8-K
Natera, Inc. (NTRA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest eventreported): February 26, 2020
Natera, Inc.
(Exact name of registrant as specifiedin its charter)
| Delaware | 001-37478 | 01-0894487 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (IRS Employer<br><br> <br>Identification No.) |
201 Industrial Road, Suite 410
San Carlos, California 94070
(Address of principal executive offices,including zip code)
(650) 249-9090
(Registrant’s telephone number,including area code)
N/A
(Former name or former address, if changedsince last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.0001 per share | NTRA | Nasdaq Stock Market LLC(Nasdaq Global Select Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On February 26, 2020, Natera, Inc. issued a press release announcing its results for its fourth quarter and year ended December 31, 2019 and provided a related investor presentation. A copy of the press release and a copy of the investor presentation are furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
The information in this Current Report on Form 8-K and the accompanying Exhibit 99.1 and Exhibit 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by reference in such filing.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated February 26, 2020. |
| 99.2 | Investor Presentation. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Natera, Inc. | |
|---|---|
| By: | /s/ Michael Brophy |
| Michael Brophy | |
| Chief Financial Officer (Principal Financial and Accounting Officer) |
Dated: February 26, 2020
Exhibit 99.1
Natera Reports Fourth Quarter and Year 2019Financial Results
SAN CARLOS, Calif., February 26, 2020 /PRNewswire/ — Natera, Inc. (NASDAQ: NTRA), a leader in non-invasive genetic testing and the analysis of circulating cell-free DNA, today reported financial results for the fourth quarter and the year ended December 31, 2019 and provided an update on recent business progress.
Recent Accomplishments & 2019 Highlights
| · | Generated total revenues of $83.2 million in the fourth quarter of 2019 compared to $67.0 million in the fourth quarter of<br>2018, an increase of 24%. |
|---|---|
| · | Generated total revenues of $302.3 million in the year 2019 compared to $257.7 million in the year 2018, exceeding the 2019<br>revenue guidance range previously provided. |
| · | Processed approximately 209,400 tests in the fourth quarter of 2019 and 804,300 tests for the full year 2019, compared to approximately<br>174,200 tests processed in the fourth quarter of 2018 and 668,600 tests for the full year 2018. |
| · | Signed $50 million agreement with BGI Genomics Co., Ltd. to commercialize NGS-based genetic assays for clinical use in<br>China and select markets. Successfully completed initial key milestones. |
| · | Entered into partnership to develop and commercialize personalized circulating tumor DNA monitoring assays with Foundation<br>Medicine, Inc. Successfully completed initial key milestones. |
| · | Received a positive draft local coverage decision from Medicare for reimbursement of Signatera™ in colorectal cancer. |
| · | Launched the BESPOKE CRC study, a nationwide multi-center registry study for patients diagnosed with Stage II-III colorectal<br>cancer that will prospectively enroll 1,000 or more patients at time of surgery. |
| · | Selected by National Cancer Center of Japan for the CIRCULATE-IDEA trial in Japan, a prospective, multi-center, randomized<br>trial for patients with Stage II-III colon cancer. |
| · | Achieved total cumulative value of signed contracts for Signatera with pharmaceutical companies exceeding $55 million. |
| · | Received a positive final coverage decision from Medicare for reimbursement of Prospera™ in kidney transplant rejection<br>screening. |
| · | Hired Eric Evans, a co-founder of Counsyl, as Chief Scientific Officer. |
“2019 was a transformational year for Natera,” said Steve Chapman, Natera Chief Executive Officer. “We delivered strong volume growth, consistent average selling price expansion, and reduced cost of goods sold per unit in our reproductive health business. By publishing excellent data, securing coverage decisions, and signing significant commercial partnerships, we opened a path to creating value in new multi-billion-dollar markets in transplant rejection and oncology. Our strong performance leaves us well positioned to continue our momentum in 2020 and beyond.”
Fourth Quarter and Year Ended December 31,2019 Financial Results
Total revenues were $83.2 million in the fourth quarter of 2019 compared to $67.0 million for the fourth quarter of 2018, an increase of 24%. The increase in total revenues was driven primarily by sales of Natera’s Panorama and Horizon tests. Natera processed 209,400 tests in the fourth quarter of 2019, including approximately 198,300 tests accessioned in its laboratory, compared to 174,200 tests processed in the fourth quarter of 2018, including approximately 162,900 tests accessioned in its laboratory. Despite selling its Evercord business in the third quarter of 2019, Natera achieved an overall increase of approximately 20% for the quarter.
Total revenues for 2019 were $302.3 million compared to $257.7 million in 2018, which represents an increase of 17%. In 2019, Natera processed approximately 804,300 tests including approximately 753,800 tests accessioned in its laboratory, compared to approximately 668,600 tests processed in 2018, including approximately 625,900 tests accessioned in its laboratory. Despite selling the Evercord business in the third quarter of 2019, Natera achieved an overall increase of approximately 20% for the year.
In the three months ended December 31, 2019, Natera recognized revenue on approximately 200,800 tests reported, including approximately 189,700 tests accessioned in its laboratory, compared to approximately 172,500 tests reported, including approximately 162,500 tests accessioned in its laboratory, in the fourth quarter of 2018, an overall increase of 16% for the quarter.
In 2019, Natera recognized revenue on approximately 763,900 tests reported, including approximately 718,500 tests accessioned in its laboratory, compared to approximately 631,800 tests reported, including approximately 594,300 tests accessioned in its laboratory, in 2018, an overall increase of 21% for the year.
Gross profit^1^for the three months ended December 31, 2019 and 2018 was $38.8 million and $24.2 million, respectively, representing a 47% and 36% gross margin, respectively. Natera was able to achieve higher gross margins in Q4 2019 as a result of improved cost of goods sold per test and approximately $3.8 million in license and development revenues earned under strategic partnership agreements. Gross profit for the year ended December 31, 2019 and 2018 was $126.9 million and $91.6 million, respectively, representing a 42% and 36% gross margin, respectively. Natera was able to achieve higher gross margins in the year 2019 as a result of improved cost of goods sold per test and approximately $16.4 million in license and development revenues earned under strategic partnership agreements.
Total operating expenses, representing research and development expenses and selling, general and administrative expenses, for the fourth quarter of 2019 were $73.6 million, an increase of approximately 37% compared to $53.9 million in the same period of the prior year. The increase was driven primarily by higher personnel-related expenses resulting from an increase in commercial activities and an increase in research and development activities under strategic partnerships. Total operating expenses, net of gain from the disposal of the Evercord business of $14.4 million in the year ended December 31, 2019 were $243.1 million, an increase of approximately 18% compared to $206.2 million in the same period of the prior year. The increase was driven primarily by higher personnel-related expenses and increased commercial activities, offset by the gain from the disposal of the Evercord business in the third quarter of 2019.
Loss from operations for the fourth quarter of 2019 was $34.8 million compared to $29.7 million for the same period of the prior year. Loss from operations for 2019 was $116.3 million compared to $114.6 million for the prior year.
Net loss for the fourth quarter of 2019 was $35.2 million, or ($0.46) per diluted share, compared to net loss of $31.8 million, or ($0.51) per diluted share, for the same period in 2018. Weighted average shares outstanding were 76.5 million in the fourth quarter of 2019. Net loss for the full year 2019 was $124.8 million, or ($1.79) per diluted share, compared to net loss of $128.2 million or ($2.22) per diluted share for the full year 2018. Weighted average shares outstanding were 69.6 million in 2019.
At December 31, 2019, Natera held $441.0 million in cash, cash equivalents, short-term investments and restricted cash, compared to $158.5 million as of December 31, 2018—the increase resulting from the successful completion of two equity offerings in second and fourth quarters of 2019. As of December 31, 2019, Natera had a total outstanding debt balance of $123.8 million, comprised of $50.1 million with accrued interest under its $50.0 million line of credit with UBS at a variable interest rate of 30-day LIBOR plus 110 bps and a net carrying amount of $73.7 million under its debt agreement with OrbiMed Advisors.
2020 Financial Outlook
Natera anticipates 2020 total revenue of $335 million to $350 million; 2020 cost of revenues to be approximately 51% to 57% of revenues; selling, general and administrative costs to be approximately $240 million to $260 million; research and development costs to be $80 million to $90 million, and net cash burn to be $125 million to $150 million^2^.
Test Volume Summary
| Unit | Q4 2019 | Q4 2018 | FY 2019 | FY 2018 | Definition | ||||
|---|---|---|---|---|---|---|---|---|---|
| Tests processed | 209,400 | 174,200 | 804,300 | 668,600 | Tests accessioned in our laboratory plus units processed outside of our laboratory | ||||
| Tests accessioned | 198,300 | 162,900 | 753,800 | 625,900 | Test accessioned in our laboratory | ||||
| Tests reported in our laboratory | 189,700 | 162,500 | 718,500 | 594,300 | Total tests reported in our laboratory less units reported outside of our laboratory including Evercord units in prior periods |
About Natera
Natera is global leader in cell-free DNA testing. The mission of the company is to change the management of disease worldwide with a focus on reproductive health, oncology, and organ transplantation. Natera operates an ISO 13485-certified and CAP-accredited laboratory certified under the Clinical Laboratory Improvement Amendments (CLIA) in San Carlos, Calif. It offers proprietary genetic testing services to inform physicians who care for pregnant women, transplant physicians, oncologists, and cancer researchers, including biopharmaceutical companies, and genetic laboratories through its cloud-based software platform.
Conference Call Information
| Event: | Natera's Fourth Quarter and Fiscal 2019 Results Conference Call |
|---|---|
| Date: | Wednesday, February 26, 2020 |
| Time: | 1:30 p.m. PT (4:30 p.m. ET) |
| Live Dial-In: | (877) 823-0171, Domestic |
| (617) 500-6932, International | |
| Conference ID: | 9992859 |
| Webcast: | https://edge.media-server.com/mmc/p/hab8jim9 |
A webcast replay will be available at investor.natera.com.
Forward-Looking Statements
This release contains forward-looking statements, including quotations of management, statements under the heading “2020 Financial Outlook,” and statements regarding Natera's current and new products and services, cost of tests, strategic partners, clinical trials, and data, reimbursement coverage, future financial outlook and financial performance, opportunities and strategies, and general business conditions. Any forward-looking statements contained in this release are based upon Natera's current plans, estimates, and expectations, as of the date of this release, and are not a representation that such plans, estimates, or expectations will be achieved. Subsequent events may cause these expectations to change, and Natera disclaims any obligation to update the forward-looking statements in the future.
These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially, including: we face numerous uncertainties and challenges in achieving the financial guidance provided; we may be unable to further increase the use and adoption of Panorama and Horizon, through our direct sales efforts or through our laboratory partners, or to develop and successfully commercialize new products, including Signatera and Prospera; we have incurred losses since our inception and we anticipate that we will continue to incur losses for the foreseeable future; our quarterly results may fluctuate from period to period; our estimates of market opportunity and forecasts of market growth may prove to be inaccurate; we may be unable to compete successfully with existing or future products or services offered by our competitors; we may not be successful in commercializing our cloud-based distribution model; our products may not perform as expected; the results of our clinical studies may not support the use of our tests, particularly in the average-risk pregnancy population or for microdeletions screening, or may not be able to be replicated in later studies required for regulatory approvals or clearances; if our sole CLIA-certified laboratory facility becomes inoperable, we will be unable to perform our tests and our business will be harmed; we rely on a limited number of suppliers or, in some cases, single suppliers, for some of our laboratory instruments and materials and may not be able to find replacements or immediately transition to alternative suppliers; if we are unable to successfully scale our operations, our business could suffer; the marketing, sale, and use of Panorama and our other products could result in substantial damages arising from product liability or professional liability claims that exceed our resources; we may be unable to expand third-party payer coverage and reimbursement for Panorama, Horizon and our other tests, and we may be required to refund reimbursements already received; third-party payers may withdraw coverage or provide lower levels of reimbursement due to changing policies, billing complexities or other factors, such as the increased focus by third-party payers on requiring that prior authorization be obtained prior to conducting a test; if the FDA were to begin actively regulating our tests, we could incur substantial costs and delays associated with trying to obtain premarket clearance or approval and incur costs associated with complying with post-market controls; litigation or other proceedings, resulting from either third party claims of intellectual property infringement or third party infringement of our technology, is costly, time-consuming and could limit our ability to commercialize our products or services; and any inability to effectively protect our proprietary technology could harm our competitive position or our brand.
Additional risks and uncertainties that could affect our financial results are included under the captions, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent filings on Forms 10-K and 10-Q and in other filings that we make with the SEC from time to time. These documents are available on our website at www.natera.com under the Investor Relations section and on the SEC's website at www.sec.gov.
Contacts
Natera, Inc.
Investor Relations
Mike Brophy, CFO, Natera, Inc., 650-249-9090
Media
Paul Greenland, Natera, Inc., VP of Corporate Marketing, [email protected]
^1^Gross profit is calculated as GAAP total revenues less GAAP cost of revenues. Gross margin is calculated as gross profit divided by GAAP total revenues.
^2^ Cash burn is calculated as the sum of GAAP net cash used by operating activities (estimated for 2020 to be between $117 million and $142 million) and GAAP net purchases of property and equipment (estimated for 2020 to be approximately $8 million).
Natera, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except par value per share amount)
| December 31, | |||||
|---|---|---|---|---|---|
| 2018 | |||||
| (1) | |||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | 61,926 | $ | 46,407 | ||
| Restricted cash, current portion | 55 | 4,597 | |||
| Short-term investments | 379,065 | 107,461 | |||
| Accounts receivable, net of allowance of 2,919 in 2019 and 1,788 in 2018 | 53,351 | 62,223 | |||
| Inventory | 12,394 | 13,633 | |||
| Prepaid expenses and other current assets | 16,376 | 6,197 | |||
| Total current assets | 523,167 | 240,518 | |||
| Property and equipment, net | 23,283 | 24,336 | |||
| Operating lease right-of-use assets | 23,730 | — | |||
| Other assets | 12,476 | 3,317 | |||
| Total assets | 582,656 | $ | 268,171 | ||
| Liabilities and Stockholders’ Equity | |||||
| Current liabilities: | |||||
| Accounts payable | 8,604 | $ | 14,587 | ||
| Accrued compensation | 16,088 | 12,668 | |||
| Other accrued liabilities | 49,043 | 32,442 | |||
| Deferred revenue, current portion | 56,016 | 4,131 | |||
| Short-term debt financing | 50,123 | 50,153 | |||
| Total current liabilities | 179,874 | 113,981 | |||
| Long-term debt financing | 73,656 | 73,357 | |||
| Deferred rent, net of current portion | — | 8,613 | |||
| Deferred revenue, long-term portion | 23,808 | 40,058 | |||
| Operating lease liabilities, long-term portion | 26,297 | — | |||
| Other long-term liabilities | 310 | — | |||
| Total liabilities | 303,945 | 236,009 | |||
| Commitments and contingencies | |||||
| Stockholders’ equity: | |||||
| Common stock(2) | 8 | 7 | |||
| Additional paid-in capital | 976,955 | 607,236 | |||
| Accumulated deficit | (699,171 | ) | (574,529 | ) | |
| Accumulated other comprehensive loss | 919 | (552 | ) | ||
| Total stockholders’ equity | 278,711 | 32,162 | |||
| Total liabilities and stockholders’ equity | 582,656 | $ | 268,171 |
All values are in US Dollars.
| (1) | The condensed, consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated financial<br>statements at that date included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. |
|---|---|
| (2) | As of December 31, 2019, there were approximately 78,005,000 shares of common stock issued and outstanding. |
| --- | --- |
Natera, Inc.
Condensed Consolidated Statements of Operations and ComprehensiveLoss
(Unaudited)
(In thousands, except per share data)
| Year ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | |||||||
| Revenues | |||||||||
| Product revenues | $ | 269,881 | $ | 240,366 | $ | 203,777 | |||
| Licensing and other revenues | 32,447 | 17,288 | 5,848 | ||||||
| Total revenues | 302,328 | 257,654 | 209,625 | ||||||
| Cost and expenses | |||||||||
| Cost of product revenues | 162,604 | 158,081 | 135,508 | ||||||
| Cost of licensing and other revenues | 12,866 | 7,974 | 4,088 | ||||||
| Research and development | 51,357 | 51,355 | 50,064 | ||||||
| Selling, general and administrative | 206,176 | 154,872 | 155,306 | ||||||
| Gain from disposal of business | (14,388 | ) | — | — | |||||
| Total cost and expenses | 418,615 | 372,282 | 344,966 | ||||||
| Loss income from operations | (116,287 | ) | (114,628 | ) | (135,341 | ) | |||
| Interest expense | (10,693 | ) | (10,476 | ) | (4,213 | ) | |||
| Interest and other (expense) income, net | 4,152 | (2,729 | ) | 2,380 | |||||
| Loss before income taxes | (122,828 | ) | (127,833 | ) | (137,174 | ) | |||
| Income tax expense | (1,999 | ) | (321 | ) | (454 | ) | |||
| Net loss | $ | (124,827 | ) | $ | (128,154 | ) | $ | (137,628 | ) |
| Unrealized gain (loss) on available-for-sale securities, net of tax | 1,471 | 214 | (41 | ) | |||||
| Comprehensive loss | $ | (123,356 | ) | $ | (127,940 | ) | $ | (137,669 | ) |
| Net loss per share: | |||||||||
| Basic | $ | (1.79 | ) | $ | (2.22 | ) | $ | (2.58 | ) |
| Diluted | $ | (1.79 | ) | $ | (2.22 | ) | $ | (2.59 | ) |
| Weighted-average number of shares used in computing basic and diluted net loss per share: | |||||||||
| Basic | 69,555 | 57,848 | 53,312 | ||||||
| Diluted | 69,555 | 57,848 | 53,604 |
Exhibit 99.2
1 Not for reproduction or further distribution. Natera , Inc. Q4 2019 Earnings call February 26, 2020
2 Not for reproduction or further distribution. Safe harbor statement This presentation contains forward - looking statements under the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this presentation, including statements regarding the market opportunity, products and launch schedules, reimbur sem ent coverage and product costs, commercial partners, user experience, clinical trials, financial performance, strategies, anticipated future performance and general business cond iti ons of Natera, Inc. (“Natera”, the “Company”, “we” or “us”), are forward - looking statements. These forward - looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially, including: we face numerous uncertainties and challenges in achieving the financial guidance provided; we may be unable to fu rth er increase the use and adoption of Panorama and Horizon, through our direct sales efforts or through our laboratory partners, or to develop and successfully commercialize ne w p roducts, including Signatera and Prospera ; we have incurred losses since our inception and we anticipate that we will continue to incur losses for the foreseeable future; our q uar terly results may fluctuate from period to period; our estimates of market opportunity and forecasts of market growth may prove to be inaccurate; we may be unable to compete succes sfu lly with existing or future products or services offered by our competitors; we may not be successful in commercializing our cloud - based distribution model; our products may not perform as expected; the results of our clinical studies may not support the use of our tests, particularly in the average - risk pregnancy population or for microdeletions screen ing, or may not be able to be replicated in later studies required for regulatory approvals or clearances; if our sole CLIA - certified laboratory facility becomes inoperable, we will be u nable to perform our tests and our business will be harmed; we rely on a limited number of suppliers or, in some cases, single suppliers, for some of our laboratory instruments and mate ria ls and may not be able to find replacements or immediately transition to alternative suppliers; if we are unable to successfully scale our operations, our business could su ffe r; the marketing, sale, and use of Panorama and our other products could result in substantial damages arising from product liability or professional liability claims that exceed our res ources; we may be unable to expand third - party payer coverage and reimbursement for Panorama, Horizon and our other tests, and we may be required to refund reimbursements already re ceived; third - party payers may withdraw coverage or provide lower levels of reimbursement due to changing policies, billing complexities or other factors, such as th e i ncreased focus by third - party payers on requiring that prior authorization be obtained prior to conducting a test; if the FDA were to begin actively regulating our tests, we could incur sub stantial costs and delays associated with trying to obtain premarket clearance or approval and incur costs associated with complying with post - market controls; litigation or other proceed ings, resulting from either third party claims of intellectual property infringement or third party infringement of our technology, is costly, time - consuming and could limit our ability to commercialize our products or services; and any inability to effectively protect our proprietary technology could harm our competitive position or our brand. We discuss thes e a nd other risks and uncertainties in greater detail in the sections entitled “Risk Factors” and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our periodic reports on Forms 10 - K and 10 - Q and in other filings we make with the SEC from time to time. Given these uncertainties, you should not place undue reliance on the f orw ard - looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to pr edi ct all risks, nor can we assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially f rom those contained in any forward - looking statement. In light of these risks, uncertainties and assumptions, the forward - looking events and circumstances discussed in this presentation may n ot occur and actual results could differ materially and adversely from those anticipated or implied. Except as required by law, we undertake no obligation to update publicly any forwar d - looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations. We file reports, proxy sta tem ents, and other information with the SEC. Such reports, proxy statements, and other information concerning us is available at investor.natera.com or at http://www.sec.gov . Requests for copies of such documents should be directed to our Investor Relations department at Natera, Inc., 201 Industrial Road, Suite 410, San Carlos, California 94070. Our telephone nu mbe r is (650) 249 - 9090.
3 Not for reproduction or further distribution. Transformative 2019 ● Extended market leadership ● New peer reviewed publications ● Significant COGS reductions ● Improved reimbursement ● Clinical validation data in multiple cancer types ● ~$55 million in cumulative pharma contracted value ● Draft Medicare coverage for Signatera in colorectal cancer ● Foundation Medicine and Beijing Genomics Institute partnerships ● Compelling peer reviewed data ● CLIA validation and operational readiness ● Final positive Medicare coverage for Prospera Reproductive Health Organ Transplantation Oncology
4 Not for reproduction or further distribution. Extend leadership position in reproductive health • Volume growth and improving unit economics • Drive path toward cash flow breakeven Change patient care for transplant recipients • Major clinical launch on track for 2020 Establish Signatera ™ as the new standard for cancer care • Major clinical launch in colorectal cancer • Practice - changing clinical trials with academic and pharma partners Three goals for 2020
5 Not for reproduction or further distribution. Continued volume growth momentum Total tests processed 88K 218K 317K 447K 515K 669K 804K 2013 2014 2015 2016 2017 2018 2019
6 Not for reproduction or further distribution. 2019 Annual revenues ($ in millions) 2019 Exceeds top end of guidance Q4 Revenues ($ in millions) $67 $83 Q4 2018 Q4 2019 24% $302 .3 $285.0 $287.0 $289.0 $291.0 $293.0 $295.0 $297.0 $299.0 $301.0 $303.0 $295 - $302 Guidance Actual Gross margin 40% 47% 36% 42%
7 Not for reproduction or further distribution. Average selling prices and COGS momentum ASP: Total revenues/tests reported 1 $388 $263 $224 $200 Q1 2015 Q4 2018 Q4 2019 Target* Blended COGS trajectory 2 1. ASP calculation excludes revenue recognition from Qiagen, FMI, and BGI partnerships, and certain non - recurring items 2. Blended COGS trajectory is computed by total COGS divided by tests accessioned. * Target COGS estimate based on currently funded and active R&D projects. $407 $384 $393 $395 $404 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019
8 Not for reproduction or further distribution. $42 $56 $70 $84 $98 3% 4% 5% 6% 7% Transplant: Pathway to significant revenues Revenue sensitivity ($ in millions) ● $2B market ● < 5% penetrated < 5% Total Total tests greenfield Market penetration Source: Natera, I nc . internal company estimates
9 Not for reproduction or further distribution. Prospera reimbursement pathway on track 2018 / 2019 2019 / 2020 x Completed analytical validation x Completed clinical validation x Successful pre - submission meeting x Obtained Z - code x Completed CLIA validation x Formal LCD submission x Draft LCD release x Launch registry study x Final MolDx LCD published • Establish pricing
10 Not for reproduction or further distribution. 1 Sigdel TK, et al. J. Clin. Med. 2019, 8, 19. 2 . Bloom RD, et al. J Am Soc Nephrol . 2017 Jul;28(7):2221 - 2232. Prospera outperforms 1 st generation dd - cfDNA test ● More sensitive and specific than serum creatinine ● Assessed all types of rejection, including TCMR ● First published dd - cfDNA assay to identify subclinical rejection Largest published renal transplant dd - cfDNA validation study 2 Highest reported overall sensitivity 2 ABMR and TCMR Highest reported performance to assess T - cell mediated rejection 2 Sensitivity First, only test to identify subclinical rejection 2 Sensitivity 217 89% 100% 92% 107 59% 27% NA Other Commercial Assay 2 Natera 1
11 Not for reproduction or further distribution. 2019 pharma total contracted value goal achieved • >50 Pharma deals signed to date • Multiple prospective studies signed & planned in CRC, NSCLC, Pancreatic, Bladder, HCC, Breast, other • Benefit for pharma trials: 1. Study enrichment: treating only MRD - positive patients, for higher drug efficacy 2. Early endpoint: observing MRD clearance, for faster study results 2018 2019 Goal 2019 Actual $9.1M $40M - $50M $55M Cumulative value of signed contracts
12 Not for reproduction or further distribution. • Sponsored by Natera • Prospective, non - randomized • 1,000 Stage II - III CRC patients tested with Signatera • Real - world study of MRD - guided treatment following Medicare LCD • Testing protocol 6x in Year 1, and 4x in Year 2 • Sponsored by NCC Japan • Prospective, randomized • 1,500 Stage II - III colon cancer patients tested with Signatera • Treatment de - escalation for MRD - negative patients, and escalation for MRD - positive patients Leadership in CRC data and clinical development BESPOKE CRC trial CIRCULATE - IDEA trial Japan Clinical validation study: JAMA Oncology (Reinert et al, 2019) 130 patients, 829 plasma samples. Relapse detected up to 16.5 months earlier (avg 8.7 months earlier) than standard imaging a nd CEA • Sponsored by AstraZeneca • Prospective, randomized platform clinical study • Stage II - III microsatellite stable CRC patients tested with Signatera after surgery • MRD - positive patients receive adjuvant chemo +/ - novel treatments • ctDNA clearance after 6 months of treatment, as measured by Signatera, used as primary endpoint COLUMBIA - 2 trial
13 Not for reproduction or further distribution. ● Est. opportunity ~1 million tests annually ● Over 85% of relapses caught too late for curative surgery 1,2 Medicare draft LCD in Colorectal cancer MRD Program Use Signatera after surgery to evaluate the need for adjuvant chemotherapy and avoid unnecessary treatment Surveillance Program Use Signatera alongside CEA to detect recurrence earlier while it may still be resectable, and reduce false positives For Stage II - III colon cancer, Stage IIA rectal cancer For Stage II - III colorectal cancer patients 1. Purandare NC, et al. The Indian journal of radiology & imaging. 2010;20(4):284 - 288. 2. Lapointe L. Laboratory, Advance Healt hcare Network. 2016;25(9):14.
14 Not for reproduction or further distribution. Signatera colorectal cancer – Medicare reimbursement pathway on track 2019 2020 x Successful pre - submission meeting x Obtained Z - code x Completed clinical validation x CLIA soft launch x Formal LCD submission x Draft LCD release x Launch registry trial • Final LCD published • Final pricing
15 Not for reproduction or further distribution. Key commercial channels Direct channel Clinical Direct channel Pharma Pharma BD reps Hiring oncology field force 100K+ clinical patients/yr 50+ active pharma partners 1 million+ genetic tests in 2018 in China Grow contracted value and revenue Launch in 2020 Biopharma Launch in 2020 Final LCD for colorectal cancer Presence Near - term goal
16 Not for reproduction or further distribution. Balance Sheet Dec 31, 2019 Sep 30, 2019 Change Cash & Investments $441.0 $454.6 2 ($13.6) UBS Line of Credit $50.1 $50.1 $0.0 OrbiMed Debt Facility $73.7 $73.6 $0.1 Q4 2019 financial overview ($ in millions, except for per share data) P&L Q4'19 Q4'18 Change Product Revenues $74.5 $63.1 $11.4 License and Other Revenues $8.7 $3.9 $4.8 Total Revenue $83.2 $67.0 $16.2 Gross Margin% 1 47% 36% 11% R&D $15.0 $12.8 $2.2 SG&A $58.6 $41.1 $17.5 Net Loss Per Diluted Share ($0.46) ($0.51) $0.05 1. Gross margin is calculated as gross profit divided by GAAP total revenues. Gross profit is calculated as GAAP total revenu es less GAAP cost of revenues. 2. Cash and investments also include restricted cash and $216.2M Natera received in the equity financing subsequent to 9/30/2 019
17 Not for reproduction or further distribution. 2020 annual guidance $ (millions) Outlook Revenue $335 – $350 Gross margin % revenue 43% – 49% SG&A $240 – $260 R&D $80 – $90 Cash burn $125 – $150
18 Not for reproduction or further distribution. 2020 investments support rapid growth • Commercial leadership position • COGS reductions: - Algorithm improvements - Automation - Alternative sequencing platforms • Commercial channel to launch colorectal cancer test • Support partner product development and launch • Clinical trials to support additional CMS submissions Reproductive health • Commercial channel to launch Prospera test • Clinical trials to support broad market penetration Oncology Organ transplant
