Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Natera Inc. analyst conference call. At this time, all participants are on a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star then the one key on your touch-tone telephone. If you require operator at any time, please press star then zero. I would now like to hand the conference over to your speaker host, Mr. Steve Chapman, Chief Executive Officer of Natera Inc. Please go ahead, sir. Good morning, everyone. Thank you for joining. This is Steve Chapman, CEO of Natera, and I'm here with Mike Brophy, Chief Financial Officer. During this call, we may make forward-looking statements regarding future events and our anticipated future operations and performance. These statements reflect our best judgment based on factors currently known to us. Our actual results could differ materially. Please refer to the documents we file from time to time with the SEC, including our recent Form 10-K, for a discussion of the risks and other factors that may cause our actual results to differ materially from those contained in or suggested by any forward-looking statements. Today, we will be addressing the key items from the Hindenburg Research report point by point. To put it mildly, we disagree with the characterization of the services we offer to physicians as well as the law to which the Hindenburg report inaccurately cites. First, prior authorizations generally. As we know from our own experiences, prior authorization is an insurance-initiated process requiring healthcare providers to pre-qualify a service to receive payment. The prior authorization process can delay access to treatments, including diagnostic imaging, laboratory specialty pharmaceuticals, and many other important medical services. Problems with physicians obtaining prior authorization for the diagnostic tests and services furnished to their patients are well documented in many sectors. For example, despite the American College of Obstetricians and Gynecologists recommending NIPT in 2020 and insurance companies covering NIPT for average risk pregnancies, some still require a prior authorization even before the test can be furnished. This administrative hurdle has been identified as a major issue in the healthcare industry that impacts patient access to care. For example, the AMA, American Medical Association, states that prior authorization is overused and existing processes present significant administrative and clinical concerns. Given the real challenges for patients, there are many companies, both private and not-for-profit, that offer prior authorization support services to both physician offices and diagnostic testing providers to ensure that patients get access to needed testing covered by their insurance company. Most clinical laboratories, including large laboratories and specialty diagnostic laboratories, use these outside services for prior authorizations or do it themselves. These are common practices in the industry. Physicians order testing as they would for any patient. The prior authorization service provider then submits the prior authorization using the information provided by the physician. Payers decide whether or not to cover the service based on the information provided by the physician and the payer coverage policy. Natera provides physicians with information about these third-party prior authorization companies, including how to register to access their service. There is no financial relationship between Natera and the physician. These third-party vendors either receive donations or charge a nominal fee for their service to assist with their day-to-day operations, and this is common practice across pharma and diagnostics, including, to our knowledge, most of our peers. I want to turn to the compliance allegations raised by Hindenburg. I am confident from our discussions with experienced healthcare counsel that the Hindenburg report is a gross mischaracterization of the federal government's position. The key division within the Department of Health and Human Services that provides guidance around these topics, the Office of the Inspector General, has never issued any regulations prohibiting a laboratory from offering prior authorization assistance services. Never. The Hindenburg report references at least one private letter advisory opinion issued to a party in 2010 to support its view that Natera violated the law. In fact, in that private advisory opinion, the OIG actually approved a prior authorization service program offered by a radiology group to community physicians who order diagnostic tests for these patients. The Hindenburg report mentions that advisory opinion but conveniently neglects to discuss the actual and favorable conclusion. The OIG has in fact issued four favorable private advisory opinions that confirm that prior authorization services offered to physicians by diagnostic radiology imaging providers do not violate the law, even if they are offered without charge. The OIG has expressively acknowledged in advisory opinions the clear administrative burden placed on providers in obtaining authorizations for diagnostic services like advanced imaging services such as MRI or CTs, and the benefits that a prior authorization service can provide to physicians and their patients only seeking to obtain coverage for a test or procedure that they in fact need. We strongly disagree with the report's characterization of federal guidance, and we believe that the prior authorization services furnished by MGML were structured in a manner to comply with these requirements. There are several of these outside companies that provide outside prior authorization services. Natera works with multiple groups, including MGML. MGML is neither owned, operated, nor controlled by Natera. The report makes an allegation that one of our former employees, who left in 2019, had a personal relationship with a senior member of MGML. To my knowledge, we do not know whether or not that is true, and regardless, we had no knowledge of any personal relationships between MGML and an employee of Natera at the time we selected MGML as our outside vendor. Regardless, Natera was never in a position to exercise control over MGML, and most assuredly never controlled how any payer interpreted submitted documentation or approved the orders for our tests. In addition, as a reminder, even if we had chosen to do the prior auths ourselves, as some of our direct peers have done, we still believe that would be compliant and within guidance. I should note also, we were not the only customer of MGML. We understand that MGML offers prior authorization services to other diagnostic laboratories that also seek to provide prior authorization support services to physicians. The offering of a prior authorization service to physicians, whether by Natera directly or through an outside vendor such as MGML, is not a new idea, and many sectors of the specialty diagnostic testing industry offer similar services to their constituent providers. These services help patients get approved quickly for the tests that their physicians order. The report also implies that MGML performed prior authorizations on 44% of Natera's volume. That allegation is completely inaccurate. In reality, MGML performed prior authorization services on roughly 11% of our volume in 2021, and we estimate less than 7% of our volumes going forward in 2022. The report also implies that Natera is the majority customer of MGML. That allegation is also not correct. Based on the volume of prior authorizations represented on MGML's website, we estimate that we make up approximately 25% of MGML's historical volume. There are other companies in the market that offer similar prior authorization services to those offered by MGML, and if needed, we would be in a position to cease using MGML with minimal, if any, impact to our business. Several investors have asked if there will be an impact on volume growth should we cease using MGML. We feel strongly that there will be no impact on volume, as this is a broadly available generic back-end administrative service, similar to that used by our peers and provided by other vendors, and MGML does not direct any volume to Natera. In summary, we disagree with the Hindenburg report on many grounds. The report mischaracterizes the services we made available to some physicians and conveniently neglects to cite the complete guidance issued by the federal government on this very topic. Next, I want to address the claims that we are being investigated by the Michigan AG. We have not received any communication from the Michigan AG and are not aware of any such investigation, so we don't have anything further to say on that matter. The report also references the New York Times article on microdeletions, which was full of inaccuracies and misleading statements, which we have addressed repeatedly in various forms. The report also references two class action lawsuits that we believe resulted from the misleading and inaccurate New York Times article. We don't believe this case has any merit, or these cases have any merit, and if they should proceed, we believe we will prevail. The report raises questions about how 22q is ordered and billed. Natera offers basic aneuploidy testing, aneuploidy testing with the addition of 22q, and aneuploidy testing plus a panel of five microdeletions, which includes 22q. Our requisition form was designed with expert physician input to accommodate demand for the addition of the single 22q microdeletion. Many physicians want to order 22q alongside basic aneuploidies because 22q is more common than basic aneuploidies such as Trisomy 13, 18, and monosomy X. We don't think there's any issue with the test order form, and as a reminder, every test Natera processes is ordered by a physician or other authorized healthcare provider. When billing for 22q, Natera uses the appropriate CPT code, 81422, which was published by the American Medical Association in response to Natera's application for a new code specific to this testing. There is no serious dispute about the appropriate CPT code. The report is simply wrong. The report contains a spurious accusation of double billing. When a doctor orders microdeletion and aneuploidy testing, Natera will bill both NIPT aneuploidy code 81420 and NIPT microdeletions code 81422 to the patient's insurance. If the patient is determined to have a co-payment or deductible, we will bill the patient for their out-of-pocket responsibility. This is the correct way to bill for these services, and the notion that we double bill patients is simply false. The report makes a further allegation that Natera routinely caps co-payments and deductibles. This is also false, and our attempts at collections have been the source of many of the online complaints. We make substantial efforts to collect patient co-payments and deductibles. We understand that medical billing is very complex and confusing, so we offer complimentary pre-test cost estimates, and if we anticipate a patient who's ordered the test is likely to have a substantial co-payment or deductible, we attempt to contact them to see whether they would prefer to pay cash or continue with their insurance. Despite our best efforts, patients may still be confused. We're not immune to online complaints, although it's important to put these online complaints in context. In 2021, for example, we performed over 1.5 million tests, and only 82 patients shared a negative comment to the Better Business Bureau. Natera consistently responds to these complaints and attempts to resolve them and resolves the vast majority of the complaints. We are very proud to say that we maintain an A+ rating with the Better Business Bureau, and we work hard to ensure every patient has a positive experience. The report also questions our market leadership in NIPT and whether our product is truly differentiated. Our leadership in NIPT is driven by clinical differentiation and peer-reviewed evidence. Panorama's unique clinical claims have been robustly documented in 23 publications, including studying more than 1.2 million patients, which far, far surpasses any of our competitors. In addition, our unique SNP-based approach lends a wide range of benefits. For example, we have the lowest false negative rate for common aneuploidies, the lowest false positive rate for common aneuploidies. We have the only NIPT with documented evidence of robust positive predictive values across all age cohorts. We have the only NIPT that can detect zygosity in twin pregnancies and report out individual fetal fractions in dizygotic pregnancies. We have the only NIPT that can detect vanishing twins, triploidy, and maternal issues, and we have the highest sensitivity and the highest positive predictive value to screen for the 22q deletion. The report also went on to say that gender testing is Natera's main selling point. This claim is not only wildly inaccurate, but fetal sex errors which occur in the range of 1% of the time with competitive NIPTs are medically significant. Inconclusive ultrasound testing can result in unnecessary additional testing workups and medical inter-intervention. Fetal sex testing that's accurate can address this issue. The report also misleadingly implies that multiple D.C. watchdog groups have called for an SEC investigation into Natera. The report references a single purported nonprofit that has sent a letter complaint to the SEC. By coincidence, this single nonprofit shares legal counsel with a law firm that's currently suing Natera in an unrelated manner. The letter largely summarizes the statements made by the January New York Times story regarding false positive screening results with regards to microdeletions. That letter asked the SEC to investigate whether Natera knowingly overstated the accuracy of its NIPT to the detriment of shareholders. Natera has not misstated the accuracy of NIPT to investors. On the contrary, Natera has published more data on microdeletions in leading medical journals than any other company in the field. We are proud of our work and stand behind our industry-leading performance. Natera has sent a strongly worded cease and desist letter to this group and prepared to take further action if legal action is warranted. In closing, I'd like to add that Natera has a mature, well-vetted compliance program that adheres to the federal government's Model Compliance Program for Clinical Laboratories. The program is headed by Natera's Chief Compliance Officer, Jerry Diffley, who has over forty years of experience in the clinical laboratory industry and legal and compliance area. Mr. Diffley is a nationally certified in healthcare compliance by the Health Care Compliance Association. We believe our procedures in regards to prior authorization services and billing are compliant with applicable laws. With that, operator, let's open it up for questions. Yes, sir. Ladies and gentlemen, if you'd like to ask a question at this time, please press the star then the one key on your touch-tone telephone. Please stand by while we compile the Q&A roster. Our first question coming from the line of Tejas Savant at Morgan Stanley. Your line is open. Hey, guys, good morning, and thanks for all the color here. Maybe Steve wants to kick things off here, what proportion of NIPT-covered lives are still under prior auth at an industry-wide level? And what did that number look like, let's say, three years ago? Do you think prior authorization will still be something that payers require, you know, a few years out from today in light of, you know, the ACOG guidelines recommending NIPT in all pregnancies? Yeah, you know, I think we said about, you know, 11% of the services. Sorry. Yeah. What Tejas is asking is just industry-wide, what fraction of NIPT volumes are subject to a prior authorization a couple years ago and now? Is that right, Tejas? Is that what you have? Okay. On that point, I think it's likely that there was you know a 40%-50% of the NIPT volume at some point in the 2017-2018 timeframe likely was subject to a prior authorization, and that's gone down precipitously over the last couple of years, particularly since the ACOG guideline was put in place. We've seen that trend continue. As Steve referenced, just in terms of our volumes, that went to this, you know, particular group, that was about 11% of the volumes in 2021. Then, you know, pro forma for the new prior auth landscape, that'd be about 7% of the volume from us in 2022, and I think that's indicative of the overall industry trend. You'll have to forgive me just in terms of the overall industry estimate. That's a very rough estimate in terms of the trajectory, but that's roughly the, you know, qualitatively, that's the situation we've seen. Our next question coming from the line of Max Masucci from Cowen. Your line is open. Hi. Thanks for taking the questions. Mike, one for you. You know, just to clear things up, can you just, you know, remind us of the dynamics in play when you are billing, you know, for an out-of-contract commercial payer? Just trying to get some differentiation between that $8,000 number that could show up in a, you know, patient documentation versus, you know, what you're actually seeking to collect from those patients. Yeah. This is Steve. I'll take that. Look, you know, we have a list price, you know, and the list price is higher than the contracted rate. With almost all insurance companies at this point, we're in-network, and the contracted rates are in the range of, you know, $600-$800 for NIPT, for example. Now, the list price is significantly higher than that, but that's why we contract with the insurance companies because we give the insurance company a discount and the net discounted rate is passed on to the patients. When the patient is out-of-network, you know, in some cases they'll owe a larger copay or deductible, and that's why we set up programs where we can identify in advance how much the patient's gonna owe on their co-payment and deductible and give the patient an opportunity to use cash. Because we don't want anybody to be surprised and have a large co-payment or deductible. We make significant effort to contact every patient so they can know how much they're gonna owe, you know, before they choose to use their insurance or not. But again, we're in-network with the vast majority of health plans. I think it's something like 95% of health plans. You know, I think the vast majority of people get the contracted rate, you know, which is in that range of $600-$800, and they'll owe a copay, you know, or deductible in the range of $100-$200 dollars. Our next question coming from the line of Puneet Souda with SVB Leerink. Your line is open. Yeah. Hi, Steve, Mike, thanks for clarifying a lot of these points that were raised yesterday. First one, just wanna clarify, you know, an overall third party sort of beyond MGML, other services that you're using, any sense of that for prior authorizations, and should we expect that number to decline? As you mentioned, these prior authorizations are submitted both by, you know, the lab as well as the clinician offices and third parties. Maybe just help us understand where the trend line is headed. Secondly, just does this have any impact on the Signatera volumes? Wanted to clarify that point as well. Yeah. Thank you. Let me first say, you know, that Signatera, Prospera today are not covered by commercial insurance companies. You know, generally a PA is not required for Medicaid or Medicare. You know, generally it hasn't been required for Signatera Prospera. This largely is focused on you know the women's health volume. You know, I think with respect to you know other prior authorization services, I think you know MGML represents a portion of the prior authorization services that are provided, you know, probably in the range of like roughly half or something in that range. Yeah, that's right. And just to speak on the trend line to your point, Puneet, that's just continuing to go down consistent with the volume trend that we articulated, and we think that's gonna continue to go that way just given you know, the ACOG guidelines and you know, the broad in-network status and in-contract status for NIPT in all risk categories. Our next question coming from the line of Catherine Schulte with Baird. Your line is open. Hey, guys. Thanks for doing this and thanks for taking the questions. First, just to clarify the 11% of volumes, is that overall volumes or women's health volumes? One of the other points that was brought up in the report was kind of the nonprofit status versus the for-profit status of MGML. Can you just walk us through what you know about that? Sounds like there are both versions of these prior auth services out there, but you know how that changes the structure, if you were to continue to work with them. Yeah. That was out of women's health volumes, roughly. You know, as we said, it's 11% and declining significantly. We think the current run rate's about 7%, you know, of women's health. With regards to MGML and whether it's a nonprofit and what their status is, you know, we don't believe whether it's a nonprofit or not has any implication. Many of these groups emerge from patient advocacy groups, whose intention was to try to help patients get coverage, you know, for testing that was already supposed to be a covered benefit from their insurance company. If the insurance company says that they cover NIPT, the patient should be able to get coverage for NIPT when they're paying to have that insurance plan. These patient advocacy groups emerged and, you know, some of them, it's not surprising, you know, were nonprofits. We don't believe whether it's a nonprofit or for-profit has anything to do with whether it's compliant or not. In fact, the examples that we gave for the OIG ruling were companies that had simply done the prior authorizations themselves and paid their own employees to do the prior authorizations. When you think about our peers in the space, some of them are using these nonprofits, some of them are using these for-profit companies, and some of them are just simply paying their own employees to do it themselves. Our next question coming from the line of David Delahunt with Goldman Sachs. Your line is open. Hey, guys. Thanks for doing this call this morning. Extra detail. Super helpful. You know, you mentioned that the volume going through MGML is only about 7% of Women's Health. It's good to hear. Can you tell us about how many PA vendors do you currently work with? Yeah. It was a little hard to hear you, but I think how many PA vendors you currently work with. You know, there's four or five different groups that we currently work with. You know, we know that there's several in this space. I think a lot of times, you know, what will happen is, you know, the physician offices that we meet or that we, you know, that wanna use our services, they're already working with a prior authorization provider that they've set up either, you know, in collaboration with another diagnostic lab or one that they've set up themselves. As time has gone on, you know, we've worked with additional vendors because physicians are already working with them. Our next question coming from the line of Jack Meehan with Nephron Research. Your line is open. Thank you and good morning. I was wondering if you could just give more color around how the payments or donations to MGML are structured. Are these fixed fee or variable? Is it per transaction or more for platform access? Just how does it work? Yeah. You know, there's a wide range depending on the groups. I think with MGML specifically, you know, initially it was a nonprofit. I think we would make a kind of generalized donation, and then we renewed our agreement. At some point in the past, it involved the payment structure to be consistent with industry standards and with how other companies operate, where it was a per approval payment. Again, it's a nominal amount, you know, that simply covers the, you know, roughly covers the operating expenses of the group. You know, as we said before, we think it's fully compliant, and many companies, in fact, hire these employees directly themselves and do the services themselves. Our next question coming from the line of Kyle Mikson with Canaccord. Your line is open. Great. Thanks, guys for the questions, and thanks for having this call. Just a two-part question. Literally just around this whole PA kind of situation. Out of the kind of Natera prior authorizations that are performed by MGML, what portion of those are, you know, denied or ultimately approved? And how does that compare to the other, like, third-party prior auth companies out there, that you're either working with or others are working with? The second question I want to ask was basically just why MGML? It sounds like you're one of a few customers there, if you're only 25% of their volume. Just wanted to get some clarity there. Thanks. Well, first of all, I'll take up the issue of like, you know, who are we working with and why. You know, there was a false allegation that we were the majority customer of MGML or, you know, somehow involved with setting up MGML. That's completely untrue. You know, clearly we're only 25% of their volume. They're working with many other laboratories in the space. You know, as we said, we work with many prior auth providers. This is commonplace in the industry. They're one of the groups that we work with. You know, it's a back-end service, so their performance is similar to the other prior authorization services providers out there. We have no influence over MGML. They don't. There's nothing special that they're doing for Natera. They're not directing traffic to us in any way. We don't have any control over their operations. All of those allegations are completely false. They're simply an additional vendor that is used by Natera and by other laboratories. Our next question coming from the line of Mark Massaro from BTIG. Your line is open. Hey, guys. Thank you for taking the questions. I appreciate the 11% in 2021. Is it safe to say that it was higher than that in 2020 and 2019? There was also an allegation about, you know, typically or you tell me, but the purpose of prior authorization is to do it before the test is ordered or the blood is drawn. Seems like the report suggests a lot of these are done after the blood is drawn. Maybe my final question is just the commentary that perhaps some of your sales reps were going in to doc offices, and essentially, whether it was your reps or MGML were acting on behalf of the doctor's offices to provide the authorization. Can you just talk about that at a high level, at an industry level, and then maybe what MGML was doing? Were they acting on behalf of the offices, or were the clinicians really providing the authorization themselves? Yeah, thanks. So all we do is bring information about these outside services to physicians. We inform the physician of the availability of these outside services. The physician then signs up and creates an independent relationship with the outside service that has nothing to do with Natera. Many of the physicians that we sell to and many of the physicians that we've grown over the years already have their own outside service that they're working with, and you know, we simply begin working with that outside service. So they are assisting the physician office in getting prior authorization coverage for patients for services that are already deemed covered services by their insurance company. As the OIG has ruled, this is compliant. There's five cases that we cited here in the prepared remarks today that have been reviewed by the OIG, where the laboratory themselves have assisted the physician to get the prior authorization, and the OIG has determined that that is, in fact, compliant. Any allegation that, you know, our sales reps are doing it or anything like that is completely false. The sales rep simply informs the physician about the availability of these services, and the physician signs up. The question of how many prior auths were done in previous years. You know, as Mike mentioned, the number of insurance companies that are requiring prior authorization has gone down over the years and continues to go down. Now, with that said, our volume has also grown significantly in recent years. If you look at prior authorizations that we performed in, say, 2018, 2019 or 2020, the volume is very, very low compared to the volume that we performed in 2021. Obviously we performed more prior authorizations in 2021 than any other year. In 2018 and 2019, the number was very marginal. In 2020 it was slightly more, and then 2021 was the highest number to date. Now we think that will go down as we go forward because a handful of large providers have recently removed their prior authorization requirements completely. You know, that's driving the number down. I think 2021 might in fact have been a peak year, even from a volume standpoint as we go forward. Thank you. I would now like to turn the call back over to our speakers for any closing remarks. Thanks everyone for joining the call on short notice. We appreciate the time and the thoughtful questions and, you know, we wanted to do this call so we could get out to as many people as we possibly could. Of course, you know, we're available for more questions offline and we'll continue responding to this. Ladies and gentlemen, that does end our conference call today. Thank you for your participation. You may now disconnect.