Invitae Corporation

Hello, everyone, and welcome to the Invitae First Quarter 2023 Financial Results Conference Call. My name is Emily, and I'll be your conference coordinator today. After the prepared remarks, there will be the opportunity to ask any questions by pressing Start, followed by the number 1 on your telephone keypad. I'll now turn the call over to our host, Hokie Luke. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Thank you for participating in today's call. Joining us today are President and CEO Ken Knight, our CFO, Roxy Nguyen, and our Chief Science Officer, Dr. Robert Daber. Before we begin, I'd like to remind you that various remarks that we make on this call that are not historical include those about our vision and business model, the company's strategic business realignment, future financial and operating results, expectations of future growth and reduction in burn rate, and future products, services, our product pipeline, and their timings. Certain points we make will constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. It is difficult to accurately predict demand for our services, and therefore our actual results could differ materially from our stated outlook. Statements on future company performance assume, among other things, that we don't conclude any additional business acquisitions, investments, restructurings, or legal settlements. We refer you to our most recent 10Q and 10K, in particular to the sections titled Risk Factors, for additional information on factors that could cause actual results to differ materially from our current expectations. These four looking statements speak only as of the date hereof. To supplement our consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States or GAAP, we monitor and consider several non-GAAP measures. We encourage you to review our gap to non-gap reconciliations, which are available in the press release and in the appendix of the earnings slide deck, both of which you can access by visiting the investor sections of the company's website at ir.mbj.com. Today's panel will discuss our Q1 highlights and our 2023 growth plan. Dr. Dabur will discuss our recent clinical updates related to BCM, and Roxy will cover the financials and key metrics from the first quarter, as well as our 2023 guidance. We will then conclude the call with Q&A. With that, I'll turn the call over to Ken.

Thank you, Hokey, and thank you all for joining us today. In the first quarter, our team continued to execute against our plan. We posted $117.4 million in revenue, which is approximately 10% year-over-year growth on a pro forma basis, along with year-over-year improved gross margins and reduced cash burn. On the operational side, We saw an encouraging readout on our PCM technology via a publication in Nature, launched new partnerships, and benefited from enterprise-wide revenue and capital management efforts. We believe that the macro drivers for growth in our space remain robust, and the opportunity for utilizing genetic information and genomic testing has substantial upside. With recent advances in technology, clinical validation, guideline expansion, and reimbursement, The industry is poised to grow. And Invitae has been a leader and a catalyst in driving many of these advances. We have industry-leading variant interpretation capability that is a result of serving nearly 4 million patients across a diverse spectrum of clinical areas. This is bolstered by our machine learning and functional modeling capabilities. We are best positioned to provide the highest quality of interpretation at an industry-leading scale. We have a strong commercial presence. For example, we are respected and well-regarded among genetic counselors and major oncology centers alike and have become a provider of choice. Our approach to science and innovation is addressing the largest market opportunities and includes revenue growth with our deep data and partnerships, and most importantly, Our dedicated team is relentless in pursuit of our mission of bringing comprehensive genetic information into mainstream medicine with great products that lead to better patient outcomes. As we look closer at our business, profitable growth continues to be the foundation of our plan. And we are allocating our capital in key areas that will lead to growth in 2023 and beyond. Let's start with oncology. Our oncology sales include hereditary cancer testing and fee-for-services business with BioPharma. On a pro forma basis, our oncology revenue in the first quarter was $60 million compared to approximately $62 million a year ago. Our fee-for-service revenue was lower year over year due to contract flow and timing, which vary. In hereditary cancer testing, we saw low single-digit growth year over year in both revenue and volume for this quarter. With guideline expansion, improved outcomes, and reimbursement practice showing signs of improved adoption for hereditary cancer testing, we are determined to assist in the adoption of non-genetic expert providers. These efforts are underway and showing improved traction with April year-over-year growth ahead of Q1 rates. We also recently announced some exciting clinical updates on our MRD franchise. as our PCM platform technology benefits were published in Nature. We are optimistic that this will further drive PCM's adoption and additionally underscores our efforts to gain reimbursement support from payers. Dr. David will cover this in more detail. Looking at our ongoing efforts for the medium term, we see valuable synergies between our hereditary germline and our somatic products. Together, they will anchor one of the most comprehensive offerings for a physician who is considering options for an individual at risk of or diagnosed with cancer. We will provide critical information for prognosis, treatment, family risk, drug interactions, and monitoring. In the rare disease category, we really saw a solid revenue growth in Q1 of approximately 33% pro forma year over year. driven by pediatric genetics as well as cardio and neuro panels. We have also introduced a number of programs to improve reimbursement rates. Our efforts to drive profitable growth are already yielding improved gross margins in this category. In women's health, we are encouraged to see continued momentum with approximately 18% pro forma year-over-year growth. In particular, Our carrier screening panel is performing well, thanks to our enhanced product that has helped drive adoption. We are also seeing increased productivity with our sales team, along with market share gain in light of industry consolidation. On the data side, we are linking Invitae's genetic data with clinical claims and prescription data to enable researchers and biopharma partners to deepen their understanding of the patient journey. and ultimately deliver a more effective therapy to the most precise patient population. On the partnership front, our data platform has enabled an exciting partnership with Deerfield that we announced in March. The partnership will leverage genetics and clinical data from us and Deerfield's broad drug discovery and development expertise to advance genetics-based drug discovery and development in rare diseases. We are delighted to work together and explore the potential opportunities based on our respective strengths. On top of our growth initiatives, we are also working to further improve our revenue cycle and working capital. Lasi will provide more details and her remarks later. Next, we will go deeper into our recent clinical updates for our minimal residual disease product, PCM. which is demonstrating impressive value for prognosis, monitoring, and surveillance during the cancer journey. But before we dig into PCM, I'd like to say a few words about our recently hired chief medical officer for oncology, Dr. W. Michael Korn. Dr. Korn joined us in March of this year, and he is a luminary at the intersection of clinical oncology and a commercial laboratory. He founded and led the Precision Oncology Initiative at UCSF and later was the chief medical officer at a large commercial genomics laboratory for five years. I'm sure that many of you will be getting to know Dr. Korn in the coming months as we provide additional updates on our oncology initiative. We welcome him to the team. Now, as Hokey mentioned, with us on the call is Dr. Robert Dever, our chief science officer for InVTED. He is here to provide additional insights into the data recently published, as well as other updates on our clinical plans. Dr. Daber has been with Invitae since 2021 and came to us via the acquisition of Genocity, which he founded. Dr. Daber led the development of many of the key technology elements that underlie our current PTM platform. He also has vast experience with both laboratory formation and product commercialization during his career. and we are fortunate to have him helping to lead this important initiative. I'll now turn the call over to you, Dr. Dabur.