Financial Highlights
NTRA | Q3 2021 Outlook
Background
We've had Natera (NTRA) on our Best Idea Long list since 3Q20. While our original thesis has played out, namely upside to their base maternity business from expanding use of NIPT testing, a new opportunity in the company's MRD test, Signatera, is nearing the point where it begins to materially contribute to results. We are optimistic about the long-term prospects for Signatera, which we think has a substantial opportunity in oncology testing.
Thesis
From our most recent update of our claims data we've tracked progress for Panorama, Horizon, and Signatera. We can also see progress in their transplant testing volume as well, but so far that is a small contributor. As we've discussed previously, there are limitations to our claims series, but the latest update is showing upside across a number of products. Growth in Signatera has been especially strong, nearly doubling in volume quarter-over-quarter.
Our revenue estimates for 3Q21 and 4Q21 are $159M and $174M versus $152M and $168M, respectively. Consensus began the year at $109M and $107M for 3Q21 and 4Q21, reflecting how far estimate revisions have come this year. For 2022, our outlook is $870M versus consensus $754M. We think NIPT adoption will continue among average risk pregnancies, but the ramp in Signatera is reaching a point where the volume growth will begin to meaningfully contribute. In addition, realized pricing is poised to make a multiyear run higher from ~$600 to $3,500 as a function of reimbursement hardening and guideline inclusion.
Valuation
At its peak in January 2021, Natera traded at 22X EV/Sales. As estimates rose for 2021 and 2022, 20% and 60% from the start of the year respectively, the EV/Sales multiple has fallen 40% from a peak of 22X to a trough of 12X over the same time frame. We think the TAM for Signatera is $2.4B on the current market opportunity of 4M tests annually at the current realized price of ~$600, but as reimbursement firms and guidelines expand, that opportunity will expand to $14B. Even in a competitive market, we expect Signatera's market share to be significant enough to contribute meaningfully to results. On our 2022 revenue estimate we can make a case for shares to trade between $130 to $150 and higher depending on the pace and magnitude of consensus estimate revisions.
Catalysts & Risks
We expect the Macro Quad 2 backdrop to be incrementally favorable for Natera, a positive change from Macro Quad 3 that has compressed multiples been a headwind for NTRA's factor exposure, but inflation remains a risk. The competitive risks are significant from multiple players entering the space. These include array-based liquid biopsy tests, such as Guardant and others using a tumor naïve approach. But there are others approaching using a tumor-informed test similar to Natera. For NIPT, 50% of births are covered by Medicaid, but coverage has not expanded as broadly as it has for commercial insurance and may leave incremental penetration and growth at risk sooner than we expect.
Key Slides
NTRA Claims Data
Updated Valuation
All data available upon request. Please reach out to with any inquiries.
Thomas Tobin
Managing Director
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