Natera Reports First Quarter 2024 Financial Results

Rhea-AI Summary

Natera, Inc. (NASDAQ: NTRA) reported positive first quarter financial results for 2024, with $367.7 million in total revenues, a 52.1% increase from the previous year. The company achieved a gross margin of 56.7%, processed 735,800 tests, and had a net loss of $67.6 million. Natera expects total revenue of $1.42 billion to $1.45 billion for 2024.

Positive

• Generated total revenues of $367.7 million in Q1 2024, a 52.1% increase from Q1 2023.

• Achieved gross margins of 56.7% in Q1 2024, up from 38.7% in Q1 2023.

• Processed approximately 735,800 tests in Q1 2024, a 17.5% increase from Q1 2023.

• First quarter financial results exceeded expectations, with cash flow breakeven achieved earlier than expected.

Negative

• Total operating expenses for Q1 2024 were $282.9 million, an increase of 22.0% from the previous year.

• Natera reported a net loss of $67.6 million in Q1 2024.

• Net loss per diluted share was ($0.56) in Q1 2024, compared to ($1.23) in Q1 2023.

• Natera had a total outstanding debt balance of $363.7 million as of March 31, 2024.

Insights

Financial Analyst

Natera's report indicates a substantial year-over-year revenue increase, with a notable jump in gross margins. This suggests scalability and potential operational efficiencies as the company grows. The gross margin improvement, from 38.7% to 56.7%, is particularly impressive, outpacing industry norms for biotech companies, which usually hover around the 50-70% range once mature. However, the reported net loss, although reduced, means the company is still in a growth phase where investment outpaces profit. For investors, the significant revenue growth and margin improvement are positive signals, but the ongoing losses necessitate scrutiny of the growth trajectory and cost management strategies. Monitoring how Natera plans to address its operating expenses, which increased by 22%, is crucial, especially as they ramp up investments in R&D and SG&A to support new products. The increase in test volumes processed indicates robust demand for their services, but it's also important to evaluate how this scales against operating costs. Looking ahead, their forecasted revenue of $1.42 billion to $1.45 billion offers a clear growth target. With an ending cash position of $882.9 million, they seem to have a stable financial runway to support the anticipated growth. The debt level, while sizable, appears manageable with the current cash reserves. As test volumes and average selling prices increase, investors should watch for continued margin improvements and a path to profitability.

Healthcare Sector Analyst

The expansion in oncology tests is substantial, with a 61.7% increase compared to the prior year. This is indicative of Natera's solid foothold in the precision oncology market, which is expected to grow significantly in the coming years. Their new fetal RhD NIPT test launch, backed by strong clinical validation, aligns with the ongoing demand for non-invasive prenatal testing and positions the company advantageously in the competitive landscape of women’s health diagnostics. Furthermore, the endorsement of genetic testing in chronic kidney disease by a leading medical society represents an external validation of Natera's services, potentially boosting the adoption rate of their tests in clinical settings. Encouraging results from their IMvigor011 trial may impact future treatment paradigms in bladder cancer, reinforcing the clinical value of their Signatera test. These developments paint a picture of a company that is not only growing its financials but also contributing significantly to the advancement of personalized medicine. However, investors should consider the inherent risks involved in the healthcare sector, like regulatory hurdles and insurance coverage decisions, which can significantly impact Natera's operations.

Biotechnology Research Analyst

The reported increase in test volume and the launch of innovative products, like the fetal RhD NIPT test, underscore Natera's strong R&D capabilities and its focus on expanding its portfolio. The company's commitment to research is evident from the published data in significant areas such as breast and uterine cancer. This focus on evidence-based innovation is critical for maintaining a competitive edge in the rapidly evolving biotech industry. For investors, this dedication to R&D can be a double-edged sword; while it is the engine for long-term growth and potential market dominance, it also represents a substantial cost. Investors should take note of Natera's R&D expenditure guidance of $350 million to $375 million, evaluating it against the company's long-term strategic goals. As a biotech company, the ability to translate these research investments into commercially successful products is vital. The positive cash flow achieved indicates that Natera is moving towards financial sustainability, a important factor for investors, especially in a sector characterized by high burn rates. The published studies and trials also provide a level of validation and credibility to their scientific approach, which could lead to stronger partnerships and increased adoption of their tests.

AUSTIN, Texas--(BUSINESS WIRE)-- Natera, Inc. (NASDAQ: NTRA), a global leader in cell-free DNA and genetic testing, today reported its financial results for the first quarter ended March 31, 2024.

Recent Strategic and Financial Highlights

• Achieved positive cash flow of approximately $3.0 million¹ in the first quarter of 2024.
• Generated total revenues of $367.7 million in the first quarter of 2024, compared to $241.8 million in the first quarter of 2023, an increase of 52.1%. Product revenues grew 53.4% over the same period.
• Generated gross margins of 56.7% in the first quarter of 2024, compared to gross margins of 38.7% in the first quarter of 2023.
• Processed approximately 735,800 tests in the first quarter of 2024, compared to approximately 626,200 tests in the first quarter of 2023, an increase of 17.5%.
• Performed approximately 114,800 oncology tests in the first quarter of 2024, compared to approximately 71,000 in the first quarter of 2023, an increase of 61.7%.
• Launched fetal RhD NIPT test backed by excellent performance in clinical validation study.
• Announced updated guidelines from a leading medical society in nephrology that support genetic testing in patients with chronic kidney disease to establish cause of disease.
• Published largest, prospective, donor-derived cfDNA study in kidney transplantation.
• Released analysis from randomized, phase III IMvigor011 trial in bladder cancer demonstrating that patients with undetectable circulating tumor DNA on serial Signatera testing may be able to forgo treatment.
• Published key data in breast cancer and uterine cancer.

“We had an excellent start to the year, driving robust volume, revenue and margin growth and achieving cash flow breakeven earlier than expected,” said Steve Chapman, chief executive officer of Natera. “We continued to deliver on our mission to transform disease management with the launch of a highly differentiated product in women’s health and the publication of practice-changing data in oncology and organ health.”

First Quarter Ended March 31, 2024 Financial Results

Total revenues were $367.7 million in the first quarter of 2024 compared to $241.8 million in the first quarter of 2023, an increase of 52.1%. The increase in total revenues was driven primarily by a 53.4% increase in product revenues, which were $364.7 million in the first quarter of 2024 compared to $237.8 million in the first quarter of 2023. The increase in product revenues was primarily driven by an increase in volume, as well as average selling price improvements.

Natera processed approximately 735,800 tests in the first quarter of 2024, including approximately 718,700 tests accessioned in its laboratory, compared to approximately 626,200 tests processed, including approximately 607,700 tests accessioned in its laboratory, in the first quarter of 2023.

In the first quarter of 2024, Natera recognized revenue on approximately 679,400 tests for which results were reported to customers in the period (tests reported), including approximately 663,500 tests reported from its laboratory, compared to approximately 583,400 tests reported, including approximately 566,000 tests reported from its laboratory, in the first quarter of 2023, an overall increase of 16.5% from the prior period.

Gross profit² for the three months ended March 31, 2024 and 2023 was $208.6 million and $93.6 million, respectively, representing a gross margin of 56.7% and 38.7%, respectively. Natera had higher gross margin in the first quarter of 2024 primarily as a result of higher revenues and continuous progress in reducing cost of goods sold associated with tests processed. Total operating expenses, representing research and development expenses and selling, general and administrative expenses, for the first quarter of 2024 were $282.9 million, compared to $231.9 million in the same period of the prior year, an increase of 22.0%. The increase was primarily driven by headcount growth to support new product offerings as well as increases in consulting and legal expenses.

Loss from operations for the first quarter of 2024 was $74.3 million compared to $138.3 million for the same period of the prior year.

Natera reported a net loss for the first quarter of 2024 of $67.6 million, or ($0.56) per diluted share, compared to a net loss of $136.9 million, or ($1.23) per diluted share, for the same period in 2023. Weighted average shares outstanding were approximately 120.8 million in the first quarter of 2024 compared to 111.8 million in the first quarter of the prior year.

At March 31, 2024, Natera held approximately $882.9 million in cash, cash equivalents, short-term investments and restricted cash, compared to $879.0 million as of December 31, 2023. As of March 31, 2024, Natera had a total outstanding debt balance of $363.7 million, comprised of $80.4 million including accrued interest under its line of credit with UBS at a variable interest rate of 30-day SOFR plus 50 bps and a net carrying amount of $283.3 million under its seven-year convertible senior notes issued in April 2020. The gross principal balance outstanding for the convertible senior notes was $287.5 million as of March 31, 2024.

Financial Outlook

Natera anticipates 2024 total revenue of $1.42 billion to $1.45 billion; 2024 gross margin to be approximately 53% to 55% of revenues; selling, general and administrative costs to be approximately $700 million to $750 million; research and development costs to be $350 million to $375 million, and net cash inflow (consumption) to be ($25) million to $25 million³.

Test Volume Summary
Unit		Q1 2024		Q1 2023		Definition
Tests processed		735,800		626,200		Tests accessioned in our laboratory plus units processed outside of our laboratory
Tests accessioned		718,700		607,700		Test accessioned in our laboratory
Tests reported		679,400		583,400		Total tests reported
Tests reported in our laboratory		663,500		566,000		Total tests reported in our laboratory less units reported outside of our laboratory

About Natera

Natera™ is a global leader in cell-free DNA and genetic testing, dedicated to oncology, women’s health, and organ health. We aim to make personalized genetic testing and diagnostics part of the standard of care to protect health and enable earlier, more targeted interventions that help lead to longer, healthier lives. Natera’s tests are validated by more than 200 peer-reviewed publications that demonstrate high accuracy. Natera operates ISO 13485-certified and CAP-accredited laboratories certified under the Clinical Laboratory Improvement Amendments (CLIA) in Austin, Texas and San Carlos, California. For more information, visit www.natera.com.

Conference Call Information

Event:		Natera’s First Quarter 2024 Financial Results Conference Call
Date:		Thursday, May 9, 2024
Time:		1:30 p.m. PT (4:30 p.m. ET)
Live Dial-In:		(888) 770-7321, Domestic
		(929) 201-7107, International
Conference ID:		7684785
Webcast Link:		https://events.q4inc.com/attendee/575350879

Forward-Looking Statements

This press release contains forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts, including the company’s financial guidance for fiscal 2024, its market opportunity, anticipated products and launch schedules, reimbursement coverage and product costs, commercial and strategic partnerships and acquisitions, user experience, clinical trials and studies, and its strategies, goals and general business and market conditions, are forward-looking statements. Any forward-looking statements contained in this press 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.

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 our financial projections and goals; we may be unable to further increase the use and adoption of our products through our direct sales efforts or through our laboratory partners; 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 engage in acquisitions, dispositions or other strategic transactions that may not achieve our anticipated benefits and could otherwise disrupt our business, cause dilution to our stockholders or reduce our financial resources; 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, including our SNP-based Microdeletion and Aneuploidy Registry, or SMART, Study, may not be compelling to professional societies or payors as supporting the use of our tests, particularly for microdeletions screening, or may not be able to be replicated in later studies required for regulatory approvals or clearances; if either of our primary CLIA-certified laboratories 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, obtain or maintain third-party payer coverage and reimbursement for our 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; 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, if and when the FDA begins actively regulating our tests pursuant to recently enacted FDA regulations; 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; any inability to effectively protect our proprietary technology could harm our competitive position or our brand; and we cannot guarantee that we will be able to service and comply with our outstanding debt obligations or achieve our expectations regarding the conversion of our outstanding convertible notes.

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.

In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Natera assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release.

References

1. Positive cash flow for the quarter ended March 31, 2024, is derived from the GAAP Statement of Cash Flows as follows: net cash provided by operating activities of $27.0 million, net cash provided by financing activities of $6.5 million, offset by net cash used in investing activities for purchases of property and equipment and acquisition of an asset of $30.8 million.
2. 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.
3. Cash inflow (consumption) is calculated as the sum of GAAP net cash provided by (used in) operating activities, GAAP net cash provided by (used in) financing activities, and GAAP net cash provided by (used in) investing activities for purchases of property and equipment and acquisition of assets.

Natera, Inc. Consolidated Balance Sheets (Unaudited) (in thousands, except shares)
		March 31,				December 31,
		2024				2023
						(1)
Assets
Current assets:
Cash, cash equivalents and restricted cash		$	813,817			$	642,095
Short-term investments			69,121				236,882
Accounts receivable, net of allowance of $7,252 and $6,481 at March 31, 2024 and December 31, 2023, respectively			288,748				278,289
Inventory			43,024				40,759
Prepaid expenses and other current assets, net			46,734				60,524
Total current assets			1,261,444				1,258,549
Property and equipment, net			125,791				111,210
Operating lease right-of-use assets			54,553				56,537
Other assets			26,417				15,403
Total assets		$	1,468,205			$	1,441,699
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	26,038			$	14,998
Accrued compensation			39,577				45,857
Other accrued liabilities			142,228				149,405
Deferred revenue, current portion			17,705				16,612
Short-term debt financing			80,401				80,402
Total current liabilities			305,949				307,274
Long-term debt financing			283,273				282,945
Deferred revenue, long-term portion and other liabilities			20,712				19,128
Operating lease liabilities, long-term portion			64,160				67,025
Total liabilities			674,094				676,372
Commitments and contingencies
Stockholders’ equity:
Common stock (2)			12				11
Additional paid-in capital			3,241,326				3,145,837
Accumulated deficit			(2,445,035	)			(2,377,436	)
Accumulated other comprehensive loss			(2,192	)			(3,085	)
Total stockholders’ equity			794,111				765,327
Total liabilities and stockholders’ equity		$	1,468,205			$	1,441,699

(1)		The consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
(2)		As of March 31, 2024 and December 31, 2023, there were approximately 122,234,000 and 119,581,000 shares of common stock issued and outstanding, respectively.

Natera, Inc. Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (in thousands, except per share data)
		Three months ended
		March 31,
		2024				2023
Revenues
Product revenues		$	364,672			$	237,797
Licensing and other revenues			3,069				3,959
Total revenues			367,741				241,756
Cost and expenses
Cost of product revenues			158,833				147,754
Cost of licensing and other revenues			307				370
Research and development			88,637				82,306
Selling, general and administrative			194,278				149,627
Total cost and expenses			442,055				380,057
Loss from operations			(74,314	)			(138,301	)
Interest expense			(3,124	)			(3,061	)
Interest and other income, net			10,267				4,585
Loss before income taxes			(67,171	)			(136,777	)
Income tax expense			(428	)			(160	)
Net loss		$	(67,599	)		$	(136,937	)
Unrealized gain on available-for-sale securities, net of tax			893				4,564
Comprehensive loss		$	(66,706	)		$	(132,373	)
Net loss per share:
Basic and diluted		$	(0.56	)		$	(1.23	)
Weighted-average number of shares used in computing basic and diluted net loss per share:
Basic and diluted			120,814				111,767

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240509885150/en/

Investor Relations

Mike Brophy, CFO, Natera, Inc., 510-826-2350

Media

Lesley Bogdanow, VP of Corporate Communications, Natera, Inc., pr@natera.com

Source: Natera, Inc.

FAQ

What were Natera's total revenues in the first quarter of 2024?

Natera reported total revenues of $367.7 million in Q1 2024, a 52.1% increase from the previous year.

How many tests did Natera process in the first quarter of 2024?

Natera processed approximately 735,800 tests in Q1 2024, a 17.5% increase from Q1 2023.

What was Natera's gross margin in the first quarter of 2024?

Natera achieved a gross margin of 56.7% in Q1 2024, up from 38.7% in Q1 2023.

What is Natera's financial outlook for 2024?

Natera anticipates total revenue of $1.42 billion to $1.45 billion for 2024.

How much debt did Natera have as of March 31, 2024?

As of March 31, 2024, Natera had a total outstanding debt balance of $363.7 million.