Piper Sandler says Natera 'scratching the surface' in oncology
Natera announced late last week that its Signatera test was granted ADLT status from the CMS, establishing an initial rate of $3,500 for each assay used in the recurrence monitoring setting, which prompted one Wall Street analyst to call the news a "welcome surprise" and another to note that Natera is only "scratching the surface" in oncology.
SIGNATERA RECEIVES ADLT STATUS: Natera on Friday announced that the Centers for Medicare & Medicaid Services granted Advanced Diagnostic Laboratory Test status for the Signatera molecular residual disease test. Obtaining ADLT status confirms that Signatera meets the highly selective criteria established under the Protecting Access to Medicare Act of 2014, Natera said, adding that the initial ADLT rate established by CMS is $3,500 for each Signatera assay used in the recurrence monitoring setting. Signatera received Medicare coverage for use in stage II-III colorectal cancer in late 2020, while finalization of a draft local coverage determination for use in immunotherapy response monitoring is anticipated for release in late 2021.
"Receiving ADLT status represents a major milestone in our commercialization efforts and confirms the unique nature of the Signatera assay," said John Fesko, chief business officer at Natera. "We are committed to working closely with CMS to expand access to MRD testing to ensure CMS members, physicians and healthcare systems can fully benefit from this revolutionary technology."
Signatera is used for treatment monitoring and MRD assessment and can detect cancer recurrence up to two years before conventional imaging. It has so far been studied in over 3,000 patients and in 12 peer-reviewed publications, including multi-site, prospective, randomized trials, across more than 25 different tumor types, and has been graded three Breakthrough Device Designations by the FDA, Natera said.
'WELCOME SURPRISE': SVB Leerink analyst Puneet Souda told investors in a research note that the receipt of Advanced Diagnostic Lab Test status from CMS for Natera's Signatera has an established reimbursement rate of $3,500 per test in the recurrence monitoring setting, which offers meaningful upside longer-term. Souda adds that the news is a "welcome surprise," and speaks to the value of assay itself and utilization of liquid biopsy in the cancer recurrence monitoring setting. The analyst made no change to his Outperform rating.
'SCRATCHING THE SURFACE': Meanwhile, Piper Sandler analyst Steven Mah said that Natera continues to be one of his top picks in medical diagnostics after the company announced that Signatera was awarded Advanced Diagnostic Laboratory Test status at an initial CMS ADLT rate of $3,500. The analyst, who remains Overweight with a price target of $150, believes Natera is just scratching the surface in oncology given the broad use-cases and clinical utility for Signatera which was validated by Friday's announcement, the 3 FDA-Breakthrough Designations and the expansion into companion diagnostics.
POSITIVE IMPLICATIONS FOR OTHERS: Wells Fargo analyst Dan Leonard raised the firm's price target on Natera to $125 from $110 and kept an Overweight rating on the shares. The reimbursement environment for specialty diagnostics has gotten a lot better over the past 5 years, and Leonard believes the implications of last Friday's announced advanced diagnostic laboratory test status for Natera's Signatera test are underappreciated and support this view, the analyst tells investors in a research note. This price point adds ~$500 to the firm's long-term pricing outlook for minimal residual disease testing, directly benefiting Natera, and indirectly making him more positive on the category to the benefit of Exact Sciences (EXAS), Invitae (NVTA) and Guardant Health (GH). The analyst raised the firm's price target on Exact Sciences to $120 from $115, on Invitae to $35 from $30 and on Guardant Health to $160 from $145.
PRICE ACTION: In Monday morning trading, shares of Natera are up over 5% to $108.23.