Natera Facing Investor Class Action Over Genetic Test Accuracy Concerns

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Natera faces a proposed class action that alleges investors were injured financially as a result of stock-price drops linked to, among other developments, reports that the company’s prenatal and kidney transplant failure screening tests are far less reliable than advertised. 

The 27-page lawsuit says that although Natera repeatedly assured investors that its Panorama prenatal test and Prospera kidney transplant screening test were reliable, and that the company’s growth was driven by its “superior technology and customer experience,” Natera’s stock price has taken numerous hits since late-December 2021 due to increased scrutiny of the defendant’s reliability claims. 

According to the lawsuit, investors “began to learn the truth” upon the publication of a January 1, 2022 New York Times report that called into question the accuracy of certain prenatal tests made by Natera and other diagnostic testing companies. The Times reported, among other things, that the positive test results for certain genetic disorders given by Natera’s tests were incorrect more than 80 percent of the time, the suit states. 

Upon this news, Natera’s stock price fell by $5.35 per share, or roughly six percent, to close at $88.04 per share on January 4, the complaint says. 

On January 14, the nonprofit watchdog Campaign for Accountability filed with the Securities and Exchange Commission a request for the agency to investigate whether Natera repeatedly claimed that its tests are “much more reliable than it appears they really are,” the filing continues. Upon this news, Natera’s stock price fell even further, by more than $6 per share, to close at $61.08 per share on January 18, the case says. 

Then, on March 9, 2022, short seller Hindenburg Research issued a report that alleged, among other things, that Natera’s revenue growth “has been fueled by deceptive sales and billing practices aimed at doctors, insurance companies and expectant mothers,” the lawsuit states. This event, too, caused Natera’s stock price to fall, this time by as much as $28.65 per share, the suit relays. 

From there, a jury found on March 14, 2022 that Natera “intentionally and willfully” misled consumers by falsely claiming its Prospera kidney transplant failure screening test was more accurate than a competing test, the lawsuit says. The plaintiff in that case was awarded $44.9 million in damages, the complaint states. 

Upon this news, Natera’s common stock price fell by nearly $9 per share, and closed at $30.32 per share on March 15, the suit says. 

On April 19, the FDA cautioned in a safety communication that the reliability and accuracy of non-invasive prenatal tests to screen for genetic disorders “may not be supported with sound scientific evidence,” and revealed the existence of cases in which false positives were reported, the lawsuit goes on. Per the suit, the FDA suggested that patients consult a healthcare provider before deciding to undergo a non-invasive prenatal test or making any decisions based on the results of such a test.

This event saw Natera’s stock price fall by more than $1.50 per share on April 19, the case says.

Overall, the lawsuit alleges Natera and its officers made between February 26, 2020 and April 19, 2022 “materially false and/or misleading statements,” and failed to disclose, that the company’s Panorama test was unreliable and had high rates of false positives, and that the Prospera test was not as precise as competing products. Further, the defendants did not disclose that, as a result of the foregoing, Natera was exposed to “substantial legal and regulatory risks” and had “relied upon deceptive sales and billing practices to drive its revenue growth,” the case alleges. 

“As a result of Defendants’ wrongful acts and omissions, and the significant decline in the market value of the Company’s securities, Plaintiff and other members of the Class have suffered significant damages,” the complaint charges. 

The suit looks to represent all persons and entities who purchased Natera common stock between February 26, 2020 and April 19, 2022. 

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