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Why Invitae's Q4 Results Failed to Wow Investors

By Keith Speights – Feb 20, 2020 at 7:00AM

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This high-flying stock's momentum could falter after missing Wall Street's revenue expectations.

Any way you look at it, Invitae (NVTA -8.78%) is smoking hot right now. The stock soared 46% last year and is up more than 60% so far in 2020.

But Invitae's sizzle fizzled at least somewhat after the medical genetics company announced its fiscal 2019 fourth-quarter and full-year results following the market close on Wednesday. Here are the highlights from Invitae's Q4 update.

Test tubes with images of DNA

Image source: Getty Images.

By the numbers

Invitae's revenue jumped 46% year over year in the fourth quarter to $66.3 million. That's the good news. The bad news is that this result fell short of the average analyst Q4 revenue estimate of $68.14 million.

The company reported a net loss of $76.9 million, or $0.79 per share, based on generally accepted accounting principles (GAAP). This trended in the wrong direction from the net loss of $29.8 million, or $0.40 per share, posted in the prior-year period.

Invitae announced an adjusted net loss in Q4 of $61.3 million, or $0.63 per share. While this loss was much wider than the adjusted net loss of $31.4 million, or $0.42 per share, recorded in the same quarter of 2018, it was a little better than the consensus Wall Street estimate of a Q4 net loss of $0.65 per share.

Behind the numbers

CEO Sean George attributed his company's strong revenue growth to several factors. He noted that Invitae expanded its customer base and saw strong reorder rates among new accounts. George also said that the company "made it easier to access our testing, both through traditional payers and via unique partnership programs."

George had predicted over 500,000 accessioned samples for full-year 2019 in his comments during Invitae's Q3 conference call in November. But Invitae reported only 482,000 accessioned samples for the year, with the Q4 total sample count of 148,000 coming in lower than expected.

Accessioned samples are the key metric the company uses. The term refers to DNA samples that have been accepted into Invitae's labs and tracked in its system (as opposed to a sample that is collected at a physician's office but not sent to the lab). 

Other key developments in the fourth quarter included Invitae's announcement in November that it plans to acquire Clear Genetics, a leading developer of software for providing genetic services. The company also announced an initiative with BioMarin Pharmaceutical to provide genetic testing at no cost to patients with signs or symptoms of skeletal dysplasias, a group of rare bone and joint disorders.  

Looking ahead

Invitae expects that more than 725,000 samples will be accessioned in full-year 2020. The company projects revenue of over $330 million for the year, up more than 50% from 2019.

Sean George said: "We enter 2020 with momentum and a unique business model that we believe is well positioned to deliver genetics-informed healthcare to patients. As we continue to scale our business, we are confident our approach and the investments we are making will further strengthen our ability to bring affordable, accessible genetic information to billions of people worldwide."

But Invitae is a growth stock with a market cap that can't be justified on its current revenue. It's still not profitable. As a result, any bump in the road is likely to cause the stock to fall. The Q4 update appears to be just such a bump, with shares sinking around 9% in after-hours trading.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Invitae. The Motley Fool recommends BioMarin Pharmaceutical. The Motley Fool has a disclosure policy.

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