Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Natera Inc. Fourth Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to 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 fourth quarter of 2023. On the line, I'm joined by Steve Chapman, our CEO; Solomon Moshkevich, President, Clinical Diagnostics; and Alexey Aleshin, General Manager of Oncology and Chief Medical Officer. John Fesco, President and Chief Business Officer is also on the line and will be available for Q&A. 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 posted to our IR site as soon as it's available. Starting on Slide 2, 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 outlook and projections, our assumptions for that outlook, market size partnerships, clinical studies and expected results, 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-K or 10-Q and the Form 8-K filed with today's press release. Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained or suggested by the forward-looking statements. Forward-looking statements made during the call are being made as of today, February 28, 2024. 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 numerical 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. Steve?

Great. Thanks, Mike. Natera is focused on transforming the diagnosis and management of disease worldwide. Our growth is driven by combining our innovative technology with significant peer reviewed clinical evidence that supports the utility of our products. We've had a lot of great news since our presentation at the JPMorgan conference and we're excited to get into the highlights. We finished Q4 with $311 million of revenue, which was $11 million ahead of the preannouncement we made in January and represents 43% growth over Q4 of 2022. Full year revenues were $1.080 billion an increase of more than 30% compared to 2022. On volumes, we processed 2,496,000 tests in 2023, which is roughly 6,000 units ahead of the preannouncement. We processed 341,000 oncology tests in 2023, representing year-over-year growth of 73.5% and we also saw strong growth metrics in women's health and organ health. Gross margins in Q4 came in at 51.4%, compared to our Q1 margin of 39.9%. We finished the full year at 45.5% above the top end of the Q3 guide. As Mike will cover later in the call, we had some revenue true ups and lab savings in Q4 that don't repeat every quarter. We estimate organic revenues in Q4 were roughly $306 million and gross margins were roughly 49%, which still represents a significant improvement versus previous quarters. And as we discussed at the JPMorgan conference, we also made great progress on cash burn throughout the course of the year, ultimately reducing our cash burn by roughly $193 million in 2023 compared to 2022. The guidance for 2024 reflects the continued momentum in the business that generated these very strong results in 2023. We are guiding revenues of $1.320 billion to $1.350 billion gross margins of 50% to 53% and cash burn for the full…

Thanks Steve. Let's start with the Invitae deal. First, recall we secured a judgment on past damages in our Archer IP litigation of roughly $20 million. We anticipated that it could be difficult to collect that amount from Invitae given their financial issues. So we applied that judgment amount as part of the consideration in this deal. We also paid Invitae $10 million upfront and if we have excellent retention of Invitae's accounts, there's a potential milestone payment that we can make of up to $22.5 million. We would be very happy to make that payment because it would mean that the deal is working extremely well for us. As a reminder, we did not take on any of Invitae's products, its lab operations, nor its physical assets. We did hire roughly 30 of their women's health sales reps and our goal is to provide a seamless transition of those Invitae accounts to Natera's Panorama and Horizon products. Our team is working hard to retain as much volume as we can and we're doing well. We expect to retain at least $20 million to $25 million in high quality recurring revenue per year, but we think there is a potential to increase that up to $50 million to $60 million depending on how things go, especially if we see clinical practice guidelines for expanded carrier screening or 22q, which we think could come as soon as this spring and would provide upside to these numbers. So we think the deal rationale is strong and we look forward to providing more updates as the year progresses. One of the keys to our offering in women's health is our highly differentiated screening test for the 22q microdeletion. As 22q goes into societal guidelines and becomes commonplace as we believe it will, the…

Great. Thanks, Solomon. Turning now to key indications. In colorectal cancer, there are multiple events worth noting. We reported the first data from our BESPOKE-CRC registry study, which enrolled patients across more than 100 centers in the United States. The study's initial results were presented at ASCO GI this year and showed exceptional asset performance consistent with prior readouts. Additionally, for the first time, it was shown that Signatera testing markedly reduced patient anxiety and over 73% of respondents. Additionally, 96% of participants reported that they wanted to continue using Signatera going forward. The next study I wanted to highlight is the INTERCEPT trial that was done by MD Anderson Cancer Center with over 1,100 patients tested using commercial Signatera. The observational component of this study was able to characterize the impact of Signatera testing on a routine clinical practice and showed a median DFS of approximately 5.6 months between Signatera positivity and clinical relapse. Interestingly, the investigators also presented preliminary results from the Phase II TAS-102 substudy, which enrolled 13 patients to receive TAS-102 based on a positive Signatera result. Despite the small sample size, the study is notable since TAS-102 is the same drug being used in the randomized perspective ALTAIR study. The exciting finding was that 54% of patients had CK clearance at 3 months, suggesting high single agent activity of TAS-102 in this patient population. Compared to an untreated Signatera positive population, where our data suggests has spontaneous clearance freight should be around 3% to 4%. Additionally, this study reported a median disease-free survival of 9 to 4 months, which compares favorably to the 5.6 months I presented a moment ago from the broader observational cohort. Though we know the study was not randomized. We believe this all provides a positive signal for the ALTAIR study.…

Great. Thanks, Alex. The first slide here is just a summary of our Q4 results compared to Q4 last year. Steve hit some of the highlights already. Revenues were up 43% and gross margins expanded by almost 10 full percentage points. On revenues, we estimate that we had roughly $5 million in true-up beyond what we typically get in a quarter that contributed to the $311 million in total revenues. So I would estimate the organic revenue number to be roughly $306 million. Steve also mentioned some lab-related savings that helped gross margins in the quarter. The way the holiday landed this year with the entire last week of December bracketed by Christmas and New Year's meant that we have fewer cases coming in from customers that last week of the quarter. And so didn't experience a typical COGS-related expenditures, we would normally expect in a week. It takes about a week for us to report out most of our tests so this resulted in slightly lower COGS expenses, but did not significantly impact revenue, which is only accrued on reported units. Netting all of that benefit out from our Q4 gross margin of 51.4% gives you our estimate of roughly 49% repeatable gross margins, which, of course, still represents a huge sequential step-up from Q3 of '23. We were able to drive these results on operating expenses that were stable compared to 2022. As Steve described, we've invested heavily to build the critical infrastructure needed to rapidly scale the business, and we believe we're in a position to drive significant future innovation with relatively modest increases in operating expenses from our current levels. This combination of expanding revenues and improving margins on stable expenses fits precisely with the multiyear strategy we've laid out in the past. The net result…

(Operator Instructions) Your first question comes from the line of Subbu Nambi with Guggenheim.

You guided to $1.32 billion to $1.35 billion in 2024 revenue. This is well above Street expectations. That said, as you noted on your last slide, there are still a lot of sources of upside. To unpack this a little bit, can you talk more about the key assumptions for things that are not in the guidance specifically, how are you thinking about the potential for videos, potential ASP increases for Signatera biomarker bill 22q, potentially Renasight. What I'm trying to get at is essentially the magnitude of upside for each of these in 2024? I can easily see our path to $50 million to $75 million in upside to your guide. When I look at these components, does that seem reasonable?

Yes. This is Steve. So maybe I'll just make a couple of comments on these different things, and then Mike, you can sort of talk about the magnitude. I mean certainly, there's a lot of opportunities for upside. You've listed a couple of them. I think within Invitae, we're working hard to move as many of those accounts over as we can. And we think that is going well, as we said in the prepared remarks. We'll have a little more visibility as time goes on. From a guideline standpoint, all we can really do on guidelines is produce the peer-reviewed evidence. And we feel incredibly good about the evidence that's been produced particularly on 22q and on broad panel carrier screening. Now I think it's really up to the societies and the physicians to decide what they want to do. But certainly, that would provide a lot of upside as we're the market leader in noninvasive prenatal testing. We have a high attachment rate of microdeletion testing. And as we sit here, we believe we're the market leader as well in next-gen sequencing-based broad panel test. When you look at Signatera and ASP, certainly, there's a lot of opportunities for upside, the same with biomarker bills. So Mike, do you want to comment further?

I mean I think those are the -- really the kind of the key drivers as you kind of think about kind of catalysts and beyond. I mean I would just reiterate what we said in the prepared remarks, which are -- the underlying trends in the core business that we've been seeing the last couple of quarters have been quite strong. And if we can just continue to see those continue to hit our marks as best as we can think in a good position for '24.

Our next question comes from the line of Puneet Souda with Leerink Partners.

First of all, congrats on the quarter beyond the preannounced numbers and really great momentum you're seeing in the business. Maybe just wanted to follow up on the guide. Steve or Mike, maybe, can you elaborate a bit more just putting together the pieces here, I mean if I look at where you have guided to versus the consensus and our expectations. I mean, you're obviously increasing the ASP on the MRD side, you have recent indication expansion that you're seeing here. Obviously, there's momentum on Panorama, ASP on Panorama from last year, carrier screening. I mean, there's a list is fairly long. So -- and then we have Invitae's volumes adding on top of it. So maybe just walk me through sort of why this prudent guide still just given sort of the momentum you have? And also maybe if you can talk a little bit about the 22q microdeletion timing? I know you mentioned that briefly, but what else needs to happen there? And I have a follow-up.

Yes, Mike, do you want to take that?

Yes, sure. Yes. I mean, I think like -- so to me, I think that's good. That's a good summary of a lot of the drivers we have going forward on '24, as Steve covered on the prior question. And I would just go back to -- in each of these drivers, you're going to take like some judgment around setting the guide for the year. We want to set something that -- so clearly, as you referenced, requires really good execution. It's going to require good volume execution. It's going to require continued momentum in ASPs and COGS. We think we can deliver that. And it's just a matter of kind of setting the level of what's challenging but achievable for the beginning of the year guide. So really no change in philosophy from what you've seen from us in prior years. On the 22q front, I think really it's the same commentary that we provided previously. The SMART trial, as we covered in our prepared remarks, we really feel like is the landmark trial in the space. Those results were excellent. They've now had time to kind of get those data out and get it published. They've been presented at multiple conferences. I think you have got or publications have now come out of that study. And so we think that merits further guideline consideration. Of course, the guideline committees run their own show and we don't have perfect visibility into the timing of those things. And hence, you never include benefit from guideline inclusions in a guide to start the year, but we remain very optimistic about our prospects.

Got it. And then -- if I could cover on the MRD side. You had ovarian cancer and as well as new adjuvant breast cancer expansion. When do you think that starts to come in into the volumes -- just wanted to confirm they should also benefit from the ADLT rate that you have currently? And also maybe Alex can talk about it within the framework of the clinical trials that you have with ALTAIR and the new trial that you announced today, can you maybe just sort of stack them because there's -- this does look like a series of sort of data sets that enhance your position in the marketplace. But also maybe just how does all of this play into the NCCN guideline update when we do hear that? And if you have any updates on that front, that would be great as well.

Yes. So first, I'll just say on ovarian and neoadjuvant breast, we're really excited about those indications. We've got some great data and more data coming out. I think generally, once we get coverage in place, that's really when the medical liaison team and commercial team can start going out and educating physicians really about the benefit. So that will take a little bit of time to come in. But certainly, there's volume there today that will benefit from Alex, do you want to talk about ALTAIR and the potential there for upside opportunity and guidelines?

Yes. Absolutely, Steve. Puneet, thanks for the question. I think as we presented in our prepared remarks, we're expecting a readout top line readout kind of in Q3 for the ALTAIR study. And we do believe that this study, if positive, maybe 1 of the largest events in how early-stage cancer is managed in quite a while. Just to put this in perspective, the last study that truly changed how early-stage colon cancer is managed was the MOSAIC study published in 2004. So I think there's a lot of pent-up interest in approving new treatment modalities for these patients. We believe that any positive statistically significant result will be significantly impactful for how patients are treated. And we're frequently asked like what are some of the numbers that would be even more significant. And I would kind of guide folks to look at the MOSAIC study, which showed hazard ratio of 0.77, and an absolute risk reduction of 5%. So we strongly feel that if we want or both of these metrics, the study would be even more significant. And then in terms of the IMvigor011 study, we're expecting top line readout for that in Q1 of 2025. And again, if that study is positive, we also believe that would significantly not just change the guidelines, but really fundamentally alter how early stage bladder cancer is managed. So I think these are the 2 most kind of immediate binary events to look forward to. And we have many other studies currently ongoing that we'll be reading out the next year or 2.

Next question comes from the line of David Westenberg with Piper Sander.

On extremely strong quarter. So I'm going to dig in to get to the guidance. I'm really happy with the guidance, but I do want to tell you the upside -- looking to the upside as well. So just in terms of the Invitae acquisition, I mean, I would assume your ASPs are higher than there is in a lot of the reproductive health areas. And you're calling for 25% or $25 million and I think $100 million business. So can you talk -- I mean, that would imply a little bit even less than maybe, say, 25%. So can you just make -- walk me through your 50% share kind of why you would anticipate just maybe that low of picking up of that share. And if it's share you don't really want I would assume other companies in the space would also not want it, and we maybe see a melt-up in pricing melt up in pricing in kind of those kind of accounts contemplated in the guide? And then finally, on that one, a lot of those OB sales force sell BRCA too. I know BRCA's not that big of a business for you, but is BRCA cross-selling also something to contemplate in that. So that was 1 question. One follow-up. It will be shorter.

Yes. No, no, that makes sense, and that's a good question. So we said we're thinking somewhere in the sort of $20 million to $30 million range is a conservative number. But we also said that we think that can get up to $50 million to $60 million. So we really have to see how things come in as we look into this sort of post-acquisition window. A couple of things to note that I think are important. I think the first thing is that the volume that we started with at the end of January after the acquisition was, I think, a decent amount less than maybe where Invitae was in the last time they reported out their volume in Q3. And that makes sense because they had announced some initiatives to reduce some of their low-margin business. So for example, some of their low cash pay business. So I think the starting point for us is different maybe than what you're what your expectations were. Now with that said, we're working hard now to transition over as many of the accounts, which is generally the high-margin accounts because those were the ones that were remaining over to Natera. And we think we're doing really well. Generally, when you look at these things, you go back and you look at December 4, I know this is a little bit different than that situation. But Natera has generally done very, very well in these settings, retaining the vast majority of the business. Certainly, 50% plus of the business. And I think that's what we'll see here. And I guess last question -- sorry, I'm back, I forgot the answer. Do you think there's an opportunity there through the OB channel, and we think there's some opportunities there as well on the oncology side. So certainly, with the disruption happening, there will be some upside opportunity there.

I forgot I asked that part. So just in terms of expectation, you have neoadjuvant breast, adjuvant breast, bladder, CRC, IO. Can you talk about your expectation for long? And just given that you have all these tissue types, and I'm asking you to predict a bureaucratic agency, but have you had any conversations with MolDX or expectations on MolDX and just say, you know what, this science works in every tumor type. So when does that get coverage?

Yes, that's a good question. So I think this question of pan cancer is something that I think a lot of people have asked over time. And certainly, as you start to look at the long tail of cancers getting covered, I think at some point in the future, there may be an opportunity for just kind of across-the-board pan cancer coverage. But we haven't set up to be dependent on that. What we're doing is we're doing very thoughtful detailed clinical validations on all the different tumor types, and we're generating the data that's needed to obtain coverage. And we think that's, I think, 1 of the reasons why we're in a leadership position today is because we've done that hard work. We generated these studies. We spent now 5 or 6 years working on some of these trials and other companies, they may come in and not put that work in and then they end up not getting coverage. So we think we're a great opportunity. Obviously, there's more tumor types that are in submission. We're excited about ovarian in neoadjuvant breast, but you mentioned lung, you mentioned -- or I guess you didn't mention gastroesophageal, we think, is a big opportunity for us that fits nicely with the colorectal indication. So lots of upside. We're continuing to focus here and generate data.

Next question comes from the line of Tejas Savant with Morgan Stanley.

Steve, Mike, I'll spare you the question why you've decided to be prudent with the guide and take a highly different tack here. What I want to know is what would carrier screening and ACOG guideline inclusion for 22q mean in terms of gross margin upside? I know it's not baked in, but were those 2 guidelines to fall in place in the spring? What does that look like? And Steve, on the exit of some of these lower margin Invitae accounts over the course of the year, is that something that we should be thinking about in terms of just the phasing of the gross margins through '24?

Yes, it's a good question. So let me just comment on Invitae first. And so what I mentioned there is that Invitae themselves had actually taken steps, I believe, in Q3 time frame of last year to exit some of their lower margin accounts or maybe move away from some of that business. And so that's why the starting point of where we took over in January was maybe a little bit different than what you might have seen from Invitae in Q3. From the Natera side, when we bring this business on, it's obviously through the Natera contracts and insurance contracts and with the Natera products. And so we think the margin should be in line with what is currently now kind of an accelerating and expanding Natera gross margin. Hopefully, that makes sense. From the upside opportunity, obviously, there's an enormous amount of upside in the guidance. We didn't include anything for 22q coverage. We didn't include anything from broad panel carrier screening. So obviously, there's upside as these things come in. If you just think about the clinical impact and the data that we generated, we really think that, that's the most important piece. 22q is a very severe disorder. It's a leading cause of congenital heart defects causes’ hypocalcemia, which can lead to seizures and brain damage at birth, if it's not treated. So this is a very serious disorder. We test for it with, I think, a very well-validated test that was prospectively done over a 7-year period. We think we've checked all the boxes for society guidelines. If you look at the very high attachment rate that we have, I think 75% plus of our in IPT, get 22q. Obviously, there's upside opportunity, but we think it's really important that patients get access to this test and then it's covered by their insurance company. The same thing for expanded panel carrier screening, as we said today, we believe we're the market leader in next-gen sequencing-based expanded panel testing. But there's still opportunity there as guidelines come in place both to extend the volume today. There are still customers and OB offices around the country that are ordering smaller panels. As the guidelines come in, we think that they will transition to broader panels, which will put Natera in a good position. And there's also a lot of business today that we're just not reimbursed on where the payers maybe have a negative coverage policy where there's an opportunity to get paid and get coverage for testing that the physicians want and that we think are important for patients.

And then switching gears to oncology, Steve. Just curious as to what's your thought process in terms of time lines to reimbursement in the breast recurrence monitoring indication? I mean that's clearly the big price. Second, can you comment on the FoundationOne tracker I mean given the broader launch in Medicare coverage here? Where you expect in terms of perhaps an attach rate by year-end '24? And then finally, the data on early detection, I believe the first readout there is relatively imminent. But just curious as to how you're sort of perhaps you've updated your thought process there in terms of the go/no-go decision in terms of the performance specs you'd like to see from that data that would be helpful.

Yes. So maybe I'll comment quickly on early cancer detection and then hand it over to Solomon to talk about breast cancer recurrence monitoring and some of the exciting data potentially coming around treatment on molecular recurrence. So on early cancer detection, we are planning probably in Q2 to read out a case-control study that's going to include both colorectal and advanced adenoma patients. And we're excited about that readout. The vast majority of those samples were prospectively collected and matched with colonoscopy. Not all of them, but the vast majority were. So then after that, depending -- we're going to take a look at how that data looks. Obviously, we're excited about it. After that, in October time frame, maybe sometime September, October, we're going to be reading out roughly a 1,000-patient prospective study that will be 100% colonoscopy match. That's already recruiting patients today. And then depending on the readout of there, we'll make a decision about what we do going forward as far as the FDA enabling trial. But the way that we've set this up is that the 1,000-patient study that's going to read out in Q3, that's actually the exact same protocol that would be used for the FDA enabling trial. So if we do want to go ahead with the FDA, we just continue enrolling into that study. So it's not like there's going to be a delay about the trial. Now as we said before, the decision for us is going to depend on what the performance of the test looks like. And everything that we're doing this year is included in our budget. It's not any additional cost. We said we're moving rapidly to cash flow breakeven. We're going to hit that in Q3 or sooner. So all of the expenses on early cancer detection will be included in that. We'll still be getting the cash flow breakeven the same schedule. If we do decide to move forward and view an FDA-enabling trial, that would be based on us seeing market-leading performance. And that needs to be, I think, better than anything else out there from a blood standpoint for both colorectal and advanced adenoma. So Solomon, do you want to talk about breast cancer?

Sure. I think the question was specifically about coverage in breast cancer recurrence monitoring. And we do have that already. Signatera was covered for recurrence monitoring in all subtypes of breast cancer, that decision came out early last year. That's been a very high demand area for Signatera. So as a reminder, almost 300,000 new breast cancer diagnoses per year in the U.S. We estimate over 100,000 of those are eligible under the Medicare coverage, which is Stage 2b and above, and that's for both adjuvant decision-making and recurrence monitoring. And then for many of those patients, especially in the hormone receptor positive disease, recurrence monitoring is something people do not just for a few years after surgery, but 5 to 10 Years after surgery. So that's a very important area for us to be helping our patients and we've been doing that.

Our next question comes from the line of Doug Schenkel with Wolfe Research.

First, let me just start with the, I guess, a clarification on ALTAIR. In terms of defining success in getting NCCN guideline inclusion and driving broader commercial reimbursement. If you get 5 to 9 months of disease-free survival, is that enough? Is that a win? I picked this range because I think that's the range of DFS demonstrated in the 2 INTERCEPT sub-studies. So as we think about the readout the summer, is that kind of the goalpost that we should be setting?

Alex, why don't you take that?

Yes, absolutely. So I would think instead of the hazard ratio for DSS. And if the MOSAIC study is any comparator, the hazard ratio there was 0.77. And then the second thing that's usually pretty important is the absolute risk reduction. So what percentage of patients do you prevent from recurring with a new therapy? And for that study, I think the event rate went down from 26.1% to something like 21.1% with addition of oxaliplatin. So I would use those 2 as benchmarks. I think the median DSS improvement in absolute terms, that may be a little bit difficult, and I would not extrapolate those numbers from INTERCEPT to ALTAIR. Instead, I would focus on the hazard ratio as well as the absolute risk reduction.

The next topic I wanted to touch on is MRD competition. So you guys have had a tremendous amount of success awarding competition, defending your intellectual property estate. There's been a ton of focus out there on how this landscape is going to evolve even with wins by Natera. There's a potential bevy of companies intending to launch new products over the next couple of years. So 2 questions. One, can you talk about what you expect in terms of stickiness associated with existing accounts and really a material first mover advantage that you have? And what can be gleaned from your experience in NIPT, which is a -- it's a competitive market where you have what I think is a very fair to say, sticky. I mean how much money would you need to invest to catch up with Natera, a company that's still doing more studies including one that you announced for the first time today.

Yes, that's a great question. I'll make a couple of comments and then maybe, Solomon, you can talk a little bit more about all the things that we've done as we look toward the future. First, I'll say there is competition. We think the tumor-informed MRD companies are the real competitors here. And particularly, I think NeoGenomics is a strong competitor. Of course, they've been in joint right now, but they have a very strong footprint. And although I think when you look at the performance of the NeoGenomics product, from an analytical standpoint, they've made some very significant claims. But if you dig into the details, they've really increased the amount of plasma input to make it seem like the test analytically performs potentially better than it does. And I think that hurts us when you look at comparative claims that they're making based on different levels of plasma input. Now when you look at the clinical validation, what we see on the radar product, is that the performance doesn't really hold up. And we see this where analytical validation or maybe looks good, but then you look at the clinical validation and it doesn't quite look as good. So you just have to be careful of that with any competitors that are making claims about the performance of their tests. Solomon, do you want to talk about some of the stuff that we've done? I think the investments that we've made into clinical data and clinical trials?

Sure. I spoke about this in the prepared remarks as well. I would say that 1 of the most fundamental pieces here is that once a Signatera patient always a Signatera patient. So once you've got a personalized assay designed for a particular patient, it's extremely unlikely that they would go design a new personalized assay with some other lab. And there's ripple effects to that, right? So that means a physician's office that's testing a bunch of Signatera patients quarterly or every 6 months, that creates its own level of switching costs for that practice to bring on another lab. Now that being said, that we are not resting on our heels from that perspective. It's always been a part of Natera's core recipe to be on the cutting edge with test performance and to continue pushing the boundaries with clinical validity and utility. And I think that's where you see us continuing to invest following that strategy. So as I -- as we pointed out on the call, we're planning to put out multiple new features and enhancements in MRD-related products over the next 12 to 24 months. And we've got a ton of investment in clinical trials. So I don't think I can give you a specific number that you asked for, how many hundreds of millions of dollars would you need to be able to catch up. But it's definitely in the hundreds of millions of dollars.

And Doug, maybe I'll just add to that a little bit. I mean if you look at the different areas Solomon broke out, you look at data, I mean we now have a significant number of peer-reviewed studies that have been published. But not only that, we have multiple randomized trials that are ongoing that have been underway, some now for kind of 5 years or something in that time frame. And I think the key thing is with these randomized trials that the data really is only applicable to the test that was used in the trial. So I think we're seeing some groups now are coming, doing clinical validations where they're looking just at the performance of their test. And as you go forward, that's really not going to be good enough. You have to have a randomized study that shows how patient outcomes were impacted based on using your test in the randomized study. And that's where we're going to be and that's where we think things are going as we move forward and moving away from analytical validations and from clinical validation.

Next question comes from the line of Matt Sykes with Goldman Sachs.

Congrats on the quarter and the year last year. Maybe just given the importance of the gross profit line, could you maybe just talk about your expectations for ASP trends for women's health kind of ex-potential guideline inclusion? Like what do you kind of envision in terms of ASPs for this year? And then I have 1 quick follow-up.

Mike, do you want to take that?

Yes, sure. Yes, Matt. Yes. I mean I think we expect to see stable trends in the in the women's health ASPs that we saw toward the end of last year. So as folks have followed for some time will recall when we saw really strong kind of sequential movements upward in the ASP particularly for carrier screening, but also for the NIPT product through the course of the year, and that was a big driver, along with obviously, Natera ASPs of the margin expansion you saw in the calendar year '23 results. And now, in '24, what the guidance was is that you get the full year benefit of the ASPs that we saw in Q4. So that -- obviously, that does leave room for there to be continued improvement, and we're working every day to continue to -- 2, we can't operate to make sure that we get the reimbursement for the covered services that we think we deserve. So there's room for that to continue to improve above the expectations we've set this year. I think that's a good kind of starting point for the guidance.

Got it. And then just on Mike, again, just on COGS reduction, and you guys have done a good job. It's obviously been a key gross margin driver. As you kind of look across your businesses, where do you see the most upside for reduction in COGS whether it's in women's health, Signatera, organ health, et cetera? Like where do you think the biggest levers are for COGS reduction this year that could actually drive those gross margins to the top end of the guide like you talked about?

Yes. I mean I think the first -- yes, the first project that comes to mind there, obviously, is the in-house project for Signatera exome in Austin. So as a reminder, we launched our exome capability in San Carlos last year, we've driven a significant portion of the volumes to the in-house exome. And then launching in Austin unlocks another wave of cost efficiencies just because you've got more space, you can deploy more automation, so on and so forth in that Austin lab. So we're very excited about that. We'd like to have that launched in the summer or early fall. In addition to that, though, I mean, I think we've got across each of the major products, I mean, Panorama, carrier screening and Signatera, we've got workflow launches and improvements coming this year that can drive COGS lower across the business. And those COGS projects because, Matt, like as you mentioned, like we have a long track record of putting those COGS projects on the board, scheduling them, investing in them and then hitting our marks in terms of actually yielding the savings. Those COGS projects are in the guide. So there's not a lot of hedge in the guide for those. But again, we're excited to deploy those, and we think they can help us mature.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.