01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Natera, Inc. (Nasdaq: NTRA) reported total revenues of $391.0 milliona for 2020, up from $302.3 million in 2019 and $257.7 million in 2018.
Product revenues were $367.2 millionb, which the filing says are primarily generated from testing in women's health, with Panorama (non-invasive prenatal test) and Horizon (carrier screening) together representing the significant majority of revenues. Net loss widened to $229.7 million in 2020 from $124.8 million in 2019, and the accumulated deficit reached $929.3 million at year-end. Stock-based compensation was $50.2 million in 2020.
The company is expanding beyond women's health into oncology, with its Signatera molecular residual disease test commercialized in 2019, and organ health, with its Prospera kidney transplant rejection test launched in 2020. The filing describes a cloud-based Constellation distribution model, which it says has been adopted more slowly than anticipated, with fewer than 20 licensees using it commercially for NIPT as of January 31, 2021. The company also highlights a 2.25% convertible senior notes offering of $287.5 millionc due 2027, issued in April 2020, and a September 2020 equity offering of $271.0 million net proceeds.
Management states that existing cash and marketable securities of $48.9 milliond and $688.6 million, respectively, are sufficient for at least 12 months after February 25, 2021. Key risks flagged in the filing include reliance on Panorama and Horizon, reimbursement pressure for microdeletions testing under a new CPT code, sole-source dependence on Illumina sequencers and Streck blood collection tubes, and multiple patent litigation matters, including suits with CareDx, ArcherDX, Progenity and Ravgen. The COVID-19 pandemic is described as having significantly reduced test volumes in early 2020, though 2020 test volumes ultimately increased year over year.
02—Key points
Key Highlights
- Total revenues rose to $391.0 million in 2020, up 29% from $302.3 million in 2019 (the filing states the 29% change).
- Product revenues of $367.2 million made up 94% of total revenues in 2020, with Panorama and Horizon representing the significant majority of revenues.
- Net loss increased to $229.7 million in 2020 from $124.8 million in 2019; accumulated deficit stood at $929.3 million at December 31, 2020.
- Cash, cash equivalents and restricted cash of $48.9 million plus $688.6 million in marketable securities; management says this is sufficient for at least 12 months after February 25, 2021.
- Issued $287.5 million of 2.25% Convertible Senior Notes due 2027 in April 2020 and repaid the $75.0 million OrbiMed 2017 Term Loan with proceeds.
- Expanded into oncology (Signatera, launched commercially in 2019) and organ health (Prospera, launched in 2020), with Medicare coverage for Prospera covering all kidney transplant recipients.
- Constellation cloud-based licensing model had fewer than 20 NIPT licensees using it commercially as of January 31, 2021, which the filing describes as slower adoption than anticipated.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 26, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $391.00M$302.33M | +29.3% |
| R&D Expenses | $100.03M$51.36M | +94.8% |
| SG&A Expenses | $303.63M$206.18M | +47.3% |
| Operating Expenses | $607.28M$418.62M | +45.1% |
| Operating Income | -$216.28M-$116.29M | −86.0% |
| Interest Expense | $15.08M$10.69M | +41.0% |
| Net Income | -$229.74M-$124.83M | −84.0% |
| EPS (Basic) | $-2.84$-1.79 | −58.7% |
| EPS (Diluted) | $-2.84$-1.79 | −58.7% |
| Shares Outstanding (Basic) | 81.01M69.56M | +16.5% |
| Shares Outstanding (Diluted) | 81.01M69.56M | +16.5% |
05—Questions
Frequently Asked Questions
What drives Natera's revenue?
Product revenues from genetic tests, primarily Panorama NIPT and Horizon carrier screening, accounted for $367.2 million or 94% of 2020 total revenues. Insurance carriers were the largest payer category at $300.2 million of 2020 revenues.
Why is the company still loss-making?
The filing attributes losses to ongoing investment in research and development and commercialization of new products, particularly in oncology and organ health. Operating expenses rose to $607.3 million in 2020, including selling, general and administrative expenses of $303.6 million and research and development of $100.0 million.
How is reimbursement a risk for the business?
The filing says many third-party payers do not reimburse for microdeletions screening, and microdeletions reimbursement has been low under a new CPT code. It also notes that Horizon reimbursement has declined under a 2019 expanded carrier screening CPT code, and that prior authorization requirements have reduced or delayed reimbursement amounts.
What dependencies create operational risk?
The filing states that Illumina is the sole supplier of sequencers and related reagents for many tests, and that Streck is the sole supplier of blood collection tubes used for Panorama. It also notes that Signatera and Prospera are currently performed only at the San Carlos, California facility, with no backup facility for those tests.
What litigation is the company involved in?
The filing describes multiple patent and advertising lawsuits, including the Illumina litigation settled in May 2020, ongoing patent litigation with CareDx (trial date April 25, 2022), suits against ArcherDX, Progenity, Genosity and Inivata, and a suit filed by Ravgen. The filing states it cannot predict outcomes or provide assurance of favorable resolution.
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