Natera, Inc. [NTRA] Filings

10-Q 1 ntra-20240630x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

⌧	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

◻	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-37478

NATERA, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware	01-0894487
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

13011 McCallen Pass

Building A Suite 100
Austin, TX

78753

(Address of Principal Executive Offices)

(Zip Code)

(650) 980-9190

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, par value $0.0001 per share	NTRA	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	⌧	Accelerated filer	◻
Non-accelerated filer	◻	Smaller reporting company	◻
		Emerging growth company	◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No ⌧

As of August 1, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, was 123,681,432.

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Natera, Inc.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024

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		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Part I — Financial Information
	Item 1. Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	9
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	10
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	48
	Item 4. Controls and Procedures	49

Part II — Other Information
	Item 1. Legal Proceedings	49
	Item 1A. Risk Factors	51
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	51
	Item 3. Defaults Upon Senior Securities	51
	Item 4. Mine Safety Disclosures	51
	Item 5. Other Information	51
	Item 6. Exhibits	52
	Signatures	54

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. The forward-looking statements are contained principally in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this report. Forward-looking statements include information concerning our future results of operations and financial position, strategy and plans, and our expectations for future operations. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as "believe," "may," "will," "estimate," "continue," "anticipate," "design," "intend," "expect," "could," "plan," "potential," "predict," "seek," "should," "would" or the negative version of these words and similar expressions.

These forward-looking statements include, but are not limited to, statements concerning the following:

●

our expectations regarding revenue, expenses and other operating results;

●

our expectation that, for the foreseeable future, a significant portion of our revenues will be derived from sales of Panorama, Horizon, and Signatera;

●

our ability to increase demand and reimbursement for our tests;

●

our expectation that Panorama will be adopted for the screening of microdeletions and that third-party payer reimbursement will be available for this testing, including our expectations that the results from our single nucleotide polymorphism-based Microdeletion and Aneuploidy RegisTry, or SMART, Study may support broader use of and reimbursement for the use of Panorama for microdeletions;

●

our expectations of the reliability, accuracy, and performance of our tests, as well as expectations of the benefits of our tests to patients, providers, and payers;

●

our ability to successfully develop additional revenue opportunities, expand our product offerings to include new tests, and expand adoption of our current and future technologies through Constellation, our cloud-based distribution model;

●

our efforts to successfully develop and commercialize, or enhance, our products;

●

our ability to comply with federal, state, and foreign regulatory requirements, programs and policies, including a recently enacted rule from the FDA that would classify our tests as medical devices, and to successfully operate our business in response to changes in such requirements, programs and policies;

●

our ability to respond to, defend, or otherwise favorably resolve litigation or other proceedings, including investigations, subpoenas, demands, disputes, requests for information, and other regulatory or administrative actions or proceedings;

●

the effect of improvements in our cost of goods sold;

●

our estimates of the total addressable markets for our current and potential product offerings;

●

our ability and expectations regarding obtaining, maintaining and expanding third-party payer coverage of, and reimbursement for, our tests;

●

the effect of changes in the way we account for our revenue;

●

the scope of protection we establish and maintain for, and developments or disputes concerning, our intellectual property or other proprietary rights, including associated litigation costs we may incur and our assumptions regarding any potential liabilities associated with our existing litigation matters;

●

our ability to successfully compete in the markets we serve;

●

our reliance on collaborators such as medical institutions, contract laboratories, laboratory partners, and other third parties;

●

our ability to operate our laboratory facilities and meet expected demand, and to successfully scale our operations;

●

our reliance on a limited number of suppliers, including sole source suppliers, which may impact our ability to maintain a continued supply of laboratory instruments and materials and to run our tests;

●

our expectations of the rate of adoption of our current or future tests by laboratories, clinics, clinicians, payers, and patients;

●

our ability to complete clinical studies and publish compelling clinical data in peer-reviewed medical publications regarding our current and future tests, and the effect of such data or publications on professional society or practice guidelines or coverage and reimbursement determinations from third-party payers, including our SMART and CIRCULATE-Japan studies and our ongoing and planned trials in oncology and organ health;

●

our reliance on our partners to market and offer our tests in the United States and in international markets;

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●

our expectations regarding acquisitions, dispositions and other strategic transactions;

●

our expectations regarding the conversion of our outstanding 2.25% convertible senior notes due 2027, or the Convertible Notes, in the aggregate principal amount of $287.5 million prior to the scheduled redemption date of October 11, 2024;

●

our ability to control our operating expenses and fund our working capital requirements;

●

the factors that may impact our financial results, including our revenue recognition assumptions and estimates; and

●

anticipated trends and challenges in our business and the markets in which we operate.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those discussed in Part II, Item 1A, “Risk Factors” in this report and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 29, 2024. Given these uncertainties, you should not place undue reliance on these forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.

Also, forward-looking statements represent our beliefs and assumptions only as of the date of this report. Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

As used in this Quarterly Report on Form 10-Q, the terms “Natera,” “Registrant,” “Company,” “we,” “us,” and “our” mean Natera, Inc. and its subsidiaries unless the context indicates otherwise.

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PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Natera, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands except par value)


	June 30,		December 31,
	2024		2023
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	796,798	$	642,095
Short-term investments		90,299		236,882
Accounts receivable, net of allowance of $7,021 and $6,481 at June 30, 2024 and December 31, 2023, respectively		335,936		278,289
Inventory		40,985		40,759
Prepaid expenses and other current assets, net		37,798		60,524
Total current assets		1,301,816		1,258,549
Property and equipment, net		133,280		111,210
Operating lease right-of-use assets		52,582		56,537
Other assets		29,311		15,403
Total assets	$	1,516,989	$	1,441,699
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	33,100	$	14,998
Accrued compensation		41,487		45,857
Other accrued liabilities		141,231		149,405
Deferred revenue, current portion		18,367		16,612
Short-term debt financing		80,389		80,402
Total current liabilities		314,574		307,274
Long-term debt financing		283,604		282,945
Deferred revenue, long-term portion and other liabilities		21,066		19,128
Operating lease liabilities, long-term portion		61,225		67,025
Total liabilities		680,469		676,372

Commitments and contingencies (Note 8)

Stockholders’ equity:
Common stock, $0.0001 par value: 750,000 shares authorized at both June 30, 2024 and December 31, 2023; 123,365 and 119,581 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		12		11
Additional paid-in capital		3,320,365		3,145,837
Accumulated deficit		(2,482,499)		(2,377,436)
Accumulated other comprehensive loss		(1,358)		(3,085)
Total stockholders’ equity		836,520		765,327
Total liabilities and stockholders’ equity	$	1,516,989	$	1,441,699

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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Natera, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except per share data)


	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023

Revenues
Product revenues	$	411,364	$	258,256	$	776,036	$	496,053
Licensing and other revenues		1,987		3,148		5,056		7,107
Total revenues		413,351		261,404		781,092		503,160
Cost and expenses
Cost of product revenues		169,850		142,808		328,683		290,562
Cost of licensing and other revenues		329		341		636		711
Research and development		89,109		78,173		177,746		160,479
Selling, general and administrative		197,965		152,508		392,243		302,135
Total cost and expenses		457,253		373,830		899,308		753,887
Loss from operations		(43,902)		(112,426)		(118,216)		(250,727)
Interest expense		(3,127)		(3,177)		(6,251)		(6,238)
Interest and other income, net		10,457		4,518		20,724		9,103
Loss before income taxes		(36,572)		(111,085)		(103,743)		(247,862)
Income tax (expense) benefit		(892)		282		(1,320)		122
Net loss	$	(37,464)	$	(110,803)	$	(105,063)	$	(247,740)
Unrealized gain on available-for-sale securities, net of tax		834		2,595		1,727		7,159
Comprehensive loss	$	(36,630)	$	(108,208)	$	(103,336)	$	(240,581)

Net loss per share (Note 12):
Basic and diluted	$	(0.30)	$	(0.97)	$	(0.86)	$	(2.20)
Weighted-average number of shares used in computing basic and diluted net loss per share:
Basic and diluted		122,853		113,690		121,834		112,734

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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Natera, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands)


	Three months ended June 30, 2023
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of March 31, 2023	113,359	$	11	$	2,741,932	$	(11,798)	$	(2,079,572)	$	650,573
Issuance of common stock upon exercise of stock options	48		—		638		—		—		638
Issuance of common stock under the employee stock purchase plan	219		—		8,674		—		—		8,674
Vesting of restricted stock units	425		—		—		—		—		—
Stock-based compensation	—		—		44,470		—		—		44,470
Unrealized gain on available-for sale securities	—		—		—		2,595		—		2,595
Net loss	—		—		—		—		(110,803)		(110,803)
Balance as of June 30, 2023	114,051	$	11	$	2,795,714	$	(9,203)	$	(2,190,375)	$	596,147


	Six months ended June 30, 2023
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of December 31, 2022	111,255	$	11	$	2,664,730	$	(16,362)	$	(1,942,635)	$	705,744
Issuance of common stock upon exercise of stock options	217		—		2,939		—		—		2,939
Issuance of common stock under the employee stock purchase plan	219		—		8,674		—		—		8,674
Issuance of stock for bonuses	349		—		19,771		—		—		19,771
Issuance of common stock for IPR&D milestone	336		—		14,435		—		—		14,435
Vesting of restricted stock units	1,675		—		—		—		—		—
Stock-based compensation	—		—		85,165		—		—		85,165
Unrealized gain on available-for sale securities	—		—		—		7,159		—		7,159
Net loss	—		—		—		—		(247,740)		(247,740)
Balance as of June 30, 2023	114,051	$	11	$	2,795,714	$	(9,203)	$	(2,190,375)	$	596,147

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	Three months ended June 30, 2024
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of March 31, 2024	122,234	$	12	$	3,241,326	$	(2,192)	$	(2,445,035)	$	794,111
Issuance of common stock upon exercise of stock options	286		—		2,182		—		—		2,182
Issuance of common stock under the employee stock purchase plan	263		—		8,862		—		—		8,862
Vesting of restricted stock units	582		—		—		—		—		—
Stock-based compensation	—		—		67,995		—		—		67,995
Unrealized gain on available-for sale securities	—		—		—		834		—		834
Net loss	—		—		—		—		(37,464)		(37,464)
Balance as of June 30, 2024	123,365	$	12	$	3,320,365	$	(1,358)	$	(2,482,499)	$	836,520


	Six months ended June 30, 2024
	Common Stock			Additional Paid-in		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance as of December 31, 2023	119,581	$	11	$	3,145,837	$	(3,085)	$	(2,377,436)	$	765,327
Issuance of common stock upon exercise of stock options	1,078		—		8,648		—		—		8,648
Issuance of common stock under the employee stock purchase plan	263		—		8,862		—		—		8,862
Issuance of stock for bonuses	270		—		24,071		—		—		24,071
Vesting of restricted stock units	2,173		1		—		—		—		1
Stock-based compensation	—		—		132,947		—		—		132,947
Unrealized gain on available-for sale securities	—		—		—		1,727		—		1,727
Net loss	—		—		—		—		(105,063)		(105,063)
Balance as of June 30, 2024	123,365	$	12	$	3,320,365	$	(1,358)	$	(2,482,499)	$	836,520

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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Natera, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended
	June 30,
	2024		2023

	(in thousands)
Operating activities
Net loss	$	(105,063)	$	(247,740)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		14,978		10,201
Expensed in-process research and development		—		2,679
Premium amortization and discount accretion on investment securities		(556)		1,450
Stock-based compensation		131,858		84,789
Non-cash lease expense		7,204		7,451
Amortization of debt discount and issuance cost		658		642
Foreign exchange adjustment		377		265
Non-cash interest expense		(13)		68
Changes in operating assets and liabilities:
Accounts receivable		(57,647)		(15,680)
Inventory		(225)		(7,281)
Prepaid expenses and other assets		20,874		12,590
Accounts payable		16,668		(9,018)
Accrued compensation		19,701		9,936
Operating lease liabilities		(8,269)		(5,196)
Other accrued liabilities		(10,598)		(11,175)
Deferred revenue		1,044		6,368
Cash provided by (used in) operating activities		30,991		(159,651)

Investing activities
Purchases of investments		(72,810)		—
Proceeds from maturity of investments		221,500		83,250
Purchases of property and equipment, net		(31,993)		(20,190)
Cash paid for acquisition of intangible assets		(10,495)		—
Cash provided by investing activities		106,202		63,060

Financing activities
Proceeds from exercise of stock options		8,648		2,939
Proceeds from the issuance of common stock under the employee stock purchase plan		8,862		8,674
Cash provided by financing activities		17,510		11,613

Net change in cash, cash equivalents and restricted cash		154,703		(84,978)
Cash, cash equivalents and restricted cash, beginning of period		642,095		466,091
Cash, cash equivalents and restricted cash, end of period	$	796,798	$	381,113

Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,592	$	5,596

Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable and accruals	$	2,245	$	103
Acquisition of warrants	$	1,884	$	—
Amounts accrued for acquisition of intangible assets	$	1,400	$	—
Issuance of common stock for IPR&D acquisition	$	—	$	14,435
Issuance of common stock for bonuses	$	24,071	$	19,771
Stock-based compensation included in capitalized software development costs	$	1,089	$	376

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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Natera, Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

1. Description of Business

Natera, Inc. (the “Company”) was formed in the state of California as Gene Security Network, LLC in November 2003 and incorporated in the state of Delaware in January 2007. The Company is a diagnostics company with proprietary molecular and bioinformatics technology that it is applying to change the management of disease worldwide. The Company’s cell-free DNA (“cfDNA”) technology combines its novel molecular assays, which reliably measure many informative regions across the genome from samples as small as a single cell, with its statistical algorithms which incorporate data available from the broader scientific community to identify genetic variations covering a wide range of serious conditions with high accuracy and coverage. The Company focuses on applying its technology to three main areas of healthcare – women’s health, oncology and organ health. In the women’s health space, the Company develops and commercializes non- or minimally- invasive tests to evaluate risk for, and thereby enable early detection of, a wide range of genetic conditions, such as Down syndrome. In oncology, the Company commercializes, among others, a personalized blood-based DNA test to detect molecular residual disease and monitor for disease recurrence across a broad range of cancer types. The Company’s third area of focus is organ health, with tests to assess kidney, heart, and lung transplant rejection as well as genetic testing for chronic kidney disease. The Company operates laboratories in Austin, Texas and San Carlos, California certified under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) providing a host of cell-free DNA-based molecular testing services. The Company determines its operating segments based on the way it organizes its business to make operating decisions and assess performance. The Company operates one segment, the development and commercialization of molecular testing services, applying its proprietary technology in the fields of women’s health, oncology and organ health.

The Company’s key product offerings include its Panorama Non-Invasive Prenatal Test (“Panorama”) that screens for chromosomal abnormalities of a fetus as well as in twin pregnancies, typically with a blood draw from the mother; Horizon Carrier Screening (“Horizon”) to determine carrier status for a large number of severe genetic diseases that could be passed on to the carrier’s children; its Signatera molecular residual disease test (“Signatera”) to detect circulating tumor DNA in patients previously diagnosed with cancer to assess molecular residual disease, monitor for recurrence, and evaluate treatment response; and its Prospera test, to assess organ transplant rejection in patients who have undergone kidney, heart, or lung transplantation. All testing is available principally in the United States. The Company also offers its Panorama test to customers outside of the United States, primarily in Europe. The Company also offers Constellation, a cloud-based software platform that enables laboratory customers to gain access through the cloud to the Company’s algorithms and bioinformatics in order to validate and launch their own tests based on the Company’s technology.

2. Summary of Significant Accounting Policies

During the six months ended June 30, 2024, there were no material changes to the Company’s significant accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (filed on February 29, 2024).

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. The unaudited interim condensed consolidated financial information includes only adjustments of a normal recurring nature necessary for a fair presentation of the Company’s results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results for the full year or the results for any future periods. The condensed consolidated balance sheet as of December 31, 2023 has been derived from audited financial statements at that date. These financial statements should be read in conjunction with the audited financial statements, and related notes for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 29, 2024.

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Some items in the prior period financial statements were reclassified to conform to the current presentation.

Liquidity Matters

The Company has incurred net losses since its inception and anticipates net losses for the near future. The Company had a net loss of $105.1 million for the six months ended June 30, 2024 and an accumulated deficit of $2.5 billion as of June 30, 2024. As of June 30, 2024, the Company had $796.8 million in cash, cash equivalents, and restricted cash, $90.3 million in marketable securities, an $80.4 million outstanding balance on its Credit Line (as defined in Note 10, Debt) including accrued interest and $287.5 million of outstanding principal on its 2.25% Convertible Senior Notes (the “Convertible Notes”). The Company is required to maintain a minimum of at least $150.0 million in its UBS accounts as collateral for its Credit Line. As of June 30, 2024, the Company had $20.0 million remaining and available on its Credit Line.

While the Company has introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations and business plans. Accordingly, the Company has funded the portion of operating costs that exceeds revenues through a combination of equity issuances, debt issuances, and other financings.

The Company continues to invest in the development and commercialization of its existing and future products and, consequently, it will need to generate additional revenues to achieve future profitability and may need to raise additional equity or debt financing. If the Company raises additional funds by issuing equity securities, its stockholders will experience dilution. Additional debt financing, if available, may involve covenants restricting its operations or its ability to incur additional debt. Any additional debt financing or additional equity that the Company raises may contain terms that are not favorable to it or its stockholders and requires significant debt service payments, which diverts resources from other activities. Additional financing may not be available when necessary, or in amounts or on terms acceptable to the Company. If the Company is unable to obtain additional financing, it may be required to delay the development and commercialization of its products and significantly scale back its business and operations.

On July 19, 2024, the Company announced its decision to redeem all of its outstanding 2.25% Convertible Senior Notes due 2027. The redemption is scheduled for October 11, 2024 (the “Redemption Date”). The redemption price for the Convertible Notes is equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date. The Company elected physical settlement with shares of its common stock as the settlement method to apply to all conversions of the Convertible Notes. Based on the conversion terms of the Convertible Notes and the market price of its common stock, the Company expects that substantially all outstanding Convertible Notes will be converted into shares of the Company’s common stock prior to the Redemption Date. As a result, the Company does not expect that its decision to redeem the Convertible Notes will have a material effect on its liquidity.

In September 2023, the Company completed an underwritten equity offering and sold 4,550,000 shares of its common stock at a price of $55 per share to the public. Before estimated offering expenses of $0.4 million, the Company received proceeds of approximately $235.8 million net of the underwriting discount.

On September 10, 2021, the Company entered into an agreement with a third party for an asset acquisition where the acquired asset was in-process research and development primarily in exchange for an equity consideration payment. In addition, pursuant to the agreement, certain employees of the third party became employees of the Company. The third party was a biotechnology company focused on oncology. The total upfront acquisition consideration amounts to $35.6 million composed of the issuance of 276,346 shares of the Company's common stock with a fair value of $30.9 million, approximately $3.9 million of cash consideration, assumed net liabilities of $0.2 million, as well as $0.6 million of acquisition related legal and accounting costs directly attributable to the acquisition of the asset. The Company accounted for the transaction as an asset acquisition as substantially all of the estimated fair value of the gross assets acquired was concentrated in a single identified in-process research and development asset (“IPR&D”) thus satisfying the requirements of the screen test in Accounting Standards Update (“ASU”) 2017-01 Business Combinations (Topic 805): Clarifying the Definition of Business. The estimated fair value of the acquired workforce was not significant. The Company concluded the acquired IPR&D has no alternative-future use and accordingly expensed approximately $35.6 million, on the day the transaction closed as research and development expense, which is reflected in its consolidated statement of operations.

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Further, additional consideration aggregating up to approximately $35.0 million was estimated to be paid via issuance of an estimated 269,547 additional shares of the Company’s common stock, consistent with the registration statement filed with the SEC on September 10, 2021, upon achievement of defined milestones relating to product development, commercial launch and continued employment of certain selling shareholders, each of which was revalued at each reporting date and amount of compensation expense was adjusted accordingly and reported in research and development expenses. In November 2022, the terms of the payment for any remaining consideration were modified, resulting in $10.0 million of consideration paid in December 2022 and $15.0 million of consideration paid in March 2023, with such consideration primarily consisting of the Company’s common stock.

Based on the Company’s current business plan, the Company believes that its existing cash and marketable securities will be sufficient to meet its anticipated cash requirements for at least 12 months after August 8, 2024.

Principles of Consolidation

The accompanying condensed consolidated financial statements include all the accounts of the Company and its subsidiaries. The Company established a subsidiary that operates in the state of Texas to support the Company’s laboratory and operational functions. The Company established a subsidiary that operates in Canada following the acquisition of the IPR&D asset. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) in the United States requires management to make estimates and assumptions about future events that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Significant items subject to such estimates include the allowance for doubtful accounts, the operating right-of-use assets and the associated lease liabilities, the average useful life for property and equipment including impairment estimates, deferred revenues associated with unsatisfied performance obligations, accrued liability for potential refund requests, stock-based compensation, the fair value of options, income tax uncertainties, and the expected consideration to be received from contracts with customers, insurance payors, and patients. These estimates and assumptions are based on management's best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors, including contractual terms and statutory limits; however, actual results could differ from these estimates and could have an adverse effect on the Company's financial statements.

Investments

Investments consist primarily of debt securities such as U.S. Treasuries, U.S. agency and municipal bonds. Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company generally classifies its entire investment portfolio as available-for-sale. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies all investments as short-term, irrespective of maturity date. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity.

The Company classifies its investments as Level 1 or 2 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. The Company holds Level 2 securities which are initially valued at the transaction price and subsequently valued by a third-party service provider using inputs other than quoted prices that are observable either directly or indirectly, such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. The Company performs certain procedures to corroborate the fair value of these holdings.

Available-for-sale debt securities. The amended guidance from ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires the measurement of expected credit

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losses for available-for-sale debt securities held at the reporting date over the remaining life based on historical experience, current conditions, and reasonable and supportable forecasts. The Company evaluated its investment portfolio under the available-for-sale debt securities impairment model guidance and determined the Company’s investment portfolio is composed of low-risk, investment grade securities and thus has not recorded an expected credit loss for its investment portfolio. Further, gross unrealized losses on available for sale securities were not material at June 30, 2024.

Accounts Receivable

Trade accounts receivable and other receivables. The allowance for doubtful accounts for trade accounts receivable is based on the Company’s assessment of the collectability of accounts related to its clinics and laboratory partner customers. The Company regularly reviews the allowance by considering factors such as historical experience, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. See Note 6, Balance Sheet Components, for a roll-forward of the allowance for doubtful accounts related to trade accounts receivable for three months and six months ended June 30, 2024 and 2023. The Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) and applies a constraint to the estimated variable consideration such that it is not probable that a significant reversal will occur. When assessing the total consideration expected to be received from insurance carriers and patients, a certain percentage of revenues is further constrained for estimated refunds. After applying the ASC 606 constraint, the Company assessed for credit losses and allowance for doubtful accounts and determined an incremental credit loss was not needed given the quality of the insurance payors from whom such receivables are expected to be collectible and the relatively short duration over which the majority of receivables are collected. Accordingly, the Company currently does not have an incremental credit loss reserve nor allowance for doubtful accounts against accounts receivable for insurance and patient payors due to the average selling price calculations which incorporate these risks as net receivables are recorded.

Inventory

Inventory is recorded at the lower of cost or net realizable value, determined on a first-in, first-out basis. Inventory consists entirely of supplies, which the Company consumes when providing its test reports, and therefore, the Company does not maintain any finished goods inventory. The Company enters into inventory purchases commitments so that it can meet future delivery schedules based on forecasted demand for its tests.

The Company uses judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations. A write down of specifically identified unusable, obsolete, slow-moving or known unsalable inventory in the period is first recognized by using a number of factors including product expiration dates and scrapped inventory. Any write-down of inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded to cost of revenue on our consolidated statements of operations. The Company makes assumptions about future demand, market conditions and the release of new products that may supersede older products. However, if actual market conditions are less favorable than anticipated, additional inventory write-downs may be required.

Other Assets

In January 2024, the Company acquired from Invitae Corp. (“Invitae”) certain assets relating to Invitae’s non-invasive prenatal screening and carrier screening business. The transaction price of $10.5 million consisted of $10.0 million in upfront payment costs and approximately $0.5 million of other transaction costs which were capitalized as intangible assets over an estimated useful life of ten years. An additional payment of up to $42.5 million may be made should the Company achieve certain customer volume retention targets and based on certain legal outcomes.

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Accumulated Other Comprehensive Income (Loss)

Comprehensive loss and its components encompass all changes in equity other than those with stockholders, and include net loss, unrealized gains and losses on available-for-sale marketable securities and foreign currency translation adjustments.


	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023

	(in thousands)
Beginning balance	$	(2,192)	$	(11,798)	$	(3,085)	$	(16,362)
Net unrealized gain on available-for-sale securities, net of tax and foreign currency translation adjustment		834		2,595		1,727

Natera, Inc. [NTRA] Filings
10-Q	[2024-08-09]
10-Q	[2024-05-10]
10-K	[2024-02-29]
10-Q	[2023-11-09]
10-Q	[2023-08-04]
10-Q	[2023-05-10]
10-K	[2023-03-01]
10-Q	[2022-11-09]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-25]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-03-02]
10-Q	[2019-11-08]
10-Q	[2019-08-09]
10-Q	[2019-05-10]
10-K	[2019-03-15]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-15]
10-Q	[2017-11-09]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-03-16]
10-Q	[2016-11-14]
10-Q	[2016-08-11]
10-Q	[2016-05-13]
10-K	[2016-03-24]
10-Q	[2015-11-13]
10-Q	[2015-08-13]
S-1	[2015-06-01]