Just giving a quick snapshot of the company coming off a Q2 print. What went right in Q2? Anything you'd point out to investors about this quarter?
Yeah, we had a very strong quarter. All-time record revenue growth. We grew something like 40% year-on-year on the top line, which is quite amazing just given the scale of the revenue that we're at now. Another strong gross margin quarter, made progress on leverage on OpEx. Record units across the board, had a very strong women's health quarter. Usually Q2, as many of you know, is a softer quarter for us seasonally. NIPT was up mid to high single digits year-on-year. Carrier screening was up low double digits year-on-year on volumes, and on both metrics, we did a little better than that on revenues. That was a really outstanding outcome driven by a couple of key product features that we've launched over the last year.
Prospera transplant business continues to ramp, continues to be a secular transition in our favor, in favor of cell-free DNA testing for transplant patients. Then, of course, Signatera had an all-time record growth quarter. The prior sequential growth units quarter had been Q1, and we did something like 25,000 growth units, 24,000 growth units, something like that. We did 34,000 growth units in Q2. That was somewhat aided by weather. The compare versus Q1 was a little bit deflated just by some bad weather in the Midwest in Q1. Yeah, even taking effect of that outstanding momentum in that business fueled by all the things coming together. You've got outstanding clinical trial data continuing to read out, getting into guidelines in muscle-invasive bladder cancer.
Just more generally, I think we're benefiting from a generalized wave of adoption for MRD as it increasingly becomes part of the standard of care for cancer, which is very gratifying to say, as I've been coming to the Baird Conference for 11 years, and we've gone from this being a glimmer of an idea to being a reality. So happy to be here.
Yeah, it's a great overview. Maybe focusing on Signatera units, which is what everyone has been focusing on. You added 34,000 tests last
Yeah
quarter sequentially against the prior record of 25,000 tests. You told us the right way to model this is use the trailing four-quarter average of sequential adds, and it's now 25,000- 26,000 sequentially. Is that the right bar for us going forward, and how do you think about the shape of that from here?
Yeah, I think that's the right bar. I think that's the way that we measure things internally. The reason why we do the rolling four quarters average is that just smooths out all these random events in terms of number of receiving days or holidays or weather or anything like that. If you're willing to do that, the growth in units seems very smooth. It looks like it's just up and to the right. It does give effect for the fact that this is a repeat monitoring test. So you have this kind of installed base, new patients starting every quarter, but then they stay with you for a number of years and deliver repeat tests over time. So that rolling four quarters average continually gets bigger, and I support that. I think that's something that the business can continue to clear that bar.
It does smooth out randomness quarter to quarter as I described.
You flagged weather depressed first quarter a little bit of the base.
Yeah
That is why 34K looked a little bit larger. Stripping out weather, what would you call clean underlying adds for this past quarter?
It is hard to measure weather exactly. It is a judgment call. Is it 5,000, 6,000 units that we missed in Q1 that ended up showing up in Q2? It is something in that range.
Yeah.
That does get you back to the bar, a good bar, I think, being the rolling four quarters average again.
Yeah. You attributed Signatera drivers in the quarter to a few things. It was the FDA halo effect, 2025 commercial and medical affairs hires reaching productivity there, the cadence of data readouts, a little bit of weather benefit as well. If you had to rank all of those, how would you essentially rank them by what contributed the most to the quarter?
It's hard to know, because when the units come in the door, they don't come attached with a note describing which of those factors drove the order. I'll just summarize a couple or expand on a couple of those drivers. So at the beginning of 2025, having been intentionally subscale in the commercial kind of sales staffing effort, we decided to go on a large sales force expansion. So we had something like 150- 200 reps, something in that zip code, selling Signatera, and we're now north of 300 reps. We got most of those people hired in the first half of 2025, and we take a long time to see the reps get to full productivity. It takes 9- 12 months.
Yeah.
So that just means that Q2 of this year is the first quarter where we really had a fully productive quarter with the sales reps. Surely that was an important driver. In addition to that, last November we were in the New England Journal of Medicine along with Roche, in the IMvigor011 study in muscle-invasive bladder cancer. That was a landmark study for us. I do think that there's a halo effect that happens when you have outstanding data in Signatera in a particular tumor type. I think that does drive general adoption across the franchise, which I can get into more. We've just continued to have a drumbeat of additional tumor types getting submitted from MolDX and a bunch of other things happening in the business, additional feature sets getting launched.
We did get into the clinical practice guidelines, the NCCN guidelines for muscle-invasive bladder cancer. That really didn't happen until June, so I think that was probably a modest benefit in Q2, and hopefully that can help us in the back half of the year.
Yep. As of the end of Q1, you had talked about 50%-75% of sales force was ramped up. Now it seems like Q2 is fully ramped on your sales force. Looking forward, is there another commercial expansion planned, or is the current team that you have right now in terms of reps what you need going forward?
The current team is what we need.
Yeah.
We're always running experiments. We're always ± 10 or 15 reps, trying to run experiments and see what works. But in terms of an intentional, very large sales force expansion, that's not something that you want to undertake all the time.
Yeah.
I think it's a type of thing that we've seen a lot of different companies in our space and adjacent spaces, they'll do a big sales force expansion, and it's actually a negative for a period of time.
Yep.
I think the commercial execution has been so smooth here that we take that for granted. But it was a great achievement by Steve, our CEO, and the sales team to get that done. It is not something you want to do every quarter, though.
No. Can you talk about just the average patient and quantify for every new patient that comes on, roughly how many surveillance tests does that generate over the following 12 months?
Well, over the course of a cancer patient's journey, we generally see that they end up ordering about 10 Signatera tests over the intervening five years once they start with us. The number of tests that they get is supposed to match up with their normal clinical workflow for that cancer type, and the numbers can vary tumor type by tumor type. And one thing we are not trying to do is to change that preexisting clinical workflow. We are not trying to have the patients run a bunch of additional Signatera tests beyond what their normal checkup workflow would be. We want to slot in there with the existing workflow, and that's been quite sticky and quite consistent for us really from the get-go. Really from 2020, 2021, we've seen a very consistent utilization on a per-patient basis.
What we've also seen is really from the beginning, we've had excellent retention of these patients over time. What we've found is when we build a blood test that's specifically designed for an individual patient's tumor, and we deliver that report to the patient, that's a very valuable piece of information that the patient really cares about. Then they get these longitudinal reports from us over time, and they use these reports to help triage what progress are they making. There's a lot of demand from the patient, along with the physician, to stay with us as they go into remission to continue to monitor just how they're doing in their life.
Signatera ASP, it's moved up about $25 per quarter for three straight quarters. You're at $1,275. The 2026 guide assumes flat from here, maybe $25 upside. Given everything you've described on coverage, why is the guide flat? What would have to happen for that ASP to move up for the rest of the year?
Yeah, I think when we set out the model for the beginning of the year, we were hoping to get to $1,250, and we're way ahead of schedule with being at $1,275 by Q2. Molecular diagnostics is a tough business, and it doesn't always work out that you just get $25 as an entitlement, as a bump to ASP every quarter. There's always puts and takes when it comes to realized pricing, even in something as well-validated as Signatera. I still think that the longer-term realized pricing potential is still very much in place. We've talked about getting to a $2,000 ASP over time. That effectively means very significant list price erosion over time, so we'll see if that actually happens.
But I think that we can get there as Signatera becomes more and more a boring part of the standard of care and gets more broadly into clinical practice guidelines.
How many quarters from when a coverage decision happens to when it shows up actually in revenue within ASP?
Well, for example, when you get MolDX coverage decisions
Yeah
it should show up the following quarter.
Okay.
Because those are set up to turn on immediately upon the decision.
Then you have seven MolDX indication submissions in. How much of the $725 ASP grind from $1,275 up to $2,000 longer term comes from those seven? I guess I'll start off with that.
Yeah. So we've quantified that previously. It's a judgment call because it depends on the evolution of your mix by cancer type. But I'd estimate that roughly $150- $200 of ASP would come from just getting a broader swath of coverage decisions across a broader set of tumor types from MolDX. Beyond that, there's additional opportunity in driving those same coverage decisions to get compliance for commercial patients that live in a state where the state mandates that commercial payers offer their commercial patients the same level of care that Medicare patients get. So you'll hear that referred to as a biomarker law state. So that represents additional upside. I think from the $1,500 range to the $2,000 target, to make that second move, I think you're going to need to get into some additional clinical practice guidelines. So muscle-invasive bladder cancer is a great start.
That's actually our third tumor type in which we're included in the guidelines. It's probably the largest to date. But I think to come over the next couple of years, we'd expect to get it into the guidelines in colorectal cancer and in certain areas of breast cancer. So I think if you got those two things, along with the momentum from coverage decisions from Medicare and broader clinical adoption generally, I think that more than supports a $2,000 ASP.
Which of the smaller indications do you think becomes the next $100 million opportunity?
I don't think that there's any one indication per se that's particularly hot to trot as far as physicians are concerned. Our vision for Signatera is that you end up using it very much like a CT scan. If any one of your loved ones was undergoing cancer treatment and they made a comment to you around like, "Hey, you know what? I've never gotten one of those CT scans before. Should I look into that?" You'd be quite concerned. I mean, of course, you're going to get a CT scan. We need to check on how you're doing as you go through your cancer journey. We view Signatera very much the same way. It's increasingly becoming that in particular cancer types.
What we're seeing in terms of the adoption of the product is much more generalized adoption in the clinic, where it used to be very rifle shot, "Hey, we've got this new stage III colorectal cancer data," so that's going to drive adoption in that specific indication. We're seeing much more general adoption, where the doctor kind of understands how Signatera works. They've got some familiarity with it. It's the same assay, that it's a pan-tumor assay by definition. They understand the patient reports. They understand how it works. They're using it more generally in their practice, and we're seeing that come through in our volume mix.
Yep. In June, the Japanese PMDA approved Signatera for patients with colorectal cancer. You expect a commercial launch later this year, pending pricing. I guess, where does that stand, and what should we be assuming for Japanese pricing going forward?
Yeah, the next step. It's taken us something like five years to get from the starting point to getting to a Japanese FDA approval. It's an enormous amount of data that we had to generate. Very proud of the team for reaching that milestone. The next step, now that we have the FDA approval, is to be priced by the Japanese Health Ministry. That's an ongoing process right now. Expect to have the results of that for colorectal cancer this fall. That would support a launch early next year. Amazingly, we're right on track relative to the schedule I think we'd laid out several years ago for our plan in Japan. Very excited about that launch.
It's surprising to me, but continues to be confirmed that the number of new colorectal cancer diagnoses in Japan is very similar to the number of diagnoses in the U.S., even though they have about 1/3 of our population. Obviously, colorectal cancer is a very serious problem in Japan. You can see the urgency with which the problem is being tackled, in part by how quickly Japan has embraced Signatera in its clinical trial. A lot of our best outcomes data in colorectal cancer is actually Japanese data because the KOLs in Japan were very keen to adopt Signatera and incorporate Signatera into the CIRCULATE-Japan trials in Japan very early on, 2018, 2019, 2020. That's given us time to get some big prospective readouts.
Even though we're not yet on the market, there's already a very strong clinical practice guideline in favor of Signatera in Japan. We've got a lot of experience running the CIRCULATE-Japan trial there with a bunch of different centers. All that augurs very well for being able to have a big impact on colorectal cancer in Japan. One note of caution is that I would just remind you that this is a new territory for us. There's a lot of different variables in Japan that we're going to have to learn about. I'm sure we don't even know what some of the challenges are going to be. We're going to have to tackle those. If you're looking at this over the next couple of years, I think Japan can be an outstanding opportunity.
In 2027, I view this as there's a lot of upside opportunity, but it's also a year where we've got to learn and figure out a new market.
And you have a strong partner in Japan. You are also adding direct sales. How do those economics work across those two channels, and does Japan carry a different gross margin than the U.S.?
Well, we will have to figure out the pricing first before I understand what the gross margin is.
Yeah.
Historically, Japan has priced these molecular diagnostic tests roughly in line with the way that they are priced in the United States. That is our hoped-for outcome, but we are going to have to see where we go on that. I think in terms of the commercial effort, you should consider it a direct effort from us in Japan. We will have our own direct sales reps. We are very happy to be partnered with SRL. in Japan also, which will help us with a bunch of logistics as well. So happy about that. We feel like we are well set up to get a good launch going there.
What is your timeline and path forward for bladder in Japan?
Yeah, great question. Now that we've gotten the Japanese approval for Signatera, we hope that our cycle time for incremental tumor-type coverages can be faster. Hopefully next on deck can be the bladder cancer approval. I'd love to have that next year. I'd love to stack on additional tumor types in the relative near term.
On Latitude, the tissue-free version, you've said it's a small number of cases inside that 283,000 test figure. Can you size it for us and talk about positioning that relative to Signatera?
Yeah, it's a couple thousand units a quarter right now, which is fantastic. The tumor-naive MRD has excellent performance, not as strong as the tumor-informed MRD, as expected. You really get a lot of information. You get a big advantage when you start with knowing everything that you learn about the patient, and you're tracking a patient's individualized most common variants in their tumor. That's a wonderful starting point for sensitivity and specificity. Nonetheless, we were thrilled with the performance that we were able to put up with the tumor-naive MRD. It plays an important role, I think probably punches above its weight in terms of its commercial contribution. You will run into the occasional physician for whom they're concerned about tissue logistics, or they have some other exigent reason why some minority of their patients may need to avail themselves of a tumor-naive MRD test.
It's great to have it available in the menu. Oftentimes, what happens is Signatera gets ordered, and the doctor is comforted in the knowledge that if there is some kind of delay or some kind of concern, that we can reflex the tumor-naive MRD and then work that problem in the background so that we can get the patient back onto the gold standard Signatera test.
Is Latitude liquid mostly used when tissue isn't available, or is it becoming its own standalone product?
Well, I think you can see in the numbers that it's mainly Signatera is what's getting used, and it's available there kind of as a backup plan. Over time, it's going to have its own role. As MRD gets more and more generalized, there are going to be sets of patients for whom the tissue access is sufficiently problematic that it's just better to use a tumor-naive MRD test. There's definitely a niche for that within the market, and we want to serve that.
What kind of Medicare rate are you targeting for Latitude?
I think it will be similar to the incumbent has a rate. I expect to be kind of in the similar boat there.
Maybe moving to early cancer detection. Your FIND-CRC study, it is approaching full enrollment, 24,000 patients, and completion is on track for Q3. It seems like a 2027 readout will give you more color just on the FDA submission. Can you maybe clarify the timeline for enrollment to submission?
Yeah. We will complete enrollment very soon, so we are very close on enrollment completion. Then we should have a readout roughly this time next year. Error bars around that, but we should be able to accession all the units and complete the development work and then get the readout. I think that will be a very exciting readout for us. Then we are going to submit to FDA, and then once approved, then get going on the launch.
Would that point to then a potential 2028 commercial launch?
It's possible, yeah. Possible 2028, possible 2029 commercial launch. Yep.
With all the positivity around CRC screening now, is this now going to be more of an investment for you going forward? Just thinking about the early cancer detection.
What's interesting about colorectal cancer early cancer detection is it's such a difficult market just to get to the starting line in. We put up a slide on the Q2 earnings call that just segmented the R&D spend by broad category, and we had something like $100 million ascribed to early cancer detection just this year.
Yep.
I think that's very challenging for the shares in the immediate term. One more example of something where we're doing something that's probably a penalty for us in the short term, but can be a benefit for us in the long term if we can get it to work. Because obviously, there's no revenue to support that right now. Every single dollar we spend on R&D for early cancer detection is just 100% negative down to EPS. That's going to reverse itself. This is a very large market. There's something like 40 million people in the United States that need one of these tests. They're not going to get a colonoscopy. They're not going to get a stool test. If a blood test is available, maybe they'll do that, or they'll do nothing. Okay?
If you need a test once every three years, roughly, that's something like 13 million people a year that need one of these tests. Okay?
Yep.
That's a massive opportunity, and we're seeing now that the commercial payers agree with that understanding, that they would much prefer a patient get a blood test over getting nothing. That's good for the system and good for patients. We're very excited to be launching in that market.
Very helpful. Women's health, that had a strong quarter this quarter, up high single-digit growth. Normally your softest period. Can you maybe unpack the drivers from this quarter and then help us think about the back half cadence there?
Well, we had an outstanding quarter post our Fetal Focus launch, which we launched near the beginning of the year. We've continually added new feature sets to the Panorama test and to our Horizon carrier screening test. I was very excited to launch, just in June, an update to the test that highlights our data. It's an algorithm update that improves our sensitivity in low fetal fraction cases, which is very exciting. We'll have data later this year summarizing what our updated performance is in low fetal fraction cases, and I think that's an incredibly valuable data set and potentially differentiating for a broad swath of docs. Just continued progress there. Maybe just taking a step back on the women's health space.
This has been a space where there are very low barriers to entry, yet 10, 15 years on, we are still the number one player in the space. What that comes down to is a thorough commitment to always producing best-in-class clinical trial data, relentless pursuit of excellent customer service, and generally excellent commercial execution.
Yep.
These are hard-won lessons that we've taken from women's health, and we've been very successful there. Now we're applying those same lessons and the same people, the same leadership team in oncology, and that's been a wonderful benefit for us.
You've launched something meaningful in prenatal three years in a row. Fetal RhD in 2024, Fetal Focus 2025, enhanced Panorama this year, I guess.
Yeah.
What should we expect for future launches 2027 and beyond?
We've got a full slate. We're going to remain very ambitious in our women's health portfolio. I'm very excited about future launches, and so is the team.
That's great. Moving to organ health. You previously described the draft policy as roughly immaterial there. What do you think now that the final determination was published?
Yeah. I think it's modestly positive for us. I think prior to the update of the policy, we were not submitting any claims where Prospera was used purely in a surveillance setting. Only billing when it was used in lieu of a biopsy. Now the policy explicitly calls for some reimbursement for surveillance testing. That's incrementally positive to us. I think it also kind of recognizes a bit of the trend that I mentioned at the top of our chat, which is I think over time, clinicians and decision-makers are understanding how powerful the cell-free DNA test is, and how easy it is to use and how much it can benefit when you're using the Prospera to monitor these transplant patients, particularly in this year after transplant.
Maybe just a financial question. You raised revenue guidance twice this year, most recently $100 million at the midpoint this past quarter, implies 31% ex-true-ups. Can you maybe walk us through what second half assumes and then any conservatism potentially baked in there?
Yeah. Well, I think that there is potential room for upside. We said on the Q2 call that we felt great about that guide, even though it was a massive raise. The guide does not presume any improvement in ASPs, just kind of steady ASP. It just reflects the demand that we've seen for our products in the first half of the year.
In terms of the accrual approach, you took a more aggressive accrual approach. Does that mechanically shrink future true-ups by narrowing that gap between accrual and collection?
Yeah. Look, the true-ups I think have continued to come down as a percent of revenue.
Yeah.
Now what's happening at the same time is that the volumes are blowing up. The volumes are absolutely ramping, right?
Yeah.
If you have 2% over-collection on a huge base, that is the same as a 20% over-collection on a smaller base. It is hard for me to forecast the absolute dollar size of true-ups, and that is why we just completely leave it out of the guide when we are giving future guidance.
On margins, you put that 70%+ long-term gross margin out there versus 61.8% today.
Yeah.
Ex true-ups. Can you maybe walk through that bridge, like what the realistic timeframe looks like over time to get there?
Yeah. I feel great about that gross margin guide over time. One, I think that over time the true-ups just kind of turn into ASP because what that represents is like, hey, we are collecting above where we had accrued historically.
Right.
I think there's generalized kind of ASP improvement that you can see in the women's health space still. The same is true for Prospera in the organ transplant space. But really where you're going to see that improvement is the ASPs in Signatera. We've talked about a $2,000 realized price we think is very realistic. That's compared to a $1,275 realized price today.
Yeah.
If you just run our current volume forecast through the wringer with a $2,000 ASP, you get to a very different answer, and I think that can largely support well in excess of 70% core progress margins.
You've talked about deploying AI across the business, particularly in the lab. I guess where is that landing? Is it the revenue cycle, lab operations, sales productivity?
Yeah. Well, step one is it's made us massively more efficient. It's allowed our employees to handle a much bigger load of volumes. Whereas previously we would have had to have been constantly kind of adding more and more people in a linear way to serve more patients and deal with more volume. Now with a relatively constant base of employees, we're able to really scale. Okay? So that's important I think on the cost side. I think the revenue side is really as exciting an opportunity as we've seen. We're seeing a real unlock in terms of the utilization of data by pharma partners and frontier labs that I think has us very well positioned to play in the future.
Awesome. That is about all the time we have. Please join me in thanking Mike from Natera for coming to the conference.