What happened
Shares of Invitae (NVTA -55.88%) continued to shake off their December slide this morning by rising 16% after the company released preliminary full-year 2018 operating results. The genetic-testing leader says it delivered triple-digit growth in both revenue and the volume of tests sold, which isn't entirely a surprise for investors who had followed along with quarterly earnings in the first three quarters of 2018.
Analysts and investors are likely more excited about the freshly minted full-year 2019 guidance. Invitae expects to deliver revenue of more than $220 million and process over 500,000 tests in the year ahead. That compares favorably with preliminary results from 2018, which include revenue of more than $144 million and 302,000 test samples.
As of 10:53 a.m. EST, the stock had settled to a 13.6% gain.
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So what
Invitae turned in a solid performance in 2018. It integrated the acquisitions of Good Start Genetics and CombiMatrix, significantly increased volumes sold, and reduced operating costs per unit. That led to triple-digit revenue growth and pushed gross margin to a record 45.3% in the third quarter. Considering its larger genetic-testing peers delivered gross margins of at least 75% in the same period, shareholders have plenty of upside to look forward to as the business continues to scale.
Management noted that it ended 2018 with approximately $130 million in cash, had access to an additional $125 million in capital, and slimmed down the quarterly cash burn to just $19 million in the fourth quarter. That's music to the ears of patient investors who had to sit through past periods of stock dilution as the business was getting on its feet.
Now what
Invitae expects to continue its torrid pace of growth while expanding its gross profit margin in 2019. If the business can average a gross margin of 50% for the full year, then it should be able to fund nearly three full quarters of operating expenses from operations alone. While it seems unlikely that the company can achieve positive operating margin by the end of the year, the business appears to be on the right track for reaching that milestone as early as 2020. Moreover, given the highly fragmented nature of the genetic-testing industry, investors shouldn't be surprised if management decides to make another acquisition to further strengthen the growth profile. Put another way, investors might expect another year of solid progress in 2019.
Check out the latest Invitae earnings call transcript.
