Two months after jumping into the market with a non-invasive prenatal screening test for Down syndrome and other genetic disorders, San Carlos, CA-based Natera is raising a lot of investment cash to seize the opportunity.
Natera is announcing today it has raised $54.6 million in a Series E financing composed of a mix of equity and debt. Two new investors, OrbiMed Advisors and Harmony Partners, led the round, which included other undisclosed new investors. All of Natera’s existing investors joined the financing, including Claremont Creek Ventures, Sequoia Capital, Lightspeed Venture Partners, and Founders Fund. The company, which raised $20 million about 16 months ago, has now pulled in about $97 million of investment since it was started in 2004.
The money is lining up behind Natera’s test, which is used to tell prospective parents whether they are about to bring a child into the world with a chromosomal abnormality like Down syndrome. Parents have long been able to ask such questions with older protein-based blood tests that weren’t especially accurate, or with tests like amniocentesis and CVS that are accurate but invasive, and come with the risk of a miscarriage. What’s happened in the last couple years is that four companies—Sequenom (NASDAQ: SQNM), Illumina (NASDAQ: ILMN), Ariosa Diagnostics, and Natera—have harnessed the power of fast/cheap DNA sequencers to detect chromosomal abnormalities in a fetus by analyzing DNA they find in a simple draw of the mother’s blood.
While the U.S. public may not see much of the progress coming from the genomics revolution in their daily lives, this is one field with potential to gain mass market awareness. About 4 million children are born in the U.S. each year, and more than 500,000 of them come from “high-risk” pregnancies, in which age, prior childbirth experience, or some other factor may motivate people to seek the kind of information that Natera and other companies are offering. Last year, the American College of Obstetrics and Gynecology helped to kickstart to this fledgling market by telling its member physicians that such DNA screening tests have “tremendous potential” on patients considered to have “high-risk” pregnancies.
Natera entered this market in February, with a test it calls Panorama. The company isn’t disclosing its revenues so far, but it is generating revenue, says Jonathan Sheena, (pictured above) the company’s co-founder and chief technology officer.
“The response has been overwhelming,” Sheena says.
Mark Lotke, the co-founder of Harmony Partners, said in a statement that he chose to invest because the Natera test “offers broader coverage, superior accuracy and earlier results than first-generation tests, and we expect it to become a leading product” for non-invasive prenatal testing.
How overwhelming is overwhelming? Natera, in the early days of its product rollout, decided to almost double the price of its test to $2,760. It has hired 50 employees in the last two months, as it has built out a national sales force, expanding its overall employee count to 230. It has been spending money on Illumina HiSeq machines it needs to process samples from patients, and the new financing will primarily be used to build up the capacity Natera believes it will need to meet customer demand, Sheena says. The market could be worth as much as $600 million this year, according to one of Natera’s competitors—Illumina.
While the market is growing fast, Natera and the other contenders have reason to tread carefully here. Since people are making life-altering decisions based on this information—like whether to continue a pregnancy—Natera insists that its test be used “appropriately,” Sheena says. That means the company wants to make sure patients who use it get genetic counseling, and a confirmation test like the old amniocentesis or CVS test, before acting on the information. Although the tests have been found to be remarkably accurate in controlled lab tests, any examples of “false positives”—in which the fate of a fetus is mischaracterized—could have devastating consequences to a family.
Already, some patients and physicians have raised concerns about whether the information being presented is poorly understood and mishandled. A story in the Wall Street Journal recently questioned whether the information patients are getting from the marketed screening tests is as accurate as what the companies have claimed. The tests also sometimes produce “inconclusive” … Next Page »