NTRA earnings call transcript, November 5, 2026

Good afternoon.

Thank you for joining our conference call to discuss the results of our third quarter of 2026. On the line, I'm joined by Steve. Chapman, Solomon Moskovich, and Alex Alessian. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor.matera.com. A replay of the call will also be posted to our IR website as soon as this is through the course of this conference call, we will make forward-looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook, market size, partnerships, clinical studies, and expected results, opportunities, and strategies and expectations for various current and future products. including product capabilities, expected release dates, reimbursement coverage, and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, including from our most recent form 10K or 10Q and the form 8K filed with today's press release. Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward-looking statements.

Forward-looking statements made during the call are being made as of today, November 5th, 2026. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. The narrative claims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the order unless we do so in a public forum. We will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year on your comparison. And now I'd like to turn the call over to Steve. Steve.

What's next for me? I'm going to remain engaged as a consultant here with the company as an and as an advisor to the board and will be actively involved in making sure Solomon and the team have everything they need to be successful. There's a lot to look forward to. In the near term, we are on track to launch Signature in Japan. We have several multi-ex submissions underway to expand access for more patients and we're seeing incredible growth in both clinical and pharma product lines. Next year, we expect to unlock the next major driver for the company and deliver our FDA enabling fine study results in early cancer detection. I'm looking forward to staying connected here. as we achieve that. Okay. Now I'm pleased to be the first person to introduce Solomon as the CEO of Natera to take us through the results of an outstanding third quarter. Solomon. Steve, I set the handoff with great. honor and admiration for what we've accomplished together in the past 15 years under your superb leadership. When I first joined the company back in 2011, before the launch of panorama, we were only about 45 people. Steve mentioned he and I shared an office where we could hear each other making cold calls and solving problems for IVF centers around the world. How far we've come.

Thank you for your mentorship and I'm grateful to have your support over the months to come. Everyone, I'm honored to serve as Natera's third CEO. In Natera, we are building an enduring healthcare company, transforming the practice of medicine by enabling earlier, more targeted interventions for those who need it. And by reducing unnecessary treatment for those who do not. In the coming years, we will improve both treatment and prevention by generating more diagnostic insights from every blood and tissue specimen, developing novel technologies and applying them in entirely new patient populations, integrating more seamlessly at the point of care, and doing it globally. It is a worthy mission, and I am proud to be on it with our 6,500 employees. To all of NTRA's employees, clients, partners, investors, and most importantly to our patients.

Thank you for your trust.

Turning now to the highlights from the quarter. It was an exceptional quarter. We processed approximately 1.1 million tests in the third quarter, up more than 22% from about 894,000 a year ago. Clinical MRD units reached approximately 316,000 compared with 202,000 in the third quarter of last year for growth of 56%. That was up about 33,000 units over the second quarter, which makes this the second quarter in a row with more than 30,000 sequential units and adjusted for the Q1 weather impact that inflated the Q2 number. I think this is the best quarter we've even had for MRV clinical growth. We generated $794 million in revenue, up approximately 34% over the $592 million that we reported in Q3 of last year. But excluding the true ups, revenues grew north of 40% year over year. Burst margin was approximately 65%, driven by strong organic improvements in both COGS and ASPs. True ups fell to about $32 million this quarter, down from $52 million in the second quarter. Burst margins held at 65%. Burst margin was at 63.2%, which is up about 140 basis points just from the second quarter. We generated cash again in the quarter and narrowed our loss. significantly, even as we continue to invest aggressively in our future growth. Given the strength of the results, we are raising the revenue guide by approximately $140 million at the midpoint, which means we expect to be above $3 billion for the year. Mike will take you through the specifics of this later in the call. Finally, I'm excited to set a bigger long-term goal for the company. We're setting the goal to double revenues in the next three years.

Reaching $6 billion in revenue in 2029. I look forward to spending more time on this call to discuss how we'll get there. Okay. On the next slide, we'll get into the business trends, starting with overall volumes. I think this chart tells the story well. Quarter of 2020, we processed about 262,000 tests. This quarter, it was about 1.09 million, more than four times that level. And it's a new company record. Obviously, Signatera continues to accelerate. And I'll cover that in a moment. But we were also pleased to see continued growth in Women's Health and Oregon Health, where Women's Health posted another strong quarter of mid to high single-digit growth. And Oregon Health grew volumes almost 40% compared to this time last. Driving that growth in Women's Health is the continued momentum from our product launches, the fetal focus late last year, together with the new integrated deep sequencing feature that delivers results at the lowest fetal fractions. In Oregon transplant monitoring, we're seeing growth coming from the Medicare coverage of surveillance, which was announced in July, and which took effect on August 30th. This has had a positive impact on both volumes and ASPs. On the oncology front, the next slide shows clinical MRV volumes in more detail. Approximately 316,000 units in the quarter, including both Signatera and Latitude MRV. As I mentioned earlier, this means we added about 33,000 units sequentially versus Q2. You'll recall that last year we made a big push to get the commercial team up to scale.

That's similar to other specialty diagnostics labs, and those reps were fully onboarded and productive by Q2. Given the number of productive reps in the field was held basically flat. I'm particularly pleased to see the volumes. What's driving that growth is that we continue to see excellent increases in both new accounts and new patient starts, as well as continued performance and subsequent repeat testing. This acceleration has happened across tumor types. Colorectal and breast cancers remain our largest indications, but I continue to be really encouraged by the contributions from the new indications because it demonstrates broader adoption of Signatera in clinical practice. And also because it increases revenue opportunity as we expand coverage to additional tumor types. On the next slide, we show year-on-year unit growth in MRD, meaning how many more clinical MRD units we process in each quarter versus the same quarter a year. I like this view because it corrects for a lot of the noise that creeps into a quarter-to-quarter comparison. Seasonality can be an obvious one, but then there's also weather like the January storms this year that held back Q1 and inflated the Q2 sequential number. So when you compare against the same quarter last year, those variables tend to wash out, and I think what's left is a very clear picture of the underlying trend, which shows that Q3, where we grew 113,000 units year over year, represents real acceleration over growth in prior quarters.

Okay, let's turn to revenue on the next slide. This shows that our total revenue progression over time. Gap revenues of $794 million were up about 34% year over year and up 42% excluding true ups. This growth compares favorably to prior years, despite a larger revenue base, which is really impressive when we think about the continued pace of expansion, growing across three businesses, hitting roughly 65% gross margin, generating cash, and investing in a deep pipeline of new products. at the same time. Growth at the scale that's so diversified and pays for itself is rare. Driving this revenue growth in Q3 has been the ASP improvements as well as volumes. Signaterra ASP stepped up again. to approximately $1,290 up from $1,271 in the second quarter and we continue to see a long-term path to $2,000 ASP and beyond as MRD is adopted increasingly into the practice guidelines and as insurance coverage further expands like we saw. with the new Medicare coverage in liver cancer. Turning to the next slide where we show gross margin fraction. Reported gross margin was approximately 65% up about 20 basis points sequentially. Including true ups, gross margin was 63.2%, which is up about 140 basis points from the second quarter. So that's a very positive underlying execution. There are a few drivers here. We continue to see a sequential step up in Signatera ASPs, as I just mentioned. But also, the lab continues to deliver leverage as we scale volumes on some of our recent product launches, as we pick up efficiencies, and as we renegotiate with some of our large suppliers. We've got a lot more work to do here going into 2027.

Mike will describe some of those efforts in a few minutes. Moving to the next slide, Medicare has granted coverage for serial use of Signatera in patients with early stage hepatocellular carcinoma. HCC in the surveillance setting. This is a disease that affects nearly 40,000 new patients per year in the U.S., of which approximately three quarters are diagnosed as early stage one through three, making this a meaningful population. That's about the same or slightly larger than muscle-invasive bladder cancer. The coverage was granted based on the strength of our published data from a multi-institutional study in JCO Precision Oncology, which showed that Signatera significantly outperformed standard of care imaging, as well as the serum. biomarker AFP. HCC is generally treated by GI oncologists and GI surgeons. Naturally, our sales and medical affairs teams are already well established within the GI community, so that means we are well positioned. It's worth noting also that this is the first new indication covered by MoldiX since we announced the lung cancer coverage in early 2025. We've been working with MoldiX on this indication since the fall of 20. 25 approximately a year ago, and we expect many more to come, which are currently in progress. We're pleased that the new MoldiX team is appreciating the strength and the validity of our real world evidence, but looking. Ahead, the next big reimbursement event that we expect will likely be in Japan, not in the US. In Japan, we are on track with the launch of colorectal cancer and muscle invasive bladder cancer, as you can see on the next.

Next slide. We were pleased to announce regulatory approval of bladder in the third quarter. Now we're working with the health ministry to finalize reimbursement and pricing, where we expect to have an update at the JP Morgan conference, if not sooner. The colorectal and bladder indications have now been consolidated into one pricing discussion. with the ministry, which we think is a positive development, and we expect the number of covered time points per patient to differ by indication. Our commercial team partners in Japan, as well as the medical community itself, are poised and ready once we have a green light to start offering the test to clinics. Moving to the next slide, over the last nine months, we've seen a real surge in biopharma demand for our MRD technology in clinical trials. After several years of relatively flat pharma revenue, the first three quarters of this year are already up roughly 70% over all of 2025, with a strong Q4 expected as well. In vigor over . . . The Q1-1 trial really helped open the floodgates. Readout last year and the companion diagnostic approval this year proved that MRD-guided trials are feasible and that NICARA can deliver on the regulatory front. We've since announced a string of Phase I, II, and III pharma studies, with more that are not yet public, many of which are recruiting directly from our commercially tested patient population. We're also seeing real momentum in matching patients.

to clinical trials, as well as data licensing and trial design services that are built on our real-world data asset. And we think the time will come when FDA adopts Cignatera MRD status as a primary endpoint. and a surrogate endpoint, which can be worth billions to a drug developer and can be life saving for patients. I expect pharma and data licensing partnerships to increase meaningfully in 2027 and beyond. So our investments in the tech The team and the capacity that our pharma clients need has been a key driver for us adding OPEX through the course of this year compared to our initial plan. Furthermore, we think the debate over Signature's technical leadership and analytical performance is largely settled now after the launch of Signature genome with phased and structural variants, which has certainly helped with biopharma as well. Before I hand it over to Alex, I would like to expand a bit on the goal that we set out at the top of the call to double our revenue to $6 billion.

Thanks, Solomon.

Moving to the next slide. This quarter, we're completing the most significant upgrade to the Signatera products since launch. And I want to spend a moment on why it matters. When we integrated phased variants into Signatera, the question was whether we could take the most... clinically validated MRD tests in the field and push its sensitivity to a level that hadn't been achieved before. The answer is yes. Signatera genome with phased and structural variants has an LOD95 sub one part. per million and we're detecting ctDNA well below that. Less than one tumor fragment in 10 million. Not long ago, most of the field considered that out of reach for a clinical assay. More importantly, the clinical data is now arriving. And it's exceptional. You'll see this assay behind several of the ESMO readouts on the next slide. Performing across cancer types and the cadence will accelerate because we've embedded it across sponsored studies, as well as pharma partnerships. Pharma interest has also been broad and immediate. It has already been selected for several global phase three programs, including the AFT 70 navigate study. So the launch is on track and we're building the next generation of signature evidence on the most sensitive platform in the field. Moving to ESMO on the next slide. This was one of the strongest meetings we've had 25 abstracts featuring the terror technology. Nine oral presentations, including the presidential symposium and simultaneous publications in Nature Medicine and ESMO open the theme across the data is consistent. Signatera is no.

Longer just prognostic. It is changing treatment decisions in Sagittarius and ongoing phase three trial of a CT DNA guided adjuvant strategy in high risk stage two and stage three colon cancer patients. We saw an early look at the physicians choice arm among the first 205 patients, one in three had their adjuvant plan changed after a negative signature result and 87% of those changes were deescalations, including nearly a quarter of page.

The primary readout is still a few years away, but the behavioral signal is already clear. Signatera is changing how CRC is managed. In Volga, an AstraZeneca-funded Phase III trial in bladder cancer, an exploratory retrospective analysis on the Signatera genome with phase and structural variance product showed that patients who were Signatera negative before cystectomy had a 24-month event-free survival of 91%, identifying an ultra-low-risk population that in the future may benefit from de-escalation, including bladder preservation. This is now the third Phase III trial in muscle-invasive bladder. cancer alongside in vigor 11 and keynote B15 to show consistent results with signatara in this cancer type. Professor Tom Powell of Barts Cancer Institute, one of the leading voices in bladder cancer and the presenting author of Volga, said that ctDNA is becoming an increasingly important tool in our armory in bladder cancer. And that role only grows as the field moves toward bladder sparing approaches. And across 10 tumor types as signatara guided a reflex strategy to liquid comprehensive genomic profiling. delivered actual biomarker findings at the moment of molecular recurrence. We believe this will open up a new indication in MRD guided patient management. Namely identifying resistance mutations ahead of clinical recurrence when patients are potentially most likely. to benefit from early therapeutic intervention. Turning now to breast cancer, where we continue to step our investment as shown on the next slide. Last quarter, I introduced signal ER 101, the first.

interventional trial Natera is running end to end. Today, I'm pleased to add AFT70 Navigate in partnership with Genentech and the Alliance Foundation for Cancer trials to that list. Here's the clinical problem. In stage two and three ER positive HER2 negative breast cancer, higher risk patients to receive a CDK4-6 inhibitor on top of endocrine therapy after definitive treatment. These are difficult, expensive drugs, and many of the patients receiving them were already cured. Navigate asks whether Signetera can identify who may be able to step down from this type of treatment. Navigate is a natural complement to the Signal ER-101 study, which holds back the CDK4-6 inhibitor and adds it only when Signetera turns positive. Navigate tests the same principle in a slightly different patient population with randomization and with the next generation. oral CERD, juridestrin, as the endocrine backbone. Together, the two studies approach the same question from both sides. The response from key opinion leaders around the world has been tremendous. And it is a testament to the level of evidence we're committed to generating. NAVIGATE is one of the many potentially practice changing studies we're investing in. Our sponsored study portfolio is expanding into endometrial, immune therapy optimization, LUN, and... Renal cell cancers, with several slated to open over the next few quarters. We'll announce each as it opens. From a business standpoint, breast is our second largest indication, and the path to broader guideline inclusion and commercial coverage runs directly through trials like these.

On the next slide, we highlight progress in our next year of cancer indications because after years of investment in these histologies, the data is finally maturing and is generating real excitement in the clinic. In head and neck cancer, three recent peer-reviewed publications showed excellent performance across both HPV positive and HPV negative disease types with a hundred percent specificity and this data builds on the perspective phase two synergy trial presented last February. This is especially important, given that some other labs are limited to monitoring only HPV positive head and neck cancer subtypes, a minority of the population, while with Signatera we're seeing comparable performance. Regardless of viral status in lymphoma, a new blood neoplasia publication covered 144 patients across 14 subtypes and showed 100% positive predictive value for. Treatment response monitoring versus 62% for PET CT scans as well as detecting recurrence months ahead of imaging. Why does this matter? Colorectal and. Breasts get the most attention because they're the biggest indications, but head and neck and lymphoma each add tens of thousands of new U.S. patients a year. And in both indications, recurrence is hard to catch with standard surveillance techniques. This is exactly where they are highly specific tumor informed. The test adds the most value. Finally, two milestones in early cancer detection as outlined on the next slide. First, the fine study. We said in May and August that we would complete enrollment in the third quarter. And we did. The studies fully enrolled with 30,000 patients.

in the PMA cohort. The population we needed for a definitive colorectal cancer readout, which we're progressing towards in 2027. Second, in October, the FDA granted breakthrough device designation to our multi-cancer early detection assay. We're pleased to see the agency recognize the data behind the program and the designation gives us a more collaborative expedited path forward. Both programs are on plan and position to support FDA submissions. We'll have more to share as the data matures with that. Let me hand it over to Mike to walk us through the financials. Mike. Great.

The next slide is a summary of the financial results for the quarter. Solomon touched on the revenue growth, which was north of 40% once again. This quarter extra. I was pleased to see the trips come down meaningfully in the quarter, as this shows we've been able to incorporate some of the recent ASP outperformance into our quarterly revenue accruals. Gross margins tell the same story where extra would make significant progress on the underlying organic growth. I was pleased to see our losses continue to narrow even as we aggressively invested in future growth. You can see our losses narrow substantially compared to Q2 and even more so compared to our third quarter 2025. I think that gives you some sense of the future potential of this business to scale. The next slide is a breakdown of where the spend is focused in both R&D and SG&A. What sticks out to me in the SG&A stack is a lot of our investments are now much closer to being fully scaled in terms of our commercial build out for oncology, which we paired this year with a step up in our investments in the team to respond to all the pharma and data demands Solomon described. Within SG&A, we also have a number of cash and non-cash adjustments related to items that I would argue don't have a big impact on operations going forward and won't necessarily repeat each year. On the R&D stack, what strikes me about this chart is how forward looking a lot of this investment really is.

We could scale this back by 70% or more and it wouldn't really harm the business for the next two years. Given the speed with which we are growing gross profit dollars in Signatera, we have the ability to invest in longer duration, truly practice-changing clinical trials that will further cement Signatera as the gold standard for many years to come. Of course, the largest single example of our future ambitions is the spin for early cancer detection. We think the fine study can be the anchor that establishes an entirely new growth vector for the company, and the guide describes how we now have breakthrough device designations. in a range of populations that will once again massively expand the size of our addressable markets. At the moment, of course, it's more than 100 million in spend that generates zero revenue. So investments like this tend to hide the success we're already having and achieving scale just for the time being.

Let's get to the guide on the next slide. Given the strength of the third quarter, we are raising our full year 2026 revenue guidance to a range of 3 billion 5 million to 3 billion 35 million, up from the 2.85 billion to 2.91 billion. on our last call. That's an increase of 140 million at the, at the midpoint. Now clearly in the $3 billion range for the full year, which is an exciting milestone for the company. The guide takes our usual cautious approach. We are assuming steady ASPs and continued volume growth. And as usual, the guide does not include any. I think we will continue to have some contribution from trips and Q4, but we'll continue to leave them out of the guide for simplicity on gross margins. We are continuing to hold steady centering in 64 to 66%. I think there. some scope for continuing progress on the cause components we described earlier, and that's balanced by leaving true ups out of the model for the guide. On OPEX, in addition to the ramp of our clinical business, the team showed you the. This were results of this enormous influx of pharma and data business demand we've seen this year, catalyzed in part by the readout of Invigor and its subsequent publication in the New England Journal of Medicine. This is great news for all the reasons we described and in order. In order to support this demand, we've accelerated a lot of investments in our pharma specific offerings, commercial team and operations that drive both capex and operating expenses higher this year, even compared to the ambitious plans we had.

In place earlier in 2026, we are going to bump the top end of the range of R&D by 25 million and I remain biased toward the top end that bump reflects the expanded effort in pharma and data services, the time. of enrollment of a number of MRD clinical trials that we have been able to accelerate and costs associated with the fine trial on SG&A, we're going to bump from 1.225 billion to 1.3 billion at the top end. We've had some one time expenses related to legal spend that since they are now. tools I want to incorporate in the guide at this point, along with additional investments we've made in the pharma commercial teams and some new commercial initiatives for Signaterra clinical that we think can pay dividends as we move into 2027. Overall, I think we have some room for outperforming. on the top line, given the strong start we have had in Q4 for Signaterra volumes. If we can continue to make progress on margins, I think it will be possible for us to continue to deliver another quarter of positive free cash flow and improving. EBITDA and Q4. Given the momentum we are seeing now, I expect 2027 to be another growth year across the board. For preliminary planning purposes, I'd stick with our standard approach to revenue. We can grow the same number of units we grew this year and hold ASP relatively steady. I'm more optimistic than that, specifically for Signaterra ASPs. For example, I think the win we announced this week in Liberty

for cancer bodes very well for several of our other Molde-X submissions. But at this point in the forecasting cycle, it's prudent to recognize that diagnostics can be a tough business and there's no rule that ASPs always have to improve in a linear way despite our success in recent years. On gross margins, for now, I would pencil in the same range as we are guiding for 2026. In a middle of the road scenario, I expect a few puts and takes on gross margins. I already mentioned ASPs, which have the potential to outperform, particularly on Signatera. On COGS, I think we are well positioned to continue to make progress along the same types of work streams we've described with this Q3 result, balanced with the potential that demand for some of our newer products like fetal focus and Signatera genome. come in ahead of schedule as we continue to experience higher cogs on those new products in the immediate term. It's important to understand that we would be willing to weather some short term pressure on cogs because we have development efforts. ready in flight to reduce the cogs for these new products over the next 18 to 24 months, and we have ample room to significantly grow asps over that same time horizon. I've got a very modest assumption for troops in this base case 2027 scenario. I expect we will continue our efforts to sunset those troops. On OpEx, we are going to keep our foot on the gas. We discussed the huge inflow of demand we are seeing for our pharma and data service offerings, and we've accelerated a bunch of these high ROAC investments there.

to meet our customers' needs. We've got a big year scheduled for MRD and early cancer detection trials. In addition to the development work, readout, and FDA submission work for FIND, Solomon and Alex mentioned the breakthrough device designation we've now secured in a broader range of populations. for early cancer detection. On the commercial side, we will selectively add to our oncology effort and largely hold our Oregon Health and Women's Health team steady. I think the net impact of all these initiatives imply OPEX growth in the 10 to 12% rate. range next year, which should allow us to continue to be cash flow generative while deepening our competitive advantages in each of these business areas. Finally, I feel great about the $6 billion revenue target Solomon described when we. Look at the multiple near term catalyst for signature, the volume and ASP potential in our core oncology portfolio, together with more modest growth from our non oncology portfolio, plus significant momentum in pharma and data licensing. I think this is a highly achievable target, even with minimal contribution. from our emerging cancer screening business. So with that, let me pause there and then hand it over to the operator for questions. Operator?

Your first question is...

This question comes from the line of Dan Brennan of TD Cohen. Your line is now open.

Shubho Nambi of Guggenheim. Your line is now open.