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Invitae Reports Nearly Threefold Increase in Q3 Revenues

This article has been updated with details from Invitae's Q3 earnings call.

NEW YORK (GenomeWeb) – Invitae reported after the close of the market Monday a nearly threefold year-over-year increase in third quarter revenues.

For the three months ended Sept. 30, Invitae reported $6.3 million in third quarter revenues compared to $2.2 million in the year ago period, but falling short of the consensus Wall Street estimate of $7.5 million.

Invitae grew its test volume by 200 percent year over year, delivering more than 15,200 reports and accessioning more than 15,500 samples.

Invitae also said that it reduced its cost of goods sold from $500 per sample in Q2 down to approximately $450 per sample accessioned in Q3, meeting its year-end goal of lowering its COGS to less than $500 per sample. 

During the third quarter, the company increased its test offerings in neurology and cardiology by launching new panels for Parkinson’s disease, neuropathies, neuromuscular diseases, as well as cardiomyopathy and skeletal muscle disease. Invitae also added new genes to existing test panels for arrhythmias, cardiomyopathies, aortopathies, and congenital heart disease.

Invitae highlighted that it has inked reimbursement contracts with five national payors, so that more than 160 million lives are covered for its tests compared to 95 million lives in Q2. Based on its success inking these contracts, Invitae is shifting its emphasis "to driving revenue as a top priority," Invitae CEO Randy Scott said in a statement.

Invitae CFO Lee Bendekgey estimated during an earnings call yesterday that the average selling price per test report in Q3 was around $525. However, as newly inked payor contracts become operational, the company hopes it will improve payment rates and drive test volume in 2017 and beyond.

Invitae is expecting to be cash-flow positive in the next two years. "This quarter represents a turning point for us as we leverage our infrastructure to continue expanding the market and rapidly take share, increase our revenues, and continue to lower cost," Invitae President Sean George said during the call. "Over the next two years, you will see us emerge from the disruptive concept bringing genetics into mainstream medicine into a rapidly growing business generating positive cash flow by the end of 2018.

Another recent positive for the company was that the Centers for Medicare and Medicaid Services issuing a final price of $925 for Invitae's test for hereditary breast cancer-related disorders. CMS's rate is close to Invitae's pricing goal for in-network contracts.

Invitae has a pricing scheme under which its tests are $1,500 per indication when they are out of network. For the institutions and payors with which Invitae has contracts and which bring Invitae in network, the price per test indication is $950. The price is $475 for patients whose doctors have ordered tests online and who pay out of pocket.

"We are seeing increasing evidence that payors are proactively pushing competitors to either match our prices or move out of network, effectively leveling the playing field," Scott said during the call. "Many payors have been quite vocal in their expectations for us to convert volume for more expensive competitors. As we execute on these contracts, we expect significantly higher payment rates across all disease areas."

Currently, between 75 percent and 80 percent of Invitae's testing revenues are from oncology. During the quarter, the company sold 12,000 tests in cancer and 3,200 tests for other indications. According to Scott, the payment rates for non-cancer tests were higher in Q3 than for cancer tests.

Previously, Invitae had projected that it will deliver between 50,000 and 70,000 test results in 2016. According to Scott, the company is now expecting to more than double test volume in 2017 led by cancer testing, and then double test volume again in 2018 as uptake of other products grow.

In past quarters, Invitae has been reporting four metrics — cost of goods sold (COGS), content, volume, and reimbursement — in order to convey growth to investors and analysts. Going forward, Bendekgey said the company would report a new set of metrics, including revenue and average revenue per test assuming a 90-day payment lag, volume, average COGS per sample, gross margins, non-COGS related operating expenses, and change in cash position.

Invitae's net loss for the third quarter was $25.0 million, or $.77 per share, compared to $22.5 million, or $.71 per share, in Q3 2015. The average analysts' estimate was for a loss per share of $.72.

Its R&D spending in the quarter was $11.5 million, up around 4 percent from $11.1 million in the year-ago period. Meanwhile, Invitae's SG&A costs grew 30 percent year over year to $12.5 million from $9.6 million.

Invitae ended the quarter with $37.7 million in cash and cash equivalents and $29 million in marketable securities.