Natera Inc at Goldman Sachs Global Healthcare Conference Transcript

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

Question: Matt Sykes - Goldman Sachs - Analyst : Appreciate it. So maybe we'll just start off sort of post Q1. Congrats again. It was a spectacular quarter you guys put up. Would love to kind of get sort of post-the-quarter feedback, things that you want to make sure that people are aware of in terms of some of the things that you saw during that quarter and what kind of surprised you the most about that quarter and what could kind of continue throughout the course of the year.

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. Maybe we'll just start on women's health. And I think that there was an expectation at some point that given the level of penetration where you are, given the level of relative maturity, I don't want to call it a mature market, but relative to some other categories, that growth would start to slow yet. It's just continued its momentum. What are some of the drivers of that women's health growth, and how should we think about in the long term about that normalization of women's health?

Question: Matt Sykes - Goldman Sachs - Analyst : Maybe just touching on that Invitae acquisition that you guys did. I think it was about $100 million in revenue that originally you guys acquired. The expectation was that you would retain lower than that. There was some customer selection that you wanted to do. Where are you in that process today, and what level of contribution should we expect from that Invitae acquisition over the next couple of quarters?

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. Maybe talk about ACOG guideline inclusion for 22q and carrier screening. It's something that's been talked about for a while, but a lot of the timing is out of your control. And I'm assuming they're not waiting on you for any additional things that you need to provide. So maybe just talk about what your expectations are now for that guideline inclusion. And then, I guess more importantly, if and when it does happen, what is sort of the material impact on revenues that you guys see from that potential inclusion?

Question: Matt Sykes - Goldman Sachs - Analyst : And, Mike, any comments on sort of the margin impact from that? I know you're kind of absorbing the cogs already from some of these tests, but if this were to come through, it's not in your guidance, but I would assume it would be margin accretive.

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. Maybe just sticking with women's health, just the opportunities with your new fetal RHD test and how that builds upon your NIPT test, and when are you anticipating revenues from this test?

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. Maybe shifting over to oncology and to start off, just any high-level takeaways from ASCO you guys have that you want to kind of communicate? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 10, 2024 / 2:40PM, NTRA.OQ - Natera Inc at Goldman Sachs Global Healthcare Conference

Question: Matt Sykes - Goldman Sachs - Analyst : And going back to Q1 for a second, you mentioned the strong performance in women's health, but Signatera also had very strong performance. Is there anything about Q1 that kind of led to that sharp increase in ordering and adoption of Signatera, and how should we think about the phasing of that growth over the course of this year?

Question: Matt Sykes - Goldman Sachs - Analyst : And what is the balance between new customer kind of acquisition and then just going deeper and penetrating the existing customers, and how do you see that balance shifting potentially over the course of this year into next year?

Question: Matt Sykes - Goldman Sachs - Analyst : Maybe talk a little bit about the competitive landscape. You guys have had this market for a little while, and it just seems that the nature of the test don't really encourage switching and things like that, so there's a bit of a captive patient group that you're in. But just maybe talk about the competitive landscape you're seeing now, how you think it might evolve over time. There's certainly a lot potentially out there, but it just seems to me that you're not seeing them quite yet. Just maybe any color on that would be great.

Question: Matt Sykes - Goldman Sachs - Analyst : Just touching on that, sort of the clinical evidence you guys have consistently generated over time. You have the CIRCULATE-Japan, CIRCULATE-France, but we've got ALTAIR readout potentially coming out in August. What are some of the key endpoints investors should be measuring the results on, and will the timing line up with potential NCCN guidelines next year?

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. And just thinking about other indications, you had some pretty strong data from your IMvigor trial for bladder cancer recently, and so how do you think about sort of a commercial ramp for that indication near-term for bladder, but then also how are you thinking about additional indications in any color you can provide as to what directions you're going in?

Question: Matt Sykes - Goldman Sachs - Analyst : And maybe just to finish up on Signatera just about the commercial coverage and the progress you've made so far, California, Louisiana, and a few others, but just how do you see that evolving over the next year or so in terms of the commercial payer?

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. And then maybe as you think about the biomarker bills, because I think it's something that you and I have discussed quite a bit, part of the issue I think is some of the language is different for each bill, and it can be very vague, and therefore the level of sort of enforcement of these bills is challenging. And so the way I've always seen it is sort of it gives you leverage to speak to the commercial payers to progress the discussion along. But how do you see the biomarker bills as providing that tailwind for that commercial coverage given sort of the vagaries within the different language and the different bills?

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. And just transitioning to organ health, which is usually less discussed than the other ones, but the [clinical] guidelines was a bit of a, at least for mine, a bit of a surprise and a huge positive event for you guys. And just given the duration of those guidelines when they come out, it was very timely as well. Could you maybe talk about how that has provided a boost to Renasight volumes, particularly in supporting genetic testing in CKD patients, and sort of what is the potential for this test longer term?

Question: Matt Sykes - Goldman Sachs - Analyst : Got it. Mike, I want to focus a little bit on gross margins. I mean, if you actually look at the share price of Natera, there was an inflection in gross margins in Q3 of last year, and that really allowed the stock to start to significantly outperform, so clearly investors are focused on this gross margin. There's so many different things to go into, whether it's ASP increases, COGS reduction, et cetera. You spend a lot of time focusing on no-pays and cash collections. Could you maybe kind of highlight some of the priorities for you over the course of this year into next year in terms of continuing that gross margin expansion? You're obviously going to get the growth that you've got on the top line, but I'm more interested in sort of what, in terms of COGS, ASPs, things that you're focused on to continue that margin expansion story.

Question: Matt Sykes - Goldman Sachs - Analyst : And you also raised your OpEx guide for the year as well, the number of things you want to invest in. I guess two questions there. One, where is that incremental spend going to go to? And two, will that still allow for operating leverage, meaning you don't want a dollar in SG&A just to mean a dollar in revenue. You want that to be some leverage there. So maybe talk through that dynamic.

Question: Matt Sykes - Goldman Sachs - Analyst : And then just given the women's health business is profitable, how are you thinking about moderating the OpEx there in order to reinvest in other areas, or are there still things you want to do in women's health that require some level of spend?

Question: Matt Sykes - Goldman Sachs - Analyst : Great. And just in the minute we have left, Steve, I just want to turn back to you for a second. As Mike mentioned in our breakfast we had this morning, you're the first commercial employee at Natera, and I think that puts you in a unique spot as CEO from a commercial lens. A lot of times we're speaking with CEOs with a scientific background. How does that inform your decision-making? How does that prioritize what you do and what you focus on? And just given the commercial strength of Natera, does a lot of that come from some of the decisions that you're making given your background and given your emphasis on the commercial acumen of the company?