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Why Invitae Tumbled 10.5% Today

By Todd Campbell - Mar 9, 2020 at 5:52PM

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The stock market's dramatic sell-off took a toll on the genetic screening company's shares.

What happened

Invitae's (NVTA -3.42%) shares lost 10.5% of their value today, as ongoing worry over a global economic slowdown more than offset expectations for significant sales growth in 2020.

So what

Invitae was far from the only company to tumble. The iShares Russell 2000 Index ETF (IWM 0.47%) lost 9.7% of its value today, and since Invitae is a member of that index, its drop isn't too surprising.

A person looking at a double helix DNA strand.

IMAGE SOURCE: GETTY IMAGES.

Nevertheless, the decline in this healthcare stock today is noteworthy because it follows a string of down days since management reported financial results in mid-February. Since unveiling its results on Feb. 19, Invitae's shares are down about 39% because of concerns over mounting losses.

Specifically, while demand for its genetic tests drove test volume 60% higher year over year in 2019, resulting in full year sales of $216.8 million, up 47% from 2018, operating expenses of $460.9 million led to a $242 million net loss last year alone.

Now what

Invitae's only in the early innings of tapping the market for genetic screening used to inform cancer treatment and family planning decisions. By expanding its offerings so it can address more indications and help parents better understand genetic risks, management's guiding for test volume to increase to 725,000 samples and revenue to exceed $330 million in 2020. In both cases, that represents growth of more than 50% from 2019. 

However, investors should expect losses to continue despite the growth. Management expects to spend more money this year to capture market share, and that will cause cash burn to exceed the $153 million it burned through last year. Given the first quarter is usually its weakest, investors may find it's better to focus on the long-term opportunity associated with genetic screening rather than Invitae's near-term performance. 

 

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