01—Abstract
Summary
Summary of the 10-K filed March 2, 2020. Cited figures are marked; the original filing is the authoritative source.
Natera, Inc. (Nasdaq: NTRA) reported 2019 total revenues of $302.3 milliona, up from $257.7 million in 2018 and $209.6 million in 2017, while its net loss narrowed to $124.8 million from $128.2 million in 2018 and $137.6 million in 2017.
Reproductive health revenue was $269.9 millionb, and the company describes Panorama and Horizon as the significant majority of its revenues. The company's accumulated deficit reached $699.2 million at December 31, 2019, and it states it has never paid cash dividends and has incurred net losses each year since its 2003 inception. The company is expanding beyond prenatal testing into oncology (Signatera, a ctDNA test for molecular residual disease, commercially launched for clinical use in May 2019) and transplant rejection (Prospera, which received a final Medicare local coverage determination in December 2019 and is slated for a full-scale commercial launch in 2020).
Revenue growth in 2019 was driven by product revenues of $269.9 millionc (up 12.3%) and licensing and other revenues of $32.4 million (up 87.7%), which included license and development services from new strategic partnership agreements with BGI Genomics and Foundation Medicine. Management states that Panorama's average-risk and microdeletions reimbursement remains low and uncertain, and that a CPT code for microdeletions has pushed payer reimbursement lower. Liquidity improved substantially: the company ended 2019 with $62.0 million in cash, cash equivalents and restricted cash and $379.1 million in short-term investments, after equity offerings in April and October 2019 that generated net proceeds of $108.1 million and $216.2 million.
Against this, it carried $123.8 milliond of debt including accrued interest, comprising the $73.7 million 2017 Term Loan and $50.1 million drawn on its UBS Credit Line. Management believes existing cash and marketable securities will suffice for at least 12 months after February 28, 2020. The company also notes it is no longer an emerging growth company and that it is party to multiple patent and false advertising lawsuits, including with Illumina and CareDx.
02—Key points
Key Highlights
- Total revenues rose 17.3% to $302.3 million in 2019, with product revenues of $269.9 million and licensing and other revenues of $32.4 million (up 87.7%).
- Net loss narrowed to $124.8 million in 2019 from $128.2 million in 2018 and $137.6 million in 2017; accumulated deficit stood at $699.2 million.
- Panorama and Horizon together represent the significant majority of revenues, and the company reported 804,300 tests processed in 2019 versus 668,600 in 2018.
- Cash, cash equivalents and restricted cash of $62.0 million plus $379.1 million in short-term investments at year-end 2019, following equity offerings of $108.1 million (April) and $216.2 million (October) net of underwriting discounts.
- Total debt of $123.8 million including accrued interest, comprising the 2017 Term Loan ($73.7 million) and the UBS Credit Line ($50.1 million).
- Oncology (Signatera) commercially launched for clinical use in May 2019; Prospera transplant rejection test received a final Medicare LCD in December 2019, with full commercial launch planned for 2020.
- Average-risk NIPT and microdeletions reimbursement remain limited; the company expects microdeletions reimbursement to stay low in the near term under the CPT code.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 2, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $302.33M$257.65M | +17.3% |
| R&D Expenses | $51.36M$51.35M | 0.0% |
| SG&A Expenses | $206.18M$154.87M | +33.1% |
| Operating Expenses | $418.62M$372.28M | +12.4% |
| Operating Income | -$116.29M-$114.63M | −1.4% |
| Interest Expense | $10.69M$10.48M | +2.1% |
| Net Income | -$124.83M-$128.15M | +2.6% |
| EPS (Basic) | $-1.79$-2.22 | +19.4% |
| EPS (Diluted) | $-1.79$-2.22 | +19.4% |
| Shares Outstanding (Basic) | 69.56M57.85M | +20.2% |
| Shares Outstanding (Diluted) | 69.56M57.85M | +20.2% |
05—Questions
Frequently Asked Questions
How much revenue did Natera generate in 2019 and how did it grow?
Total revenues were $302.3 million in 2019, compared with $257.7 million in 2018 and $209.6 million in 2017. Product revenues were $269.9 million, up 12.3%, and licensing and other revenues were $32.4 million, up 87.7%, driven largely by new strategic partnership agreements.
Is Natera close to profitability?
No. The company reported a net loss of $124.8 million in 2019 and states it expects to continue incurring losses for the foreseeable future. Its accumulated deficit was $699.2 million at December 31, 2019.
Does Natera have enough cash to fund operations?
Management believes existing cash, cash equivalents and marketable securities will be sufficient to meet anticipated cash requirements for at least 12 months after February 28, 2020. The company ended 2019 with $62.0 million in cash and equivalents and $379.1 million in short-term investments, but also carries $123.8 million of debt.
What are the main risks around reimbursement?
Many third-party payers do not reimburse for NIPT in average-risk pregnancies or for microdeletions screening, and the CPT code for microdeletions has resulted in low reimbursement rates. The company also notes that prior authorization requirements and payer recoupment requests have affected revenues and collection trends.
What are Natera's growth prospects beyond prenatal testing?
The company is pursuing oncology with Signatera, a personalized ctDNA test for molecular residual disease, which was commercially launched for clinical use in May 2019, and transplant rejection with Prospera, which has a final Medicare LCD and is planned for full commercial launch in 2020. Both are in fields new to the company, and the filing states it cannot assure their success.
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