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Investors would be forgiven for not noticing it, but the genetic testing industry has been quietly undergoing a radical transformation in recent years. Gone are the days when a single company could monopolize a cancer screening test by patenting genes. To be more blunt, the forces that powered Myriad Genetics (NASDAQ:MYGN) to the forefront of the industry no longer exist, having been replaced by a competitive marketplace where innovation and vision will decide the winners. 

The process is ongoing, but one company is well-positioned to take advantage of the opportunities ahead. Invitae (NYSE:NVTA) may not seem all that special at first glance, but it has been beating Myriad Genetics at its own game -- and investors can expect it to continue. Cancer-screening tests for the now-infamous BRCA genes that can help doctors gauge the risk of breast, ovarian, and prostate cancers have been driving top-line growth in the last year. Falling costs and the company's ability to survey over 1,000 human genes linked to various diseases promise to supercharge growth for the foreseeable future.

Thanks to a combination of leadership, execution, and growth potential, Invitae is the one stock I'd buy right now. Here's why.

The game has changed

Wait -- doesn't Myriad Genetics have patents on breast cancer genes? It did. But in June 2013 the Supreme Court of the United States unanimously ruled that companies could not patent naturally occurring DNA, whether they were the first to isolate it or not. The decision immediately invalidated patents on thousands of human genes and marked the day the company's business model cracked.

Remarkably, rather than transform itself and adapt to the new rules of the game, Myriad Genetics has stubbornly attempted to hold its ground while resorting to questionable tactics aimed at keeping competitors at bay. The strategy was never likely to be sustainable. Indeed, the pioneer's stock has fallen 45% since the SCOTUS decision. The stock is down even further in 2016 as investors have begun to cope with the reality that the company is in danger of losing significant ground to the competition.

MYGN Chart

MYGN data by YCharts.

Invitae is one of the companies leading the stampede. Whereas Myriad Genetics' BRACAnalysis test costs $4,000, Invitae offers a BRCA diagnostic at the Medicare-set price of $925 per test. Its prostate cancer panel is also quickly gaining traction and could steal market share from Myriad Genetics' Prolaris. The company has already captured over 10% of the oncology market. Given that the unjustifiably high costs of genetic testing have been the most limiting obstacle to broadening the clinical use of the technology, investors shouldn't be surprised that the company's tests are in high demand.

The number of billable tests has soared from 4,500 in the third quarter of 2015 to 15,200 in the same period of this year. It's noteworthy that non-oncology billable tests have grown from less than 900 to 3,200 in the same comparison period, which highlights the enormous market potential of high-quality, low-cost genetic testing outside of oncology applications. The company is initially targeting cardiovascular diseases, although diagnostics for numerous inheritable diseases will follow. 

Creating more value than it captures

It may sound like Invitae is coming in like a wrecking ball, and that analogy wouldn't be too far off. Low costs, quick turnaround times, and a rapidly expanding lineup of genetic testing services are changing the role of genetic testing in the clinic.

Let's say a patient walks into their doctor's office with a certain set of symptoms. The doctor has a diagnosis in mind, but rather than order more expensive tests that could be inconclusive, she can now order a gene panel from Invitae that will detect the presence (or absence) of genes linked to that diagnosis. Patients pay a flat rate for a single test comprising multiple genes, whereas some companies bill for each gene analyzed. The results from the genetic test can provide a strategic path forward for treatment or, as can also often be the case, peace of mind without the need for additional expensive tests.

The ability to detect and treat diseases at earlier stages in progression could lower the cost burden for patients and the wider healthcare system, result in better and more effective treatment, and catalyze a fundamental shift in our approach to healthcare. To put it another way, Invitae is creating more value in its technology ecosystem than it captures, which has been at the core of some of the most successful growth companies on the stock market.

Don't worry, though -- Invitae is still well-positioned to capture a tremendous amount of value. Driven by growing test volumes, quarterly revenue has jumped from $2.2 million in the third quarter of 2015 to $6.3 million in the same period of 2016. Gross margin per billable test has improved from a loss of $342 to a loss of just $64. Management expects to achieve cash-flow-positive operations by the end of 2018, which would erase current quarterly operating losses of about $25 million.

That should be much easier to achieve after Invitae struck deals with some of the country's largest insurance providers. Invitae will end 2016 with 160 million individuals in its network, an enormous leap from the 5.5 million individuals under its umbrella to begin the year. And although it will likely need more funding before the end of 2018, the company recently padded its cash position with a share offering that will net over $40 million in proceeds. The total cash on hand should be sufficient to fund operations into the fourth quarter of 2017.

What does it mean for investors?

Invitae has an expansive network of individuals, a growing portfolio and pipeline of genetic testing panels and services, and, most importantly, market traction. Continued execution and double-digit growth for the foreseeable future would allow the company to make good on its promise to transform the healthcare industry. The next-generation genetic-testing innovator still has a long way to go, but a bright future is already within sight. That's why Invitae is the one stock I would buy right now.

Maxx Chatsko has no position in any stocks mentioned. Follow him on Twitter to keep up with developments in engineered biology and materials science.

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