— Exiting non-core businesses and
geographies to prioritize higher-margin business initiatives
—
— Expects to deliver
approximately $326 million in non-GAAP annualized cost
savings in 2023 —
— Provides preliminary revenue and
gross margin ranges for the second quarter of 2022; amends
full-year 2022 financial guidance —
— Conference call and webcast today at
5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time —
SAN
FRANCISCO, July 18, 2022 /PRNewswire/ -- Invitae
(NYSE: NVTA), a leading medical genetics company, today announced a
comprehensive plan to realize the full potential of its
industry-leading genetics platform. The plan introduces a
significant realignment of the company's operations in support of
business lines and geographies that generate sustainable margins,
provide the best return to fuel future investment and accelerate
the company's path to positive cash flow. The plan further helps
ensure Invitae remains at the forefront of innovation and
advancements in genomics by allocating resources towards the
company's core genome sequencing and genome management platforms
that have the potential to improve healthcare outcomes.
The operational realignment includes streamlining and cost
reduction programs that are expected to deliver approximately
$326 million in annualized cost
savings to be fully realized by 2023 and extend the company's cash
runway to the end of 2024.
In a separate press release issued earlier today, Invitae
announced executive and board-level transitions to lead the company
in this next phase and achieve its mission of bringing the power of
genetic information to mainstream medicine.
Kenneth D. Knight, Invitae's CEO,
said, "We are at a unique, transitional moment in the
rapidly-evolving genomics industry when companies that balance
accessible, trusted and cutting-edge genomic information with
disciplined operational excellence will be in a far stronger
position to thrive and deliver transformative healthcare outcomes.
This operational imperative is at the center of the plan we
announced today, which will advance several critical objectives and
is intended to drive long-term profitable growth. First, our
refocused and realigned platform will allocate resources where they
should be: at our core, we are a growth-oriented genomic testing
platform. Second, aggressive actions to substantially reduce spend
over the coming 12-18 months will improve operating leverage and
align Invitae's cost structure with current market dynamics and the
broader economy. These adjustments will meaningfully extend our
cash runway and accelerate the pursuit of our long-term growth
targets and positive cash flow. Most importantly, the plan
reaffirms our commitment to leading the way in shaping the future
of medicine through powerful genomic tools."
Mr. Knight continued, "Invitae's new operating plan has
far-reaching and – for many of our dedicated, hard-working team
members – difficult implications, and we regret that impact.
Invitae is committed to working closely and compassionately with
those adversely affected to help ensure as smooth a transition as
possible, and we thank everyone on our team for their
contributions. As we look to that future, we are as committed as
ever to driving forward our mission and advancing the kind of
transformative healthcare that is Invitae's core."
Operating Plan Overview
At a high level, Invitae will eliminate non-core operations
while realigning and sharpening its focus on the portfolio of
businesses that generate sustainable margins and deliver returns to
fuel future investment. In the testing business, Invitae will
shift operational and commercial efforts to accelerate positive
cash flow by maintaining robust support of the higher-margin,
higher-growth testing opportunities among oncology, women's health,
rare disease and pharmacogenomics. The company also plans to
continue its expansion and integration of key digital health-based
technologies and services in order to create a differentiated model
in genetic health. Longer-term, Invitae remains committed to its
genomic management business. The company believes that it holds
outsized growth potential and intends to continue to prioritize the
tools, partnerships and applications that support the development
of genome management as the catalyst for the future of
healthcare.
Operating Plan Details
- Headcount and office/lab space: The company plans
workforce reductions aligned with its newly-streamlined operations.
The company is also taking immediate steps to consolidate
underutilized office and laboratory space.
- Portfolio optimization: The company has conducted a
rigorous assessment of its product portfolio as well as the
associated research & development and commercial spending. The
new plan shifts the focus to programs relevant to the core testing
businesses to drive near-term cost of goods sold (COGS) reductions.
These programs will speed the pathway to positive cash flow and
drive the completion of the genome management platform that places
Invitae in the middle of patients, providers and the greater
healthcare ecosystem. Initiatives and products that are not
attached to the go-forward core priorities have been put on hold or
eliminated.
- Other operating expenses: The company has performed an
extensive review of internal and external costs and how those may
align with the new business structure. Through that analysis,
additional savings will be generated through the ongoing
digitization of workflows, elimination of duplication and
streamlined processes across the core platforms and rationalization
of technology and external services spend.
- International business structure: As part of the plan
announced today, the company will shift its focus to serving less
than a dozen international geographies where the testing business
demonstrates the potential to reach positive cash flow in a shorter
duration. The company plans to conduct an orderly exit from
territories and countries in which the business is more nascent,
focusing on supporting those territories through the transition and
allowing those providers and patients sufficient time to shift to
alternative resources for their testing needs.
As noted, these changes are expected to deliver approximately
$326 million in annual cost savings
by the end of 2023 and allow the company to extend its cash runway
to the end of 2024. Invitae will operate as a leaner, more focused
organization, targeting both a stronger and more profitable testing
services business as well as the completion and launch of a genome
management platform, which will serve to allow patients, providers,
and the entire healthcare ecosystem to utilize genomic information
for a lifetime of better personal health decisions and
outcomes.
Supporting the growth of the company's core testing and other
commercial efforts remains a priority. The company will continue to
drive its commercial efforts to best suit its differentiated
platform offerings through a more efficient sales and marketing
approach.
Preliminary Second Quarter
Results
On a preliminary basis, the revenue for the quarter ended
June 30, 2022 is approximately
$136 million.
GAAP gross margin in the second quarter of 2022 is expected to
be 18-19%. Non-GAAP gross margin is estimated to be 39-40%.
Cash, cash equivalents, restricted cash and marketable
securities totaled around $737
million on June 30, 2022.
Second quarter 2022 cash burn is estimated to be approximately
$150 million.
Invitae has not completed preparation of its financial
statements for the second quarter. The preliminary, unaudited
results presented in this press release are based on current
expectations and are subject to change. Actual results may differ
materially from those disclosed in this press release.
Guidance
Invitae has updated its 2022 annual revenue guidance to reflect
the preliminary first half results and the anticipated impacts of
the actions announced today, which include the sale or wind down of
non-core products and services and the elimination of certain
international territories to focus on more profitable revenue
streams. Revenue in the near term is anticipated to be flat in the
second half of 2022 over the first half, representing a low
double-digit growth rate for full year 2022 over 2021 despite the
impacts of the strategic realignment. We expect 2023 to be an
adjustment year and for longer term revenue growth rates to return
to between 15% and 25% beyond 2023.
Invitae is maintaining its previous 2022 cash burn guidance of
$600-650 million, which includes an
estimated $75-100 million to be used
for reorganization activities and severance. The company also
anticipates its cash burn to be in the range of $225-275 million in 2023, or a $325-425 million reduction from expected 2022
cash burn.
Non-GAAP gross margins are expected to continue to increase for
the rest of the year, based on ongoing margin improvement efforts
and the current realignment initiatives, to the range of 42-43% for
full year 2022.
Non-cash related charges are expected to be recorded in the
third quarter of 2022 and in following quarters.
Webcast and Conference Call
Details
Management will host a conference call and webcast today at
5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time to discuss today's
announcements. To access the conference call, please register at
the link below:
https://event.on24.com/wcc/r/3870686/DE684B93E9A64871E619579F0C45867A
Upon registering, each participant will be provided with call
details and a conference ID.
The live webcast of the call and slide deck may be accessed here
or by visiting the investors section of the company's website at
ir.invitae.com. A replay of the webcast will be available shortly
after the conclusion of the call and will be archived on the
company's website.
About Invitae
Invitae Corporation (NYSE: NVTA) is a leading medical genetics
company whose mission is to bring comprehensive genetic information
into mainstream medicine to improve healthcare for billions of
people. Invitae's goal is to aggregate the world's genetic tests
into a single service with higher quality, faster turnaround time,
and lower prices. For more information, visit the company's website
at invitae.com.
Safe Harbor Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements relating to the expected impact,
benefits, parameters, details and timing of the company's strategic
business realignment or various aspects thereof; the company's
beliefs regarding the potential of its business, and its business
priorities; the company's preliminary financial results for the
quarter ended June 30, 2022; the
company's future financial and operating results, including
estimated annual cost savings, cash runway, guidance for 2022 and
beyond, and the drivers of future financial results; the company's
beliefs regarding what is necessary to succeed in the
industry; the company's focus for the remainder of 2022, and
its expectations regarding future operating cash flows; and the
company's expectations regarding its genome management platform and
the benefits thereof. Forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ
materially, and reported results should not be considered as an
indication of future performance. These risks and uncertainties
include, but are not limited to: actual results for the quarter
ended June 30, 2022; the ability of
the company to successfully execute its strategic business
realignment and achieve the intended benefits thereof on the
expected timeframe or at all; unforeseen or greater than expected
costs associated with the strategic business realignment; the risk
that the disruption that may result from the realignment may harm
the company's business, market share or its relationship with
customers or potential customers; the impact of COVID-19 on the
company, and the effectiveness of the efforts it has taken or may
take in the future in response thereto; the impact of inflation and
the economic environment on the company's business; the company's
ability to grow its business in a cost-effective manner; the
company's history of losses; the company's ability to compete; the
company's failure to manage growth effectively; the company's need
to scale its infrastructure in advance of demand for its tests and
to increase demand for its tests; the risk that the company may not
obtain or maintain sufficient levels of reimbursement for its
tests; the ability of the company to obtain regulatory approval for
its tests; the applicability of clinical results to actual
outcomes; the company's failure to successfully integrate or fully
realize the anticipated benefits of acquired businesses; risks
associated with litigation; the company's ability to use rapidly
changing genetic data to interpret test results accurately and
consistently; laws and regulations applicable to the company's
business; and the other risks set forth in the company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2022. These forward-looking statements
speak only as of the date hereof, and Invitae Corporation disclaims
any obligation to update these forward-looking statements.
Non-GAAP Financial
Measures
To supplement Invitae's consolidated financial statements
prepared in accordance with generally accepted accounting
principles in the United States
(GAAP), the company is providing several non-GAAP measures,
including non-GAAP gross margin and non-GAAP cash burn. These
non-GAAP financial measures are not based on any standardized
methodology prescribed by GAAP and are not necessarily comparable
to similarly-titled measures presented by other companies.
Management believes these non-GAAP financial measures are useful to
investors in evaluating the company's ongoing operating results and
trends.
Management is excluding certain items from some or all of its
preliminary non-GAAP operating results. These non-GAAP financial
measures are limited in value because they exclude certain items
that may have a material impact on the reported financial results.
Management accounts for this limitation by analyzing results on a
GAAP basis as well as a non-GAAP basis and also by providing GAAP
measures in the company's public disclosures.
Cash burn also excludes certain items. Management believes cash
burn is a liquidity measure that provides useful information to
management and investors about the amount of cash consumed by the
operations of the business. A limitation of using this non-GAAP
measure is that cash burn does not represent the total change in
cash, cash equivalents, and restricted cash for the period because
it excludes cash provided by or used for other operating, investing
or financing activities. Management accounts for this limitation by
providing information about the company's operating, investing and
financing activities in the statements of cash flows in the
consolidated financial statements in the company's most recent
Quarterly Report on Form 10-Q and Annual Report on Form 10-K and by
presenting net cash provided by (used in) operating, investing and
financing activities as well as the net increase or decrease in
cash, cash equivalents and restricted cash in its reconciliation of
cash burn.
In addition, other companies, including companies in the same
industry, may not use the same non-GAAP measures or may calculate
these metrics in a different manner than management or may use
other financial measures to evaluate their performance, all of
which could reduce the usefulness of these non-GAAP measures as
comparative measures. Because of these limitations, the company's
non-GAAP financial measures should not be considered in isolation
from, or as a substitute for, financial information prepared in
accordance with GAAP. Investors are encouraged to review the
non-GAAP reconciliations for historical periods that will be
provided on the company's website in connection with today's
conference call.
Contacts for Invitae:
Investor Relations:
Hoki
Luk
ir@invitae.com
Public Relations:
Amy Hadsock
pr@invitae.com
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