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Invitae's Q3 Revenues Jump on Increased Test Volume

NEW YORK (GenomeWeb) – Invitae reported Thursday after the close of the market that its sales increased seven-fold year over year for the third quarter.

For the three months ended Sept. 30, the firm reported revenues of $2.2 million, up from $310,000 for Q3 2014 but short of the consensus Wall Street estimate of $2.6 million.

The company billed more than 5,100 reports during the third quarter, a 360 percent increase compared to the year ago period, and accessioned more than 5,400 samples.

Invitae's net loss for the third quarter was $22.5 million, or $.71 per share, compared to a net loss of $12.6 million, or $14.24 per share, in Q3 2014. The average analysts' estimate was for a loss per share of $.70. Invitae used 31.9 million shares to calculate its net loss for Q3 2015 compared to 885,999 shares for Q3 2014. The firm went public in February 2015.

Its R&D spending doubled to $11.1 million from $5.6 million in the year-ago period, and its SG&A costs grew 71 percent during the quarter to $9.6 million from $5.6 million.

The company raised its guidance for billable tests delivered in 2015 to between 17,000 and 19,000, up from a previous guidance of 16,000-18,000 billable tests delivered.

Invitae ended the quarter with $49.0 million in cash and cash equivalents, and $98.3 million in marketable securities.

The company has pegged its growth to four metrics: reducing the cost of goods sold per test; increasing test content, increasing test volume, and improving reimbursement and cash collections. The company highlighted that it has reduced cost of goods sold from less than $850 to less than $750 per sample accessioned for the quarter.

Invitae is aiming to deliver more than 1,000 genes for under $1,000 per indication in the first half of 2016. The company recently made progress in this regard by more than doubling the size of its genetic testing platform, which now gauges 600 genes, and adding new test panels for hereditary cancer, cardiovascular, neuromuscular, pediatric, and other rare disorders.

Invitae additionally said it has signed new contracts with institutions and payors, including Tufts Health Plan and Blue Cross Blue Shield Association.

In May, Invitae announced new pricing schemes for its tests that took effect June 1. For third-party payors where Invitae is out of network, the tests cost $1,500 per indication. For institutions and payors with which Invitae has contracts and which bring Invitae in network, the price per test indication is $950. Patients whose doctors have ordered tests online and who have decided to pay out of pocket pay $475. During the quarter, 75 percent of revenues came from third party payors, 18 percent from institutions, and 7 percent from patients.

Invitae believes that its transparent pricing schemes will help ink contracts with payors who are also looking to rein in costs. The Centers for Medicare & Medicaid Services has proposed pricing for a new CPT code for BRCA1/2 testing and gapfill pricing for hereditary cancer panels. Invitae execs said during a call to discuss quarterly financial results that they backed CMS's efforts to reduce the cost of hereditary genetic testing and have submitted public comments suggesting that all of these codes be priced at $950 per test.

"We think this represents the changing landscape in hereditary genetic testing. Ultimately, it is an opportunity to expand coverage and increase access for patients, while driving down costs for the government and other payors," Invitae Chief Operating Officer Sean George said during the call. "While others may view these developments as headwinds, we view them as tailwinds for our business."

Some market analysts have interpreted UnitedHealthcare's recent proposal to require genetic counseling for reimbursing BRCA1/2 testing as a potential headwind for companies selling hereditary cancer risk tests. "We are really excited about the role of genetic counselors," Invitae CEO Randy Scott said during the call. "Having genetic counselors broadly engaged in ordering genetic tests is appropriate."

According to Scott, the medical genetics and genetic counseling segment serves as a core market for the firm. "The bigger part of our volume is coming in through that community, which is already providing independent genetic counseling," he said. "So, we don't see some of the payors wanting independent genetic counselors involved in the ordering of tests as really having a significant impact one way or another on our business."