On August 5, 2020 Natera, Inc. (NASDAQ: NTRA), a pioneer and global leader in cell-free DNA testing, reported financial results for the second quarter ended June 30, 2020 and provided an update on recent business progress (Press release, Natera, AUG 5, 2020, View Source [SID1234563219]).
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Recent Accomplishments & Highlights
Processed approximately 234,100 tests in the second quarter of 2020 compared to approximately 194,200 tests processed in the second quarter of 2019, an increase of 21%.
Generated total revenues of $86.5 million in the second quarter of 2020 compared to $74.4 million in the second quarter of 2019.
Published Signatera study in Nature Cancer validating ability to monitor tumor response to immune therapy in 25 different types of solid cancer.
Launched the PEDAL study designed to demonstrate Prospera test enhancements at the American Transplant Conference.
Presented four abstracts, including one oral presentation and three poster presentations, at the American Society for Clinical Oncology conference demonstrating the performance of Signatera in areas including colorectal cancer and hepatocellular carcinoma.
Enrolled first patients in both CIRCULATE-Japan and BESPOKE CRC for Signatera in colorectal cancer, and in PROACTIVE for Prospera.
Received positive coverage from Noridian for Prospera; commenced full commercial launch.
Received the Force for Change Illuminator Award from Leading Women Entrepreneurs.
"The business was very resilient in the second quarter," said Steve Chapman, Natera’s Chief Executive Officer. "We posted another very strong volume and revenue result despite the COVID-19 impact, and we achieved major milestones across the oncology and transplant businesses. We are very proud of the team’s performance during this challenging time."
Second Quarter Ended June 30, 2020 Financial Results
Total revenues were $86.5 million in the second quarter of 2020 compared to $74.4 million for the second quarter of 2019. The increase in total revenues was driven primarily by sales of Natera’s Panorama and Horizon tests. Natera processed 234,100 tests in the second quarter of 2020, including approximately 221,600 tests accessioned in its laboratory, compared to 194,200 tests processed in the second quarter of 2019, including approximately 181,600 tests accessioned in its laboratory.
In the three months ended June 30, 2020, Natera recognized revenue on approximately 220,000 tests for which results were reported to customers in the period (tests reported), including approximately 208,400 tests reported in its laboratory, compared to approximately 187,600 tests reported, including approximately 174,800 tests reported in its laboratory, in the second quarter of 2019.
Gross profit* for the three months ended June 30, 2020 and 2019 was $39.5 million and $30.5 million, respectively, representing approximately 46% and 41% gross margin*, respectively. The company was able to achieve higher margins in the second quarter of 2020 primarily because of improved cost of goods sold per test and increased revenues.
Total operating expenses, representing research and development expenses and selling, general and administrative expenses, for the second quarter of 2020 were $91.2 million, compared to $59.2 million in the same period of the prior year. The increases were primarily driven by headcount growth to support new product offerings.
Loss from operations for the second quarter of 2020 was $51.6 million compared to $28.6 million for the same period of the prior year.
Net loss for the second quarter of 2020 was $59.6 million, or ($0.75) per diluted share, compared to net loss of $32.4 million, or ($0.48) per diluted share, for the same period in 2019. Weighted average shares outstanding were approximately 79.0 million in the second quarter of 2020.
At June 30, 2020, Natera held $571.2 million in cash, cash equivalents, short-term investments and restricted cash, compared to $441.0 million as of December 31, 2019. As of June 30, 2020, Natera had a total outstanding debt balance of $247.5 million, comprised of $50.1 million with accrued interest under its $50.0 million line of credit with UBS at a variable interest rate of 30-day LIBOR plus 110 bps and a net carrying amount of $197.5 million under its seven-year convertible senior notes. The convertible senior notes were issued in April 2020 for net proceeds of $278.9 million, of which a portion was used to repay the $79.2 million obligations under the company’s 2017 term loan with OrbiMed Advisors. The gross principal balance outstanding for the convertible senior notes was $287.5 million for the second quarter of 2020.
2020 Financial Outlook
Natera anticipates 2020 total revenue of $345 million to $365 million; 2020 cost of revenues to be approximately 51% to 55% of revenues; selling, general and administrative costs to be approximately $260 million to $280 million; research and development costs to be $85 million to $95 million, and net cash burn to be $125 million to $155 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 burn is calculated as the sum of GAAP net cash used by operating activities (estimated for 2020 to be between $117 million and $147 million) and GAAP net purchases of property and equipment (estimated for 2020 to be approximately $8 million).