On November 5, 2020 Natera, Inc. (NASDAQ: NTRA), a pioneer and global leader in cell-free DNA testing, reported financial results for the third quarter ended September 30, 2020 and provided an update on recent business progress (Press release, Natera, NOV 5, 2020, View Source [SID1234570221]).

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Recent Accomplishments & Highlights

Processed approximately 262,000 tests in the third quarter of 2020 compared to approximately 200,200 tests processed in the third quarter of 2019, an increase of 31%.
Generated total revenues of $98.1 million in the third quarter of 2020 compared to $77.9 million in the third quarter of 2019, an increase of 26%. Generated product revenues of $93.3 million in the third quarter of 2020 compared to $66.9 million in the third quarter of 2019, an increase of 39.5%.
Practice Bulletin published by American College of Obstetrics and Gynecology (ACOG) and Society of Maternal Fetal Medicine (SMFM) supporting use of Non-Invasive Prenatal Testing (NIPT) for all pregnancies.
Received positive final coverage decision from Medicare for Signatera in colorectal cancer and commenced full commercial launch.
Received draft local coverage determination from Medicare for Signatera in immunotherapy monitoring.
Presented new Signatera data at the 2020 European Society for Medical Oncology.
Announced two prospective phase 2 trials to evaluate early stage breast cancer patients with leading pharmaceutical companies.
Successfully completed $287.5 million follow-on equity offering.
"Q3 was an exceptional quarter," said Steve Chapman, Natera’s Chief Executive Officer. "We delivered a significant increase in volumes over an already strong second quarter. We are pleased with the initial positive reaction to the ACOG/SMFM Practice Bulletin, and continue to execute nicely on our oncology and organ health commercialization plans. After years of hard work, we’re now seeing the new businesses contribute to our strong revenue growth. We are very excited about our current trajectory and are significantly raising our 2020 revenue guidance."

Third Quarter Ended September 30, 2020 Financial Results

Total revenues were $98.1 million in the third quarter of 2020 compared to $77.9 million for the third quarter of 2019. The increase in total revenues was driven primarily by a 39.5% increase in product revenues compared to the third quarter of 2019. Natera processed 262,000 tests in the third quarter of 2020, including approximately 249,300 tests accessioned in its laboratory, compared to 200,200 tests processed in the third quarter of 2019 including approximately 187,200 tests accessioned in its laboratory.

In the three months ended September 30, 2020, Natera recognized revenue on approximately 238,600 tests for which results were reported to customers in the period (tests reported), including approximately 226,700 tests accessioned in its laboratory, compared to approximately 189,600 tests reported, including approximately 178,000 tests accessioned in its laboratory, in the third quarter of 2019.

Gross profit* for the three months ended September 30, 2020 and 2019 was $46.3 million and $34.0 million, respectively, representing approximately 47% and 44% gross margin*, respectively. The company was able to achieve higher margins in the third quarter of 2020 primarily due to 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 third quarter of 2020 were $102.1 million, compared to $69.5 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 third quarter of 2020 was $55.8 million compared to $21.1 million for the same period of the prior year, which included a gain from the sale of the Evercord cord blood banking business of approximately $14.4 million.

Net loss for the third quarter of 2020 was $58.3 million, or ($0.72) per diluted share, compared to net loss of $23.1 million, or ($0.33) per diluted share, for the same period in 2019. Weighted average shares outstanding were approximately 80.9 million in the third quarter of 2020.

At September 30, 2020, Natera held $809.7 million in cash, cash equivalents, short-term investments and restricted cash, compared to $441.0 million as of December 31, 2019. As of September 30, 2020, Natera had a total outstanding debt balance of $250.0 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 $200.0 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 as of September 30, 2020.

Financial Outlook

Natera anticipates 2020 total revenue of $380 million to $390 million; 2020 cost of revenues to be approximately 51% to 54% of revenues; selling, general and administrative costs to be approximately $270 million to $280 million; research and development costs to be $90 million to $95 million, and net cash burn to be $140 million to $150 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 $132 million and $142 million) and GAAP net purchases of property and equipment (estimated for 2020 to be approximately $8 million).