Amid a string of earnings reports below company guidance and analyst estimates and with its stock price sitting near all-time lows since they it went public in 2015, genetics company Invitae announced Monday after the markets closed that it had replaced company co-founder and CEO Sean George with Kenneth D. Knight who has served as COO of the company since 2020. The company also announced a reorganization, that will result in an unspecified number of layoffs, to refocus the business on its core genome sequencing and management platforms while ceasing sales and operation in all but ten countries—moves the company said will result in roughly $326 million in cost savings by the end of 2023.
George will remain with the company in an advisory capacity during the transition and will also remain on the board of directors. In addition, Randy Scott, Invitae’s co-founder, former CEO from 2012 to 2017, and former executive chairman from 2017 to 2019, is returning to the company as chairman of the board. Eric Aguiar, who has been Invitae’s independent chairman since 2019 and a member of the board since 2010, is now lead independent director.
“We are at a unique, transitional moment in the rapidly-evolving genomics industry when companies that balance accessible, trusted and cutting-edge genomic information with disciplined operational excellence will be in a far stronger position to thrive and deliver transformative healthcare outcomes,” said new CEO Knight in a press release announcing the shakeup.
As a result of a top-to-bottom assessment of its product portfolio, Invitae said it will focus its effort on driving business in its higher-margin and higher-growth testing segments that include oncology, women’s health, rare disease, and pharmacogenomics. It also aims to differentiate itself in the market through the continued expansion and integration of digital health technologies and services. In addition, Invitae plans to cease operation in all but 10 companies over the coming months, winding down its operations over time to allow it customer to seek alternative testing resources.
Preliminary Q2 results
The reorganization and cutbacks are necessary given the company’s cash position, which it outlined in preliminary second quarter 2022 results it released yesterday. The company’s current cash, cash equivalents, restricted cash and marketable securities total $737 million, and its anticipated cash burn rate for Q2 is roughly $150 million. The company also reiterated its projected FY 2022 cash burn rate being in the $600 to $650 million range, $75 to $100 million that attributed to the reorganization and severance.
Revenue for the second quarter will total approximately $136 million, about 17% higher than Q2 in 2021, though company officers said revenue for the second half would remain flat relatively to this year’s first half results. Looking further ahead, “we expect 2023 to be an adjustment year and for longer term revenue growth rates to return to between 15% and 25% beyond 2023,” the company noted in a press release.
New CEO
In turning to Kenneth Knight, Invitae is banking on his deep nuts and bolts experience honed over the past 25 plus years at large, multinational corporations like Caterpillar, General Motors, and most recently at Amazon.com where he vice president of Transportation Services, Global Delivery Services, Fulfillment Ops and HR.
Knight joined Invitae in 2020 as COO where his work has been touted by the company for “driving higher quality revenue initiatives and establishing infrastructure to enable gross margin expansion,” in addition to his work on the reorganization plan.
“Invitae’s competitive advantages are well-established: an industry-leading genetics testing platform, excellent relationships with patients and providers alike and a relentless focus on lowered costs and accessibility,” Aguiar said in a press release. “Ken understands these attributes incredibly well and is the ideal leader to harness them in an accelerated drive towards positive cash flow. We have seen firsthand during Ken’s tenure as COO—and in his prior experience at diversified, large-scale enterprises—that he will deliver operational execution and cost discipline while preserving the innovation-first culture that is at the heart of the Invitae model.”
