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Invitae Acquires Three Companies: YouScript, Genelex, Diploid

This article has been updated with additional information provided by Invitae executives during a conference call to discuss the acquisitions. 

NEW YORK – Invitae said after the close of the market on Tuesday that it is acquiring three companies: YouScript, Genelex, and Diploid.

YouScript provides a clinical decision support platform to help physicians manage their patients' medications in the context of genetic test results and can be integrated into electronic medical records; Genelex is a pharmacogenetic testing firm; and Diploid is a Belgian firm with an artificial intelligence software called Moon that diagnoses genetic disorders from patients' gene sequencing and other clinical data.

Invitae will acquire YouScript for around $79.3 million, which includes $25 million in cash and Invitae common stock. The company said it will buy Genelex for approximately $20.7 million using shares of Invitae common stock and pay additional shares if certain milestones are met.

Genelex initially operated with the decision support platform under its aegis, but spun out YouScript as a separate entity a few years ago. The two acquisitions are slated to close in coming weeks and Invitae doesn't expect this to impact previously projected revenue and volume guidance for this year.

The transaction to acquire Diploid has already closed. Invitae said it will pay around $95 million for the company, of which $32 million will be in cash and $63 million in Invitae common stock. Additionally, Invitae has granted restricted stock units valued up to $5 million for certain employees of Diploid who will continue with the firm.

Adding pharmacogenetic capabilities places Invitae even more squarely in competition with Myriad Genetics, which similarly provides genetic testing for hereditary cancer risk, noninvasive prenatal testing, and bought PGx testing firm Assurex in 2016 for $225 million in upfront payments and $185 million in milestones. 

"Adding pharmacogenetics to Invitae's services enables us to offer greater value to our existing customers and helps us expand into new customer types and clinical areas," said Invitae CEO Sean George in a statement. "Despite its broad utility, the incorporation of pharmacogenetic information into routine medical care has been slow. We believe that Invitae's business model and technological capabilities, combined with an offering designed for ease of use in supporting clinical care, can accelerate the use of pharmacogenetic information."

Over the past year and a half, however, the regulatory environment for PGx testing has become more uncertain with the US Food and Drug Administration last year issuing a safety alert expressing its concern about labs making claims lacking evidence; sending a warning letter to Inova Health's lab; and reaching out to other labs asking them to remove references to drugs in their test reports. The agency has said it took action out of concern that physicians would make inappropriate changes to patients' drugs based on inaccurate results from labs. 

"Simply detecting pharmacogenetic variation is not nearly enough to make the information clinically useful," Robert Nussbaum, chief medical officer at Invitae, added in a statement. "Combining Genelex testing with clinical decision support in the EMR using YouScript software enables clinicians to easily navigate this information when making prescription choices at the point of care."

However, software companies in the PGx space have also been on FDA's radar. In the aftermath, at least one company providing decision support for PGx testing, called Translational Software, has decided to seek 510(k) clearance through the FDA.  

In a call with market analysts to discuss the acquisitions, George said that both Genelex and YouScript had heard from the FDA, and had subsequently altered their offerings to patients, providers, payors, and health systems. He added that Invitae is in discussions with the FDA on a number of topics, and will add pharmacogenetics to the list. 

YouScript and Genelex are based in Seattle and have fewer than 20 employees and around 10 employees, respectively. They will join up with Invitae's existing presence in the city. Diploid has fewer than 10 employees and some Invitae employees will move to Leuven, Belgium to support the staff there. 

The Diploid acquisition is in line with Invitae's efforts to further automate and bolster its variant classification capabilities. Last year, the company acquired artificial intelligence-based variant interpretation firm Jungla for up to $65 million. 

As Invitae scales up its genetic testing capabilities, the company is expecting that Moon's variant interpretation infrastructure will allow it to quickly interpret patients' genetic and phenotypic data into actionable insights and lower the cost of performing exome analysis. "More importantly, this technology will help us accelerate progress toward the routine use of whole genome sequencing in addition to panel and exome testing, ultimately helping more patients get the diagnosis they need, sooner," George said in a statement.

During the call, George said that typically, it takes Invitae's internal processes between 30 minutes to an hour to identify candidate genes that need interpreting based on a particular patient's medical information. Diploid's software can do this in mintues. With the help of the Moon platform, Invitae plans to migrate larger next-generation sequencing panels and exome sequencing products to a whole-genome offering in six months to a year, and at the same prices.