Natera Inc at Canaccord Genuity Growth Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Good to have you. So I think -- so last Thursday, you reported the second quarter results beat consensus by like $20 million on the top line, strong gross margin, broad-based growth. Just talk about like what kind of turned out in terms of volume and ASP dynamics, too?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Okay. Yes, that was great. The revenue guide was raised for the beat like -- like I just mentioned $20 million, so like this may have been asked on the call or addressed earlier, but basically like how much conservatism and what is the philosophy of guidance now with the company? Because it's 3 years I feel like my time covering the company. Every quarter being raised. But how much conservatism is baked in basically at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2023 / 8:30PM, NTRA.OQ - Natera Inc at Canaccord Genuity Growth Conference

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Yes. We were talking heavy oncology revenue. It's kind of like not -- it's a moving target. It's like kind of early segment. I feel like women's health is probably more visible to you. I mean is that a source of upside if you think about the 3 segments?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : And there's no like competitive sort of headwinds thus far. Like what are you seeing in the market when you think about the tumor-naive test out there?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Okay. And then just as a result of being like first mover basically, you have really solid reimbursement on both, within the adjuvant window for basically like a subscription more or less? And then like the recurrent monitoring setting, look like it's kind of like paper test almost or at least a bundle of a few tests. So -- and that's from local indications. I think you got like 2 indications for CRC right now for colon cancer, then MIBC and then breast cancer, which was most recently and you have like 40 peer-reviewed locations with 25 tumor types, I guess, mostly solid tumor types. How do you think about like what's next in terms of reimbursement from Medicare for one of those tumor types? And then how tough is like the liquid tumors? And -- because, I mean, there's only like one company that's actually doing that stuff.

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Do you think MolDX would never want to do this on like a pan-tumor basis?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Okay. And then sticking with Signatera, just on the like NCCN guidelines and it definitely keeps getting brought up. I feel like this time last year, we had this chat and probably talked about it similarly back then. I mean, at this point, you have more data, you have CIRCULATE-Japan published, I believe you have 18-month data. Follow-up here coming out from that. You have more studies. There should be like a panel or a meeting like this summer from NCCN colon cancer. So I mean, is it possible that like within the next 12 months, we get at least like a footnote in those guidelines?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Got you. Okay. Sounds promising now on women's health. Maybe just starting to kind of like just some of the dynamics in the quarter around the volume shifting around an ASP dynamics, I remember, like I think around the third quarter, we talked about how the California prenatal screening program was going to be. There was some movement there, there's an injunction there. That will be a headwind to ASP. There's also the expanded carrier screening dynamics that is not being covered by payers. So now we have -- I mean, the carrier screening aspect, that broader panel, it's not really being -- I guess it's getting better and better. But really on the PNS on the California program, that's like -- that's all pretty much resolved. You're not trying to shift your volume back to Panorama from that lower price test, right? That's kind of -- that's progressing. So what's the -- how material is that volume in the second quarter, at least? And what's the update...

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Also in acquiring those customers naturally versus potentially allowing those customers to come to us over time (inaudible). If you just thought about that gross margin...

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : I feel like the other drivers of gross margin kind of margins in general in this business would be like microdeletions. And then obviously, the expanded carrier screening like you kind of just talked about. There is this upcoming like next month, there's an ACOG prenatal meeting. These 2 topics are on the agenda. There was -- I think it was a mean like a couple of months ago as well. Like what's the most likely outcome here? And when -- whether -- what's the timing? When can we hear something possible? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2023 / 8:30PM, NTRA.OQ - Natera Inc at Canaccord Genuity Growth Conference

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Right. Then maybe like a few minutes left. Let's talk about the cash kind of like targets and burn everything going forward. So the expectation is that you'll be cash flow positive or breakeven at some point in 2024. That's a quarterly number. I guess how do you think about the assumptions to get there, not necessarily talking about another raise or whatever, but just like top line growth and then like gross margins? I mean you increased the guidance this year and strong growth, but the margins are still 41% to 44% on this line, seemingly had a huge quarter. So I mean, yes, what has to kind of happen for you to get at '24?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : And at scale, I think you talked about the overall company gross margins could get to 70%?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Okay. And then an important question here. I mean like what happens when you get to breakeven? Like that you could do just push through adjusted EBITDA profitability and then you just like increase margins over time? Or do you want to kind of show investors you can get there and then just keep growing and investing and doesn't necessarily stay like -- or I guess, expand margins? Or do you want to just kind of just show that it can be like a really powerful operating model? Or the other thing is, of course, you have the swinging data to coming out, so you might like have to invest a lot there.

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Got you. Okay. All right. Well, I guess any closing remarks that what should be -- again, I feel like we talked about like the guidelines and think of that they're like important catalyst. But I mean, if that's mentioned too often, like what in your view is going to be like really going to drive this business in the next year or so?

Question: Kyle Alexander Mikson - Canaccord Genuity Corp., Research Division - Analyst : Okay. All right. Perfect. Well, let's leave it there. Thanks, Mike, for coming out. Appreciate it.