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Invitae Corp (NYSE:NVTA)
Q2 2019 Earnings Call
Aug 6, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Invitae's Second Quarter 2019 Financial Results Conference Call.

[Operator Instructions]

Laura D'Angelo, you may begin the conference.

Laura D'Angelo -- Investor Relations

Thank you, operator. And good afternoon everyone. Thank you for joining us for our second quarter 2019 financial results earnings call. Joining us today are Sean George, our CEO; Shelly Guyer our CFO; Lee Bendekgey, our COO; Katherine Stueland, our Chief Commercial Officer; and Executive Chairman, Randy Scott. As you listen to today's conference call, we encourage you to have our press release available, which includes our financial results, as well as metrics and commentary on the quarter.

Before we begin, I would like to remind you that various remarks that we make on this call that are not historical, including those about our future financial and operating results, our plans and prospects, the focus of our business strategy, our plans to integrate and manage businesses we acquire, market opportunities, future products, service -- services, our product pipeline and the timing thereof, demand for and reimbursement of our services, and our investment in our infrastructure and operations constitute forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act.

It is difficult to accurately predict demand for our services and therefore our actual results could differ materially from our guidance. Our guidance on future Company performance assumes among other things that we do not conclude any additional business acquisitions, investments, restructurings or legal settlements. We refer you to our 10-Q for the quarter ended March 31, 2019 in particular to the section titled Risk Factors for additional information on factors that could cause actual results to differ materially from our current expectations. These forward-looking statements speak only as the date hereof.

To supplement our consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States or GAAP, we monitor and consider non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP net loss, and cash burn. We encourage you to review reconciliations, which are available in the press release.

With that I will turn the call over to Sean.

Sean George -- Chief Executive Officer

Thank you, Laura. Invitae is now a decade in to the execution of a contrarian model in healthcare, demonstrating that aggressive investment in technology can successfully remove barriers, such as cost or access. The execution of this model has led to increased utility and subsequent demand of genetics for the billions of people on the planet, we believe could benefit from this most fundamental of personal health information.

Every year, just in the United States, more than 1.7 million people are diagnosed with cancer. But only a fraction of them are getting the genetic information they need to guide their current care. Invitae continues to lead with science in demonstrating the importance of offering comprehensive genetic testing for everyone with cancer and therefore broadening testing guidelines. Beyond cancer, we have found exactly the same to be true in other areas of medicine. More people would benefit from access to genetic testing to inform their healthcare choices,

For example, of the 6 million pregnancies in the US per year, only a small percentage of those currently benefit from the full suite of genetic information that can be of great value for the health and well-being of both the mother and baby. Invitae also believes there was a clear benefit in making genetic health screening available to those without a strong personal or family history that were traditionally weren't testing. With the launch of our proactive offering a number of years ago, we opened up genetic testing to a completely new set of customers.

Our approach is gaining ground with the broader commercial launch of our direct channel, which enables those customers for the first time to order the same clinical grade testing that experts have come to rely on from Invitae. With more and more data supporting the broad utility and value of genetic information across all stages of life, and our success in lowering the barriers to people gaining access to comprehensive clinical-grade testing, we are moving toward a day when personal genetic information is considered a necessary part of everyone's routine healthcare.

Another opportunity to increase access to such testing is through our biopharma partnerships. With the addition of a dozen partnership programs in the second quarter alone, we now have a growing network of more than 50 biopharma partnership programs. The growth of these programs, allows us to accurately diagnose more people than ever. And then, upon including them in our network, introduce them to partners across the healthcare continuum that can help with appropriate treatments, therapies, and qualify patients for clinical trials. We envision this trend accelerating in the foreseeable future as monitoring, screening, and prevention strategies, as well as therapies become more tailored, better targeted, more cost effective and result in better outcomes.

In a very short period of time, we have ramped up commercial insurance coverage now approximately 275 million lives in network. More importantly, the payers are now starting to engage more strategically, given the growing importance of genetics in the provision of healthcare. We are honored to be named one of only seven companies in UnitedHealthcare's Preferred Lab Network effective July 1st. We continue to believe that broad capabilities, quality, transparency and price matter, especially in healthcare.

As more and more payers, self-insured employers, integrated provider networks and governments around the world evaluate the various tools available and partner with the best providers for the genetic information needs, we will continue to execute and invest to further position Invitae as a leader in advanced medical genetics.

We are proud to have grown from 2,029 samples and a few hundred dollars revenue in 2013 to where we are now. Our progress in the first half of 2019 gives us confidence in our ability to deliver on our guidance of more than 500,000 samples accessioned and more than $220 million in revenue. This is another year of investment for Invitae, as we lower the cost of genetic testing across our platform and at the same time rapidly add to our content and capabilities. We continue to deepen and widen our competitive moat as we now make it even easier to access genetic information needed across all stages in life.

I will now turn the call over to Shelly to highlight our financial results for the quarter.

Shelly Guyer -- Chief Financial Officer

Thank you, Sean. Volume matters. We are pleased to have posted a 52% growth in accession volume over the second quarter of last year, and an 18% sequential growth from the first quarter of 2019. We accessioned more than a 111,000 samples this quarter with billable volume of nearly 111,000. Notably, we experienced growth across all segments especially strong volume from international markets, which again accounted for over 10% of the total accession volumes. Several comments on how to think about modeling our business moving forward.

This quarter, the accessioned and billable volumes were nearly the same, in line with our historical experience that the difference between accessioned and billable volume is small in the second quarter. But we expect that due to seasonality, there will be a larger gap between accessioned and billable volumes in the third quarter as shown on the slide in the appendix. And as you think about the remainder of the year, remember that we normally experience seasonality in our growth in accessions between the second and third quarters.

Last year we only grew 7% between these quarters. And how we track in to our guidance? We guided to 40% of the volume in the first half of the year with over 205,000 accessions we stand at over 41% of our annual guidance in the first six months of the year. We reiterate our guidance for the year of over 500,000 accession samples for 2019.

In the second quarter, we generated $53.5 million in revenue, which represents a 43% growth in quarterly revenue year-over-year. This quarter, over 70% of our revenue came from third party payers, and just under 30% from both institutions including partners and patient pay. The increase in percentage from third party payers is largely due to the full effect of Medicare paying for the del/dups for HBOC and Lynch syndrome, as well as from continued increases in insurance payments.

In terms of ASPs, our average was $471 this quarter, down from $500 in last year's second quarter, which included a one-time $2.3 million benefit for Medicare payments for HBOC's del/dup. Excluding the one-time del/dup payment, the comparable number from last year would have been $466. And while this quarter is $471 is up from the first quarter's ASP of $455. Remember that we had some writedowns in the first quarter that we don't expect to repeat. Taking these into account, we believe that we will have our ASPs bounce around a bit, but that we will see the ASPs trend lower in the near term as our payer and product mix changes.

As we continue to get more test in the contract and collect more from the third party payers, we expect small quarterly increases in ASPs. But these will be offset by lower pricing in areas that are growing like our patient pay and international businesses, as well as the product mix changes. While, we are pleased with our strong revenue growth this quarter, our historical experiences that our third quarter revenues traditionally only up slightly from the second quarter, due to seasonality in the underlying billable volumes. We believe that this year we'll follow this trend.

So in summ, revenue in the second quarter is on track with our annual guidance. Recall that we had suggested that around 40% of our revenue historically came in the first half of the year. We achieved 43% in the first half of this year. We reiterate our annual guidance of over $220 million in revenue for 2019. In the second quarter of 2019, we reduced COGS to an average cost per sample of $252, down from $279 in the second quarter of 2018, representing a 10% reduction year-over-year. The COGS per sample increased from the first quarter primarily due to a large stock based compensation expense in the quarter for our annual retention in merit-based RSU grants totaling $1.5 million, which added approximately $13 per sample, as well as other factors including higher cost related to NIPS and our direct channel launch.

Just a reminder of my past comments on COGS, we expect COGS will continue to fluctuate as we introduce new products and bring new technologies online. Importantly, new products we introduce will have worst margins early on, and depending upon the uptake of those products could put pressure on our COGS. We made a commitment to make 2019 a year of investment, and we intend to Invitae eyes newly acquired technologies and products, and continue to target 50% gross margins.

We improved gross profit by more than 50% from the previous year, generating $25.5 million in the second quarter of 2019, versus $16.9 million in the second quarter of 2018. This quarter, our gross margin was 48%, up from 45% in the second quarter of 2018, which was aided by the one-time Medicare payments for del/dups and without this benefit would have been 42%.

As discussed last quarter, we are investing in several areas of the business to foster growth this year and beyond, enabling us to scale and offer additional products across all stages of life. For the quarter, we incurred operating expense, which excludes cost of revenue of $77.4 million, an increase of about 65% from the $46.9 million in the second quarter of 2018. But what are the current changes? The increase in opex of $21.8 million in the first quarter was due to several factors that need to be further explained, so you can understand the cost structure of our base business, excluding the impact of our acquisitions.

First, we had an increase of $4.9 million of stock-based compensation in opex in the second quarter, primarily due to the annual retention and merit-based RSUs granted. Second, we expensed approximately $2.6 million in stock-based compensation for the inducement RSUs granted to Singular Bio employees, which is expense to R&D. Third, we incurred over $3.2 million in one-time cost for the acceleration of options upon the close of the Singular Bio transaction, which is expense to G&A. And fourth, we expensed $1.2 million in legal and accounting acquisition-related costs for Singular Bio and Jungla.

The remainder of this increase from the first to second quarter in opex was due to growth in our base business. We continued our investment in selling and marketing and R&D with a total increased cost of over $6 million. In selling and marketing, we increased our sales headcount to approximately 190 at quarter's end and incurred additional marketing cost to support our NIPS offering launched in mid-February and our direct channel launched in early June. In R&D, we continued our head count expansion focused on scaling our business, preparing for future content expansion, improving the customer experience and driving cost down.

Now let's move to our cash position. At quarter end, our cash, cash equivalents, restricted cash and marketable securities totaled $254 million. Cash burn and non-GAAP measures totaled $33.2 million in the second quarter of 2019. On the first 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 continue to anticipate burning up to 50% more in 2019 when compared to 2018. Our burn could be as high as $150 million in 2019.

Our financial strategy is to focus on the increase of operating cash flows. While we've elected to push our path to GAAP profitability out and instead make 2019 a year of investment, we will operate the company to maintain the ability to swing to profitability with the resources on hand. In our press release, we have provided non-GAAP net loss per share reconciliation. We will provide these reconciliations every quarter until our obligations to Singular Bio for equity milestone payments have been completed.

How should you think about our future payments? If you look at the performance, you will see several categories. We do not expect future payments for acquisition related post combination expense, which totaled $3.2 million this quarter. However, you will see large acquisition related stock-based compensation charges. These charges were $2.6 million for the 10 days from deal closing to the end of the quarter. As we move forward, the compensation expense for each quarter may include both time-based and performance-based grants. Each quarter, we will break out these acquisition-related charges separate from our base business opex. We expect that this would last no longer than two years.

I will now turn the call back over to Sean.

Sean George -- Chief Executive Officer

Thank you, Shelly. We've had a strong and busy quarter, with the launch of our direct channel to enable consumers to initiate a clinical grade genetic tests for the first time, the presentation of data at various conferences demonstrating that more people could benefit from genetic testing, the acquisitions of both Singular Bio and Jungla whose technologies, enhance the quality and scale of our business, and continue to work in expanding our genome network with more biopharma partnerships. The pace of our industry's consolidation is picking up. Volume and scale matter. Technology infrastructure will win the game in the long run.

And we have demonstrated the ability to acquire and successfully integrate technologies and platforms over the last several years. We've grown the company explosively over the past 25 quarters, continuing to average double-digit quarter-over-quarter growth.

Our model is working and the timing is right. Around the globe in all corners of healthcare-related industries, the fundamental importance of genetic information is coming into focus and Invitae is in the right position to lead in this new era of medicine. Before we move to Q&A, I wanted to take the opportunity publicly to express my deepest gratitude and upmost thanks to Randy, who is here with us today.

His vision for the future has been a guiding light, not just for all of us here at Invitae but for many across the entire industry. While we will miss his direct official involvement in the future operations of the company, I very much look forward to our continued strategic brainstorming and working with him as an internal friend of the company. Thank you, Randy for everything you've done and the many more things you're going to do for Invitae, the industry and the world at large.

Randy Scott -- Executive Chairman

Thanks, Sean. Boy, it's been a fantastic experience being a part of the founding team here in Invitae and I really couldn't be more excited about the future, because in my opinion Invitae really is not just building a company, but an entire ecosystem. So as I retire and take some time up to spend with my amazing wife, who has put up with me starting and running companies for 35 years and kids and three of the cutest grand kids you've ever seen, it really is knowing that Invitae is in great hands going forward.

So next year after I've taken some time off, I plan to open a family investment office and to continue investing in the ecosystem that Invitae is creating and being a great partner going forward. So with that, let me just say that I plan to be a very significant shareholder for Invitae for a very long time and as I turn not only the call, but the chairs roll back over to Sean, it's just really been one of the great choice my life to work with you guys as a team.

Sean George -- Chief Executive Officer

Thanks Randy. Thank you for all of us. And with that, we'll, we'll turn the call over to operator for Q&A.

Questions and Answers:

Operator

[Operator Instructions] And your first question is from Tycho Peterson with JP Morgan. Your line is open.

Unidentified Participant

Hi, thanks. This is [indecipherable] on for Tycho. First, can you comment on what are the key hurdles that need to be addressed to hit the 50% long-term gross margin goal? And what does that the acquisitions of Singular Bio and Jungla do to expedite that timeline?

Sean George -- Chief Executive Officer

Yeah, I think I'll let Shelly comment on exactly where we are. I can say the Singular Bio, of course there are price points for non-invasive prenatal screening in the 200 plus million pregnancies around the globe that are -- that the Singular Bio technology will allow us to hit and maintain our 50% gross margin target. Jungla, we spent a good four plus months in a pilot or collaboration with them before we really started moving to discussing teaming up together. And in that, we've gotten updated to know that we could significantly reduce our variant unknown significance rate as well as reduce the labor involved in resolving those. That will actually have an impact -- we will start enjoying that impact within a couple of months, again against the backdrop of all of the larger puts and takes that affect our COGS line, which I think I'll let Shelly speak to now exactly where we're at and where we see going forward.

Shelly Guyer -- Chief Financial Officer

Thanks for the question. So 48% was our gross margin this quarter. We have had quarters that have been above that, and we told people that we anticipated that it would jump around a bit. So as we look at it, given that is a target, and it's not going to be specific, we anticipate that by collecting more, let's say, from the third party insurance, as we begin to get some more of those payers to pay us higher rates, not only for oncology tests, but also for other tests, reproductive and other diagnostic sorts of tests so we can drive up the collection rate.

Similarly, we have control over the costs in many of respects. For instance, we've been putting a lot of money in the medical interpretation and as Sean mentioned, Jungla which should help us be able to bring some of those costs down but also to enable us to scale over time. So it's really the volume throughput, which allows us to have much more control on driving those long-term costs down. So it's always in a quarter whether we're investing or whether we are trying to drive the COGS specifically down and that will mean that we will have bumps around.

With time, the decision is to either try to collect more or we can have decisions to bring the pricing down and to be aggressive with that or we can add more content on the COGS or drive that down. So all of those levers are available to us, which is why we've indicated that it will jump around that 50% in any of those one -- any of those levers will assist us in helping to further our business in say around that 50% level.

Unidentified Participant

Great, that's helpful. And then you mentioned that volumes from both institutions and patient pay were just under 30%. So I was wondering, what is sort of the positive early traction you're seeing following the patient-initiated testing platform launch at ASCO? And how you're expecting that to evolve?

Sean George -- Chief Executive Officer

Yeah, I think I'll let Kevin speak to the evolution of it. I think early returns are in and basically as expected, we expect kind of that direct channel to build modestly. Again, we're spending orders of magnitude less on those, that type of channel than kind of I think people are accustomed to for consumer-type products. And an important measure, I think on the mix here is that that direct channel yields of -- all three payment types, both all three patient pay, institutional and insurance bill. The channel is the volume driver that we're using to generate the interest and as, and I think as expected, and I think also, interestingly, the mix of what people are looking for is quite different.

Some are coming in through that direct channel for diagnostic tests and R&D qualified for insurance payment. Some are coming in as a part of one of our, almost 50 biopharma partner programs that enjoy for which that ease of access and easy use is a key feature. And then of course, some are finding this information interesting enough that they are just willing to go ahead and start the process and pay for themselves. So all three payment types will come in through this channel. So as it's broken out in the K's and Q's, it's not a one-to-one correlation. But with that -- with that as a clarification I think Katherine can speak to what to expect in the future.

Katherine Stueland -- Chief Commercial Officer

Sure, thanks, Sean. So we've spent five and a half years building a really strong medical brand that genetic counselors, genetic experts and other clinicians have grown to trust and rely on, and ensuring that with the introduction of this new channel, we are able to continue to uphold that -- those relationships and that brand that was really of paramount importance to us as we introduced our direct-to-patient channel initiation. And so the initial response from clinicians after we did some education with them on it was very positive. And so we are, and our nascency of experimenting with various marketing strategies mainly digital right now and we'll plan to spend the next several months continuing to experiment there with pretty minimal spend.

We'll keep you posted as we learn more, if our spend looks to be more than what we currently have budgeted for but as Sean mentioned, our intention is that it will be orders of magnitude less than what you see pharma or direct-to-consumer ancestry companies do spend. So this year as we've mentioned in the past, minimal contribution to volume from the direct channel, but more as we look to 2020 and beyond.

Unidentified Participant

Great, thank you. And last one from us. Can you briefly comment on interest from pharma and how you are seeing pharma partnerships evolve? Thank you.

Katherine Stueland -- Chief Commercial Officer

Certainly, so we added 12 additional programs this quarter, and what we've seen is a handful of things. One, we're adding additional partners to existing programs and we are adding additional programs to existing partners too. So we're starting to see some -- some same-store sales, if you will within the pharma channel. We also introduced several new programs, four Detect programs where we're screening for muscular dystrophy, prostate cancer, LSDs and heart conditions as well, cardiomyopathies and arrhythmias. And we have signed on at least one partner to those programs and look to bring on additional partners and we're really looking forward to seeing what the returns are on those programs because they are really addressing unmet needs for patients who are not getting tested.

These are also in conditions where they are gaining data to show the utility of genetic testing in these areas. And similarly, these are areas where pharma companies are currently investing in clinical research. So that is how we chose those four areas and it really came up in terms of pharma conversations where they were looking to be able to generate data in those areas. So, continuing to really build a strong and growing network of patients as well as pharma owners.

Unidentified Participant

Great, thanks.

Operator

Your next question is from Doug Schenkel with Cowen. Your line is open.

Doug Schenkel

Hey, good afternoon. Before getting into my questions, I just want to say, Randy, you've had a very profound impact on Invitae and the broader world of genetics. And I know this is just a break in the action for you rather than something that warrants the so long or a good bye. So I'd just say, congrats and enjoy it and we'll talk soon. So on -- I guess my first question is really on the growth drivers. What is the expected impact of being part of the United PLN effective July 1st? Is that something that you expect to have to drive volumes at some point this year or beyond?

Sean George -- Chief Executive Officer

Yeah. So I think our expectations, I'd say in the early months and perhaps in months, meaning three to six months, is I think likely to be modest. These kind of programs tend to take a while to get ironed out -- kind of the systems, the same system that we've been working with struggling over the many years to kind of get all the payment up to full freight are the same systems that are also rolling out these programs. So they tend to -- they tend to take a while to iron out the kinks.

With that said, I think in the relatively near-term, they do have an effect. These kind of steerage programs are effective in a lot of other aspects of the, I'd say commercial insurance business, and we think that it is a -- longer-term, it is certainly a very important piece of our commercial strategy. We have always suggested even -- for many years, it looked like we didn't really understand what we're talking about. But we had suggested that at some point in time, people who pay for genetic testing, genetic information are going to start looking at the line item and asking questions and it would appear that that has begun and with United as a leader in it, I think we expect over the next year for many more to follow suit.

And again, it has always been a part of our commercial strategy. The suggestion that the purchasers of our, the information that we are the providers that will help us in driving the volume and it looks like -- it looks like that day has come and we do expect to see that influence increase over time.

Doug Schenkel

Okay. I guess another growth driver question which will segue us into a quick discussion on guidance assumptions. So on non-invasive prenatal testing, what's been the impact on new account growth in the early going? And what expectation for NIPT cross selling in these accounts is embedded into guidance, given the second half ramp that your guidance implies especially Q3 to Q4?

Sean George -- Chief Executive Officer

Yeah, so there is definitely a -- I would -- given the seasonality, mainly the summer break impact on Q3, at the beginning of the year we suggested and still at this point it looks indeed that -- the impact of NIPS offering this year, and its creation of new accounts and allowing us to also put carrier with it along with other. We have a variety of other tests in that selling, NIPT cross selling. Yeah, a significant impact on the year will happen toward the end of the year, end of Q3 into Q4 and that's still our outlook. Nothing's changed there or put a different way. It hasn't -- it hasn't launched wildly in excess of our expectations nor do we think it's going to be a major driver of Q3. So it's kind of launched a few months ago, it is proceeding about as we expected. We are seeing new account pick up. We suggested that without NIPS, there were some repetitive health accounts that we're just not interested in having conversation. That is indeed playing out and again we do -- we do see it and expect it to start picking up the growth in our repetitive health accounts toward the end of the year.

Doug Schenkel

Okay. So recognizing you clearly had a lot of momentum in this quarter than have over several quarters. Just to be clear about the math in terms of sequential growth, Q2 to Q3 you're assuming. I think you said about 10% sequential volume growth that would seem to imply that you're looking for volume growth of about 40% sequential Q3 to Q4. So again there is a lot of momentum here and I appreciate what you just walked through Sean on NIPT, NIPS but that does seem to be a big jump at least on the surface. So is it reproductive that should give us more confidence in the achievability of these -- of this target, or is there something else that we should in addition to NIPS be looking to?

Sean George -- Chief Executive Officer

Yeah, it's not only reproductive. So reproductive is definitely a big chunk of that. We are seeing uptick in the pharma partnership volume. So that is, that is growing rapidly. We are also seeing, as we kind of highlighted last quarter, the international business is picking up pace. And so when you take all of those involved that's what gives us confidence about a big Q4 and I think also, and I think this is. I'm glad you brought up, because it's a very familiar conversation. This is the exact same Q3 conversation we had last year. At the end of Q3, remember it was only 7% growth. People were freaking out that oh my gosh, there's no way you can have such a monster quarter. The seasonality is real, it is a very real factor, Q4 is definitely big quarter. So when you take -- when you take those three factors in order, plus the seasonality where we think we're, I think we're in great shape to meet and exceed the guidance.

Shelly Guyer -- Chief Financial Officer

The only -- I'd make there is that we did mention that we uptick to it in our sales force in the quarter in that as those people start tracking and they take some time to get on-boarded, we would expect late in the third quarter and into the fourth quarter that they will all be fully productive by that point in time. So that's one other thing that I think gives us the confidence that you are --

Sean George -- Chief Executive Officer

Yeah that's a good point. I think it's worth one point of views on that, in the past, we've, it's been flowing off where we've typically out of the entire of the new adds almost entirely in the month of January, the size and the territories this time around, we didn't really finish that process up until April. And then of course, with a three month to six month burn in that, that's the other factor that gives us a late contribution from the new, the last bit of the new ebbs.

Doug Schenkel

Okay, that's helpful. And Shelly, just last one for you. Really a clean-up question. Last quarter, you had some revenue reversals working against you. In any given quarter, there can be reversals. There can be on the flip side, I think some accruals that can work in your favor. Anything to call out this quarter in terms of things that may be worked against you or worked -- it worked in your favor in terms of reversals or accruals or anything like that?

Shelly Guyer -- Chief Financial Officer

So, let me answer that by differentiating between the one-time pick ups that we had historically for the del/dups. And that was in the second quarter last year of $2.3 million and that was not expected, and that was for a test going back a full year. So that was $2.3 million in the second quarter. So some of the comparisons this year, you have to take that out to be able to have an apples to apples with this quarter. The other time that we got that one time pick up was in the fourth quarter and that was $1.9 million, also for Medicare but that time for Lynch syndrome. This year, we have not had any of those one-time that we've broken out. If you look at the charts in our slides, you don't see any dotted lines. So yes, we had some dimunition and some things that we took, but they weren't from exogenous factors. They were from our internally controlled things. And as we did indicate, it was probably on the order of about $1.6 million and it was largely related to acquisitions and reviewing some of the institutional expect prices in the first quarter and we took those down.

What you will always have in every quarter under the rules of 606 is that you set your expect prices and that as you find your collections changing over time, you can increase or decrease those. In this quarter, you'll see in our 10-Q, which is I hope now filed $2.4 million of upticks. That means that we were conservative historically in some of those amounts, and that just across the board in general we're collecting better than we had anticipated. So that's $2.4 million. But that and the first quarter none of those were exogenous factors. Those are all just looking at our collections and saying what's up and what's down. And we'll continue to do that every quarter under 606 as we move forward and we'll report on those. Nothing spectacular. All just normal course of business this quarter.

Doug Schenkel

Okay, very helpful. Thank you.

Operator

Your next question is from Kevin DeGeeter with Oppenheimer. Your line is open.

Kevin DeGeeter -- Oppenheimer -- Analyst

Hey, congratulations on a really strong quarter guys, and thanks for taking my questions. With regards to the biopharma channel, can you just talk to us a little bit about -- give some framework as the relative order of magnitude of contribution to pharma and kind of also to what extent now that you do have that phase initiated channel, are you seeing a change in uptake of your patient volumes that are may in part be driven through access through that channel?

Sean George -- Chief Executive Officer

Yeah. So I think the very high level and I think then we can go in a level details you want. The pharma business, the paid revenue there shows up in the filings in the institutional. And that I would just, we don't break out that versus kind of academic institutes, but you can kind of say, it's a good portion of that institutional revenue that's represented there. On the business basis, again since we don't break out by the disease areas and frankly the new pharma partnerships are now kind of beginning to encompass our entire menu. I would just say that it is a significant contributor to our overall growth and certainly our revenue growth. Albeit that being said, the clinical business is still the driving factor of both the volume and the revenue. So very important contributor, a rapidly growing contributor. But we're not at the point where it is the swinging factor on the business. And frankly, if we continue to do things right, it will, the whole thing will grow and it will continue to be a very important, but not major contributor.

I think the key -- the key thing on the patient pay volume or again I think this is also where -- and look we internally get tripped up on those two. So it's worth just clarifying there -- there is the sales channel and then there is the direct channel, which is the direct marketing and digital advertising. And both of those channels can produce either patient pay, institutional or insurance bill business. In the direct channel efforts today that we just recently launched, we've seen a mix of all three payment types and so the shortest answer to your question is, given the small numbers and the fact that there is a mix of all payment types, the overall impact of that direct channel marketing activity on the business has basically been minor at best against the broader scope of everything that's going on.

Now as Katherine pointed out that direct channel over in the years to come will become a bigger -- we think will become a larger portion of the volume driving. And in that, I think you would expect to start to see the payment mix tilt toward patient pay and institutional. And that's because, again without going too much in the details, obviously, the patient pay aspect, that's pretty clear that's people and families with credit cards, but also a large number of institutions we think are going to take us up on going to ease of use, and ordering through that channel. And by those, you could imagine large physician practices, employers, self-insured employers, employer groups, etc, etc and in addition to academic and testing centers around the globe for which it's just much easier to reach people with that easy direct logistics. So I think, I hope that answers your question. Was there a more detail on the pharma side you wanted to go into?

Kevin DeGeeter -- Oppenheimer -- Analyst

No, that's great. It's very helpful. And then maybe just one more sort of strategic question. I mean there has been a fair amount of M&A activity in the group. I think you've had a pretty clear path over the last couple of years in terms of your -- Invitae style kind of bolt-on, more technology oriented transactions. But any thoughts as to where there might be opportunities strategically to get to some of the longer-term goals more rapidly, bring in the larger and more kind of commercial stage assets into retail, particularly given the currency you have here in the pharma stock, guys?

Sean George -- Chief Executive Officer

Yeah, well, again I think we are still wildly undervalued. So we still have to evaluate it on a one-off basis, that's how Kevin, how to throw that in there. Look, I think the way and this is a -- it's actually, it's a telling question of the way we view both the industry and the way we've built the business. Our view of M&A, is that the targets we acquire really have to have a pretty clear path to being able to fully integrate into our technology platform kind of bolting on businesses and adding them and kind of filling in the gaps with logistics and running multiple -- running multiple platforms in parallel just doesn't get us to the COGS that we need. And so they are in there and is kind of the answer to question is a bit of you'll notice a kind of a marquee all the way from the very smallest to the largest of our acquisitions are things that we have relatively clear path to completely integrate it into the data flow of the platform. Look, more or less integrated in the data flow the platform.

I think when you start thinking about much, much larger commercial assets and yield that becomes harder and harder to imagine. And I think I'll just leave it at that. It's not a no, but the amount of work and the amount of that kind of integration work really goes up dramatically, the more established, the more different, the more I would say traditional the approaches. And in those in, it's not for lack of -- looking at, in those examples, we often come to the conclusion that the investment, the better use of capital is to build it on the modern infrastructure as opposed to trying to integrate a traditional technology stack into a new one, but again only by way to try to give you a sense of the consideration. Not necessarily, yes or no. I think we have a pretty active M&A sourcing and diligence pipeline and we consider a lot of things.

Shelly Guyer -- Chief Financial Officer

It's Shelly. The only thing I would -- Kevin, the only thing I would, it's Shelly. The only thing I would add there is, yes, we look at the make versus partner versus buy in. So, as you may recall for somatic, we originally partnered and then decided that we could actually do that on our own probably building on a better stack as we developed it internally. Remember that we did two out of six acquisitions, were together in a new area of reproductive health. And so we will look at complementing to build the full suite of types of products that are being asked for by our partners, whether that be reproductive whether that be somatic, etc. We will look at all the opportunities and then with the technologies, not only these two recent ones which helped dramatically with COGS. But remember AltaVoice got us into the partnership type business. And so we'll look at across the board at what's being requested by our partners and our users, etc, and so that we can offer the vision that we've been talking about to build all the suite of products at the best cost, accessible to all and make it easy and sticky for our customers to use us. And so that's where we look across all of those various contributors to our business development.

Kevin DeGeeter -- Oppenheimer -- Analyst

Great, thanks so much.

Operator

[Operator Instructions] Your next question is from Puneet Souda with SVB Leerink. Your line is open.

Puneet Souda -- SVB Leerink -- Analyst

Yeah, hi. Thank you. Thanks, Sean, Shelly. If I could first touch on non-invasive prenatal screening and your acquisition of Singular Bio, just help us understand, how you are thinking broadly about the NIPT opportunity here, maybe the market strategy and potential COGS reduction you can derive from the technology? And sort of could you elaborate a little bit more on the timing given you've had this couple of weeks or maybe a little bit more, since you acquired the company?

Sean George -- Chief Executive Officer

Yeah, absolutely. I think kind of on a high level, let's just take a step back, our stated goals in reproductive health are from a woman considering having a child, all the way through the one year pediatric check-in. There are currently anywhere from about half a dozen or more genetic tests that may or may not be run to aid in both outcome healthy mom and healthy baby. Just in the US, there are 6 million pregnancies a year, a very, very small percentage of them take up that information, as a part of general care and that's, and that's what we're really focusing on is everything from fertility testing, pregnancy complications, carrier screening, non-invasive prenatal screening, amnio, CVS, all the reproductive suite up to and including a neonatal test that may in the very near future, I'll include everything from a kind of the metabolic newborn screening type panel we run today to exomes and genomes, in the relatively near future. So that's how we view the reproductive health clinical market, it's kind of think of it as 6 million, I mean just in the US per year that are going to go through that journey and could use that information. If you think of the whole world, it's actually over 200 million pregnancies. And given all of that information, I mentioned half a dozen or so more tests, some are covered by insurance, some are covered by insurance wholly, some are covered by insurance partly, some are not covered by insurance.

And so our view is that depending on what kind of -- how much information an individual would like to receive in that arc, there will be different price points. And we want to make sure that we have price points that can serve the entire globe, the 200 plus million women around the globe that become pregnant every year and all the way up to those individuals interested in getting the absolute best cutting-edge most information leaving as little a chance as possible and the price points associated with that. So that is a fairly long backdrop to answer the question that -- Singular Bio allows us to dramatically reduce the cost of goods for non-invasive prenatal screening and that we think that will be essential in hitting some of the price points that we think will really unlock the true global demand for it. And that's of course why we acquired them. There are -- the team has already -- it was -- in terms of logistics is pretty simple. They were a few blocks away. The team is now here, we've moved their development laboratory where we think we can get it into production within 18 months or 24 months somewhere thereabout.

And I would add the other -- by the way the other benefit for really acquiring some small really innovative shocks as you pick up, you pick up great start-up talent that is used to working in an environment that is very unforgiving and timeline focused and tend to be pretty, pretty experienced folks that understand the technology well and with all our acquisitions we've -- with many of our acquisitions, we've been able to add that to the Invitae culture and this is no exception.

Puneet Souda -- SVB Leerink -- Analyst

Great, thanks for. Thanks for that detail. So if I could pull back a little bit and just look at the menu expansion opportunities that you have all -- menu expansion overall that you've talked about and it seems like a number of opportunities that we're seeing where you know Invitae is taking steps, I think carrier screening and NIPS bundle, which we are hearing more about, there is a proactive testing or the patient directed testing effort that you have ongoing. And then you have the DETECT programs on top of it for, I think that started in July for prostate and muscular dystrophy and other health condition. So I'm trying to understand when we put that together in the framework of your full year guide, which is 500,000 tests and going to a million and doubling essentially. Help us understand how much sort of contribution, should we expect from some of those efforts versus the core business, which was more hereditary and breast and ovarian cancer? And how should we think about these other, these additional drivers driving the next -- over the next two years and sort of what sort of volume should we be expecting from these efforts?

Sean George -- Chief Executive Officer

Yeah, no, it's a great question. And I think it also, it presents the opportunity to kind of frame how we're thinking about it. Yes, the guidance this year for the 500,000 samples and all of the revenue associated with that -- that's, that is we hope that by covering that arc of care, whether it's the reproductive arc or the cancer arc or the cardio arc, by providing that full arc of care from start to finish, we hope that we will start demonstrating that there are multiple datasets that we can deliver and add value for the patient and subsequently get paid for.

However, I think for this year's guidance, we really aren't anticipating a whole lot of that nor meaningful impact from it. So this year is very much kind of a sample by sample ASP, we're targeting. If you do the math, it's around 440 per sample ASP this year. And that's kind of it -- as we look aspirationally until next year and as a reminder, we provide guidance -- routinely, we provide guidance in January but aspirationally as we think about a million samples of $500 million in revenue next year, we absolutely are expecting a contribution of the idea that multiple tests would be ordered off the same sample that results in one part of the family would leave lead to testing and results in the other part of the family that for example integrated care networks would be interested in not only the data that is answering the question for the individual at the time of clinical care, but also data that could answer larger population based questions for the larger management of their population and thus you could create the value multiple times off the same data set for the same patient. That will definitely be a feature where we are aiming to make that a feature of that aspiration for next year.

To the extent what percent is that versus the like -- I think you referred to as a core business, again that's going to be. So that is actually the core business model. We've just been building -- we've just been using the current diagnostic testing industry in the way that it works as a -- building up into it as a prelude to it and we will be -- we were transforming in wholesale and so I think we will, we will do our best next year to map, kind of here's how many samples in the old lingo this would be, and translated to how many 'discrete' test ordered, but we do anticipate next year, the revenue on a per patient basis to change to something that is more interesting kind of year one revenue per patient, year two revenue per patient, year three revenue per patient and the associated allocated COGS accordingly.

Puneet Souda -- SVB Leerink -- Analyst

Okay, that's great. And if I could just squeeze in one on the commercial front, could you just I don't know if you gave the sales rep count that you have currently and sort of where does that go by the year end in terms of the expansions that you're doing?

Katherine Stueland -- Chief Commercial Officer

Sure. So we have about 190 folks working on the sales team and we expect that that's going to be pretty steady by and large between now and the end of the year.

Shelly Guyer -- Chief Financial Officer

We do sometimes hire at the tail end of the fourth quarter to be sure that people are ready in January of the New Year. But we wouldn't expect that they would be productive if you're thinking about, how many of them could generate volume this year, this is really that group that would be able to do that.

Puneet Souda -- SVB Leerink -- Analyst

Got it. Okay, great, thanks guys.

Operator

Your next question is from Jeffrey Cohen with Ladenburg Thalmann. Your line is open.

Jeffrey S. Cohenwith

Hi, thanks for taking the questions. You spoke a little earlier about global, now that your accession rate hit 10% on the international basis. Could you talk a little bit about some of the areas of interest that you're seeing and can you talk a little bit about some of the money flow as far as what you're seeing from reimbursement in payers out there? And also talk about some of the geographies that are coming online, perhaps quicker than you expected or not?

Sean George -- Chief Executive Officer

Yes, absolutely. I think our thesis globally has largely been one that at a certain price point, the ex-US world of genomics and genomic medicine opens up and we are there. So we've begun to see that with a very small commercial effort historically, it's about 10% of our total business, now that's the entire world, but still with the amount that we've put after it's -- the demand is palpable, the excitement is clear. We have fairly limited ex-US capabilities, we are essentially serving the ex-US market with the same infrastructure and logistics that we serve the domestic market. So it's always kind of hampered our ability to go after it. Nonetheless, we are starting to -- a picture is emerging that with the price points we have, particularly in carrier screening, our price points in the broader -- there are -- I'll put our broad epilepsy panels, our large developmental panels. There is no one around the world that can get this high quality information at the price points we can offer. So it's really, it's really kind of all over the map. It tends to be region specific for a lot of reasons that we are not worth going into now or perhaps ever. I think it's with more time we can go into it. But the areas we see picking up are really kind of Northern Europe, Latin America, Israel, Middle East and kind of, we spent a lot of time in APAC as well. They all kind of have -- we see the equal amount of demand. We do not do a lot in China or Japan for structural reasons, it's just difficult to get in there and worth pointing out to answer your question, we have not to date, spent a lot of time with the traditional Central European reimbursement authorities. It's just. Historically, we just -- it's too long of a ramp, it's too much time, it's been, it's been not a priority for us. I think once we decide to put some real effort after international, I think we will start by just continuing to broaden the menu, lower the -- essentially really fix up the logistics to make it much, much easier to get local language support.

Over time, I think we might begin addressing at the government level. But I think, we want the picture to emerge a little, a little more clearly for governments around the world. Just how valuable this is for the management of their population and until then I think we can do better. We can do better going after the demand that we know exists at the price points that we can currently offer and people are willing to pay. We're very, very bullish on it. The government reimbursement side of it, ex-US is something that will probably a question mark for a while.

Katherine Stueland -- Chief Commercial Officer

So I would just add to that the institutions over how we really began and then we supplemented that with patient pay. And so, we do get that paid for upfront and then pharma partners. So the other big piece of that. So when you think institutions, it's not just some of the large institutions that we direct bill that means and not governmental agencies. And so as Sean said, we're not waiting for third party insurance. We're not waiting for the governments, we're getting paid today from those institutions, pharma partners and patients directly.

Jeffrey S. Cohenwith

Okay. Would there be any other paths as far as you're deciding as far as efforts made in certain territories is there -- are there avenues available that are more partnership focused or is that not aware that the company would plan to go over?

Sean George -- Chief Executive Officer

You know, a partnership, possibly in the past, we -- there was a period of time we aggressively approached -- pursued the distributor kind of the classic distributor model in our industry and I mean frankly with 60% gross margin, there is just not a lot of margin to go around. We can't spend 40% plus of revenue on sales and marketing. We don't do domestically and again the global distribution network set up around these very -- these are very esoteric, these are very highly complex tests. The global distribution network set up around it just frankly demands -- demands more margin than we have to give. So partnerships, yes, absolutely. But I do think given our ability to drive volume with very, very little effort, we actually think there is, it's worth exploring what we can do direct with a little bit of cleaning up of the logistics and local language support, export, import etc.

Jeffrey S. Cohenwith

Okay, perfect. Thanks for all that. That's it from me.

Operator

Your next question is from Bruce Jackson with Benchmark. Your line is open.

Bruce Jackson

Hi, thank you for taking the question. So when you look at your product portfolio, are there any places where you'd like to fill in either in terms of technology, like you did with Singular and Jungla or any places in terms of capabilities with menu breadth or therapeutic area?

Sean George -- Chief Executive Officer

Yeah, the short answer is yes. I think the, and it's actually it's a little bit of a running joke around here, all the things is the answer. But again, you remember it takes us back, we generally are pursuing aggregating all the host of genetic information in single platform and then turning that into the market at the right place at the right time on the patients' behalf. So if you think about what additional we've done in genetics, we've mentioned that in and I think the way to think about is in each disease area, there are, there is data that is very interesting for the management of patients, the preventive measures that can be deployed in the therapies therein. And to the extent that we can envision taking those data streams and mass generating that data on every sample that comes in the door, that's a kind of thing that we're looking to add to our technology stack.

In cancer, we've begun by working on somatic tissue profiling and then subsequently the liquid biopsy for the monitoring. So that for a cancer individual, an individual with cancer risk or diagnosis, we can really understand the like of diagnosis of the cancer they have and monitor it as treatment progresses. I would imagine that expression profiling, other exogenous factors there, any kind of genomic information that maybe isn't specifically inherited genetic or tumor or somatic genetic but is also interested in the management for patient care. I would imagine that over time we will be adding that as well. I think the way to think about the disease areas is we're pretty close to 'all of it'. But now, when you think of things like pharmacogenomics, when you think of autism, when you think of kind of more emerging areas for which the data is accumulating that genetics is important that previously perhaps wasn't treated as a Mendelian disease' but is now becoming important for healthcare, those are other areas as well. And I think that's probably good enough, it's -- there is a lot of really scaled information out there that we think in mass will lead to much better patient management, patient outcomes and is currently being deployed in the industry and we'll continue investing in our cost of goods and our infrastructure capabilities to manage it.

Bruce Jackson

All right. Got it. Thank you very much.

Sean George -- Chief Executive Officer

All right, thanks.

Operator

Ladies and gentlemen, this concludes the Q&A period for the call. I'll now turn it back over to Laura D'Angelo for any closing remarks.

Laura D'Angelo -- Investor Relations

Thank you for joining us today. We look forward to catching up with you soon at upcoming conferences.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Laura D'Angelo -- Investor Relations

Sean George -- Chief Executive Officer

Shelly Guyer -- Chief Financial Officer

Randy Scott -- Executive Chairman

Katherine Stueland -- Chief Commercial Officer

Unidentified Participant

Doug Schenkel

Kevin DeGeeter -- Oppenheimer -- Analyst

Puneet Souda -- SVB Leerink -- Analyst

Jeffrey S. Cohenwith

Bruce Jackson

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