Natera, Inc.

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our first quarter of 2025. On the line, I'm joined by Steve Chapman, our CEO, and Salman Machkevich, President, Clinical Diagnostics. Ash Leshin, General Manager of Oncology, will be available for Q&A. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor.meterra.com. A replay of the call will also be posted to our IR website as soon as it's available. Starting on slide two, during the course of this conference call, we will be making forward-looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook, market size, partnerships, clinical studies, and expected results, opportunities and strategies, and expectations for various current and future products, including product capabilities, expected release dates, reimbursement coverage, and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we filed from time to time with the SEC, including our most recent form 10-K or 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, May 8th, 2025. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. The therapist claims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the 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-on-year comparison. And now I'd like to turn the call over to Steve. Steve?

Thanks, Mike. Let's get to the highlights on the next slide. We generated 502 million in revenue this quarter compared to 368 million in Q1 of last year, which represents approximately 37% growth. We had an outstanding volume quarter across the board with 855,000 units processed in the quarter. This included a big step up in women's health volumes over Q4 of last year, and a record volume quarter for Signatera. Signatera clinical volumes grew 52% year-on-year and increased by roughly 16.5 thousand units compared to Q4, which is our best sequential unit quarter yet for Signatera. Gross margins were 63% in the quarter, and when you back out, true-ups grew more than 110 basis points just compared to Q4, so we're feeling great about the margin expansion we're still seeing in the business. We also generated 23 million in cash, even as we doubled down on growth investments as discussed on the Q4 call in February. With all this momentum, we are in a position to substantially raise the revenue guide for the remainder of the year. We now expect revenues to be in the range of 1.94 billion to 2.02 billion this year, a raise of $70 million from the midpoint of our prior guidance given just a few months ago. This implies about 26% revenue growth year on year, extra ups, which is really strong. For strategic highlights in the business, starting off most recently at ISHLT, we shared a positive readout of the prospective defined study in heart transplantation, which demonstrated Prospera's ability to predict clinical outcomes in heart transplant. Remarkably, Prospera outperformed biopsy in predicting graft dysfunction one year after transplant. The study also tested DQS, or donor quantity score, which is a novel feature unique to PROSPERA. PROSPERA with DQS outperformed donor fraction alone in predicting graft dysfunction. PROSPERA with DQS's outperformance over fraction alone was also published this week in a separate study in the American Journal of Transplantation. The paper reviewed the head-to-head performance of donor quantity score, DQS, versus donor fraction alone, and found that DQS performed with higher accuracy. Solomon will discuss this further later in the call. Next week, we'll attend the ESMO Breast Annual Meeting. Most notably, we look forward to a presentation on the I-SPY2 trial, which is a great collaboration that has produced strong data on signatera in different settings of breast cancer. This particular trial will report on the ability of Signatera to predict outcomes for metastatic recurrence in high-risk early-stage breast cancer. It's especially novel as it looks at the neoadjuvant setting and measures ctDNA levels at diagnosis prior to treatment. In the study, Signatera's unique method goes beyond just positive and negative results to categorize positive patients by tumor quantity and then shows the five-year recurrence-free survival, which correlates with that quantity. While serial testing and ctDNA dynamics will certainly help further refine a patient's trajectory, we're seeing a significant amount of clinical information coming from this single blood draw prior to any treatment beginning. Later this month at ASCO, we'll have the largest and broadest set of data that we've ever had, with more than 25 presentations on a wide range of tumor types, including six oral presentations. We have eight in breast cancer alone, several in colorectal and GU, two real-world evidence studies based on our proprietary database, and a large-scale readout of our signatory genome test. And finally, we're pleased to see critical findings in sarcoma from a Stanford-led study presented at the Society of Surgical Oncology Conference last month. With more than 2,100 samples, this is the largest sarcoma study in ctDNA analysis to date, and the results were excellent. Sarcoma is an important indication with 17,000 new diagnoses per year in the United States, so this is similar in size to ovarian cancer, and it's a very important cancer type because there are significant unmet needs that need to be addressed, and it's a tough cancer to treat. While we're extending our lead in breast, colorectal, muscle-invasive bladder, lung, and the other initial histologies, we're making significant progress in other tumor types. Sarcoma is just one example of many where this type of data will be reading out. Okay, so let's jump into some of the volume highlights on the next slide. As you can see, we processed 850,000 tests in the quarter, with strong growth across the business. This represents a sequential increase of 8% over Q4 of 2024, which is one of the best quarters we've ever had. Women's Health had an outstanding quarter, growing more than 40,000 units sequentially in Q1 versus Q4 alone. This excellent growth extends what was a very strong 2024, where women's health grew hundreds of thousands of units year over year, even when excluding the impact of Evitae. Organ health was also very strong in the quarter. We saw north of 50% year-on-year growth in organ health and a lot of interest in our donor-derived cell-free DNA and germline tests. Okay, moving on to oncology. The next slide shows the progression of signatory clinical units over the last eight quarters. We're very excited to see a record growth quarter with 16,500 growth units over Q4. This is the fastest that we've ever grown and a testament to the strength of our technology, the breadth and quality of our clinical data, and the great user experience we've built to help patients with cancer. We estimate that over 45% of oncologists in the United States ordered a Signatera test last quarter. We think the next two years is an especially critical period for MRD as we evolve toward becoming the standard of care, and we are continuing to invest to expand clinical utility and to innovate to help as many patients as possible. Okay, the next slide shows our revenue progression over the last six quarters. We're excited to cross the $500 million in revenue threshold for the first time in a single quarter. Despite the scale at which we're now operating, we still grew revenues 37% over Q1 of last year. In addition to the volume momentum, the investments we've made in our reimbursement operations continue to improve average selling prices, and we're seeing ASP strength across the board in women's health, organ health, and oncology. Signature ASPs moved above $1,100 in the quarter, driven primarily by continued execution on securing Medicare Advantage reimbursement. All of this effort is allowing revenue growth to outpace volume growth. Of course, ASP growth has been a major driver of our margin expansion over time as well, as this chart shows how we've moved from 39% to 63% in the last several quarters. The 63% includes about $34 million in true-ups, and we're really pleased to see our underlying gross margin improvement, again, about 110 basis points for 59.3% in Q4 to 2024 to 60.4% Q1 of 2025. That gross margin improvement came from all the positive trends on ASPs, and COGS were excellent again in the quarter across the business as we continue to get scale efficiencies from the robust volume growth. We feel great about our gross margin trajectory as we look out over the next several years. In the near term, we expect signature ASPs to increase as we improve on our Medicare Advantage reimbursement, and we also hope to see some green shoots in biomarker states with commercial plans later this year, as we've previously discussed. Longer term, we've got some significant potential opportunities that could further drive margin improvements. Guidelines in the United States and Japan for Signatera have the potential to move ASPs above $2,000 per test. We've made a ton of progress on the women's health side as well on ASPs, but we still have carrier screening guidelines and 22Q guidelines ahead of us. As we continue to grow share in Oregon Health, Prospera and ArenaSite can also both be accreted to gross margins as well. We previously described a longer-term goal to get gross margins above 70% over time, and I think we remain very well positioned to reach that target. We started this year with a guide to remain cash flow breakeven, and we were pleased to now generate $23 million of cash in the quarter. We demonstrated in the second half of 2024, we are capable of generating much more free cashflow right now, but we see 2025 as a crucial investment year for us, particularly around Signatera. Given the potential size of the market, we think Signatera could eventually generate more than 5 billion in revenue annually. So it makes sense to continue funding high ROIC investments in commercial operations, clinical trials, and product improvements. On that topic, We've never had a more exciting slate of data reading out across the business this summer, and I want Solomon to walk you through all of that data now. Solomon?

Thanks, Steve, and good afternoon, everyone. I'll start off with Oregon Health. Steve mentioned that we just published an important manuscript in the American Journal of Transplantation, the premier scientific journal in the field. This paper demonstrated the excellent results of our two threshold algorithm for Prospera, which combines donor fraction with the donor quantity score, also called DQS. Using this unique two threshold algorithm, Prospera with DQS delivered better sensitivity and specificity than donor fraction alone, including a 37% reduction in false positives. The same algorithm was also evaluated in our DEFINE-HEARTS trial, which was presented last week at the ISHLT conference. As a reminder, the defined trial is a large-scale, prospective, multicenter, longitudinal study of donor DNA in heart transplant patients. The objective of the study was to assess serial cell-free DNA dynamics and its association with clinical outcomes in the first year after heart transplant. We evaluated more than 100 patients and more than 1,000 samples, utilizing Prospera with DQS to measure levels of donor DNA in the blood. The results showed that patients with at least one elevated Prospera result were at significantly higher risk for experiencing an adverse event in the first year, which is defined as graft rejection, graft dysfunction, re-transplantation, or death. In this trial, Prospera also outperformed serial biopsy by threefold in predicting graft dysfunction. Before Prospera, endomyocardial biopsies used to be performed every month as part of standard surveillance in many heart transplant centers. Obviously, a highly undesirable procedure that carries inherent risk. But more and more, we are starting to see physicians replace biopsies with Prospera. Turning now to oncology, where we continue to make excellent progress. At this month's ESMO Breast Congress coming up in Munich, we're excited to present new data from multiple studies, including the I-5-2 trial that will highlight Signatera's ability to predict long-term outcomes in early-stage breast cancer patients. The data from over 700 patients will show that testing Signatera negative at diagnosis is an extremely good prognostic marker after being treated with surgery and chemotherapy. Not only was Signatera status at diagnosis a highly significant predictor of outcome, regardless of disease subtype, But the quantity of tumor burden, as measured by ctDNA, was also correlated with outcomes. This reflects Signatera's differentiated quantification capabilities. And it's the first time to our knowledge that anyone has demonstrated the clinical value of absolute ctDNA quantity at time of diagnosis. These findings open new therapeutic strategies, including the potential for Signatera negative patients to skip chemotherapy and other intensive forms of treatment. The question is that Natera will evaluate definitively in upcoming prospective trials. This data also highlights the benefit of starting signatera testing at the earliest stage of a patient's treatment journey, right at diagnosis. At this time, we believe signatera will become a standard component of the diagnostic workup for a breast cancer patient, much like testing for HER2 status or hormone receptor status today. Beyond our data generation efforts and the core indications, we continue to pursue expansion into new histologies at a rapid pace. One such indication is sarcoma, with over 17,000 new cases diagnosed in the U.S. every year. Because of the heterogeneous nature of this disease, both adjuvant and surveillance strategies tend to be highly individualized. Surveillance that can include frequent imaging for up to 10 years, highlighting concerns for radiation exposure in such patients. There's a strong clinical unmet need here, which we think is ideal for Signatera. So we're very pleased about the recently presented sarcoma study out of Stanford University, showing the validity and utility of serial Signatera in over 200 sarcoma patients and more than 2,000 plasma samples, representing, to our knowledge, the largest study to date of ctDNA monitoring in sarcoma. The findings showed exceptional test performance, including overall recurrent sensitivity of 89% and specificity of 100%. These numbers were strong across subtypes, including some of the more clinically difficult-to-treat histologies like Lyomyosarcoma, where the sensitivity was 93%. We look forward to these results being published and working more closely with the sarcoma community. a great example of Natera's strategy to introduce and validate Signatera across all cancer types. Looking ahead now, this will be a busy and exciting ASCO conference for Natera, with nearly 30 abstracts and presentations planned across multiple tumor types, including, as Steve noted, six oral presentations. Four of those orals will be in breast cancer alone, two of which are in the neoadjuvant setting, building up the momentum with the iSlide2 trial. One of them, We'll have interim results from our prospective randomized DARE trial, and the fourth breast cancer oral presentation will demonstrate the utility of treatment monitoring in the metastatic setting, which is something new. These studies started years ago, and the results will serve to further expand our data leadership in MRD. We also look forward to presenting posters with clinical performance data in Merkel cell carcinoma and other cancer types, and a readout from our new signature genome assay. As we announced previously, the genome version of Signatera is now broadly available. This version of the test leverages Natera's patented multiclutch PCR technology and our targeted and de-sequencing approach. It detects ctDNA at frequencies as low as a single tumor copy per million, and it is being offered alongside the Signatera exome assay, which itself regularly detects in the ultra-sensitive range and can get down to the low single-digit parts per million as well. At ASCO, we will present our first clinical data with Cignatera genome, encompassing hundreds of patients and thousands of plasma samples across multiple tumor types. The assay performance looks very strong, with longitudinal sensitivities ranging from the 90s up to 100%, depending on histology, and with specificity approaching 100%. We believe the specificity is very important, and we're pleased to see that Cignatera's high specificity is maintained, even with the improved sensitivity of the genomes. This is something where we have seen other MRD labs struggle with clinical specificity data that is low or simply not reported at all. We've generally seen competing MRD labs struggle with translating extreme analytical claims into clinical performance. Furthermore, we've developed a research version of our genome assay that's available to our academic and pharma collaborators that will improve detection to levels even below a single part per million. opening, we believe, even more research opportunities. So we're really excited about what lies ahead. We've got a lot of incredible data reading out in the near future. As you can see from our continued strong volume growth, the medical community is responding positively to the utility of Signaterra, and we expect that trend to continue as we move ahead. So with that, I'll turn it over to Mike to cover the financials and the guide. Mike?

Great. Thanks, Solomon. The first slide is just a summary of our Q1 financials. If you look at the year-on-year change column to the right, you'll get a sense of the progress we've made across every metric of the business. Steve covered the care we've been on with respect to revenue growth driven by both volumes and ASPs. I was particularly pleased to see women's health units step up as strongly as they did, just given the scale at which we are now operating. And of course, Oregon Health and Oncology just continue to ramp. If you strip out all true-ups from the gross margin line, we expanded gross margins by more than 800 basis points from roughly 52% this time last year to north of 60% today. All of that progress allowed us to generate cash and actually reduce our loss per share, even as we significantly ramp R&D and SG&A to take advantage of the growth opportunities we have ahead of us, particularly in oncology. We maintained a pristine balance sheet with nearly a billion in cash and no debt outside of the relationship line of credit we have with UVS. Okay, let's get to the updated 2025 guidance on the next slide. As Steve described, we are raising the revenue guide by about $70 million at the midpoint. This is our standard approach. The guide does not include any true up revenues in future periods. So the $70 million bump implies rapid revenue growth for the full year, just as Steve described. We are holding the gross margin guide at 60 to 64% for the full year, and the Q1 results put us in great position to land in that range. Given the organic gross margin was about 60.4% in Q1, I think this guide again shows we are confident in the ASP and COGS trend we saw in Q1 are sustainable, and we've kept an edge in the gross margin guide to account for possible short-term headwinds we could get from the new products we're launching, but we haven't really seen much of that penalty just yet. For both revenue and gross margins, the guide does not require heroic improvements in the business trends versus Q1, but rather steady execution on the targets in front of us. We're also bumping SG&A and R&D modestly higher as we look to maximize out-year revenue growth. We expanded our commercial operations in Q4 and Q1, and those investments are on track to drive additional growth in 26 and beyond. The bump here in Q1 accounts for some non-cash expense accruals and non-cash charges related to stock-based comp, along with some additional staffing we are putting into areas of the business where we are seeing high returns. For example, as John Fesco described in February, we've made a number of key hires focused on delivering AI-supported solutions in the revenue cycle operation, and we are already seeing results that merit further investment. On the R&D side, We are seeing additional opportunities to accelerate data generation. Some of the recent data sets we presented have spawned significant interest from the academic community, and we are running as hard as we can to make sure we have the key clinical trials needed to unlock more indications along the lines of what Salma described in this section. These clinical trials have delivered extremely high ROICs in the past because they form the bedrock for broader adoption and allow us to drive reimbursement across an ever wider range of tumor types. The net of all this is that we are holding steady with our plans to remain cash flow breakeven. We're obviously off to a great start with 23 million in cash flow generation in Q1, and we'll be opportunistic with future investments for the balance of the year. Okay, with that, let's open it up to questions.

We will now begin the question and answer session. In order to ask a question, press star followed by the number one on your telephone keypad. Our first question comes from the line of Dan Brennan with PD Cowan. Please go ahead.

Great. Thanks for the questions. Maybe the first one, obviously the sequential volume growth and signatory really solid. A bit above even what Mike and Steve, you guys kind of pointed to as we get into 25. Can you just give a little flavor of what's going on in the market, kind of what drove it? It's just kind of volume growth sustainable as we go through the year. And then I have a follow-up.

Yeah, thanks, Dan. So, you know, obviously we're really pleased, you know, record sequential quarter in growth. And, you know, that's off the back of a couple of really strong quarters in a row. We're just seeing that the data that we generated, the performance of the test, the very strong clinical utility is resonating with physicians. And that combined with the large commercial presence that we have, plus the very significant scale and user experience focus that we have, whether it's quick turnaround time, EMR capability, mobile phlebotomy, all of those things are working, and the volume is increasing. As far as kind of the rest of the year goes, we're not sort of changing the previous quarter over quarter sequential growth which we said was around like 10 to 12 000 units roughly um but obviously you know we we are pleased with with what we saw now and uh we're seeing a lot of uh a lot of utilization and a lot of excitement as we move forward great and then just as a follow-up a lot of clinical evidence coming up at ESMO and ASCO um

I know you guys went into a few of the studies, what you're most excited about on the neoadjuvant side, which of these do you think, I know, Mike, you talking about investment, stepping up in R and D because the community wants to see these studies report out, which of these do you think we should focus in on, um, say over the next years, but that could really begin to move the needle on actually volumes in the marketplace. Thanks.

Yeah, I'll just make some general comments and then maybe, you know, Alex Solomon, if you want to comment, um, you know, first, I think we're incredibly excited to have more than 25 presentations at ASCO, including six oral presentations. That's really remarkable and a testament to the team and the academic PIs that we've worked with. You know, certainly we've got a very strong presence in breast cancer and gastrointestinal cancers as two of the largest areas. I mean, breast I-SPY2, which we announced today, you know, the DARE study, which is a randomized study looking at the concept of treatment on molecular relapse, that's generating a lot of excitement. So, there's a lot of good data reading out pan-cancer, I think, you know, continuing the trend of having a data-driven approach. And remember, a lot of these trials started you know, five years ago, right? So these aren't studies that you can sort of just drop in at the last second and run a prospective randomized study. You know, it takes a long time to get to this point, and we think this just continues, you know, the leadership position that we have in this space. Solomon or Alex, you want to add anything?

Yeah. We're looking forward to the readout of the InVigor 011 trial. which we've done in partnership with Genentech. That's their trial, so they're going to read that out, but we do expect that to be mid-year. And that, you know, we think that has the potential to really move the needle in GU with muscle invasive bladder cancer. And if successful, you know, that'll be the first companion diagnostic label that we take through FDA. Alex?

No, I think that's a great summary. I would also just highlight, you know, I think there are more and more smaller histologies, like we highlighted sarcoma, where we are starting to see data mature. And even though each indication by itself may be only, you know, 10, 15, 20,000 patients a year, in combination, you know, that is a significant growth opportunity. So I think we have data coming out in pancreatic, melanoma, gastroesophageal. So we're really excited to kind of share some of those data sets and really keep growing kind of the number of patients that Signetaria can help through kind of market-leading evidence generation strategies.

Our next question will come from the line of Ataysia Savant with Morgan Stanley. Please go ahead.

Hey, guys. Good evening. A couple of ones on Signatara, actually. So maybe just to kick things off, one question that we've been getting a little bit is, is there a delta in terms of the number of tests reimbursed for breast versus CRC in the recurrent setting? And if so, do you have any studies underway to point on, you know, more studies in response to physician and KOL sort of opinions, I guess, that could help define the optimal frequency of testing in the breast recurrent setting?

Yeah, so, you know, as we kind of go through, you know, the process of getting reimbursement with MOL-DX, you know, part of that process is to sort of look at, you know, what the cadence is in the studies and, you know, what the standard kind of imaging cadences are. And those aren't always necessarily going to be the exact same time points in each tumor site. So I would say, you know, without getting into kind of the details on each particular tumor site, you know, you can just expect that there's going to be differences. You know, I think, you know, sometimes it's, you know, two times a year in the surveillance setting. Sometimes it's four times a year in the surveillance setting. You know, sometimes it's two times a year for the first, sorry, four times a year for the first three years, and then it's two times a year thereafter. You know, so, of course, as we read out sort of the AST currently, you know, that includes tests that may be performed that may, you know, be intermediate between one of the, you know, one of the reimbursed time points where we're not getting paid. And those are areas where we see opportunities. So, you know, of course, as Mike has talked about, we think the signature ASP over time can be up to $2,000. And, you know, part of that is getting covered or tests that today we're not getting paid for. That includes tumor types where we're not covered, but that also includes some of the fill-in for maybe time points, you know, that aren't necessarily covered today that we think could be covered.

Got it. That's helpful. And then a couple of quick cleanups for Mike here. Mike, did you guys see any disruption from either weather or calendar day dynamics in the first quarter? Clearly, you had a very strong quarter. So I'm wondering if it could have been even better if those dynamics were in play at all. And then secondly, just in light of the strong sequential growth acceleration and signature of volume here, How are you thinking about revenue seasonality in the second quarter? Is Flattish a fair assumption, or do you think we could get a little bit of a dip in light of what you guys typically see in women's health?

Yeah, thanks for the questions. I mean, certainly weather was a huge challenge in the quarter, particularly, you know, with respect to the wildfires in Southern California. You know, that's a very important, you know, area of the country for us, very important territory. You'd be hard-pressed to see it in the volumes, however, and that kind of harkens back to our experience, you know, in the pandemic, where if you just looked at our quarterly volume progression, it would be very difficult to determine that there was a massive lockdown and a huge societal disruption. The reason for that is that these are time-sensitive, kind of urgent tests that the patients need on a tight time horizon. And so what we have seen over and over again is that while weather can disrupt us for a period of time, ultimately, you know, these patients need their NIPTs. They need their carrier screening test. They need their Signatera test. And they find a way to get back in relatively short order back to the physician's office and get that testing done. I think that that concept has massive implications for how efficient the commercialization model is for Niterra. relative to a lot of players, you know, even within the molecular diagnostic space. So, you know, weather was a huge issue in the quarter, but we were able to kind of power through it. As it relates to, you know, pacing through the rest of the year, I think, you know, the women's health pacing I think is kind of holding up true to form. You know, we generally expect Q1 to be a very strong volume quarter for women's health. then your same store volumes drop off in Q2, and then they recover in Q3 and Q4. And that's just a function of when people show up in their OBGYN's office to get the NIPT. In the background of that, the new account wins are not really seasonal. I mean, those are kind of happening in the background, but we have such a big book of existing business you know, the same store volumes, if you will, do have a noticeable impact on volumes and ultimately revenues. And if you've seen a little bit of that in prior years, although we've had some acquisitions and other things that have kind of obfuscated that trend, I expect that trend to be more noticeable here in 2025 because it's a fairly, you know, there's not a lot of exogenous factors kind of driving a difference for us for women's health. And then the other, you know, Signatera is getting bigger and bigger, and that just continues to ramp. Prospero is getting bigger. You know, the transplant business is getting bigger and bigger, and that's just continuing to ramp. We haven't really identified that there's some, you know, marked seasonality there. Other than the point that I think you mentioned, Tejas, and we've tried to bring up in the past is that, you know, I wouldn't be too precious about the exact number of growth units per quarter, particularly for Signatera, just because we're operating at a scale where you know, a couple of days here or there in terms of number of days in the calendar for a quarter, holidays, things like that, that can throw that off. But, you know, overall, I'd say I expect, you know, the standard seasonality in women's health to kind of affect the pacing and then the other businesses to continue to ramp.

Fair enough. Appreciate the color, Mike. Thank you.

Our next question comes from the line of Rachel Bottenstall with J.P. Morgan. Please go ahead.

Hey, great. Thanks for taking the questions and congrats on another great quarter, you guys. So first up, I just wanted to ask on the Sigma-Terra volume strength in the quarter, can you walk us through which indication did you see the greatest sequential growth for Sigma-Terra volumes? And then kind of how do we see that roadmap from here in terms of indication contributing to growth for the rest of the year?

Yeah, that's a great question. So we're really pan-cancer, you know, at this point. So, you know, obviously we're seeing a lot of interest across the board. You know, that includes colorectal, breast, lung, muscle, evasive bladder, ovarian, standard immunotherapy monitoring across all different tumor types. You know, I think everyone sort of knows, you know, the colorectal is, you know, the largest indication, you know, but certainly there's several others that are really seeing a lot of interest. We're doing well across the board. We're seeing very strong growth across all the tumor types, and I think that that just, again, like helps us kind of recognize how big of an opportunity this is. You know, we're really at the very early stages, but there's a lot of, you know, there's a lot of room for continued growth, and we've put ourselves in a position where we're now, you know, deep in the offices, and as they start to order you know, and expanded indications, you know, we're right there to partner with the physician to help more patients.

Great. And then just for my follow-up, I wanted to ask on screening. I didn't really talk about that a ton in the prepared remarks, so can you walk us through what are you assuming on the screening front? You increased the R&D guide. Is any of that going to be tied to getting some data on the colorectal screening front as well?

Yeah, it's a good question. So, you know, as we said before, we have the PROCEED study where that's actually now met the goal of enrolling more than 3,000 patients. So, you know, that's basically done. We're now going to be reading that out toward the end of the year. So, that's exciting. That was the big prospective colonoscopy match study that we had talked about previously. you know, I would say toward the end of the year, you'll get that big readout. And then the other main update is the FDA enabling study, the FIND study. We're actually expecting the first patient in on that this month, which is exciting. So, you know, as a reminder, that's basically designed in the same way as the PROCEED trial. PROCEED was designed you know, itself to exactly match what you would do in an FDA-enabling trial so that data is super reliable. So we're just sort of picking up from there, you know, and the fact that we're already, you know, already at first patient end targeted for this month is pretty exciting. You do see some of the R&D expense, you know, trickling in throughout 2025, but that's also going to be kind of built in in 2026. You know, that's in the models and in the guidance in the way, you know, kind of Mike is talking about the future of the business. Where are you accounting for that?

Our next question will come from the line of Tycho Peterson with Jeffries. Please go ahead. Thank you.

Hey, this is no on for Tyco. Thanks for taking our question. I wanted to start by asking about ASPs for the year, specifically. Yeah. I was talking about with denial and things like that. And Mike, do you want to take that?

It was a big garbled on my end. Can someone just repeat that for me?

Just a question was what's our sort of trajectory on ASP for the rest of the year and what are the puts and takes on, you know, denials, true ups, uh, coverage, you know, how should we be thinking about them?

Yeah. I mean, I think, um, you know, the guide contemplates kind of, uh, stable ASPs, uh in the uh in the women's health business uh in the in the oregon health business and then some modest improvement uh coming from coming from signatera really areas where we feel like we've got very clear line of sight on this is things like you know increasing uh modestly increasing the percentage of of times we get allowed uh from medicare advantage for for tumor types that are already objectively covered and we should be getting paid 100 of the time we're going to continue to grind that higher through the course of the year. So I feel pretty good about that. As I mentioned in the prepared remarks, I think like the ASP guide and kind of the revenue guide for the year does not require, it requires good execution, but it doesn't require some heroic change in the conditions of the business that we saw in Q1. As it relates to true-ups, I mean, look, I think on a percentage basis, you're seeing the true-ups kind of feather down as expected as percent of total revenue. In terms of absolute dollars, it's kind of a little bit hard to predict because the volume in the business is growing so rapidly. That's the reason why we don't guide with true ups in the future periods. So the guide, you know, for the rest of this year, it includes the 34 million in actual true ups from Q1, obviously, because those are in the books. But for the remainder of the year, just presume zero. And that, you know, that goes for the gross margin period. guide as well. If you ask me, will we have some true-ups? Yes, we will. They're just hard to predict, and I think they make it harder for you guys to model it, so we leave it out.

Great. Super helpful. And then for my follow-up, could I just get a quick update on tissue-free MRD and what the timeline is like there and what reception has been like in the research environment? Thanks.

Yeah, good question. So, yeah, we've outlined, you know, the forthcoming launch of tumor-naive MRD testing in colorectal. You know, that's sort of on track with what we had said previously. You know, I think the data looks really strong. You know, not as good as tumor-informed, you know, as expected, but we feel really good about that. And, you know, we'll give you an update as that rolls out.

Our next question will come from the line of Doug Schenkel with Wolf Research. Please go ahead.

Hi, this is Colleen on for Doug. Thanks for the question. We have a few questions. First, on your prenatal business, can you give a bit of color on the over 40K test sequentially on the split between NIPT and carrier screening? Also, we haven't seen anything in the Green Journal table of contents for May or June in terms of ACOG guidelines for micro deletions or expanded carrier screening. Should we assume that this might be coming in the late summer at the earliest? And can you remind us what the revenue and ASP impact would be if favorable guidelines are published?

Yeah, it's great questions so. You know, when you look at sort of the prenatal business, we usually see kind of consistent growth proportional to the size of the product portfolio within the women's health business. So, you know, NIPT is the number one product followed closely by carrier screening, you know, followed by the other products in the portfolio. So, you know, the growth kind of trajectory is sort of similar to women's you know, to what we see there. So carrier screening and IPT both growing really nicely. And I mean, 40,000 quarter of a quarter is a really strong growth number. And I think that, you know, it's just a testament, again, to the strength of the technology, the continued execution by our team, all the peer-reviewed data that we've published. And that's off the back of, you know, in 2024, what was a really strong growth year where we had, you know, several hundred thousand units of growth, even when you sort of exclude anything related to Vitae. So women's health is growing really nicely. With regards to the micro-deletion guidelines and carrier screening guidelines, these are things that we believe are coming. We don't have any insight on the timing, but There have been some references recently in articles where they're talking about the forthcoming guidelines as, you know, they're sort of referencing them. You know, so we think that's a positive sign. You know, the other good news about them not being out yet is that they remain upside for us. So, you know, we're actually doing incredibly well as a business, and we have this huge upside opportunity ahead of us built in on our core business. So I think that's sort of a positive. When you look at microdels, we see a pretty high attachment rate. I think we said previously it's something like we're going to do something like a million 22Q tests this year or something in that range. And those aren't reimbursed, right? So they're built into our TOGs. They're built in to the infrastructure that we're running today. There's a code in place that has a good ASP. We've contracted with payers for the test. It's just not reimbursed. So you can imagine if you flip on reimbursement, let's say at $200 or $500 for a million unreimbursed tests a year, that's going to have a pretty significant impact. But of course, we'll have to see how that pans out. I think the CPT code is priced on the CMS fee schedule around $750, something in that range. But of course, we're not putting that in our models. But even at a few hundred dollars in reimbursement, the upside could be very significant for us.

All right, thank you. And then just one quick follow-up on indication mix for Signatera. Is breast above 25% of total volume now? And is there anything you can share on how a potential increase in breast as a percentage of total volume impacts your payer mix, given breast cancer patients tend to be a bit younger than colorectal cancer, lung, et cetera? And relatedly, how have biomarker bill wins impacted your no pay rate with commercial plans? Thanks.

Yeah, those are good questions as well. You know, I think breast actually, we're doing really well. I mean, we've generated a lot of data in breast cancer. The physicians, they really like our tests. They like the performance of our tests. We've got great genome data in breast cancer. So, you know, we're seeing a lot of excitement there. The DARE randomized study that's going to be reading out, You know, that's obviously generating a lot of buzz. I-5 data that we just announced today, plus what's coming to ASCO is generating a lot of buzz. So, you know, I think it's definitely one of the main tumor types. We don't see this sort of, you know, I think dynamic of, you know, maybe that burning the reimbursement or anything like that. It's actually, like, reimbursed very nicely, you know, with Natera. given our current structure. And, you know, we think breast is a good opportunity. It's one of the main cancers and one of the ways we're going to help millions of patients as we move forward. The second question about biomarker, I think that's the bigger, you know, question is when are we going to start getting reimbursed from commercial plans? And, you know, really what you're seeing largely today, you know, at the ASPs, you know, Mike outlined around that $1,100 price point. there's still a lot of upside in the commercial opportunity. And the biomarker states, we're starting to see some positive signs there, but there's a lot of opportunity. And we think, as we said, over time, the ASP for Signatera can be around $2,000, which is a significant increase from today. So when you look across, you look at women's health, you look at oncology, revenue growth in the next five years is not just going to come from volume. It's going to come from significant improvements in AST from coverage wins and from turning on commercial payers and from getting paid on more tumor types. And we think that's exciting because revenue growth is going to be accelerating above the level of volume growth.

Our next question comes from the line of Catherine Schulte with Baird. Please go ahead.

Hey, guys. Thanks for the questions. Maybe just first on Japan, since you brought that up, getting your $2,000 Signature ASP, can you just remind us the timeline and path forward there and, you know, what kind of updates we could expect to hear this year on that topic?

Yeah, that's great. Let me have Solomon take that for an update on Japan. Solomon?

Yes. We're excited about the... The program in Japan, we are on track there. So it's been submitted to the regulatory authorities, the Japanese version of the FDA. It's called the PMDA. They're reviewing our application, our submissions. If everything stays on track, we would expect that to be approved towards the end of the year, maybe as late as early next year. And that would trigger then the next submission to the health ministry for reimbursement, which happens sequentially. That probably takes another six to nine months and brings us towards late next year when we start expecting this to impact top line. And we know there's really significant demand for this technology in Japan. As a reminder, there's approximately the same number of colorectal cancer diagnoses per year in Japan as there are in the United States. despite there being a massive difference in overall population. And they're very eager to do biomarker-driven MRD-guided treatment decisions. And it's already in the guidelines. MRD is already mentioned in the society guidelines in Japan as well. So we're looking forward to that. We're on track.

Got it. And then maybe at this point in the launch for Signatera, I mean, you guys are continuing to put up pretty incredible sequential volume growth, even with competitors coming out. We've got a new one entering the market now. One competitor got surveillance Medicare coverage, and you guys still seem to be pretty dominant in where you are. So I guess, is there any change to how you go about that commercially in the current competitive landscape? Or maybe what are you hearing from customers Um, around your value proposition.

Thanks. Yeah, we're, you know, we're obviously pleased with our growth. Um, there's been a lot of competitors that have been out, you know, for a long time. Um, you know, selling tests, uh, very present, um, you know, doing early access programs, um, you know, talking to doctors. So, you know, we don't really think there's, there's a change necessarily. happening right now in the competitive environment. Certainly, there's been some larger companies that have gotten coverage maybe six to nine months ago that have been out there. We're just focusing on delivering. And what we're seeing is that physicians really like the performance of our test. They like the clinical data that we've delivered. Now we have over 100 peer-reviewed publications. We have long-term overall survival data. We have data with physicians acting on the results of our test. And I think they put a lot of emphasis on that, not necessarily some of the analytical validation studies that are easily manipulated or aren't necessarily... We're not really able to kind of dig into the details as much. We think we're doing very well. We're excited about what we're hearing from physicians about our product and the growth trajectory.

Our next question comes from the line of Puneet Sudha with Learing Partners. Please go ahead.

Yeah. Hi, guys. Thanks for the questions here, and congrats on another strong quarter. First one, on the women's health of business, the 40,000 units came in ahead of our expectations as well. And just trying to understand, how are you lapping the Invitae comps there? Could you remind us, you know, how much of that, you know, how much of that growth was there in 2024 from Invitae and how does that comp affects your expectations for the year? And then, Mike, maybe on the ASP side, we're seeing commercial payers being under pressure. I was just wondering what sort of gives you the confidence that ASP remains flat to maybe just slightly up in that segment in women's health?

Yeah, great. No, thanks for the question, Puneet. Yeah, first, you know, on the volumes, you know, we, as you guys will remember, we took on the Invitae accounts really in Q1 of last year. So we've got almost a full year now of integrating the Invitae volumes into our business. And that was a very successful transaction for us. And we're really pleased to be able to just kind of provide that kind of continuity of care to a large swath of what were then new customers, but now have been with us now for some time. So, you know, as you kind of go through the rest of the year, the comps are reasonably clean relative to last year. And that's just kind of integrated in the volumes to the extent that it's a little bit hard to kind of separate out, hey, what was Invitae volume versus, you know, what was, you know, Natera volume. uh, at the time. So it's just, it just continues to kind of add to the platform. The reason why, um, deals like that in additions to volumes and the, like, for example, the growth we had in Q1 is so valuable to us is that we've got a, you know, fantastic operation to, to drive ASPs that we've really shown a lot of strong results on now over the last two years. So, you know, that team obviously scales perfectly with, um, With the volumes, they're happy to, you know, add a dollar of ASP across a bigger and bigger base of Panorama volume, for example. I mean, you get perfect synergies on that. That operation, Puneet, is what gives me the confidence that the guide, you know, you can actually kind of hold the results steady. um, through the rest of the year and feel good, uh, as a guide, you know, that's not the commercial goal. That's not the goal that the team has internally. I mean, the, the internal team, uh, has a, you know, a buildup of, um, all kinds of situations where we've got, you know, coverage policies in place. Uh, these are standard of care tests and yet, you know, for one administrative reason or another, uh, we're still not getting reimbursed as we should. And the team, you know, takes that personally. And that goes, you know, from Steve on down. And we work extremely hard to try and improve that situation. So I hear you that, you know, there will be some – there can be some pressures, and there have been, and that can come and go. But I think underlying that is I think we've got a good path to hopefully grow ASPs, you know, even as the guide holds the study for now.

Okay, super. That's great. And then on, you know, Cigna Terra, maybe just a broader question. I just want to understand, going forward over the next two quarters and into 2026, could you elaborate sort of what are the, you know, critical drivers for strong growth? Is it NCCN? Is it getting deeper into the community setting? Is it getting into maybe other tier accounts beyond the tier one and two? Is it, you know, is it indication growth? Just maybe walk us through how you see the stack of drivers that are going to continue to drive this signatory growth, because obviously that's an important question every quarter for us and for investors.

Yeah, thanks. That's a good question. So, you know, I think first you just start off with kind of the fundamentals, you know, which is that this market is very, very, you know, at a very, very low level of penetration. And although there's a lot of excitement around the volume that we've done and the growth that we've had, we're still, you know, in the very low single digits when you look at the broader opportunity. which I think is important. And so the way that it works is, like we said, we're already working with 45% of oncologists right now. 45% are actually ordering Signatera. So it's not like 3% of oncologists are ordering Signatera and we've got to go figure out how to get the other 97% to order. We already have half the oncologists in the country placing orders. Now, as data comes out, as they get used to the test as they see the value in their practice, they start to order it on more patients within their practice. And I think that's really the main driver of growth combined with bringing new NPIs and new physicians into the fold. So we focus on those two things, new doctors coming in that haven't used before or taking doctors that are using the product and showing them clinical data that allows them to use in other patients. And remember, the vast majority of physicians in volume is in the community setting. So, you know, it's not good enough to just have one indication. You know, I think if you come out and you have one indication reimbursed, it's going to be very, very difficult to go to the community setting and say, hey, do you mind just carving off like this one particular subtype of patient and sending that to me? but we can't really do all the other stuff. So we're in this unique position where we have a pan-cancer offering. We're broadly covered. We're connected in the EMRs. We have a very large medical affairs team, customer service team. The turnaround time is very fast. And I think that puts us in a unique position. So we're generating as much data as we can. We think that drives utilization. We're focusing on obviously the big cancer opportunities, but also not ignoring the smaller opportunities. We're innovating. You know, as you can see, we've now launched the Signature Genome product. And, you know, there we're getting down to one part per million. You know, we do see there are some physicians that are interested in that, although I think it's, you know, the vast majority of doctors are very pleased with the performance of the exome test, which itself gets down into the ultra-sensitive range, you know, down to very low single-digit part per million. But there are some that want genome, and we're making that available to them. So there's not really a reason at this point to use any of the competitive tests, and we think, you know, that puts us in a competitive position going forward to grow with the market. We're certainly investing a lot in clinical data, clinical research, and we think we're in an excellent position. Actually, we've never felt stronger than we do right now about the growth trajectory of the business. And you can see right in the face of competitive launches where they're putting a lot of energy in. There's a lot of energy right now from competitors. We're putting up record numbers like we've never seen before. And I think that really speaks to the strength of our technology. and the way physicians feel about our data and the way they feel about the performance of Signataria.

Got it. All right. Thanks, guys. I appreciate the details.

Our next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.

Hey, guys. Thank you for taking our questions. This is Will on for Matt. Just want to touch on the on the gross margin. It was really strong this quarter. Can you talk a little bit more about the COGS improvement initiatives and longer term, how much room is left for COGS reduction or is gross margin improvement largely going to come from the higher ASPs? Thank you.

Yeah, I'll comment on that briefly and then maybe Mike, if you want to, you want to add something. So there's certainly room for room for COGS improvements. We do have a handful of larger scale projects that are underway right now. You know, a lot of the projects that we had announced previously, like, you know, building the tissue sequencing labs, you know, those are largely completed, but there's still opportunity. And, you know, we're working on those opportunities now. There's also just COGS reductions that come with scale. A lot of, if you look all across the workflows and just at the operations in general, as we continue to scale up, I think that provides some additional leverage, which really helps us. But of course, there's huge upside opportunities on improving ASP and improving reimbursement. And I can't emphasize that enough that When you look at the ASPs today, that really takes into account the fact that there's a lot of tests where we're not getting coverage from insurance companies. And a lot of the investment that we've been making is to change that. And you are going to see that changing over the next five years. And that's why we're saying, look, we think we can effectively double the ASP. of Signatera, we can really increase the women's health and organ health ASPs going forward, which can drive significant revenue growth that can outpace volume growth.

That's helpful. Thank you. And then maybe building on the last question, you launched the whole genome product this quarter. Just curious, any color on initial uptake? and building on your previous comments longer term, how do you see the whole genome fitting into your portfolio?

Yeah, that's a good question. So, yeah, we've launched the genome test. It's broadly available now, pan-cancer. We get down to one part per million. We are seeing, you know, some interest, but, you know, I think largely physicians are really supportive of the peer-reviewed data that they've seen with the with the exome-based tests where you have a lot of, you know, clinical outcomes. And, you know, one of the things that we're hearing from physicians is that, you know, some of these sort of extreme performance claims that are coming out of analytical studies, they're just not seeing that translate into improved clinical performance. And they're also, you know, raising concerns about specificity problems with some of the other genome-based laboratories. So, you know, we think we're in a good position. We have great performance on the exome. Doctors are telling us that they like the performance of the test. They like all the peer-reviewed data. They like the long-term data sets. They're raising concerns about, you know, extreme analytical claims, you know, not necessarily translating into clinical performance. And they're raising concerns about specificity from some of the other companies. And, you know, we're seeing As Solomon pointed out, you know, in some cases, the competitors are actually not even disclosing their specificity. I think we saw that recently. A genome competitor, they talked about their colorectal data. They actually didn't disclose their specificity. So, you know, that raises questions. And, you know, doctors see that. So we think we're in a good position. You know, long-term, we have both products available. The doctor can look at the data, and they can choose which tests they want to go with.

Appreciate the color and congrats on the quarter, guys.

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