Government efforts to slow the spread of the SARS-CoV-2 virus have had severe negative consequences for the economy. While that includes obvious industries such as restaurants and air travel, the trickle of first-quarter 2020 earnings reported to date have demonstrated that most economic sectors have been affected in at least some way.
Investors should likely expect that to include genetic testing services offered by Invitae (NYSE:NVTA), which reports first-quarter 2020 operating results after the market closes on May 5. The company has pursued a growth-at-all-costs business strategy that hinges on bringing clinical-grade genetic testing to the masses. To succeed, it needs to provide seamless telemedicine capabilities, which are now being tested sooner than expected by the coronavirus pandemic. Will the company get a passing grade and maintain its growth trajectory?
Can telemedicine avoid a COVID-19 slowdown?
Invitae offers genetic testing services to diagnose disease, inform treatment options, screen individuals for health risks, and guide health decisions during pregnancy. Many tests can be purchased online and processed with a saliva sample. The relative simplicity of sample collection suggests a trip to the doctor's office isn't required, even if clinician support is necessary to complete the ordering process.
That could help Invitae to avoid a decline of similar magnitude to NeoGenomics (NASDAQ:NEO). The oncology reference lab processes various types of cancer diagnostics, including genetic tests, at its 11 global laboratories for hospitals and biopharmaceutical companies. It experienced a 25% to 30% decline in test volumes in April 2020 compared to the year-ago period, but many of the samples it processes are more complex than saliva.
But investors can't be sure Invitae's business will avoid severe negative impacts from stay-at-home orders. The ability to do so rests largely on the success of the company's telemedicine capabilities, which also happens to be a key component of the push to make clinical-quality genetic testing part of routine healthcare.
Invitae launched its first telemedicine initiative in June 2019. The goal was to enable a smooth experience for consumers to order medical genetic testing online. To overcome a lack of local genetic testing providers and expert input, the company designed a process guided by expert genetic counseling services that was seamlessly integrated with its state-of-the-art labs. Tests could be ordered and tracked online, with final results sent directly to a patient's personal physician.
Those nascent telemedicine capabilities were bolstered in November 2019 with the acquisition of Clear Genetics, which developed chatbots for providing genetic services at scale. The HIPAA-compliant software product, named Gia, guides doctors and patients through the process for ordering medical genetic testing directly through Invitae.
In early April, Gia received a timely upgrade to make it easier for telehealth providers to determine testing options, order diagnostics, and ensure samples are delivered to laboratories. Results can also be easily accessed and discussed during telemedicine sessions.
Will it be enough to help Invitae avoid a coronavirus slowdown? Perhaps, but investors might want to consider that the bigger obstacle may not be convenience, but awareness. Genetic testing is still a relatively new service in most doctor's offices. The availability of Gia might not matter much if patients and doctors don't know it, or Invitae's growing menu of genetic tests, exists.
A big test for Invitae's growth strategy
Given the sudden arrival of the coronavirus pandemic and stay-at-home orders, it's probably unrealistic for investors to expect Invitae to make a seamless transition to telemedicine services. Investors should prepare for the business to be negatively affected -- at least temporarily.
That said, the investment in telemedicine and telehealth capabilities such as Gia give the company a unique advantage in a highly fragmented genetic testing space. The same holds true for the company's relatively unusual focus on providing clinical-grade genetic testing services directly to consumers, which many competitors have mostly resisted to date. Whether it helps Invitae to offset the negative consequences of the coronavirus pandemic or make up for growing losses incurred by the company's growth-at-all costs business model remain to be seen, but investors will get an answer when first-quarter 2020 earnings are released this week.