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Invitae Refinances Debt, Raises $30M as Q4 Revenues Drop 3 Percent

NEW YORK – Announcing Q4 financial results in line with prior projections as well as a convertible notes debt refinancing and $30 million new capital raise on Tuesday, Invitae executives expressed confidence that the company is on track toward its goal of reaching profitability, with a solid cash runway to 2024.

On a call with investors to discuss the firm's earnings, recently appointed CEO Ken Knight said Invitae's Q4 revenues were down about 3 percent year over year to $122.5 million, compared to $126.1 million a year ago. This was in line with the firm's earlier estimate and slightly above the Wall Street consensus estimate of $121.3 million.

Revenues included $119.0 million in test revenue, down from $121.6 million in Q4 of 2021, and $3.4 million in other revenues, down from $4.5 million in the prior-year quarter. The company attributed the year-over-year drop to the impact of discontinued businesses and geographies that took place last year.

Invitae CFO Roxi Wen said the breakdown among products was $76 million from oncology tests, including hereditary cancer testing, therapy selection tests, and personalized cancer monitoring services offered to pharmaceutical partners. The firm's women's health business, including NIPS and carrier testing services, brought in $20 million, and another $16 million came from rare disease, pharmacogenomics, and other testing products.

Under the newly announced convertible notes transaction, with a fund managed by Deerfield Management and other investors, approximately $306 million worth of outstanding 2.00 percent convertible senior notes due 2024 will be converted into approximately $275 million aggregate principal amount of new 4.50 percent Series A convertible senior secured notes due 2028, along with approximately 14.3 million shares of the company's common stock.

In addition, Invitae will sell $30 million of new notes to the investors for cash.

"We have added $30 million in cash to our balance sheet and successfully refinanced the vast majority of our short-term obligations through 2028," Knight said in a statement, adding that the move will allow the firm to focus on achieving positive cash flow and delivering on its "mission to bring comprehensive genetic information into mainstream medicine to improve healthcare for billions of people."

Company executives also reported that other major initiatives under the firm's 2022 strategic realignment are largely completed, including the sale of its Archer portfolio of research-use-only next-generation sequencing kits to Integrated DNA Technologies in December.

"Collectively, this work helped us reduce our ongoing cash burn to $77 million for the quarter if we exclude certain items. This is a significant reduction compared to $196 million in Q4 2021, and our cash burn has continued its declining trend over the past five quarters," Knight said.

Referencing an injunction issued last November in a suit filed by Myriad Genetics and Laboratory Corporation of America against the California Department of Public Health, Knight said Invitae is optimistic regarding its ability to grow its prenatal testing presence in California "as well as the rest of the country."

The injunction prevents CDPH from enforcing a recently amended requirement that only labs contracting with CDPH be allowed to perform trisomy screening for California residents.

Net loss for the quarter was $99.8 million, or $.41 per share, compared to a net loss of $205.1 million, or $.90 per share, in Q4 2021.

On a non-GAAP basis, Q4 net loss per share was $.34, compared to an $.81 net loss per share in Q4 2021. Wall Street analysts, on average, had expected a net loss per share of $.53.

Invitae's Q4 R&D costs dropped by nearly half to $71.5 million from $131.8 million in the year-ago quarter, while SG&A spending was down 20 percent at $90.0 million compared to $112.6 million in the same period of 2021.

Invitae's full-year revenues were $516.3 million, up 12 percent from $460.4 million, matching analysts' average estimate. This included $500.6 million from genetic testing and $15.7 million in other revenues.

According to the company, active healthcare provider accounts totaled 20,929 as of Dec. 31, an increase of approximately 13 percent year over year.

Active pharmaceutical and commercial partnerships grew to 238, up about 34 percent, and the firm's total patient population reached more than 3.6 million at the end of 2022, with over 62 percent agreeing to data sharing.

The company's full-year net loss was $3.11 billion, or $13.18 per share, compared to a net loss of $379.0 million, or $1.80 per share, in 2021. Non-GAAP net loss per share was $2.20, compared to a net loss per share of $3.10 in 2021 and beating the Wall Street average estimate of a $2.40 net loss per share.

Invitae's 2022 R&D spending dropped 3 percent to $402.1 million from $416.1 million in 2021. It's SG&A costs were $411.2 million, down 13 percent from $474.0 million the year before.

Looking forward, Invitae said it expects full-year revenue in 2023 to exceed $500 million, representing low double-digit year-over-year growth compared to 2022.

In a note to investors, William Blair's Andrew Brackmann wrote that although this guidance falls below the most recent Wall Street consensus, the firm's debt resolution should outweigh that discrepancy, "as it gives the company some breathing room and should allow the near-term focus to be on core execution."

That said, he added, investors will likely "continue to watch for specific proof points showing the success of the recently completed realignment plan before bidding shares higher."

Invitae ended the year with $257.5 million in cash and cash equivalents, $289.6 million in marketable securities, and $10 million in restricted cash.

In morning trading on the Nasdaq, Invitae shares were down 22 percent at $1.68.