Invitae (NVTAQ) 8 Nov 232023 Q3 Earnings call transcript

Good afternoon, and welcome to the Invitae Third Quarter 2023 Financial Results Conference Call. My name is Carla, and I will be your operator for today's call. [Operator Instructions]

Thank you, operator, and good afternoon, everyone. Thank you for participating in today's call.

President Schrank. Ken are new and today Ana CFO, us and Knight; CEO, our Joining

statements among begin, most meaning points differ like on are that we safe is model, we and investments, those restructurings Before stated Private difficult I'd future the from materially our future make our remarks that our about results, on section GAAP that consider with for only non-GAAP to things, conclude rate our prepared of new constitute accordance provisions or in and financial various refer the slide It statements the and this Securities pipeline section To predict our stakeholders press generally assume, our with to company's available forward-looking recent statements at and product accurately of of titled We therefore, financial Investors current the as cost in Today, both recent which information will access future you our particular and we demand United for our XXXX consolidated in ir@invitae.com. discussions our cover metrics encourage to within website and call as vision settlements. operational the hereof. the efforts. performance results measures. the to company timing, that expectations of you not GAAP, the business of events will as operating an date Risk other the to by several the Ken services, accounting any our and are news Statements including future well accepted key operational and in on States, of release and to during Act. additional speak supplement XX-Q improvement details or cause non-GAAP we growth, and the We monitor which could services, can acquisitions, financial will the Litigation you to provide our review reduction forward-looking don't factors reconciliations, principles guidance. These results of Reform expectations. we and update harbor historical, earnings actual Factors reduction visiting business in outlook. quarter. remind Certain the deck, in XX-K Ana could products, on differ you legal make burn from actual the and appendix materially

with the With We Ken. call turn to conclude Q&A. will that, call I'll the over then

everyone you, consensus QX we for and or Hoki, who where exceeded was quarter estimates another Thank welcome and metrics. met today. performance joined key us, us productive

resulted Our higher-quality costs pursuit continued gross revenues unit of in and expansion. margin lower

year. XX.X% quarters months hit last this efforts expense We X same in gross which have sequential versus basis for QX burn a control margins non-GAAP consecutive in and period the XXX of resulted improved quarter, approximately XX% cash reduction Operational of in point improvement and a XXXX ongoing have from first represented X the expansion our XXXX.

the saw track a bolstered XXXX XX% by growth pipeline and cancer U.S. from led decline, pro year-over-year pro market the full to impacted by Disease rebuild an our and hereditary basis $XXX.X cost fee-for-service increase XX% X.X% commercial forma followed women's Oncology forma we volume XXXX the cancer. X% on influenced with as for our from growth, pro for an approximately by headwinds sequential were saw XX% quarter, a on revenue commitments. for for in a year-over-year hereditary X% Rare was are and way forma on X.X% Revenues We payment insurance year of revenue basis. growth. that by year QX second a Oncology lower health work growth this forma improvement year-over-year an growth. revenue pro which quarter reduction million, roughly with

headwinds, Regarding resources In reported approximately this we we we significant $X a second negative the quarter, the commercial and impact have seeing to improve devoted payment are tackle progress. payment issue number year. collections, to of continue million revenue to see $X.X are decreased in we believe results quarter positive QX. the and fourth We about in going line, into and that that to million to the next to

see work encouraged improve these our of Since language will in still is health actions do Those executing and also on Today, continue. in much We the the you has and entire by our XXXX, July to been business. realignment efforts have recognize to XX-Q. needed productive been there initiatives our will are growing journey. on and our team improvements concern the

will, the plans cash liquidity. stakeholders over and reduce constructive in XX company's improve and a We are top actively burn is next operating solutions. priority, are This further months, and that seeking creating engaging our we with feedback the

addressing Our special assets needs. committee are number Board, capital, exploring we options, and our continuing of our capital has certain a With include improvement structure operational selling reduction of which cost on debt, could Board and Directors our to focus a raising formed addressing efforts.

our X. Moving wins. to our hereditary highlight want few a In of the first cancer secured its third panel. SBA authorization we recent kind I to of common the for quarter, Slide

submission novo It and was category processes. our submission a as technology method-based approach and to validation. review panel was as of of guide voluntary Invitae was goal to the our understanding and the establish of XXXX submitted in proud new this We agency's to are device a a using methodology. based application de an We a this through on example able accomplishment

worked As market closely and requirement to product this the Meeting such, is a testament are labs, to our and FDA our authorization. led and processes which agency's with supporting test data, stringent the to quality. review us to the

and products. this regulatory future similar the the Importantly, of for performance associated required sets data expected decision approval bar for

operations, our offering commercial development As our as for through to benefits. step, assay potential of are and relates teams the next FDA-authorized implications working the an it

that well served quarter, positioned very Of reached spectrum In data for million XX% remain patients we proof regulatory that are X.X should a this We these areas. of served, landscape diverse also across future. as available also the in change tests laboratory believe patients we developed decision will serves clinical surrounding the sharing. a point the third

We will variant patient traction already industry-leading further breadth strengthen continue of we an to to believe our I capability, data revenue management the efforts cycle well of collections quality our that and as provide to also highest and interpretation interpretation quarter. during mentioned, continued this to at cash the are scale. gain improve And positioned clinical

all monitoring enhanced exciting customers assay received steps The Finally, our we and On in as we for update submission personalized on Slide approval migration PCM X. have seamlessly. assay. expected to and patients to which cancer clear business. internal the benefit required been processes had is our enhanced an as for recently chemistry our completed well And our

going a the few benefits. of forward, running assay and the are enhanced here are We

test rejected. is limit previously as the burden This automation less reduced the were of supporting PCM scale perspective, of our DNA, steps the future growth. process labor with enhanced assay prior same able the in detection, have achieve performance have us We lower lends been to a cell-free samples potentially and itself From the version to number lead in enabling to materials sensitivity improving The enabling workflow, now able times. may to costs. we that our

arising the confidence we to partners term, rebuild to have in to we our more combination in of exome reporting matters comprehensive profile the patients enhanced have part as we providing to the add menu. also addresses sequencing permit synergies concludes study whole the results the sematic to from to that Study of care. to And products. hereditary Natera continue we ongoing our importantly, us operate profile, data ability to tumor and germline fee-for-service strong differentiated chemistry as a pipeline. in our offering stand-alone primary even continue genomic continue and see new ability confident and our validated As X sets finally, an the Overall, cancer we PCM between of superior products litigation, pharma are oncology submission, decision-making most enabling Longer that solution. us the at

a to do anchors for both cancer. of options types ability comprehensive most treatment on of and considering one offerings platform physician Our one for testing the patient

over since I'll have our talent that Before to leadership note added fantastic we call our for discussion, last team call. I the financial the executive some hand

Over Commercial incoming value our Chief They experience, the financials. our Officer; extensive Financial bring past Ana to few our Officer, that will I'm as Officer. Guigley relevant as Ana turn I with discuss months, the long-term the to as deliver appointment we of And Robert Schrank Chief will David Sholehva, our team. announced Ana? that, confident each Chief to and they and Operating and

RUO reflects products year-over-year third including revenue certain cash decreased toward solid $XXX of the and due product quarter. here be roughly kit exited IVF of to Ken. million, part which, you, Thank goal pleased the as approximately to excluding international mentioned, geographies of businesses, discuss quarter the burn. fiscal results, X% we I'm of was from increased exit the When you our to in announced offerings, impact XXXX. realignment flat reducing as our X% last and Revenue and those primarily certain to progress

oncology, and million breakdown, generated pharmaceutical Women's million. partners health, $XX the noninvasive testing to carrier hereditary patient screening network testing at cardio, $XX offered neuro, disease prenatal a projects. revenue fee-for-service generated pediatrics Looking generated services including our and of approximately This cancer including $X and million. revenue partnership rare data and other includes $XX TCM testing number our was data from testing Data including sponsor products. business, management and programs, was million.

year-over-year As I revenue flat X% sequentially. approximately mentioned roughly pro and earlier, was forma increased

We have the also during impact a exited quarter, on our did material PGX which testing not third revenue.

would if and forma our points have higher, XX year-over-year we exclude revenue, revenue growth quarter and respectively. quarter-over-quarter your reference, third pro basis been PGX XX For

composition. approximately this fee-for-service compared on as reimbursement quarter. sequentially, as last details to higher at of oncology was to million cancer of ago. well revenue Oncology decline PCM year-over-year revenue. testing weaker year to $XX the revenue revenue $XX largely pressure hereditary primarily Compared to million of Looking a The attributable our due PCM revenue improved quarter

panels our we Disease and and to to back revenue build are grew million, as pro screening pediatric $XX Ken business, As as mentioned driven neurodevelopmental for well improvements product grew cardiac penetration testing forma by APT. XX% our earlier, health continued rare conditions. led diligently XX% In year-over-year, carrier Women's approximately Rare by in pipeline. of our continued working

Our focus drive $X due more data testing declined patient about sponsored by program. million year-over-year, profitable to primarily and network business to our

Slide to XX. Moving

XX.X%, in which quarter Third was sequentially in quarter. second and compared XX.X% compared the gross to XX.X% margin improved non-GAAP year-over-year XXXX to QX

non-GAAP or XXX% operating expenses quarter Third $XXX revenue. of were million

ended can XX, the XXXX. out to measures costs of drive marketable margin QX basis, revenue September with system in to disposals X the cash We expansion. million continued $XXX we last of cash, OpEx of improvements margin other equivalents, chain in to of quarter On the XXX% is $XXX.X compared higher resulted million on million OpEx costs which to of supply In $XXX in or in due point management, net. gross third was improvements than other process losses want, of third expansion $XXX impairments efficiencies. revenue XXX% via related 'XX. still securities $XXX impairment the a While long-lived restricted compared non-GAAP was cash of our cost operational and we at revenue and compared and and of the million million quarter to quarter, control and quarters assets successful efforts third We incurred to restructuring, GAAP and probably year, to

a improved includes million around approximately a interest ongoing approximately represents in period resulting cash the on increase $X from XX% another defined million an semiannual in in Third expense $X compared acquisition-related sequential $XX burn partially related improvement to was renegotiation quarter $X offset This impact year. of approximately million. burn, same $X of XX, last million quarter The payments, million to Slide the payment, this contract cash by DSO. as

going actively language assessing mentioned, As necessary and in our operational Ken the XX-Q. to we concern the are liquidity address measures

forward. we as current stakeholders continue to our and operate the can usual options help and balance obligations that with sufficient Currently, cash chart we and our closely path service to as financial liquidity have our our sheet. working are extend runway to understand customers, the optimize partners We

Our prior third helped of the patients the divided improvement Slide that on $XXX we The as third in slide. as In per of quarter quarter. and stabilized goods number found in well on was efficiencies hereditary a revenue the ticked cost the This initiatives. the patient metrics by productivity our as for drive the sold quarter per patient measured the cancer was as mentioned $XXX revenue we company performance quarter XX. Revenue payments key the on total billing company's ordering Cash the continued collection in reasons versus burn to Variable quarter, by are up for based of revenue is period. cost percent margin. favorable in higher prior

anticipate We to of $XXX loan to are margin million be prepayment $XXX will of to repayment revenue ongoing result our reported quarter, first of non-GAAP XXXX, reaffirming the the guidance in related gross of term burn in In the in XXXX and penalty voluntary range and a exceed million range burn. cash the XX% as the and cash XX%.

the ongoing burn million downward adjusted reminder, was $XXX million, of to cash our quarter. which, range reaffirming as guidance are We after $XXX a second

from Our XXXX. XX% cash burn than target represents improvement more

great Invitae to of I been to hand it at look forward I Ken? forward. Ken, going the you meeting back and and weeks, colleagues has interacting I last with to just Before to it my know many here want few you, getting say

Thanks, in Anna. results today's QX summarize To the call.

our reaffirming hereditary showing FDA wins ninth with quarter. margin year our and for Increased already. clear approval financial panel on the X And collection cancer the for straight achieved the progress Non-GAAP PCM our payment guidance. are we of to enhanced expanded full gross assay. are improve and We regulatory submission efforts the authorization resources

our to look performance to we out operational improve. As XXXX, close continues

forward for things focused ahead. challenges more determine is achieve committed best control, on in we serve it remain I'll the short that as to mission many order patients to we hand our addressing team you questions. term to that now over to the and Operator, Our are we the can the in path

Thank you, Our comes today Isabel Ken. from question [Operator Instructions] Partners. from Leerink first Prugue

Could and are mind for And these MRD I don't design to you new the with test. maybe the for how if we concerns? announcement speak the IP perhaps litigation saw [Indiscernible], the earlier enhancements of helps addressing you this chemistry commercial... clarifying if same the

this Isabel, sorry, I'm is hearing you. was I Ken. having difficulty

that. relative first PCM the to addresses the of with question there's how Natera ongoing was assay your part still think it I and litigation. Obviously, the litigation enhanced

going are are that appropriately how that -- into what the the from differences under addresses the enhanced of patents about that the and In lot chemistry the process specifics, made, the on go dispute terms to it I'm were changes not we dispute. of chemistry between items differs those able be the specifics confident a to we've and this knowing But it.

[Indiscernible]. that glad I'm

commercial redesigned of that. part asset the well second can question The with for if as we the my to and was plan expect see

Yes.

going So the assay be forward. -- the enhanced assay is our operating assay that to we're going

for our be commercialization And enhanced the assay. so prepare product, will product, as of our that of MRD off we PCM based

Isabel. you, Thank

take Cowen. next We question Brennan from now Dan will from our

was guide. This is It for Dan. a Stephens on more Tom on the question

it, but reaffirmed in you clearly, sequential that to acceleration. seems So be some

then the could you of if through follow-up. puts more guess some I one kind and of that? So behind And talk takes got I've

Yes.

cancer double-digit business. volume growth we already hereditary our place, taking seen in talked growth talked -- We we've So quarter-over-quarter. we're seeing about already the especially sequential that about

with women's the hereditary that double-digit getting we quarter And of doing test to And the payment basis how in we're year-over-year disease we reimbursement, that on so talked about and will continue. have and revenue. per better fourth in and volume going And sequential average growth business revenue revenue combination and the cancer rare collection our quality growth then on XX% XX% growth that's a work a our forma continue pro health, us gives revenue. our growth confidence it's to and doing expect

to we're that we the that We of is confidence be have what going to revenue have able a achieve. lot guide

and of conversations your helpful. with kind you going to back, to have as down off jumping you of just cash of growth That's requirements settled is these kind kind meet that stakeholders, of requirements feel potentially Great. forward? have you stepping guess rate revenue I And kind sufficient credit ban

our Without a the I getting stakeholders. working I of as mean, I respect lot with into think details, we're must process

right are the And them to to questions. sufficient information Our think kind stakeholders I are those responses of asking the questions. providing we

They're confident the working map so company we've in how good for our we're and to the I tough continue to is to relationship forward we've And of determined the to hard, decisions, the to we representation questions. build a a been has that got I able work some well. We're just dedication done. that the we've work together. team say we -- that am company, path the to extremely -- made point the done and of grip our upon in asking already we've have. execute the and process extremely this and the continue And visions the worked

goes that the year. we into out and part so had without we saying really XXXX, do going what has set momentum for team of on to our And our the delivered that like last

Tejas Our Morgan next from ahead. from Savant question Stanley comes

within for we into can the you if if then is Congrats spillover payers do insurance it the and like what could year-end, from this the quantify be Tejas. your guidance quarter. This Madison year you you in commercial expect think is of on resolved year? And of firstly, seeing at XXXX? wondering the delayed any impact oncology. as improving on midpoint or be that then kind impact next was Maybe we for by expect sounds just to payment the I

in terms the But We're materialize. full starting be have. So that I'll of of won't seeing commercial that payer work XXXX. benefit until it that we've the year say actually into to seen to we that's you that, addressing that we done challenges we believe get the

making, is good the is see next of and year full we'll that we progress are a the confident year. we're doable, news it So implication

guide. revenue was? the the of Is midpoint the on implications the about that Yes. question your question so what And

at of guidance into range midpoint. the headwind? what's for What Just like kind this year the baked

quarter, level That's test really corporate in -- we're top we'll to expect Well, payment QX our that confidence for I'd expecting after say that average and quarter guide. the going revenue we well. our improve has improved, seen you've that informing as per that's

We payment of increasing per our test are the growing quality revenue also seeing average improvement in what and in of in well our things confidence guide. of [Indiscernible] in as the those is gives more us volume growth as X together terms

follow-up. maybe that. you bit helpful. talked really then I one That's just about a And Okay. realize

if to our independent extremely us focusing at company Board of looked the Board the our helping to company. specifically capital more The dedicate supportive time, the this, of But of directors to several forward. will, as was structure willing really and is on have we way on the you guide

last on we on to we're we that, we lines urgency said year, focusing so signal we And doing. One And I'm talked reminded it's would the which level that, all talked drive And appropriate things And short the of a be that. to things. about the a with growing execute But operating of when say that they're try then was of putting me, future into time a path mapping the and to commitment the set company. in, sign. for Time were term. I is with be a few out the to business stabilize you kind that good about then to the that out able to profitably, to and investment we going Invitae. we to really path an next and associated are little like premature mapping

committee really steps are we And phase to this so and and Board and are there direction. special where us X in with help that is this and X I between our effort think

you. Thank

next Blair. now take question William our Andrew from will from Brackmann We

to over talk that and can many gross up the if can time. that up the Andrew. Dustin line trend guys driving see Wondering is levers on about to over On continue quarters. where This it end good margin, for you

profitable made decision, levers Yes. to driving really we cost a XX there's that changing a the I commercialization that at volume are a multiple that. mean conscious volume. decision we ago focus were from all starting go-to-market on about efforts growing Obviously, months

about secondly, dedicated supply and really Ana of quarter our efficiency it's internally, more And it's efficiency as laboratory in as talked been process step -- logistics, has on has been whether #X. efficiencies, our Then we've each cost margin whether variable so our driving and that's well. chain, improvement impressive focused processes that as probably expansion quarter, about in our gross terms operations

is that's of And moving also a effort So our there. true direction. in I think mix then sign right the focused

actions gross were story. businesses took that the to just of exited not our Some and we year, accretive last margin territories

but terms made And hard and path so we our right to think decisions, to of I are proving tough those solidifying more to growth be profitable in some growth. decisions wrong than

of So led and ultimately, variable the system driving margin. our being it's gross for performance that together in demand in then of cost about quality solid and progress the some intentional middle and we things pretty have the really revenue ourselves part cost those structure about of terms strong and to

the Understood. we which on Within a catalyst? community update penetration oncology, called get if could into as efforts an you've just the setting, past in your wondering out

Yes.

setting So what I And the growth hitting is that double-digit talked volume in the say about our for revenue I'd hereditary the volumes. community growth in QX. in spear cancer that we're growth cancer hereditary growth is of finding

what in talked And competing earlier which segment hoping in were grow still is NCI in we -- but growth our about were to setting, more are, kind we and we wanted and centers, community of and so the academic and operate we that are still we where our are when the genetic expand we seeing call medical our of the to there, we're what we we're points. business, expecting that where starting our and center experts well

to momentum that's starting there. positive so And prove some with

Okay. just in on and that for then expected progress next us. around year. into PCM setting clinical And the one heading Great. time lines Pipeline more

bit you -- a be about specific, can talking little studies? mean, more you your... I for about are timing is say when PCM, when -- you talking or And reimbursement what are pipeline say you you

studies, commercialization indications. of could it be Yes, different reimbursement and

good question. a It's Yes.

tumor areas, So colorectal several our efforts are on breast to starting types, and clinical lung, cancer. in really focus

the get reimbursement. We needed to pursue are to starting data

that would fruition in XXXX, reimbursement see we'll our for can already kind to come our what to they get support making as for CMS gotten into support reimbursement. early we levels start start expecting where we're indication to submissions product. We've some data from so And of

And been kind -- that going path they're work more more data what target be has know confirm needed our so and our take reimbursement that to of we're study doing focused get kind get products. the to what for to is information the and we of going really on and to

And getting how XXXX, able in so I you now a think all more been of And aligned give be as more we've terms than that to that a we're together. of in while lot unfolding. into as clarity we we we'll get see to

Our next question from Sachs. comes from Sykes Goldman Matthew

This Matt. is Avi on for

cancer first Can great hereditary FDA on to your see for authorization to market was that the receiving overall since product? provide an authorization hereditary your update segment The one, you cancer it panel.

when processes in yes, they thank So at FDA my it. proud what looked saw our of We're of we're the comments, our I I as the extremely -- said comment mean, and all, first you for about methodology.

at And do we that with to haven't we're is working product we when will at point, to is operational in FDA step far we're terms of a of authorization. development authorization It's commercial as next and So looking done through the what -- efforts, FDA what But combination that. the understand to the going announce ready we our it, authorization, opportunities that. are internally, our those a and market this our so are. be commercialized commercializing

the you business? reallocating after about through PGX thinking can one, just exiting how resources you're Okay. then your Great. talk And next

processed. many I where of regards, stand-alone operation mean, PGX the terms being for yes, was, So business us were in the samples in a

pretty part, exited And that so basically to those dedicated that PGX company. unfortunately, we most the the And exited business. have much were for resources

is JPMorgan. from from [Operator Our Vatnsdal next question Instructions] Rachel

for [Indiscernible] on Rachel. This is

and Given the you're X into there but on the lot quarters? some how And Obviously, it, you trending little for your a next about profitability, for year-end just have you profile quarter-over-quarter. of decline on network factors a... bit on underlying that into think you about patient it? maybe going few are talk you the heading commentary the give Can quarters, a refocusing a can growth then plan since saw I growth data us

for as question. I a goes as been that's into it obviously taken a into Yes, we we our in compensated news us unprofitable work on that model about guide. where look discount story when sponsor the testing It's are great an think program it do. revenue We my mean, year-end, humble a to opinion. for we situation we being one we've at appropriately so of for focused from kind a testing good moving

a is think what And off we was business. can do drop little still that I we And going revive continue the so grow volume we were significantly. to we profitably, We that found it concerned grow and can to both. that can

products off the that our forward coming less also some downside way, path developed of because we're the by So we're the being received. business data about innovative concerned seeing the -- well momentum are back at product. also we've we And

driven a diseases, adult in as of are rare through. to off business. business And our so diseases patient data odyssey it see got for we going pediatric great A correlation lot our pediatric rare rebounding actually disease that is that's epilepsy the us rare of business

a path there, And last this a we've that the that like gotten so than we combination stability of were are have gross to they we part good from better standpoint. each the think margins we year of performing we're and Is and this XX.X% that margin quarter. in our segments gross time

of margin if expecting year quarter, some full lower improvement Do you next. you're then which here. That's quarters guide, you that to quarters meaningfully think growth adjusted was talk patient super and general. where street. or lower be you maybe next upside swing above to seeing the but continue? is full could year It data the if maybe this hit gross we're in below on X Could that segments the interesting think potentially trend about guide and that the right in kind sort some of that to potential it'd above hitting of helpful network XX% wanted Do I few or that, factor gross a Great. margin see segment that's or

the it us way mean, play out that dynamics there I is thinking some for that the we're year. about we might finish as is mix Yes. still

bit And so mix to QX. have a little of, we there's lands see our in how product

We satisfied of So product to that same we sure we've and look, tremendous products, gross the mix we're think margin those then the appropriately and have with we're community, margin. and to I a to being efforts. time, say, rewarded we provide see At that we have how we service revenue that of and know care XX%. I'd XX% we gross have to not health make determination great kind product contributes for got this

And think our effort margin from is determination being far concluded. so I and gross

the what is start to And things the and to at we're pretty point, we think But it this future. as like we time, as we're XXXX making, this up out we takes expand through. be, But continue that that, navigating will can guide into mix about terms confident like so we finishing the at progress that puts we we're that. of there start year, mapping in same and think we'll darn and

Thank you.

today. registered questions further no have We

remarks. final hand So back Knight over for to with I'll that, Ken

next continued as interest thanks, again to support well as once look talking We and forward Appreciate joining Well, us. appreciate you again, in everybody. to your us you quarter.

So Thank all. you be well.

joining. concludes for This today's Thank you call.

may You now your disconnect lines.