Invitae’s 3Q23 Results Drive Further Concern About Long-Term Viability as Cash Burn Goes Wrong Direction and Revenues Decline
11-9-23 (by: Scott Gleason) Invitae has released its financial results for the third quarter with revenue decreasing 9% to $121.2 million compared to $133.5 million in the same period last year. Management stated that the reduction is attributable to exited businesses and geographies and after adjusting for these changes revenue increased 4% on a pro forma basis. Street forecasts called for revenue of $120.8 million. Hereditary cancer revenue declined year-over-year and the company’s guidance implies a sequential step up in revenue. Management stated on the call that it is seeing quarter-over-quarter hereditary cancer growth in the double digits in the fourth quarter and expects that to continue. Revenue per patient improved in the quarter to $474 versus $459 in the prior period. Myriad, Invitae’s largest competitor recently reported its results with strong hereditary cancer volume growth of 18% citing market share gains.
The company noted on the call that it believes the recent changes in its MRD test chemistry address its recent patent litigation with Natera while also improving sensitivity, though the litigation between the companies is ongoing.
Non-GAAP gross margin was 52.4%, marking the ninth consecutive quarter of improvement. The company took large asset impairment charges in the quarter which could reduce its amortization expense in future periods. Non-GAAP operating expense was $122.1 million, representing a decrease from $150.0 million in the third quarter of 2022. As of the end of September, Invitae had $264.7 million of cash, cash equivalents, restricted cash, and marketable securities, compared to $557.1 million as of December 31, 2022. The company burned $72.2 million in cash in the quarter, with cash burn from operations increasing on a sequential basis, and cash burn is the primary investor concern. At the current burn rate, Invitae has only four quarters of cash remaining and despite a recent restructuring still carries significant debt obligations. Management noted that the company is engaging with its stakeholders to strengthen the balance sheet. The company noted that certain actions such as capital raises, asset sales, and business refocusing are all on the table.
Invitae reaffirmed its fiscal 2023 outlook, expecting revenue in the range of $480-$500 million and non-GAAP gross margin in the range of 48-50%. At the mid-point the guidance implies revenue of $131 million, a significant sequential step up versus recent trends. Ongoing cash burn for 2023 is expected to be in the range of $220-$245 million.