Back to Bio

Invitae Corporation: Initiation of Research Coverage

Friday, August 14, 2015

William Blair & Company initiated research coverage of Invitae Corporation (NVTA $8.84), a genetic information company, which offers a 221-gene, next-generation sequencing-based test menu via its CLIA-certified and CAP-accredited laboratory in San Francisco, California.

Analyst Amanda Murphy estimated the company would generate revenue of $32.8 million in 2016 and $88.2 million in 2017.

“Invitae should benefit from access to a large and growing addressable market as it expands its current menu to include genes relevant for broader indications,” Murphy said. “The company came to market in 2013 with a disruptive model whereby it intends to offer the most comprehensive assay at the lowest price. Ultimately, Invitae intends to take advantage of high price elasticity of demand for genetic testing by driving down price to the point where the market essentially becomes self-pay. We see some risks to the business model, at least in the interim, as the company works to transition the market to a predominantly self-pay model and expand beyond its current focus on hereditary breast, ovarian, and colon cancer. These include dependence on private payer reimbursement, at least in the near term; potential for increased competition, which may drive down price more quickly than anticipated; the pace of cost of revenue reductions, which must be faster than price declines for the company to reach profitability; and the potential for increased FDA regulation.”

Murphy continued, “Invitae has raised a meaningful amount of capital, which enables it to focus on improving process automation and informatics investments to drive reductions in cost of revenue per test, thus lowering costs. Invitae intends to maintain a small, targeted salesforce and leverage partners to magnify its marketing reach, leading to relatively low personnel costs. The company is led by Randy Scott, co-founder of Genomic Health, and has built a strong management team with a track record for success.”

William Blair & Company is a global investment banking and asset management firm. We are committed to building enduring relationships with our clients and providing expertise and solutions to meet their evolving needs. An independent and employee-owned firm, William Blair is based in Chicago, with offices in 16 cities across five continents. For more information, please visit williamblair.com.

View our research coverage list


William Blair or an affiliate does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision.

William Blair or an affiliate is a market maker in the security of this company.

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from this company within the next three months.

Additional information is available upon request.

Please contact us at +1 800 621 0687 or view disclosures on our coverage list.

Current Ratings Distribution (as of 7/31/15)

Coverage Universe
Outperform (Buy): 66%
Market Perform (Hold): 32%
Underperform (Sell): 2%

Inv. Banking Relationships*
Outperform (Buy): 16%
Market Perform (Hold): 3%
Underperform (Sell): 0%

* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

The compensation of the research analyst is based on a variety of factors, including performance of his or her stock recommendations; contributions to all of the firm’s departments, including asset management, corporate finance, institutional sales, and retail brokerage; firm profitability; and competitive factors.

Stock ratings, price targets, and valuation methodologies: William Blair & Company, L.L.C. uses a three-point system to rate stocks. Individual ratings and price targets (where used) reflect the expected performance of the stock relative to the broader market (generally the S&P 500, unless otherwise indicated) over the next 12 months. The assessment of expected performance is a function of near-, intermediate-, and long-term company fundamentals, industry outlook, confidence in earnings estimates, valuation (and our valuation methodology), and other factors. Outperform (O) – stock expected to outperform the broader market over the next 12 months; Market Perform (M) – stock expected to perform approximately in line with the broader market over the next 12 months; Underperform (U) – stock expected to underperform the broader market over the next 12 months; not rated (NR) – the stock is not currently rated. The valuation methodologies used to determine price targets (where used) include (but are not limited to) price-to-earnings multiple (P/E), relative P/E (compared with the relevant market), P/E-to-growth-rate (PEG) ratio, market capitalization/revenue multiple, enterprise value/EBITDA ratio, discounted cash flow, and others.

Company Profile: The William Blair research philosophy is focused on quality growth companies. Growth companies by their nature tend to be more volatile than the overall stock market. Company profile is a fundamental assessment, over a longer-term horizon, of the business risk of the company relative to the broader William Blair universe. Factors assessed include: 1) durability and strength of franchise (management strength and track record, market leadership, distinctive capabilities); 2) financial profile (earnings growth rate/consistency, cash flow generation, return on investment, balance sheet, accounting); 3) other factors such as sector or industry conditions, economic environment, confidence in long-term growth prospects, etc. Established Growth (E) – Fundamental risk is lower relative to the broader William Blair universe; Core Growth (C) – Fundamental risk is approximately in line with the broader William Blair universe; Aggressive Growth (A) – Fundamental risk is higher relative to the broader William Blair universe.

The ratings, price targets (where used), valuation methodologies, and company profile assessments reflect the opinion of the individual analyst and are subject to change at any time.

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies—to our clients and our trading desks—that are contrary to opinions expressed in this research. Certain outstanding reports may contain discussions or investment opinions relating to securities, financial instruments and/or issuers that are no longer current. Always refer to the most recent report on a company or issuer before making an investment decision. Our asset management and trading desks may make investment decisions that are inconsistent with recommendations or views expressed in this report. We will from time to time have long or short positions in, act as principal in, and buy or sell the securities referred to in this report. Our research is disseminated primarily electronically, and in some instances in printed form. Electronic research is simultaneously available to all clients. This research is for our clients only. No part of this material may be copied or duplicated in any form by any means or redistributed without the prior written consent of William Blair & Company, L.L.C.

This is not in any sense a solicitation or offer of the purchase or sale of securities. The factual statements herein have been take from sources we believe to be reliable, but such statements are made without any representation as to accuracy or completeness or otherwise. Opinions expressed are our own unless otherwise stated. Prices shown are approximate.

This material is distributed in the United Kingdom and the European Economic Area (EEA) by William Blair International, Ltd., authorized and regulated by the Financial Conduct Authority (FCA), and is only directed at and is only made available to persons falling within articles 19, 38, 47, and 49 of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 (all such persons being referred to as “relevant persons”). This document is intended for persons regarded as professional investors (or equivalent) and is not to be distributed to or passed onto any “retail clients.” No persons other than persons to whom this document is directed should rely on it or its contents or use it as the basis to make an investment decision.

“William Blair” and “R*Docs” are registered trademarks of William Blair & Company, L.L.C. Copyright 2015, William Blair & Company, L.L.C. All rights reserved.