Natera, Inc. (NASDAQ:NTRA) Q3 2023 Earnings Call Transcript

Natera, Inc. (NASDAQ:NTRA) Q3 2023 Earnings Call Transcript November 8, 2023

Operator: Thank you for standing by and welcome to the Natera Inc. Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder today’s call is being recorded. I will now hand today’s call over to Michael Brophy, Chief Financial Officer. Please go ahead sir.

Michael Brophy: Thanks operator. Good afternoon. Thank you for joining our conference call to discuss the results of our third quarter 2023. On the line I am joined by Steve Chapman, our CEO; Solomon Moshkevich, President of Clinical Diagnostics; and Alexey Aleshin, General Manager of Oncology and Chief Medical Officer. John Fesko, President and Chief Business Officer is also on the call and will be available for Q&A. Today’s conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted investor.natera.com. A replay of the call will also be posted to our IR site as soon as it’s available. Starting on Slide 2. During the course of this conference call, we will make forward-looking statements regarding future events and our anticipated future performance such as our operational and finance outlook and projections, our assumptions for that outlook, market size, partnerships, clinical studies, opportunities and strategies, and expectations for various current and future products including product capabilities, expected to release dates, reimbursement coverage, and related effects on our financial and operating results.

We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time-to-time with the SEC, including our most recent Form 10-K or 10-Q and the Form 8-K filed with today’s press release. Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward-looking statements. Forward-looking statements made during the call are being made as of today, November 8th, 2023. If this call is replayed or reviewed later after today, the information presented during the call may not contain current or accurate information.

Natera disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today’s call, but will not provide any further guidance or updates on our performance during the quarter, unless we do so in a public forum. We’ll quote a number of numerical growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year-on-year comparison. And now I’d like to turn the call over to Steve. Steve?

Steve Chapman: Thanks Mike. I think our Q3 results demonstrate the strategy we’re paying off and I’m excited to share the highlights. We generated $215 million in total revenue and product revenues were up 33% versus last year. Volumes were stronger again across the business with strong year-on-year growth in women’s health and oncology versus Q3 of last year and a nice sequential recovery quarter for organ health. Signatera volume growth particularly continues to exceed our internal forecast and this was the second-best quarter ever in terms of the absolute unit growth in the clinical panel. As good as those topline metrics are, I’m most encouraged by the margin and cash on results. We talked about the focused effort to improve ASPs and I think that effort started to pay off this quarter.

Gross margins were 45%. You’ll recall we also had 45% gross margins in Q2, but we noted it was closer to 43% on a normalized basis as it had some one-time benefits. In contrast, we think this quarter represents an organic 45% based on ASP and COGS improvements. We slashed our cash burn dramatically in the quarter as well, almost a 50% reduction compared to last quarter. Clearly, we are getting leverage as revenue grew rapidly, while operating expenses was essentially flat and margins have improved. Our efforts to improve ASPs, is also leading to getting reimbursed more quickly on average from payers. Mike will talk about this later in the call, but we think this is a good sign that more ASP improvements are in store for future quarters. These results in the continued strong trends we are seeing so far in Q4 put us in a position to significantly improve our annual guidance across the board.

We are raising the revenue guide once again to a completely new range and now expect to come in between $1.035 billion and $1.050 billion in total revenue for the year. We are tightening the gross margin guide to the top end of the range and are now expecting full year gross margins to land between 43% and 44% which we think implies the strong Q3 gross margins are repeatable in Q4. Finally, we are dramatically reducing our tax burn guidance for the year now expected to be $250 million to $280 million. This represents a more than $200 million reduction in cash burn versus 2022. The momentum we are seeing leaves us even more confidence that we are in a good position to repay cash flow breakeven quarter next year. And we do not believe we need any guideline changes in order to hit that milestone.

The significant reduction in cash burn has largely been achieved, because our core strategy is working. We are growing revenue rapidly while reducing COGS and improving ASPs, we are keeping OpEx stable though at very competitive levels allowing us to maintain a strong commercial team and continue to focus on clinical and innovation road maps. For example over the past few years, we’ve made investments into technology development, product enhancements and clinical trials and these investments are now resulting in an excellent pipeline of new products and new indications to go after within our core businesses. As a result, in 2024, we expect to announce new MRD-related products and updates along with other major innovations that empower future growth.

In addition on the clinical side, we have major randomized controlled trials that we expect will be read out in 2024 some of which have taken investments over five or more years to get to this point. So we think we are positioned very nicely for the future. We’re on a rapid revenue growth path, while moving quickly to cash flow breakeven and doing so with our previous multiyear investments driving potential major near-term catalysts. On top of our financial results, we had several big wins during the quarter. I’ll start with RenaCARE which has proven to be a landmark study for us in an area that we believe can drive significant growth overtime. Last week we announced the study publication as in JASN, a leading nephrology [indiscernible] and also share the results at the ASN Kidney Week conference.

As a reminder RenaCARE is a large real-world prospective study of more than 1,600 patients that looked at the impact of genetic testing within chronic kidney disease. The finding is coding strong clinical and diagnostic utility profile for Renasight or genetic test to identify causes of CKD. The results also exceeded clinical precedents for the implementation of genetic testing within an at-risk population for example Hereditary Breast Cancer which we think is a good proxy for comparison. I don’t spend too much time on this now, as Solomon will cover it in detail later in the call, but I’ll just note that we’re very excited to see where we go from here. Feedback from nephrologists has been positive. And we believe these results lay a strong foundation for increased adoption and coverage.

The market opportunity is potentially large and notably underpenetrated with 37 million people affected by CKD in the United States. There’s a significant need for reliable and actual genetic information to serve these patients and we think Renasight could be that driver backed by the strong clinical evidence we reported in the study. In oncology, we presented key colon cancer data at ESMO from the GALAXY arm of the CIRCULATE study. Notably, this analysis included 2,000 patients, which was like as many as the Nature Medicine paper as well as significantly longer follow-up at 24 months. The data provides significant insights to the predictive and prognostic value Signatera and CRC with ongoing excellent performance by Signatera. Separately, while MRV has historically been focused on the initial adjuvant draw and the adjuvant chemo decision-making, the initial MRD timepoint represents only a tiny fraction of the overall MRD opportunity.

More and more we are leading the way in a new area that we call treatment on molecular relapse, which is where patients can actually receive a drug upon becoming ctDNA positive with Signatera in the surveillance setting rather than waiting for radiologic evidence of recurrence. This is part of our key vision for how the serial use of Signatera to transform cancer care and ultimately save lives. And we see it gaining real momentum now with sponsorship from both pharma and academic consortia. In fact, long-term this might be the single biggest MRD opportunity and one where we believe Natera has a meaningful first-mover advantage with multiple Phase 2 and Phase 3 trials already underway, some which have been ongoing for several years already. So Alex will describe treatment on molecular relapse a little bit later in the call including describing the new SREP [ph] ctDNA study which seeks to show the benefits of treatment on molecular relapse in early-stage breast cancer.

This is a randomized Phase 3 trial conducted across 120 sites in 12 countries led by the European Organization for Research and Treatment of Cancer, otherwise known as EORTC. We also published a digital data in lung cancer, strengthening our leadership position in the patient population. In 2023 alone, we publicly presented the results for four key lung cancer cells across the neoadjuvant, adjuvant and metastatic treatment study and we’ve seen very strong performance. Two of these were conducted in collaboration with our partners at Foundation Medicine and demonstrated strong clinical test performance for immunotherapy monitoring. These studies helped to support the broad clinical launch and Medicare covers their FoundationOneTracker, which we also announced in October.

As many of you know Tracker is a complimentary asset at Signatera with a focus on patients with advanced stage cancers. We’re very excited about the launch and believe this new offering will help oncologists make the best possible decisions about the pace of care through actionable and personalized data. Great. So with that let’s get into some of the business trends on the next slide. We saw continued strong growth in volumes across the major product areas as I described. In women’s health, we had strong growth compared to Q3 of last year. The strong growth particularly given our ongoing efforts to reduce some volume from account where we don’t see a path to stable reimbursement over time. In Organ Health we were pleased with the return to growth.

As a reminder, earlier this year, reimbursement changes created some uncertainty for transplant centers about when they should order Vasistera. That uncertainty has now largely been resolved. And in Q3 we saw coming our larger customers recurring to prior levels. Both Organ Health and Women’s Health represent large underserved base of population that have a critical need for the type of testing we offer. Solomon will cover the oncology volumes later in the call where the trends continue to be positive. On the next slide you can see that our revenue growth is getting a significant boost from improved reimbursement in addition to our volume growth. The left chart of total revenues, which grew 27% year-on-year, and I think that growth rate actually understates our good progress because we recorded a large one-time licensing payment in Q3 of last year.

The product revenues on the right-hand side of the page we adjust for that. And as you can see product revenues were up 33% year-on-year. We made a decision last November to redouble our efforts on reimbursement and billing operations making sure that we navigate all the operational hurdles required to get reimbursement for covered service. For example, doing better on appeals when a service is denied or chasing down missing insurance information. Since then, we’ve made a significant investment in new processes. We’ve added new team members and we’ve identified systems and engineering opportunities. While we’re still at the very early stages, it’s great to see that we’re starting to see these efforts come through in the financial results and there’s still a long way to go.

Of course, these improvements benefit both revenue growth and gross margins as you can see on the next slide. Gross margin dipped to 41% in Q4 of last year and then to 39% in Q1 of this year as we executed growth on the initiatives that we’ve described in the past. On the Q2 call, we described that gross margins were helped a bit by some one-time factors. In that time, we estimated the organic gross margin to be about 43% on a normalized basis. In Q3, our 45% gross margin is largely organic. We are seeing modest improvements in the NIPT and carrier ASPs and have outperformed our expectations in Signatera. For each of these products we have put in place multiple operational initiatives whose effects have not yet been fully recognized in revenue approval.

So we’re cautiously optimistic that we can deliver steady gains in the gross margins throughout the course of 2024. Another interesting byproduct of all this efforts is that our cap election cycle noticeably improved in Q3 compared to prior quarters, which helped drive the significant reduction in quarterly cash burn along with the revenue growth and gross margin improvement. Finally, we continue to hit our marks on cost of goods sold as we’ve expanded our Signatera, Exton laboratory and executed COGS projects across the company. We’ve got a full slate of these lab infrastructure projects and we expect to launch many of them during 2024. This has been a big area of investment within our R&D budget and it will be nice to see that investment pay off.

In addition to the above cards project, we’ve also passed some key validation and regulatory milestones with an alternative NGF provider. We validated the Signatera technology on an alternative NGF platform and in partnership with a major pharmaceutical company achieve a regulatory milestone using that alternate platform. In addition, we validated NIPT on alternative NGF platform and past the regulatory milestones which we may now launch a version of in our centralized laboratory. All of these factors give us confidence that we are on track to get to a cash flow breakeven quarter next year. And with that, let me turn it over to Solomon, who will dive deeper on the results from RenaCARE in the Oncology business. Solomon?

Solomon Moshkevich: Thanks Steve. I just got back to the weekend from the American Society of Nephrology, ASN, Annual Conference in Philadelphia, where renal genetics was a hot topic and where the RenaCARE paper was well received. Many doctors expressed the belief that nephrology is at the beginning of a new wave of personalized medicine similar to where oncology was as it feels 15 to 20 years ago. There are about 37 million people in the US living with CKD or roughly one in seven adults. CKD is also a significant burden on the healthcare system with roughly $85 billion of Medicare spend related to its management. Natera launched the RenaCARE study back in 2019 in collaboration with leaders from Colombia, Yale, NYU, Mayo Clinic and several other leading institutions, with the goal of determining what personalized insights can be gained from genetic testing with Natera Renasight product with 380 disease-related games.

And how often a genetic diagnosis we can attain in treatment. More than 1,600 patients were enrolled across 31 sites in this real-world prospective study. The results were impressive. Some of the key headlines as you can see on the slide. One in five patients tested positive for a genetic cause of PKD meaning that a pathogenic or likely pathogen variance was found in their germline DNA. Out of the positive one in two paces received a new or reclassified diagnosis and of the positive one in three reported pain and treatment plan. At a high level when thinking about Renasight’s diagnostic yield of 20.8%, let’s compare it to hereditary cancer testing like the classic BRCA one and 2J. Where studies tension a test positive rate of between 5% and 17% including in cohorts that meet NCCN criteria for being high risk and that have received Medicare or commercial insurance coverage.

We all know the germline DNA testing in oncology has become standard practice. So given the high yield we’ve seen for Renasights together with a significant clinical utility, we see a great opportunity here for exchanging standard practice in nephrology with strong potential for clinical guidelines and insurance coverage. To that end we recently submitted an application to MolDx for coverage of Renasight. So we look forward to their feedback particularly given the strength of the RenaCARE studies. a little bit deeper now on study findings. One of the key stories unfolding here is that genetic testing is useful not only in the 8% or 9% of patients without a diagnosis but also in patients who have already been given a clinical diagnosis. For background CKD has a vast spectrum of underlying causes.

The current diagnostic protocols generally rely on basic measurement of kidney punting as well as imaging and biopsy. This approach has left significant gap. For example diagnoses that are nonspecific meaning that the kidney disease may be inaccurately attributed to diabetes or hypertension when in fact those may be comorbidity that mask the true cause of a patient with CKD. Similarly in the case of cystic disease it contains clinical management to now the subtype of disease whether it’s driven by PKD1 or PKD2 for example. In many cases we also found that timely genetic testing could have helped the patient avoid an unnecessary invasive biopsiesa. There are more than 20 drugs already addressing gene-specific CKD targets on the market and approximately 270 clinical trials.

So having a specific diagnostic information can really enhance targeted treatment options they can open doors for participation in clinical trials and ultimately it can improve outcome. For people who want to learn more we just published a good white paper on our website. In summary, the RenaCARE study provides solid evidence demonstrating that Renasight testing is useful and appropriate in the vast majority of patients presenting with PKD that it can lead to an earlier and more accurate diagnoses in standard of care practices and frequently same or refine an existing diagnosis and it can enable clinicians to tailor treatment decisions. We’re very enthusiastic about the future pence of this product to help millions of people with CKD. Moving to oncology now, where we had a great quarter.

Clinical signature volumes shown on the right had one of its best quarters to date in terms of absolute growth. This growth reflects a strong increase in new patient initiation continued perial testing by existing patients and significant adoption by new physicians, who had never ordered Signatera before. We believe over 35% of all US oncologists ordered Signatera in the quarter. The left-hand chart includes all clinical volumes and pharma units. As a reminder, we had a site in pharma units in Q2 which we discussed in our call in August. So we broke out the clinical volumes separately this time relative to the pharma business which is doing well but is a bit more lumpy as expected. We recently closed some big pharma projects across various cancer types, including prospective, retrospective and real-world data studies.

There continues to be significant interest such that we are now expanding capacity in the RUO labs. Back to clinical Signatera, we’ve also continued to drive steady improvement in the average sales price outpacing our initial expectations. In Q2, our ASP was in the 800s. In Q3, it was in 900s, and now we see a near-term path getting above 1,000. This road map is being driven by better operational execution as well as anticipated Medicare coverage of new indications and expanded coverage among private payers. As a reminder, Signatera is in a unique economic position with its advanced diagnostic lab status or ADL which is very hard for other MRD labs to replicate. We believe all the data that we’ve been announcing and the studies underway will help drive ongoing volume growth over the near and long term.

So with that let me turn it over to Alex to provide a closer look at some of those studies. Alex?

Alexey Aleshin: Thank you Solomon. We recently presented updated 24-month data from the Galaxy cohort at this year’s ESMO 2023 conference. The data continues to support and strengthen our two Seneca hypotheses that have implications to change how CRC is managed namely the MRD-positive patient’s benefit from treatment, while MRD-negative patients do not. On the right-hand side of the page, CK negative patients continue to show vestinal disease-free survival, regardless of adjuvant treatment. No significant differences in DFS at 24-months were observed for CPA negative patients receiving ACT compared to those without ACT. We believe this data further dereslkomahar definitive randomized Vega study, which seeks to tablet the de-escalation strategy as a standard of care in early-stage CRC.

On the left-hand side of the page, we see CPAs positive patients treated with ADP have significantly improved DSS compared to patients who undergo observations. This effect even after adjusting for all possible confounding convictions. The randomized arm of this trial known as Altera, the scheduled the readout in mid-2024, which will further assess whether the disaPAS-102 on top of chemo can further improve DFS and MRD-positive patients. We believe that, if the study is positive it would establish a pathway for a new standard of care in therapeutic treated with prive intent or tested with Signatera. As a reminder, the data on this page reflects outcomes based on single segmentary time points within eight weeks post surgery. The delta study is a key component in the protocol that allows enrollment of patients who were initially negative, but then term positive in the surveillance setting up to 24-month pose surgery.

This is a new concept in MRD and is what we are calling treatment on molecular recurrence. The majority of trials and data in the MRD space today have been focused on additive and decision-making based on the first one or two time points immediately post surgery. However, we believe the largest market is treatment on molecular relapse defined as initiating treatment based on positive ctDNA status in the surveillance setting instead of waiting for clinical or radiologic recurrence. This space could be multiple orders of magnitude larger and potentially revolutionize cancer treatment by providing patients a second chance cure before avert recurrence is detected on a scan. We have seen tremendous interest in this strategy from clinicians, patients, pharmaceutical companies.

These studies take years to design and run, and we recognize this opportunity over five years ago, and we now have multiple studies that are rolling in this phase, including the ones listed below. I want to highlight a new study recently announced, the Phase 3 TREAT- ctDNA trial in early stage breast cancer that is being done in collaboration with the ERTC Consortium. The primary objective of the study is to evaluate whether Menarini’s oral endocrine monotherapy ORSERDU can delay and or prevent occurrence of distance, metastasis, or death. In patients with current Signatera positives in the late surveillance setting. The study is expected to screen approximately 1,900 patients across more than 125. And if successful, the results of the study could support broad recommendations for serial monitoring with Signatera in HR-positive HER2-negative breast cancer patients.

Additionally, we continue to see strong interest in the DARE and LEADER studies that are also examining treatment on molecular recurrence in breast cancer patients, and should be reading out in the 2024 to 2025 time frame. We continue to generate new clinical data to support Signatera reimbursement in an expanding list of indications. Today, we want to highlight non-small cell lung cancer, where in 2023 we have generated multiple present patients and public patients in neoadjuvant, adjuvant and metastatic settings, including radiotherapy and immunotherapy treatment response monitoring. We have seen immunotherapies transition from being utilized primarily in late-stage non-small cell lung cancer to earlier stages of disease. With the recent approval of these infants in the neoadjuvant, adjuvant, and terioperative settings, this has resulted in a significant expense of IO treatment eligible patients.

A setting where Signatera is well-positioned to serve, given the strength of our data and existing reimbursement for IO monitoring. In the adjuvant and surveillance setting, we continue to achieve exceptional solicitation, producing 100% across multiple studies, a key performance factor that many competitors have struggled with. In the recently published LIBO study of state 1 to 3 lung cancer patients, we observed an 82% detection for treatment and 100% longitudinal sensitivity to a recurrence with a median of 162 days lead time. This build previously presented data in the AVO study showing a 93% longitudinal sensitivity to recurrence, broad set of data so a very strong performance across all key metrics. We believe these various datasets are critical to establishing clinical utility, achieving reimbursement and maintaining market leadership in emerging indications like non-small cell lung cancer.

The strength of the data has led to interest in prospective clinical trials, with the first Signatera trials in the state now being launched. We plan to provide further updates on our prospective evidence generation strategy during future call. Lastly, we want to highlight that we are now expanding our data generation efforts with partners like Foundation Medicine, where the cracker product was utilized either exclusively or in combination with Signatera in both the EMPower 1 and IMPower131 studies. Building on the strength of this evidence and the recently announced Medicare coverage for IO monitoring, we are excited to highlight the FoundationOne Tracker product that is now available across the U.S. This innovative assay combines the genomic information derived from the FoundationOne CDx Q-based comprehensive genomic profiling test with a personalized assay design and seek DNA analysis from Natera.

We believe this is a great win for patients, given this product will enable greater access to impaired core technology when it may be limited or previously exhausted. We are excited for the additive effect of the partnership for our core monitoring business and excited to present additional clinical data to support the value of integrated informed PPD monitoring into routine clinical practice. Now handing it over to Mike to review our financial detail. Mike?

Michael Brophy: Thanks Alex. The first slide is just our standard results slide. We can see again that revenues were up substantially versus last year despite the fact that we had a very large licensing quarter in Q3 as Steve mentioned. So that really highlights how strong our product revenue growth has been over the last year and also gives me some confidence that the gross margins are sustainable. Operating expenses for some modest growth versus Q3 last year. But this year we’ve been effectively flat in sequential quarters now even as we delivered significantly faster revenue growth. The balance includes proceeds from the equity raise in September though we remain in a very strong capital position. The next slide highlights the cash burn dynamics we’ve seen in the last year and a half.

You can see we were burning roughly $115 million to $120 million a quarter on average in 2022 as we set up all the infrastructure needed to deliver a first-class launch of Signatera. We stepped down to $80 million to $90 million a quarter burn as volumes and reimbursement grew rapidly. And now we’ve put that cash burn roughly in half in here in Q3. As Steve described we placed a lot of emphasis on getting reimbursement recently for covered services. And while we are still in the early innings of that effort we do think you’ll be getting some results here in Q3. Days sales outstanding fell dramatically in the quarter and now stand in the low 90s. I’ll offer the standard caveats here. We fully expect cash burn to fluctuate quarter-to-quarter and given our COGS projects are all on track we do have some large topic than we planned in Q4.

However, I think the trend you see here in the car dinette continued progress and we expect to see more of that next year. Great. Let’s get to the 2023 guide on the next page. As Steve described, we are once again in a position to completely rerate the revenue guide upwards and now expect to come in at $1.035 billion to $1.050 billion. We are pleased to be tightening the original gross margin guide drop into the range. And since the OpEx guide is remaining unchanged that means we cannot significantly reduce our expected cash burn guide for the year and now expect it to be $260 million to $280 million. For many of you that have followed us for some time, you’ll know that we try to set forecast that requires good, but achievable execution. And I think that’s what this guide implies.

We’ve got to continue to grow margins and they clean the ASP improvements we obtained this year. This guide does not imply however continued growth in ASP. Obviously, we are focused on making that happen, but there’s always some uncertainty around the specific timing of ASP improvement, which is why we are reserving that as upside to the guide per our usual practice. As Steve described, we are feeling very positive about 2024 and we feel like we’ve got the right-sized sales team to continue driving growth given units are largely a function of sales rep productivity and rep counts are remaining stable next year. I think repeating the same unit growth we achieved this year is a good target. This will require good execution because our commercial team will ultimately to manage a larger book of existing business at the same time as they’re growing those units.

In addition to this particular volume upside, we are now starting to see revenue increase at a faster pace as ASP improves. So if our strong ASP trends continue that could be another factor helping us in 2024. On revenues we’ve got the potential for a number of further upside tailwinds that I would regard as upside to our base forecast. We are cautiously optimistic on 2022 and broad panel carrier screening guidelines and footnote inclusion in NCCN guidelines. Based on the [indiscernible] of meetings we’ve been publicly announced from these guideline committees we would expect update relatively early in 2024. I’ll say it again that we do not need the fit our tax flow breakeven targets in order to continue making progress on ASP which could support steady improvements in the gross margin over the course of the next year.

We expect operating expense to be relatively stable in 2024 compared to 2023. We’ve talked about the commercial team and we are rapidly getting operating leverage on our lab infrastructure for Signatera. Holding R&D expenses study will still allow us to make critical investments in prospective clinical trials and contingent sold reductions. We are also planning to launch a leader compelling new products and we are looking forward to talking more about those in the future. Our overarching goal in 2024 is to get to pace breakeven without sacrificing growth and innovation. Given that objective, we’re planning to spend only about $15 million next year on early cancer detach. That investment will still allow us to deliver two significant data readouts one of it will come by either the end of this year or very early in Q1 and the other in the first half of 2024.

If those data was very strong and pass-through investment criteria then we would evaluate moving forward with the program. Given the goals we have in front of us in our core products we will only put further into this area in the future if we see excellent results that we think can be market leading and we’re hitting our cash flow goals. So we’re really excited to be talking about the future of Natera and with that let me open it up to Q&A. Operator?

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Q&A Session

Operator: [Operator Instructions] Your first question is from the line of Tejas Savant with Morgan Stanley.

Tejas Savant: Hi, guys. Good evening and thanks for the time here. Congrats on a great quarter. Steve, Mike just in light of your comments that you didn’t really have any benefit from onetimers year in the quarter on either revenue or gross margin. Can you just help us contextualize that implied fourth quarter guidance. It looks like you’re pointing to sort of flattish growth sequentially and flattish gross margins as well for my quick math. So any color on sort of any offsets that we should think versus the typical year-end seasonality.

Michael Brophy: Hi, Tejas. Thanks for the question. It’s Mike here. Yes look on the guide I think on the gross margins I think that’s just tightening to the top end of that range implies similar or better gross margins in Q4. As you guys know we don’t guide specifically to quarters. So there’s a level of caution there. I don’t think that should be taken as a message about concerns about underlying trends. As you’ve heard in the prepared remarks the underlying trends that really across the business remain incredibly strong. I echo this similar sentiments on the revenue line. Volumes typically follow a pattern where Q2 and Q3 are kind of our weaker quarters in terms of the seasonality from the women’s health business. Q1 is our strongest quarter but usually Q4 is also a good quarter as well.

So we felt we’re off to a good start with Q4. As I mentioned in my prepared remarks, I mean our approach to providing guidance is always to try to provide good but achievable benchmarks for financial guidance and we hope to be able to exceed this.

Steve Chapman: Yeah. I’ll just add. This is Steve. We’re off to I would say an incredibly strong start in Q4 and we’re continuing to see I think acceleration in ASPs and in volumes.

Tejas Savant: Got it. That’s super helpful color. And then guys a couple in terms of the follow-up here, one on Signatera. Can you just update us on your status with BFCA [ph]. And I know this is a immaterial part of revenue but it’s a question that we’ve gotten from investors here. And how do you juxtapose that with the biomarker bill being passed in California, you’ve got the F1 tracker opportunity coming up as well. So any color on that? And then my second part of the follow-up is actually on Renasight. Given the really strong results here in RenaCARE. How are you thinking about the slope of that adoption curve? I think in the past Steve you had mentioned about — you mentioned the 37 million patient population, but about 750,000 newly diagnosed annually. So just any color in terms of the slope of the uptake there, and early feedback from payers and nephrologists would be fantastic? Thank you.

Steve Chapman: Yeah. Thanks a lot. So I guess first just on commercial payers and the biomarker bill, I think some of the other groups that have presented have talked quite a bit about that. We’re, obviously, monitoring things. We’re taking a little bit of a more cautious approach. We want to see how things actually come through. But the reality is the biomarker builds are in place now and passed in a significant number of very critical states. So we think that it could serve as an opportunity I think to quicken the traditional pace that you see for commercial coverage. And, obviously, with California passing that’s resolved things with Blue Shield of California. But overall I would say this biomarker bill is a net positive.

It’s something that is unique for its time period and not an opportunity that’s been available previously. So frankly this might end up being the quickest path to get commercial coverage versus what we’ve seen historically. From a Renasight standpoint, I think the RenaCARE study, we think is a real inflection point. We’ve already previously said about 40% of nephrologists have used the product, we’ve done tens of thousands of tests at this stage and the excitement from the nephrology community and the interest is incredible. I mean it’s like something that I haven’t experienced before where nephrologists are really welcoming this product in with open arms. They’re very engaged they — it’s like they’ve been starving for a product like this.

So, we’re excited about that. With that said, any time you’re introducing something new, it does take a while to get protocols in place and get that type of market penetration that could be impactful. When I think about the market size, I think a very direct comparison here can be made with hereditary cancer testing. There you have a very similar situation where you have the sort of incident and prevalent pools. And frankly, they’re a similar size. And hereditary cancer testing today is an incredibly large opportunity. And so, we think we’re laying the groundwork for something similar.

Operator: Your next question is from the line of Puneet Souda with Leerink Partners.