NVTA Invitae

Laura D'Angelo Head, Investor Relations
Sean George Chief Executive Officer and Co-Founder
Shelly Guyer Chief Financial Officer
Tycho Peterson JP Morgan
Doug Schenkel Cowen
Puneet Souda SVB Leerink
Tejas Savant Morgan Stanley
Kevin DeGeeter Oppenheimer
Ophir Gottlieb Capital Market Laboratories
Simon Barnett ARK Invest
Call transcript

Ladies and gentlemen, thank you for standing by, and welcome to Invitae's First Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Thank you. I'll now turn the conference over to Laura D'Angelo.

Laura D'Angelo

Thank you, operator, and good afternoon, everyone. Thank you for joining us for our first quarter 2021 results call.

Joining us today are Sean George, our CEO; Shelly Guyer, our CFO and Katherine Stueland our Chief Commercial Officer.

As you listen to today's conference call, we encourage you to have our press release available, which includes our financial results, as well as metrics and commentary on the quarter.

Before we begin, I'd like to remind you that various remarks that we make on this call that are not historical, including those about our future financial and operating results, our plans and prospects, the focus of our business strategy, our plans to integrate and manage businesses we acquire, market opportunities, future products, services, our product pipeline and the timing thereof, demand for and reimbursement of our services and our investment in our infrastructure and operations, 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 10-K, in particular, to the section titled Risk Factors for additional information on factors that could cause actual results to differ materially from our current expectations. These forward-looking statements speak only as 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 exclude from our non-GAAP operating results as applicable, amortization of acquired intangible assets, acquisition-related stock-based compensation, post-combination expense related to the acceleration of equity grants or bonus payments in connection with the company's business combination, adjustments to the fair value of certain acquisition-related assets and liabilities, acquisition-related income tax benefit. We exclude from non-GAAP cash burn as applicable changes in marketable securities. Cash received from equity financing and cash received from exercises of warrants. In this period, our non-GAAP measures include; cost of revenue, gross profit, operating expense, including research and development, selling and marketing and general and administrative, other income expense, net, as well as net loss and net loss per share and cash burn. We encourage you to review our GAAP to non-GAAP reconciliations, which are available in the press release and in the earnings slide deck. With that, I will turn the call over to Sean.

Sean George

Thanks, Laura, and good afternoon, everyone. We've had an active start of the year and our progress toward establishing genetic information as the standard of care for patients facing key healthcare decisions throughout life continues to accelerate. Each patient has an incredibly important and unique journey. Whether a family desperately seeking earlier and better answers for a sick child, a woman who deserves access to cutting edge genetic information and she embarks on having a child or a cancer patient. Who will benefit from the molecular characterization of their cancer regardless of stage so they can receive better, more personalized therapy selection and post-recent monitoring as they fight most important of fights. It is a collection of these patients in total and our ability to help them that drives our aggressive approach to improving healthcare by bringing genomic information front and center as medicines new vital sign. We mark our progress toward that goal through the strongly results we deliver. Q1 was a great quarter for us and our key performance metrics indicate that we're steadily shaking pandemic impacts and looking to rapid expansions in 2021 and beyond. We've taken strong measures to show up our cash position adding $1.6 billion to fuel our ongoing mission. We'd like to welcome our new investors and express continued gratitude to all of our shareholders for sharing a long-term vision for how genetics can help transform healthcare for all because we've had multiples announcements and opportunities to communicate with investors about financing and M&A activities so far this year. I want to keep today's prepared remarks focused on our progress and other clinical areas and highlight the continued build out of our global genetic information platform.

Before we do that Shelly will walk us through the Q1 quarterly results and outlook for 2021. Shelly?

Shelly Guyer

Thank you, Sean. We generated revenue of $103.6 million in the first quarter representing a strong 61% growth from the first quarter of 2020 and part due to acquisition related activity. This growth was achieved despite some lingering impacts of the pandemic. In the first quarter 59% of ours came from third-party payers and 33% from biopharma partners and other B2B customers, primarily hospitals and medical centers with the remainder coming directly from patients.

Our third-party revenue remains strong largely due to continue improvement and commercial third-party payer performance across all test types. But particularly with our hereditary cancer and NIPS test.

So why the percentage decreased in revenue from third-party payers as compared to the first quarter of 2020? The decrease is primarily driven by a change in our oncology business customer mix which now includes a great proposition of biopharma and other B2B partner customers. Consistent with our discussion of ASP trends last quarter, we realized an ASP of $383 this quarter down from $408 in the fourth quarter. The decline was primarily driven by a shift in payer mix from third-party payers to patients. Changes in product mix also impacted ASPs this quarter as we saw rise in the proportion of reproductive testing with lower ASPs as compared to hereditary cancer and CNP or Cardio Neuropes test. Progress with third-party payers represents a notable source of leverage as we look to the rest of the year.

Our many investments in our platform and willingness to provide early access to patients ahead of the payer adoption curve continues to bear fruit.

However changes in payer and test mix will cause our ASPs to bounce around a bit over the next several quarters. Note, that we expect ASPs to benefit from the launch of our oncology therapy selection and disease monitoring products both as LDT services and as regulated clinical products in the coming quarters in years.

As the business is developed, billable volume has become our key volume metric, an important benchmark given that we accrue the majority of our revenue based on the number of billable reports in a period. We're pleased to report a 72% growth in billable volumes in the previous year with approximately 269,000 tests in the first quarter. We saw this growth despite the continued effects of the pandemic as well as some very tough weather across the states that caused some disruptions. We attribute this tremendous growth to some catch up on the testing backlog, a seasoned salesforce now more able to visit with clients, taking share from competitors and an ever-increasing acceptance of genetics due to the continued flow of research and publications. Internationally, we saw volume growth that was slightly ahead of our US business and represented nearly 18% of total billable volume for the quarter. Driven by the strength of our decentralized oncology business and our continued expansion in Europe, Japan, Australia and Israel to name a few.

As we've noted in prior quarters, it's easier to understand our business and financials by providing non-GAAP metrics. Most line items on the P&L are affected by acquisition related charges to allow for the comparison of the two sets of numbers. We urge investors to review the detailed reconciliation to non-GAAP and tables included in today's press release and at the back of this slide deck.

For the remainder of the call, we will discuss non-GAAP numbers including cash burn which we believe provide a more relevant depiction of the operating business dynamics.

Our non-GAAP cost per unit now defined as the total non-GAAP cost of revenue divided by the number of billable units in the quarter was $242 in the first quarter. This is up from $227 from the fourth quarter largely due to lower accessions conversion ratio since the large number of samples received in the quarter were not billable in the quarter. Due lesser extent due to some new assays we ran, which were not as efficiently processed as more mature products. Recall, that we move to looking at COGS per billable unit when we moved away from reporting accessions due to addition of our [indiscernible] products, many of which do not accessions, so historical comparisons must be viewed with caution. Non-GAAP gross profit was $40.5 million in the first quarter which translates to a non-GAAP gross margin of 39%. The lower margin is partially due to the timing issue billable versus accession that increased our COGS in the period and our margins were impacted by our mix.

Our reproductive volume grew faster than other parts of the business. But this comes at lower margins.

We expect that increased collections rates on NIPS and decreased COGS over the next several quarters will positively impact our gross margin. Recall, we continue to target 50% gross margin in the long-term. Non-GAAP operating expense which excludes the cost of revenue was $155.4 million in the first quarter as compared to $145.9 million in the fourth quarter.

We continue to invest in our business in the following areas; research and development which was up nearly $14 million mostly due to headcount increases but also new external development projects primarily to scale our business and modernize our platform, build out content across all ARCs, improving COGS and create a more patient centered experience benefitting patients and physicians.

In addition, selling and marketing was up nearly $4 million also mostly due to headcount increases to facilitate volume expansion internationally. General administrative expenses decreased by $8.5 million over the fourth quarter mostly due to a decrease in acquisition transaction cost of $12.6 million associated with the Archer acquisition.

Given the stabilization of the markets and the opportunities in front of us including multiple M&A ideas worth assessing. We'll continue to make prudent investments in projects, programs and acquisitions. Notably, we closed One Codex in February and Genosity in April.

In addition to acquisitions, we expect that OpEx for the remainder of 2021 will continue to increase as we invest primarily in R&D and marketing and as we build out our new facility in North Carolina. Cash burn was $112.3 million in the first quarter including cash paid to financing closed acquisitions and associated expenses.

Excluding acquisition cash paid primarily related to One Codex our burn for the quarter would have been $94.6 million.

Moving to our cash position, cash equivalents restricted cash and marketable securities totaled $681.9 million at March 31 compared to $360.7 million at December 31, 2020.

Our January equity offering netted $434.3 million and is included in these cash figures.

Importantly, post the quarter close. We raised an additional $1.1 billion net via a private convert offering led by Softbank. On a proforma basis, this [indiscernible] cash as of early April at over $1.8 billion. And to close, our Q1 revenue and current trends have us increasingly confident that we'll exceed the $450 million in revenue guidance for the year.

We will reassess and make any necessary adjustments to that target when we report Q2 results in August.

Now I'll turn the call back over to Sean.

Sean George

Thanks Shelly.

As I look at the results from this quarter. I'm encouraged to see how past investments in our platform menu and customer experience drive our ability to serve more and more patients year-after-year. Many of you may recall years ago when we were investing heavily to build out our women's health capabilities. Throughout last year and continuing through this quarter, we're seeing those investments bear fruit. Women's health now represents nearly 30% of our overall business as we create new markets and take share from competitors and drive strong growth in new customers.

For example, we added over 2,600 new accounts in the first quarter alone and we're seeing durability in our customer relationships once established.

So as we think about the investments, we've made last year into the present quarter. We're attempting to drive the same virtuous growth cycle all of this gives us increased confidence in driving strong annual growth into the coming years. To support enhances this rapid growth, we're moving ahead with both domestic and international expansion plans. We're expanding our commercial footprint, local fulfillment and product infrastructure for our fast-growing international business.

In addition, we announced in April that we've signed an agreement to open a new major production facility near Research Triangle Park in North Carolina. When up and running, this facility will double our capacity, strengthen our operations and help us offer industry leading turnaround times including for customers across the Atlantic and in South America. The opportunities to build out our platform and to bring more customers on to it remain attractive and numerous. We anticipate maintaining our invest on stance through the remainder of the year and as we indicated the last quarter are planning to increase the rate of investment above the baseline of Q4, 2020.

Our strong cash position allows us to deploy resources thoughtfully to extend our reach in the new geographies, accelerate commercial launch plans and pull exciting development programs forward. I mentioned earlier, the example we see of the investments we've made years ago in women's health driving significant growth today. I'd like to take another moment to share a similar example and one that illustrates how our approach is transforming patient care. Many of you know, our Behind the Seizure program and some of you may have spotted a story in the Seattle Times about two fathers and their young daughter. One family faced obstacles that are sadly still typical for sick children. They waited three years for clinicians to adjust genetic testing and were told, that would cost $25,000. After pleading with insurance companies they were finally able to have their daughter tested. She was diagnosed with Batten disease a genetic disorder effecting around three of every 100,000 people in the US. Tragically, her disease continued to progress and ultimately took her life.

The other family's experience shows what is possible when barriers are limited in ways that spur clinicians to embrace genetics. Early on in their daughters care, a neurologist suggested genetic testing through Invitae's Behind the Seizure program. She was tested quickly at no charge and was also diagnosed with Batten disease.

Fortunately, the intervention happened early and attention quickly turned to treatment and therapies that are slowing the progression of her condition. I tell this story to point out the wide gap in the way system currently works and the potential for our platform to transform care. We began investing in programs like Behind the Seizure's years ago to open access the testing and drive adoption by clinicians. These programs are creating a virtuous cycle in which more patients are diagnosed and effective treatments are developed and directed to those patients sooner. This was one of our earliest programs and we've now created many more like it. All have potential to push diagnoses and treatment earlier across clinical areas ranging from rare disease to common cancer. The ecosystem we're helping create will drive better outcomes for patients across wide swap of healthcare.

Our platform can bring together pharma, biotech, clinicians and researchers in a way that drive better, more efficient and personalized care.

For a small cost, compared to days trial and error and search for an accurate diagnosis and effective treatment. The value to the healthcare system benefit to society is immense. What you see here shows how genetic information unlocks better outcomes throughout the system and at all stages in life. Early in life, risk identification helps creates a personalized approach to monitoring for health issues that may develop.

For example, undetected cardiovascular disease in young athletes and breast cancer in young women.

As we move in the middle and later in life. Biomarkers replaced trial and error, giving patients access to better therapies. Throughout the combination of genetic and health information and the ability for patients to access it, further fuels personalized care. Patients benefits as do drug discovery efforts through improved research and better faster clinical trial programs.

Finally, for those who ultimately do end up facing a life altering health crisis like cancer targeted therapies guided by universal companion diagnostic and personalized monitoring mean better outcomes. And it then circles back to where we began, with genetics of a patient providing an understanding of potential risk for their family members. This is why we believe and ever more clinicians agree that genetic information is becoming a new vital sign. One used to guide healthcare throughout life. That vision of healthcare translates roughly into the large addressable markets we're targeting while lot of attention gets focused on cancer. The reality is, the genomic information is becoming increasingly crucial to healthcare, all throughout life. We believe the majority of expecting parents will have ready access to generic information when starting a family and young adults will receive it as they transition out of childhood along with starting a college fund or investing a life insurance will become standard to invest in a baseline genetic profile that can inform medical decisions throughout that person's life. The massive amount of genetic data will in turn drive faster and better drug discovery, trials and outcomes increasing the quality of life.

We have before us an incredible opportunity to serve billions of people in developed healthcare markets worldwide and help drive a fundamental shift in the way healthcare delivered.

As we think about where we are today, we see the pace of adoption toward that future rapidly accelerating. We see it in our business. We see it in clinician behavior. We see it in changing guidelines and payer decisions. We see it drug development and clinical research.

We are entering the steep slope of the genetics adoption curve and we intend to lead the industry through it. We're playing to win.

Our strategy is unique and our vision is ambitious. The future we've long discussed that sees genetic information, driving mainstream medicine is coming into view as a reality. We're aggressively focused on establishing a global infrastructure and delivering the most comprehensive menu of technologies and services through that platform to every patient who can benefit.

We are committed to doing what it takes to compete across medical specialties and to drive access to billions of patients in need and to an entire new generation, who will genetic information as a standard baseline for all their healthcare decisions. With that, we'll now turn the call over to the operator for Q&A.


[Operator Instructions] and your first question comes from Tycho Peterson with JP Morgan.

Tycho Peterson

Sean, I'll start with Genosity and just wondering if you could talk a little bit more about the thought process, why this is kind of the right time to do that deal? I think, you know at the time this could actually expedite the path to market and reduce the cost and maybe accelerate the traction - PCM LDT.

So why do you feel like that's the case and then, maybe you could also just touch on the 40% of Genosity revenues that are not tied to Archer and is there an opportunity to kind of leverage that too?

Sean George

The short of it is, while the Archer tech and capabilities are great. Standing up PCM as a laboratory to all test and getting it validated, proved built into our tech infrastructure was going to take some time and expense and with the team in Genosity already have that up and running. Again 60% of their revenue was very much engage of running that for by biopharma partners. That we know works, we actually know the team there - long many years in the industry, really great team. It proved to be a great opportunity to accelerate our broader commercial launch for PCM.

So we hope to do that broadly through our commercial channel LDT sometime this year and save a bunch of time and cost development for kind of the process and systems that were already existing there. The remainder of the revenue I think it's a kind of thing where I think a lot of it is contractual.

So much of it will remain and continue.

Some what is indeed to other players who may or may not be themselves competitors and that kind of us which isn't a new situation for us? It's handful of acquisition in the past, we've been there. And we always just - again you start with what's best for the patient, continue that service, continue that care then they'll all make their own decisions in their own time. Again I think we'll continue to try to serve suggest that those personal cancer monitoring services in those therapy selection services they offer best in class and we're only going to make them even more scaled and available globally.

So that's the way we view that to your question.

Tycho Peterson

Okay and then a follow-up in Genosity. Are you able to comment all on the litigation with [indiscernible], is there kind of a timeline we should be thinking in terms of next steps?

Sean George

No, not really able to comment on it. These are active litigation. Again we anticipated and took kind of that before the acquisition and same on Genosity.

Tycho Peterson

Okay and then on the balance sheet you highlighted $1.8 billion in net cash. Can you just talk a little bit about how you're thinking about M&A and inorganic investments? Obviously, you're taking up organic investments as well. But how you're thinking about inorganic at this point?

Sean George

Yes, I think on the M&A, the space is moving a lot and there is lot of really interesting capabilities out there. With that said, we're mostly thinking about showing up the balance sheet. Making sure to always have a clear path to operating cash flow positive. Obviously with our level of investment now.

You need a little more of a cushion to get there in the coming years. Specific things we know, we are going to be investing in. the PacBio collaboration which we announced earlier as I had mentioned they're kind of different speeds you can imagine that going. We can now really put all we can into from our side at least. The additional production facility in the East Coast, this allows us to better turn on time, lower COGS. Frankly, we're kind of bursting the seams here the West Coast, that was a needed expansion and now this capital allows to really get after that right away. And the of course continued investment in ex-US. Outside the US, we continue to see really great pent-up demand, our business now is moving north of - I think it's almost 18%. It's outside the US.

As we've stated, I'd be surprise if in three to five years it's not 30% or more. There's a lot of opportunity. There's no global play in genetics and that's an area we want to be able to keep investing. Not to mention of course all of the exciting development programs that, we tend to meet for a reasonable early return on investment. This allows us to look at some of the more exciting ones and try to accelerate them.

I think that's the bottom line of the use of capital, are those kind of things that we wanted to make sure just to keep after this year.

Tycho Peterson

Great, last one on gross margins. I understand kind of mixed dynamics playing on margin this quarter.

I think last quarter you talked about potential get into 50% by the end of this year and how you're kind of saying 50% well return. But maybe Shelly, can you just talk about when think you'll actually hit that 50% mark in target?

Shelly Guyer

Yes, I think by the end of the year or early the next year. One thing to note is that, we did have quite a difference between the accessions and the billables in this quarter and if you actually did put through all those accessions and the billables in the quarter. That COGS per unit would have dramatically changed.

So something like 10% fall off between the accessions and the billables and so you're not getting those in the first quarter.

You'll get those in the second quarter. But you had all the cost of those accessions going through in the first quarter.

So it's really hampering you buy several, probably 6%, 7% on your COGS and on your gross margin.

I think it's important to remember that, that we do have seasonality in the first quarter; it's always is the worst about 10% in the first quarter. Generally the second quarter is closer between the accession and the billables.

Tycho Peterson

Okay, that's helpful. Thank you.


Your next question comes from Doug Schenkel with Cowen.

Dough Schenkel

So Shelly, anything you can give us? I mean ideally would have organic revenue growth or something on Archer given this is just the second full quarter. Can you share anything with us that would help us track how Archer is tracking from a growth perspective sequentially and relative to plan?

Shelly Guyer

Yes, so I think your first comment was that we don't generally break these things out and we promise to do it only in the fourth quarter and then to integrate it with the rest of the business because the business is one platform. It is integrated and we've changed the priorities for what the former Archer is looking at in terms of collaborations and things like that versus the priority of getting LDTs up and running and that sort of thing.

And so we're not really looking at it as standalone business.

I think it was a very solid quarter for them. We had noted some COVID issues in the fourth quarter of last year. We're seeing some of those things work themselves out.

So it's exactly where we would have expected it. But I would say, if you took a standalone company that was looking for an IPO and you look at what those revenues were expected to be in 2021 that is not the trajectory that we have them on because the priorities have dramatically changed as now, they're part of our platform and working together.

So did fine, don't break them out and integrating it nicely.

So it is one platform, one oncology offering, etc.

Sean George

Doug, I might add it's basically oncology is about 50% of our business now and so I think the best way is going to be marking that and seeing the top line growth and it's that relative position within it. Which will underline the comprehensive risk their selection of monitoring progress we're making?

Dough Schenkel

Okay. Yes, I mean I totally understand. I mean at the same time given how inquisitive Invitae is.

I think a few of us sort of continue to push for some mile markers that we can use to kind of measure the success of acquisitions that obviously not all going to work, hopefully more of them work than others. But that's the reason I'm pushing.

So is the metric you would like us to use to make sure that amidst of all these acquisitions. But the growth is more than just inorganic efforts - if you're not going to break this out, then how do you want us to plan success or assess for you?

Sean George

I think, if we're looking.

Let's say Archer specifically what I would say is, well that's now fold into our oncology business. We'll certainly be talking about what percentage of the total that is. That should be growing at a clip that satisfies the question of inorganic versus organic growth. And layered in there of course we'll have regulatory submissions approval, we'll have product launch milestones.

I think we'll have discussions, very similar to I think as we look back to reproductive health. We had a reproductive health offering, modest one. We purchased CombiMatrix and Good Start. We then started talking broadly about reproductive health. It's growth year-over-year and then kind of as we see now that growth is picking now and becoming. It's close to 30% overall business at this point. And I think that's given a really good view to what those acquisition did for us buy giving us a broader menu to accelerate the top line of that business and I think that's the same - I think that's the same tracking I think we can provide for the Archer acquisition and Genosity acquisition for our oncology effort.

Dough Schenkel

Okay, that's super helpful and then I guess one more on just the Archer transaction. I mean some of the Archer customers that were being supplied with Archer kits are folks that I believe could be at least broadly defined competitors to Invitae. Is there anything you can share on just customer retention with that dynamic in mind?

Sean George

Yes, I think there are certainly some players both commercial partners and direct customers. I'd say that we're continuing on and serving them as before. My general sense is, the call point and the used cases probably just [indiscernible] where there's probably not a whole lot of issue here in the early years. Out years, year two from now maybe everybody will think differently. But right now it's - it's not a major point of contention at this point.

Let's say.

Dough Schenkel

Okay, thank you guys and actually last one. Sean, this is probably more Shelly question.

As we think about the North Carolina facility. The logistical benefits of having a facility there are pretty clear and we're well articulated.

The other dynamic there is, it does tend to be less expensive to run a lab in North Carolina than in the Bay Area. Overtime, should we expect some COGS improvement associated with the opening of that facility?

Shelly Guyer

Yes, I think so, remember the vast majority of some of those costs are basically the units, the reagents, the equipment and that sort of thing. It's less of the labor cost.

So you'll have savings on that proportion which is labor cost. Remember a lot of labor cost is going to be people who are [indiscernible] and the interpretation in that can take place anywhere.

So yes, you have some benefit from those labor reductions. I really look at it though, not only from what Sean said before but also a diversification for risk. We're in the Bay Area and having another site that is large and capable of continuing to operate, if anything should happen in the Bay Area is exceedingly important to us, is a risk reduction method. The final thing would be from a cost perspective.

If you can ship quickly to the East Coast and you can ship for internationally from some of the European sites etc. you got a big cost savings also on some of your shipment cost depending on what zones you're in and so it's not just the cost of the labor, that you should think about. But also some of those ancillary costs that will be helped by having in East Coast facility.

Dough Schenkel

Got it.

Okay. Thank you again.


And your next question comes from Puneet Souda with SVB Leerink.

Puneet Souda

So first one, just wanted to ask you on in terms of the full year guide and what you can provide onto the second quarter.

Just wanted to get your view on what you're hearing from the field recently. I mean sort of what percent of the reps are in person versus still remote? I mean just asking that because you're maintaining a full year guide here [indiscernible].

Given the level of vaccination sort of we're seeing out there and in terms of comparisons you have much better comparison in the second quarter. I know there's Archer contribution here as well and NIPS volumes are growing and based on what Shelly has said, some of those accessions are going to turn into billables.

So just wanted to get your sense on the second quarter volume growth. I wasn't clear if I hear that earlier and any puts and takes to that.

Sean George

I think the informative piece on the quarter was, obviously the year started choppy not just for us, for a lot of people. What we're saying is, obviously the back half of the quarter picked up really nicely and we pointed to more than 2,600 new accounts created just in the quarter. The last year that metric was kind of blown COVID kind of made that metric a little meaningless. But there was the year before the total for the entire year was something like 7,000 accounts.

So we're definitely pleased with kind of what looks like we're coming out of the pandemic impact. We're definitely pleased with new account formation. We're seeing more and more reps getting active in the locals.

Now with that said, we're also seeing on a case-by-case sometimes a rep-by-rep certainly territory-by-territory basis that some places are going backwards, some places are just changing access. And then of course ex-US it's still a little bit of thin [ph].

So that's why as we sit today, we're optimistic.

I think I certainly feel good about the call that we're going to exceed 450 and as this quarter played out.

I think that was right call that we're making. We'll see how the next quarter goes and I think if everything kind of continues to play the top line we might reassess at the next quarter. But right now it's little early to get too far ahead of ourselves. I'd say we'll just I think we called the year right at this point and it's playing at about as we expected.

Puneet Souda

Okay. And in terms of Archer obviously that's an important question given the contribution to the growth, given the importance of the franchise to the overall building out the oncology franchise. Maybe, can you give us any sense and I know it's - you're not breaking this out. But anything - should we still assume the 50% to 60% growth profile that you had pointed out earlier. I know Shelly mentioned that they had some IPO numbers which are not to be considered now. But maybe 50% to 60%, if you can provide any contribution of Archer in that or anything that help us get sort of gage for Archer. And I know I'm somewhat asking around an earlier question. But that's an important question for the growth of that business.

Sean George

I do think it's an important question. I understand that. The way we think about it is, if you take oncology business now. That oncology business should grow in that 50% to 60% profile. Frankly our whole business, that's what we're targeting 50% to 60%. Plus or minus that oncology should - keep up with that, maybe exceed it. Certainly as we get like PCM, therapy selection LDT's launch and that's the idea. And then by tracking that oncology business versus the whole versus the overall growth. We're confident that we're going to demonstrate that much like prior acquisitions we can take these integrate them, operationalize them and then place them into our overall platform and commercialize them and really kind of contribute to ongoing high growth profile.

So we'll definitely be checking on that every quarter. How's oncology business doing? Again the idea of we're confident. The idea of understanding risk both at a personal and population level. Stratifying patients therein, choosing the right therapy for all stages of cancer and then monitoring those individuals. We think that is the precision oncology offering that we're confident will provide significant top line growth for the years to come.

Puneet Souda

Okay, thanks and if I could, Sean in terms of the combined versus centralized versus the distributed model.

Now that you've had some time to look closely at Archer and its customers and those interactions. I'm wondering if you have any additional thoughts in terms of the distributed model versus centralized because obviously the centralized has given you nice cost leverage in past.

And so I'm just wondering with the new facility coming up, how are you thinking about decentralized versus centralized? And also was wondering if you can provide any updates on the timing of PCM? Obviously, they're product launching and de-market and I'm just wondering, when should we think about the assay being on the market or any performance or any updates on the performance metrics of those assays? Thank you.

Sean George

Yes, so the PCM I can answer first. We're looking now to get that out as a full commercial offering sometime this year, probably it's hard to say exactly when.

Before thinking about a full-blown commercial offering kind of into the year and next and I would like to have that be sometime this year. And kind of really ramp up to a broader offering of that and we think that's really important. The distributed, our position on that hasn't changed at all.

I think the closer you get to it.

You get a really good sense for the dynamics of what is going to drive decision for an account to try to run this themselves versus send it out. But it doesn't really change market - it's not a market change from our previous view of it. Certainly not a market change from the prior Archer team leadership views it. Again we're actually, we're very certainly large accounts in the US and certainly many accounts outside the US. The ability to support letting alone sample is going to be critical and like I said before and to be clear, this is not a priority right now. That cadent capability, the quality regime around it. The manufacturing capabilities and the ability to support it, is also key for other disease areas that would like to be able to offer reproductive health, cardio, pediatric disorders.

So those are things in the future that we're also going to that decentralized model will be important. Particularly for larger governments that are interested in us, standing up capabilities locally.

Puneet Souda

Got it.

Okay. Great. Thank you.


And your next question comes from Tejas Savant with Morgan Stanley.

Tejas Savant

Sean, one quick question for you on the OUS setting. Can you just fill in some color on the momentum you're seeing there and how you're thinking about the buy versus bill debate in those markets? And then similar question on pharma partner revenue trends as well. I mean what does that look like coming out of the pandemic here. And if you can help us sort of break that out in terms of the guide that would be super helpful.

Sean George

Ex-US, the market outside of US is fragmented pretty well along country lines for the most part, certainly regional lines.

So in that sense, frankly there aren't that many buy options that make it kind of sense. It's all the work of the buy, with none of is still.

So I think that's one way, that's kind of where we look at it.

With the steady investment. I truly believe and with kind of experience around this table as a guide. It only works in country, for country and that's going to take a lot of the investment. But good reason is, we've got a head start and we're rolling forward on it. Again a regional opportunity may present itself, that might make a lot of sense. There just aren't many, not many options there for a broad capability on that front. And then let's see sorry the other question?

Tejas Savant

On pharma revenue trends here existing the pandemic.

Sean George

That's right, so for sure some of the pharma solves is that, kind of was impact by the pandemic we see that picking up as well kind of getting back in action again. We do breakout pharma, what pharma pays for on our filings that's the percentage that pharma pays for, we'll continue to do that. The pharma business is important for us. It's very much beyond just the pharma paid R&D. I mean frankly pharma paid R&D isn't really that great of indicator of the health of business. It's helpful from a cash perspective. But it doesn't - it's not like a long-term value creator there. The pharma program is really important for validation for getting all the data to support both therapy section of monitoring, so those are essential to keep those going. And of course then, real action in the future is matching patients to the target therapies doing research on new targets, new capabilities that network of patients our data can bring and we can bring to our pharma partners which we're really excited about pulling forward. The more patients we get the more different data sets we get on them. It's a good - pretends well for the future. But right now it's a mix of patient identification programs and validation and research programs and clinical trials that seems to have been picking up, kind of also we're coming out of the pandemic and still be important part of the revenue going forward.

Shelly Guyer

Yes, we noted - that was 33% this quarter.

So that was a nice uptick from prior quarters.

Tejas Savant

Got it. And just a couple of quick housekeeping ones for you Shelly. Genosity, are you assuming sort of around $10 million or so in terms of the non-Invitae sales revenue over the course of the remainder of the year? Is that fair or is there room for upside there?

Sean George

We're actually encouraged to be with it's kind of deminis with any luck, it will be in the noise of it. But and we don't know what the count on for the rest of the business that wasn't - if you remember 60% was pass through anyway, so you don't really get to book that as additional and then the rest of its unknown. How that's going to play out? And we don't have a hard opinion about it either.

So we're just encouraging people to ignore that for now.

Tejas Savant

Got it and Sean, can you help us think through the impact on turnaround time once the RTP facility comes online here? And then I have one final follow-up.

Sean George

And this is where, I love this because this kind of shows where we are. We're literally talking 18 hours. I mean it's not, 18 to 24 hours which is, it's huge. And even more importantly, our shipping build is getting up there and so that being in that shipping zone to maintain those service levels and reduce the cost of it is, is really key.

So yes, it's only a day difference but the real important difference is how much you pay for that days advantage and that's a key to having on the East Coast.

In addition like we mentioned across Atlantic or South America it's a little more straightforward. But faster and cheaper.

Tejas Savant

Got it and then one final one from me.

With the $1.8 billion on the balance sheet, Sean. I know you mentioned the RTP investment and the OUS expansion. But how are you thinking sort of the cancer screening opportunity here. I mean that's the one sort of elephant in the room so to speak that you don't have today in the portfolio that would make logical sense for you to look at?

Sean George

We spend an awful lot on development. We get a lot of samples from patients that we have - who's at risk we're now performing therapy selection and monitoring on them. I'd say the short answer is, yes, we've got at least three technologies in house that you could imagine we're looking to develop data on early screening. Again we're very likely going to be focusing on people we know are risk, that just from our world view and the way we deal with our patients and customers, that seems to make the most sense. The people we already know at risk, very high likely of developing cancer earlier. And then of course there are many technologies out there that look pretty interesting and compelling as well and yes, the cash balance helps us kind of not way too much about the build by decision. I would say it's fitting in something we're evaluating. We truly are focusing on, what we think the bulk of the action at least this and next year will be is in, who's at risk? What therapy should they get? And then what's the best way to monitor for the disease either coming back or to alter the course of therapy. We think that's where the bulk of the action is going to be in oncology and nonetheless yes, we're looking to future and pretty happy about where we are vis-à-vis access to patients, access to samples, the kind of data and technologies at our fingertips.

Tejas Savant

Super helpful. Thank you.


And your next question comes from Brian Weinstein with William Blair.

Unidentified Analyst

This is Griffin on for Brian. Thanks for taking my question.

Just a quick follow-up on the measuring Archer milestones here. Can you give us update on stratified [indiscernible] of course submitted FDA late last year.

You see breakthrough devices [indiscernible], hearing anything from FDA regarding potential priority review and anything on timing there?

Sean George

It's not typically a best practice to discuss the discussion with the FDA. Obviously because this was part of an acquisition milestone. It obviously is an important question. What I can say is, it was submitted end of last year at the time we suggested look these things can take anywhere from nine to 18 months. There's nothing that's changed on that timeline. It's actually a fairly complex submissions. It's got DNA RNA infusion. The DNA copy number variations and RNA. And I would expect that we're going to start to see the initial approval, initial indications on time, that's our general sense. There's nothing that is changing that view right now. But we'll keep people posted. It's kind of thing you kind of know, when it happens and then we continue the dialog with them for new indications, new targets, etc. from there.

Unidentified Analyst

Understood and then just one more just given how broad your product portfolio is, in hereditary diseases, family planning, oncology, etc. Are there any areas within the business that you're seeing particularly faster maybe slower recovery and if still has that kind of informing where you putting time, resources and investments?

Sean George

I got to tell you it's hard to measure the market growth against the recovery.

For example reproductive health is growing very fast right now.

I think some of that's to the extent there was an impact in COVID. Recall that, that area was impacted the least in the COVID impact.

Now so there's a little bit of COVID recovery. I also think there's just general, there's a lot of market growth there going from the number of women's who are getting the service today. The number one, who'll get them in the future.

In terms of the fact of recovery slope, yes oncology particularly on the early risk side of things. A lot of other pediatric and rare disorders those are the most impacted and those are the ones showing the steepest recovery at this point in time. Again it's difficult to piece out exactly. But I think that's a what's market growth versus what's recovery in influence. But I think that's the best we can tell right now.

Unidentified Analyst

Great, thank you.


And your next question comes from Kevin DeGeeter with Oppenheimer.

Kevin DeGeeter

Sean, one of your peer group companies with some portfolio called out made an R&D day [ph] today 8% to 10% organic growth for their business.

You're calling simply 50% at least near term for oncology and potentially for the business overall. I guess maybe sort of two parts of this question. Can you give us a perspective as to how you think of kind of organic growth for the business and the context about that 50% number? And maybe a little bit more contextual for some of the key end market. Do you have a good kind of current field as we do exit the pandemic with a little bit different dynamics in the market, as to how we should think about industry level growth metrics for oncology and women's health?

Sean George

Yes, I do want to clarify when point out 50% to 60% growth for the next two or three years. We don't distinguish organic, inorganic obviously very large inorganic addition to that is a little bit cheating, we wouldn't count those.

On the margin, there's going to be some acquisition in that I would assume over the next three years. But if you kind of take that aside, our view is still very much rooted in the fact that, the majority of the patients who could use this information aren't getting it today and I think even in some of the more developed like carrier screening in non-invasive prenatal testing. In carrier screening, broad panel screening is just now becoming kind of widely accepted and reimbursed by payers. NIPT. We've kind of covered that ad nauseam. But still there's only two, 2.5 million women in the US, 2.5 million pregnancies or so are getting afforded to those technologies. There still 6 million pregnancies just in the US. On oncology it's even more, it's even more tilted. The number of individuals getting their cancer staged appropriately. The appropriate molecular characterization or the best molecular characterization. It's a still very small percentage of all of the people getting diagnosed with cancer over a year and then of course on the recurrence in the monitoring side. It's greenfield. It's essentially a greenfield kind of thing.

So our view is that, sorry I should have started with risk assessment. Even with really strong market position we have. We're seeing guidelines move faster than people can keep up with and the markets are double the size of what they were two years by way of kind of recommended screening for people for cancer. And not to mention, just top of the prospect there's another huge chunk out of there.

So that's really our view, is what you're looking - if you're looking at oncology, you're looking at risk assessment therapy selection monitoring. Risk assessment is - the formal markets are reasonably penetrated. But the new market size is getting added all the time. And then for therapy selection monitoring its essentially early days period. And frankly if you look out beyond there, it's the same. I mentioned reproductive health and then if you look at pediatric disease same thing.

I think we've done a pretty reasonable job with epilepsy whereas almost 0% of kids with epilepsy were getting appropriate diagnoses now. It's not zero, but it's certainly not 100 times umpteen other a longtail of other genetics disorders for which there is really effective targets therapies on. so it's your long way of saying, the short of it is, it's a - the market is growing and the need is materializing. Granted, it has to be at the right price point. It has to be at a level of utility, that your average clinician, your average patient can understand. Which of course is the hard part? But that's our view of the growth. What the tailwinds of growth look like.

Kevin DeGeeter

Great and then, as a follow-up question.

I think following-up on one of the earlier questions talking about other potential end markets for growth.

With the scale of the operations company has in cost structure at Invitae. Can you just give a perspective on interest in population sequencing, opportunities in both US and there's a number of opportunities are out there? But they - actually wise as well?

Sean George

I can, I think. I'd say two things, we often get approached by folks who have done population sequencing programs and then are having a hard time figuring out what then to do. The research aspect of it is probably satisfied. But then what to do then to actually communicate. What you communicate and when and to whom and how do you manage the patients as a result? That is where the top seek programs, I think meet the real world of clinical utility of genomic sequencing. And frankly, I think we're in early days of that.

We will see more and more of those coming and we'll kind of do our part there.

I think what's particularly interesting is, what you're seeing around the globe is almost a skip to I think ministries on health around the globe are skipping away from, let's just do a population sequencing program to - how do we do a population-wide genomic program? How do we actually implement genomic medicine for our population? How does it work? What do you need the sequence and when? What do you tell people and when? And essentially and again I point to the genome you care, the NHS report that came out end of last summer that I think is a pretty reasonable blue print for what a lot of ministries and health in globe around the world were evaluating and again it kind of reads like an RFP for the Invitae business model.

So we're excited to kind of see those discussions spinning up and we're excited to see what we can do, by way of enabling from crib to death population genomics and see how we can really bend the curve on outcomes and cost.

Kevin DeGeeter

Thanks for taking my questions.


And your question comes from Ophir Gottlieb with Capital Market Labor.

Ophir Gottlieb

Just two quick ones.

I think 2021 was the year that Singular Bio was going to be getting into production for non-invasive prenatal screening and that would eventually impact something like 40% of the entire reproductive business. How is that tracking and can you comment on possible impact on COGS?

Sean George

Yes, so this is the year.

As you point out, we're going to begin putting that into product. It won't immediately take all of the NIPS volume. but certainly by the end of this year, we expect to have a good chunk of it up running and saving COGS and then certainly by middle of next year transition the majority of it. The extent that will impact COGS like you said, if you take a little under 30% of our total business model of reproductive.

I think 35% to 40% is on IPO.

So it's a significant impact and it certainly helps. We look at the margin profile on the overall basis. But if you consider reproductive health either separate it. It certainly has a real impact on the gross profit contribution on a percent of basis for those samples.

So we're excited to see that coming to play and like I said, by the end of this year we'll have some good proportion of our NIPS converted over [indiscernible].

Ophir Gottlieb

Can you give any color to the impact there? Or do we have to wait?

Sean George

No, I think you have to wait, a lot of it is kind of when and what portion, which is still something that we don't have 100% visibility to.

Ophir Gottlieb

Okay, great. Also there's a possibility that Exome could become [indiscernible] revenue in 2021, perhaps in the back half. Where you would run instead of potentially in panels. Do you have any update on that?

Sean George

No we're excited to be moving into the genome powered era where Exome and/or genomes are going to be, the natural way to go for a lot of differential diagnosis and difficulty to diagnoses diseases. And in particular, I think this will be more of a next year story for autism development of [indiscernible] disability.

So yes, we're very excited about that and again I think this is where - this is just the beginning of kind of power of genomic scale for some of these conditions. And again, we do think good news on that one and the reason we think it will be a one of the growth accelerators is there's a well-established market for microarrays and panels, microarrays in Exomes used to diagnose its children and kind of nearish [ph] term version of that is a single test that covers all of it based on a genomic analysis at the same clinical quality for sensitivity and specificity diagnostic yield etc. and that yes, we definitely that will be a growth driver.

Ophir Gottlieb

Is there something, we would be considering in the back half something to address our estimates?

Sean George

In terms of adjust, I think that's one of the things we pointed to, when we talk about guidance we pointed to as a potential upside for this year. I would - I think the timing is still something that whether it's going to have a big impact or not is still unknown even today.

Ophir Gottlieb

Okay, fair enough. I'll take the rest offline. Thank you.


And your next question comes from Simon Barnett with ARK Invest.

Simon Barnett

Just one question here. so last week, at PacBio's Rare Disease Conference.

I think several rare disease collaborators mentioned that the relative lack of structural variant information and shared databases made the interpretation step a little bit more manual for a lot of these clinical cases. Staying on the topic of interpretation, I'm just wondering while these databases are still growing over the coming quarters and years. How do you feel like the functional modeling platform is sort of set up to automate the interpretation of a lot of the more novel variant types that you're going to start picking up as you migrate to increasingly more to at the HiFi sequencing?

Sean George

I mean it's really to the crux of the question here. actually it's two parts, so the FMP portion its FMP module of our infrastructure allows us to push more variance away from the VUS, variant of unknown significant state into either suspected benign likely pathogenic. Which translation is it's a more certain result for clinicians and patients and it leads to higher diagnostic yield? So you get a better service, you get more certain answers.

We also by the way get more patients that we identify that could benefit from targeted therapies from our biopharma partners.

And so the FMP module allows us to do that and to the extent that we can do it in automated fashion by plug it into our interpretation infrastructure. It also reduces the COGS associated with looking at all those variants of unknown significance and the work that goes therein. That was an acquired asset that we integrated into our interpretation engine. Overall our interpretation engine automates as much as possible and then leaving the human specialized work for only the most exclusively difficult variants to call. And I think it's a kind of thing where that has been the key to us both kind leading in quality and at the same time lowering cost dramatically. And I think it's also - I think going forward I fully understand I can empathize with the sentiment especially with some of the clinicians at the conference. Again, we would offer. We've got a pretty good cutting-edge platform for doing this. This is why we can do at certain expensively and we're going to over the coming years be opening that platform up to those individuals as we extend our global data infrastructure taking more and more patients and their data in and again at their behest sharing that and their outcomes to push the science in each one of these rare disease forward, even faster.

Now the other thing you mentioned on that was the [indiscernible] again as we mentioned when we did the PacBio announcement earlier in the year. There's another aspect of that the two kind of work in concert with each other.

If you're getting higher fidelity reads across variance that otherwise we missed. By definition you're increasing your diagnostic yield which is again translates to better diagnosis, more patients correctly diagnosed and you're going to finding a lot of variants that aren't in the canonical databases or in the world unfortunately. Again the good news is, our infrastructure is set up to deal with those things and to get them.

I think maybe a way to think about it, pushed them to canonical as soon as possible, as soon as it's humanly or actually human plus [indiscernible] possible. And that's a real benefit of things like the FMP module of our infrastructure amongst others. Again we also quite deployed which was kind of again we've kind of talked about it as a variant genomic variant debulker is it where, to help identify a lot of those really earlier frequency variants in that to quickly assign, if they could be causative or not.

So yes, the two work in conjunction and again it's view of our kind of constant investment and innovation on improving the interpretation reporting at the same time, scaling it to the global scale at low and cost in the process.

Simon Barnett

Great, thank you so much.


And there are no further questions. I will now turn conference back over to Laura D'Angelo for closing remarks.

Laura D'Angelo

Thank you for joining us today. We look forward to connecting with you soon at upcoming conferences.


This concludes today's conference call.

You may now disconnect.