On February 28, 2023 Natera, Inc. (NASDAQ: NTRA), a global leader in cell-free DNA testing, reported financial results for the fourth quarter and year ended December 31, 2022 and provided an update on recent business progress and financial outlook (Press release, Natera, FEB 28, 2023, View Source [SID1234627915]).

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Recent Accomplishments & Highlights

Generated total revenues of $217.3 million in the fourth quarter of 2022 compared to $173.0 million in the fourth quarter of 2021, an increase of 25.6%. Product revenues grew 28.2% over the same period.
Generated total revenues of $820.2 million in the year 2022 compared to $625.5 million in the year 2021, an increase of 31.1%. Product revenues grew 37.4% over the same period.
Processed approximately 559,700 tests in the fourth quarter of 2022, compared to approximately 438,800 tests processed in the fourth quarter of 2021, an increase of 27.6%.
Processed approximately 2,066,500 tests in the year 2022, compared to approximately 1,570,000 tests processed in the year 2021, an increase of 31.6%.
Performed over 196,000 oncology tests in the year 2022, representing an increase of 158% over 2021, with 40 published peer-reviewed studies for Signatera to date.
Guiding 2023 total revenue of $980 million – $1 billion, reducing cash burn by approximately $150 million in 2023.
Secured Medicare coverage for breast cancer, representing fifth coverage decision for Signatera.
Prospective, multi-site CIRCULATE study featured on the cover and as lead publication in the January 2023 issue of Nature Medicine, which demonstrated Signatera’s ability to predict chemotherapy benefit in colorectal cancer with 18-months of clinical follow-up.
New American College of Medical Genetics (ACMG) guideline supporting screening for 22q.11.2 deletion syndrome.
National Society of Genetic Counselors (NSGC) guideline recommending that expanded carrier screening be made available to all individuals considering reproduction and all pregnant pairs.
Updated International Society for Heart and Lung Transplantation (ISHLT) guidelines for heart transplant, including dd-cfDNA testing in a Class 1B recommendation.
Seasoned healthcare executive Ruth Williams-Brinkley appointed to the Board, effective March 2, 2023.
"We delivered another strong year in 2022, helping a record number of patients with their care," said Steve Chapman, Natera’s Chief Executive Officer. "We achieved important milestones that demonstrate the clinical utility of our tests, expanded coverage, and built on our leadership in evidence generation. Our guidance for 2023 reflects our expectations for robust top-line growth as we reduce operating expenses and continue to position the company for ongoing success."

Fourth Quarter and Year Ended December 31, 2022 Financial Results

Total revenues were $217.3 million in the fourth quarter of 2022 compared to $173.0 million for the fourth quarter of 2021, an increase of 25.6%. The increase in total revenues was driven primarily by a 28.2% increase in product revenues, which were $212.9 million in the fourth quarter of 2022 compared to $166.1 million in the fourth quarter of 2021. The increase in product revenues was driven by an increase in test volumes compared to the fourth quarter of 2021. Natera processed approximately 559,700 tests in the fourth quarter of 2022, including approximately 543,900 tests accessioned in its laboratory, compared to approximately 438,800 tests processed, including approximately 424,200 tests accessioned in its laboratory, in the fourth quarter of 2021.

In the fourth quarter of 2022, Natera recognized revenue on approximately 519,200 tests for which results were reported to customers in the period (tests reported), including approximately 504,500 tests reported from its laboratory, compared to approximately 410,900 tests reported, including approximately 397,100 tests reported from its laboratory, in the fourth quarter of 2021, an overall increase of 26.4% for the quarter.

Total revenues for 2022 were approximately $820.2 million compared to $625.5 million in 2021, which represents an increase of 31.1%. Total revenues, excluding non-recurring revenues of $28.6 million from the Qiagen arrangement, increased by 37.4% in 2022 compared to 2021. In 2022, Natera processed approximately 2,066,500 tests including approximately 2,004,000 tests accessioned in its laboratory, compared to approximately 1,570,000 tests processed in 2021, including approximately 1,513,400 tests accessioned in its laboratory.

In 2022, Natera recognized revenue on approximately 1,919,600 tests reported, including approximately 1,861,000 tests reported from its laboratory, compared to approximately 1,453,500 tests reported, including approximately 1,400,100 tests reported from its laboratory, in 2021, an overall increase of 32.1% for the year.

Gross profit* for the three months ended December 31, 2022 and 2021 was $90.0 million and $78.9 million, respectively, representing a gross margin of 41.4% and 45.6%, respectively. Natera had lower margins in the fourth quarter of 2022 compared to the fourth quarter 2021 primarily due to increased labor and overhead costs driven by volume growth and customer support. Gross profit for the year ended December 31, 2022 and 2021 was $364.0 million and $307.1 million, respectively, representing a gross margin of 44.4% and 49.1%, respectively. Natera had lower margins in the year 2022 primarily due to changing product mix, increased labor and overhead costs driven by volume growth and customer support, as well as one time revenue recognized from the Qiagen arrangement in 2021.

Total operating expenses, representing research and development expenses and selling, general and administrative expenses, for the fourth quarter of 2022 were $231.7 million, compared to $218.6 million in the same period of the prior year, an increase of 6.0%. Total operating expenses in the year ended December 31, 2022 were $905.0 million, an increase of approximately 16.7% compared to $775.2 million in the prior year. The increases were primarily driven by headcount growth to support new product offerings.

Loss from operations for the fourth quarter of 2022 was $141.8 million compared to $139.7 million for the same period of the prior year. Loss from operations for the year 2022 was $541.0 million compared to $468.2 million compared to the prior year.

Net loss for the fourth quarter of 2022 was $142.6 million, or ($1.37) per diluted share, compared to net loss of $140.6 million, or ($1.48) per diluted share, for the same period in 2021. Weighted average shares outstanding were approximately 104.3 million in the fourth quarter of 2022 compared to 94.8 million in the fourth quarter of the prior year. Net loss for the full year 2022 was $547.8 million, or ($5.57) per diluted share, compared to net loss of $471.7 million, or ($5.21) per diluted share, for the full year 2021. Weighted average shares outstanding were 98.4 million in 2022 compared to 90.6 million in 2021.

At December 31, 2022, Natera held approximately $898.4 million in cash, cash equivalents, short-term investments and restricted cash, compared to $914.5 million as of December 31, 2021. As of December 31, 2022, Natera had a total outstanding debt balance of $362.0 million, comprised of $80.4 million including accrued interest under its line of credit with UBS at a variable interest rate of 30-day SOFR plus 121 bps and a net carrying amount of $281.7 million under its seven-year convertible senior notes issued in April 2020. The gross principal balance outstanding for the convertible senior notes was $287.5 million as of December 31, 2022.

Financial Outlook

Natera anticipates 2023 total revenue of $980 million to $1.0 billion; 2023 gross margin to be approximately 41% to 44% of revenues; selling, general and administrative costs to be approximately $510 million to $540 million; research and development costs to be $325 million to $345 million, and net cash consumption to be $300 million to $325 million**.

* Gross profit is calculated as GAAP total revenues less GAAP cost of revenues. Gross margin is calculated as gross profit divided by GAAP total revenues.

** Cash consumption is calculated as the sum of GAAP net cash used by operating activities (estimated for 2023 to be between $250 million and $275 million) and GAAP net purchases of property and equipment (estimated for 2023 to be approximately $50 million).

Test Volume Summary

Unit

Q4 2022

Q4 2021

FY 2022

FY 2021

Definition

Tests processed

559,700

438,800

2,066,500

1,570,000

Tests accessioned in our laboratory plus units processed outside of our laboratory

Tests accessioned

543,900

424,200

2,004,000

1,513,400

Test accessioned in our laboratory

Tests reported in our laboratory

504,500

397,100

1,861,000

1,400,100

Total tests reported in our laboratory less units reported outside of our laboratory

Tests reported

519,200

410,900

1,919,600

1,453,500

Total tests reported