Natera, Inc. (NTRA) Q3 2019 Earnings Report, Transcript and Summary

Welcome to Natera's 2019 Third Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, November 6, 2019. I would now like to turn the conference call over to Mr. Michael Brophy, Chief Financial Officer. Please go ahead.

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our third quarter. Also on the line is Steve Chapman, our CEO; Bob Schueren, Chief Operating Officer and Solomon Moshkevich, General Manager of Oncology and Transplant. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investor.natera.com. A replay of the call will also be available at investor.natera.com. 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 financial guidance for the full year 2019; our assumptions for that guidance; market size; partnerships; clinical studies; opportunities and strategies; and expectations for various current and future products, including product capabilities, expected 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-Q and the Form 8-K filed with today's press release. These documents identify important risks and other factors that may cause our actual results to differ from those contained in or suggested by the forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed 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 will quote a number of numeric or 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.

Great, thanks Mike. Good afternoon everyone and thank you for joining us. I will cover our recent highlights and progress in the business since we spoke last August and Solomon will cover our progress in oncology and then Mike will provide additional details on our financial progress. As Mike mentioned, we will be referring to slides that were just posted at investor.natera.com. A quick review of the highlights and then I will go into more detail on each topic. We had a very successful quarter. We are really pleased to put up another strong quarter with $77.9 million in revenues for Q3, easily exceeding the $74 million to $76 million range we had pre-announced as part of the equity offering in October. This represents roughly 19% revenue growth versus Q3 of last year. We also had another strong volume quarter which was also up roughly 20% versus the third quarter of last year and represented sequential growth versus Q2 of 2019. We feel like we're hitting on all cylinders now. Average selling prices and volumes were up in the quarter. COGS was lower sequentially and we cleared additional development hurdles in our partnership with BGI, which allowed us to recognize additional revenue from our collaboration efforts. As many of you know, we were also very pleased to receive a draft local coverage decision from Medicare for colorectal cancer and we're now actively planning for a significant clinical launch next year. We've also started to make strides in our partnership with Foundation Medicine to develop and commercialize personalized circulating tumor DNA monitoring assets. We signed that deal in Q3 and as we discussed, we believe this opens up an entirely new oncology market that we hadn't been able to access previously. And finally we completed a very successful equity offering. We upsized the deal and executed the green shoe, so the total deal raised $230 million, which puts us in a strong position to execute on our upcoming commercial launches for Prospera and Signatera. Now let me jump into the details. On volume growth, more than 200,000 test process in the quarter represents roughly 20% growth versus the same quarter last year, consistent with our year-on-year growth in our strong first half and up 3% sequentially versus Q2 2019, despite Q2 being one of the best quarters we've had. The growth was really balanced between NIPT and carrier screening. We are seeing continued momentum so far in Q4 and we believe that we are on track for a strong overall volume growth in 2019, very much in line with the goals we set at the beginning of the year. The next slide covers average selling prices. We were very pleased to see the sequential improvement in Q3 when Q2 itself was ahead of our expectations from the beginning of the year. As we've discussed, the average risk market remains a largely untapped opportunity. As we have described previously. We estimate average-risk is only 15% to 20% penetrated and we think the key driver for unlocking that market is a revision to the ACOG guideline on NIPT that was withdrawn last year. We continue to believe that update will be positive, but of course the timing of the new guideline remains uncertain. In addition to volume growth, we believe there is roughly 60 million cash and revenue we can unlock from our existing NIPT volume when average risk is fully-covered. In the meantime, we think there's an opportunity to drive ASPs higher even without average risk reimbursement through continued execution on cash collections and improve performance against payer requirements such as prior authorization policies. After having some success on these fronts in the spring, we launched a fresh set of initiatives in the summer and the early returns have been encouraging so far, because we air on the side of caution when setting our revenue accrual. However, a lot of these recent improvements are not yet reflected in the ASPs we are reporting today, because we want to see the trends persist over several quarters. So we feel like we have some good momentum here. Just a reminder to calculate these ASPs, we are stripping out revenues earned from strategic partnerships like BGI because we want to give you a sense of our unit level ASPs, but those partnerships certainly make a valuable contribution to our financials. The milestones we reached with BGI contributed about $6.6 million in revenue this quarter. And with work now starting with the Foundation Medicine, we expect to continue to have some contributions from various partnerships over time. As a reminder on our Q2 call, we pulled the average risk reimbursement assumption out of the 2019 guide and essentially replaced that revenue with progress on partnerships like BGI. So this is playing out largely as expected. The next slide describes our blended cost of goods sold progression. As you can see on this slide, we've made significant progress over the past year and have a long track record of reducing COGS over time. We posted a $234 per unit COGS in Q3, which is again an improvement from Q2 and clearly we are running much leaner than the $260 to $270 range we posted last year. We remain on track to reach our goal to bring blended COGS below $200 per unit. As we've described in the past. We think the next wave of savings will come from larger projects underway that we expect to hit in 2020. As we described, we have a clear line of sight to completion of those projects. I just want to call out that in Q4 we are making several infrastructure investments to increase the scale of the lab, which will play a key role in hitting our long-term COGS targets. Some of these investments, we will conservatively book as upfront expenses in Q4 which may take the COGS per unit marginally higher in that quarter, but again, we remain on track for the set of improvements we'll describe in 2020. Okay. Now let me touch on a moment for our effort in transplant. As we've described, we think the transplant business can be a meaningful contributor to our overall business. We estimate this market is only about 5% penetrated today. I've had a chance to go on the road recently and meet with transplant centers in different regions. One key takeaway from those meetings is that, the majority of the centers are still in very beginning stages of using cell-free DNA as a tool in patient care. So we see a very meaningful Greenfield opportunity and we will also compete hard for the existing cell-free DNA users. The right hand side of the chart just gives you an indicative range of potential future revenues from this business. If you assume 20,000 new transplants per year in the United States, seven tests per year in the first year and then quarterly thereafter for the next two years with realized pricing at the current CMS rate, you can see a range of estimated annual revenues that could be achieved at a reasonable market penetration rate and could well – as could well proved to be conservative. The next slide is the same chart that we've shown ever since we announced the presentation of our validation data last summer. We've hit every milestone towards a commercial launch on time so far and now we're just awaiting the final local coverage decision and pricing before our commercial launch. We said previously, we expect to have those in hand by the end of the year and while obviously we don't control the timing, everything we know so far indicates that we are on track for that goal. We previously announced our proactive registry led by Dr. Jonathan Bromberg from the University of Maryland and a second study led by Dr. Phil Halloran from the University of Toronto. We are actively recruiting sites for those studies and we're really pleased with the interest thus far and we look forward to providing updates in the future. Now, let me hand the call over to Solomon to discuss our recent progress in oncology. Solomon?

Thanks, Steve. Many of you tuned into our oncology update call a few weeks ago. We did that primarily so that investors could have an easily accessible presentation that dives into our oncology efforts in some detail. I'm not going to go with that same level of detail here, but please take a look at our investor relations page for the more detailed presentation if you haven't seen it. Given we have a lot of newer investors on the call I will give a summary of that information today. The first slide is a reminder on where Signatera is positioned, as a Molecular Residual Disease test or MRD test. We're not focused on asymptomatic screening seen on the left side of the slide. Signatera is also not focused on therapy selection, which is typically where people talk about when referring to a liquid biopsy and where many of the other commercial tests today are in position. Therapy selection tests look at the specific genomic profile of the tumor and then match the patient to appropriate therapy based on the tumors genotype. Signatera’s main focus, however is in the middle of the slide, cancer monitoring and MRD assessment, which we estimate to be a roughly $15 billion market. We think our core technology is well suited to this indication with Signatera’s, personalized tumor-informed approach uniquely positions to win, because it maximizes accuracy and efficiency, which is critical in the setting. There are three key applications within this segment. First, patient stratification, where MRD size can determine the risk of recurrence and support better treatment decisions, in the adjuvant and the neoadjuvant setting. Second, serial testing after definitive therapy to detect recurrence earlier than current diagnostic tools. And third therapy effectiveness monitoring, how well is my immunotherapy working, for example. We're making meaningful progress in each of these three areas. The next slide summarizes the key commercial channels we are pursuing. In our direct pharma channel, we're offering Signatera to biopharmaceutical companies as a tool for using clinical trials. When we talked about the oncology business even six months ago, sales to pharma was the primary path for us to generate near-term oncology revenue. Since then, we've opened up three additional channels, each of which we believe represents a significant opportunity. First, is the direct clinical effort, we received a draft coverage decision in colorectal cancer for Medicare in August. This indication addresses two unmet needs for a very large population of colorectal cancer patients. And we are now building out the commercial team and designing a registry study to support the clinical adoption of signature at scale in colorectal cancer. Next is the clinical opportunity for Signatera in China, and for competing in global clinical trials with our partner BGI Genomics. BGI already has a very large genetic testing business in China, which did more than 1 million cell-free DNA tests last year and has experience with Chinese FDA approval. We expect BGI to launch Signatera for the Chinese market in 2020 or BGI will handle all the sales and marketing effort and pay us a royalty on sales. We believe China represents a very large opportunity with roughly 4.3 million new cancer cases and 2.8 million cancer deaths annually. Many of these cancer survivors do not get consistent access to high quality imaging. So blood-based monitoring tool like Signatera, it’s relatively simple to distribute can address in crucial unmet need. Finally, in Q3 we're very pleased to announce our partnership with Foundation Medicine. In this partnership, we will co-develop personalized CT DNA monitoring products using tissue analyzed by FoundationOne CDx as the baseline essay. Within partnering with Foundation Medicine, a leader in comprehensive genomic profiling of tumor tissue and the results of ease and offering this additional monitoring information to their existing patients and existing biopharm partners, gives this product a chance to rapidly become the standard for monitoring in the setting. For our newer investors, I'd like to just briefly summarize the two intended uses proposed by Medicare in colorectal cancer. The first unmet need is the early detection of cancer recurrence. Approximately 25% to 30% of patients with local or regional CRC will relapse and colorectal cancer is a cancer type where early relapse detection is known to improve outcomes, by allowing some patients to become eligible for curative surgery if recurrence is detected early enough. For this reason patients today are monitored closely using a combination of CT imaging and the serum biomarker, CEA for at least five years. Unfortunately, the vast majority of recurrences today over 85% are caught too late for cure to surgery, with most cases being diagnosed after clinical symptoms have already appeared. In our JAMA Oncology paper, Signatera detected relapse up to 16.5 months earlier than standard tools and on average 8.7 months earlier. This is a significant lead time that can result in more patients having a chance to curative treatment. For a patient who just positive with Signatera in this setting, the physician could reflex to higher resolution imaging, such as contrast guided CT scan, a PET scan or MRI to locate the lesion as soon as possible. Furthermore, the direct head-to-head comparison of testing serially with Signatera versus testing serially with CEA, shows significant improvement in both sensitivity and specificity. Signatera’s sensitivity was 88% compared to 69% for CEA. And patient level specificity was 98%, compared to 64% with CEA, meeting less than one-tenth the false positive rate of CEA. On a per test level, Signatera’s specificity was even higher at 99.7%, implying a positive predictive value per test of over 97%. This is why Medicare proposed coverage for Signatera testing with a timing and frequency that matches NCCN guidelines for surveillance with CEA. In this regard Signatera could significantly reduce unnecessary clinical and diagnostic workups and the anxiety associated with false positive results. The second major unmet need is to triage patients for adjunct chemotherapy after surgery. Most local and regional CRC patients are cured with surgery alone. So the objective of chemotherapy after surgery is to eradicate any micrometastatic disease that may remain in the body. The problem is that physicians and still now could not know who has micrometastatic disease and who does not. So many patients today are significantly over-treated with chemotherapy. In a status quo, we estimate that up to 11 patients are treated to benefit just one. Using Signatera, however to stratify patients after surgery can lead to more patients getting treatment who need it and to a significant reduction in unnecessary treatment and adverse events, for patients who test negative on Signatera and our clinical candidates for treatment deescalation. This potentially improves treatment efficiency to treating only three patients to benefit one instead of 11 to benefit one. This slide lays out the pathway to commercial launch. We were ahead of schedule in getting draft LCD, which covers the use of Signatera in certain patients with stage two and three colorectal cancer, supporting testing with the same frequency of CEA, which is roughly four times per year in first two years and about two times per year thereafter. With occasional short interval testing indicated for certain high risk patients. Overall, we think the indication described could represent a testing pool of up to 1 million tests annually. Making this, we believe the largest specialty oncology diagnostics to ever receive a draft coverage policy for Medicare. Based on these developments, we're not designing a registry trial with multiple NCCN centers and we'll begin enrolling patients in the near future. We're also building out a meaningful direct sales channel, targeting oncologists and GI surgeons who treat colorectal cancer. We'll be ramping that effort over time and expect to have a sizeable team hired by mid-2020, which is about the time we expect to have a final coverage decision for Medicare. While this effort will be focused on driving volumes in the colorectal indication for which Medicare has already proposed coverage, we anticipate this commercial channel will also support additional indications across solid tumors. Ideally, we'd like to have a steady stream of coverage decisions, it opens up the use of Signatera broadly in the clinical space. With that, let me hand it over to Mike to walk through the financials. Mike?

Thanks, Solomon. Now to summarize our results from the quarter, the results for the quarter cross the wire this afternoon and I'm going to focus on the key points of the Q3 results. As Steve mentioned, revenues for the quarter were $77.9 million, up 19% versus Q3 last year. Gross margins were 44% in the quarter, up 800 basis points versus the same period last year. We've benefited from our development efforts with BGI in the quarter as Steve described, but even without this development revenue we estimate gross margins were better versus last year, given the significant drop in cost of goods sold per unit we are seeing. Steve reference average selling prices in the quarter. As a reminder, we calculate that metric by dividing total revenues by test reporting out of our labs and we try to be conservative in stripping out variables such as reserves and true-ups that we don't think are consistently recurring events. In the last three months, we've seen a significant improvement in our collection metrics, and if those trends hold, we think there's potential to see more of that benefit reflected in the revenue accrual Q4 and beyond. Panorama revenues for the quarter were $37.6 million, compared to $36 million in the third quarter of 2018, an increase of roughly $1.6 million. Horizon revenues for the quarter were $26.1 million, compared to $23.5 million in the third quarter of 2018, an increase of roughly $2.6 million. Total operating expenses for the second order were $69.5 million, compared to $50.5 million in the third quarter last year. Stock-based compensation charges related to the share price increase litigation expenses that we don't think are permanent ongoing expenses personnel and other outside services contributed significantly to the increase. But we did see expected operating expenses ramp-up consistent with our planned product launches that we've discussed. We also incurred $1.5 million impairment charge related to the sale of Evercord. In addition to the total operating expenses, we reported $14.4 million gain from the sale of Evercord, which is why the loss per share is so much lower at this quarter. Pro-forma for the recent equity offering, shortly after the close of the quarter the company held $455 million in cash, cash equivalents, short-term investments and restricted cash, compared to roughly $238 million as of June 30th, 2019. The capital structure remained in the same place at the end of Q3. Turning to our feature outlook, we are effectively raising and tightening our revenue guidance to $295 million to $302 million for the year. If you include the revenue that would have come from Evercord, which we sold in a quarter, our guide would have been $299 million to $306 million. On gross margins, we were previously guiding 35% to 41% and we're now timing that to 39% to 41%. On SG&A, we had guided to $180 million to $190 million and we're increasing that slightly to $195 to $205 million, the increase is largely driven by a non-cash expense related to stock-based compensation, which again is driven by the increase in the share price along with some legal expenses as I described. We have forecasted R&D expense to be $60 million to $65 million this year and we're lowering that to $52 million to $57 million. We did find some efficiencies in the teams and we’re able to accomplish our R&D goals with fewer people than we had initially forecast, but another key driver of that reduction frankly is more timing related. We added more people later in the year, so I didn't quite feel the full expense burden during the calendar year 2019. Finally, we are significantly reducing the cash burn forecast for the year. We were previously guiding to $80 million to $100 million in cash burn and we are now down to $65 million to $75 million in cash burn and that change is really driven by the $13.3 million in upfront cash we received from Foundation Medicine and the $10.2 million in upfront cash we took in for the sale of Evercord and neither event was included in our last guide. We will stick to our standard plans for the 2020 guidance format and the timing and the Q4 call. I will also note that in Q1 of 2020, we plan to start reporting a combined unit number for Panorama and Horizon and a combined revenue number for Panorama and Horizon. This is for competitive purposes, since we're the only public company breaking out the data currently at this level of detail. We'll continue to break this out like we normally do for Q4 and then make the change when we report Q1 next May. Now, I'd like to open the line for question. Operator?

Thank you. [Operator Instructions] Our first question comes from Doug Schenkel with Cowen and Co.

Hi there. This is Adam Wieschhaus on for Doug. Thanks for taking the question. Let me just start off with a question for us – for you Mike. What does your Q4 guidance imply of contributions from some of these emerging licensing revenues like guide in BGI and Foundation Medicine? Also it looks like you have midpoint by $8.5 million, so can you just walk through what was contemplated in that guidance update? Thanks.

Yes. And so I don't anticipate the licensing deals to contribute as much as they have contributed in the last two quarters. The reason why I'm not breaking that off specifically, Adam, is that it really – it is – the revenue recognition is a function of the teams working together between the two companies and meeting milestones and the rev rec is kind of flows from that. That's why I've some deferred on giving specific odds there. I do anticipate some licensing revenue in Q4, but not as pronounced as what we've seen in the last two quarters.

Okay. Thank you. On BGI, it looks like you made some really good progress in the quarter with those technical and commercialization milestones. What hurdles remain before a product can be launched there? And any further specifics on when that launch could be? I know you've said 2020, but anything more detail would be helpful. Thanks.

Yes. Thanks, Adam; this is Steve. So there is two products that we're working on. I think one is Signatera in China, which we think is a very big opportunity because the Chinese oncology market is about four times larger than the U.S. market. So not only does it enable clinical testing in China to serve those patients, but it also allows us to run global clinical trials with companies who want to have an arm of that trial run in China. So we think that's a significant advantage and we've already signed deals that include that Chinese arm, which we're excited about. So to commercialize, we think it will be in 2020 as we set on the Signatera side initially to targeted hospitals centers and specialty centers. And then once Chinese FDA approval comes in, launch more broadly. But it will also be available in prospective clinical trials in 2020. The other opportunities on the Prenatal side as we've mentioned, the BGI partnership includes access to our Prenatal technology and we also expect that to launch in 2020.

Thank you.

Thank you. Our next question comes from Bill Quirk with Piper Jaffray.

Hi, this is Rachel on for Bill. Congratulations on quarter guys.

Thank you.

So for colorectal, you guys have talked – yes, for colorectal, you guys had talked about mid-2020 for reimbursement. So is there any update on MolDx, on Signatera and more of a defined timeline than that? And then going off of that, can you talk about the pace of hiring salesforce for colorectal and the ramp of how you guys will hire for that?

Yes. Thanks, Rachel. So, as we've said previously, we think sort of mid-2020 roughly would be when the final LCD would come in. I mean there's sort of a standard cadence to these submissions and the open comment period and so forth. And just – we believe this will line up to that sort of mid 2020 timeframe. And I think we mentioned also on our oncology call that we're actively engaged with MolDx and Medicare on various fronts, not only this LCD, but we've already completed a pre-submission meeting for our second oncology product. So we see Signatera really as a pan-cancer opportunity in the future in colorectal, even though it's, we believe the largest specialty diagnostic test of all time to ever receive draft coverage, it's really just one of many coverage decisions that we think will come in the future. So we had a very positive second pre-submission meeting on that second product and we look forward to submitting the dossier there in the future as well and we'll update investor community on that as we complete that process. As far as sales hiring goes, what we said is, the product is clear approved, it's available, we have a very limited commercial effort at this point. We plan on ramping up the salesforce to be aligned with building momentum and building growth into that summer local coverage decision that we think will come. So we're going to start off relatively small and scale it up over time. We're also going to be launching our registry trial, which we expect to announce later this year, we've gotten very good feedback from top centers and key opinion leaders. So a lot of momentum, very positive things going on.

Great. And then for a Panorama COGS, you’ve guys have made substantial improvement over the last few years. And your goal is to get to do 100, but how much lower do you think you can drive that, if any?

Yes. So I'll comment and then maybe Mike can comment. So the number that we show you is the overall COGS, which includes all of the different products. So we've said that Panorama is already below $200. We think that we can get that down significantly lower with some of the projects that we already have in place that we'll be launching at 2020. We think our overall COGS across the board in the reproductive health business will be below $200 based on the currently ongoing projects.

I wouldn't have done, that’s cumbersome.

Okay. Our next question will come from Tycho Peterson with JPMorgan.

Hi, thanks. This is Eleni on for Tycho. Thanks for taking our questions. Going back to your comments on guidance. Mike, can you impact the different pieces there? You've increased the midpoint by about $8 million, but then you've beat by $4 million this quarter and you're also expecting around $4 million headwind from the sale of Evercord, which seemed to practically cancel each other out. So what other piece is there to consider here that is driving the $8 million increase at the midpoint?

Well, the actuals year-to-date are driving that obviously, we had a very strong Q3. And we do expect the core business to continue to grow and we expect ASPs to – we expect to continue to see progress there. So the short answer is we've beaten out the expectations, our own internal expectations Q1 to Q3, and we do expect good strong core business growth in Q4. And we do expect more muted revenue recognition from our partnerships relative to the last two quarters as I described to Adam.

Okay. That's helpful. And then in terms of the cumulative pharma contracted value, can you talk about where you're tracking to-date and how much has been recognized?

Yes. So we're well on track for that $40 million to $50 million contracted value target that we laid out at the beginning of the year, it’s just consistent with what we said at the beginning of the year, we’re going to use that as kind of an annual target, really just to help you guys kind of frame the overall opportunity and we'll give the readout on the Q4 call, in terms of where we landed for the full year, but that's – we feel like that's well on track. In terms of revenue recognition, not really a material amount of actual revenue recognition coming from those deals yet, as we've talked about, there's a waterfall here where you sign the deal with a pharma customer, it takes them on average something like a year to actually have the trial launch and start sending you samples and you start booking revenue then. So the way I generally think about these things is you sign a deal, there's a year of prep that goes into that and then the sample start flowing and you recognize the revenue from the deal, that contracted value turns into revenue in years two, three and four.

Okay. And then lastly, I realize you are not guiding for 2020 yet, but given the wide range of outcomes for the different catalysts such as ACOG average risk reimbursement, CRISPR and Signatera ramps, liquid exome, BGI, Foundation Medicine and other partnerships. Can you give us an early read on how you're going to be thinking about your guidance framework about the different moving pieces and how you're thinking about the wide-range of outcomes? Thank you.

Yes, I mean, look I think that, in terms of the catalyst that you mentioned, really we feel like the risks are more weighted towards kind of timing versus whether or not we get them. We feel very, very good about executing on all of those initiatives. What we do expect for 2020 is, we do expect continued progress in the core business and we do expect to have successful launches in both the transplant and in oncology. I think in terms of putting numbers around that, the reason why we guide on the Q4 color, that we'd like to have a couple of months of actuals to do a bottom of analysis and actually kind of give you guidance that's thoughtful and kind of grounded in those actuals.

Okay. Thank you.

Thank you. Our next question comes from Catherine Schulte from Baird.

Hey guys, thanks for the questions. First just given QIAGEN shifted that sequencing strategy, what's the path forward there and any changes to your rev-rec expectations for the rest of the year, if that's being terminated?

Yes, not thanks Catherine, there is not really any changes to what we had previously expected the QIAGEN revenue recognition just because we'd always anticipated that it would have been quite small in 2019 one way or another. In terms of what happens next with the partnership, we just need – we need to be in dialogue with QIAGEN and we're doing that now. So once we have some resolutions there and we have some feedback from our partner, then we'll share that with you all.

Okay. And then with final Medicare coverage for transplant, potentially coming pretty soon, how quickly do you think you could start seeing revenue contribution from Prospera following effective Medicare coverage? Are you guys prepared to flip a switch commercially to drive volumes or should we think of this as a more gradual ramp?

Yes, I think what we've said before is we wanted to put ourselves in a position to fully commercialize shortly after the final LCD comes in and we think that that will happen this year. Of course, with any new product there's always a gradual ramp. And we think, it will be similar in this case, so that we feel very positive about the feedback that we've gotten from physicians not only on our product, but also on the overall market opportunity as I alluded to in the prepared remarks. And the initial discussions that we're having now on our proactive registry study have also been very positive where we're engaged with many of the top centers. So overall I think, it's looking very good. I would expect we would announce a launch, shortly after receiving the final LCD. It does take about 60 days roughly before you can start collecting from Medicare and so we're trying to time things appropriately.

Okay. And then can you just give us an update on the SMART trial, when should we be expecting your readout and what's your level of confidence that this data should drive better reimbursement for microdeletions over time?

For SMART question, we'd love questions about SMART it's been awhile. Yes, the SMART trial is actually really going along beautifully. I mean, we've completed enrollment of the last patient. The last baby has been born, the newborn arrays are being analyzed and being completed and it's almost done. And we take the readout on the data will be sort of mid next year. We think this is a really a groundbreaking study. It's the largest of its kind. It's the largest perspective study that's ever been done on non-invasive prenatal testing and specifically for microdeletions. So we think it has the opportunity to move the needle in multiple different ways, one in aneuploidy NIPT if that's necessary at the time and then separately in microdeletion testing. So the microdeletion disorders are very common and they're very severe and we have seen positive guidelines from groups like ACMG and ISPD. So if this was able to move the needle more broadly to receive better coverage overall, it would make an enormous impact on the Natera business. It's not even something necessarily that we've included in some of the upside models that we've described, but it does have the opportunity to be a really enormous contributor. So, today we're seeing about 80% of our orders, include order for microdeletion testing and we were very happy to secure a unique CPT code for that microdeletion test and to secure pricing from CMS in the $700 range. So, even at a very discounted rate to that $700 price, it would make a very significant impact.

Okay, great. Thank you.

Thank you. Next question comes from Alex Nowak with Craig-Hallum.

Great. Good afternoon everyone. Solomon, can you detail out the CRC registry study here, just how many patients, how long are they going to be monitored for it and what the primary endpoints are?

Great. Thank you for the question. We're planning to release – announced to release full details of the registry study by the end of the year. We expect first patient to be enrolled early 2020. And we're going to have many sites involved in the trial. And we haven't announced yet those details, things are getting finalized and looking forward to share those details when we're ready.

Okay. Understood. And then Steve, on just the prenatal business, the volume growth for Panorama and Horizon has been around 20% for 2019, in some cases a little bit higher than that. You're looking towards 2020 here, do you expect to maintain that level of growth or do you think their growth is probably going to modulate a little bit back to the more like a market growth, which is probably in the highest-single-digits.

Yes, I would say we feel very strongly about supporting and continuing to grow our core business and remaining the market leaders. In fact, we have multiple different enhancements that we think we'll be launching in 2020, that our sales team is very excited about. So, Mike, do you want to comment more specifically on the guide.

And not really just because we're going to guide on the Q4 call, I mean, I do think that the way to think about our growth is in terms of absolute units and the performance that we can show there. And so the last few quarters are a good – a good proxy for what we can do, steady state, we’ve got some of these improvements that Steve has alluded to. We're looking forward to announcing those next year.

Okay, understood. Makes sense. And then you had prior authorizations kind of impacting the ASPs a little bit this year, you obviously had CPT changes over the last couple of years, is there anything major happening in the coding or billing landscape here that we should be aware of entering 2020?

I mean, the landscape has remained relatively stable through the course of 2019. And this is something that – it's always an evolving landscape, there's not some new paradigm shift that we're anticipating for 2020 in terms of kind of a steady state other than of course, average risk and reimbursement, which would be a big deal. But, again, Alex these things are often incremental and we continue to execute against, some of the new requirements that are put on us and we do expect, there to be incremental new challenges and then we have to just execute against them.

What Mike said on the call. I mean the – a lot of the changes that we made that were proactive this year, where we are seeing improvements are really not yet baked into our ASP. And so when we do our accrual process just by the nature of the way that we do it and the fact that we're conservative, we really see some of that in the future. So we think there's actually some upside that we're looking forward to from the improvements that we've made this year.

Okay. Understood. Good to hear and congrats on good results.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to management for any closing remarks.

Just thanking everyone for the call and another successful quarter for us and we look forward to being in touch.

Well ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.