Shares of Invitae (NVTA -11.11%) were crashing 15.4% lower as of 3:16 p.m. ET on Tuesday. The steep decline came after the medical genetics company announced several developments on Monday that rattled investors.
Invitae revealed a shakeup in its executive ranks. CEO Sean George has stepped down. George has been replaced by Kenneth Knight, who is currently serving as the company's chief operating officer. Invitae is also bringing back former CEO and co-founder Randy Scott as the chairman of its board of directors. Current Chairman Eric Aguiar will remain on the board as the lead independent director.
The company also announced an operational realignment. These changes include workforce reductions, eliminating or placing on hold some products and initiatives, and exiting some international markets.
In addition, Invitae provided a sneak peek at its second-quarter results. The company expects Q2 revenue of $136 million, below the consensus estimate of $142.4 million. Invitae stated that revenue will likely be flat in the second half of 2022, compared to the first half. The company anticipates low double-digit revenue growth for full-year 2022.
There was a simple reason why the genetic-testing stock sold off so heavily today. If Invitae was firing on all cylinders, these changes wouldn't have been necessary. The game of musical chairs at the top and the operational realignment underscored that there were problems that needing fixing.
However, the changes could help Invitae over the long run. Knight was brought on board in 2020 with plans for him to eventually take the helm. Scott's return as chairman should be a good move, thanks to his knowledge of Invitae and the genetic-testing industry.
In particular, the operational changes will help put Invitae on a more solid financial footing. The company expects the cutbacks to deliver around $326 million in annual cost savings by the end of next year. The changes will also extend Invitae's cash runway through the end of 2024.
Investors should probably look for sluggish growth to continue into 2023. Invitae stated that it expects "2023 to be an adjustment year." However, the company projects that annual revenue growth will be higher -- between 15% and 25% -- after next year.