Founded by Matthew Rabinowitz and Jonathan Sheena in November 2003, Natera (NTRA) engages in the discovery, development, and commercialization of genetic testing services. It provides the Panorama non-invasive prenatal test (NIPT), Vistara, horizon carrier screening (HCS), spectrum pre-implantation genetic screening and spectrum pre-implantation genetic diagnosis, Anora products of conception (POC), and non-invasive paternity testing (PAT).The firm also offers Constellation, a cloud-based software product that allows laboratory customers to gain access to the algorithms and bioinformatics in order to validate and launch tests based on the technology. Natera is headquartered in San Carlos, CA, and currently employs an approximate total of 975 employees.
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OVERVIEW
Since August 2020 and the widening of access of NIPT to average-risk patients, Natera Prospera test volume has been increasing steadily month over month and provided the upside to 3Q20 results and the boosted guidance. At the same time, Natera's Horizon carrier test has remained more stable. Our ability to see test volume gives us enhanced visibility into the underlying volume drivers and points to substantial upside in the next few quarters and likely beyond. Management stopped reporting revenue by test in 3Q19 which masks the success they have had through 3Q20 in both recovering from COVID-19, as well as the partial quarter contribution from NIPT testing for average risk patients. Our preliminary 2021 revenue estimate is $500M compared to consensus of $456M, but there are meaningful pockets of upside.
THESIS
Average Risk NIPT | Assuming NIPT is 25% penetrated and NTRA has 50% market share, its not unreasonable to assume Panorama revenue multiples of their current level.
COVID-Comp Negative | Both NIPT and carrier testing declined during the early stages of the COVID-19 pandemic, providing an easy compare as the vaccine is rolled out which we should be able to monitor. A return to in person care and the potential for improvements in maternity trends should also provide a tailwind to volume in 2021.
Liquid Biopsy Ramping | According to our data, the contribution from Signatera is currently only in the low single digits in terms of volume. However, the trend is on a clear trajectory higher. Based on our conversations with experts, we believe Natera has a defensible market position in minimal residual disease detection for colon cancer, as well as other cancers. Relative to some of the more high profile companies who are chasing early detection and pan cancer screening, we suspect NTRA has been somewhat overlooked.
