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Invitae's Transition to 'Genomic Information Company' Likely to Include More M&A Activity


NEW YORK (GenomeWeb) – This year, Invitae has already acquired four companies, with the latest purchase of CombiMatrix and Good Start Genetics this week enabling its entry into reproductive health testing. But this may be just the start of the company's M&A activities.

The company is at a point where "it's wise to consider acquisitions that can positively contribute to cash flow within a two-to-three-quarter period of time," Invitae CEO Sean George told investors and analysts during a call to discuss the company's latest acquisitions.

"There is a lot of support in terms of capital that can be put to use to engage in this kind of strategy," George said.

The company also announced it had agreed to sell $73.5 million of its stock in a private placement, the proceeds from which will be put toward growing the company's menu of tests in new markets through acquisitions. In considering acquisition targets, Invitae will focus on companies with revenue, and a predictable collections rate, operating expenses, and cost of goods sold. CombiMatrix and Good Start both fit the bill by bringing in reproductive health testing capabilities into Invitae's pipeline, which to date has consisted of genetic tests for adult and pediatric inherited conditions.

Good Start, based in Cambridge, Massachusetts, offers next-generation sequencing-based preimplantation and carrier screening for inherited disorders. The company, which has conducted 1.7 million tests since it launched in 2012 and reported $22.5 million in revenues last year, has a strong presence within in vitro fertilization clinics.

The firm's products include EmbryVu for preimplantation screening and GeneVu, a carrier screening service performed in the clinic. Good Start also offers VeriYou, a carrier screening test that individuals can order online. After receiving a spit kit at home, customers can send a sample for analysis, get results, and receive genetic counseling from their homes.

With this test, Invitae, which to date has marketed its tests to physicians, will venture into the consumer genomics space. The US Food and Drug Administration allows companies to offer carrier testing directly to consumers online if they also provide information about published data backing up the use of the test, the test's performance characteristics, the chances of the test failing, how to obtain genetic counseling, and other information. 

The VeriYou service currently includes genetic counseling within the $169 price tag, and George noted that Invitae will likely incorporate a way for the patient to share carrier screening results with his or her own doctor "particularly when there is a positive result that's going to need following up on."

Later this year, Invitae will also launch an app through the personal genomics company Helix. Using it, customers who are at low risk for heart disease and cancer according to treatment guidelines can find out if they have genetic markers that put them at higher predisposition for these diseases. A doctor will need to sign off before patients can order the app. 

Meanwhile, CombiMatrix, which had $12.9 million revenues in 2016, is focused on prenatal diagnosis and pediatric developmental disorders. Invitae was attracted to the company's capabilities in recurrent miscarriage analysis and its expertise in chromosomal microarray analysis, which is widely used in preimplantation genetics and, in many instances, has replaced karyotyping.

"They are the last remaining standalone commercial player with any significant experience … [in] chromosomal microarray analysis," George told analysts during the call. Invitae wanted to tap into that expertise, because it will launch a next-generation sequencing "replacement" for chromosomal microarray capabilities next year, he added.

The reproductive genetic testing space is a crowded market, including companies such as Natera, Counsyl, Laboratory Corporation of America, and Quest Diagnostics. A number of these players also provide non-invasive prenatal testing, which is the fastest growing segment in genetics projected to grow to a $6.8 billion annual global market by 2022, from $5.35 billion in 2010.

Neither Good Start nor CombiMatrix, however, have a market-ready NIPT product, which George acknowledged during the call "is a key gap in the portfolio."

Invitae doesn't have a timeline for when it would advance an NIPT product, but could choose to do so through a number of different avenues. The company has been testing out its internal capabilities in this space, but could also "use the most commonly available approach from Illumina and run it at a scale that will still give us a cost advantage," George noted. Illumina accepts samples from labs that want to offer NIPT and analyzes them in its CLIA-certified lab via its Verifi Prenatal Test.

Additionally, Good Start "has some technology under the hood" that Invitae will explore for a "more sensitive, more specific, and less expensive path." Last year, Good Start inked a deal where Roche Diagnostics would sell its GeneVu carrier screening tests along with its Harmony noninvasive prenatal fetal aneuploidy test, which was developed by Ariosa Diagnostics. 

Good Start's decision to come under Invitae's aegis may not necessarily end its relationship with Roche. "Our intent has been to follow up with [the Roche team] and see where this will go," George said. "We don't have any a priori thoughts that we would end that commercial relationship."

While Invitae decides how it wants to enter the NIPT space, for the near term the company is planning to focus on the existing capabilities of the CombiMatrix and Good Start teams in reproductive health, where George sees plenty of room for growth.

Invitae characterized the addition of reproductive health capabilities with these two acquisitions  as the start of its ability to provide genomic information that supports healthcare decisions across every stage of an individual's life.

"This is how we imagine genetics becoming part of mainstream care," George said in an interview. "At any entry point, whether it's before family planning, during conception and pregnancy, immediately upon birth, or later in life, … by being able to have the full offering from start to finish we'll be able to migrate this from a balkanized test-by-test, patient-by-patient, report-by-report industry into something that looks like an information management industry."

Before buying Good Start and CombiMatrix, Invitae had purchased two data software companies. In January, Invitae acquired data company AltaVoice, which operates several programs allowing research organizations to track patient data and recruit subjects for clinical trials. Then, in June, Invitae bought health software developer Ommdom and its genomic management tool CancerGene Connect, a platform for collecting and managing genetic family histories. 

Invitae has also been aggressively increasing the number of genes it tests for across a variety of indications, while lowering its cost of goods sold, in an effort to make genetic testing more accessible and affordable for billions of people.

The company had set a goal of testing for 3,000 genes by the end of 2016, but then launched an exome sequencing test that allowed it to jump to offering analysis of 20,000 genes. Invitae also said this week that it expects to have reduced its cost of goods sold per sample accessioned from $500 in the second quarter of 2016 to $345 in Q2 2017.

Invitae's growth strategy comes from a recognition that diagnostics is a challenging business and financial pressures in recent years is forcing consolidation in the industry. "The last six months have shown a marked increase in the number of companies that have either ceased to run their testing operations or have put themselves on the market for trade sale, looking for partners or investors," George said.

Some recent notable mergers and acquisitions in the genetic testing space include Konica Minolta's decision to buy Ambry Genetics; Transgenomic's merger with Precipio Diagnostics; the merger between Alere and Abbott that has yet to finalize; and Eurofins' purchase of Italian firm Genoma, which focuses on NIPT and oncology testing.

"This will move from a 100-plus player game on the supply side for genomic information to be two, maybe four [players] in a three-to-five-year time period," George predicted.

It seems Invitae is angling to be one of the players left standing, since it intends to continue to expand through M&A activity. "We're certainly not committing to a certain number [of acquisitions] per year," he said. "But I think it would not be surprising at all if M&A was a steady fixture in our efforts to achieve our mission."