Business Overview and History
Natera, Inc. (NASDAQ:NTRA) is a leading diagnostic company that has developed innovative molecular and bioinformatics technologies to change the management of disease worldwide. The company's proprietary cell-free DNA (cfDNA) platform combines novel molecular assays and statistical algorithms to identify genetic variations with high accuracy and coverage, enabling personalized genetic testing and diagnostics across several key healthcare verticals.
Natera was founded in 2003 as Gene Security Network, LLC in California and later incorporated in Delaware in 2007. The company's core business revolves around applying its cfDNA technology to address unmet needs in women's health, oncology, and organ health. Natera's core technology combines proprietary molecular assays that measure genetic variations across the genome with statistical algorithms that incorporate data from the broader scientific community, allowing for the identification of genetic variations covering a wide range of serious conditions with high accuracy and coverage.
In 2013, Natera launched its first product, the Panorama non-invasive prenatal test (NIPT), which screens for fetal chromosomal abnormalities and genetic diseases. Over the following years, the company expanded its women's health portfolio to include carrier screening, preimplantation genetic testing, and hereditary cancer screening tests. In the oncology space, Natera commercialized its Signatera molecular residual disease test in 2017, a personalized, tumor-informed test that detects circulating tumor DNA to monitor for cancer recurrence. The company has since expanded the use of Signatera to additional cancer types. In 2018, Natera entered the organ health market with the launch of its Prospera organ transplant assessment tests to monitor for organ rejection.
Throughout its history, Natera has faced challenges common to diagnostic companies, including developing and validating its tests, securing reimbursement coverage from third-party payers, and increasing commercial adoption of its products. The company has invested significantly in research and development to enhance its existing tests and develop new offerings across its key focus areas.
Natera's success has been driven by its focus on innovation and its ability to generate robust clinical data to support the clinical utility of its tests. The company has published over 250 peer-reviewed publications as of December 31, 2024, and maintains a strong intellectual property portfolio with over 500 issued or pending patents. This commitment to R&D and validation has allowed Natera to establish itself as a leader in the markets it serves.
In recent years, Natera has made significant strides in expanding its product offerings and driving adoption of its technologies. The company's revenues have grown from $625.5 million in 2021 to $1.70 billion in 2024, representing a compound annual growth rate (CAGR) of 39.3%. This impressive growth has been fueled by strong performance across Natera's core business lines, as well as the company's ability to secure favorable reimbursement agreements and drive operational efficiencies.
Product Segments
Natera operates in three main areas of healthcare: women's health, oncology, and organ health.
Women's Health Natera's key women's health product is Panorama, its non-invasive prenatal test (NIPT) launched in 2013. Panorama screens for fetal chromosomal abnormalities such as Down syndrome, Edwards syndrome, and Patau syndrome, as well as five common genetic diseases caused by microdeletions. Panorama can be performed as early as 9 weeks into a pregnancy with a simple blood draw from the mother. The company states that Panorama is the most accurate NIPT commercially available in the U.S. based on published data. Panorama generates the significant majority of Natera's women's health revenues.
Natera also offers Horizon, its carrier screening test to determine if individuals are carriers of single-gene variations that could cause certain genetic conditions in their children. Horizon screens for up to 613 inherited conditions. Additionally, Natera provides other women's health tests such as Vistara for single-gene conditions, Spectrum for preimplantation genetic testing, Anora for products of conception testing, and Empower for hereditary cancer screening.
Oncology In oncology, Natera's lead product is Signatera, a personalized circulating tumor DNA (ctDNA) test for detection of molecular residual disease (MRD), recurrence monitoring, and treatment response evaluation across a range of cancer types. Signatera is designed to track patient-specific tumor mutations and has demonstrated the ability to detect ctDNA at low levels to identify MRD. Natera sells Signatera both for clinical use and to biopharmaceutical companies for research use.
Natera also offers Altera, a comprehensive genomic profiling test to support treatment selection based on a patient's tumor biomarkers. Altera can be ordered standalone or in conjunction with Signatera.
Organ Health Natera's Prospera test assesses active rejection in kidney, heart, and lung transplant patients by measuring the fraction of donor-derived cell-free DNA (dd-cfDNA) in the recipient's blood, which can increase during organ rejection. Prospera is designed to help physicians rule in or rule out active rejection and potentially reduce the need for invasive biopsies. Natera also offers Renasight, a genetic test to determine if there may be a genetic cause for an individual's chronic kidney disease.
Financial Analysis and Liquidity
Natera's financial performance has been strong, with the company reporting revenues of $1.70 billion in 2024, up 56.7% from the prior year. This growth was driven by a 57.7% increase in product revenues, which accounted for 99% of total revenues. The company's gross margin also improved significantly, reaching 62.9% in Q4 2024, up from 51.4% in the same period of the prior year.
Despite the company's rapid growth, Natera has continued to invest heavily in research and development (R&D) and selling, general, and administrative (SG&A) expenses to support its product pipeline and commercial expansion. R&D expenses totaled $404.1 million in 2024, while SG&A expenses were $841.3 million. These investments have weighed on the company's bottom line, resulting in a net loss of $190.4 million for the year.
However, Natera's strong revenue growth and operational improvements have enabled the company to generate positive cash flow. In 2024, the company reported operating cash flow of $135.7 million and free cash flow of $58.7 million. As of December 31, 2024, Natera had $945.6 million in cash, cash equivalents, and short-term investments, providing ample liquidity to fund its ongoing operations and strategic initiatives.
In terms of liquidity metrics, Natera's debt-to-equity ratio stands at 0.16, indicating a relatively low level of leverage. The company's current ratio of 4.00 and quick ratio of 3.87 suggest a strong ability to meet short-term obligations. Additionally, Natera has access to a $100 million credit line, of which $20 million remains available as of December 31, 2024.
Natera's direct sales force accounted for 94% of revenues in 2024, with the remaining coming from laboratory partners. The company processed approximately 3.06 million tests in 2024, up from 2.50 million tests in 2023, demonstrating strong volume growth across its product portfolio.
Guidance and Outlook
For the full year 2025, Natera is guiding for revenues in the range of $1.87 billion to $1.95 billion, representing growth of approximately 12% at the midpoint. This guidance reflects the company's confidence in the continued momentum across its product lines, as well as its ability to drive further improvements in reimbursement and operational efficiency.
The revenue guidance presumes continued volume growth and stable average selling prices (ASPs) across the business, with Signatera expected to continue its sequential growth above 8,000-10,000 units per quarter. Natera is also guiding to continued gross margin improvement above the 59% level seen in Q4 2024, driven by a mix of ASP growth and cost of goods sold (COGS) reduction initiatives.
Specific areas of focus for Natera in 2025 include:
1. Women's Health: The company expects to see steady volume growth and stable ASPs in its women's health portfolio, which includes Panorama and Horizon. Natera is also working to secure additional coverage and reimbursement for its microdeletions screening capabilities within Panorama.
2. Oncology: Natera anticipates continued strong growth for its Signatera MRD test, driven by expanded Medicare coverage, guideline updates from the National Comprehensive Cancer Network (NCCN), and the ongoing adoption of Signatera in clinical practice. The company is also investing in the development of new product offerings, such as a tissue-free MRD assay and a whole-genome-based MRD test.
3. Organ Health: Natera expects to see accelerated adoption of its Prospera organ transplant assessment tests, driven by the upcoming readouts from two key clinical studies – PEDAL and DEFINE. These studies are designed to demonstrate the clinical utility of Prospera in monitoring kidney and heart transplant patients, respectively.
4. Early Cancer Detection: Natera is also making progress on its early cancer detection program, having recently announced positive results from the PROCEED study evaluating its technology in colorectal cancer. The company plans to initiate the FDA-enabling FIND study in 2025, which will further validate the performance of its early detection assay.
Natera plans to increase investments in R&D, SG&A, and the launch of their early cancer detection (ECD) program, while still targeting cash flow positive results in 2025. The guidance does not include the impact of potential true-ups, which Natera expects will moderate over time as their cash collections and accruals become more aligned.
Competitive Landscape and Risks
Natera operates in highly competitive markets, facing rivalry from both established diagnostic companies and emerging players. In women's health, the company competes with the likes of Laboratory Corporation of America, Myriad Genetics, and Illumina's Verinata subsidiary. In oncology, Natera's Signatera test competes with offerings from Guardant Health, Invitae, and NeoGenomics, among others. In the organ transplant space, Natera's primary competitor is CareDx.
To maintain its market-leading position, Natera must continue to invest heavily in research and development, generate robust clinical data, and provide a superior customer experience. The company also faces risks related to potential regulatory changes, reimbursement challenges, and intellectual property disputes, which could impact its ability to commercialize its products and services.
It's worth noting that Natera faced a short seller report in 2022, but an independent investigation found the allegations to be unfounded. The company has not experienced any recent CEO departures or major scandals that could impact its operations or market position.
Industry Trends
The global molecular diagnostics market, in which Natera operates, is projected to grow at a compound annual growth rate (CAGR) of 10.4% from 2025 to 2030. This growth is driven by factors such as the increasing prevalence of chronic diseases, advancements in genomic technologies, and the rising demand for personalized medicine.
Natera is well-positioned to capitalize on these trends, given its strong product portfolio and focus on innovation. The company's continued investment in research and development, as well as its efforts to expand reimbursement coverage and increase average selling prices for its tests, should allow it to maintain its competitive edge in the rapidly evolving diagnostics industry.
Conclusion
Natera has established itself as a leader in the diagnostic testing market, leveraging its innovative cfDNA technology to address unmet needs across women's health, oncology, and organ transplant. The company's strong financial performance, robust product pipeline, and focus on clinical validation have positioned it for continued growth, as evidenced by its solid 2025 guidance.
While Natera faces competition and regulatory risks, its commitment to innovation and its track record of successful commercialization suggest that the company is well-positioned to capitalize on the significant opportunities within its core markets. As Natera continues to expand its product offerings and drive further operational improvements, the company may emerge as an increasingly attractive investment opportunity for investors seeking exposure to the rapidly evolving diagnostics industry.