NEW YORK – Invitae reported after the close of the market Wednesday a 51 percent year over year increase in third quarter revenues, beating the consensus Wall Street analyst estimate.
For the three months ended Sept 30, the firm generated $56.5 million in revenues compared to $37.4 million in Q3 2018, and beat the consensus Wall Street estimate of $55.0 million.
The company's test revenues were $55.5 million in Q3 2019, a 52 percent increase compared to $36.6 million from the year ago period. Approximatley 73 percent of test revenues was attributable to payments from third-party payors, 19 percent from institutional partners, and 8 percent from self-pay patients. The company also recognized $1.0 million in other revenues compared to $755,000 in Q3 2018.
"The continued high percentage [revenue contributions] from third-party payors is largely due to higher Medicare payments on our cancer tests and better payments from commercial third-party payors as we continue to get more tests into contracts and collect more on each test from these payors as a group," Invitae CFO Shelly Guyer said during a call with market analysts.
According to Guyer, in the third quarter, there was growth across all testing segments. The firm's testing volumes grew in international markets, which comprised 10 percent of accessioned samples. Reproductive test volumes also saw a general "pick up" led by increases in noninvasive prenatal screening, and the company's Detect pharma-sponsored testing programs also ticked up, she said.
The firm accessioned more than 129,000 samples in the quarter, up 65 percent from a year ago, when it accessioned 78,000 samples. The average cost per sample in Q3 2019 fell 5 percent to $249 from $262 in Q3 2018.
The company's net loss for the quarter widened to $78.7 million, or $.82 per share, from $31.7 million, or $.45 per share, in Q3 2018. Non-GAAP net loss per share was $.69, missing the consensus Wall Street estimate of a loss per share of $.56.
Its R&D spending for the quarter nearly tripled to around $47.0 million from $15.8 million. In a 10-Q filing with the US Securities and Exchange Commission, the company attributed the increase in R&D costs to the growth of the business and to costs related to its acquisitions of Singular Bio in June and Jungla in July. Meanwhile, the company's SG&A costs rose 74 percent to $54.4 million from $31.3 million.
Invitae ended the quarter with $467 million in cash and cash equivalents and $300,000 in marketable securities.
The company said it is on track to meet its previously provided guidance for the year, and accession more than 500,000 samples and generate more than $220 million in revenue. By 2020, the company plans to accession more than 1 million samples and net $500 million in revenues.
During the earnings call, analysts asked company executives whether they expected any negative impact from CPT coding changes in hereditary cancer testing that took effect at the start of the year, and which materially impacted the quarterly revenues of competitor Myriad Genetics. Earlier this year, CMS retired older CPT codes describing sequencing and large rearrangement analysis of BRCA1 and BRCA2 genes. "At its heart, this is not a coding problem," said Invitae COO Lee Bendekgey. "This is a contracting and pricing problem."
"We have said for many years now that as we made our presence felt in contract negotiations with private payors that prices would come down," Bendekgey said, noting that while it has taken time for prices to come down, there is room for further reductions. While the retired codes won't impact Invitae, the company remains focused on its goal to improve affordability and access in genetic testing, and he said that the firm's low-cost tests have been a major force in bringing down prices in the space.
During its earnings call with analysts earlier this week, Myriad CEO Mark Capone maintained that the company's revenue shortage during its fiscal first quarter was squarely a coding problem. Additionally, when asked how well the assumptions he made five years ago aligned with the current genetic testing market, Capone replied that despite facing significant competition, the company had kept up volumes in the hereditary cancer testing segment — among the top revenue drivers for the firm — better than analysts had expected.
Reimbursement, however, was much more challenging than Capone expected. He added: "I don't think we anticipated that there might be a competitor in the space that would be willing to price significantly below cost, and [to] amount losses of over $0.5 billion. We probably didn't anticipate that type of business model."
Additionally, analysts asked Invitae executives about the Centers for Medicare & Medicaid Services' recently announced draft national coverage determination for germline genetic testing for cancer patients. The government payor has proposed national coverage for US Food and Drug Administration-approved or -cleared germline NGS testing for breast and ovarian cancer patients, and would allow Medicare contractors to provide local coverage for tests that are performed in a CLIA-certified lab but aren't FDA approved, when patients have other types of cancers.
As industry observers have pointed out, currently there is no germline NGS test on the market that has FDA clearance or approval and, therefore, no test would meet the criteria for national coverage. "We do not for a minute believe that that's really what CMS intended: to essentially render all [NGS] germline testing for [hereditary breast and ovarian cancer] syndrome non-covered," Bendekgey said, and added stakeholders are sure to push back on this requirement during the public comment period.
In Thursday morning trading on the New York Stock Exchange, Invitae's stock price was up around 2 percent to $16.11.