What happened

Shares of genetic testing and genomics specialist Invitae (NYSE:NVTA) crashed over 18% Tuesday morning after the company announced fourth-quarter and full-year 2017 earnings. Mr. Market sent the stock sharply lower last month when the company provided preliminary expectations to investors. The finalized results published Tuesday were actually slightly better than the preliminary results from last month. Nonetheless, Wall Street punished the stock again in a move that is a bit of a head-scratcher.

There are a few angles to the full-year 2017 results that investors should consider, especially as Wall Street grapples with both high growth and relatively high levels of dilution. As of 11:55 a.m. EST, the stock had settled to a 9.5% loss.

A chart with a negative slope drawn on a chalkboard.

Image source: Getty Images.

So what

Here's a look at Invitae's full-year 2017 operational results compared to the prior-year period:




% Difference

Test volume





$68.2 million

$25 million


Gross profit

$18.1 million

($2.8 million)


Operating income

($121.3 million)

($100.2 million)


Net income

($123.4 million)

($100.3 million)


COGS per sample




Cash burn

$97.7 million

$76.3 million


Source: Invitae.

The company held firm on the preliminary guidance for 2018 provided last month. Invitae still expects to process at least 250,000 tests and generate revenue of at least $120 million in the year ahead. The increase is owed to a combination of growth in the base business, contributions from four acquisitions, and an uptick in biopharma collaboration revenue. Regarding the latter, the genetic testing leader now has partnerships with over 12 biopharma companies.

While the revenue growth is astonishing, Wall Street is still concerned about cash burn and mounting losses. Invitae has largely financed its growth to date with share dilution. Considering the business burned through roughly $98 million in cash last year and entered 2018 with just $76 million in cash and cash equivalents on hand, analysts can already see what's likely coming: more dilution.

Now what

Invitae is now hovering at a market cap of just $300 million. While that seems pretty cheap given the long-term potential, it's important to keep in mind that more dilution will be needed to fund operations and growth for the foreseeable future. The company is a long way from profitable operations or cash flow breakeven, and Wall Street seems to be factoring that into the stock's recent slide.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.