NVTA

I thought this small company might be of interest here. Has it been discussed? Invitae (NVTA) is a rapidly growing genomics testing company. It had 136% revenue growth in 2017 (with two acquisitions contributing) and expects 79% revenue growth in 2018. Wall Street was disappointed with this guidance and it had about a 10% pullback.

https://finance.yahoo.com/news/apos-why-invitae-dropped-much…

It still seems like phenomenal growth to me. The company is only trading at an enterprise value of just under 4 times expected 2018 sales so it doesn’t look terribly expensive - but it’s not yet profitable. NVTA is expanding its market share. The global genetics testing market is $3.8 billion and is expected to reach $10.3 billion by 2024 according to some projections.

http://www.strategyr.com/MarketResearch/Genetic_Testing_Mark…

I already owned another company, Illumina (ILMN), in the genomics industry but just added a small starter position in NVTA. They have different niches in this rapidly growing industry.

What do others here think?

Dave

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Hi remmdawg,

I brought up NVTA on this board last year with my post #27635 at http://discussion.fool.com/invitae-nvta-32707595.aspx

No discussion followed.

Earlier this week I commented on an FMI thread with post #35609 at http://discussion.fool.com/hi-have-no-specific-comment-about-thi…

FMI and NVTA (plus may others, it seems) are competitors. This week’s post cited a Seeking Alpha article that was actually about NVTA, although I didn’t identify the subject company earlier this week as it was incidental to the point I was making.

With this week’s post I was drawing attention to the comments of kas23 - an expert in the field - to genetic sequencing companies in general. kas23 didn’t particularly like the financial prospects of the genetic sequencing industry, preferring instead the genetic sequencing machines and consumables industry (e.g. ILMN).

One reason that some people on this board like FMI so much is the very large cornerstone holding of Roche, and the prospects of Roche buying out the minority shareholders at a premium. Another reason is that FMI has an FDA approved genetic test. I’m no longer current on NVTA, but I don’t think NVTA shares either of these attributes.

Regards,
Bombora

5 Likes

With this week’s post I was drawing attention to the comments of kas23 - an expert in the field - to genetic sequencing companies in general. kas23 didn’t particularly like the financial prospects of the genetic sequencing industry, preferring instead the genetic sequencing machines and consumables industry (e.g. ILMN).

One reason that some people on this board like FMI so much is the very large cornerstone holding of Roche, and the prospects of Roche buying out the minority shareholders at a premium. Another reason is that FMI has an FDA approved genetic test. I’m no longer current on NVTA, but I don’t think NVTA shares either of these attributes.

Regards,
Bombora

Very nteresting. Thanks for the insights. I hadn’t seen this earlier post. One link seem to make a good case for NVTA. It looks like NVTA has had more rapid growth than FMI and may actually catch up in revenues despite having a much smaller market cap (about 1/5 the size). It’s trading at only about 6 times 2017 revenues (less than 4 times 2018 projections) while FMI is trading at about 17 times 2017 revenues. That seems ultra rich to me, especially with slower growth then NVTA thus far. Maybe a recent spike in the price has been driven by buyout speculation.

I’m very optimistic about the long term future of the genomics industry. I am in the medical field and I’ve followed the industry for some time. I plan on holding ILMN longer term and look to add over time. It is the top dog in its particular niche in the industry. As for NVTA, it is a much smaller player and therefore, much riskier. I’m not sure about the competitive risks although I’m optimistic about the room for multiple players given the TAM. And NVTA quite possibly will itself be a buyout candidate with significant upside at its lower price to sales multiple.

I’ll keep a small position in NVTA for now.

Thanks again!

Dave

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It looks like NVTA has had more rapid growth than FMI and may actually catch up in revenues despite having a much smaller market cap (about 1/5 the size). It’s trading at only about 6 times 2017 revenues (less than 4 times 2018 projections) while FMI is trading at about 17 times 2017 revenues.

Given the amount of money both companies are losing, expect that dilution will continue to be an issue especially for the much smaller company, NVTA.

Bear

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Given the amount of money both companies are losing, expect that dilution will continue to be an issue especially for the much smaller company, NVTA.

Bear

Yes, this is expected.

But its revenue growth is extremely rapid. In 2013, it had $148,000 in revenues. In 2018, it expects at least $120 million in revenues, 79% annual growth. And it seems to be making strategic acquisitions. The cost of genetic sequencing is dropping rapidly as well.

This is a longer term play but not that long term given the recent catalysts in the industry. I anticipate rapid growth to continue for the foreseeable future. So I think it’s a decent bet over a 3-5 year time period at its current price.

I added on the price drop today. It’s still a very small position for me (less than 1%). It’s risky and it seems I’m a contrarian to the market on this one right now. I will continue adding to ILMN which will remain my major play on the sector.

dave

I suppose genetic testing will eventually become a commodity, like cholesterol testing (e.g.) is now. My guess is that means a shorter runway than for a SaaS company like Shopify, but who knows how much shorter?

My guess is that, like KITE, many of the most promising companies will get bought by companies like Roche and Gilead, maybe even Illumina.