Good questions Ruhaan:
This cant be just the effect of one off secondary.
You’re right (sort of…), there were two offerings in the time frame you noted:
AN FRANCISCO, March 28, 2018 /PRNewswire/ – Invitae Corporation (NYSE: NVTA) today announced the pricing on March 27, 2018 of an underwritten public offering of 11,111,111 shares of its common stock at a price to the public of $4.50 per share. All of the shares are being sold by Invitae.
https://ir.invitae.com/news-and-events/press-releases/press-…
SAN FRANCISCO, March 5, 2019 /PRNewswire/ – Invitae Corporation (NYSE: NVTA) today announced the pricing of an underwritten public offering of 9,000,000 shares of its common stock at a price to the public of $19.00 per share. All of the shares are being sold by Invitae.
https://ir.invitae.com/news-and-events/press-releases/press-…
So the company ls losing gobs of cash with no sight of profitability…
“Losing money” is one way to look at it, strategic resource allocation for a company that is working to grab market share to set a base for significant growth into the future is another way one could view the “cash burn” in the last three quarters. Here is Shelly Guyer, CFO, on the Q3FY19 Conference Call with the details:
As discussed last quarter, we are investing in several areas of the business to foster our growth this year and beyond, enabling us to scale and offer additional products across all stages of life. And we have completed two acquisitions, both of which impact operating expenses and need to be teased out. For the quarter, we incurred GAAP operating expense, which includes cost of revenue of approximately $101.4 million, compared to $47 million for the third quarter of 2018. This quarter’s operating expense includes $47 million in research and development, $32.7 million in sales and marketing costs and $21.7 million in general and administrative costs.
But, it is important to understand whether non-GAAP operating expense of $79.8 million is more indicative of the spend for base business, eliminating the stock-based compensation and post compensation expense related to our two recent acquisitions.
So, what are the key drivers of OpEx this quarter? First, research and development costs were $47 million, including $18.6 million in stock-based compensation for the inducement RSUs granted to Singular Bio employees as part of the acquisition. Our spend on the base business increased by $5.7 million compared to the second quarter of 2019, primarily due to continued investment in R&D, including headcount expansion focused on scaling our business, content expansion, improving the customer experience and reducing COGS.
Second, sales and marketing costs were $32.7 million, which includes $4.2 million in branding and advertising costs related to our direct channel campaign, launched in June of this year.
Third, General and administrative costs were $21.7 million and fairly flat from the prior quarter. We incurred over $3.5 million in costs for the acquisition of Jungla in the third quarter.
Finally, stock-based compensation during the quarter includes $3.1 million related to the management incentive plan, which we’ll continue to see in future quarters.
Now, let’s move to our cash position. At quarter-end our cash, cash equivalents, restricted cash and marketable securities totaled $473.5 million. During the quarter, we raised $19.5 million in net proceeds from our ATM and $339.9 million in net proceeds from the convertible debt offering.
Cash burn, a non GAAP measure, totaled a $140 million in third quarter of 2019. This includes a $15.4 million cash payment in connection with the acquisition of Jungla and an $85.6 million payment to extinguish the overland debt, which includes $1.3 million of accrued interest on our third quarter 2019 quarterly interest payment. On an apples to apples basis on how we have talked about the burn over the past year, and the absence of these cash outflows, the cash burn would have totaled $40.3 million in the third quarter of 2019.
On the second quarter call, we indicated that we would continue to invest in our business throughout the year and into 2020, and that our quarterly burn would increase throughout the year. For the year, we stated that we anticipated burning up to 50% more in 2019 when compared to 2018. Our burn could be as high as $150 million in 2019. Excluding the impact of overland [ph] and the acquisition-related cash payments, we have burned $103 million year-to-date.
Recent acquisitions:
Clear Genetics: https://ir.invitae.com/news-and-events/press-releases/press-…
Jungla: https://ir.invitae.com/news-and-events/press-releases/press-…
Singular Bio: https://ir.invitae.com/news-and-events/press-releases/press-…
My current take on NVTA:
With regard to short term stock price a lot is riding on how the company finishes the year. NVTA is in a race to meet its 2019 guidance…and it is not clear if they will get there or not…
As I mentioned in my Deep Dive posted above on this board in February. 2019 (link below), NVTA provided guidance for 2019, stating that they expected to accession more than 500,000 samples and generate more than $220M in revenue.
So you might be wondering how the company is doing against this goal in the first 3 quarters of FY2019? Well, here are the numbers:
Samples (Thousands): Q1 Q2 Q3 Total: Needed in Q4 to reach Guidance:
94 111 129 334 166K
Revenue (Millions): Q1 Q2 Q3 Total Needed in Q4 to reach Guidance:
41 53.5 56.5 151 69M
Those, folks, are nail biting numbers, requiring significant performance improvement in both areas to meet their guidance. When asked by an analyst on the 3Q Conference Call, CEO Sean George explained what the company is doing to try to get there:
Puneet Souda – SVB Leerink – Analyst
Yeah, thanks Sean Shelly and Lee. My first question is on the guide. I appreciate you’re keeping the guide intact for the year end but that does imply what seems like a significant ramp here. Correct me if I’m wrong but I’m looking at about 30% sequential increase here. And in terms of accession volume you just delivered 16% and the number is mid-teens to maybe a high-teens that you have sort of delivered in the past and I appreciate that the fourth quarter is strong.
And you have sales force productivity here and in addition to that you were hoping to get other test added NIPS potentially growing. But maybe just help me understand where do you get the confidence in terms of the volume and what segment is it is it mostly NIPS is it mostly market share? One of your competitors reported they are doing now a double-digit growth in their volume.
So I’m just trying to understand what gives you the near-term confidence here in getting to the full-year guidance or an exception volume?
Sean George – Co-founder and CEO
Sure, Yeah. I appreciate the question. So again I would state you can look at it by volume in revenue Q4 versus the rest of the year you can look at the sequential growth rates and while there is Q4 needs to be a very strong quarter. It has historically always been a strong quarter. Those numbers whether it’s 33% remaining in the year versus 28% or 27% in past years.
It’s a little more but it’s not that much more. The sequential growth quarter-over-quarter has been not last year but in prior year in the high '20s. And I think like I mentioned on the previous question we’ve acknowledged that there is a big Q4 ahead and we expect to have a big Q4. The three major reasons are we have the sales force ads came in and are now only in August fully ramped up and productive and the whole team is now having motivated focus on the end of the year.
Our NIPS* launch is driving volume and increasing our account take in account penetration in the OB segment. You mentioned another competitor I think [?] for many years had 15% to 30% growth year-over-year. We would never expect that to immediately turn off into zero. With that said as I’ve also pointed out confidence on the reproductive spaces that of the six million pregnancies in the US every year there is only one to two million of them to get carrier or expanded carrier screening or non-invasive prenatal screening and/or both.
So the former [?} business continued to perform pretty well as well as Natera Progenity and the smallish Quest and LabCorp businesses and we still feel that there is plenty of room to grow in reproductive. And then the third that we mentioned again we accelerated the pace of and kicked off a handful of pharma programs middle of the year which we do expect to contribute toward strong volume even as we close out this year and move into next.
So those are the three contributors to our view of the relatively back-end weighted as I did mentioned before yes we’d love to be in a more comfortable perch to hit our annual guidance. With that said we are presently tracking and it’s in the hand of our commercial and operating teams to execute the next six seven weeks.
https://www.fool.com/premium/coverage/earnings/call-transcri…
(*What are NIPS, you ask? Read this press release for more information:https://ir.invitae.com/news-and-events/press-releases/press-…)
When NVTA provides its Q4 and full year earning report in early February, how the stock price reacts will largely be determined by whether or not the company meets this 2019 forecast of sample volume and revenue, IMHO.
NVTA is the most “speculative” stock I own. I have sized my position appropriate to the risk/reward I assume. Therefore, my position is about 2.5% of my portfolio. My bet is that precision medicine is the future of healthcare in the developed world, and the company that builds the strongest foundation now has the best chance to dominate as the market grows and matures. This is one of those TMF1000 stocks, where if the thesis works out one doesn’t need to own a lot to realize significant gains, and if it doesn’t, not much is lost. I see nothing to invalidate my investment thesis to date, here it is:
Given the advances in science and the rapidly declining cost in effort and expense in mapping the human genome, personalized medicine is the next big trend in healthcare in the developed world. Invitae, led by proven industry leaders and attracting significant capital for research and development, has developed products that are superior qualitatively and price point-wise in a disruptive market that is expanding rapidly. Finally, Invitae is proving that scaling is critical to it business model: by consistently increasing the number of sample tests they perform, they are able to bring down the cost of test to the consumer, thereby significantly increasing the chances for profitability over time.
https://discussion.fool.com/deep-dive-invitae-34140364.aspx
I will remain long in NVTA through their Q419, year end earnings report. If they miss their 2019 guidance, I’ll dive into the results and reassess how enthusiastic I remain or not at that time. At this point, we are awaiting a binary outcome…either they meet/beat or they miss. All NVTA shareholders should be aware of this situation and determine how comfortable they are holding at this point. I would not be able to find fault with any NVTA shareholder who exited at this point. It is not, as the numbers indicate above, a slam dunk that they will get there.
As always, I welcome Fools thoughts on any or all of this.
Best, Swift…
Long NVTA