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

Good afternoon, everybody. I'm Tycho Peterson from the Life Science team. It's my pleasure to introduce our next company this afternoon, Natera. Just a quick reminder, if you've got questions, you could submit them through the function on the website. With that, let me turn it over to Steve.

Great. Thanks, Tycho. Appreciate you having us today. So I want to start off just briefly on Slide #2, our safe harbor statement. I just recommend you to take a look at this. It's on our website. Feel free to read through that. Slide #3, a little bit on the background of Natera first. So Natera is today the leader in cell-free DNA technology. In 2013, we had the launch of our product in the field of women's health, Panorama NIPT. And the product is based on proprietary molecular biology techniques combined with unique bioinformatic algorithms that allow us to get down to the level of a single molecule in a tube of blood for extreme accuracy. Now we've taken the same platform technology, and we expanded it into oncology and to organ health in 2020, and we're now seeing significant growth in those businesses as we help more and more patients. So today, we've published more than -- we performed more than 3 million tests. We're the leader in peer-reviewed published data across cell-free DNA applications and we have more than 300 technology patents filed, including greater than 100 issued. So moving on to Slide #4. This is just a snapshot of our product portfolio that has come out of this core technology. And you can see the extensive innovation and growth that we've had here, as we expand the reach of our product portfolio across our 3 business units. You go to the next slide. One of the things that we're really proud of, on Slide #5, is that all of our products are supported and driven by real-world peer-reviewed data. We now have more than 100 peer-reviewed papers supporting the performance of our product and that includes studying more than 1.3 million patients across those studies. So if you go to the next slide, please, Slide #6. This is our formula for success. As I mentioned, in NIPT, we were the fourth company to launch in 2013, and we're now the market leader with more than 40% of market share, and we're continuing to grow extensively in oncology and in organ health. So what is it that has really driven our formula for success and put us in the position today to be a market leader? We think it's really 4 things. First is having leading-edge technology and constant innovation. The second is extreme focus on customer experience and support services. The third is being the #1 in clinical data and having expert clinical teams, which we think is very important. And the fourth is having a broad and talented commercial team and a broad distribution channel. Now as I conclude the interview, I want to move to talking a little bit about 2021. So I'm on Slide #7 now. We had a very transformational 2021. We processed more than 1.5 million tests and that equates to 52% growth year-on-year versus 2020. We consolidated market share in women's health even as the market expanded significantly, and we believe now we have more than 40% market share in the noninvasive prenatal testing space. Throughout the course of the year, we raised our revenue guide by greater than $100 million. We generated groundbreaking new cancer data, including Phase III data in muscle-invasive bladder cancer and a landmark 6-month follow-up study on 800 patients in the CIRCULATE trial. We achieved major reimbursement milestones for Signatera, where we were awarded an Advanced Diagnostic Lab Test status, and we got an umbrella LCD published opening the door for pan-cancer coverage for Signatera. We announced our expansion into early cancer detection. In women's health, we've read out the SMART study in both NIPT and microdeletion. And as a reminder, that's a landmark 5-year 20,000-patient trial. We also achieved cash flow breakeven in the women's health business. We had the commercial launch of the Prospera Kidney with quantification test and also expanded into heart and lung with the Prospera franchise, and we have the successful readout of the Trifecta study, which is the largest prospective fully biopsy-matched kidney data set that's ever been produced. So I'm going to touch a little bit more on the volume on Slide #8. You can see here just a graphic of our volume growth. So not only did we have our fastest growth from a percentage basis in 2021 that we've had since our IPO, but it was the most net unit growth that we've had in that same period. Now this is really being driven by an expansion in the women's health business and increased utilization in accordance with the American College of Obstetrics and Gynecology guideline to recommend noninvasive prenatal testing to all pregnant women. But also now a rapid acceleration in volume in oncology with our Signatera test and in organ health with our Prospera test. So I first want to touch on women's health on Slide #9. We believe that average risk testing for NIPT will help millions of patients per year. So in 2020 -- in late 2020, the American College of Obstetrics and Gynecology recommended that noninvasive prenatal testing be made available to all pregnant women. And this has really driven a significant increase in utilization that has helped us to expand the ability to help more and more patients. We believe today that the high-risk pregnancy market, which is about 800,000 pregnancies, is about 85% penetrated, and the average risk pregnancies, which we think is about 3.6 million in the United States is about 35% to 40% penetrated. So the overall market today is only about 35% to 40% penetrated and there's a significant opportunity for growth to help more patients. Now I want to move to Slide #10 and briefly talk about the value of prenatal screening. There's been a lot of discussion about this recently, and I want to clear up a couple of misperceptions. So the point of prenatal screening is to identify a high-risk cohort of patients that might benefit from diagnostic testing. So if you look on the left-hand side, the historical method is serum screening. For the past 40 years, since the 1980s, the obstetrics and gynecological providers recommended all pregnant women be screened with hormonal-based serum tests. Now if you look at how this test performs in a disorder like trisomy 21, which has a prevalence of 1 in 700, if you screen low risk with this test, your risk is reduced from 1 in 700 to 1 1870. If you screen high risk, your risk becomes 1 in 29. So that means that 28 out of 29 women that screen positive with these old hormonal tests will actually not be positive. And when they go on to get a diagnostic procedure, the baby will not carry the condition that you're screening for. So Natera set out to improve upon this approach, and I'm going to show the performance of the Panorama test on the right. So if you look at the same disorder, trisomy 21, that has an incidence of about 1 in 700, if you screen low risk with our test, your risk to your pregnancy is less than 1 in 10,000. So that means less than 1 in 10,000 patients that receive a low-risk Panorama result will, in fact, have trisomy 21. If you screen high risk, your risk score becomes 9 out of 10, which means 9 out of 10 women that screen positive with our test will, in fact, have trisomy 21, and 1 out of 10 will not have trisomy 21 after it's confirmed on a diagnostic procedure. So you can see that where previously only 1 in 29 women that were called positive were, in fact, positive. Now with our test, 9 out of 10 women that are called positive are, in fact, positive. Now how does the old historical serum tests compare to a more rare disorder like 22q, a disorder that's considered to be more rare? Well, in fact, 22q is, in fact, the most common microdeletion syndrome, The prevalence is stated to be about 1 in 2,000 in the literature, which makes it almost as common as Down Syndrome, especially for women under the age of 27. So with our test, if you assume the prevalence is 1 in 2,000 and you screen negative, your risk is reduced to 1 in 9,000 from 1 in 2,000. If you screen positive, you go into a high-risk category where your risk now becomes 1 in 2. So that means that 1 out of 2 women that we call high risk for this disorder will, in fact, have the disease, and they will have an affected child on confirmatory diagnostic testing, and one of them won't. And that's how the test is designed to work. Now Natera offers the screening test with a very responsible approach. The first thing that we do is we put the negative predicted value and positive predicted value on every report. The second thing is we put -- we give free informational sessions by a licensed counselor in both pre- and post-test, that's available to any patient that wants access. The third is our test are only available through licensed physicians and where a physician has obtained patient consent. Fourth, we report our risk -- or excuse me, we report our results as high risk and low risk rather than reporting out positive or negative to help reinforce the idea that these are screening tests -- And then last, we have extensive peer-reviewed data, validating our test performance. Now what does this look like in the real world? So you go to the next slide, which is Slide #11. And this gives an example of an actual high-risk result. This is a real report that a patient would receive that would screen positive for 22q. So at the top on the left, it says high risk for 22q deletion syndrome. Immediately below that it says this is a screening test only. Genetic counseling and diagnostic testing with a microarray should be offered to further evaluate these findings. And then immediately below that, it says Panorama analyzes DNA from the placenta. In some cases, placental DNA can differ from that of the fetus. Therefore, even with high-risk results, the fetus may be unaffected. We then go on below to actually list out the conditions that were tested, the result, the risk before the test and the risk after test. So nowhere on the report do we say positive or negative. We always talk about the risk before the test and the risk after the test. And if you look in this case, the patient screen positive for 22q deletion syndrome, the risk before the test was 1 in 2,000 and the risk after the test was 1 in 2, which means that this patient's pregnancy had a 50% chance of being affected with the disorder or a positive predicted value of roughly 50%. So we do take extensive care to talk about the positive predicted value so much that our result back to the patient when they screen positive is actually that patient's positive predicted value. Now for a more rare microdeletion, for example, like Prader-Willi and Angelman syndrome, this would, in fact, say 1 in 20, and that would be the patient's risk after having a positive result. 1 in 20, meaning only 1 out of 20 women would have a positive result and 19 out of 20 would, in fact, screen negative after invasive diagnostic testing. So you could see we make a significant effort to be transparent with the results. Now I'm going to go on to Slide #12. We talk about the results of the SMART trial. The SMART trial was a 20,000-patient prospective study that looked at the performance of noninvasive prenatal testing and microdeletion testing in a real-world setting. And the results were initially read out at the Society of Maternal-Fetal Medicine in 2021 and then have just been accepted for publication in the American Journal of Obstetrics and Gynecology, which is the premier journal of the main society. So when I look at the performance of the test, for trisomy 21, we had exceptional performance, an accuracy of 99.7%, which means the results were correct, 99.7% of the time. And we had a positive predicted value in this prospective trial of 95%. That compares to 3.5% with the outdated maternal serum screening tests that have been recommended for the past 40 years. With microdeletion tests for 22q specifically, we found that the disorder was extremely common, 1 in 1,500, making it the second wells common genetic disease that can be screened for -- non-invasively, and more common than Down syndrome for women under the age 27. We showed an accuracy of 99.94%, which means we gave a correct result to the patient 99.94% of the time. And using a prospective algorithm that we developed and launched in March of 2021 run prospectively in the trial, while the results were still blinded to us, we achieved a positive predicted value of 53% in the study, meaning 1 of 2 women that we call positive are, in fact, positive. These results are remarkable, and, we think, performed exceptionally well in light of the quality of the Journal. And I think the quality of the study that we performed. 22q is very important because these patients generally take about 4 to 5 years to be diagnosed, an average of 4.7 years. And that's a very stressful time for the families, where they're trying to uncover how they can better help their child. But most importantly, screening can help with early intervention. And when these babies are born, many times they have seizures that cause brain damage. And if the baby was identified prenatally, they can, in fact, be treated at birth with calcium and prevent some of the seizures and limit the amount of brain damage. So we think it's important to screen for this test. Once the paper is out, which we expect to be soon, we intend to go speak to the societies about testing. And we hope -- of course, we can never predict the future, but we hope to get a recommendation to screen for 22q. Now I want to move on to the next slide, Slide #13, talk about the Transplant business. So in Transplant, there's a significant opportunity to help patients. We think, in total, there's about 1.2 million tests per year that we can go after and compete for to help more patients across kidney, heart, liver and lung. And that market today is only about less than 10% penetrated. So we're seeing great growth off the strength of our product. We're working with about 50% of the top transplant centers, and we're very pleased with the uptick that we've seen. On Slide #14, I want to highlight a new product launch that we announced late last year, which is Prospera with quantification. Now the historical methods only focus on reporting out the percentage of donor-derived cell-free DNA. And you can see here the algorithm that generates the percentage of donor-derived cell-free DNA. And what they said is if you have more than 1% donor-derived cell-free DNA, you're positive. Well, we went back and worked on that, and we decided and we determined that it's actually the absolute quantity of donor-derived cell-free DNA that can drive a significant portion of the positive results. And we developed a new algorithm that better incorporates the absolute quantity. And what this does is eliminate the variability caused by the total cell-free DNA or the denominator in the equation. And you can see on the right, things like high body mass index or infection, things that are very common in transplant patients can drastically impact the total quantity of cell-free DNA and disrupt the percentage of donor-derived cell-free DNA and potentially the false negatives. So we wanted to study this prospectively, and we did so on the next slide, Slide #15. In the largest prospective study that has fully biopsy-matched cohort that's ever been done. Now this is the Trifecta study led by Dr. Phil Halloran, who's one of the premier researchers in the field. This had more than 2x the number of biopsy match rejections than any other study that's ever been done, including the DART study, and had data from more than 20 U.S. and international sites. And the results here are just exceptional. These are very strong results and show unequivocally that the quantitative method is superior to the percentage method. Now the quantitative method combined with the percentage is superior to the percentage method. We look forward to publishing this in Q1 of 2022, we hope. And we think this will really be a significant moment for the business. I want to touch on Slide 16 on heart and lung, where we've also expanded. We think we have a great value proposition here for physicians and patients. In heart, there's a big penetrated market opportunity. We saw an area under the curve in our study that was prospective. And 250 patient samples, combined with a data set of retrospective samples from 100 patients. We saw an AUC of 0.84. So we think here, we're well positioned to do well given the noninvasive nature of our tests. The incredible performance that we saw, which eliminates the need to do both DNA and RNA on the same patient. Doing DNA and RNA together can be very costly. Some of our competitors will charge $6,000 for the combination of DNA and RNA. With our test, we charged $2,840. We get exceptional AUC from a single blood draw, and it's very easy to use. We don't have to spin down the sample and ship it on dry ice like some of the competitive assays require. We also are looking forward to sharing our results in lung which have now been submitted for publication. So I want to expand on Slide 17 on the opportunity in oncology. We now are working across all 3 of these areas here for a total of $50 billion in TAM. I'm going to focus our energy today on monitoring an MRD, which is the Signatera opportunity. So what we've seen on Slide 18 is consistent results across MRD, where we now validated pan-cancer way across the many different cancer types, including colon, breast, lung and bladder. And what we've seen consistently is at a positive Signatera result without further treatment has predicted relapse with a PPV greater than 98%. So if you're positive, you're going to recur. We've also been able to identify cancer recurrence at a very early stage, sometimes up to 2 years in advance of imaging alone. Now let me go to Slide #19. which is important because I think there's a shift happening right now in oncology evidence generation. Now we spent a lot of energy over the last 5 years reporting out the sensitivity, the specificity and the negative predicted value and positive predicted value of our tests. Now we consider that to be validation data, analytical, some clinical validation data. But we're -- really it's going to drive guidelines and drive utilization as prospective outcomes data. So that's things like disease-free survival, overall survival or predictive data that shows that MRD testing can predict treatment benefit. So I want to first talk about what we're doing there on Slide 20. So last year, we read out the data from CIRCULATE-IDEA trial, which is the largest prospective in MRD study at ESMO IO in 2021. If you look at the first 800 patients with a mean 6-month follow-up, and we showed the disease-free survival stratified by ctDNA. Now the results were excellent, but they were also very early. And so I'm pleased to announce that in 2 weeks at ASCO GI, we'll be sharing a very, very robust data set of more than 1,000 patients analyzed with a mean follow-up of 12 months and we'll be showing disease-free survival stratified by the ctDNA result. But not only that, we're going to be talking about the predictive nature of the test, building evidence that could change society practice guidelines. So if you go on to Slide 21, on the left-hand side, what's already been shown. What does the literature already show. And the literature already shows that ctDNA is prognostic in colorectal cancer. If you're ctDNA-negative, you're going to have a better outcome than if you see ctDNA-positive. You're going to do better, you're going to have better disease-free survival. What hasn't been shown on the right in which we're going to show for the first time is the predictive nature of ctDNA testing in colorectal cancer. So these are the questions that we're going to seek to answer. Does MRD-positive -- do an MRD-positive patients benefit from chemotherapy and is the benefit present across all stages. It has not been shown prospectively today that MRD-positive patients benefit from chemotherapy. And there's a lot of patients today that aren't getting chemo because it's simply not offered to them in Stage 2. If they don't meet clinical criteria, they're not getting chemo. We want to show that if you're ctDNA-positive, you need to get off of chemo and there's a predictive benefit to patients that are ctDNA-positive. The second is our ctDNA dynamics predictive of adjuvant benefit. So does the change in trajectory during the course of adjuvant treatment in some way, predict the chemo benefit. Now that's going to be a very important readout. And again, the first time that this will be shown. And then the third, the holy grail, is, do MRD-negative patients, in fact, benefit from chemotherapy? Every Stage 3 patient today is getting chemo, many Stage 2 patients are getting chemo and a lot of them simply don't benefit, but they suffer the side effects. We want to show that MRD-negative patients do not benefit from adjuvant chemotherapy. And that question will be described in more detail at ASCO GI in 2 weeks and then further at ASCO in the spring. So some of this data is so strong that the PIs in fact, actually don't want to show it at ASCO GI, but want to save it for the main stage at ASCO. And so we'll have to see what they present in 2 weeks versus what they present in the spring. But overall, we think this is a major advancement and especially in light of the NCCN guideline committee commentary in December that they're looking forward to seeing predictive data on the performance of MRD testing in colorectal cancer and that, that type of data is what will be necessary to change society guidelines. So we feel very good about the fact that we're already doing these studies. We're already very well ahead of anybody else in the field. And this is the type of data according to the NCCN that they need to change guidelines. So now I just want to go to the next slide and talk about the broader opportunity. There's a significant unmet need that is now being served by this one platform technology that we've developed and the one oncology commercial team that we built out. So we initially published an Stage 2 and 3 colorectal and that's where we got coverage. We think that's about 1 million tests per year opportunity. In IO response monitoring, we now receive coverage. We think that's about 800,000 tests per year opportunity. But based on what's here in the short term in front of us, we think we have an opportunity to get coverage for about 4 million tests per year, which would make this one of the largest oncology opportunities of all time. But we now have more than 100 studies underway. These are prospective trials combined with biobanks, combined with NIPTs And when you look at the cumulative value of the indications in the pipeline in these studies, we think in the future, in the mid-term, all that effort is going to result in expanding the TAM to about 13 million tests per year. So we're really excited, not only about what's in front of us today, which can be a very big opportunity for us to help millions of patients, but also about what's going to come in the near future. So I want to now move on to Slide #23, which is our coverage roadmap. So in 2020 and 2021, we were very successful. We got coverage for Medicare and colorectal cancer in Stage 2 and 3 initially, and then we also won coverage in Stage 4. That was an advancement that we got later on in the year. We also got immunotherapy response coverage in a pan-cancer setting. And we were awarded an Advanced Diagnostic Lab Test status from CMS. Next year -- this year, excuse me, in '22 and '23, we think we can get NCCN guideline change in colorectal cancer. We think we'll get coverage for more than 5 additional cancer types for Medicare. In fact, we've already submitted for coverage for additional indications, and we think we'll get the initial private payer coverage. And then beyond that, in 2024 and beyond, we think you'll see the readouts from our definitive Phase III clinical trials, and that will drive pan-cancer coverage. I want to reiterate that we are the leaders today with MRD data in more than 3,500 patients with greater than 15 peer-reviewed publications and over 100 clinical studies in the pipeline to drive coverage and practice guidelines and build a moat around our platform technology. I want to last close on pharma before I go into some catalysts for the business. We continue to do very well in pharma. We're now moving into a major Phase III wins I think everyone saw the results from the vigor010 study, which showed the predictive nature of MRD testing in collaboration with Genentech and their drug atezolizumab. We've now won additional trials, the ZEST study in breast care. We'll continue to see our total contracted value accelerate. So where are we winning? The first is the product performance. Pharma wants to see proven peer-reviewed published performance. They want to see an extensive regulatory capability, which we've now spent a lot of energy building out, and they want to see commercial and reimbursement leadership. So we're really firing on all cylinders now with pharma, checking the box for a lot of the things that they need. And we think this partnership is great because in the short term, we get paid for doing the testing. But in the long term, it gives us the type of evidence generation that is needed to secure guidelines. So I want to close talking about some 2022 catalysts on Slide #25. So we think there's going to be continued adoption in NIPT. We expect to have the SMART trial published here very early in 2022 for both aneuploidies and microdeletions. We expect to read out big readouts in colorectal cancer from the CIRCULATE-IDEA study at both ASCO GI and ASCO. We expect to show the initial data from the bespoke colorectal trial in the second half of 2022. We expect to generate a significant amount of data and peer-reviewed publications in multiple different cancer types beyond colorectal. We expect to have additional reimbursement wins for Signatera in new tumor types. We're going to have a suite of significant organ health publications in heart, lung and kidney. We're going to benefit from year 2 of commercialization in organ health and oncology where we're building on the established base of business that we've built in 2020 and 2021, and we're going to expand on that. And we're now seeing very significant volume acceleration in both of those businesses. And then, of course, we have a suite of product enhancements and launches that we look forward to bring in to the market. So with that, I'll wrap it up and open it up for questions. Thank you.

Great. Thanks, Steve. Great overview. A lot to unpack there. Maybe just starting out on Signatera, volumes to date have obviously been really strong. How much is coming from pharma versus clinical at this point? And what's the mix like among different use cases, CRC versus IO monitoring versus other?

Yes. Thanks, Tycho. So I also want to introduce the General Manager of our Oncology franchise, Solomon Moshkevich; and our Chief Financial Officer, Mike Brophy, who will be joining me here for the Q&A. So we're actually seeing great growth across both pharma, where we're seeing increases in our total contracted value in line and outpacing our expectations. And we're seeing pharma companies shift from Phase II trials in retrospective studies to now big Phase III registrational trials. But we're seeing a lot of the growth come from the clinical business. And that's where we think, ultimately, the bigger revenue driving opportunity is going to be. So now things are starting to really accelerate. We're seeing record growth every quarter, we're seeing doctors repeat ordering in the way that the test has been prescribed to be used, and we're seeing patients proactively seek out their next test because of the comfort that the result gives back to them. And we're seeing now buzz when we go to conferences, there's a big buzz about Signatera and about solid tumor MRD testing. So it's not just in colorectal. We are seeing, since the IO guidelines came out, a record numbers of IO monitoring tests coming in and now use being done proactively in a pan-cancer setting. So there's a lot of opportunity there. The majority of the business is colorectal, but we are starting to see things pick up in other areas as well.

And are you still committed to not going down the tumor-naive path like some of your peers are?

Yes. So we actually think the tumor-informed approach now is winning in the marketplace. Based on competitors being out there now for 9 months in the market, and just kind of us looking at our volumes and kind of understanding what competitive volumes look like, we feel like we're in a very strong position. And we think physicians are making the proactive decision to use the tumor-informed approach.

And how has traction been for Altera, for CGP since you launched. Has it been a meaningful revenue contributor?

Yes. So we've been offering that on a limited basis, really only when it is supporting a Signatera order. And sometimes because we have the tissue, the doctor wants to order Comprehensive Genomic Profiling at the same time as Signatera for monitoring purposes. And so even with that limited promotion, we're actually seeing significant acceleration in record numbers in Q4.

I'm going to take a couple that came in over e-mail. And the first is, how should we think about the ASP tailwind to Signatera in 2022, given the ADLT, but also mix shifting toward non-CRC volumes?

Yes. Mike, do you want to take that?

Yes. I mean, I think, I'd know, as we've talked about previously, the ASP for Signatera CLIA is really still immature today. I mean, the ASP is in that kind of circa $500 range. Today, even though when we get paid, the wind paid pricing is above $2,500, and that's only going to increase this year. There's a couple of the structural headwinds, I think, will kind of drive a pretty linear increase in ASPs over the next couple of years. One is the ADLT pricing and steadily increasing fraction of our mix is going to come from recurrence monitoring as we get further into the launch, and we've got a higher percentage of patients who've already done their first kind of set up testing and then they're going to graduate, if you will, to one of recurrence monitoring. The second driver is just getting broader reimbursement within CMS for additional tumor types. So Steve outlined the drumbeat that we've already delivered on under the umbrella LCD in terms of additional tumor types, where we've submitted for additional reimbursement. We expect we have a couple more this year and next year as well. And then finally, with the evolution of the CIRCULATE data, we feel like we're starting to have line of sight on getting into guidelines clinical practice guidelines in colorectal cancer, which we think would unlock commercial reimbursement for colorectal cancer. So that's kind of like the latter, if you will, the higher ASPs over the next couple of years. The headwind really is our success in a broad range of tumor types. What we have found is that when physicians are ordering the test, they tend to be ordering this test not just for colorectal cancer, but for a range of cancers, and that's a critical component of the tumor-informed approach is that it's a pan-cancer technology. And so some of those won't be reimbursed in the immediate term, but we feel like that's a very bullish signal for the business over time.

And Mike, I know you've moved away from kind of giving volumes by product, but people are asking about underlying Signatera growth rates and size of the business today.

Yes -- look it's -- yes -- no, I appreciate it. And look, it's just continuing to ramp. I mean, long-term, holders of the stock know that we used to give very detailed disclosure, and that probably harmed our business competitively. So for competitive reasons, we haven't broken that out yet. I think over time, we'll evolve in that direction just because these businesses are starting to get bigger. I will say that the -- as you saw in the growth chart for the overall business, you see a very meaning inflection in the growth for full year '21, and that implies a very strong growth rate in Q4. And so that is the NIPT business growing, but obviously, something new is happening here more recently in the last few quarters, and that's the new businesses that's Signatera and Prospera.

Are you able to talk about the Personalis relationship, and if you intend to take that tissue exome sequencing in-house at some point?

Yes. So we have a great relationship with Personalis. I think they -- we've been asked multiple times today. I think about their kind of announcement that they had some rapidly increasing revenue that was due to some volume that they're performing for Natera. So we think that, that's great. It's exactly what we're seeing is volume is increasing rapidly, and we have tissue capabilities at our lab. We also have more than a couple of labs that we've worked with for tissue and Personalis is one of them. We think they have a very high-quality product. And I think we have a strong relationship with them, and we intend to continue working with them as volumes scale. Again, we do have our in-house capability, and we have to kind of manage volume there and so forth, but we're happy with our partnership with Personalis.

Maybe just shifting to screening, the development roadmap there. You obviously talked last quarter about the 40,000 patient dataset you've got access to. What's the timeline to meet at least some initial data on test performance? And how do you think it could be differentiated here?

Yes. So what we're doing right now is we're in the process of combining our DNA offering that we developed, which is basically a tumor-naive DNA offering. And we're combining that with the Aarhus methylation signature and then some additional discovery work that we've done ourselves on methylation. Their methylation signature is published. Also, I mean, they have great data there, 85% sensitivity with a 99% specificity. So combining that with our DNA approach and then we're going to run portions of the Aarhus data. So we think maybe late '22 or early '23, we can start to see some of the data coming out and we'll go from there. I think the strength of the Aarhus study is prospectively collected 40,000 samples, well-curated outcomes data either with colonoscopy or 5-year clinical outcomes. And we think it's a very strong data set, and we think that the test can perform very well in that setting.

And just to kind of circle back because it's tumor-naive on screening, but you're tumor-informed on MRD. I mean it doesn't sound like you would want to leverage any of that tumor-naive capabilities over to MRD, right? To your comments before, tumor-informed...

Yes. I mean, look, we have the option to and I think that's important because there's probably going to be some settings where you do want a tumor-naive approach in the MRD context. And I think we have the option to do that, but that's not the primary offering that we're going after and the main MRD offering we're gone after. But we're not limited from a technological capability, which I think sets us up nicely, as the market grows and expands.

Shifting over to women's health. How fast did the NIPT market grow last year in your view? And obviously, you had a big competitor exit, so that helped. But where do you think average risk penetration went from the start to the end of the year last year? And how much of a tailwind is that this year?

Yes. So I think the average risk penetration really accelerated last year, along with, I think, gaining market share for Natera. So we started the year probably at about like 35% market share. And I think we finished around like a 42% share. And we think we picked up the lion's share of the Progenity volume. So we're seeing both as the market expands, our market grow. We think today, overall, the market is probably in the kind of high 30s, low 40s penetration, but there's a lot of room to go and help more patients. And we're pleased to see that we're starting to win some of the big hospital systems. For example, we were just notified of a big win of a 20,000 birth hospital system that's converting over to average-risk NIPT. So those are the type of big kind of system-wide wins that are out there that we think are going to propel us to continue helping more and more patients.

And then on microdels and as it relates to ACOG, is 22q enough to get in the guideline inclusion and how much incremental revenue could that generate if it goes through?

Yes. So we think that the 22q is really the focus of our efforts with the societies and our focus in the peer-reviewed publications. I think a lot of the kind of recent press on more rare microdeletions really doesn't apply to a disorder like 22q, where you have a 1 in 1,500 disease incidents in the prenatal population, and you have an intervention that you can take at birth and you have a test that's generating the type of sensitivity and specificity resulting in a positive predicted value of 53% that we've now seen in the prospective multisite SMART study. So we think this is a nice technical setup when you're talking about society guidelines and what are the things that they would want to see if they were to kind of write those down. Proactively, this would be it. It would be kind of exactly what they would list out. And we look forward to trying to get coverage once the paper comes out, I think the main impact is how this is going to help patients. And what I outlined on the call earlier is particularly in 22q, a lot of times, these babies are born and they suffer seizures immediately at birth because they have hypocalcemia. If we can identify these babies prenatally and treat them with calcium, many of the time those seizures can be prevented. They are also the second leading cause of congenital heart defects. And now in many days, these heart defects can be surgically repaired if the baby is born in the right care center. And so we want to make sure that these pregnancies are getting to the right center and not in an area where they just simply can't care for the baby at birth. So that's what we're focused on, and we're increasing our education around those items.

Great. I know we're a minute over. Just 1 last one before we hop off. I'm sorry to hop around, but back to screening for a minute. One came in on the Aarhus dataset that you got. Is it enough for FDA approval versus running your own prospective studies like competitors?

Yes, we're going to have to see. I mean the way the study was designed, it was initially designed as a prospective early cancer detection study. And we've just simply been swapped in as the test is being used. So it's the type of rigorous collection that we think could be the type of thing that the FDA wants to see. But it's way too early to comment. I think we're still in the development stage of working on the test. We got to see how the results read out I mean, of course, if it ends up working out, that will be fantastic. But we sort of see it as a big dataset that's going to read out -- that's going to support or going into the space that's going to give Natera and investors and the public the confidence for us to make the type of investments in a large prospective trial that we need to make.

Great. Well, good to see you guys. I appreciate you taking the time today, and we'll chat soon.

Great. Thanks, Tycho.

Thanks, Tycho.