Tuesday, February 26, 2019

A current AIM Small Cap Equity Holding: Natera, Inc. (NTRA, $16.55): “Natera on a Tech on a Tear” By: Chez Daggs, AIM student at Marquette University

Natera, Inc. (NTRA, $16.55): “Natera on a Tear”
By: Chez Daggs, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


Natera, Inc. (NASDAQ:NTRA) is a worldwide genetic testing and diagnostics company that’s changing how doctors and patients manage genetic disease. They develop and commercialize non-invasive methods for analyzing DNA, and offer a host of proprietary genetic testing services.

• Appointed a new CEO and COO into management.  

• Announced a new partnership to co-distribute kidney transplant rejection tests.

• Obtained two Z-codes for their Signatera cancer detection technology.

Key points:

In January 2019, Natera appointed Steve Chapman as Chief Executive Officer (CEO) and Robert Schueren as Chief Operating Officer (COO). Before Chapman stepped into this new role at Natera, he was the company’s COO. Chapman’s is a great fit as Natera’s new CEO considering he has a strong track record of past achievements. He has shown himself to be a great business leader, he has hands-on experience with genetic diagnostic testing, and has given winning growth strategies with the company. Schueren is also an expert executive with 30+ years of experience and a record of achievement with high-growth start up and large companies. Management seems to be in good hands moving forward.

Natera announced an agreement early February to partner with Thermo Fisher Scientific’s One Lambda to co-distribute its kidney transplant rejection test. One Lambda offers human leukocyte antigen (HLA) typing, antibody detection products and more. One Lambda’s diagnostic tests are used by transplant centers worldwide. By partnering with One Lambda, Natera now has an accelerated entrance into new markets by leveraging the infrastructure of a global leader. They can offer customers an improved variety of tests that provide better detection performance, ultimately having a greater impact on patients.

Natera has obtained two Z-codes which are used for initial and subsequent testing orders for patients. The Z-codes will be important for the company’s Signatera test. Signatera is a unique technology that offers a successful approach to cancer detection and is planned to be clinically launched in Q2 2019. The codes will cover various cancer types, and the Signatera technology has already shown strong performance across multiple cancer types including lung, breast, and bladder. Natera has a goal to establish Signatera as a new standard technology now that the technology can detect cancer recurrence up to 2 years ahead of other clinical factors. Natera plans on Signatera being a key tool for oncologists in the future.

What has the stock done lately?

The Q4 market turbulence took a hit to Natera’s price, but it seems to be bouncing back well. Natera’s stock has performed very well over the past month rising around 27.80% since the start of January. The stock had a very slight jump in price after the One Lambda announcement. Management has a positive forward outlook moving into 2019 as they keep the focus on changing the management of disease worldwide with their unique genetic testing.

Past Year Performance:

Natera has increased ~78% in value since last year, but the last four months of 2018 was rough for the stock. In August 2018, the stock had reached an all-time high of $29.62/share before tumbling down ~62% to a price as low as $11.34/share in January 2019. Although they had a rough end to 2018, the past year was great for Natera due to research collaboration with several leading global cancer centers and key announcements for new genetic codes for medical testing.

1 Year Stock Chart vs. Benchmark
Source: FactSet

My Takeaway:

Natera’s stock price reaching a new high in 2018 was a positive sign for the company. The current price is trading above the initial purchase price for the AIM domestic small cap fund, and has already surpassed its price target of $13.23/share. Management stated that all the strategic plans they set out to complete in 2018 were in fact completed. With the successful Signatera technology launching clinically in 2019, and a couple of large deals planned, 2019 seems to be another promising year for Natera.  

1 Month Stock Chart
Source: FactSet