Natera, Inc. Q3 FY2026 earnings call

• Leadership Transition: CEO Steve Chapman is stepping down after nearly eight years, handing leadership to Solomon Moshkevich, who remains engaged as a consultant. The transition is described as occurring from a position of strength.
• Volume Growth: Processed ~1.1 million tests in Q3 (+22% YoY). Clinical MRD units grew 56% YoY, adding ~33,000 units sequentially.
• Technology Upgrade: Launched 'Signatera Genome' with phased and structural variants, achieving a limit of detection (LOD) of <1 part per million. This enhances sensitivity for ctDNA detection.
• Clinical Data: Presented 25 abstracts at ESMO. Key findings include the Sagittarius trial showing Signatera negative results led to de-escalation of adjuvant therapy in 87% of changed cases. Volga trial identified ultra-low-risk bladder cancer patients.
• Reimbursement Milestones: Medicare granted coverage for Signatera in early-stage hepatocellular carcinoma (HCC). Regulatory approval received for bladder cancer in Japan; pricing discussions underway.
• Pharma Momentum: Biopharma demand for MRD technology surged, with revenue up ~70% YoY. Invigo 011 readout validated MRD-guided trials. Multiple Phase I-III studies announced.
• Long-term Goal: Management set a target to double revenue to $6 billion by 2029, driven by oncology ASP/volume growth, global expansion (Japan), and pharma/data licensing.

Total revenue was $794 million, up approximately 34% year-over-year (YoY) and over 40% excluding true-ups. Gross margin was approximately 65%. Clinical MRD volumes reached ~316,000 units (+56% YoY). Key segment drivers included: Oncology (Signatera), which saw ASP increases to ~$1,290 and strong volume growth across colorectal and breast cancer indications; Women’s Health, which posted mid-to-high single-digit growth driven by Fetal Focus; and Organ Health, which grew volumes nearly 40% YoY following Medicare coverage for transplant surveillance. Pharma and data licensing revenues surged ~70% YoY.

• Full Year 2026 Revenue: Raised to $3.35–$3.5 billion (midpoint increased by ~$140 million vs. prior guidance). Expected to exceed $3 billion.
• Full Year 2026 Gross Margin: Maintained at 64–66% centering.
• Full Year 2026 OPEX: R&D top end raised by $25 million to reflect pharma/data investments and FIND trial costs. SG&A top end raised to $1.3 billion due to legal expenses and commercial team ramp.
• 2027 Outlook: Expects another year of growth. OPEP expected to grow 10–12%, driven by clinical trials and pharma infrastructure. Gross margins likely to remain in the 64–66% range initially, with potential for improvement as COGS efficiencies materialize.

• True-Ups: While declining, true-ups (~$32M in Q3) still impact reported financials; management excludes them from guidance.
• New Product COGS: Short-term pressure on gross margins due to higher COGS for newer products like Signatera Genome and Fetal Focus, though management expects cost reductions within 18–24 months.
• Reimbursement Uncertainty: Future ASP growth depends on continued MolDX submissions and guideline inclusion; delays or rejections could impact upside.
• Competitive Landscape: Increasing competition in prenatal and MRD testing markets, including larger infrastructure competitors like LabCorp.

Q: Dan Brennan asked about Solomon's priorities and the $6B revenue target assumptions, specifically regarding CRC screening contribution and ASP levers. / A: Solomon stated no radical strategy change; focus remains on execution, service, and practice-changing data. He noted the $6B target is achievable without significant CRC screening contribution, relying instead on existing businesses. CFO Mike Brophy added that hitting $6B requires only modest ASP increases (to ~$1,450 from current ~$1,290), driven by broader MolDX coverage and guideline inclusion, which he views as eminently achievable.

Q: Puneet Souda asked about the pacing of trials contributing to the $6B target and whether screening will drive growth in 2028/2029, and requested context on the CEO transition timing. / A: Solomon clarified that major trials (e.g., SIGNAL, AFT70) read out years later and support long-term growth beyond the 2029 target. Early cancer detection (FIND trial) is not expected to be a major contributor in 2028/2029 due to timeline; growth will come from existing US/ex-US businesses and ASP/volume increases. Regarding the transition, Solomon explained it was a planned move from strength, agreed upon by Steve and the board.

Q: Daniel Markowitz asked for updates on remaining MolDX submissions post-HCC coverage, their aggregate revenue potential for 2027/2028, and the gross margin trajectory through 2029 amidst new product COGS. / A: Solomon expressed confidence in upcoming submissions but declined to predict specific timing or order. Mike Brophy confirmed multiple submissions are in flight, viewing them as key upside drivers for ASPs. On margins, Brophy reiterated a path to >70% gross margins long-term. He acknowledged short-term COGS dilution from new products but emphasized solvable cost reductions in 18-24 months and anticipated ASP improvements that will offset these costs.

Q: Casey Woodring asked for components of the $6B growth plan and details on OPEX allocation for building the pharma/data business. / A: Mike Brophy outlined growth components: steady non-oncology growth, Signatera ASP/volume expansion, and repeat customer base benefits. Solomon added that pharma/data should contribute several hundred million dollars by 2029. He highlighted Natera's unique data asset (half-million+ patients, longitudinal genomic/clinical data) as valuable for trial design and patient stratification, requiring investments in data abstraction and commercial teams.