Shares of Natera (NASDAQ:NTRA) are in free fall this morning, down more than 35%, after Hindenburg Research released a short report on the company. Natera is a clinical genetic testing company that primarily focuses on women’s health. The report alleges that NTRA is an ideal short due to shady management, deceptive sales and billing practices, and unprofitability. NTRA stock has now lost more than 50% of its value since 2022 began.
Why Is NTRA Stock Down Today?
Hindenburg states that Natera is now the market leader in non-invasive prenatal testing (NIPT) by volume. However, the firm believes that Natera engaged in several shady practices to get there. As part of Hindenburg’s research process, the short firm interviewed two dozen former Natera employees, patients and industry experts. It also submitted several Freedom of Information Act (FOIA) requests to “state Medicaid offices and state Attorneys General.”
For starters, Natera paid $11 million to the Department of Justice in 2018 to settle allegations of “improper sales & billing.” The allegations concerned Panorama, which was the company’s flagship NIPT test from 2013 to 2016.
Furthermore, in 2017, Natera’s healthcare payers imposed “prior authorization” requirements for the company’s tests to reduce excessive billing. Prior authorization is a management process that is used by insurance companies to determine whether a product or service will be covered by insurance. However, Natera’s risk disclosures explicitly warned that prior authorization could “severely hamper revenue growth.”
A few months after the prior authorization was enforced, Natera created a new, “supposedly non-profit entity” called My Genome My Life (MGML). Shortly after, Natera’s sales team started pitching doctors on “free prior authorization help” through MGML.
Hindenburg Alleges MGML Engages in Fraudulent Practices
Additionally, despite Natera being a leader in NIPT, the firm only has three employees on LinkedIn. The company’s “president” is Vickie Seth, but Hindenburg claims this is a pseudonym. Indeed, Seth shares a mailing address and had a “close relationship” with “Natera’s former VP of sales at the time MGML was created.”
Hindenburg adds that a former employee informed them that the former Natera VP of sales “realized that his sales operation was up against the wall” after the creation MGML. On top of that, the short firm alleges that MGML hides its third-party status effectively. It does so by submitting information to insurance providers using a practitioner’s credentials. This practice is in direct violation of “HHS anti-kickback guidance.” Natera obtained practitioners credentials by “help[ing] doctors’ offices access insurance prior authorization portals.”
All in all, Hindenburg Research is extremely bearish on NTRA stock and disclosed that they are “short shares of Natera.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.