Natera Inc at Wolfe Research Healthcare Conference Transcript

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

Question: Douglas Schenkel - Wolfe Research - Analyst : So you reported a really solid quarter again last week. You beat revenue expectations by $80 million. You increased full year guidance by over $100 million. This has been a consistent theme, certainly over the last several quarters throughout this year. Can you just tell us what's going on? And really what have been the biggest surprises as we think about what has gone right for the company over the last several quarters?

Question: Douglas Schenkel - Wolfe Research - Analyst : A few follow-ups and thank you for that. In no particular order, really just what I was jotting down as I was listening to you. The COGS per test on Signatera, you talked about the improvement there. How much of that is change in mix, meaning adjuvant versus surveillance, versus improvements in procurement and just making changes internally on a same-store sales basis, if you will? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 4:00PM, NTRA.OQ - Natera Inc at Wolfe Research Healthcare Conference

Question: Douglas Schenkel - Wolfe Research - Analyst : Okay. On ASPs, there's been some improvement, but if you take true-ups out, ASP improvement hasn't been -- I don't think it's been a record for the company in terms of what we've seen in terms of tailwinds from ASP improvement. Where I'm going with this, though is, I think part of the true-up momentum is you guys are getting better at collecting and true-ups could be from a year ago, they could be from a quarter ago. My sense is it's not years ago, it's getting tighter. And where I'm going with this is true-ups could actually equate to -- actually, these are -- meaning, these are sustainable ASP durable improvements as we think about the next few quarters. If I'm making any sense there, is there something to that?

Question: Douglas Schenkel - Wolfe Research - Analyst : Another high-level question, how do you balance the opportunity to invest in growth with the opportunity to drive free cash flow and margins?

Question: Douglas Schenkel - Wolfe Research - Analyst : I do want to talk about pipeline momentarily, but just a few more numbers questions. So I think it's from 2022 Analyst Event where you talked about longer-term EBIT margin goals of 25%. I don't think there was a time -- there wasn't -- this is going to happen by -- yeah, it was just out there. In a world where you're above $2 billion in revenue and your gross margins are moving well into the 60s, is that the point where mathematically you're going to be getting closer to that target? Or do you think there are sufficient things to invest in pursuant to making the patient experience optimal?

Question: Douglas Schenkel - Wolfe Research - Analyst : Where you are investing some of the upside the last few quarters? I mean I think you bumped up your sales and marketing expectation in terms of what you're investing there. I think you took up R&D spend by about $20 million. At least you told us to model $20 million higher in Q4 than Q3. is the investment largely to go after things like indication expansion or Signatera fortifying the sales force? Or are you investing in adjacencies that are a little further afield?

Question: Douglas Schenkel - Wolfe Research - Analyst : Okay. All right. Let's get into some specifics on Signatera. So can you just give us a lay of the land and in terms of like where we are now in terms of indication expansion and what's up next?

Question: Douglas Schenkel - Wolfe Research - Analyst : Okay. 40% of oncologists have ordered Signatera. How would you characterize penetration at those accounts?

Question: Douglas Schenkel - Wolfe Research - Analyst : No, it's helpful. And then building off of that, is it pretty promotion dependent? Like how often do you have to be in there with the docs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 4:00PM, NTRA.OQ - Natera Inc at Wolfe Research Healthcare Conference

Question: Douglas Schenkel - Wolfe Research - Analyst : Yes, those are -- I mean, collectively, that gets at when we talk to clinicians when we just read what's out there. The -- okay, I'd like to do recurrence monitoring, but what do I do and what's the evidence to suggest that you can get actually a change in outcomes and survival benefit. A lot of these studies get at that next year.

Question: Douglas Schenkel - Wolfe Research - Analyst : So building off of that. That's one of the things that makes me feel pretty good about Natera from a competitive standpoint. And I think next year is a year where we expect to hear a lot more from some of the folks that are trying to move into MRD is when you think of competitive moats for REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 4:00PM, NTRA.OQ - Natera Inc at Wolfe Research Healthcare Conference Natera, could you maybe walk through data infrastructure? How -- like in general, really I'm trying to get at how you're feeling about what could be a more noisy environment from a competitive standpoint?

Question: Douglas Schenkel - Wolfe Research - Analyst : In terms of the angle that a lot of the new entrants are talking about taking, sometimes it's tumor-informed but broader panel. Sometimes it's tumor agnostic. You talked about potential new products next year. You have initiatives in both of those areas to the extent that clinicians want them, correct?

Question: Douglas Schenkel - Wolfe Research - Analyst : All right. We're over time. Any closing remarks?

Question: Douglas Schenkel - Wolfe Research - Analyst : All right. Thanks for being here, Mike.