What happened
Shares of genomics leader Invitae (NVTA 200.00%) rose nearly 14% Tuesday after the company reported third-quarter 2017 earnings Monday afternoon. Investors have become accustomed to eye-popping growth numbers in recent quarters -- and the most recent three-month period didn't disappoint.
The company, which deploys a business model based on selling high volumes of high quality genetic tests spanning the entire human genome, reported record revenue, gross profit, and testing volume. It also cut its cost of goods per sample to record lows. Although it was a mostly positive quarter, investors should note that Invitae continues to burn through cash and report relatively large net losses as it attempts to expand its market share for long-term success.
As of 3:41 p.m. EST, the stock had settled to a 12.4% gain.
Image source: Getty Images.
So what
The numbers are pretty impressive, especially when compared to the year-ago period:
|
Metric |
Q3 2017 |
Q3 2016 |
Difference |
|---|---|---|---|
|
Total revenue |
$18.1 million |
$6.2 million |
189% |
|
Gross profit |
$4.87 million |
($0.97 million) |
$5.84 million |
|
Net income |
($27.4 million) |
($24.9 million) |
($2.5 million) |
|
EPS |
($0.57) |
($0.77) |
N/A |
|
Testing volume |
40,000 |
15,500 |
158% |
|
COGS per sample |
$330 |
$450 |
(26.7%) |
Data source: Invitae.
Investors will rightly note that the net loss reported by Invitae continues to grow. That's a calculated move by management to rapidly grow and scale its genomics platform and testing packages. It's also an expensive one. Indeed, the company has raised money through stock offerings and debt raises. The relatively high amount of dilution in recent years has certainly eaten shareholder gains, and is the only reason EPS appeared to improve in the third quarter of 2017 compared to the year-ago period.
However, it's important to note that two major acquisitions in the fast-growing prenatal and perinatal space -- Good Start Genetics and CombiMatrix (closing in November 2017) -- have yet to fully deliver on their potential. Both companies achieve positive gross margins today, which will only add to the momentum for Invitae in 2018.
Now what
Management feels pretty confident about the company's direction. In fact, Invitae is on track to achieve break-even cash flow by the end of 2018. That would be a big relief for shareholders and outside investors that have been reeling in dilution in recent years, even if additional stock offerings are made after the milestone is achieved to fund future growth. If this high-growth genomics leader isn't yet on your watchlist, then you may want to make some room.
