Natera, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Although the request references 2022 Q4, this filing reports full-year results; it does not provide a clear standalone Q4 financial summary in the supplied text.
Business context
Natera is a molecular diagnostics company operating in women’s health, oncology, and organ health. Panorama prenatal testing and Horizon carrier screening generated the majority of revenue. Signatera is its oncology molecular residual disease test; Prospera assesses transplant rejection. Testing is performed primarily in company laboratories, with additional distribution through partners and its Constellation cloud platform.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $820.2 million | $625.5 million |
| Product revenue | $797.3 million | $580.1 million |
| Licensing and other revenue | $22.9 million | $45.4 million |
| Gross profit and approximate gross margin | $364.0 million; 44.4% | $307.1 million; 49.1% |
| Operating loss | $541.0 million | $468.2 million |
| Net loss | $547.8 million | $471.7 million |
| Net loss per share, basic and diluted | $5.57 | $5.21 |
| Cash used in operating activities | $431.5 million | $335.2 million |
Revenue rose 31.1%, primarily on higher testing volume. The company processed approximately 2.07 million tests, up from 1.57 million. Oncology units processed increased to approximately 196,400 from 76,400. The gross margin figures above are calculated from reported revenue and cost of revenues; the filing does not present them as a separate margin line.
Costs increased faster than product revenue: cost of product revenue rose 43.9%, while research and development increased 19.8% and selling, general and administrative expense increased 15.2%. Management attributed cost growth to higher testing volumes, third-party processing fees, shipping, labor and overhead. Licensing and other revenue fell 49.5%, largely because FY2021 included $28.6 million recognized following the Qiagen settlement.
Liquidity, debt and cash flow
- At year-end, cash, cash equivalents and restricted cash totaled $466.1 million; short-term investments were $432.3 million. Together these amounted to approximately $898.4 million.
- Operating cash outflow was $431.5 million. Investing activities provided $330.3 million, principally from investment sales and maturities; financing activities provided $482.6 million, including $433.2 million net proceeds from a November 2022 equity offering.
- Debt included $80.4 million outstanding, including accrued interest, on a UBS credit line and $287.5 million principal of 2.25% convertible notes due 2027. The credit line is secured by cash and marketable securities, carries a variable rate, and UBS may demand repayment or terminate it at any time.
- Accounts receivable rose to $244.4 million from $122.1 million. The company says collections for tests billed to insurers or patients typically take nine to twelve months.
Outlook, risks and unusual items
- Natera expects losses and negative operating cash flows to continue in the near future. Management stated that existing cash and marketable securities were expected to cover anticipated cash requirements for at least 12 months after March 1, 2023; additional financing may nevertheless be needed to support growth and development plans.
- Key business risks include dependence on Panorama and Horizon, uncertain reimbursement—particularly for microdeletions and expanded carrier screening—competition and pricing pressure, and whether newer oncology and organ-health products achieve adoption and coverage.
- The company relies on Illumina for sequencers and reagents and Streck for certain blood collection tubes. Supply disruption, regulatory action, or inability to transition to alternatives could impair testing operations.
- The company faces uncertainty over possible expanded FDA oversight of laboratory-developed tests, as well as privacy, cybersecurity, intellectual-property, reimbursement and healthcare-compliance risks.
- Legal matters include a CareDx false-advertising case in which a jury found Natera liable for $44.9 million. Natera’s motion for judgment as a matter of law was pending, and the company stated it did not consider a loss probable and estimable. The company also reported ongoing litigation and governmental inquiries; it could not predict their outcomes. An independent board committee concluded that allegations in a March 2022 short-seller report were unfounded.
- The November 2022 equity offering raised $433.2 million net and increased shares outstanding. Stock-based compensation expense was $152.4 million, up from $115.2 million in 2021.
Ernst & Young issued an unqualified opinion on the financial statements and internal control over financial reporting. The auditor identified genetic-test revenue measurement as a critical audit matter because estimating expected insurer and patient collections, disallowances and refunds requires significant data and judgment.
Investor verification priorities
- Track test-volume growth against revenue per test, gross margin, and the continued increase in operating losses and cash use.
- Assess accounts-receivable growth, collection experience, payer denials, refund reserves, and the assumptions used to estimate genetic-test revenue.
- Verify progress in reimbursement and coverage for microdeletions, Horizon panels, Signatera and Prospera, and the effect of payer contracts on realized pricing.
- Review cash runway alongside the credit line’s on-demand repayment terms, convertible-note conversion or settlement exposure, and potential future financing needs.
- Monitor outcomes and potential financial effects of the CareDx award, other litigation, and regulatory or reimbursement inquiries.
- Evaluate dilution from equity issuance, stock-based compensation and potentially convertible notes, and confirm subsequent share-count changes.