Preterm at RBC Capital Markets: Diagnostic Innovations and Financial Strength

On Wednesday, 21 May 2025, Preterm (NASDAQ:SERA) presented at the RBC Capital Markets Global Healthcare Conference 2025. The diagnostic company highlighted its strategic advancements in predicting preterm births, showcasing both promising opportunities and challenges. Despite the competitive market, Preterm is pushing boundaries with its innovative lab-developed test and robust financial backing.

Key Takeaways

• Preterm’s test addresses the unmet need for predicting preterm births, especially in first-time mothers.
• The company has secured a $215 million funding, ensuring a financial runway until the end of 2028.
• They are targeting a $3.2 billion market by focusing initially on three to five states.
• The test has shown significant reductions in NICU admissions, offering economic benefits.
• Key catalysts include Medicaid plan traction and the publication of study results.

Financial Results

• Medicare code for the test is priced at approximately $750.
• Total addressable market (TAM) is estimated at $3.2 billion, with 3.6 million annual births.
• Expected gross margins are around 80% as test volume increases.
• The company has raised a total of $215 million, including a recent $57 million raise.
• Cash runway is projected to last until the end of 2028, with an annual cash burn rate between $25 million and $30 million.
• Elevance projects savings of $1,600 per member screened with the test.

Operational Updates

• Preterm’s lab in Salt Lake City, Utah, can process hundreds of thousands of tests.
• The sales force is expanding, led by a new Chief Commercial Officer from Exact Sciences.
• Initial focus is on three to five states with high preterm birth rates and strong payer relationships.
• The company has mapped over 300 proteins expressed during pregnancy and maintains a biobank of over 20,000 samples.

Future Outlook

• Preterm is expanding its product pipeline into other women’s health conditions like preeclampsia and postpartum depression.
• Anticipated catalysts include the publication of study results and increased Medicaid plan adoption.
• The company aims to provide revenue guidance for fiscal year 2026 by the end of this year or early 2026.
• Preterm plans to expand nationwide following initial traction in targeted states.

Q&A Highlights

• The test is a lab-developed test (LDT) overseen by CAP and CLIA, not the FDA.
• Elevance partnership has expedited reimbursement decisions, with a Medicare code established.
• The test is cost-effective compared to transvaginal ultrasounds, with significant NICU savings.
• Pricing is set at $750 to ensure widespread adoption, particularly under Medicaid constraints.
• OBGYNs are optimistic about the test’s potential to reduce NICU admissions.

For more detailed insights, please refer to the full transcript below.

Full transcript - RBC Capital Markets Global Healthcare Conference 2025:

Unidentified speaker: Labor. And prior to that test, what was the what was the method for predicting preterm preterm births?

Jenny: Well, Connor, there’s really no good risk factors that can predict preterm birth except previous preterm births, which of course does not apply to first time moms, of which moms three point six million moms every year who give birth, very large portion of which are preterm birth mom sorry, are first time moms, and short cervix at the onset, which, of course, fewer than two percent of moms have. Okay. So before our test, half of moms who give birth prematurely don’t have any risk factors, so there were no opportunities for the physician to predict that anything will go wrong in the pregnancy.

Unidentified speaker: Okay. So there’s no test. It’s just, okay, have you had preterm birth before, and you have a short cervix?

Jenny: That’s Think of.

Unidentified speaker: That’s determining if we think you’re gonna have a preterm blood broadcast. So first test of its kind. And where do we stand? So is it it’s FDA approved? Is it is it where do we stand on the approval process?

So we’ll start there.

Jenny: Preterm test is a lab developed test or an LDT, and it’s overseen by CAP and CLIA in New York State. It’s not overseen by FDA. Last year, actually about April, FDA announced that it will start overseeing lab developed tests. Unfortunately, they lost the battle in court, and in April of this year or rather March of this year, the rule was pulled back, so FDA does not oversee lab developed tests. So we are fully accredited by the institutions that do oversee lab developed tests across the country.

Unidentified speaker: Okay. That’s a good I wanna ask about this because this this is a a good point of question for a lot of diagnostics companies. So because you are a lab LDT, at this point, what does it look like for other tests? First off, is there any risk on that you see from, you know, additional legislation that would perhaps impact your ability to market an LDT test? And then going forward, how difficult is it for someone to get approved for another get market another LDT test in the same area?

Jenny: Well, interesting you ask. We were actually excited because we’re we were well positioned to get FDA approved. We were anticipating it when we were building our lab to FDA standards, and our evidence that we developed over the last ten years put us in a terrific position. That said, FDA is known to oversee medical devices, and it was ruled that lab developed tests are not medical devices. So at this point we don’t see any risk to commercialization, and should FDA at some point in the coming years come back to oversee LDTs, we’re still well positioned.

That said, it’s actually going to be harder now for LDTs to go for FDA approval even if they wanted to because of clear distinction that lab developed tests are not medical devices.

Unidentified speaker: K. Alright. Thanks for that. So you have an approval that you can go out and market. What is the so then, call it, the next hurdle would be reimbursements.

Where do you stand on reimbursement?

Jenny: Well, excitingly, we even in the last five years, we’re partnering with a national payer, Elevance, who saw the breakthrough that this test could create in improving health of moms and babies as well as saving cost of care in childbirth and the first year of life for the baby if the baby is born healthier with the help of preterm test and the intervention bundle administration. And together we ran our pivotal trial PRIME that we just read out at the major conference Society for Maternal and Fetal Medicine in January of this year. So we’re really looking forward to seeing this huge leg up on many diagnostic companies that wait for years for reimbursement by, at the outset, partnering with a national payer. In addition to that, we are very excited that unlike many diagnostic and life sciences businesses for which Medicaid or Medicare reimbursement trails commercial reimbursement by two plus years, we’ve seen the opposite. We’ve seen an outreach from Medicaid plans across states to us excited about the potential of improving care to moms and babies while reducing cost.

So we think we will have the opposite exciting momentum where both the commercial and Medicaid plans are going to provide coverage.

Unidentified speaker: Okay. And you told me I learned something yesterday where you you’re going to to get national coverage where you’re presenting not only the outcomes of the test, but the outcomes of what the intervention is post the results of the test, if I’m not mistaken, which is I’ve I’ve never heard that from a diagnostics reimbursement standpoint. So I’ve I’ve gotta imagine that’s pretty powerful.

Jenny: That’s exactly right. This clinical utility data is really unique. Usually diagnostic companies just provide analytical clinical validation that the test works, but we went ahead and tested with 5,000 plus patients in our PRIME study the intervention bundle, which is the low dose aspirin, progesterone and care management, to show the outcomes of the screen and treat strategy. And this is what the community is so excited by. We shouldn’t be on the hook as a diagnostic company to demonstrate the overall outcomes, However, having done that, it’s going to help this breakthrough innovation get adopted by the community because they see the impact of the intervention.

Unidentified speaker: Got it. And so what’s the tie what’s the timing? When’s the soonest you could see a reimbursement decision such that you know exactly how much you’re getting paid for the test and by whom?

Jenny: Well, we do have a Medicare code

Unidentified speaker: Mhmm.

Jenny: For about $750. In terms of the coverage decisions, we will try to announce as many as we can as soon as Sure. They arrive, but we do see a lot of green shoots already where Medicaid plans, MCOs, are starting to run pilots with us to see the impact it can have on their member population.

Unidentified speaker: Got it. Okay. So $7.50 a test is the basic ASP, and then is the goal to basically, it would be used in every every pregnancy?

Jenny: Yeah. The back of the envelope, almost. Okay. Back of the envelope of taking three point six million births per year, if you subtract those with short cervix and those with previous preterm birth, that gives us a TAM of about three point two million women. So the math is simple from there on.

It’s a multibillion dollar opportunity.

Unidentified speaker: Yep. Okay. Well, that’s great. And so if you got the test, you got reimbursement. So what how do you go after that three two two to three billion dollar TAM?

I’m assuming you’ve gotta market to the or sell it to the OBGYNs. Is that is that who the

Jenny: That’s right. We’ve got we’ve got a very broad market to conquer, and there’s about 40,000 OBGYNs in this country. Of course, the maternal fetal medicine specialists in this area are our key champions because they deal with higher risk births. For us to tackle this broad market and three point two million births right away would probably be incredibly challenging nationwide. So we’re taking a targeted approach, selecting a few states starting with three to five this year to really go after density adoption in those geographic areas.

It’s a very high ROI approach. We’ve selected states that have a d plus March of Dimes grading for the level of preterm birth these their states have, where we have already key opinion leaders and champions of our test that can influence the community, where we have good relationships with the payers in that state, and, of course, Medicaid. So for us, creating the momentum in three to five states this year on the coattails of the impending publication from the prime study is the key goal. And then as we show what the test can do to reduce the effects of preterm birth in those states and show the business case of also cost savings and health economic impact, it will be much easier for us to get uptake across the board. So we will expand from there with the plans that have experience with us that we’re going to suggest that we continue working together in other states and go from there.

Unidentified speaker: Got it. And this is a test that you run-in your lab. And so what what is your current capacity and needs to expand capacity for for testing volume, you know, both in that with the five states and then as you expand beyond that?

Jenny: Our lab is a state of the art lab in Salt Lake City, Utah, and we are, with the existing investments in robotics and mass spec technology, are ready to run hundreds of thousands So for the next few years, we’re very well positioned for scaling.

Unidentified speaker: Okay. And so the so you’re doing on mass spec. I’m assuming the cost of goods are pretty low. So it’s $7.50, and at scale, you’ve got pretty good gross margins?

Jenny: We do as expected in the industry, roughly 80% as we ramp up volume. And, of course, at 3,200,000.0 as we Mhmm. Penetrate majority of the market, we absolutely can evolve our test to put it on any of the existing ubiquitous platforms. Okay. So but that’s probably a few years away.

Unidentified speaker: Okay. Got it. And then what about so you’re good on on manufacturing. What about just from a build out Salesforce? Do you have the do you have the folks in place right now to go after those five states, and then as the you know, you need to build out beyond that?

Jenny: We are hiring as we speak, and indeed, we’ve got coverage in several of those states. And I’m excited to share that we just brought on board a terrific chief commercial officer, Lee Anderson. He comes to us from Exact Sciences, and prior to that a long career building genomic health and specifically Oncotype, which is a arguably one of the biggest diagnostic products in the industry. So he is going to take home and grow our team and fill out the capabilities in our team to be able to support this growth.

Unidentified speaker: Okay. So from a from a cash needs perspective, you had you’ve got enough cash to get you at least to those five states between manufacturing, between the sales force, and then at some have you stated you’ve got enough cash to get to profitability, or what’s the you know, where is your your cash burn, and and what’s your runway right now with what you have?

Jenny: Yeah. No. We just reported in our quarterly close that we are in great position. We’ve just raised on the coattails of our data additional 57,000,000, so now we’re 215,000,000. Very fortunate among diagnostic companies in this volatile environment to have, through the end of twenty twenty eight, about four years to get to profitability with this funding.

We are very excited to make sure to drive uptake Mhmm. Quickly and cost effectively. Mhmm. So our annual burn rate of cash has been between 25 and 30,000,000. We do have room to grow that with OpEx to ensure that we are spending appropriately on commercial efforts across the country as we scale states and save some dry powder for when the guidelines change

Unidentified speaker: Okay.

Jenny: Which will be a pivotal event Okay. In our marketing and sales efforts to go ahead and expand nationwide.

Unidentified speaker: Okay. Great. So we’ve got plenty of runway and cash. That’s

Jenny: Very fortunate. I that’s one of the distinctive characteristics of us as a diagnostic player.

Unidentified speaker: Alright. So that’s just starting on a $3,000,000,000 TAM. We’re the only player. There’s not a lot of diagnostics companies like that. It’s pretty exciting.

So and let me just you know, maybe less and, obviously, less important to the near term story, but what do you do with with the I mean, first off, you’re collecting a lot of data on these tests. And then is there other things that could you, you know, you could test for when you’re running the preterm test? And and have you looked at that, or what’s in your r and d pipeline? I guess two part question.

Jenny: Yeah. Absolutely. We’ve mapped over 300 proteins that get expressed during pregnancy in expectant mom’s blood, and of course a rich pipeline of women’s health products that may include preeclampsia, gestational diabetes, gestational hypertension, postpartum depression, and a whole host of different conditions. For us, what’s really important is to hit it out of the ballpark with the first test, and we already validated and began research on other conditions like preeclampsia and are collecting a an extraordinary biobank of 20,000 plus samples that we can mine. And, of course, our dataset has been terrific for us already.

And in the day and age of AI and with every biomarker test, increasing role is played by algorithms that incorporate other factors into the results, we believe we’re incredibly well positioned to integrate the data and the samples to mine it for future products. Okay.

Unidentified speaker: Alright. We’ve got plenty of time left, and I apologize, but this is such a simple story that it’s it’s to me, it’s very easy to understand. So I I don’t have a lot more on the preterm test, but maybe just give us, you know, kind of the questions that everyone else is getting. So on US policy, so maybe start with tariffs. Any any impact from the tariff policy to you guys?

Jenny: We are lucky to be insulated from the tariff impact because the test is conducted here on the ground in The United States. I do think it will be worth it for me to recap some of the clinical test results on preterm because PRIME study created a really exciting reaction Mhmm. Among the community because we showed that we can keep one out of five babies out of the NICU by supporting babies getting born later healthier as opposed to being born more premature without the test and the intervention bundle. So

Unidentified speaker: okay. That’s a good I do have a follow-up question. So what’s the cost I don’t know. The cost benefit analysis, obviously, having healthy babies is very important. But as you’re going to a reimbursement, so the $7.50 cost, how does that compare to what an extra day of stay is in in the NICU and then, you know, other costs later in the in the in the baby’s lives?

Jenny: So glad you asked because this is a unique diagnostic product that doesn’t just promise better life in the future by diagnosing a condition, we screen and the screening and intervention generates savings in a year. For example, there’s a couple of pieces of evidence we’ve published. One was done by Elevence, our partner, even a few years ago, where they’ve modeled savings from applying the test to 40,000 of their expectant mothers, and they found that they will save $1,600 per member screened with the test.

Unidentified speaker: Okay.

Jenny: And most recently, we reported that economics are as spectacular from our PRIME study. Specifically, we talked about the number needed to screen Mhmm. So the number of mothers that need to receive the test in order to save one NICU day, which, by the way, in this country on average is $4,500, but up to $20,000 if it’s a NICU with a lot of machines that are used and it’s a premature baby, is just between three and four mothers. So imagine how powerful it is economically. You screen three or four moms, and you save 4,500 to 20 thousand dollars.

And that doesn’t even include the cost of care for the first year of life of the baby, which is even more costly. Average NICU stay for a preterm baby is over ten days. So if you think about the cost of that premature baby, and by the way, one out of ten babies are born premature, so that’s an enormous cost to the system. As a matter of fact, from Medicaid, and about forty three percent of moms get born on Medicaid, for them, childbirth related costs represent twenty seven percent of all inpatient costs in Medicaid. That is a staggering amount of money.

It’s over $25,000,000,000 overall it costs the country in preterm birth. So I’m going back to the economics and this powerful number of number needed to screen between three and four, and this is just to save one NICU day. When we compare what is the number needed to screen for preterm test and what’s currently in the guidelines, which is transvaginal ultrasound, for transvaginal ultrasound, the number needed to screen number of moms that need to be monitored every two to four weeks, so four to eight times over pregnancy at between 3 and $800 per screen. So this is many thousands of dollars of treatment. You need to screen hundred and fifty moms to save one NICU admission.

For us, it’s 41 moms. So it’s more than three times more effective. And if you look at the cost comparison of transvaginal ultrasounds throughout pregnancy, the four to six at up to $800 per test versus $750, you can immediately see the benefit to the system.

Unidentified speaker: Got it. Well, only sorry. It just sounds to me like you should be charging a lot more than $7.50, but I guess

Jenny: Well, it’s a it’s a good point. However, we are eyeing the full market. What we care about in our mission is to ensure that every mom who needs the test gets it. We are operating in the environment when Medicaid is looking to cut 800,000,000,000 plus out of its budget, so we want to make sure that we are priced for adoption across the board. Got it.

Unidentified speaker: And you said you’ve been getting basically inbound from Medicaid, but what I mean, what’s what’s the reaction on the OBGYN community? I would assume that they’re dying to I mean, very excited to get this test as well, but kind of what what have you seen from from the OBGYN community?

Jenny: Well, keeping one out of five babies out of the NICU is unheard of. When we talk to clinicians, they’re saying they haven’t seen an innovation that does that for decades. So for them, it’s really critical that we continue publishing our data and sharing with the community how powerful the test is, and we’re planning to do just that. We have about three to four publications in development, and for us engaging with the clinical community on that data is going to be essential. Of course, the clinical community is going to talk to us about not just how powerful the test is, but also on the efficiency of the interventions, which are very safe and well known.

Low dose aspirin, eighty one milligrams, and daily vaginal progesterone are well known in the community, and the care management of a weekly nurse call is one of those that, of course, will be critical in the shortage of nurse staffing resources that need to be directed only to moms who need it because we are unfortunately in a situation where there are more health care deserts and fewer and fewer nursing staff that’s available.

Unidentified speaker: Got it. Alright. So if I just look at the catalyst timeline from now until the end of the year, what’s what are the big what are the dates and what, you know, what are the the big ones that we should be looking for?

Jenny: First big one is a publication. Mhmm. So we’re looking forward to sharing all of the results that showcase how powerful this breakthrough is. I don’t have the exact date for you to announce, but it’s coming imminently. Second one, of course, is seeing our traction with Medicaid plans Mhmm.

Which I do think is going to be a breakthrough for diagnostic test industry where Medicaid plans are moving so quickly. And last but not least, of course, is the uptake in in volume.

Unidentified speaker: Mhmm. Okay. So if we as we get into 2026, you anticipate that at that point, you may be able to give fiscal twenty six revenue guidance or test test guidance, things like that. Do you think you’ll be in position to do that towards the end of the year, early twenty twenty six, by the time you report q four?

Jenny: Well, we you’re right. We haven’t been guiding because we want to make sure that we get into a position where we can forecast pretty accurately the volume so that the analysts can make sure to set expectations of the investors that we can meet and beat. Mhmm. I cannot promise ’4 this year, but as soon as we are in great traction position with three to five states and see line of sight of the volume quarter over quarter, we will start.

Unidentified speaker: Great. Perfect. Well, Jenny, thanks for joining us. Very exciting story. We appreciate it, and we appreciate everyone that listened in.

Jenny: Thank you so much for hearing our story, and look forward to talking to you again.

Unidentified speaker: Yeah. Bye.

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