Recently, invitae submitted its quarterly report 10-Q to the U.S. Securities and Exchange Commission, saying that its subsidiary archerdx could not achieve a product registration milestone agreed at the time of M & A, so it needed to cancel a debt of $262.5 million.
In October 2020, invitae acquired archerdx with a total price of US $1.4 billion. At that time, it paid US $325 million in cash and prepaid 30 million shares. The acquisition terms also stipulate that if archerdx achieves a certain milestone, invitae needs to pay additional money.
In the 10-Q quarterly report submitted this time, invitae said that among the five milestones agreed in the acquisition agreement, archerdx completed one last November, thus triggering the cashing of 5 million ordinary shares and US $1.9 million in cash. In addition, three milestones were completed on June 30 this year, triggering the cashing of 13.8 million ordinary shares and $3.3 million in July.
However, archerdx is not expected to achieve the last milestone, that is, stratafide, a pan solid tumor genomic CDX product used to guide cancer treatment and monitor efficacy and recurrence, cannot be approved by FDA before March 31, 2022. Stratafide test mainly identifies the intervenable tumor genomic changes from tissue or blood samples and matches them with the cancer therapy under research or approved. This test reagent was recognized as a breakthrough medical device granted by FDA in 2019.
“For the final milestone payables of archerdx, as of June 30, 2021, the debt has decreased to zero from $262.5 million as of March 31, 2021 and $287.7 million as of December 31, 2020.” Invitae said in its quarterly report 10-Q that according to feedback from FDA, archerdx’s stratafide product is unlikely to be approved by FDA before March 31, 2022.
In invitae’s Q2 financial report, its executives have discussed the possibility of this financial adjustment. Tycho Peterson, an analyst at JPMorgan Chase, said invitae executives were still confident that stratafide would be approved by the FDA, only a few months later than originally planned.
Invitae provides a series of gene testing products, including genetic tumor and cardiovascular disease screening, and has served more than 2 million users so far. In 2021q2, it achieved a revenue of USD 116.3 million, an increase of 152% compared with USD 46.2 million in the same period last year; Q2 gross profit was US $25.2 million, compared with us $3.2 million in the same period last year. Q2 operating expenses were US $159.3 million, with an initial net loss of US $129 million.
Tycho Peterson wrote: “invitae management is tight lipped about FDA’s specific comments and whether additional data is needed. However, the management said that FDA’s comments pointed out a clearer path for the team and actually increased the team’s confidence in stratafide’s approval by FDA. ” Therefore, he believes that the debt relief of $262.5 million will not affect the expectations of the company’s financial performance.
In addition, according to people familiar with the matter, exact sciences recently issued an M & a invitation to invitae, but the management of invitae refused to comment, saying that there was no discussion on this topic. Exact sciences is the largest cancer screening enterprise in the United States, and the latter is the giant of genetic disease testing in the United States.
In recent years, there have been many mergers and acquisitions related to cancer screening. For example, Illumina planned to acquire grail for us $8 billion last year, while exact sciences agreed to acquire thrive early detection Corp for us $2.15 billion, showing the capital’s enthusiasm for the cancer early screening market.
It is said that Catherine wood’s Ark investment management may be the driving force behind the acquisition of invitae by exact sciences. Ark investment management is currently the largest shareholder (11%) of invitae and owns 6.2% of exact sciences.
Catherine wood is the founder of ark fund. The ark Fund led by Catherine wood quickly exploded with very brilliant performance and ranked first among more than 2400 funds in the United States by the end of 2020. She once made a lot of money when Tesla’s share price was low. Therefore, she is also known as the new generation of “female stock god” and “female Buffett”.
According to the ark fund website, the fund aims to “capture the long-term growth and capital appreciation created by disruptive innovation”, mainly focusing on artificial intelligence, robotics / automation, energy storage, genetic technology and blockchain technology. In terms of gene technology, it mainly invests in gene sequencing, gene editing, gene therapy, biosynthesis, targeted therapy and molecular diagnosis.
In addition to holding a large number of invitae shares, ark fund also bet on editas medicine founded by Zhang Feng and CRISPR therapeutics founded by Nobel laureate Emmanuelle Charpentier.