Natera says it has begun making good on its priorities for 2021, which include expansions in noninvasive prenatal testing (NIPT), transplant rejection testing, minimal residual disease (MRD) cancer testing, and pharmaceutical business for its Signatera™ circulating tumor DNA (ctDNA) cancer test.
“We are taking the same technology that we’ve applied to become the market leader in non-invasive prenatal testing and applying that now in the fields of oncology and organ health,” CEO Steve Chapman told GEN.
In an interview during the recent J.P. Morgan 39th Healthcare Conference, Chapman said Natera aims to build on its 2020 accomplishments, which included processing a record 1 million tests, successfully launching Signatera, and surpassing growth goals set before COVID-19 for its Prospera™ donor-derived, cell-free DNA (cfDNA) transplant assessment test.
At more than 1 million, Natera’s estimated 2020 test volume was higher than projected, Puneet Souda, managing director, life science tools and diagnostics with SVB Leerink, and colleagues commented in a January 20 research note—a key reason why the firm raised its price target for Natera stock from $95 to $140 a share.
“Moving forward, we are more bullish on the company’s ability to deliver in 2021 and beyond across all business segments, including their reproductive health core, oncology (Signatera) and transplant (Prospera),” Souda wrote.
Natera is expected to release fourth-quarter and full-year 2020 results in February.
Natera’s reproductive health assays accounted last year for nearly all of the company’s testing volume and revenue. Those assays include the blood-based Panorama™ NIPT test, which looks at chromosomal aneuploidies as early as nine weeks of pregnancy, launched in 2013; and the Horizon™ Carrier Screening test, designed to inform couples of their risk of passing on serious genetic conditions to their child.
“The vast majority of our volume today and revenue is coming from the women’s health business. But we’re actually having very successful launches in both oncology and organ health right now,” Chapman said. Over time, Chapman expects a shift “to where more and more of the volume and revenues are coming from these emerging oncology and organ health opportunities.”
Strengthening Core Business
Yet Natera is also moving to strengthen its core reproductive health business. This week at the Society for Maternal-Fetal Medicine (SMFM)’s 41st Annual Pregnancy Meeting, Natera is presenting data from its SNP-based Microdeletion and Aneuploidy RegisTry (SMART) clinical trial (NCT02381457), a nearly 20,000-participant study intended to validate a new artificial intelligence (AI)-based platform for the Panorama assay. Panorama with AI is designed to further improve the test’s accuracy for common aneuploidies and microdeletions by learning from more than 2 million cf DNA tests that Natera has processed.
According to Natera, the SMART trial is also the first large prospective trial detailing the performance and incidence of microdeletions in the population. Chapman said the data, abstracted on SMFM’s website, included a finding that in the chromosome 22q11.2 deletion syndrome (DS or DiGeorge syndrome)—the leading cause of inherited congenital heart defects after Down syndrome—microdeletions were seen in 12 of the study’s 18,289 participants with both cfDNA and DNA confirmation results, about 1 in 1,500 pregnancies. That prevalence was higher than the 1 in 2,000 to 1 in 4,000 that Natera expected.
That’s also a higher prevalence than other commonly screened conditions, such as cystic fibrosis (about 1 in 2,500) or spinal muscular atrophy (about 1 in 10,000), testing for both of which is already reimbursed.
In another study presented at SMFM, of 18,496 women with both cfDNA screening and genetic confirmation, the original Panorama assay detected the following trisomies: T21 (100 patients), T18 (18 patients), T13 (15 patients). The updated AI algorithm achieved similar performance, but the no-call rate improved significantly from 3.3% to 1.46% on the first blood draw and from 1.57% to 0.60% on the second. Positive predictive value (PPV) for all trisomies were 74.3% on the first draw and 94.1% on the second.
“We believe that one of the main hurdles in microdeletion reimbursement was a lack of high quality data in an average risk population. With this prevalence data being presented, which includes 83.3% overall sensitivity, 99.95% specificity and 52.6% PPV on Panorama’s updated algorithm, we believe guideline inclusion could potentially come as early as this year, with reimbursement to follow,” Souda predicted.
Natera carried out more than 400,000 microdeletion tests in 2020, with scant reimbursement—despite the Centers for Medicaid and Medicare Services (CMS) setting a $759.05 price and assigning a CPT code (81422) for the test.
“Explosive” Growth Prospects
“Any material increase in the percentage of paid microdeletions claims will result in an explosive step function in [Natera’s] NIPT segment,” Max Masucci, an analyst with Canaccord Genuity, predicted in a January 14 research note. “We remain positive on [Natera] after abstract data readouts from its 5-year, 20,000 patient SMART trial were posted on the SMFM website.”
The company hopes the data from SMART will lead to that predicted explosive growth, which Chapman estimated could generate as much as double the company’s 2019 revenues of $302.33 million or more.
“The results of this study could trigger society guidelines and a reimbursement change that would get us $100 million to $300 million plus in additional profit per year,” Chapman projected, depending on how private insurers reimburse Natera for the test.
At the low end, should private insurers agree to pay only $250 for the test, Natera could still generate another $100 million based on current testing volume, Chapman said.
“At the very high end, there’s probably $300-400 million in profit there for us in additional revenue on an annualized basis, based on our volumes today… That could double and triple as the market penetrates further,” Chapman said. “That is something that could come through as we start to turn the corner into 2022.”
“A Major Advancement”
“This is really a huge opportunity financially, but even more importantly it’s a major advancement in medicine that I think is really going to help patients and help physicians,” he added.
Souda of SVB Leerink agreed that the microdeletion data will drive pricing, reimbursement, and ultimately revenue for Natera.
“We see SMART study data on microdeletions being significant for inclusion in ACOG [American Colege of Obstetricians and Gynecologists] guidelines, leading to eventual microdeletion reimbursement for [Natera],” Souda observed. “We expect the microdeletion data to be a key driver of ASP [average selling price] and revenue expansion longer term, as the company is already running 100k+ microdeletion panels per quarter with no reimbursement currently.”
Another driver for Natera in growing its reproductive health business will be expanding Panorama testing into average-risk pregnancies. Starting in 2021, Chapman said, Natera plans to expand Panorama’s penetration from 20-90% of that market, which according to the company accounts for 3.4 million of 4.2 million U.S. births each year—a higher figure than the 3,791,712 births tallied by CDC in 2018.
Chapman said Natera will be able to penetrate the market now that major insurers have expanded their coverage of NIPT to all pregnancies; both Aetna and United HealthCare announced the change effective December 2020. The insurers’ actions followed the issuing of a Practice Bulletin published by ACOG and SMFM which supported use of NIPT for all pregnancies.
“The market is completely opened up,” Chapman said. “Doctors, as they start to adapt to the new guidelines, are going to be choosing our tests, and we think there’s going to be a real slingshot effect here of us riding the wave of the average risk expansion as that market penetrates over the next 3-4 years.”
Transplant, Oncology Expansions
Chapman said Natera would continue expanding its transplant patient testing business based on its Prospera assay, a Medicare-covered cfDNA blood test designed to assess the risk of rejection of a transplanted kidney. As of 2018, almost 230,000 American patients live with a functioning kidney transplant and no longer require dialysis, with a record-high 22,393 kidney transplants occurring nationwide, according to the 2020 Annual Data Report of the U.S. Renal Data System.
In May 2020 at the virtual American Transplant Congress (ATC), Natera showcased an improved version measuring background cfDNA, which in transplant patients is increased in COVID-19 and other conditions. Natera estimates test developers have only penetrated 10% of a transplant assessment market whose size it estimates as high as $2 billion, leaving much room for further growth.
Later this year, researchers from Natera and partners plan to publish studies with data on background cf-DNA in transplant patients with COVID-19. A COVID-19 case study has been submitted for publication, while another study of 25 COVID-19 patients has been completed
“I think one of the core foundational capabilities of Natera is innovation, and we intend on continuing to improve on the Prospera product,” Chapman said. “We’ve been very pleased with our launch so far. In fact, in 2020 we beat our pre-COVID forecast, which we were pretty impressed with just given all the disruption from COVID. We’re excited that we were able to go out and basically exceed what we had planned on doing.”
Another priority for Natera in 2021 will be building its oncology testing business, where the company has focused on MRD monitoring, a market it has projected as high as $15 billion.
Natera launched its Signatera cancer test last year, with a first indication in Stages II and III of colorectal cancer (CRC). That indication offers a potential market opportunity, according to the company, of 1 million tests a year—nearly half the total estimated 2.4 million test opportunity in cancer. The remainder includes 800,000 tests a year for immune-oncology response monitoring, and 600,000 tests for newly published and presented indications.
From CRC to Pan-Cancer
By targeting CRC first, Chapman said, Natera reasons it can treat 85% of the 20% of CRC patients whose cancer recurrences are now detected too late to cure through surgery, resulting in liver metastases: “Because the very high clinical utility and the big market opportunity, that’s why we picked colorectal.”
This quarter, Natera plans to launch Signatera for its second indication, immuno-oncology (IO). While some 200,000 patients receive IO treatments, most show little to no response, or show pseudoprogression in which lymphocytes infiltrate the tumor, and make it appear that it’s growing. In August, researchers from Natera and the Princess Margaret Cancer Centre published a study in Nature Cancer that validated Signatera’s ability to evaluate tumor response to immunotherapy in 25 different types of solid cancer. Signatera detected ctDNA before treatment in 98% of cases (92 of 94 patients), which Natera said emphasized its validity as a universal biomarker across tumor types.
Natera has more than 50 clinical trials or biobank studies underway. The company also cites past studies showing Signatera to be validated in forms of bladder, breast, colon, esophageal, and lung cancers in addition to CRC—most recently a study in neoadjuvant breast cancer study published in December—with a study in muscle invasive bladder cancer set to come out in the first half of 2021.
“We really see this as a pan-cancer assay where in the future, really every tumor type would be eligible for Signatera,” Chapman said. The company expects to pursue a pan-cancer indication once CMS finalizes a new umbrella coverage paradigm for cancer testing, something expected to occur later this year.
Another growing avenue for expanding Signatera revenue, according to Natera, is contracts with biopharmaceutical partners. Last year, Natera signed contracts with biopharmas totaling $65 million—more than half of its total $120 million in contracts, and about 71% above the $46 million in contracts signed in 2019.
Chapman said the average contract size is growing, including multiple late-stage trials with rising patient volumes and development fees.
Kicking the Tires
“We’re seeing a major acceleration right now in the form of going from earlier exploratory studies and Phase II clinical trials, to now more significant, more expensive Phase III trials,” Chapman said. “Companies have tested our technology. They’ve kicked the tires, they’re comfortable with it. They see the power of it. And then, particularly coming out of the results of the first Phase III clinical trial that included MRD testing, which was released in December.”
That study, IMvigor010 (NCT02450331), was a Phase III randomized controlled trial comparing adjuvant Tecentriq® (atezolizumab), a cancer-fighting programmed death-ligand 1 (PD-L1) blocking antibody marketed by Genentech, a Member of the Roche Group, to observation in muscle invasive bladder cancer patients.
While IMvigor010 missed its primary endpoint of disease free survival in the intent to treat population, the study showed better news for Natera in overall survival, showing a 41% benefit in MRD-positive patients with detectable ctDNA who were treated with Tecentriq, vs. a zero treatment benefit in MRD-negative patients.
“Without using MRD testing as an inclusion criteria, the study and the drug failed. But when you use MRD testing to determine who should get treatment, it was a remarkable success. So the inclusion of Signatera saved a drug that previously wouldn’t have gone to market, and now has a path to go to market in a very large opportunity,” Chapman said.
“We think that as a result of that study coming out, all pharma companies are really going to now need to include MRD testing in their clinical trials. They’re taking too much of a risk to not include it, and that as a result has caused an enormous amount of inbound calls: Phones ringing off the hook, tons of excitement. It’s really just the beginning, I think.”
Laying the Foundation
Also this year, Natera expects to launch the personalized circulating tumor DNA (ctDNA) monitoring assays it has been developing with Foundation Medicine for users of its FoundationOne® CDx tissue-based broad companion diagnostics for all solid tumors.
The assays will be launched first for biopharma customers of FoundationOne® CDx, with the goal of enabling ctDNA monitoring in biopharma trials to establish clinical utility for the tests, then expand availability of the novel assays to clinical customers, Chapman said.
Natera and Foundation Medicine launched their collaboration in August 2019, with Foundation agreeing to pay Natera approximately $13.3 million in upfront licensing fees and prepaid revenues, plus up to approximately $32 million in minimum annual payments and payments tied to Natera achieving various milestones.
As of September 30, 2020, Foundation Medicine paid Natera all upfront fees and revenues, and $3 million toward milestone payments, Natera disclosed in its Form 10-Q quarterly report for Q3 2020.
Natera’s business growth explains why the company’s headcount has increased by about 50% from the 1,039-employee workforce it reported as of December 31, 2019. Much of that workforce growth came in R&D and clinical trials, as well as in lab operations to manage the increasing volume of tests, Chapman said.
“We continue to make investments, particularly in new businesses where we think there’s a path to unlock shareholder value and really help patients, and unlock that additional clinical utility,” Chapman added.