I was looking thru the holdings of AK Invest a few weeks ago, and one of their top holdings was Invitae (NVTA).
Invitae does genetic testing, and their goal to reduce the cost of genetic testing to a point where everyone will be tested to improve their health. They claim that most people get genetic testing now when they have health issues, and in the future, it will be standard to get tested to proactively treat genetic deceases.
Recent presentation at a growth stock conference.
3Q15 $2.2 M
3Q16 $6.3 M
3Q17 $18.1 M
3Q18 $37.4 M
Goal is to reduce the cost of running a test (COGS)
cost to run one sample
Rev. $37.4 M (+106%)
Gross margin 45%(up from 27%)
oper. exp. up 31%
beat and raise
Goal is to continue to improve gross margins and get to cash flow positive.
If everyone does get genetics screening in the future, will be a huge TAM.
I know this is a stock that Saul looked at earlier in the year (https://discussion.fool.com/my-take-on-invitae-nvta-32950862.asp…), but I’ve been invested in NVTA for a few months now. A few things you should know about it:
1) They IPO’d around 2015 at 17 and only a few months ago gotten back to that $17 mark. Why?
While they’re revenue have been going like CRAZY during that entire time, constant share dilution has kept their price down. In fact, their market cap has more than doubled in that time, while the # of shares had more than doubled if I’m remembering correctly. BUT, after their last offering in May, their CEO said they wouldn’t need additional financing from the market. While investors rolled their eyes, people have begun to realize that he may be telling the truth, as NVTA has done a great job of reducing cash burn, cutting burn by 50% in the last year. Couple that with improving gross margins (~45% Q3 '18 compared to ~25% Q3 '17) and I think this year is a turning point for the company.
2) Their CEO has done this before
Their current CEO, Sean George, has done this before. He helped build Genomic Health into what it is today (NVTA is actually a spin-off of GHDX). Invitae wanted to focus on high volume, low cost genomic testing and has worked diligently towards that goal. They eventually want to be the Amazon of genetics, eventually monetizing their enormous database of genetic data. Their low cost approach seems to be working, as they’re driving down their cost per sample enormously using machine learning on their Illumina-supplied machines.
These were the notes that came off the top of my head, so I might be forgetting some important points. I’ll write more when I have the time.
Thank you. I didn’t know the company had been discussed on this board before.
No worries, Jim. I didn’t know until a few days ago!
The board mainly had problems believing that NVTA would ever meet their gross margin goal of 50% (at the time, it was something like 18%) and become cash flow positive. They are still burning cash at the rate of $30MM per quarter, but their financial position has changed dramatically and a new discussion is warranted.
Apparently the goal is to build a database as fast as possible and have the infrastructure to be the lowest cost highest reliability genetic tester.
It seems no matter what illumina wins.
Competition and commoditization of services is my number one concern for any company in the genetic reading space. Though labcorp amd quest built enterprises and did well for their shareholders performing tests anyone can do. In fact I believe they compete with NVta.
I too looked into them after seeing ark funds held them but quickly dismissed them with the competitive threat and the fact their ceo said they don’t foresee dilution in the near future and within months had another offering.
There is an interesting recent review of NVTA on Seeking alpha by a bullish researcher whose opinion I respect:
The Bullish Thesis And Future For Invitae Story Is Breathtaking https://seekingalpha.com/article/4221843?source=ansh $NVTA