Natera, Inc. Q3 FY2025 earnings call

• The quarter was fantastic with $592M revenue, up 35% YOY. Volume was strong across the product portfolio, including a record for Signatera growth with 202,000 clinical MRD tests processed. - Gross margin improved to 64.9% in Q3. - Raising 2025 revenue guidance by $160M to $2.18B-$2.26B, gross margin to 62%-64%, and free cash flow to ~$100M. - Fetal Focus expanded to cover 20 genes, launching before end of 2025. - Signatera had a record quarter with 21,500 units growth, and ASPs around $1,200. - ESMO data on Signatera in bladder cancer supports its role in directing treatment after radical cystectomy. - PROCEED-CRC study on early colorectal cancer detection showed promising results with detection rates for advanced adenomas.

In the third quarter, Natera generated $592 million in revenue, a 35% year-on-year increase. Women's health saw solid sequential quarterly growth, driven by Fetal Focus. Organ health was strong with greenfield and competitive wins. Signatera processed 202,000 clinical MRD tests, with a 21,500-unit growth in Q3, and an ASP of roughly $1,200. Gross margin in Q3 was 64.9%, a significant improvement from prior periods.

• Raised 2025 revenue guidance to a range of $2.18 billion to $2.26 billion. - Gross margin guidance adjusted to 62% to 64%. - Free cash flow expected to be roughly $100 million for the full year. - Expect OpEx growth of around 10% next year, focused on R&D and clinical trials. - Volume growth for women's health and organ health expected to be similar to current year, and Signatera unit growth based on rolling 4-quarter average.

• Actual events or results could differ materially from forward-looking statements due to factors such as regulatory changes, market competition, and outcomes of clinical trials. - Differences in performance between ctDNA assays and technologies, as well as trial design differences, could impact results.

Q: On prenatal, why now for Fetal Focus 20-gene panel and reimbursement?

A: Steve Chapman said the 5-gene panel launched well, R&D ready for broader panel, and EXPAND trial is the gold standard for prospectively collecting data. On reimbursement, they're moving forward with the broader panel launch.

Q: On Signatera 2026 volume growth, clarification on sequential run rate.

A: Steve Chapman and Mike Brophy discussed that volume growth for Signatera is based on a rolling 4-quarter average as a goal, expecting healthy quarters given the strong team and prospective outcomes data.

Q: On early detection, updates on multi-cancer strategy?

A: Steve Chapman mentioned focus is on CRC first, but they have activity in the background and an excellent team, with MSA being an area of interest for the long term.

Q: On gross margins for next year, outlook?

A: Mike Brophy said gross margins are expected to improve next year, with the target of reaching over 70% over time, and feeling encouraged by the 64.9% gross margin in Q3.