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Invitae's Market Opportunity Grows to $45 Billion After Latest Acquisition

ArcherDX has decided to embrace the well-known axiom, "a bird in the hand is worth two in the bush." Instead of going ahead with its planned $100 million initial public offering, the Colorado-based developer of cancer tests decided to take a $1.4 billion offer from Invitae Corp. (NYSE:NVTA).

Investors clearly liked the acquisition, pushing shares of Invitae up more than 50% this week to near $29 on June 26. Earlier in the day, the stock price touched more than $30, an all-time high for the 10-year-old San Francisco-based genetic information company.


ArcherDX has more than 325 unique products and is developing in-vitro cancer diagnostics, with Food and Drug Administration submissions expected later this year, according to an article in FierceBiotech. The company's Stratafide DX and Personalized Cancer Monitoring efforts have both received breakthrough device designations from the agency.

With the addition of precision oncology startup ArcherDX, Invitae is making certain it gets a foothold in the growing use of targeted therapies for treating cancer based on a patient's genetics and type of tumor, reported Xconomy.

ArcherDX also has collaborations with AstraZeneca (NYSE:AZN) and Bristol-Myers Squibb Co. (NYSE:BMY) to apply its assays to the drugmakers' clinical cancer research.

Invitae has been hot on the acquisition trail, adding five other genomic-related companies in the past year. The company was especially active in March, when it acquired YouScript, Genelex and Diploid.

Invitae's offerings include tests for heart disorders, metabolic conditions, rare diseases and inherited forms of cancer. Sales of its products were more than $212 million last year. Besides helping patients learn the risk of developing inherited diseases, the company is helping several pharmaceutical companies with patient diagnosis, clinical trial recruitment and drug research.

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Covid-19 threw a monkey wrench into Invitae's forecast for the year. The company had a strong first quarter going until mid-March, when it was forced to suspend guidance for 2019 as volumes were cut in half, explained President and CEO Sean E. George during an earnings call with analysts.

"I do think it's worth noting that the trajectory we were on for the first ten weeks of the year would have had us well on the path to exceed around 850,000 samples for the year and handily beat our revenue expectations," George said.

Billable tests are important measures of the company's growth, and in the first quarter billable volume grew by nearly 75% from the first three months of 2019. The increase was strong across all segments, with reproductive and biopharma programs standing out.

Sales in the first quarter were $64.2 million, up 58% from the same period a year earlier. Gross profit climbed 23% to $23.8 million, while the net loss was $1.03 per share compared to 47 cents a year earlier.

According to an article in Nanalyze, the number of Invitae's billable tests needs to grow faster so the company can obtain enough funding to cover its losses until the benefits of economies of scale kicks in. The article notes that genetic testing will be the foundation of personalized medicine, and Invitae now competes in a $45 billion market after the ArcherDX acquisition.

Disclosure: The author has a position in Bristol-Myers Squibb.

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This article first appeared on GuruFocus.