Natera, Inc. (NTRA) Earnings Call Transcript & Summary

All right. We're going to go ahead and get started. I'm Tycho Peterson. It's my pleasure to introduce our next company this afternoon, Natera. [Operator Instructions] And with that, let me turn it over to Steve.

Great. Thanks, Tycho. I'm Steve Chapman. I'm the Chief Executive Officer of Natera. Thank you for having us today. I'm going to start off on Slide 2. So Natera is, today, the market leader in cell-free DNA technology. We've performed over 3 million tests. We are the leader in peer-reviewed published data, and we have more than 250 technology patents with over 100 issued. We've come a long way from 2013 when we launched our first cell-free DNA test, Panorama. At that time, we were the fourth to market, and we've grown significantly since then to become the market leader. And we're glad, in 2020, we were able to expand our platform technology, the same technology that took us from fourth to first and where we're the market leader in NIPT, we've now expanded into oncology and organ health, 2 very large additional market opportunities. Let me jump to Slide 3 for a minute. We really hit our goals and did exceptionally well in 2020, and we set ourselves up nicely for an excellent 2021. So the reproductive health business, we processed approximately 1 million tests in 2020. That was the fastest net unit growth that we've ever had in the business, and we have very strong tailwinds taking us into 2021, which I'll talk about in a minute. In the organ health side, we exceeded our prepandemic Prospera volume growth targets. We've done very, very well. And on Signatera, we executed our colorectal clinical launch. We got reimbursement. We have a drumbeat of new studies that are coming out. We've seen significant acceleration in the pharma business, and we now hired our clinical sales team. So all across the businesses, we've done exceptionally well. Move to Slide 4 for a moment. So what has allowed us to become the market leader in cell-free DNA testing? And how did we go from fourth to first in NIPT? So we think it's a combination, starting on the upper left-hand side, of bleeding-edge technology combined with constant innovation. So you can look back at our history of launching new products and consistently innovating and improving our products. This is something that we hold very dear and is very important to our success. The upper right-hand side, we have an extreme focus on user experience and support services to make it easy to use our products. The bottom right, we believe it's important to be the #1 in clinical data, to publish more data than any other company and have expert clinical teams. And then the bottom left, we have broad and talented and strong commercial teams. If you go to Slide #5, all of these things come together, to put together charts like this, in our reproductive health volume growth. And you can see in 2020, we've processed about 1 million tests, which is just an extreme acceleration from where we were before, the best year in our history and the fast -- fastest net unit growth that we've ever seen, giving us significant momentum going into 2021. And all of this is despite the impact of COVID, so I'm really proud of how our team performed. Now there's 2 major tailwinds that are behind us going into 2021. The first on Slide 6 is the average risk NIPT opportunity. So on the right-hand side, you could see today that average risk, which is about 3.4 million births, is only about 20% penetrated. Now just late last year, we saw both an updated guideline from the American College of OB/GYN and Society for Maternal-Fetal Medicine, but we also saw major payers like UnitedHealthcare and Aetna, for the first time, issuing positive coverage policies. So we think that this is going to unlock rapid growth, getting us up to that 90% penetration rate in the average risk market over the next several years. So we're well positioned to ride the wave of this growth, and it's not yet really factored into those exceptional growth numbers that you saw for our business in 2020. The second major tailwind in our women's health business on Slide 7 is the readout of the SMART trial that's going to be happening in January at the Society for Maternal-Fetal Medicine conference. So for those who aren't familiar, the SMART study is a 20,000-patient, multisite prospective trial that looks at genetic outcomes on all of the live births, to look at average risk NIPT performance, to look at microdeletion incidence and performance and to validate the Panorama AI platform. So this will be the largest NIPT study that's ever been published. It will be the first large prospective validation showing the performance and the incidence of microdeletion testing, and it will validate our new Panorama AI platform, which is going to extend our market leadership performance -- market-leading performance beyond even where we are today. So we're excited about this because of the future impact it can make, not only on expanding our market share and helping us win competitively, but also for the reimbursement opportunity with microdeletions. So today -- in 2020, we performed over 400,000 microdeletion tests. Now that -- we're not really reimbursed on that test today, despite the fact that CMS has priced the test at $759. There's a unique CPT code from the AMA. There's pricing in place, and we have a big book of volume. So we're hoping with this new study that, that can help us get positive coverage policies. Now if we were able to get priced at the microdeletion rate, that would be $300 million in additional revenue and cash just from the volume that we're doing today. At a more conservative $250, you could think about it as an additional $100 million in revenue and cash just simply from the volume that we're doing today. And the data that's coming out is - nobody's ever going to produce data that is more significant and bigger than what we're putting out in January. So this is a really significant moment for the microdeletions business and for our women's health franchise. So now let me shift gears a little bit to organ health on Slide #8. So the transplant opportunity ahead of us looking at donor-derived cell-free DNA is a very large market. It's greater than $2 billion. It's very unpenetrated. Today, less than 10% penetrated. There's a lot of greenfield opportunity. And you can see on the right-hand side that even at relatively low levels of market penetration, this can give Natera a very significant boost to revenue and make a very significant impact on our business overall. Now moving on to Slide #9. So I told you earlier that we exceeded our prepandemic Prospera volume targets. Now that's despite a lot of the disruption happening from Prospera. When we set that target in January of 2020, it was a stretched goal. And we're really pleased that despite the impact of COVID, we've been able to hit that in 2020 and have nice momentum going into 2021. Now one of the pieces I outlined that's critical to our success is continued innovation. We're not just doing that in women's health. We've now brought that into organ health. So at ATC, in May of 2020, we launched a new product that goes along with Prospera that we call background check. Now we're able to now, from a single workflow, without any additional cost and without any additional delays to the turnaround time, check the amount of background DNA that is in each sample. Now that's important because the donor-derived cell-free DNA percentage is donor-derived cell-free DNA divided by total DNA. So if the background or the denominator has increased significantly artificially, that can mass projection it to lead to false negatives. So in the fall, we presented some new real-world data at the ASN conference, showing high levels of clinical utility. And what we're seeing is, especially in COVID, that there could be these enormous increases in background DNA. So we're happy that as we go into 2021, that we have 2 big COVID studies that we're going to be sharing. One is a case study that's been submitted for publication, and the other is a series of 25 COVID patients where we've assessed both the rejection status and background status, and it's going to confirm what we've shown previously to be the high clinical utility of looking at background DNA where we're the only ones doing this. Okay. Now let me move on to oncology, Slide #10. So you're all familiar at this point with the liquid biopsy market. There's early detection, monitoring and therapy selection. And while we think all of these are important, we're mostly focusing on the very large monitoring market, and we were really the first ones to go after this $15 billion market opportunity. So let me tell you a little bit about our product, it's called Signatera, on Slide 11. So Signatera is a personalized and tumor-informed MRD test. We start off by doing whole exome sequencing of the tumor tissue to identify a unique signature of tumor mutations that's specific to you. We then custom design and manufacture a personalized multiplex PCR assay for each patient, targeting their top 16 clonal variants found in the tumor, and we do that using a proprietary selection algorithm to pick not just any 16 but the right 16. Then we use that personalized assay in the patient's blood to detect the presence of circulating tumor DNA for the purposes of MRD assessment and for ongoing monitoring and a patient's response to therapy. So if you go to Slide #12. We've now published this across multiple tumor types, and we've seen the same impact every time. In colorectal, in breast, in lung, in bladder, in IO therapy monitoring and in many other cancer types that we're going to be revealing in the future, we see consistently very high levels of performance, in the 88% to 100% range of sensitivity, detecting relapse ahead of imaging. And we've also seen extremely high positive predictive values, greater than 98%. When we tell you you're positive, you are going to recur. We think this is one of -- the amount of data that we have is one of the key differentiators for us. I'll talk a little bit about that more later. So going to Slide #13. So Signatera is commercialized in 2 areas. The first is in pharma, and the second is in clinical. I'm going to talk first about pharma. So I'm excited to announce today that we have seen a massive acceleration in our pharma business with greater than $120 million in total contract -- cumulative total contracted value signed to date. And you can see the acceleration in the chart on the right-hand side with greater than $65 million signed in 2020. Now the growth is even more stark than what you see here because our 2019 number included some of the deal value from our partnership with Foundation Medicine. So we're really seeing a massive increase right now in the total contracted value. The average deal size is getting larger. We've now signed multiple Phase III clinical trials, and we're just seeing a lot of momentum. If you go to Slide 14. Despite the momentum that we've had, we're actually now seeing a significant increase after this result from the IMvigor010 study, which was released in December. So the phone has been ringing off the hook from pharma companies because of the performance that we've shown here. So this was a large Phase III randomized control study that looked at atezo versus observation in adjuvant bladder cancer. And this was funded and paid for by Genentech. And what it showed was that using MRD as a selection criteria for which patients should get treated can have a very significant survival benefit. So in the MRD-positive patient population, there was a 41% survival benefit for the patients that were treated versus not treated. Now that's huge because normally, pharma companies are getting approval for drugs where they have a low single-digit survival benefit. But here, using MRD-directed treatment, we're showing a very significant benefit of 41%. And this is most important because the trial, without using MRD-directed treatment, failed. It showed no benefit. So all the money that pharma had spent on the trial, it really was for nothing, except for the fact that the MRD treatment decision-making was able to save the trial. So we think that this is now going to be a must for all pharma companies to include MRD assessment in every adjuvant trial. And again, just it's brilliant data, very important for patients. And the phone has been ringing off the hook. This is going to really accelerate the pharma business. Now moving on to Slide 15. I want to shift gears to the clinical setting. So no longer pharma, now we're talking about clinical. The first indication that we're going after is colorectal cancer. We've received final coverage from Medicare. We've built our sales team, and we are on market for this product, and we're seeing acceleration. We're beating our expectations. This is an opportunity of about 1 million tests annually in stage 2 and 3 colorectal cancer alone. And there's 2 key pieces of this. There's the adjuvant decision-making. Does the patient need to get additional chemotherapy? And then there's surveillance, which is where you do routine blood draws to try to detect the recurrence of the cancer early. About 20%, 25% of colorectal cancer patients relapse. Unfortunately, 85% of them are caught too late for curative surgery. So we're now surveilling patients routinely with the hopes that we can identify the recurrence early and get that patient queued up to do surgery. So we're really excited about this opportunity. We've seen great performance in the lab. The turnaround time that we're delivering is very quick. It's a week for the ongoing blood draws. And for the setup process, it's less than 3 weeks, which is suited perfectly in the colorectal setting because the physicians do not give adjuvant chemotherapy until 6 to 8 weeks after the patient has been diagnosed. So with our ability to be able to generate these personalized monitoring results, get the exquisite sensitivity that we're getting, which outperforms any other test on the market, including tissue-naive products, we're able to turn -- to get a result back with a significant window of time for the patient to make that adjuvant decision window. So now let me shift gears a little bit, Slide #16. What's the second indication that we're going to launch? So a lot of people ask us that. The second area that we're going to be launching is in IO monitoring, immunotherapy monitoring. So we had a great peer-reviewed publication in Nature Cancer earlier, which was with Princess Margaret Cancer Centre and Merck, looking at their product, KEYTRUDA. And this is another area that has very high clinical utility where we perform very well, and we outperform the tissue-naive products that are on the market. So there's more than 200,000 patients that are treated per year with immunotherapy. And unfortunately, many don't respond. And that's because of this phenomenon of pseudo-progression. So pseudo-progression can delay the identification of nonresponders. And our product, Signatera, combined with imaging, can actually decipher pseudo-progression or not, and we can identify 100% of the nonresponders. So we think this is a great clinical utility. We can help patients get off of an immunotherapy that's not working and onto a drug that is working, or we can help them remain on treatment if that's the most appropriate for them. In addition, there's a serial monitoring opportunity, which can identify secondary resistance or, in the end, ultimately, exceptional responders that can be removed from IO treatment altogether because they've just completely eradicated the cancer from their body. So we're excited about this. We're going to be launching later this quarter, and we think we can have reimbursement over the summer when the LCD is finalized. If you move to Slide #17, other cancer types in data. Now this is critical. So we've now published 7 peer-reviewed papers across multiple different cancer types. We studied more than 25 different tumor types, and we have over 25 biobanks in-house. So we didn't just start working on this last year. Over 5 years ago, we started aggressively scouring the earth, looking for biobanks and looking for studies that we could participate in. And the data that we're generating now goes back 5 years. And most of these studies have 3 to 5 years of outcome. So to start from scratch today and try to replicate this book of data is very, very challenging, I think, for other companies. But what's most exciting is that we have 25 biobanks in-house and a total of more than 50 studies ongoing. That's going to allow us to unlock many other different cancer types under the umbrella LCD coverage. So expect -- stay tuned for a lot of data being published in 2021 and additional data being submitted for reimbursement. Now let me close on Slide 18 just by talking about the oncology MRD opportunity that we have right in front of us today for near-term reimbursement. So with stage 2 and 3 colorectal cancer, that's about 1 million tests per year with IO response monitoring. That's 800,000 tests per year. And then with muscle-invasive bladder, neoadjuvant breast and stage 4 oligometastatic colorectal, that's another 600,000 patients. We think that can be covered under the umbrella LCD. So around 2.4 million patients per year already where we generated and published the data that we think is sufficient for us to go out and get reimbursement. Now there's much more to come. Ultimately, we think this will be a pan-cancer assay. And we're excited to give you more updates about additional trials and data as we go into our Q4 earnings call and throughout 2021. So with that, I'll open it up for questions.

Great. Thanks, Steve. Any more color you can kind of give us on 4Q? And welcome, Mike. Good to see you, too. You said prepandemic volume targets exceeded. Can you just clarify what those were? And then was that all driven by the PROACTIVE registry trial and PEDAL? Or maybe just if you'd give us as much color as you can on fourth quarter, it'd be good.

Yes. So I guess, overall, we processed well more than 1 million tests per year as a company and approximately 1 million tests in the reproductive health business. So we're hitting on all cylinders. The overall net unit growth that we saw as a company was the fastest that we've ever seen in the history of the business, and that acceleration continued in Q4. So it's really across all the different business units. We have the launch of the organ health business. We have the launch of oncology. And then we have continued growth and innovation in the reproductive health business. So the growth is coming from everywhere. We're doing exceptionally well, but we have a lot of tailwinds going into next year, and I look forward to seeing the launches continue and the growth continuing in 2021.

Got it. And then just so we're clear, the full year volume, are you able to kind of actually quantify that? You said over 1 million basically in 2020. Okay.

Yes. Greater than 1 million tests processed across the businesses and approximately 1 million alone in the reproductive health business.

A couple of things you touched on I'd like to follow up on. The microdeletion reimbursement opportunity, $300 million potentially to come your way. How do you think about over what time period and are there hoops you need to kind of jump through, posters, publications coming out?

Yes. So there's no real hoops. I mean just like -- this is the gold standard study. There's no -- you can't design a study better than this. This is the gold standard. It took 5 years to complete. It's 20,000-patient study. It's not going to get any better than this. So the study is going to read out at SMFM. It's going to be published later in 2021. And I think it's going to add -- I think it's going to give us enough to get society guidelines. And once those guidelines get in place, it's just now up to -- for the health plans after that. Now we're not baking that into our sort of internal numbers. We see this as kind of icing on the cake. I mean we haven't spent a lot of time talking about it, but I mean talk about surprise upside, this could be enormous.

And you're pretty confident in that $759 pricing from CMS or you said it could potentially be $250 million if it came in below. I mean that -- explain that trade-off.

I mean, look, the CMS price is there, and it's set. So that is what it is. Private payers will generally draft off the CMS rate. Some of them will give you roughly CMS. Some of them give you a portion of CMS. So I think it's mostly about coverage. If you're conservative and you just say $250 a test, that puts you at $100 million in additional revenue and cash just from the book that we're running today. Now you shouldn't think about it as being capped at that level because we see doctors ordering the microdeletion test. 8 out of 10 times, they place an order for Panorama. So as we penetrate that additional 3 million tests in the average risk space, that microdeletion number is going to go up significantly as well. And it's pretty baked into our COGS as well.

And competitively, you can differentiate there, too, right since your peers generally don't do that? And so...

Yes. Well, look, every other company does shotgun sequencing. We do targeted sequencing of SNPs. Now that has an extreme advantage for aneuploidy testing, where we have the highest sensitivity and specificity on the market. But it has an even more distinguished advantage in microdeletions, where you're looking at these very small deletions and duplications because we can target the specific deletion and duplication and go to extreme depths of sequencing at that particular target, whereas if you're doing shotgun sequencing, the only way to get to very low levels of sequencing is to actually sequence the entire genome, which just is not cost effective. And so at the reimbursement levels that are out there for NIPT, the only way to get the exquisite performance is with the targeted SNP-based products. And what we're going to put out in the SMART study is going to blow away what anybody else has put out there, both from a sensitivity standpoint, from the ability to get this very, very small microdeletions, which nobody else does, and from a positive predictive value standpoint.

Got it. So you've got kind of the double tailwinds of the ACOG lift plus the microdeletions, that would be pretty interesting. A number of questions that have come through on Signatera. Maybe what's the negative predictive value for IO monitoring? We'll start with that one.

Yes. So I don't have that off the top of my head. Solomon, do you want to talk a little bit about the performance specs on IO monitoring?

Yes. The -- I think to break down the question, if somebody has increasing tumor DNA while on immunotherapy, especially if that is in conjunction with progressive disease on a scan, we saw 100% prediction of nonresponse in our study. So 0% of those patients had any objective response. Conversely, any patients who cleared their circulating tumor DNA, in other words, went from positive to negative during treatment, enjoyed 100% overall survival through the end of clinical follow-up. And that's significantly better than the data we're seeing from static tumor-naive assays who are trying to do the same thing with immunotherapy response monitoring.

Got it. And then in terms of kind of pan-cancer assay, can you -- are you able to talk a little bit about which indications come after IO? I know, Steve, you mentioned you had inbounds on that. You've mentioned 50-plus studies across breast, melanoma, pancreatic. I mean how are you kind of prioritizing?

Yes. So just in December, we put out data on neoadjuvant breast, which was very strong data coming out of the I-SPY 2 study, where we were able to show how MRD testing can augment pathological complete response or maybe even outperform pathological complete response. So today, if you achieve pathological complete response after adjuvant treatment or if you don't achieve it, you have a 25% of recurrence. And so with Signatera MRD, we can take that 25% of patients that are going to recur, and we can stratify in 2 cohorts: one, the Signatera negative that only has a 7% chance of recurrence; and another, the Signatera positive that has a 63% chance of recurrence. So we can give you better information that can help the physician make appropriate decisions on how they want to treat the patient in the adjuvant window. And then in muscle-invasive bladder, I mean this is opening up a whole new opportunity to really bring immunotherapy into the adjuvant window where, unfortunately, today, 50% of patients recur even after they have their bladder removed, and they have a cystectomy. But with the data that we're showing, this is going to enable patients to start being treated in the future at the appropriate time with certain immunotherapies. So we're excited about those. We also have data that's going to be coming out across multiple different cancer types that we shared on the slide. And you'll have to kind of wait and see as that rolls out. But there's many studies that will be coming out that we think can fit under the umbrella LCD where we can get short-term coverage. And there are some big shots on goal for long-term coverage in some really enormous markets that we're going to be diving into detail on, on our Q4 earnings call as a result of some of the Phase III clinical trials that we've recently signed. We'll be going into more detail on that in the February call. You're muted, Tycho.

Sorry. I know you talked about reimbursement in that kind of $1,800 to $3,500 range. As we think about kind of driving commercial adoption, you talked about pseudo-progression, serial monitoring. Can you maybe just talk about those 2 groups and how you think about what it takes to drive adoption in each?

Yes. So reimbursement, we've said that we're sort of pleased with the way the negotiations went with CMS, and we're kind of right in the pocket there. So that's great. We're glad to have cleared that. When you look at what it's going to take to drive commercial adoption, there's a couple of steps that you have to take. I think you have to produce the data. You have to show there's high clinical utility. You have to get reimbursed by Medicare. You have to build a sales team. You have to do postmarket surveillance studies like the registry trial that we're doing with BESPOKE, build relationships with the key opinion leaders, get into society guidelines and then ultimately get commercial reimbursement. I mean that's the playbook for diagnostics, and we have that. We're executing on it. And we're seeing really good uptick on colorectal right now. We're very, very pleased with the performance that we're seeing since our launch, and it's going to be exciting to see this business hit milestones and grow.

I got one that came in. Maybe a good one for Brophy, put him in the hot seat for a minute. But with all the new test launching, are you guys thinking about changing disclosure? Total test accession and processed and blended ASPs are particularly useful. So are we going to get more granularity as you roll these tests out?

Over time, yes, you definitely will. I think in the immediate term, I think the disclosure is going to remain relatively consistent, and that is primarily for competitive reasons. We certainly -- we've had the experience in the past of providing much more granular disclosure than the field and have had occurrences where that's actually hurt us competitively because other players can see how well we're doing, and then they double down. So we're reluctant to give disclosure that harms the business. But over time, I mean, look, our bias is to give you the information. So it will be a continuum, Tycho. I mean we'll start with the current level of disclosure. And I think over time, we'll start giving -- for example, we could start giving like volumes between reproductive health and the new businesses, for example, is just like one idea. And then over time, we'll just kind of get to more of a standardized disclosure.

And speaking of new competitors, Guardant and Grail both MRD -- or announced MRD launches early this week. Can you talk a little bit about how you think about competition in the market?

Yes. So I think the first thing is we thrive on an extremely competitive environment. I mean that's where we operate the best, and that's what -- frankly, that's what we're used to. So when we entered NIPT in 2013, we were the last ones to come in. And now we're the dominant market leader by far in volume, revenue and peer-reviewed publications. So it's a key formula of continuing to innovate and focus on the right things. I think when you look specifically at some of the announcements that were made, we're seeing consistently the tumor-naive products just don't reach the same levels of performance. So I think specifically, we'd be happy to kind of go through the different publications that are out there. But unfortunately, I think -- well, I guess, one thing is most of these groups don't have any publications. They have a poster or a slide. And I think you got to compare that against a detailed peer-reviewed publication that's been through the wringer. But even when we compare the publications to the slides that are out there, we're seeing superior performance when you look at the key metrics that are out there. And that includes not just the tissue-naive assays. That also includes other groups that are looking at personalized MRD and making different claims about personalized MRD products. So from everything that we've seen, we have the marquee performance, and we have the most published data, and we're going to continue to innovate and keep it that way.

Are there things you can do to kind of improve turnaround time? Because at least in our discussion with Guardant, they highlighted a 7-day turnaround time as a real competitive advantage for MRD for them.

Yes. So our turnaround time is 7 days for the ongoing blood draws once the test is set up. And then for the setup process, it takes about 3 weeks to set up the test. So they probably didn't go into this detail, but when you're diagnosed with colorectal cancer and you have surgery, you don't start adjuvant chemotherapy for 6 to 8 weeks. So you really -- the doctor has 6 to 8 weeks to make the decision on how they want to treat the patient. So you can get the results back in a week, but it's not going to change any of the decision-making. Now the initial setup for us is 3 weeks and then the ongoing is 1 week. But we think that, that extra couple of weeks, especially since it doesn't really change the kind of utility, is very worthwhile for the very significant performance differentiation that you get. So if you go back, and just to get into some of the detail, if you look at the hazard ratio on the slide, I think Guardant showed yesterday, they have a hazard ratio of 11 from the landmark time point. So what hazard ratio is, that means what is the likelihood of a patient that's called positive to recur versus a patient that's called negative. So their hazard ratio is 11. Ours, in our peer-reviewed publication from that landmark time point, is 17. That means we do 1.5x better than what they do at giving a patient a like -- the -- giving a patient back a result that they're going to recur. And I think that that's going to be important, and ultimately, I think the -- like we've seen in other businesses, you can put a slide up at JPMorgan, but you have to publish the data, and ultimately, giving better performance for patients is going to win.

One of the things you highlighted, I think, for the near-term MRD testing opportunity is kind of 1 million cases in stage 2 and 3 CRC. You've talked about 800,000 in IO and 600,000 in kind of newly published presented indications, 2.4 million. But how are you defining kind of near term as we think about the volume? I know on the last earnings call, you talked about Guardant360 and FoundationOne as kind of proxies.

Yes. So I guess that sort of last slide that I showed, I think that basically is -- of the data that we published, what can we submit for reimbursement right now under the existing or the draft LCD. So there are some other big markets that when you look at like treatment on molecular recurrence, for example, where the market is very, very large, but you have to do that hand-in-hand with pharma. Because you can't administer a drug on a molecular relapse without really doing a study with pharma that shows that that's going to get the same or improved levels of outcome. So there's other big indications that we're going to be talking about that maybe aren't included on this very near-term reimburse road map but that we're still working on and we're still generating the data on. When you look at the penetration into these markets, we've seen FoundationOne, Guardant, even going back to like Genomic Health, you usually see this sort of low single digits the first year, kind of mid-single digits the second year and then maybe high single digit, low triple digit as far as penetration rate as you look at the first couple of years. And we think we'll be trending nicely right in pocket with where these other successful oncology companies have been.

And then what's the latest on kind of the BGI partnership, in launching Signatera in China?

Yes. That's actually going exceptionally well. We've now completed the process with BGI of getting the test up and running in China. It works really, really well, as we suspected it would. I think the -- there's a handful of pharmaceutical studies that are signed already that have an arm in China. And we're going to continue to push on pharma, which I think we've said for a long time is the, I think, the initial use case in China and then follow that up with a focus on the clinical opportunity where we're working hand-in-hand with BGI to work out the launch strategy there for the clinical opportunity in China. But the product development is completed. It works, and we're excited to see that launch through.

And then just following up on the partnership front with Foundation. Obviously, that's more focused on pharma trials. Can you just talk a little bit about the next steps, objectives as part of the collaboration?

Yes. So Foundation is a fantastic partner. We really share their extreme focus on quality, and we're very pleased to be partnered with them. We've made a lot of progress. We're looking forward to the biopharma launch and that being followed by the clinical launch. We think they're an excellent partner for their presence, their focus on quality. There's a lot of work behind the scenes. And when we can, we look forward to really giving the detailed, granular status update of where we are, but there will be a launch this year.

And then on Prospera, you had real-world data at ASN in the fall showing clinical utility, high levels of background of cfDNA impacted by viral infection. Can you just talk on the importance of that data, how it differentiates you from CDNA, AlloSure?

Yes. So when you look at the percentage of donor-derived cell-free DNA, which is what everybody is using today, the problem is that, that number can be impacted just simply by having a higher denominator. So the percentage of donor-derived cell-free DNA is a fraction. It's donor-derived cell-free DNA divided by total cell-free DNA. If the total cell-free DNA increases, it throws off the fraction of donor-derived cell-free DNA. So what we've seen, particularly in COVID, if the patient has COVID, their total cell-free DNA is going to be exploding through the roof because there's going to be a lot of cell death that's occurring, and that's going to increase the amount of total background DNA. So we're able to adjust and correct for that, and others aren't. And we think that's a competitive advantage. And we've put some preliminary data out there. We're going to be publishing this big case series of COVID patients very soon. And we think that that's going to be a continued differentiator for us. Like I said, we're doing well on the volumes. I'm really pleased to see that this organ health market is huge. It's actually -- I think it's way bigger than what we've given it credit for. I mean if you look at the revenue being generated by some of the other companies out there, I mean this is an enormous business for us to be in. And I'm really glad that we've made the progress that we've had because I think, ultimately, this can make a big impact on Natera as a company.

Can you just give -- last question, just give us a sense of expansion plans around organ transplant beyond kidney?

Yes. I mean, certainly, our initial goal in front of us is to make sure that we're successful in kidney. I think there's no reason why our technology wouldn't work in other areas. But you could just see that the revenue that's just being generated by others in the space, which is just enormous, that's what we want to keep focused on right now, is getting our piece of that share. And we'll look at other organs in the future when the timing is appropriate.

Great. We hit the end of the session. I want to thank you guys for taking the time. It was a great overview. Enjoy the rest of the conference, and talk to you soon.

Thanks, Tycho.

Thanks, Tycho. Thank you.

Thank you.