Financial Officer. Please go ahead.
Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our fourth quarter of 2022. On the line, I'm joined by Steve Chapman, our CEO, Solomon Moshkevich, General Manager of Oncology, and John Fesko, Chief Business Officer. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investors.natera.com. A replay of this call will also be available at investors.natera.com. Starting on slide two, during 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, 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 our most recent Form 10-K or Form 10-Q and the Form 8-K 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, February 28, 2023. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Natera disclaims 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 quarter 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-over-year comparison. Now I'd like to turn the call over to Steve. Steve?
Thanks, Mike. We had a great year in 2022, both in terms of commercial execution and achieving key milestones. We processed 2.1 million tests, which is year-over-year growth of 32%. Revenues were $820.2 million for the full year, $40 million higher than the midpoint of our initial 2022 guidance, up 31% from 2021, and up 37% when excluding the one-time QIAGEN revenue. Business momentum continued in Q4 with volume growth of 28% and product revenue growth of 28% year-over-year, even off a bigger base and with a difficult year-over-year growth comparison after a very strong Q4, 2021. We performed 196,000 oncology tests in 2022, representing growth of 158% with 64,000 tests performed in Q4.
This demonstrates continued strong sequential growth of 21% or an increase of 11,000 units versus Q3 of 2022. We estimate that now more than 30% of oncologists in the United States are ordering Signatera. We've achieved several key milestones even since our presentation at the J.P. Morgan conference earlier this year. We were very pleased to see our prospective multi-site CIRCULATE study was published in January on the cover of Nature Medicine, which gives you some sense of the excitement that the data is generating in the field. Consistent with our earlier publications in both colorectal cancer and other tumor types, the data showed strong predictive and prognostic value of Signatera 18 months out post-surgery. Solomon will dive deeper into these topics later in the call.
Second, we received confirmation from MolDX that Signatera had met coverage requirements for adjuvant and recurrence monitoring in patients with stage 2 B or higher breast cancer across all subtypes. We estimate that stage 2B and higher population could represent roughly 1 million tests per year. Breast cancer patients already account for a growing portion of our Signatera volume. In addition to the current coverage, we've got a pipeline of data designed to further highlight Signatera's utility and expand coverage in breast cancer. In fact, we expect to publish two large-scale breast cancer studies this year, each with approximately 1,000 plasma samples. In women's health, we were very encouraged to see the American College of Medical Genetics issue updated guidance to include a recommendation that all pregnant individuals be offered screening for 22q deletion syndrome.
ACMG's guideline referenced the strong 22q performance results achieved in the SMART study. We hope to see action by other medical societies later this year as they digest and incorporate the findings of that study. We were also pleased to see another guideline adoption for expanded carrier screening as the National Society of Genetic Counselors recently offered a very strong endorsement. We will get into this in more detail later in the call. In organ health, the International Society for Heart and Lung Transplantation issued new guidelines recognizing the value of donor-derived cell-free DNA with a class 1 level B recommendation. We continue to work towards Medicare coverage for our Prospera Heart test. In addition to heart, we eagerly await the publication of our prospective real-world RenaCARE study, which evaluated Renasight in chronic kidney disease patients.
We expect that study to publish in the first half of this year. Moving to 2023 guidance. We are setting our initial 2023 revenue guidance at a range of $980 million-$1 billion. We expect to generate this continued top-line momentum even as we reduce operating expenses from 2022 levels and dramatically reduce our cash burn. I'm really pleased to inform everyone that we will be guiding to a cash burn reduction of roughly $150 million compared to 2022, and we are reiterating our path to hitting a cash flow breakeven quarter in 2024. As we mentioned previously, we've included about $5 million of annual expense all in for early cancer detection in our budget.
This doesn't include the cost of a new PMA-level prospective study, which we estimate would be about $30 million over two years if required. We said before, we're awaiting the results of our proof of concept study and further feedback from the FDA on the R-house trial. Once we have the results and feedback in hand, we can then decide whether it's necessary to pull the trigger on a stepped-up level of investment. It goes without saying, we wouldn't do that without having very favorable results from the proof of concept study. We are very pleased to announce the appointment of Ruth Williams-Brinkley to our board of directors. Ruth is a seasoned healthcare executive with three decades of industry experience. She currently serves as president of Kaiser Permanente Health Plan of the Mid-Atlantic States, where she oversees regional operations.
She also held leadership roles at large health systems earlier in her career. We are thrilled to welcome Ruth to the board and we look forward to working with her. Okay, great. Let's get into more details on the next slide. In 2022, we processed approximately 2.1 million tests, a 32% increase over a very strong 2021 growth year. This represents strong traction across the businesses, and I think we are well-positioned for continued growth. I'm going to start off talking about women's health. Today, we estimate that roughly half of eligible patients in the United States are getting an NIPT. While that underlying market continues to grow, we've continued to consolidate market share.
As we've also discussed, guideline adoption for 22q and expanded carrier screening are additional opportunities to further expand access and help more patients, and we are pleased to see recent traction in both areas. Let me turn it over to John Fesko, our chief business officer, to discuss some of the latest updates on these topics. John?
Thanks, Steve. In December, the American College of Medical Genetics published a practice guideline that recommended offering non-invasive prenatal screening for 22q deletion syndrome to all patients. The guidelines specifically referenced the SNP-based screening method Natera developed and profiled in our 20,000-patient SMART study, which published last year in the American Journal of Obstetrics and Gynecology. 22q deletion syndrome is the most common microdeletion syndrome in humans, affecting about 1 in 1,500 live births. It is more common than other genetic conditions recommended for routine screening, such as trisomy 18, trisomy 13, cystic fibrosis, and spinal muscular atrophy. 22q deletion syndrome is a leading cause of congenital heart defects, palate issues, immunodeficiencies, endocrine dysfunction, and neurological issues.
Patients born with 22q deletion syndrome may be very challenging to diagnose, with a median age of diagnosis at 4.7 years after seeing on average 7 different clinical specialties prior to molecular diagnosis. Treatment with calcium from birth can prevent seizures and brain damage caused by hypocalcemia. In our SMART study, we saw 83% sensitivity in a 0.05% false positive rate, resulting in a very high positive predictive value of 53%. We're excited about the momentum created by the publication of SMART and ACMG's new recommendation that all patients be offered 22q deletion screening. We believe that 22q deletion screening will be a significant differentiator for Natera.
Natera runs targeted sequencing of SNPs, and we can differentiate maternal from fetal DNA, we can cost-effectively sequence at a much deeper level across the 22q region versus labs simply doing massively parallel signature sequencing. These differences contribute to our high sensitivity, specificity, and PPV. Today, most labs only test for 22q deletions above 2.5 megabases. This is a major limitation because 41% of high-risk 22q results in our SMART study were below 2.5 megabases. Natera is not limited in this way. We've created a significant competitive lead with our published data. To our knowledge, Natera is the only lab who's published a multi-site prospective study of 22q screening with genetic confirmation on the majority of subjects. The SMART study took seven years to complete and publish and will likely never be done again.
To our knowledge, there are no other prospective trials ongoing, in which case this data lead will persist for a long time. We think these significant performance differences will be important to physicians, especially given there is now a guideline recommending 22q be offered to all pregnant women. We believe physicians will place more value on 22q performance going forward. These differentiators may also be important for health plans as we start to see coverage come into place, as we believe will happen. It's possible that payers will limit their coverage to only those 22q tests that have been validated to this extent. Beyond NIPT, we're also seeing guidelines change for expanded carrier screening. Early this month, the National Society of Genetic Counselors published a practice guideline to recommend expanded carrier screening be made available to all individuals considering reproduction.
This follows a recommendation from ACMG in 2021 that expanded carrier screening should be offered to all pregnant patients. We're also seeing these guideline changes lead to medical policy changes at health plans. In fact, just this month, one large benefit manager that covers 15% of commercial covered lives released a new policy that supports the use of expanded carrier screening. There's still work to be done here, the fact that we are now seeing progress is important. Okay, I'll turn it back to Steve to discuss organ health. Steve.
Great. Thanks, Sean. Our initiatives in organ health are going well. We continue to benefit from the publication of the large-scale, multi-site prospective Trifecta study in kidney transplant, which came out last fall. The results of that trial were excellent and appear to have been well-received by the community. In heart transplant, we are excited for the readout of the independent, academically-led DTRT study. In DTRT, investigators tested greater than 450 plasma samples from greater than 150 heart transplant recipients across seven top academic sites, with biopsy match samples and clinical follow-up of up to three and a half years. We believe this is one of the most significant trials to date in the field, and we look forward to the results being published soon.
Our momentum in heart is timely because ISHLT, the main governing body, just updated its guidelines to include donor-derived cell-free DNA testing for surveillance in heart transplant recipients. I also mentioned Renasight at the top of the call. As a reminder, Renasight is our genetic test for patients that have been previously diagnosed with chronic kidney disease. The test can determine whether they may have a genetic cause of their chronic kidney disease. We think there are more than 1 million newly diagnosed patients per year and about 37 million patients living with chronic kidney disease. With more than 10% of the population of the United States having CKD and being eligible for testing, we think this is one of the largest areas of healthcare that can be improved with genetic testing.
Three years ago, we worked with the world's leading investigators from Columbia University, Yale University of Pennsylvania, University of Pittsburgh Medical Center, New York University, Mayo Clinic, and Cleveland Clinic, among others, to design the definitive RenaCARE study. We completed enrollment in RenaCARE in August, having enrolled more than 1,600 patients from over 30 centers. The study is designed to assess how Renasight's genetic findings may impact the clinical management of patient care. As the results read out, it's important to put them in context. I think hereditary cancer is an instructive comparison. In a large study of nearly 3,000 cancer patients published in JAMA Oncology, 13.3% of patients had a pathogenic germline variant indicating hereditary cancer. Of those patients with a high penetrance variant, 28.2% had resulting treatment modifications. As RenaCARE reads out, we will be looking at the same metrics.
What fraction of the study participants have a pathogenic variant associated with their CKD? What fraction of the positive patient's treatment was modified after the pathogenic variant was discovered with the Renasight panel? We think the RenaCARE study could position us for guideline inclusion in the future. This is a very large opportunity, and we already have a distribution channel in place through our existing nephrology call point. Stay tuned for more updates on this important opportunity. With that, I will now turn it over to Solomon to review our oncology results in more detail. Solomon.
Thanks, Steve. In the past few months, we've made great progress in oncology. The big stories today are volume growth, colorectal data publication, and Medicare coverage in breast cancer. We've observed excellent volume growth and adoption since our launch in 2019. At the end of Q3, we had communicated our expectation to deliver more than 185,000 units in 2022. As you can see, we've exceeded expectations with 196,000. This growth is driven by new patients, by follow-on tests for existing patients, and by new ordering providers. Steve mentioned that more than 30% of oncologists in the U.S. are now ordering Signatera.
When combined with strong volume growth, I think this shows that Signatera is rapidly becoming part of the standard of care in the United States, helping many patients gain reassurance when their test comes back negative or to get an early chance at intervention when the test is positive. In terms of volume mix, the way to think about it is that roughly 60%-65% of the volume is from colorectal, bladder, and immunotherapy monitoring. Now adding breast cancer to that list makes about 80%. As a reminder, our reimbursement today is largely driven by Medicare, and we are making progress with commercial plans as well.
We've gotten to this point because of our core technology and the magnitude of the clinical unmet need, also because we've been able to scale the lab and build an industry-leading medical and commercial team with reimbursement momentum and advanced diagnostic lab test status based on strong evidence of clinical validity and utility across disease types. We believe Natera benefits from an important first-mover advantage in the MRD field. We think a Signatera patient with an existing personalized assay is unlikely to switch to another MRD test. That has a ripple effect. Since our ordering providers will usually have a cohort of existing Signatera patients who are doing ongoing monitoring with regular blood draws, it makes it more challenging to bring another MRD lab into the physician's practice, which creates a unique competitive advantage unseen in the clinical lab industry.
Another significant competitive advantage is in data generation, where we started working back in 2015. We now have roughly 40 peer-reviewed Signatera publications across more than two dozen cancer types. I think the fact that we've been able to generate consistently excellent results across tumor types gives us confidence in the eventual pan-cancer adoption and reimbursement for Signatera. Let's turn now to our progress in colorectal cancer. In mid-January, we announced the publication of our CIRCULATE study in the journal Nature Medicine, featuring 18 months of clinical follow-up across over 1,000 patients. The study demonstrated strong performance for Signatera with a presurgical detection rate of 95.9% in stage 2 and 3 colorectal patients. In addition, we showed the strong predictive benefits of Signatera in CRC, where Signatera-positive patients benefited significantly from adjuvant chemotherapy, whereas Signatera-negative patients did not.
We think this has significant implications for CRC patients, many of whom today do not get the chemotherapy they need, or others who may be treated unnecessarily. The key distinction here is the prospective nature of this study, with physicians and patients receiving results in real time, and also the predictive element, which takes the evidence beyond sensitivity and specificity into improved outcomes. This raises the evidence bar for the whole field, and it strengthens the utility of Signatera in colorectal cancer. We expect that it will help us reach the next level in physician adoption, as well as influencing the NCCN Guidelines Committee. We are still anticipating an updated NCCN guideline in the near future since it has not yet been published from the annual committee meeting in August of 2022.
Given the timing of our publication this January, we do not know if the evidence will have been incorporated by the NCCN committee in this round. In that case, we expect it would be considered in the next round. Also, the CIRCULATE trial is ongoing, with future readouts expected to strengthen the evidence further, including from the two randomized arms, ALTAIR and VEGA. To step back for a minute, our journey in colorectal cancer creates a replicable roadmap for Signatera adoption in new indications. First, the Biobank cohort that confirmed clinical validity and enabled Medicare coverage and initial adoption. Then the prospective trials, partnered either with pharma or academic consortia that drive more definitive evidence with an aim to change guidelines. We plan to repeat that journey in bladder cancer, immunotherapy monitoring, and breast cancer.
The MolDX decision to cover Signatera in breast cancer is the latest example of this model at work. Signatera was approved for coverage in advanced breast cancer patients for both adjuvant and recurrence monitoring across all disease types. Given the number of people suffering from breast cancer in the U.S., we view Medicare coverage as a critical milestone. Looking at the addressable market, there are approximately 290,000 newly diagnosed breast cancer patients every year, with approximately 25%-30% of these patients with resectable stage 2B and higher. For this patient population, we estimate an addressable market of approximately 1 million tests, and we see potential opportunities to expand our coverage in the future into the neoadjuvant setting and earlier stages of disease.
Steve mentioned that a meaningful chunk of our existing Signatera clinical volumes, approximately 15%, are already coming from breast cancer patients. This is an early sign of the strong demand from patients and physicians to inform difficult treatment decisions and better monitor their disease. Many of our strongest testimonials come from patients with breast cancer, including one that was featured on Good Morning America. The breast cancer community is highly organized and self-empowered, making this an indication where we see patients voting with their feet. We're looking forward to growing rapidly in breast cancer as we expand our commercial effort and deliver more data from our clinical pipeline. This coverage decision expands our reimbursed addressable market to approximately 3.5 million tests per year.
In 2023, we will be focusing our team on growth in CRC and breast cancer, as well as bladder cancer and immunotherapy monitoring, publishing new evidence and translating it into expanded coverage and adoption. Our clinical data pipeline remains strong, with this slide showing some key highlights. During Q4, we continued our progress with peer-reviewed publications in gastroesophageal and anal cancers, along with the key publication of our CIRCULATE study. We also had a good data set in melanoma that was accepted for publication. At key medical conferences, we presented new data in colon, esophagogastric, anal, and neoadjuvant breast cancer. At the same time, we remain focused on our phase III studies and our CDX partnerships in colorectal, bladder, and breast cancers, shown on the right side of the page here with more to come. I'd like to hand it over to Mike to cover the financials.
Mike?
Great. Thanks, Solomon. The next slide just summarizes our 2022 performance and financials. Steve covered the revenue and growth rates, and we feel like we are in a great position to continue driving growth given our leadership position in several large and under-penetrated areas of care. I would just note that the growth comparison versus 2021 is a little skewed against us because you'll recall in 2021, we had the one-time revenue recognition of close to $29 million from the wind-down of our QIAGEN partnership that Steve alluded to. That also affects the comparison on gross margins, which were a little elevated in 2021 with QIAGEN and other revenue true-ups. Of course, we've described how headwinds in Germany ASPs, the California PNS Program, and growth in Signatera clinical volumes would temporarily pressure margins as we sought to expand reimbursement.
Operating expenses landed in line with our original guide from this time last year. Our ending cash balance is in line with our expectations. Let's get into the guide. As Steve mentioned, we are guiding $980 million-$1 billion in revenue for 2023. This will require us to continue to deliver strong volume growth across all of our focus areas, includes some caution on advancing average selling prices. As we've described in the past, we feel like we can make meaningful progress on ASPs just through execution in women's health and the natural evolution of our volume mix for Signatera clinical volumes. We've included modest progress on these fronts in the guide.
We are also including a very modest benefit from the recent breast cancer coverage decision. I expect we will be able to give more details on the impact of breast cancer coverage once we gain more experience with the reimbursement. In addition to those efforts, we have the three major guidelines that can really change our reimbursement profile with 22q and expanded carrier screening in women's health and ACG guidelines in colorectal cancer. Consistent with our typical approach, we haven't included any potential impact from these guideline changes in our forecast just because we don't control the outcome or the timing. We are taking a similarly cautious line on gross margin. This guide essentially presumes limited progress on reimbursement and hitting our COGS projects this year.
Over the longer term, guideline inclusion and continued steady reimbursement execution would give us clear line of sight to gross margin in the mid-50s and beyond, just as we have described in the past. Okay, on the next slide, I want to spend a bit more time on OpEx and the cash burn guide. You'll note that despite guiding to continued growth, we expect to see operating expenses to decline by roughly $45 million this year versus 2022. As Steve described, we've built strong leadership positions in each of our areas of focus that can now drive substantial future growth without continuing to increase operating expenses. Many of you will recall that we've executed this playbook once before when we pledged to get to cash flow break even in our women's health business by the middle of 2021.
In that instance, we had spent years building a commercial channel, running large clinical trials, improving product performance while executing large COGS reduction projects, and investing in a user experience platform that could scale with large volume increases. We then held our women's health-related expenses stable as the big trials concluded. While the volumes continued to pour in, we met our 2021 guideline. We've now established strong leadership positions in our newer areas of focus, this year we can start to demonstrate the same operating leverage. As a result, we expect our cash burn to decline by roughly $150 million this year alone. We've already demonstrated meaningful reductions in quarterly cash burn over the course of 2022, where we burned approximately $160 million in Q1 of 2022, and now we're at roughly half that amount in Q4.
We've also been making good progress in collecting on some of the accounts receivable generated during the rapid growth we experienced last year. I called out roughly $50 million in cash collection backlogs in Q3. We estimate we've collected about $40 million of that cash to date. CSOs also declined modestly in Q4, despite continued strong sequential revenue and volume growth. We put a lot of muscle behind accelerating our Signatera reimbursement processes recently. We think all this progress puts us in good position to pursue the cash flow break even target we set last year. If we get good news on any of the three guidelines I mentioned, we fully expect to reach a cash flow break even quarter in mid-2024, as we've previously described.
If we are delayed with those guidelines, we still think we're in a great position to hit the goal with continued cost discipline. We expect our existing cash balance will allow us to meet the current objectives ahead of us. We are very pleased to share these results with you today. Now let me hand the call over to the operator for questions. Operator?
To ask a question, simply press star one on your telephone keypad. Our first question will come from the line of Tejas Savant with Morgan Stanley. Please go ahead.
Hey, guys, good evening. Just a couple of quick follow-ups here, Mike, for you. Can you talk in a little bit more detail about the Signatera breast coverage decision in terms of both the near-term impact? I know there's some chance of a look-back payment, and obviously you've cited about 15% of your current volume that comes from breast. Just curious as to some specifics around the contribution there from Signatera, perhaps in the back half of the year here.
My second follow-up is on the gross margin trajectory, totally understand a bunch of puts and takes here, based upon the ASP recovery in reproductive health, and some of the other sort of, you know, non-covered indications for Signatera that you guys are making a commercial push in. Any color on the sequential trajectory on gross margins through the year would be helpful as well. Thank you.
Hey, thanks, Tejas. I appreciate the questions. I'll take the last one first. Yeah, I do. I think what you've inferred in your question is right. I do expect gross margin trajectory to just improve over the course of the year, for all the variables that we've discussed on the call and in the past. I mean, you have more time for reimbursement in Signatera to kick in. You have more time for the mix to evolve for us to continue to improve our ASPs in Signatera. Then some of the other, some of the other projects that we're working in the women's health channel, also have more time to, you know, to bear fruit as you progress through the year.
I do think that's kind of steady margin progression through the course of the year. On the breast cancer contribution, yeah, look, I mean, we obviously we just got the positive decision from MolDX, and we're very excited about that. Just given the short timing between getting that news and this call, we just as usual, we just kind of erred on the side of caution in terms of the contribution to the guide. A couple of things that we're looking for is that, you know, we're gonna need to engage with Noridian and just kind of get the details from MolDX on the pricing and, you know, that'll happen on the typical timeline.
That'll give us more clarity on, you know, exactly, what the contribution can be, you know, through the quarters in the year. I would also expect that to be kind of back-end weighted. The other variable I think to call out there is just the, you know, what can the volumes be in breast cancer. I think Steve alluded to this on the call. The breast cancer volume has come in, like, quite organically, you know, through our channel. Now on the heels of this coverage decision, there's a potential for us to, you know, significantly expand our, you know, reimbursed breast cancer volume. You got to give us a chance to go and execute on that before we incorporate it in a guide.
Finally on the look-back payments, I mean, I expect there to be some. Like, you know, typically these things are, you know, the coverage decisions end up being, you know, effective, you know, as of the submission to MolDX. I think there'll be some look back there going back into last year. As we have more clarity on that, we'll let you know. Let me pause there, Steve, if you had any other commentary on that question.
No, I think you thoroughly covered things. Thanks, Mike.
Got it. Thanks, guys.
Your next question comes from the line of Julia Kim with J.P. Morgan. Please go ahead.
Hi, good afternoon, guys. Just to follow up on the gross margin guidance, I mean, looking at the 41%-44% versus your mid-50% gross margin, somewhere in 2024, obviously understanding that, you know, guideline is a big moving piece to that, but, you know, how much of that gross margin improvement is dependent on the guideline and the revenue inflection, and how much of that is kind of, you know, more within your control, like the lowering sequencing cost and lab operations? If the guidelines do not materialize before mid 2022, 2024, what kind of levers or where do you see flexibilities to further take down cost? I have a follow-up.
Yeah. Mike, let me first kind of just comment on, you know, some of these COGS projects. You know, we've really done a good job over the years of rallying our resources on, you know, these big COGS reduction projects, and these are pretty straightforward. I mean, these have to do with, you know, versioning to the NovaSeq, you know, versus the NextSeq, for example, or, you know, expanding capacity, you know, in our in certain facilities. You know, so these aren't like technically complex projects. They're really straightforward. I think we have pretty high confidence in hitting them.
We've got a handful of, like, really big COGS reduction projects that I think are making up a significant chunk, you know, of what we're showing here as we move out into the future guidance. Mike, do you want to comment a little bit on the margin progression further?
Yeah, no, I think that's a good lead in, Steve. I mean, I think there's a lot of that margin progression that is just purely within our control. I mean, Steve touched on the COGS projects. I think on the ASP front, I mean, we also talked in detail about the evolution that we expect to see in Signatera ASPs. Just as a reminder, we've already kind of seen a real sea change in Signatera ASPs from launch to now, which is, you know, ASPs were in the, you know, mid $400s as we started, and now they're kind of in the, in the mid $700s.
That can continue to evolve in our favor, just based on mix and increasing the reimbursement we're seeing, you know, from Medicare, and also expanding some commercial coverage as well. I think those are all levers that are in our favor. Then I think the other part of this, in terms of levers that we can pull, I mean, you see us pulling some of these levers right now, and that is just kind of the leverage we can get on our operating expense base. You know, I think this, you know, our ability to continue to drive revenues on the, you know, on the current platform, I think is just simplified by the cash burn guide.
I think that, you know, in the event that guidelines are delayed, I don't think that means that they're permanently delayed. I think that means we can still get them. We've got, you know, scope for us, I think to still meet our goals with continuing the OpEx discipline as we talked about in the prepared remarks.
Yeah.
Gotcha
just to be clear, so we don't need those, you know, any of those guidelines to come in to get to that 50% margin target.
Gotcha. Super helpful. Then one more on the women's health side, if I may. It seems like between microdeletion, ECS, and MRD, microdeletion is the nearest term, in terms of, you know, when we can expect guidelines. You mentioned in your prepared remarks that, you know, the evidence is strongest for 22q. If the guideline and subsequent payer coverage is limited to 22q, how much ASP lift can we expect to see for your women's health volume?
Yeah. I'll take that. You know, 22q, I think is really the whole ballgame for microdeletion testing. You know, when we actually led the coding submission to the AMA, which started I think in 2017. The code was granted in 2019. You know, today the pricing that we have in payer contracts and with CMS is for 22q. Other deletions are included, you know, 22q is sort of the base, you know, base micro deletion that's part of that coding infrastructure. The pricing from payers will be the same, whether it's 22q or whether it's a broad micro deletion.
We think 22q is where most of the interest is, you know, as we go forward, and I think that's where the guidelines are going to be focused. We've got a lot of differentiators. I mean, I know John sort of highlighted some of those, these differentiators really make a big difference, both with physicians, and we think also with payers. I think it's going to be interesting to see how, you know, how this pans out in the future. You know, I also mentioned, you know, on expanded carrier screening. You know, today we have a good guideline in place from NSGC. There's a strong guideline from ACMG, the ACOG guideline is actually pretty strong.
We think it's in fact supportive of expanded carrier screening, that's one of the reasons why you're seeing payers starting to issue positive coverage policies. We mentioned on the call that one of the lab benefit managers that covers 15% of all the commercial covered lives in the United States just last week issued a positive guideline for expanded carrier screening. That's new incremental upside, you know, that's not in the model. You know, I think as Mike mentioned, you know, product mix is sort of, you know, one of the reasons why you've seen the slight reduction in margin recently.
You know, some of that comes from us making a proactive decision to take on some of the low margin Sema4 business as they went out of business. We thought that that was a good idea to do because we knew that these guidelines were coming. You know, it turns out that was the right decision. Now we've seen since, you know, since they went out of business and we picked up a significant chunk of that volume, we've seen this big lab benefit management company now come out and say they're gonna be covering expanded carrier screening. We've seen the NSGC guidelines come out.
I think, you know, that was the right decision is sort of temporarily take on a larger book of expanded carrier screening volume, you know, have a slight reduction in the overall margin, but, you know that the guidelines are coming, and we're gonna be able to go collect on that in the future.
Gotcha. Super helpful. Thank you.
Your next question comes from the line of Puneet Souda with SVB Securities. Please go ahead.
Hey, guys. thanks. First one, on Signatera. You know, can you just clarify what, you know, contribution from biopharma versus clinical, in the volumes that you saw in the year? Then I have a few follow-ups.
It's overwhelming. It's very, you know, overwhelming, you know, contribution from the clinical versus the pharma, as you'd expect. Solomon, go ahead, if you wanna comment.
I think that was Steve. Steve, did you wanna comment on that?
All right. No, I was just gonna say if you wanna make any more color on that, go ahead.
The major accelerating growth we're seeing right now is from the clinical business for the multiple reasons I reviewed during my remarks. Pharma business is looking steady. We've got a pretty strong pipeline as well, both of retrospective studies as well as new prospective trials. We remain committed to our phase three and companion diagnostic partnerships as well.
Okay. Got it. Helpful. Then maybe for Solomon as well trying to understand the overall TAM that is accessible and inaccessible at this point for Signatera, given that you already are in breast, and congrats on that. As CRC already IO monitoring, the indications are expanding. Maybe talk to us as to the tumor-informed approach with the tissue. How much of that $20 billion or so market can you capture? Sort of what portion of the market remains sort of inaccessible because it's the tissue-based approach?
Sure. Thanks for the question. I don't think of major portions of the market being inaccessible because of the tissue informed approach. I think If anything, the tissue informed approach gives an advantage in terms of a single product that can be applied pan-cancer and across stages of disease, and I think that's how we're seeing this story play out. To your question of, you know, penetration of the TAM, you know, breast cancer was a really significant milestone for us, given how many patients are out there suffering from breast cancer or who are breast cancer survivors. 3.5 million tests per year now addressable and covered by Medicare is very significant.
In terms of growth, you know, there are multiple additional indications that we see for opportunity to expand coverage with Medicare. I think that at this point, in addition to that, you know, we're really focused on expanding the private coverage for the indications that you already saw on the slide, you know, in colorectal cancer, bladder, breast cancer, and immunotherapy monitoring. I think there's a ton of growth on the table, from those four categories and from growing to new ones where we've shown several studies that have good validity evidence, in other GI cancers
In the neoadjuvant setting for breast cancer, and more. Hopefully, that answers your question.
Got it.
If we need-
Yeah, no, that's very helpful, Solomon. A last one for Mike, if I may. Mike, you know, the carrier testing market saw an exit from one of your competitors. Wondering sort of how are you thinking about that volume, you know, some of that volume coming to Natera. Then, you know, could you talk to us about, you know, commercial pricing in that market, and how should we think about the ASPs in that market, you know, in 2023 and beyond? Thank you.
Yeah, no.
Yeah.
Yeah.
Let me take that one, Mike. The, you know, I'll comment. I mentioned, you know, previously, I think, you know, we did see the exit of a pretty sizable competitor. You know, Natera has actually, you know, I think, done pretty well and gained some of that business there, you know, largely in carrier screening. Now that's relatively low-margin business today. And, you know, as we've outlined, we think that there's an opportunity in the near future to significantly increase the ASP of, you know, that volume that's coming in. We just saw a guideline on expanded carrier screening from, you know, NSGC.
We just saw a large benefit management company that covers 15% of commercial covered lives, change their coverage as of last week. Whereas previously you wouldn't have gotten coverage, now you will. We think that there's a lot of upside, and that sort of bet that we made on going out and saying, "Look, let's take on this business, even though it's low margin initially, but we can turn it into, you know, something that makes sense for us," I think was the right bet. Mike, do you want to comment further on sort of what the landscape looks like?
No, I think that, I think that covers it well. Thanks.
Yeah. Thanks.
All right, guys. Thanks.
Your next question will come from the line of Max Masucci with Cowen and Company. Please go ahead.
Yeah. Hi. Thanks for taking the questions. Congrats on another great year. The five-year Signatera CRC surveillance period, it's essentially pegged to, you know, prior recommendations, you know, for CEA testing. In breast, the risk of recurrence, you know, varies by subtype. Just based on any conversations, you've had with CMS or others, you know, how are you thinking about the ideal surveillance period for Signatera Breast? Like, is it more likely to be static, you know, say five years across all subtypes? Or, you know, could it vary by subtype?
Yeah.
Take that one, Steve.
We're really waiting. Yeah.
Go ahead.
Let me just add a couple comments, so you can jump in. I think we're, you know, if you look back at the clinical trials that we've done, you know, I think we've done about five years of follow-up on those, on those patients. I think we're, you know, we're kind of using that as a good benchmark. We're still waiting for the kind of final billing letter to come from MolDX, you know, which will have a little bit more of the detail in it. You know, we just kind of revert back to sort of what's in the clinical trial. Solomon?
Right. Yeah. Just to echo Steve's comments, the conservative view is to look at what we presented in the paper, the EBLIS trial, that was published in Clinical Cancer Research, which had follow-up of up to five years, and testing every 6 months. To your question, Max, you know, the patients are treated very differently depending on their disease subtype and their stage. you know, We know that if a patient, for example, with triple-negative breast cancer is gonna recur, they tend to recur earlier post-surgery and post-definitive treatment, compared to a HR-positive, HER2-negative patient, who whose chance of recurrence is kind of steady over, you know, even more than five years, up to 10 years.
We, we do expect to see some variation in the usage patterns across those subtypes. I think, you know, it's still a little bit early days to see how that really plays out. I think also we're pretty pleased to see the initial uptake of Signatera in breast cancer, as we mentioned, where this really significant number of patients are just voting with their feet, and they want that information during the surveillance period as well as to help inform some tough treatment decisions.
Absolutely. Super helpful. My... I'll just ask one more. The, the Medicare coverage win for Signatera MIBC came in July. you know, did that coverage win trigger any acceleration in test ordering for Signatera IO? Just given the sheer number of newly diagnosed operable, you know, breast cancer patients each year, on a similar note, you know, do you expect the Signatera Breast Medicare coverage win to trigger or accelerate ordering of Signatera IO in 2023 and beyond?
Yeah, let me just comment there. You know, I think getting a Medicare coverage I think definitely is an endorsement of the data. I mean, they do a very rigorous review. You know, I think it may not necessarily be that sort of coverage that sort of triggers additional ordering, but I think it allows us to feel, you know, comfortable that to have our medical affairs team, you know, out educating physicians and our commercial team out educating physicians, you know, very thoroughly about, you know, the indication. When you look at, you know, muscle-invasive bladder, I mean, we're seeing record numbers. When you look at IO, we're seeing record numbers and growth.
When you look at any indication that's come out and gotten coverage, you know, that really has triggered, I think additional education and medical education around the particular tumor type, which, you know, does result in increased utilization. You know, certainly breast, we're seeing a really strong organic interest, but, you know, once we put the power of our team behind that as well to show the data and educate physicians on the studies that we've done, we think it's gonna be powerful.
Great. Thanks for all the questions.
I was just gonna add to that we do see, we do see I think your question is about one of the nuances with does coverage in bladder or coverage in breast cancer trigger increased usage in IO monitoring? It's an interesting question.
Yes.
We do see that to the extent that if physicians may start using the test in one particular type of patient and then start to realize the benefits that could be applied across many more patients in their practice, and we've seen that over and over again. That is a natural type of step. The other thing I'll mention is that it's sort of related to Puneet's question earlier, the number of patients who are eligible for immunotherapy continues to grow every time new trials read out from the top immune checkpoint inhibitor manufacturers. That, you know, that just continues to expand our eligible population as well, with more and more patients on immunotherapy.
That's great. I appreciate the detailed response.
Your next question will come from the line of Catherine Schulte with Baird. Please go ahead.
Hey, guys. Thanks for the questions. I guess first on the commercial payer side for Signatera, what are your expectations for 2023 if we, you know, just assume no NCCN guideline inclusion? Are there any other states that have or are working on legislation for covering genetic testing like Signatera, similar to what we saw in Louisiana last year?
Solomon, do you wanna take that?
Sure. There are, I think there are, four states who have already passed legislation and a whole lot more who are reviewing legislation in their state houses. We're, you know, we're actively monitoring that, though we don't really control that, but we are involved in a lot of the discussions. I think, John Fesko and his team have done a great job of educating lawmakers across the 50 states. We do see more and more progress now with commercial payers, as our evidence continues to strengthen, and as the adoption among their covered patients also continues to increase.
We do expect to be making some announcements this year of commercial coverage, and hopefully we see some further adoption of the biomarker legislation. You know, John, if you wanna add anything to that.
Thanks, Solomon. Just to expand beyond Louisiana, legislation is passed and is in effect now in three other states, including Rhode Island, Illinois, Arizona. There's legislation pending in at least 15 states, this year, championed by the American Cancer Society, including some big states like Texas, Florida, New York. We actually feel quite confident about that, and it's great for patients. It's great for the space. That's pushing commercial policy on the payer side as well.
Okay. Super helpful. Then maybe one on early detection. You know, when should we expect to hear the results from the proof of concept study and FDA feedback, just to know the path forward for that program? Are those 2023 events?
Yeah. They definitely will be. You know, I would say, proof of concept will probably be, like, you know, two phases. One will be, you know, slightly smaller study, and then there'll be a follow-on study that, you know, has several hundred patients, which, you know, we hope to be able to announce the results from. I think those will definitely be 2023 events. For as FDA goes, we do expect to get some additional feedback this year. You know, we've already previously described some of the initial feedback. Yeah, I think the key right now is that the investment is low. We're, you know, we're keeping that stable at around $5 million a year.
You know, we're in a position to crank that up on the back of very strong proof of concept results, which we hope to have.
All right. Great. Thank you.
Our next question will come from the line of Andrew Cooper with Raymond James. Please go ahead.
Hey, guys. Thanks for the questions. maybe to start, you know, you've given in the past some metrics on sort of the California dynamics. Can you give us the latest and greatest there and sort of what the expectations assumed in the guide are for the status quo or potential outcome from some of the legal actions going on there?
Mike, you wanna take that?
Yeah, sure. I mean, we've. Just to recap, I mean, there's now an injunction in place in California, which allows us to offer Panorama to our customers there, which is great. We've basically in the guide, we've assumed that this is still a fairly meaningful headwind in 2023, as it relates to margins. I do think that there's upside there. As we kind of progress through the year, we'll continue to give you updates to get an increasing fraction of our customers will, you know, migrate to Panorama over time. I think that's another one where it's. Look, that's a hard one to model for all the obvious reasons.
When faced with those types of things, we tend to be conservative and cautious. We've basically modeled, you know, a, you know, a very kind of modest scenario there to which we, you know, we hope we can beat.
Okay, great. Then, you know, I wanna focus maybe on one comment you made around the path to breakeven. I think you said, you know, we've done this before in women's health. I guess, does that, you know, does that lead us to believe when we think about some of these OpEx cuts that are coming, they're coming outside of women's health? Is there more meat on the bone there? Just how do we think about the actual dollar reductions and where some of those are actually stemming from and what they tell us about sort of the business and where you're going from that perspective?
Yeah. I'll start.
Yeah. Please. Oh, sorry, Mike. I'll make a couple comments and then you feel free to jump in. I mean, look, the, you know, we've been really focusing on sort of running an efficient operation, you know, for, you know, for a long time. I think, you know, when you look at a lot of the spending that we've been doing, you know, on R&D, a lot of that's in, you know, clinical trials. You know, I think as some of these studies start to read out and trials start to phase off, you know, you can start to get some of the reduction in operating expenses. You know, I'll give you one example. You know, the SMART study.
For 7 years in a row, we spent between $5 million-$10 million a year, you know, running that study. You know, now it's done, the results have read out, and we no longer have to, you know, continue making that investment anymore because the study is done. You know, I think that's a great example of where we've made the right investments. We, you know, we funded the trial, and now the trial is completed and it's wrapped up. There's a lot of focus on sort of efficiency on completing some of the trials. You've seen, we now got 40 publications. I mean, that took a lot of work. You know, but it's really sort of across the board. Okay, great. Maybe one last one.
Mike, you said, I think, mid-$700s ASP in the clinical side for Signatera. I think last quarter you said over $750. Just wanna make sure kind of the trajectory there, and how you think about in the guide and to the degree you can give a little bit more detail, just, you know, the growth in covered indications, which it seems like you're certainly focusing on versus, you know, ancillary growth that you're happy to take, but in non-covered and sort of the margin dilutive side.
Yeah. We saw another good quarter this quarter in terms of just kind of steady, you know, clinical oncology ASP progression. I think we're on the same. We're kind of humming along there is the way I'd characterize it. I mean, I think we've talked about previously that, you know, leave the guidelines aside just on things like volume mix, expansions in the covered universe. Fewer, you know, people kind of in the bundle and more kind of getting to the recurrence monitoring setting. You know, I think there's a pretty clear trajectory for us to get into the 800s over the course of the year. I, you know, I feel like we're right on track with that.
Great. I'll stop there. Thanks again.
Our final question will come from the line of Mark Massaro with BTIG. Please go ahead.
Hey, guys. congrats on an excellent 2022. you know, you have a number of peer-reviewed publications and I guess I'd be curious if it's reasonable to expect you to add, you know, a couple more, you know, Medicare coverage wins this year. you know, obviously you have data for lung, esophageal, melanoma, head and neck, pancreatic, ovarian, but how should we think about the timing of potential Medicare coverage determinations? you know, roughly how many have been submitted to MolDX that we would be waiting on, you know, some type of decision?
Thanks, Mark. You know, we have a steady flow of submissions that, you know, go on at any particular time. I mean, we're not sort of for competitive reasons, you know, we're not outlining the exact strategy, but I mean, the fact that we have 40 peer-reviewed publications is a big deal because you cannot get coverage without having peer review data. We think the ability, you know, to leverage these publications to go get coverage is actually a big differentiator and a big moat for Natera. You know, it's the same with our ADLT status, right? From our view, no one else is eligible for an ADLT without going and getting FDA approval, you know, which is a very difficult path for others to go out and do based on their starting point.
Again, we think that's another big reimbursement moat that we have. You can definitely expect to see additional updates this year as we work through the kind of pipeline of submissions. We're not gonna kind of crank out the exact strategy just for competitive reasons.
Okay. Just my last question, you know, looking at some other pioneers in the space like Foundation Medicine, Guardant Health, for example, you know, we saw some pan-solid tumor determinations, which kind of, you know, covers a bunch of indications with one decision. You guys have done a great job of showing a lot of data, but do you think in the future, we may be able to see, you know, a pan-solid tumor Medicare coverage determination, and curious if you're, you know, having that conversation with Medicare and what type of framework they might be communicating to you?
Yeah. I think, you know, we've always sort of said that, you know, we think that you really have to go indication by indication until, you know, you've hit a certain threshold or there's sort of a tipping point where it becomes, you know, more of a sort of a pan-cancer view. I think, you know, we're really moving fast at getting through the indication by indication coverage. you know, I, I think we're doing a great job. We're delivering the evidence and that's gonna be the foundation for everything. The great thing about Signatera and the tumor-informed approach is that it's pan-cancer. We don't have to go out and kind of redesign the assay.
We just run the same platform across all different tumor types, and I think that enables this path to pan-cancer. You know, stay tuned. I think, you know, it's possible there could be some momentum, on pan-cancer in the future, but we're gonna have to see how things pan out.
Sounds good. Thanks so much.
Ladies and gentlemen, that will conclude today's meeting. We thank you all for joining. You may now disconnect.