Natera Inc Q3 2024 Earnings Call Summary

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

Question: Puneet Souda - Leerink Partners - Analyst : Yeah. Hey guys. Really strong congrats -- I mean, a strong quarter here, congrats on this. It's great to see the cash generation. Maybe, Mike, first for you or Steve, can you outline the ASP pickup that you're seeing across the product? I know you highlighted Signatera. Can you elaborate how that Signatera ASP can continue to grow? And the stability of ASP across the other products, because I think that has come in scrutiny a bit with some of the commercial payers paying closer attention to coverage and ASPs. So wondering if you can elaborate a bit on that? Then I have questions on oncology?

Question: Puneet Souda - Leerink Partners - Analyst : Got it. That's great. And then on the Signatera, can you elaborate how much of the lift are you seeing from volume growth in the community setting or maybe the tier 2 setting vs when you present data at these conferences, including ESMO, ASCO and others, the lift you get from that is, I assume, is mostly in the community -- in the academic setting, but just trying to parse out where you're seeing the growth and the sustainability of this growth, obviously very strong in the quarter.

Question: Puneet Souda - Leerink Partners - Analyst : Got it. And last one, just Alex, maybe, Alex, the Nature Medicine paper. Where is that most helpful? Is that most helpful for NCCN or is it driving deeper into the clinical practices? And maybe just elaborate what you expect out of the 702 study at ESMO? And then would that study actually give you any further insights into the IMvigor011 study?

Question: Daniel Brennan - TD Cowen - Analyst : Congrats on the quarter. Maybe first one just on Signatera price, Mike, the $1,050 nice improvement but a little bit more modest than what we've seen in prior quarters. Can you just speak to -- I know you gave some color in the prepared remarks, just speak to kind of some of the drivers of price from here in particular, like on the biomarker, I know you guys have been -- I felt fairly constructive on what this opportunity could be. You've had, I think, five states live for over a year. You had three of the biggest states in the country go live in the last month or so. So I'm just wondering what your experience has been and whether or not that could be more of an upside driver and maybe you're kind of making some good services in there?

Question: Daniel Brennan - TD Cowen - Analyst : Got it. And maybe just one follow-up. Maybe I'll say on the financial side, just on the gross margins, really nice gross margin expansion 400 basis points ex the true-ups. I know you talked about -- Steve talked about in the prepared remarks, some of the only cost initiatives. you just give some more color on the driver there? Are we starting to see the benefit of the adjuvant surveillance mix shift starting to come through, which is a nice gross margin leverage and I know you kind of updated the full year guide, but as we -- I think you talked a little bit about '25, Mike, in the prepared remarks, but how do we think about the trajectory of gross margins as we kind of turn the calendar into '25?

Question: Tejas Savant - Morgan Stanley - Analyst : Hey guys, good evening. Just a couple of cleanups to start on, perhaps the guidance framework or even just what you're seeing in terms of recent trends in the business, Steve. So First of all, in light of some of the pain the private payers are going through in the Medicare book of business, have you seen any uptick in prior auth or just more documentation required in the last few months across the oncology portfolio I know you mentioned the biomarker middle rollout starting to help a little bit in the back half of next year. But is there any risk here that some of these private payers might grab their feet on the implementation at all? And then, Mike, just to clean up on the guide really, can you quantify the weather impacts and to what extent that was a little bit of an offsetting factor in the revised guide?

Question: Tejas Savant - Morgan Stanley - Analyst : Got it. Okay. And then one on Signatera and the 702 study guys. How should we be thinking about framing those DFS and OS results in terms of what's clinically meaningful for physicians. And also, given that the results will be dependent on the drug evaluated, obviously, can you provide a little bit of color or context around prior studies that showed CELEBREX on top of standard adjuvant chemo and is a promising approach in certain populations?

Question: Tejas Savant - Morgan Stanley - Analyst : Okay. That's actually really helpful. And Steve, last one for me on screening. We've been getting the question a little bit. Back in September, you talked about being relatively close to sharing that data. And I think you'd also called out that you expect initial proof of concept to be a little bit more sophisticated and fulsome than your initial expectations, which was going to help you sort of inform 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 12, 2024 / 9:30PM, NTRA.OQ - Q3 2024 Natera Inc Earnings Call that go, no-go decision. So just curious as to where we are in terms of that process? Is year-end still the right benchmark on time lines there? And have the post evolved a little bit in your mind in light of the ESMO data on advanced adenoma from one of your peers?

Question: Rachel Vatnsdal - JPMorgan - Analyst : Hey, great, good afternoon and congratulations on the quarter. You guys. So first I have just on Signatera volume. Can you walk us through what you guys are assuming within 4Q for quarter-over-quarter Signatera volume growth? You've historically talked about this 8,000 to 10,000 rate for the past few quarters. You've obviously been beating that as well. So should we expect that trend of beating that volume level into 4Q to continue? And then what kind of a sequential assumption when we head into 2025?

Question: Rachel Vatnsdal - JPMorgan - Analyst : Got it. And then by just on SG&A. You raised the guide for SG&A for the year. And you've talked about accelerating some of your growth investments. So obviously, it makes sense to invest into the business. But just can you break down for us where is that driving increased spend going towards? And then on 2025, you've historically talked about this like annual OpEx growth of mid-single digits to high single digits over time. So is that the right way for us to think about 2025? Or what other factors should we be considering that would move the number higher or lower relative to that range?

Question: Douglas Schenkel - Wolfe Research Securities - Analyst : Okay. First, on volume growth. You're tracking the year-on-year volume growth of, I think, about $550,000, maybe $600,000. Mike, if I heard you right, I think you said at some point on the call, we should expect similar volume growth next year. Did I get that right? And if so, does that mean a similar number of incremental tests across the portfolio next year? 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 12, 2024 / 9:30PM, NTRA.OQ - Q3 2024 Natera Inc Earnings Call

Question: Douglas Schenkel - Wolfe Research Securities - Analyst : Okay. Year-to-date, you have about $110 million in true-ups. Hopefully, I did that math right. Obviously, we don't know what Q4 true-ups are going to be. That said, as we model out of next year, should we be kind of taken true-ups out of the base as we think about normalizing the business space? Or is there an argument that these true-ups are actually indicative of better collections and sustainable ASP improvements?

Question: Douglas Schenkel - Wolfe Research Securities - Analyst : Yeah. And Mike, I'm with you. And again, for whatever my opinion is worth like everything you just said makes sense. What I'm getting at is you've had these consistent true-ups, presumably from periods that aren't years ago, they're presumably closer and closer to the quarter we're in. So it's almost as if like these true-ups are actually indicative of, obviously, their collections from past periods, but you're actually getting paid more frequently on these tests. So I wouldn't expect you to model -- our guide true-ups into the model. But I could see this being a sign that like, yes, the ASPs are actually going higher, and this is sustainable. Is that logical?

Question: Douglas Schenkel - Wolfe Research Securities - Analyst : Okay. Last one, Mike, what was the mix of first-time tests versus recurrence monitoring. I think Dan may have tried to get at that earlier, but I'm just curious if you could give us anything specific there because it was a really good gross margin quarter. Obviously, as that mix shift starts to kind of kick in, that's another leg to gross margin, but I didn't hear anything on the call to suggest that, that was like a material driver in this period to the margin improvement.

Question: Matthew Sykes - Goldman Sachs - Analyst : Hey, good afternoon. Thanks for my questions and congrats on the quarter. Mike, maybe just the first one for you. Just following up on Rachel's question on the OpEx. I'm just curious, as you think about the women's health business, certainly as it relates to sales and marketing. Are we at kind of a steady state there on the sales and marketing side, where there's sort of some maintenance investment you think you made, but most of the sales and marketing is going towards Signatera. I'm just trying to think about as we move into '25, how you're thinking about the allocation of OpEx across the product portfolio? And just want to make sure that my assumption on the Signatera is the sort of the beneficiary spend are going to be maintained into next year?

Question: Matthew Sykes - Goldman Sachs - Analyst : Got it. And then just for my follow-up, just on Signatera. Have there been any noticeable differences in indication growth. Meaning, I know it CRC and breast is sort of the main ones, but have you seen any shift towards different indications that any that are ramping up significantly that might have been sort of lower volumes to begin with? Or has it been pretty consistent this whole time?

Question: Tycho Peterson - Jefferies LLC - Analyst : Hey, thanks. A lot has been asked already. Just a couple on the numbers here in the near term. What was the Invitae contribution in the quarter? And then you did raise by more than the beat, $40 million by more than the beat, what's the delta on that? 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 12, 2024 / 9:30PM, NTRA.OQ - Q3 2024 Natera Inc Earnings Call

Question: Tycho Peterson - Jefferies LLC - Analyst : And then I guess thinking about the framework you've put in place for next year, the 500,000 to 600,000 tests, where do you think kind of the community penetration goes? And then it sounds like you don't feel like you need to add additional reps at this point as we think about next year?

Question: Tycho Peterson - Jefferies LLC - Analyst : Okay. And then just lastly, I guess, on time lines for the readouts on breast and kidney, should we still expect those next year as well? I mean, I know we've covered CRC and bladder and some of the other indications, but how do we think about the breast and kidney time lines?