DISCLAIMER: I am not an Investment Advisor. The information provided in this article is not investment advice and should not be taken as one. Only use for educational purposes. Please do your own DUE DILIGENCE before making any investment decision.
Invitae (NVTA) - CEO Sean George Presentation at the JP Morgan Healthcare Conference week
Q4 2021 numbers pre-announcement
The week started with Invitae management pre-announcing Q4 revenue numbers and business metrics as follows:
64% YoY growth from $279.6M in Q4 2020 to $458M in Q4 2021.
76% YoY growth in billable volumes of more than 1.16 million in Q4 2021, up from 659,000 in Q4 2020.
Ended the year with more than 17,500 active healthcare provider accounts.
Active pharma, health systems, software and services partnerships expanded by 68% to 178. The importance of these partnerships is that they form a major component of revenues coming from Invitae’s data and data services platforms, which is a higher margin business.
Ciitizen Patient Network Launch
Invitae announced the launch of Ciitizen (its Q3 2021 acquisition) patient network, a service that is now available to the company’s business partners and individuals. The service will assist in pooling health information in one place and is available to patients to use as they see fit. Sean George reiterated the importance of the service by saying:
“it is 100% patient owned, patient controlled, consented, and fully trusted. Wherever that information is going to go, it will be at the behest of the patient and only at the behest of the patient.” - Sean George, Invitae CEO
Sean reiterated the company’s goal of enabling genome management on a global scale saying:
“We have ambitions, in the future, not just to work with healthcare ecosystem partners, not just to work with healthcare data partners, but eventually as we move into the era of genome management; it is all of retail, all of tech, anybody with a device, anybody who can bring anything to the table to help an individual understand and navigate a specific point of their healthcare journey. We believe that this kind of patient network will be fundamental in enabling that in the future, and we couldn’t be more excited to be launching this today.” - Sean George, Invitae CEO
Data Platform Strength
During the presentation, a surprising set of slides showed its data platform is presently being used by non-healthcare/pharma companies, strengthening the case of the depth and quality of data the company possesses. Big/Mega tech companies like Snowflake, Amazon, Fitbit, Google, Apple and Microsoft already use Invitae’s platform, as shown below:
Management indicated that they plan to organise a technology day in the spring for a deeper dive into the strength of its data platform.
Business and Financial Outlook
Management noted that by the end of the year, Invitae will have the “the most comprehensive offering” on the market for counseling tools, risk testing, therapy selection, monitoring and next steps. In the future, management plans to continue to build and invest in areas including cardiovascular disease, neurodegenerative disease, and pharmacogenomics. A long term view for the company was presented:
In a new posture, Invitae CEO Sean George particularly emphasised how the company would pivot towards cash flow generation and improved bottom line metrics going forward.
“Not only do we have to put up industry leading growth, we also have to show the operating leverage in the business and we also want to be able to generate our own cash flow to continue to invest in the execution of that vision. This year for the first time, and again, we will on our earnings call, we will be guiding not just to the top line of our business but also to gross margins, [timing and expectations therein] and guiding to cash burn. This is a bit of a shift for the company. Up until now... for the last decade, we've been entirely myopically focused on execution of our novel business model and driving top line growth.” - Sean George, Invitae CEO
“As I mentioned, we'll still be driving top line growth but it is now time, giving the size and the numbers involved; it's time to make sure everyone involved with the company, everyone invested in the company can see milestones we put out to improve the operating leverage and eventually get to profitability. But more importantly have everyone be able to mark to mark where we are going and how we are getting there which I think will help answer a lot of questions about the business model which we are certain works and we want to start guiding to and executing to numbers that will convince everybody else of it.” - Sean George, Invitae CEO
The CEO noted its previous statements about >50% Gross Margins were aspirational goals but now, they will be formally guiding to such mid/bottom line metrics to show investors they are indeed focused on these goals.
In the next earnings call, management indicated they will introduce a living dashboard of business and financial metrics that will be updated quarterly. A taster was presented, as shown:
Week Roundup with News Update
To round up the week, Invitae’s latest acquisition Ciitizen was selected by HealthShare Exchange as a partner (link to news), moving the company towards its mission of democratising health and genomic data for patients who seek to take increasing control over their healthcare. For context, HealthShare Exchange (HSX) is a nonprofit community-directed organization that securely consolidates and makes available electronic patient health information at the point of care throughout the Greater Philadelphia/Delaware Valley area’s healthcare ecosystem. HSX has 13 million members.
Teladoc Health (TDOC) Summary
Management indicated their flexibility to move into new specialties in the future. Anecdotally, these new specialties should increase the current $68 PMPM present opportunity. I envisage Teladoc Health incorporating genomic data and information into primary and chronic care.
Brad Freeman (@StockMarketNerd) made a summary of Teladoc’s presentation and it would not be valuable to you readers if I re-invented the beautiful wheel he’s created. Yes, it’s that good. Hence, please kindly read Brad’s summary here: Teladoc Health JP Morgan Health Conference presentation summary.
Of note, when asked how the company views the year long weakness in its stock, Jason Gorevic (the CEO) stressed that the company has always delivered on its promises, a core value of the company. To me, this strengthens the believe that the projected 2022 revenue of $2.6B from management is a sandbag, which allows the company to deliver on that promise.
Conclusion
I observed that CEOs of healthcare and genomics companies are starting to emphasise how they are moving towards profitability and improved bottom line metrics. Case in point was Invitae, as well as Exact Sciences and Accolade (not discussed in this piece) during the conference. Due to the pressure their stocks have seen in the market, it is not surprising their stances are shifting. Of course, the business could also be reaching inflecting points at the same time. More will be known when they report in late January and throughout February. Cautious optimism is the game for me.
At the depressed levels of several stocks in the genomics and related space, I’m of the opinion that this will be a year of consolidation through Mergers and Acquisitions. Although, it should be noted that several CEOs of large biopharma companies declined to suggest doing major M&As in their presentation/Q&A sessions during the conference. However, those CEOs suggested they could pursue bolt-on acquisitions, if it adds value to shareholders and business. That’s the point, isn’t it?
Expect fireworks in 2022!