Natera (NASDAQ: NTRA) reported Q4 EPS of ($0.46), $0.09 better than the analyst estimate of ($0.55). Revenue for the quarter came in at $83.2 million versus the consensus estimate of $77.83 million.

Fourth Quarter and Year Ended December 31, 2019 Financial Results

• Total revenues were $83.2 million in the fourth quarter of 2019 compared to $67.0 million for the fourth quarter of 2018, an increase of 24%. The increase in total revenues was driven primarily by sales of Natera\'s Panorama and Horizon tests. Natera processed 209,400 tests in the fourth quarter of 2019, including approximately 198,300 tests accessioned in its laboratory, compared to 174,200 tests processed in the fourth quarter of 2018, including approximately 162,900 tests accessioned in its laboratory. Despite selling its Evercord business in the third quarter of 2019, Natera achieved an overall increase of approximately 20% for the quarter.
• Total revenues for 2019 were $302.3 million compared to $257.7 million in 2018, which represents an increase of 17%. In 2019, Natera processed approximately 804,300 tests including approximately 753,800 tests accessioned in its laboratory, compared to approximately 668,600 tests processed in 2018, including approximately 625,900 tests accessioned in its laboratory. Despite selling the Evercord business in the third quarter of 2019, Natera achieved an overall increase of approximately 20% for the year.
• In the three months ended December 31, 2019, Natera recognized revenue on approximately 200,800 tests for which results were reported to customers in the period (tests reported), including approximately 189,700 tests accessioned in its laboratory, compared to approximately 172,500 tests reported, including approximately 162,500 tests accessioned in its laboratory, in the fourth quarter of 2018, an overall increase of 16% for the quarter.
• In 2019, Natera recognized revenue on approximately 763,900 tests reported, including approximately 718,500 tests accessioned in its laboratory, compared to approximately 631,800 tests reported, including approximately 594,300 tests accessioned in its laboratory, in 2018, an overall increase of 21% for the year.
• Gross profit1 for the three months ended December 31, 2019 and 2018 was $38.8 million and $24.2 million, respectively, representing a 47% and 36% gross margin, respectively. Natera was able to achieve higher gross margins in Q4 2019 as a result of improved cost of goods sold per test and approximately $3.8 million in license and development revenues earned under strategic partnership agreements. Gross profit for the year ended December 31, 2019 and 2018 was $126.9 million and $91.6 million, respectively, representing a 42% and 36% gross margin, respectively. Natera was able to achieve higher gross margins in the year 2019 as a result of improved cost of goods sold per test and approximately $16.4 million in license and development revenues earned under strategic partnership agreements.
• Total operating expenses, representing research and development expenses and selling, general and administrative expenses, for the fourth quarter of 2019 were $73.6 million, an increase of approximately 37% compared to $53.9 million in the same period of the prior year. The increase was driven primarily by higher personnel-related expenses resulting from an increase in commercial activities and an increase in research and development activities under strategic partnerships. Total operating expenses, net of gain from the disposal of the Evercord business of $14.4 million in the year ended December 31, 2019 were $243.1 million, an increase of approximately 18% compared to $206.2 million in the same period of the prior year. The increase was driven primarily by higher personnel-related expenses and increased commercial activities, offset by the gain from the disposal of the Evercord business in the third quarter of 2019.
• Loss from operations for the fourth quarter of 2019 was $34.8 million compared to $29.7 million for the same period of the prior year. Loss from operations for 2019 was $116.3 million compared to $114.6 million for the prior year.
• Net loss for the fourth quarter of 2019 was $35.2 million, or ($0.46) per diluted share, compared to net loss of $31.8 million, or ($0.51) per diluted share, for the same period in 2018. Weighted average shares outstanding were 76.5 million in the fourth quarter of 2019. Net loss for the full year 2019 was $124.8 million, or ($1.79) per diluted share, compared to net loss of $128.2 million or ($2.22) per diluted share for the full year 2018. Weighted average shares outstanding were 69.6 million in 2019.
• At December 31, 2019, Natera held $441.0 million in cash, cash equivalents, short-term investments and restricted cash, compared to $158.5 million as of December 31, 2018—the increase resulting from the successful completion of two equity offerings in second and fourth quarters of 2019. As of December 31, 2019, Natera had a total outstanding debt balance of $123.8 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 $73.7 million under its debt agreement with OrbiMed Advisors.

"2019 was a transformational year for Natera," said Steve Chapman, Natera Chief Executive Officer. "We delivered strong volume growth, consistent average selling price expansion, and reduced cost of goods sold per unit in our reproductive health business. By publishing excellent data, securing coverage decisions, and signing significant commercial partnerships, we opened a path to creating value in new multi-billion-dollar markets in transplant rejection and oncology. Our strong performance leaves us well positioned to continue our momentum in 2020 and beyond."

GUIDANCE:

Natera sees FY2020 revenue of $335-350 million, versus the consensus of $334.88 million.

• Natera anticipates 2020 total revenue of $335 million to $350 million; 2020 cost of revenues to be approximately 51% to 57% of revenues; selling, general and administrative costs to be approximately $240 million to $260 million; research and development costs to be $80 million to $90 million, and net cash burn to be $125 million to $150 million2.

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