on positive ctDNA status in the surveillance setting, rather than waiting for clinical or radiologic recurrence. This space could be multiple orders of magnitude larger and potentially revolutionize cancer treatment by providing patients a second chance for a cure before recurrence is detected on a scan. We have seen tremendous interest in this strategy from clinicians, patients, and pharmaceutical companies. These studies take years to design and run, and we recognized this opportunity over five years ago, and we now have multiple studies that are moving into this phase, including the ones listed below. I want to highlight a new study recently announced, the Phase 3 TREAT-ctDNA trial in early-stage breast cancer, which is being conducted in collaboration with the ERTC Consortium. The primary objective of the study is to evaluate whether Menarini's oral endocrine monotherapy, ORSERDU, can delay and/or prevent the occurrence of distant metastasis or death in patients with current Signatera positivity in the late surveillance setting. The study is expected to screen approximately 1,900 patients across more than 125 sites. If successful, the study results could support broad recommendations for serial monitoring with Signatera in HR-positive HER2-negative breast cancer patients. Additionally, we continue to see strong interest in the DARE and LEADER studies, which are also examining treatment on molecular recurrence in breast cancer patients and should be reading out in the 2024 to 2025 time frame. We continue to generate new clinical data to support Signatera reimbursement in an expanding list of indications. Today, we want to highlight non-small cell lung cancer, where we have generated multiple presentations in 2023 in neoadjuvant, adjuvant, and metastatic settings, including radiotherapy and immunotherapy treatment response monitoring. We have seen immunotherapies transition from being utilized primarily in late-stage non-small cell lung cancer to earlier stages of disease. With the recent approval of these treatments in the neoadjuvant, adjuvant, and perioperative settings, there has been a significant expansion of IO treatment-eligible patients, a setting where Signatera is well-positioned to serve, given the strength of our data and existing reimbursement for IO monitoring. In the adjuvant and surveillance setting, we continue to achieve exceptional metrics, producing 100% sensitivity across multiple studies, a key performance factor that many competitors have struggled with. In the recently published LIBO study of stage 1 to 3 lung cancer patients, we observed an 82% detection rate for treatment and 100% longitudinal sensitivity to recurrence, with a median lead time of 162 days. This builds on previously presented data from the AVO study, which showed a 93% longitudinal sensitivity to recurrence, showcasing a robust performance across all key metrics. We believe these various datasets are critical to establishing clinical utility, achieving reimbursement, and maintaining market leadership in emerging indications like non-small cell lung cancer. The strength of the data has led to interest in prospective clinical trials, with the first Signatera trials now being launched in the state. We plan to provide further updates on our prospective evidence generation strategy during future calls. Lastly, we want to highlight that we are now expanding our data generation efforts with partners like Foundation Medicine, where the Tracker product was utilized either exclusively or in combination with Signatera in both the EMPower 1 and IMPower131 studies. Building on the strength of this evidence and the recently announced Medicare coverage for IO monitoring, we are excited to highlight the FoundationOne Tracker product that is now available across the U.S. This innovative assay combines the genomic information derived from the FoundationOne CDx comprehensive genomic profiling test with a personalized assay design and seeks DNA analysis from Natera. We believe this is a great win for patients, as this product will enable greater access to improved core technology when it may be limited or previously exhausted. We are excited about the additive effect of the partnership on our core monitoring business and look forward to presenting additional clinical data to support the value of integrated informed PPD monitoring into routine clinical practice. Now handing it over to Mike to review our financial details. Mike?

Thanks, Alex. The first slide is just our standard results slide. We can see again that revenues were up substantially compared to last year, despite the fact that we had a very large licensing quarter in Q3 as Steve mentioned. So that really highlights how strong our product revenue growth has been over the last year and also gives me some confidence that the gross margins are sustainable. Operating expenses showed some modest growth compared to Q3 last year, but this year we've been effectively flat in sequential quarters now even as we delivered significantly faster revenue growth. The balance includes proceeds from the equity raise in September, though we remain in a very strong capital position. The next slide highlights the cash burn dynamics we've seen in the last year and a half. You can see we were burning roughly $115 million to $120 million a quarter on average in 2022 as we set up all the infrastructure needed to deliver a first-class launch of Signatera. We've stepped down to $80 million to $90 million a quarter burn as volumes and reimbursement grew rapidly. And now we've put that cash burn roughly in half here in Q3. As Steve described, we placed a lot of emphasis on achieving reimbursement recently for covered services. While we are still in the early stages of that effort, we do believe you'll be getting some results here in Q3. Days sales outstanding fell dramatically in the quarter and now stand in the low 90s. I'll offer the standard caveats here. We fully expect cash burn to fluctuate quarter-to-quarter and, given our COGS projects are all on track, we do have some large topics that we planned in Q4. However, I think the trend you see here in the cash dynamic is continued progress and we expect to see more of that next year. Great. Let's get to the 2023 guidance on the next page. As Steve described, we are once again in a position to completely re-rate the revenue guidance upwards and now expect to come in at $1.035 billion to $1.050 billion. We are pleased to be tightening the original gross margin guide to 43-44%. Since the OpEx guidance remains unchanged, that means we can significantly reduce our expected cash burn guidance for the year, now expected to be $260 million to $280 million. For many of you who have followed us for some time, you'll know that we try to set forecasts that require good but achievable execution, and I think that's what this guide implies. We've got to continue growing margins and the ASP improvements we obtained this year. This guide does not imply continued growth in ASP, obviously, we are focused on making that happen, but there's always some uncertainty around the specific timing of ASP improvement, which is why we are reserving that as upside to the guide per our usual practice. As Steve described, we are feeling very positive about 2024, and we feel like we've got the right-sized sales team to continue driving growth given units are largely a function of sales rep productivity, and rep counts are remaining stable next year. I think repeating the same unit growth we achieved this year is a good target. This will require good execution because our commercial team will ultimately manage a larger book of existing business at the same time as they're growing those units. In addition to this particular volume upside, we are now starting to see revenue increase at a faster pace as ASP improves. So if our strong ASP trends continue, that could be another factor helping us in 2024. Regarding revenues, we have the potential for a number of further upside tailwinds that I would regard as bonuses to our base forecast. We are cautiously optimistic regarding the inclusion of 22q guidelines and footnote inclusion in NCCN guidelines. Based on the discussions of meetings we've publicly announced from these guideline committees, we would expect to see updates relatively early in 2024. I'll say it again, we do not need the guidelines changes to hit our cash flow breakeven targets in order to continue making progress on ASP, which could support steady improvements in gross margin over the next year. We expect operating expense to be relatively stable in 2024 compared to 2023. We’ve talked about the commercial team, and we are rapidly gaining operational leverage on our lab infrastructure for Signatera. Holding our R&D expenses steady will still allow us to make critical investments in prospective clinical trials and achieving cost reductions. We are also planning to launch compelling new products, and we look forward to discussing these in the future. Our overarching goal in 2024 is to reach cash flow breakeven without sacrificing growth and innovation. Given that objective, we're planning to spend only about $15 million next year on early cancer detection. That investment will still allow us to deliver two significant data readouts, one of which will come by either the end of this year or very early in Q1, and the other in the first half of 2024. If those data results are strong and pass our investment criteria, we would evaluate moving forward with the program. Given the goals we have in front of us for our core products, we will only invest further into this area in the future if we see excellent results that we believe can be market-leading as we hit our cash flow goals. So we are really excited to address the future of Natera, and with that, let me open it up to Q&A. Operator?

Your first question is from Tejas Savant with Morgan Stanley.

Hi, guys. Good evening and thanks for the time here. Congrats on a great quarter. Steve, Mike, just in light of your comments that you didn't really have any benefit from one-time events during the quarter on either revenue or gross margin, can you just help us contextualize that implied fourth quarter guidance? It looks like you're pointing to sort of flattish growth sequentially and flattish gross margins as well for my quick math. So any color on offsets that we should consider versus the typical year-end seasonality?

Hi, Tejas. Thanks for the question. It's Mike here. Yes, look on the guidance, I think tightening the gross margins to the top end of that range implies similar or better gross margins in Q4. As you guys know, we don't guide specifically to quarters, so there’s a level of caution there. I don’t think that should be interpreted as a message about concerns regarding underlying trends. As you've heard in the prepared remarks, the underlying trends across the business remain incredibly strong. I echo the similar sentiments on the revenue line. Volumes typically follow a pattern where Q2 and Q3 are kind of our weaker quarters in terms of seasonality in the women's health business. Q1 is our strongest quarter, but usually Q4 is also a good quarter as well. So we felt we were off to a good start in Q4. As I mentioned in my prepared remarks, our approach to providing guidance is always to try to provide good but achievable benchmarks for financial guidance, and we hope to be able to exceed this.

Yeah, I'll just add. This is Steve. We're off to what I would say is an incredibly strong start in Q4, and we're continuing to see acceleration in ASPs and in volumes.

Got it. That's really helpful information. I have a couple of follow-up questions. First, regarding Signatera, can you provide an update on your status with BFCA? I understand this is a minor part of revenue, but it's a question we've been receiving from investors. How do you see this in relation to the biomarker bill being passed in California? Also, with the F1 Tracker opportunity approaching, any details on that would be appreciated. My second follow-up pertains to Renasight. Given the strong results in RenaCARE, how do you view the adoption curve? In the past, you've mentioned a patient population of 37 million, with about 750,000 newly diagnosed annually. Any insights on the uptake and early feedback from payers and nephrologists would be great. Thank you.

Yeah, thanks a lot. So I guess first just on commercial payers and the biomarker bill, I think some of the other groups that have presented have talked a bit about that. We're obviously monitoring things, and we're taking a little bit of a more cautious approach. We want to see how things actually come through. But the reality is the biomarker bills are now in place and passed in a significant number of very critical states. So we think that it could serve as an opportunity to quicken the traditional pace that you've seen for commercial coverage. And, obviously, with California passing, that's resolved things with Blue Shield of California. But overall, I would say this biomarker bill is a net positive. It's something that is unique for its time period and presents an opportunity that hasn't been available previously. So frankly, this might end up being the quickest path to get commercial coverage versus what we've seen historically. From a Renasight standpoint, I think the RenaCARE study is a real inflection point. We've already previously indicated that about 40% of nephrologists have used the product; we've conducted tens of thousands of tests at this stage and the excitement from the nephrology community is incredible. It’s like something I haven't experienced before, where nephrologists are really welcoming this product with open arms. They are very engaged. It’s as if they’ve been starving for a product like this. So, we’re excited about that. With that said, any time you're introducing something new, it does take a while to get protocols in place and achieve market penetration that could be impactful. When I think about the market size, I draw a very direct comparison with hereditary cancer testing. In that field, there is a similar situation where the incident and prevalent pools are about the same size. Hereditary cancer testing today represents an incredibly large opportunity. Consequently, we believe we're laying the groundwork for something similar.

Your next question is from the line of Puneet Souda with Leerink Partners.

Hi, everyone. Thank you for taking my question. First, I'd like to ask about ASP, and then I have a follow-up regarding the guidelines. It's great to see the improvement, and I appreciate the details shared about Signatera. Could you provide insight into the ASP improvements for Panorama and Horizon? What should we expect moving forward? Additionally, regarding Signatera, could you discuss the potential ceiling, considering the ADLT rate, reimbursement, the expansions in indications, and the possible inclusion in guidelines, which may benefit commercial payers? So, could we delve into ASP?

Thanks, Puneet. I appreciate the question. So yes, first on the ASPs, we saw significant improvement not only in the Signatera ASPs, which we covered, but we also saw encouraging improvement in the women's health ASPs. I think that’s both for Panorama and for carrier screening. You may recall that earlier in the year, we actually guided assuming some erosion in the ASPs in that category. At the time, I mentioned that it wasn’t due to our observations, but rather more as a precautionary measure. Frankly, we haven't seen that erosion. Indeed, we’ve actually observed some improvement. Now, where does that improvement come from? It really stems from a variety of sources and small contributions from a range of efforts that we've been making over the past year, and Steve covered that in more detail during the call. So leading the guidelines aside, which I think could be very impactful, I am quite encouraged about the trajectory we are seeing right now on ASPs in women's health.

Yes. Just what is the ceiling for Signatera, and how do you think about that with the ADLT indication expansions?

Yes. So I think Solomon covered it in the prepared remarks that based on what we’re seeing right now, just on the current coverage dynamics we have on our current tumor types, we feel like there’s a path beyond $1,000 just through kind of grinding the blocking and tackling to ensure that we receive payment for covered services. We clear the myriad of administrative hurdles that one typically encounters in this space, so I believe there is a lot of room to grow from where we are now. I wouldn't put a ceiling on it per se. As we start reaching those levels, we will have more data, feedback from NCCN, and also new prospective randomized data. There will be multiple sources feeding into it. So I would expect a fairly smooth trajectory in the ASP going forward, which is very encouraging.

Yes, I'll just add too. One of the things that is really exciting is we are now looking at a very clear path to cash flow breakeven in 2024 and strong revenue growth ahead, and we are not incorporating any of the upside opportunity from guideline changes or the potential upside opportunity from biomarker legislation, which was just asked about a minute ago. The model we are assessing primarily includes the status quo along with our improvements in blocking, tackling, and billing operations, but all of those other potential catalysts are very significant upside that we do not require to achieve cash flow breakeven and allow for another good year.

Got it. Super helpful. And then on guidelines, can you clarify on the women's health side, Mike? Did you say you're expecting to see 22q guideline update in early 2024? I just wasn't sure if I heard that correctly. And then regarding NCCN for the Signatera side, could you elaborate—given the number of data sets you have already with ALTAIR and the ctDNA study coming up? I guess the question is, when does this translate into NCCN guideline inclusion? What that guideline inclusion can look like?

Yes. First, let me talk about women's health. We don’t have any information on what happened or any specific outcomes. However, we do know that there was a guideline committee meeting, I think, in September from ACOG. If you consider the timeline, we might receive results from that meeting in Q1. We don’t know whether they will be positive or negative, but we feel strong about the fundamentals behind 22q testing as outlined in the SMART study and the rationale for expanded carrier screening. So, we’ll have to stay tuned and see what happens there. As for the NCCN side, regarding the meeting that occurred in August, we are expecting to hear an outcome from that maybe later this year or early next year. We do know that the CIRCULATE 18-month data was included in the review due to timely submissions. However, we do not yet know the outcome. Fortunately for Natera, we have been working on randomized controlled trials in the escalation setting for example, the ALTAIR study for over five years. In 2024, we will have initial results from ALTAIR readout. Regardless of the guideline committee outcomes this year concerning the CIRCULATE study, next year the ALTAIR results will be available. It’s just a matter of waiting, assuming positive results from the trial, which is why we feel very confident. The ALTAIR setting includes both treatment escalation and treatment on molecular recurrence components where patients from the VEGA study that were initially negative will be monitored with ctDNA and can transition to treatment once they screen positive. We are excited about the readout on this treatment on molecular recurrence, which emphasizes the importance of surveillance testing. We look forward to presenting both study results.

No.

Your next question is from the line of Catherine Schulte with Baird.

Hey guys, congrats on the quarter. And thanks for taking my questions. I guess, first, Steve, I think you mentioned planning to launch some new MRD products next year. Could you give any additional details on that? Will that cover additional indications, or are you more referencing a new platform like the potential for a Liquid Exome or Tumor-Naïve kind of off-the-shelf version?

Yeah. So we’re going to have multiple new things rolling out, not just in MRD but across the business. We have been investing heavily in research and development and innovation throughout our company’s existence, especially over the last couple of years. I think this means we are finally going to see the fruits of our labor with numerous significant product launches and updates arriving next year. So for the MRD side, you should expect to hear about multiple opportunities, both new products and product updates.

Okay. Great. And then you mentioned validating Signatera and NIPT on an alternative NGS provider. Any additional color you can provide on that? What's the timeline for rolling out NIPT on the alternative sequencing platform in your central lab? Is the plan to switch all of your volumes over?

Yeah. So I think you all know the history here regarding the evolution of sequencing. Over the past several years, we’ve seen the market open up quite a bit. Now we have made progress on multiple different instruments. We’re excited to have met our regulatory milestones, validating both Signatera and NIPT on an alternative NGS platform. We are focusing on reducing our COGS and achieving cash flow breakeven. We will make the best decision for Natera regarding which provider we use based on service level, price, and quality.

Your next question is from the line of Rachel Vatnsdal from JPMorgan.

Great. Thank you for taking my questions, and congrats on the quarter, you guys. So first off, it's great to see the coverage of the FoundationOne Tracker in the U.S. last month. Can you walk us through how we should size that opportunity? And then, how quickly can it become a meaningful contributor here?

Yeah, Solomon, why don’t you take that?

Sure. Yeah, thank you for the question. We were very excited about receiving coverage from Medicare. We thought it was appropriate given the great data that have already been generated to support the tests. FoundationOne Tracker is positioned well for patients in advanced cancer states who are already undergoing a FoundationOne CDx test and want to monitor response to immunotherapy without needing to send another tissue sample for Signatera. This is especially useful for patients where tissue might be scarce or already exhausted after the initial genomic profiling. So that’s exciting, and we look forward to rolling that out. The commercialization will be led by Foundation Medicine, and it will help many patients.

Great. And then my follow-up, I want to ask about the pending lawsuits that you guys have with Rabgen in the upcoming trial early next year. You have one peer that had to pay out in the high $200 million range, but other peers have settled out of court. You had one peer earlier this week flag that their payout is going to be in the $30 million range all in. So, can you just walk us through what are the potential range of outcomes that we could see for tissue? And any color on dates leading up to that trial?

Hey, Rachel. Thanks for the question. Just like in all ongoing litigation, unfortunately, I can’t provide a lot of details on ongoing litigation. We clearly believe we don’t infringe on any patents, and we don’t think the patents are valid. We feel that we have some very strong defenses. That’s all we can share for now, but we look forward to providing more updates as they become available.

Your next question is from the line of Dan Brennan with TD Cowen.

Great. Thanks for the question. Maybe the first one, Mike, you talked about some of the screening data that's coming out later this year and early next year, and you talked about if the data looks very strong, you would evaluate moving forward only if excellent results are attained. Can you give us a sense of what we expect to see here coming up in these two studies? And just any more color around the level of evidence you would need in order to push ahead?

Yes. So this is Steve. I'll take that. We mentioned earlier that we have a case-controlled study that is likely to come out by the end of this year, perhaps early January, followed by another study looking at advanced cetinoma. Once we have both of those results, we will evaluate how we measure up against competitors and what our financials look like. There will be two decision points: First, how do we compare against competitors, and second, how do our financial outlook and cash flow breakeven goals appear? We won’t do anything that might jeopardize our ability to achieve cash flow breakeven. So we are taking a thoughtful, measured approach, hitting key milestones before deciding on the next steps. If we do proceed, those next steps would likely occur in 2025 or 2026, and at that time, we’ll be operating in a different environment where we believe we will be cash flow positive.

Got it, thanks a lot. And then, on NTCN, if you are successful getting inclusion as a footnote in the current update that's expected early next year, what would that mean? Obviously, commercial coverage could start, and you'd likely see a volume benefit. Could you clarify? As a related question, regarding the GALAXY 24-month data, how much does that de-risk ALTAIR? I know you kind of mentioned, but I think the regimen might differ from ALTAIR. Just wondering how much confidence that gives you in an ALTAIR positive readout. Thank you.

Yes, let me quickly touch on guidelines and then Alex can comment on the CIRCULATE data regarding ALTAIR. You need guidelines to grow volume and to obtain commercial reimbursement. We are growing volume right now at a strong pace, and we’re also seeing commercial reimbursement rolling in. Because of the biomarker bill, we think this trend is continuing. As it stands, guidelines would accelerate those processes, but importantly, we don't require guidelines to reach our cash flow breakeven and grow the business significantly. We'll wait and see how things play out, but even if we don’t secure guidelines this time around, we have the ALTAIR study coming up, giving us a strong position. Alex, do you want to expand on the CIRCULATE data and its implications for ALTAIR?

Yes, absolutely, Steve. We have indeed seen a continuation of separation of the curves in the ctDNA positive arm of the CIRCULATE study. Furthermore, we continue to observe that MRD-negative patients show minimal benefit from adjuvant chemotherapy. The absolute differences have decreased and those curves have now seemingly reversed. We think this information not only de-risks ALTAIR but also assists the Vega study. Since ALTAIR is expected to be unblinded soon, we can extrapolate these findings to project that CT-positive patients carry a high risk of recurrence without intervention. We have seen that adjuvant chemotherapy reduces that risk but does not completely eliminate it, and we are adding a known active agent TAS-102, which is already approved in colorectal cancer and has demonstrated efficacy, even in second and third-line treatment. Adding this agent and randomizing patients to receive either that drug or placebo gives us significant confidence that we will see an effect from that study. However, we won’t know the results until the study is unblinded. Given the study design and findings so far from CIRCULATE, we are optimistic.

Great. Thank you.

This does conclude the allotted time that we have for questions and answers. I will now hand the call back over to our presenters for any closing remarks.

Hey, thanks, operator, and thanks to everyone for joining us today. We're really excited about these results, and we’re very pleased to share them with you. So, thanks again for joining.

This concludes today's call. Thank you for joining. You may now disconnect your lines.