Invitae (NVTA)

Invitae (NVTA) is a relatively new and small genetic testing company.

Much smaller than established rivals Genomic Health (GHDX) and Myriad Genetics (MYGN), NVTA is currently neither profitable nor cash-flow positive, but is very fast growing.

NVTA bills itself as the disruptor in the field of genetic testing, even claiming to be the “Amazon of genetic testing” about a year ago.

Certainly, NVTA’s selling point to potential clients (whether they be patients themselves, or the patients’ medical service providers such as physicians or medical insurance companies) is that it’s bringing down the cost of genetic testing beneath that of its competitors.

NVTA gets economies of scale in gene testing by running individual tests that screen for several genes at a time, so a client is not left paying for one single gene test after another in search of the culprit genetic defect.

NVTA seems to use commercial genetic testing equipment, so there can be no competitive advantage in this regard.

Instead, NVTA claims that its competitive advantage lies in its process and methodology, and perhaps, people.

NVTA claims that its bigger competitors can’t emulate NVTA’s methodology, because the bigger competitors are lumbered with legacy processes that can’t be disrupted without causing self-harm. And NVTA believes that smaller would-be competitors just don’t have the financial, human and technical scale to emulate NVTA’s methodology. So, NVTA alone, they claim, is in the sweet spot for the democratization of genetic testing.

I can’t meaningfully assess NVTA’s claimed methodology competitive advantage, other than to note that they are certainly quickly gaining both clients and technology partners.

Nor can I hazard a guess as to whether genetic testing will evolve into an industry where there are profits to be made by the genetic testers, or whether the industry will become so commoditized that the clients capture all the value.

However, it’s clear that NVTA intends to one day be at the top of the genetic testing industry, whatever kind of industry it is.

Bombora (no position in NVTA)