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Why Genetic Screening Stock Invitae Skyrocketed 16.4% in March

By Todd Campbell – Apr 4, 2019 at 12:46PM

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The company's making progress in its goal to make genetic screening for healthcare available to everyone.

What happened

After reporting soaring sales in February and successfully bolstering its balance sheet through a secondary stock offering in March, Invitae Corporation's (NVTA 1.15%) share price shot up 16.4% last month, according to S&P Global Market Intelligence.

So what

Advances in genomics are allowing researchers to develop increasingly precise treatments for complex diseases, including cancer, and that's sparking demand for genetic screening services that offer insight into patients' genetic makeup.

A double helix of DNA within a test tube.

Image source: Getty Images.

The growing demand for genetic screening, especially in cancer, prenatal, and neonatal markets, is fueling impressive financial results at Invitae.

On Feb. 19, the company announced its genetic testing volume had more than doubled to 303,000 in 2018, resulting in full-year revenue of $148 million, up 117% from 2017. In the fourth quarter, revenue was $45.4 million, up 78.6% from Q4 2017.

Invitae's cost per test declined by over 20% in 2018, resulting in gross margins of 53% in the fourth quarter and 46% for the full year. For perspective, gross margin was 27% in 2017.

On the heels of its results, management completed a secondary stock offering on March 8 that was fully subscribed, including an underwriter's option to purchases additional shares. In total, Invitae placed 10.35 million shares, generating $196.7 million in proceeds, excluding fees, for its balance sheet.

Now what

It's early innings for genetic screening, so this additional financial flexibility will come in handy as Invitae invests heavily to establish leadership. The company's improving revenue and gross margin suggest progress is being made toward profitability, but Invitae's still losing money every quarter, and that's likely to continue for a while.

Nevertheless, the company expects genetic test volume to exceed 500,000 in 2019, resulting in revenue reaching $220 million, up 48% from 2018. If the company can continue delivering that kind of growth, it's likely only a matter of time before it can reward investors with earnings. 

Todd Campbell owns shares of Invitae. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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