Invitae’s share price wobbles despite genomics tie-up

Invitae Corporation’s [NVTA] share price failed to reverse its recent downward streak in early April, despite a slew of positive company announcements, including the acquisition of genomics firm Genosity and securing a hefty $1.15bn investment.

Shares in the genetic testing company have risen 2.3% to $39.07 throughout the month so far (as of 14 April’s close), following a 4.8% decline in March.

Invitae’s share price had a positive start to 2021, climbing 18.4% in January. However, the stock changed direction the following month and ended February down 19%. 

As of 14 April, Invitae’s share price was down 6.5% year-to-date, underperforming both the broader market and the genomics theme. The S&P 500 was up 9.8% in the same period, while the Global X Genomics & Biotechnology ETF [GNOM] was down 4.5%.

Invitae had a 2.91% weighting in the genomics fund as of 14 April and a 3.05% weighting in the Global X Telemedicine & Digital Health ETF [EDOC], making the latter its largest allocation according to data by ETF.com. The telemedicine fund was up 2.8% in the year-to-date (through 14 April).

Expanding genetic and oncology testing

Invitae kicked off April with an announcement that it was launching a new programme that would allow for sponsored genetic testing for neurodegenerative conditions in the US, Canada, Australia and Brazil.     

Investors appeared to react positively to the news and Invitae’s share price jumped 2.6% on 1 April, the day of the announcement. The stock was boosted again on 5 April by 3.1%, after the company announced its plans to acquire Genosity.

Invitae said it had entered an agreement with the innovative software and laboratory solutions genomics company to accelerate the time to market and decentralisation of its oncology offerings.

The tie-up will see Invitae acquire Genosity for circa $200m, $120m of which will be in cash and $80m in Invitae shares. Certain Genosity employees will also receive restricted stock units of up to $15m in value.  

Invitae will tap into Genosity’s complex sequencing-based test solutions to ensure that patients receive “timely, comprehensive genetic information that is used to guide their care from diagnosis to monitoring for disease recurrence”, said Robert Nussbaum, chief medical officer at Invitae, in a statement.

“Together with Genosity, we believe our combined novel capabilities and capacity will help us reach that day sooner for patients around the globe,” he added.

On the same day, Invitae also announced a $1.15bn investment — via senior convertible notes due in April 2028 — from a small group of investors led by SB Management, a subsidiary of SoftBank Group [9984.T].

The notes will have an initial conversion price of $43.18 per share, representing a 20% premium to the stock’s trailing five-day average on 1 April 2021.

Robert Abbott, president of Abbott Consulting, noted in Seeking Alpha in February that Invitae had seen an increase in institutional investor interest. At the end of December last year, 379 institutional investors, including Ark Invest, Baker Bros Advisors and Vanguard Group, owned significant stakes in the stock. Abbott referenced data from Nasdaq that indicated 92.6% of Invitae shares were held by institutional investors.

A genomic revolution

With the global genomics market forecast to hit $62.9bn by 2028, according to a report by Grand View Research, companies like Invitae that are developing next-generation sequencing-based tools to screen genes are positioned well to benefit.

Kevin DeGeeter, an analyst at Oppenheimer, raised his price target on the stock to $48 following the announcements on 5 April. He gave the stock an outperform rating, but said this wasn’t based on the company’s large investment from SoftBank.

“We would generally view balance sheet expansion sufficient to fund operations to profitability as supportive of revenue multiple expansion,” he wrote in a note to clients seen by Precision Oncology News.

Invitae’s share price was rated a strong buy among four analysts on TipRanks, with a price target of $50.33 representing a 28.8% gain from its 14 April close.