This article has been updated with additional quotes and information from Invitae's Q3 earnings call.
NEW YORK (GenomeWeb) – Invitae reported after the close of the market on Monday that its third quarter revenues more than doubled year over year.
The San Francisco-based genetic testing firm posted total revenues of $18.1 million for the three-month period ended Sept. 30, compared with $6.3 million for the third quarter of 2016. Revenues included results from Good Start Genetics, which was acquired on August 4. Invitae reported that its base business generated $16.0 million in Q3, a 154 percent increase from the year ago period.
Invitae's base business accessioned more than 34,400 samples for testing during the quarter, a 122 percent increase from the year-ago period. Factoring in Good Start's contributions, the consolidated business accessioned more than 40,000 samples. During the quarter, Invitae reduced its cost of goods sold per sample accessioned to $330 from $450 in Q3 last year.
Over the summer Invitae said it was acquiring Good Start Genetics and CombiMatrix. While the CombiMatrix acquisition is slated to close in November, Invitae on Monday said that it has made significant headway in Q3 in integrating Good Start into its day-to-day operations, systems, and policies.
For the full quarter, Good Start's sample volume was approximately 9,250 compared to around 9,500 samples accessioned in Q2. "The biggest factor impacting the Good Start volume third quarter was Sema4's termination of an agreement to provide expanded carrier screening services," said Invitae CFO Shelly Guyer during an earnings call with analysts.
She noted that at the time of acquisition, expanded carrier screen testing accounted for between 15 percent and 20 percent of Good Start's volume, and until Invitae can introduce another expanded carrier screening offering, "Good Start's overall volume will remain depressed."
Invitae faced a number of issues during Q3 that CEO Sean George highlighted during the earnings call. It came to light in August that due to a quality control issue, the company's hereditary cancer testing was not detecting an MSH2 rearrangement. George said that Invitae has nearly completed its retesting evaluations in relation to this problem, and informed all customers.
"We're acknowledging that we're getting to a scale where these [quality] issues are going to have these kinds of ramifications," George told analysts, explaining what Invitae has done to avoid this type of quality control failure in the future. "We've implemented additional quality control checks, [and] implemented or are implementing additional documentation [for] change of control management that ... will prevent that from happening again."
As a result of this issue, the company had to retest more than 50,000 samples, which revealed that eight patients received a false-negative result, while 47 patients require new samples. This had a less than $100,000 impact on cost of goods sold.
Also, Anthem Blue Cross had a rocky start to the launch of its automated prior authorization program for genetic tests, launched in July. As a result of providers' confusion using the automated portal, with the test selection menu, and CPT codes utilized in the system, Invitae experienced a temporary increase in claim denials and delays. This had around a $400,000 negative revenue impact during the third quarter.
"Going forward this should be immaterial," said George during the call, and added that the company expects test revenue to ultimately come in as the issues are sorted out.
Invitae has also submitted comments to the Centers for Medicare & Medicaid Services regarding its release of preliminary lab test payment levels ahead of implementation of the Protecting Access to Medicare Act. Under the new Medicare pricing law slated to take effect beginning next year, CMS proposed pricing that is 10 percent lower for Invitae's hereditary cancer panel (CPT code 81432) compared to current levels.
This code is currently being paid at $931 and got a 2018 PAMA price of $838. Meanwhile, competing labs such as Myriad Genetics, using legacy CPT codes 81211 and 81213 to bill for hereditary cancer panel testing, received an initial price of $2,949 from CMS, up from $2,781 in 2017.
"Just how confusing and seemingly misconstrued the results were suprised even us," George said. "We, of course, are engaged in all manner of conversations, through all channels, to help clarify what we think is a misconstrued calculation of the pricing for the code that we've been instructed to use, as well as some overall confusion about the use of codes more widely."
Invitae's net loss for the quarter was $27.4 million, or $.57 per share, versus a loss of $25.0 million, or $.77 per share, for the year-ago quarter. Analysts, on average, had expected a loss per share of $.52.
The firm's R&D costs were essentially flat year over year at $11.5 million, while its SG&A spending nearly doubled to $24.3 million from $12.5 million.
Invitae closed the quarter with $33.9 million in cash and cash equivalents, and $43.0 million in marketable securities.
In morning trading, Invitae's stock on the New York Stock Exchange was up more than 5 percent at $8.59.