01—Abstract
Summary
Summary of the 10-K filed March 24, 2016. Cited figures are marked; the original filing is the authoritative source.
Natera, Inc. (NTRA) reported net revenues of $190.4 milliona for 2015, up from $159.3 million in 2014 and $55.2 million in 2013, but a net loss widened to $70.3 million in 2015 from $5.2 million in 2014.
Panorama, its non-invasive prenatal test (NIPT), generated $139.6 millionb, or 73% of 2015 revenues. The company accessioned over 254,000 Panorama tests in 2015 and reports growth in its U.S. direct sales channel, which rose to 77% of revenues from 59% in 2014. Management notes that revenue growth in the U.S. and internationally has slowed, with product revenues up about 6% in the fourth quarter of 2015 compared with the prior-year period.
The balance sheet strengthened after the July 2015 IPO, which raised $178.5 millionc net of underwriting discounts and offering expenses. Total stockholders' equity was $184.8 million at year-end 2015, compared with a deficit of $171.3 million a year earlier. Cash, cash equivalents and short-term investments totaled about $230.5 million, and the company repaid its senior secured term loan in October 2015 with borrowings under a $50.0 million UBS credit line, which had $42.0 million outstanding at year-end.
Management states that existing cash and marketable securities are sufficient for at least the next 12 months. Key risks highlighted include dependence on Panorama, reimbursement that is mostly negative for average-risk pregnancies and for microdeletion screening, possible FDA regulation of laboratory-developed tests, sole-source reliance on Illumina for sequencers, and pending securities class actions tied to the IPO and a patent lawsuit with Sequenom.
02—Key points
Key Highlights
- Total revenues rose to $190.4 million in 2015 from $159.3 million in 2014, and net loss increased to $70.3 million from $5.2 million.
- Panorama accounted for $139.6 million, or 73%, of 2015 revenues, with over 254,000 Panorama tests accessioned during the year.
- U.S. direct sales force generated approximately 77% of revenues in 2015, up from 59% in 2014 and 45% in 2013.
- The July 2015 IPO raised $178.5 million net; stockholders' equity moved to $184.8 million at December 31, 2015 from a deficit of $171.3 million.
- The company repaid its $20.0 million senior secured term loan (with $28.0 million total payment to ROS) in October 2015, funded by a $32.0 million draw on a $50.0 million UBS credit line, plus $10.0 million drawn in November 2015.
- Reimbursement remains a key uncertainty: most third-party payers had negative coverage determinations for average-risk pregnancies, and some do not reimburse microdeletion screening.
- Two purported class action lawsuits were filed in February and March 2016 under the Securities Act relating to the IPO registration statement, and a patent infringement lawsuit with Sequenom remains pending.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2015, Natera lost $0.37.
- Revenue$190.4M100.0%
- Cost of revenue−$112.8M59.3%
- Gross profit$77.5M40.7%
- Operating costs−$137.3M72.2%
- Operating income−$59.8M31.4%
- Interest, other & tax−$10.4M5.5%
- Net income−$70.3M36.9%
04—Financials
Financial Highlights
Figures from 10-KFY2015filed March 24, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $190.35M$159.29M | +19.5% |
| Cost of Revenue | $112.84M$78.40M | +43.9% |
| Gross Profit | $77.51M$80.89M | −4.2% |
| R&D Expenses | $27.71M$17.29M | +60.3% |
| SG&A Expenses | $109.64M$62.94M | +74.2% |
| Operating Expenses | $250.19M$158.62M | +57.7% |
| Operating Income | -$59.84M$665K | −9098.2% |
| Interest Expense | $3.50M$4.22M | −16.9% |
| Net Income | -$70.28M-$5.15M | −1264.0% |
| EPS (Basic) | $-2.68$-1.07 | −150.5% |
| EPS (Diluted) | $-2.68— | — |
| Shares Outstanding (Basic) | 26.20M4.80M | +445.9% |
| Shares Outstanding (Diluted) | 26.20M— | — |
05—Questions
Frequently Asked Questions
How quickly is Natera's revenue growing, and is growth slowing?
Revenue grew to $190.4 million in 2015 from $159.3 million in 2014, a $31.1 million increase, primarily from higher Panorama volumes. The filing states that the rate of growth in product revenues has decreased, remaining relatively flat in the third quarter of 2015 versus the prior year and growing about 6% in the fourth quarter of 2015 versus the prior-year quarter.
Why did the net loss increase in 2015?
Total cost and expenses rose to $250.2 million from $158.6 million, led by selling, general and administrative expenses of $109.6 million (up from $62.9 million) and cost of product revenues of $112.8 million (up from $78.4 million). Other expense, net of $7.9 million, included debt extinguishment costs from repaying the senior secured term loan.
How dependent is the company on Panorama?
Very dependent. Panorama represented 73% of 2015 revenues, 73% of 2014 revenues and 56% of 2013 revenues. The filing says the company expects a significant portion of revenues to continue to come from Panorama at least in the near term.
What is the company's liquidity position?
At December 31, 2015, the company had $28.9 million in cash and cash equivalents, $0.9 million of current restricted cash and $201.6 million of short-term investments. It carried $42.0 million of short-term debt under its UBS credit line. Management believes existing cash and marketable securities will be sufficient for at least the next 12 months.
What legal matters could affect investors?
Two purported class action lawsuits filed in San Mateo County Superior Court in February and March 2016 allege that the IPO registration statement and prospectus contained misleading statements. The company cannot predict the outcome or estimate potential loss. Separately, the company continues to litigate with Sequenom over the '540 patent; the Court of Appeals for the Federal Circuit affirmed invalidity as to the company, and Sequenom filed a Supreme Court certiorari petition on March 21, 2016.
06—Continue