All right. Thank you. Well, good morning everyone. I'm Evie Koslosky, the Life Science Tools and Diagnostics Analyst here at Goldman Sachs. I'm joined here today by Mike Brophy, CFO of Natera.
Good morning. Thanks for having me.
Of course. I guess just to start things off, you came off a really strong Q1. You cleared the 1 million unit milestone for the first time in a single quarter, raised full year revenue guide. Maybe walk us through a high level of what you saw in the quarter, how things have changed since then.
Yeah. Well, we had a great quarter. We had another record Signatera volume growth quarter. We had an absolutely massive women's health quarter as a record on a number of different levels, just in terms of volumes. Realized pricing was outstanding across the board. COGS per unit was actually outstanding across the board, if you look at just the specific unit economics and the COGS per test that we delivered. Had a very strong set of data that we just released at ASCO I guess last weekend, circa last weekend, that was very encouraging. We're on a fantastic trajectory here. Looking into the rest of the year, we significantly bumped the revenue guide. We bumped the gross margin guide.
We even bumped the R&D guide this year, which I viewed as a positive because what that meant was that we were actually enrolling our early cancer detection study much more quickly than what we had anticipated. More of the spin from ECD is coming in 2026 versus 2027, which means we'll just get out on the market quicker. Really kind of firing on all cylinders across the business.
Great, we just had ASCO last weekend. You mentioned some of the data. I think you guys have really leaned into this kind of tumor treatment on MRD approach. Maybe talk through some of the data and feedback from oncologists, and then how Signatera is being used now to guide treatment decisions.
We had a bunch of data at ASCO. It was just extremely practical data. We had data from the GALAXY study that just further reinforced this concept that Signatera-negative patients have extremely good outcomes it looks like, Signatera-positive patients really materially benefit from receiving their chemotherapy. Just further reinforcing this concept that Signatera's just critical to triaging this patient population because you lose patients in both directions. You've got people that turn down their chemotherapy for all kinds of very understandable reasons that really do need it, that really would benefit, and it costs the system when they avoid their chemotherapy, and the reverse is also likely true. Another important dynamic there, we saw this in the IMvigor trial last year.
We had patients that started off negative on Signatera and then turned positive, and then went on to get adjuvant treatment, adjuvant chemotherapy, and those people benefited. Those people actually had a very good outcome as well. I think that's an important kind of nuance to the data that's very important in the daily life of an oncologist, of how to manage these patients as they turn positive later on in their journey. Beyond that, we had an outstanding kind of meta-analysis across a broad range of tumor types, across several thousand patients in a bunch of published papers. I think that's quite relevant for physicians as well because we're seeing a real evolution in terms of how do oncologists adopt Signatera.
I think if you rewind three, four years ago, I think physicians were primarily adopting Signatera for specific use cases, primarily in colorectal cancer because that's where the initial data was. Now we're seeing many more oncologists adopt Signatera and MRD monitoring just more generally as a concept in their practice because of the breadth of the data that we've been able to deliver over time across a broad sweep of tumor types. To be able to crystallize that in a meta-analysis as kind of a pan-tumor analysis, I think kind of provides more ballast to that decision. Finally, I was quite encouraged with the data that we showed on the ultra-sensitive genome backbone with phased variants. We had some very interesting data in non-small cell lung cancer that was presented there, which I think is quite exciting as well. Very successful conference.
One thing about our progress with Signatera that we take very seriously is that really every single conference that you go to now, there's just a drumbeat of data that if we'd had this set of datasets three, four years ago at an ASCO, it would've been like, "Oh my gosh, this is unbelievable." We'd be celebrating, high five. Now this is kind of the standard. Every conference we're putting up a huge amount of data, I think that's both required, but it also speaks to the flywheel effect that you get when you're constantly investing in clinical trials over a period of time.
Great. You mentioned the phased variants. I know there's a plan to launch an updated version of Signatera later this year. Maybe talk through more detail on that, what feedback has been in the research setting for that test.
I think it's been great, I think it's commensurate with our own experience in the business over a long period of time, I think we're on version nine of the Panorama NIPT test. I think if you even went to a bunch of our best customers and said, "Hey, what version of Panorama are you on?" Or "What's different about Panorama now versus three, four" I don't know if many people would be able to really articulate that for you. There's just a belief and an expectation that we've just continued to improve the performance of the assay, I think that's of a piece with the plan with Signatera as well.
Over time, we'll just continue to evolve and continue to improve the performance of the test. As we're enrolling clinical trials that start now that read out in the 2030s, we had a couple of very interesting ones that we've announced recently. Those will likely be on the next version of Signatera. I think for now, the primary preference for most physicians is to order the Signatera test, and know that it's kind of the gold standard, and it's backed up by all the data that we've published so far.
Great. Then, I guess, you've seen new entrants in the MRD space. You have the market-leading position in tumor-informed MRD. I guess, what's the stickiness factor for Natera? Is it the clinical evidence, EMR integration, commercial team? How would you characterize that?
Yeah, I think it's all those things. I think you've just got to solve important problems for patients and physicians, you have to do that with excellent customer service. That's simple, but not easy. It's been very hard to get to that level where we can do that consistently at scale. It's taken us the better part of a decade now. We've got about that size of a head start in terms of delivering that. If you double-click down to the individual patient level, a patient has initiated on Signatera when they're in the middle of a critical healthcare emergency that they're going through. They've found out that they've had cancer. They've often had surgery to remove the tumor, now they're having a personalized individual tumor. Serial basis. There's information that flows from one test to another.
You can track your tumor burden as measured by mutated fragments per mL of plasma longitudinally. They're used to the test report, they're accustomed to Signatera helping them guide their cancer journey. You can imagine the level of stickiness that you have with that patient is unlike anything that's ever existed before in molecular diagnostics. Once you have that level of stickiness at the patient level, it's much more straightforward to attach that at the clinic level. Once you have a critical mass of patients on Signatera, there's an incredibly high incentive to have your next patient also be on Signatera.
Great. You recently launched the Latitude test, for tissue-free MRD, in CRC. I guess, how are you positioning this alongside Signatera? Is it mostly a reflex option? What has the early feedback been on that test?
Sorry, for the Latitude test?
Yeah.
Yeah. No, I think Latitude, very proud of the rapid kind of evolution of the product launches that we've had with Signatera, and we've talked about the ultrasensitive offering. Latitude, I guess, is kind of on the other end of the spectrum. I think there are specific use cases where a tumor-naive MRD test will be an option that physicians will want to avail themselves of. From our perspective, back to my kind of original comment is, we just want to be able to solve all the problems for the patients and the physician. This is a particular use case. A lot of times, a physician may just prefer Signatera, but perhaps they have some concern. They haven't done this before. They've never done a personalized MRD test before, and they have some concern about exactly how the logistics will work.
This is a nice way to allay those concerns. You say, "Look, Doc, go ahead and order Signatera." If for whatever reason there's some delay or there's some access to tissue or what have you, we can reflex to the Latitude test, then work the problem in the background and get the patient back on the gold standard Signatera test for subsequent time points. I feel like that's a very compelling offering. You can see how just that positioning generates a lot of benefits for Signatera, even if it's not a ton of Latitude volume. I think the Latitude volume will also grow on its own over time because there will be specific use cases where Latitude is particularly relevant.
Great. Then the recent FDA approval for Signatera as a CDx in bladder cancer, I guess, how should we think about implications related to this approval in terms of volume or ASP uplift? I guess, how do you expect this to kind of help with commercial payer conversations?
Yeah, it's a massive milestone for us to actually kind of go through the process and get to an FDA approval for the Signatera test. The customer base, the physicians are not monolithic. There are sets of physicians, there are segments of that group that care about having an FDA-approved option. I think it's a marker of the quality that we have in the lab that we were able to pretty seamlessly meet the standard required by FDA in supporting the submission of atezolizumab. I think more broadly, it's hard to separate the FDA approval just from the quality of the data that was generated in the IMvigor study.
I won't bore you to rehash it right now since we're short on time, look, there's a reason why that data was in The New England Journal of Medicine, it was a watershed moment for the company, for Signatera, and for MRD in general.
Great. Then Japan is kind of the other major opportunity for you moving forward. I guess talk us through kind of the commercialization model there, direct sales force, sub-licensing model, then kind of what the margin profile is of that international revenue and then pricing considerations.
I'm very excited about this. As many of you know, colorectal cancer is an acute problem in Japan. Similar absolute number of people get colorectal cancer in Japan as compared to the U.S., despite the fact that it's circa a third of the population. It's just much more prevalent there. A lot of our best prospective outcomes data is Japanese data for this reason, so the Japanese have been very proactive in helping us to generate that data. I expect to get a Japanese FDA approval this year, get pricing this year, with a launch next year. There's already a guideline in place. We have excellent data in-country. I'm quite excited about what that portends for us in the future.
Awesome. Switching to women's health, you had a really great quarter in 1Q. Are there any particular areas of the portfolio you would call out? What your expectations are in terms of growth cadence within women's health for the rest of the year?
I think that we're the strong market leader in women's health. It's gratifying to see now the penetration. I think we were talking about this at the breakfast Evie, but now it's very common for women to get an NIPT, whereas even 10 years ago, this was a rare experimental thing. It's made a huge difference to patients over that time horizon. We're going to continue to innovate. You saw we had a massive Q1. In part, that's good commercial execution, and part that's evidence of our continued product launch pipeline. Just recently, I think last week, we had a press release highlighting our data in patients with low fetal fraction.
These are patients where the amount of cell-free DNA that you detected from the fetus as compared to the mother, the amount of DNA from the fetus is very low relative to what you would normally expect to get. Our evidence looks outstanding in that cohort. We've actually launched that new capability in the lab now. Patients can avail themselves of an NIPT as early as eight weeks as opposed to the standard 10 weeks. That data will be submitted and presented at a major conference later this year. We're very excited about that.
Great. The other exciting part of women's health, you recently launched Fetal Focus. It seems like it had a really successful launch and good growth in 1Q. What's the early feedback been, and then how are you positioning that in relation to your Horizon test?
Yeah, it's been fantastic. We're very excited about that launch. Off to a quick start. A lot of patients have availed themselves of the option of Fetal Focus to have that available as mom gets the Natera screening test. Still early days, so I'm excited to see where it goes. I think it's always interesting to try and parse when you have a very strong volume quarter. Well, why was that? Well, there's a bunch of different things. Fetal Focus was clearly a key driver.
Okay. I guess in terms of market share, do you think the Fetal Focus test will help you in that aspect of the portfolio?
Yeah, I definitely think it's an important piece. One way to think about that is just given how much competition there has been in NIPT over the last decade, how is it that we've been able to play the role that we've played in that market? I think one of the key reasons why we've been so successful there is that we're constantly being very ambitious in terms of the data that we generate and the cadence of our product launches. You rewind a year, we launched an Rh factor test, largely in response to a shortage of RhoGAM in the U.S., and that was a critical unmet need that came up quickly, and we were able to launch the test, and that was very important.
Every year, we like to be on the cadence of launching something new and important for patients, Fetal Focus certainly fits within that paradigm.
Great. Maybe talk through some of the pricing considerations in women's health. What levers do you have to keep that inching higher, and what sort of revenue contribution should we expect from volume versus pricing?
Well, the good news in women's health is that we're a decade in. The tests are much more incorporated in the standard of care. NIPT is now kind of a boring test, and I mean that in the highest possible compliment. There's no better way to be boring than to just be in the standard of care and be something that everybody gets. What that means is that the fraction of time that you get paid should be quite high. Get that does not cover non-invasive prenatal testing for their patients. You've got to navigate the specific administrative requirements of each individual payer. We've had a decade to understand those requirements, and to get quite good at just hitting our marks with the payers so that we can just get paid a high percentage of the time.
What that ends up yielding is realized ASPs are actually higher now than they were when we went public 10-plus years ago, which I'm very proud of that stat, as I say it every time, I'm on a stage like this. What maintains your realized pricing is, one, the clinical utility is clearly there. You're generating net benefits to the healthcare system by delivering these tests. You continue to innovate, that allows you to continue to have meaningful market share. So long as you have meaningful market share in a product that is a standard of care, that gives you the ability to sit at the table with a payer and work with them as a partner versus being a supplicant, like if you were just one of a dozen small players or something like that.
Great. You recently expanded your portfolio into rare disease with the Zenith launch. Talk through early feedback, why that market makes sense with your existing offerings?
Yeah, I think there's a lot of overlap, both in terms of technology and call point with rare disease to the other things that we offer. We offer a bunch of germline screening. Obviously, carrier screening is the largest example for us. We also offer a BRCA test. We offer a bunch of innovative products in the in vitro fertilization space. In all of those different products, there's a lot of technology, a lot of hard work that we have evolved on in terms of variant curation and delivery of the product itself in terms of the technology, as well as the call point. A lot of these people, the precision medicine group within a hospital system will be extremely relevant to all those products I just mentioned. Renasight is in the kidney space, screening products, and rare diseases fits right within that paradigm.
You're often calling on the hospital system. We've seen a lot of engagement with these bigger groups. It enables further adoption in terms of getting into these EMR systems. I think there is a synergy there, a benefit to the rest of the products when you offer something innovative like we are in rare disease.
Great. You mentioned Renasight, so I guess we'll touch a bit on organ health, I guess. What are you seeing in terms of volumes that you see there, both in the quarter and any catalyst that we should look out for in that portfolio?
It's been a fantastic evolution for us. This is another one where, prior to the advent of these molecular diagnostic tests, the standard of care was quite onerous. I mean, these kinds of physical biopsies that you would take of a person's heart every month or very frequently, when you've just given them a transplant, is quite onerous. Being able to supplement that with the cell-free DNA readouts, I think, has made a huge benefit to patient care. I think that we're on a kind of a secular growth wave in transplant diagnostics, where cell-free DNA is going to have an increasingly more and more important role to play in terms of monitoring these patient's post-transplant. I don't think that's a static metric. I think there's a lot of room to grow there. Renasight, we're very excited about.
Chronic kidney disease is obviously a huge area of spend for Medicare. It's an enormous problem just for the healthcare system. We've run studies that show a meaningful proportion of these patients have chronic kidney disease, not because of lifestyle factors or other reasons, but because they have a pathogenic variant that's causing their chronic kidney disease, and it's very important to know that. It's important to know which patients are in that category, because it affects how you care for them. I think if you look out further into the future, there's a healthy pipeline of therapeutics on the way that ostensibly would be available to potentially cure some of these people that have these pathogenic variants. That's very exciting to be part of that journey. I think we're just scratching the surface, honestly, in organ health.
Awesome. The other thing I wanted to touch on, you recently raised your R&D guide.
Yeah.
A lot of that had to do with the reinvestment back into the CRC early detection pipelines. Maybe talk through how you're thinking about that market developing over time, and why you're excited to get into the early detection phase.
Yeah. It's a huge unmet need. There's 40 million people in the U.S. that need to get screened for colorectal cancer, and they're just not going to get a colonoscopy. They're not going to avail themselves of a stool test, unfortunately. If you could have a high-performing blood test that they could get at their annual checkup, they would avail themselves of that. There's a huge amount of misery in the world that can be avoided just by getting an early screen in colorectal cancer. We had some outstanding preliminary data, where we took the lessons, I think, from the space as these data sets have evolved over the last three, four years, and we tried our very best to have the preliminary data be a very rigorous readout.
The reason why you have to run a big FDA-enabling study is that you got to enroll 25 to 40,000 patients and actually get the result. We're running at that as quickly as we can. We mentioned on the call that we expect enrollment to actually complete now here in the second half, which is meaningfully ahead of our original expectations. That would imply that we get a readout in 2027 and a commercial launch in 2028. That's an enormous opportunity for us that right now it's only a penalty. It's only on the R&D spend, it kind of obscures the leverage that you're getting in the commercial business, and it generates no revenue. That will reverse. That will go from zero to being all growth as we launch in that space. I think that's an outstanding long-term catalyst for shareholders.
Awesome. Very exciting. I think that's probably a good place to end, thank you so much.
Yeah. Cheers. Thanks for the time