Updated Aug 10 at 5:05pm ET.
Follow Natera to never miss an important update.
Natera brought in about 753 million dollars in revenue last quarter, which was well ahead of the 660 million dollars analysts expected. The company is seeing a major shift toward its oncology business. It processed nearly 297,000 cancer tests in the quarter, a 57 percent increase from the same time last year. These tests, called Signatera, help doctors look for tiny traces of cancer DNA in a patient's blood to see if a tumor is returning.
The company also improved its gross margin, which is the profit left after paying for the direct costs of running the tests, to 64.5 percent. This is a key metric for Natera because it shows the business is becoming more efficient as it scales up. While the company still lost about 47 cents per share, that was slightly better than the 49-cent loss analysts predicted. For a long-term owner, the main takeaway is that the cancer testing business is growing rapidly and becoming a larger, more profitable part of the overall company.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
The company is scheduled to report its second quarter results today. Analysts expect a loss of about 49 cents per share on revenue of roughly 660 million dollars.
We are watching two specific areas to see if the business is staying on track. First, we want to see if oncology test volume continues to grow at a high rate, which would prove its Signatera cancer test is becoming a standard tool for doctors. Second, we are looking for gross margins, the profit left after the direct costs of running the tests, to stay above 64 percent as the company scales up.
The company has submitted its Signatera test to Japan's health regulators for use as a companion diagnostic, which is a test used to help doctors decide which treatment is right for a specific patient. This follows a previous approval in the country for colorectal cancer.
Expanding into Japan is a key part of growing the business outside of the United States. If approved, this would give the company access to a new group of patients and doctors in a major international market, helping to diversify its revenue beyond its core American business.
Source: Business Wire
A study published in a medical journal showed that Signatera was more accurate and faster at detecting when Merkel cell carcinoma, a rare and aggressive skin cancer, came back compared to the standard antibody test.
While this specific cancer is rare, the result is important because it adds to the pile of evidence that Signatera is a superior technology. Every study like this makes it easier for the company to convince doctors to switch to its tests and for insurance companies to pay for them.
Source: Business Wire
A final decision from Medicare administrators has strengthened the coverage for Prospera, a test used to monitor whether a patient's body is rejecting a transplanted organ. Starting August 30, the new policy will cover six tests in the first year after a kidney transplant and four tests per year for the next two years.
Stable and predictable payments from Medicare are vital for the company's financial health. This expanded coverage reduces the risk that the company will perform tests without getting paid and should help drive higher sales for its organ transplant business.
Source: Business Wire
Analysts rushed to raise their price targets following the company's recent earnings report and stock price surge. Most analysts, 24 of 27, rate the stock a buy, though the average target of $311 is slightly below today's price.
The company has a habit of clearing the bars set by analysts, often beating revenue and profit targets by wide margins as its testing volume outpaces expectations.
| Expectation | |
|---|---|
| EPS | $-0.32 |
| Revenue | $704M |
