NVTA (2020 - Q1)

Ladies and gentlemen, thank you for standing by and welcome to the Invitae's First Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Laura D'Angelo, Head of Investor Relations. Thank you. Please go ahead. Laura D'

Thank you, operator, and good afternoon, everyone. Thank you for joining us for our first quarter 2020 earnings call. Joining us today are Sean George, our CEO; Shelly Guyer, our CFO; Lee Bandekgey, our COO; Bob Nussbaum, our Chief Commercial Medical Officer; 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, our investment in our infrastructure and operations, and finally the outcome of ongoing conversations with out auditors regarding the accounting associated with acquisitions, these statements 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 slated outlook. The statements on our future company performance assume among other things that we don’t conclude any additional business acquisitions, investments, restructuring, or legal settlements. We refer you to our 10-Q for the year ended December 31, 2019, and particularly 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. In this period, these non-GAAP measures include cost of revenue, gross profit, operating expense, including research and development, selling and marketing and general and administrative, 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 Slides 10 and 13 of the earnings deck. With that, I will turn the call over to Sean.

Thank you, Laura, and thank you all again for joining us on the call. We continue in our mission to transform the genetic testing industry from one where genetic information is used sparingly on a test by test, indication by indication basis served by high margin niche market business models to one where genetic information is used broadly as a medical utility to improve outcomes and lower the healthcare costs for billions of individuals around the globe. The year started off in a dramatic fashion, with an exceedingly strong Q1 right up until mid-March when volumes fell around 50%, prompting us to suspend our guidance. While we understand better, the near-term impact of the COVID-19 pandemic. I do think it is worth noting that the trajectory we were on for the first 10 weeks of the year would have had us well on the path to exceed around 850,000 samples for the year and headed [ph] to beat our revenue expectations. More importantly, we don’t see any structural systematic changes in the demand for genetic information and are getting a general sense that perhaps when all is said and done, the importance of diagnostic information may actually appreciate faster. And in fact, each week in April up to and including this week in May we see steady daily average volume increases. While early, and really only happening on a regional level, we view this as evidence supporting our scenario outlook of the COVID recovery period and more importantly the essential nature of genetics in mainstream medicine. What we are seeing in the near term is that now more than ever, the way people access healthcare is changing. Invitae has been investing for sometime on this front and is uniquely positioned to help clinicians deliver care to their patients through this pandemic. Our production facilities are fully operational and we continue to add to our enhanced capabilities in telemedicine and at home solutions, as well as supporting our clinicians with professional education when transitioning to telehealth. Our GHFR recently integrated from the Clear Genetics acquisition last fall, has played a key role in scaling these capabilities, and our direct channel development is timely given the given the number of couples trying to conceive or are currently pregnant at this time. This week we will be launching a marketing campaign educating consumers about this capability and just how easy it is to access genetic information for healthy mom and baby from the comfort of their own home. We are all adjusting to a new reality and we believe this new normal should be one where all of our customers have access to the genetic information they need, but even more accessible and delivered a new more efficient and safer ways. And Invitae is better poised than anyone to lead this effort. I will now turn the call over to Shelly to highlight quarterly results.

Thank you, Sean. Just a quick comment before I begin. We noted in today's release that interest and other experience net and net loss are preliminary and subject to change as we finalize acquisition related adjustments. These adjustments will be incorporated in Invitae's Form 10-Q to be filed with the SEC on or before May 11. We don’t expect the impact of any change or reclassification to be material. Importantly, any reclassification would not impact revenues, volume or cash balances for this or prior periods. Volume remains a metric which best reflects the health of our business and as Sean mentioned, we had a very strong quarter of growth. We recorded nearly 64% growth in volume over the previous year, accessioning more than 154,000 samples in the first quarter of 2020. We accessioned more this quarter than the full year 2017. Billable tests are important given that we accrue our revenue based on the number of billable reports in a period. This quarter we reported billable volume of more than 151,000 which represents 74% increase over the first quarter of 2019. Volume growth was strong across all segments with higher growth in reproductive tests and biopharma programs. Additionally, international volume was strong now running at 11% of our billable volume. Recall that we experienced seasonality in our volumes. The first quarter has traditionally been our lowest and we believe the record volume this quarter despite the last two weeks being affected by the pandemic along with early signs of recovery are indicators of continued future growth potential. We generated $64.2 million of revenue this quarter a 58% increase from the first quarter of 2019. In the first quarter over 68% of our revenue came from third-party payers and just over 30% from both institution including pharma partners and patients. The continued high percentage from third-party payers is largely due to higher Medicare payments despite the known 10% payment reduction on certain cancer tests effective January 1. Additionally, we continue to see steady improvement in commercial third-party payer performance. Consistent with our discussion of ASP trends last quarter, we realized an ASP of $418 this quarter down from $443 in the fourth quarter of 2019. This decrease was primarily driven by payer and product mix changes, which will continue to impact ASP going forward. Because most line items on the P&L are affected by acquisition related charges from amortization of acquired intangible assets and acquisition related stock-based compensation, we have provided a detailed reconciliation to non-GAAP in tables included both at the end of today's press release and on this slide and slide 13 of this deck. Our GAAP financials for the first quarter are provided in the table on this slide as well as in our press release and regulatory filings and were average cost per sample 262 gross profit of $23.8 million, gross margin of 37% and operating expense of $121.6 million. Throughout the remainder of the discussion of the quarterly results, we will refer to non-GAAP numbers which we believe are more relevant depiction of the business dynamics and the decisions we are making going forward. We also provide cash burn which is a non-GAAP measure. Investors are encouraged to review the non-GAAP reconciliations. Our cost of revenue per sample was $245 this quarter, 10% increase from the first quarter of 2019. The increase in cost of revenue per sample was driven by the higher incurred costs of newer content offerings and mix changes offset by investment in cost reductions and the growing impact of scale on our cost structure. While the path forward to pre-COVID volumes is unknown, we do expect to see higher costs per sample through the second quarter and a trend back towards 50% gross margins by the end of the year. The key measure of our long-term financial success is the ability to generate sustained positive operating cash flows. In the near-term gross profit growth is a reasonable substitute indicator. Gross profit was $26.5 million, an increase of 35% over the comparable number a year ago. The gross margin for the quarter was 41%. The ASP declines from product and payer mix shifts, the increase in COGS per sample due to product mix, along with the increase in accession to billable volume GAAP due to seasonality impacted our gross margin. We provide a reconciliation on this slide to show the adjustments to GAAP from the cash flows in our financial statements to the non-GAAP numbers investors are accustomed to us presenting. Moving to operating expenses, we exited 2019 and began 2020 in investment mode and the early months of the year exhibited very strong growth. We continue to invest in our business in operating expenses for the first quarter were $101.9 million. Our first quarter spend fell into several areas. First, sales to increased headcount and facilitate product launches and volume expansion and marketing to support our direct channel. Second, research and development mostly headcount increases to facilitate scaling our business, content expansion, improving the customer experience and reducing COGS and third general and administrative to support the growth of the business. With the changes brought on by COVID and as we highlighted in our last public call, we significantly scale back our expenditures starting at the end of March and into the second quarter, by pulling back on investments in future projects, instituting a reduction in force, and other personnel expense reduction measures. The company is continuing to closely monitor the impact of the pandemic on testing volume which is highly varied based on clinical area, geography, and clinician type and we will continue our efforts to calibrate our spend as appropriate. Cash burn, excluding acquisition related expenses would have been $66.2 million. Moving to our cash position at March 31, 2020 cash, cash equivalents, restricted cash and marketable securities totaled $301 million. Several important events occurred at the beginning of April which affected our cash position. We closed on our pharmacogenomics acquisitions, YouScript and Genelex, using around $25 million in cash. We completed a public offering of common stock yielding $173 million in net proceeds and these events combined with our cash on hand at March 31 meant that we started the second quarter with around $450 million on the balance sheet. With the cost reduction moves mentioned above, which we have made given our current scenario outlook, we are targeting a total cash burn of less than $200 million for 2020 and an exit burn rate of less than $30 million in the quarter. We have more than enough capital to withstand a variety of downside COVID scenarios and emerge out of the coming quarters even stronger for it. I will now turn the call over to Bob Nussbaum to highlight some of our recent data.

Thank you, Shelly. Invitae is committed to contributing research to the medical community to better healthcare for all of our patients. Among Invitae's data at the World Congress of Cardiology virtual meeting we presented a study showing that 96% of individuals genetically positive for a cardiomyopathy would be falsely reassured by a negative result provided by limited genotyping testing strategies, commonly available in direct to consumer services. In contrast, comprehensive genetic testing identifies actionable variance in a substantial portion of cardiomyopathy and arrhythmia patients that may confer eligibility for genes specific precision therapies and guide implementation of established management recommendations. Among Invitae's 13 abstracts at the American College of Medical Genetics and Genomics annual virtual meaning just last week. We presented research from the Invitae's Detect prostate cancer program. This found that one in seven patients had a positive genetic result. Independent of where the examination of tumor tissue showed there was intermediate, high risk, or very high risk disease present. In addition, half of the patients with actionable findings had no family history of disease. This indicates that overly narrow testing criteria based on the degree of severity of the disease or whether there was a positive family history of prostate, breast, colon or ovarian cancer, deprived nearly half of all patients who could benefit from testing from having their testing performed and covered by insurance. Our research collaborations by showing increased deal from broadening testing criteria identified more patients with actionable findings with clinical implications, such as qualifications to approved therapies or clinical trials. This data also highlights that simple partners are coming onboard to be a part of Invitae's tech programs to provide no charge genetic testing for conditions in which testing is underutilized, but can improve diagnosis and treatment, thus highlighting the importance of Invitae's growing network of biopharma partners. In the first quarter alone we added 12 new bioparma partnerships bringing the total number partners to more than 90. These sponsor testing programs are also important for patients who have recently lost insurance coverage or cannot afford the cost of genetic testing. I will now turn the call back over to Sean.

As Bob mentioned, our growing network is a huge contributor to our ability to bring Genelex in the mainstream medicine and across the Board our diversified products, services, technologies, channels, customers and geographies, meaning that we are well equipped support clinicians around the world through these trying times in which we aim to be of service however we can to our customers. We're certain our aggressive investment in ways to access the platform positioned us better than anyone to support clinicians and patients using the clinic from afar model. We have had telehealth options in place for some time now and our past investments in acquisitions and our customer flows have enabled the transition to telemedicine that has been rather seamless. Over the many years we've developed and/or acquired new content, much of it just now starting to contribute to the business leading to the broadest menu available which is making it easier and easier for our network partners, health systems, and governments around the globe to look to one place for all their genetic information needs. And even as we respond to present challenges by pulling back on some of our future investments, we continue in the relentless pursuit of our mission to better deliver genetic information to billions of patients worldwide and the clinicians that serve them. Even in times like these, there are cancer patients, people with cardiovascular diseases and families afflicted by other genetic disorders that need this information. For the women that are trying to conceive are pregnant, they need access to genetic information from the comfort of their home from conception through the pediatric one year check in. The importance of genetic information and diagnostics in general and their impact on population health is only growing faster. The unmet need is immense. The challenges surrounding this pandemic will subside and we continue to position Invitae as a runaway winner in one of the most exciting and dynamic sectors of healthcare when it does. With that, I will now turn the call over to the operator for Q&A.

[Operator Instructions] The first question is from Puneet Souda of Leerink. Please go ahead, your line is open.

Yes, hi Sean, thanks. So my first question is on Invitae has driven market share growth and captured market share over time, with this disruption ongoing a number of costs reduction efforts that you're doing across the organization, how are you thinking about sort of emerging from this and how are you looking at the broader landscape of the peer group genome line testing companies, how do you think Invitae merges out of that because traditionally you had into menu expansion and reducing the cost and obviously the lever you can pull here is reducing the cost more aggressively? So just help us understand how do you position into that as some of these tests that are hereditary obviously elective on a certain time scale though what is your expectation as you emerge from this crisis in the second half?

Yes, so I think the – as we mentioned we do see some over the last few weeks, some recovery in daily average volumes. It definitely is really hyper regional and is a little over the map. So we're calling in early, too early to really call anything. In terms of emerging on the other side of the COVID impact scenario stronger for it, what we've done is essentially pulled back on a lot of future investments and alter the mix of investment. The short of it is to favor near-term gross profit generation, which I think is no surprise to anybody, that's a natural move you would make. So we've made the OpEx moves. We've stopped hiring. We've let some people go. So we've done all of the basics of housekeeping. And on the investment front, we've really been focusing on COGS improvements, product improvements that allow us to kind of take immediate share, like where we see immediate share opportunity, share capture opportunity we're focusing on those product improvements. Any of the front line kind of customer facing both clinician and patient portal capabilities that ease, move friction from the workflow, unable [ph] a lot of the legwork to be done for clinical genetics upfront and out of the office we're prioritizing those efforts. And other investments in systems that help us scale the business with better operating leverage. And so, I think it's really not that different from the balance of our – if you consider our portfolio management R&D investments if you will over time, albeit with the challenges on the top line from this COVID. The OpEx moves we've made and will continue to make, those investments are being targeted more towards near-term gross profit generation. And then I think that will continue on certain clients for the period, customers for the period and I think as things come back again we will emerge with the broadest menu, the capabilities that allow us to serve those customers with the least amount of friction domestically and around the globe.

Okay and that's helpful. Shelly, if I could ask on burn reduction here, as you look at the number of acquisitions that you have done over the last year and recently and deployed in your script and Genelex how much of that reduction is sort of if you could lay out for us the order priorities in terms of cost reduction, where is the majority of this coming from and where do you stand currently on the total sales reps and should we expect a reduction in those acquisitions that you have done or is it going to be more of the core business reduction or the reduction in the core business for hereditary and others where you have invested before?

Yes, so I think, as I highlighted we had been an investment mode and that was a lot of additional R&D heads and others to do some of the things that Sean talked about as well as some in the sales force et cetera and in G&A to help us to scale the business. So across the board we cut back. We did not focus on cutting back on any of the recent new acquisitions. I think that would be shortsighted. Our goal is to integrate those quite quickly. If we can get some savings from that that would be great, but that is not an area of focus for us in terms of cash reduction and cost reduction. I think more important is to integrate those really rapidly. And as you recall, Clear Genetics had a small number of people as did Jungla and Diploid. So it is not like there are a lot of heads and a lot of extra burn that comes from that, but again on those three, the critical getting those integrated in to be able to increase the sales level and have the top line improving and enabling that customer service side and access to the tests. And so, all of those are priorities for us, not in terms of reduction of costs, but in terms of growing on the top line and being able to offer enhanced products and services. And then I'll let Katherine talk about specifically sales force.

We ended the first quarter with approximately 300 people in the field, both US and internationally and while in April we did tighten up that team a bit. I would say that team has really been predominantly focused as Sean mentioned being of service to our customers today and really being a good partner for genetic counselors who are trying to navigate how to provide care. Walmart being able to do it though the normal course of the day. So the team is super focused, I would say on making sure that we're being serviced through our customer base, utilizing and deploying [indiscernible] to be able to make sure that accounts are getting set up with that service because we know that that provides access for patients through their clinicians and we know that that's going to be a service that provides an important letter in terms of reorder rates moving forward.

And if I could ask the last one on Gia and telehealth expectations. Can you quantify sort of how much of the business currently is coming from telehealth versus traditional call ins and other methods from genetic counselors? And longer term Sean, how do you think about genetic counselors moving to telehealth even more aggressively after this sort of the telehealth Renaissance that we have seen across healthcare, and how do you smoothen that process when it comes to reimbursement and especially situations where genetic counselors are maybe licensed by the state and can't consult outside their state. So how do you work through those and what's your expectation here for genetic counselors using telehealth longer term and driving business to you?

Yes, let me start and then I'll answer the kind of the impact, Katherine can kind of go through some latest developments of genetic counselors in our infrastructure and then I think Lee can address the reinvestment side, so really quickly to answer the first question, the impact of Gia is a difficult one to qualify, specifically the stand out. We have invested for some period of time now with our patient portal, our clinician portal and have always been adding features that make it easier and easier to do that, not with a rep in the clinic walking the clinician through it or pulling charts or filling out information and having to do it in the clinic. So that's been in development for some time. Gia has definitely accelerated that, but it's just hard to say kind of if the majority of our orders are through our online portal, how much of that now is caught - uplift from Gia versus it's difficult to say, but I would say kind of like we can definitely see even the very early days it is having a positive impact and the ability to drive more volume, how clinicians get greater throughput through their clinics, eliminate a lot of the activities that otherwise would take time in person. So we're pretty pleased with how it's going. And then Katherine, I think you had a question specifically about how genetic counselors are using it the billing, so Katherine can speak to the GC part.

You know, what's really interesting is, initially we thought Gia was going to be most supportive in clinics that did not have a GC on site. And certainly amongst OBs and cancer centers we're seeing since the introduction of Gia’s capabilities just about a month ago, we're seeing a strong demand in terms of people interested in getting set up. But GC is actually because of the pandemic have been really interested in figuring out how to work with Gia in order to ensure that moving forward they can be as efficient as possible. One of the things that we know, genetic counselors have long struggled with our waitlist. And so if Gia can be of service in terms of trying to really help identify which patients are in the most dire need to see a genetic counselor sooner, then that's really how genetic counselors are seeing Gia is being a help to their clinical care. So overall I would say it's a really interesting development just given the current situation in terms of restricted access to clinicians. Gia is being helpful across all three of those customer segments.

And Puneet, this is Lee.

Go ahead.

Go ahead.

On the reimbursement. I think you asked about the reimbursement question, I think it's a pretty interesting and important development.

So Puneet, this is Lee. On the reimbursement side, I think Gia and tools like Gia that we have been working on help in a number of ways. The first thing they do is they make it more likely that our customers will order via the portal. And keeping in mind that the Holy Grail for reimbursement is having a clean record to bill with no errors and all the information that the payer requires. So we have much lower error rates when our customers order via the portal than when they do via paper wrecks [ph]. And we have much less missing information obviously when people use the portal. So that's one difference. The second difference is that we have found that where we have the opportunity to interact directly with the patient, which Gia facilitates, we can get information quicker and it's more accurate. So if we're missing information we can reach out to the patient. We're likely to get that information and we're likely to have the right information. So those are the primary reasons why Gia helps reimbursement, and as an aside, because it drives more towards the portal, it helps reduce operating expenses because the paper wrecks are more manually - more head counts. They require more head count.

And sorry about, I think I cut you off it.

Yes, that’s fine. No this is fine. I just wanted to add that this issue of the relationship between Gia and genetic counseling. We're in the process of preparing a manuscript of the experience of Gia for over 37,000 patients in clinic like mammography screening, routine colonoscopy screening, or annual well visits to OB GYN, where there is no genetic counselor. The vast majority of those practices don't have a counselor there at all. And Gia was able to identify a quarter of those healthy individuals should have genetic testing. So it is having a major impact not just around the genetic counseling world, but its extending way beyond what we generally think of as being the world of genetic counseling.

Next question is from Doug Schenkel of Cowen & Company. Please go ahead. Your line is open.

Hey, good afternoon everybody. Let me start with a volume question. So I guess in multiple parts, is it fair to assume that cancer testing has initially been more resilient than reproductive testing? The second thing is, you said volume was down 50% at the end of March. I believe that's what you said. Was that year-over-year versus trend versus Q4? And then the third part is, it sounds like you saw consistent improvement week-to-week or since the end of March. So, would you be willing to give us something in terms of how you acted in April, maybe framing it the same way you framed your comments on the end of the March?

Yes, sure. So first to clarify the, in fact in the early kind of as soon as we saw daily average volume falling off in the first - early two first week or two. In fact, it was reproductive across the board that held up the best getting hit somewhere in the 20-ish plus percent range. And it was a lot of the other disease areas that got hit the most. So for cancer included in there, anywhere between 30% and 50%. The detail on that is where it gets interesting that kind of there were clearly some accounts acute - large cancer care centers, acute cancer care centers, late stage that did not get impacted at all. And then on the other hand, there were others that did. And this is where the regional aspect of this really started to become apparent early on. But nonetheless, general at a high level of reproductive got hit at least. Other disease areas did get hit more with some kind of acute care, obviously still continuing. And then in terms of the 50% that is a - versus trend. I think that's a key clarification. When we say down 50%, we mean from the prior weeks, daily average volume. So that was kind of like we were on a path and then, overnight we saw a 50% reduction off of the past, not compared to the same time period last year or last quarter. And then on the last part and kind of related in terms of the recovery, it's kind of a similar answer as the initial impact. The recovery again, this is just a few weeks and it's looking at daily average volume jump, which is pretty stochastic, and it's the same kind of thing where depending on the client and almost really down to the zip code now, and certainly globally, country-by-country, it's still a bit back and forth. So I just think it's really too soon. It's really too soon to call a trend for the foreseeable future. We would expect that Q2 is going to be impacted, the volumes are going to be impacted from the COVID period. There is no - there's no matter how quickly this comes back on current trendlines, Q2 will be impacted both by way the volume and then of course that flows through primarily on the COGS side of things. But then after that it's too early to tell.

Okay. So that's helpful. And I guess as I think about Q2 just building off of what you just said, Sean, at the end of Q1 relative to trends, you were down about 50%. It sounds like things are moving in the right direction. But I really don't have any idea how to even with a wide band, the possibilities model Q2 because we have those facts that you shared. On the flip side, Q2 is usually stronger than Q1. And again, you talked about week-to-week improvement. Is there anything more you can share to maybe help us model out a range of different outcomes here as we're updating our forecasts?

Yes, I mean, I think – there is a little unfortunately not a lot more, but I think a little bit more we can, you're definitely right. Q2 typically is bigger than Q1. Again, it's a new year. We've got new customer types. It's getting harder for us to kind of look to pass with all the new product areas and the new customer types, it's a little bit more difficult to look back to historical seasonality nonetheless. Yes, I think, we don't expect if depending how long the impact goes, you can kind of call a 50% reduction off a trend that would slightly improve. I think that's kind of how we would view it. And slightly, we do mean slight. The encouraging thing is that we are seeing recovery not a continued trough at 50% reduction and no further degradation. But just to clarify by slight improvement, we do mean slight and the fact is one by one by one accounts are opening up and coming back. So I think if we had to summarize our Q2 outlook, it would be call it what we probably were on track to do minus a little less than 50%. And then flow through the according COGS and you'll get kind of the same impact on the bottom side and the gross margin side. And it's beyond that, it's really hard to say anything else. We are – the scenario outlook that we're kind of dealing with here anticipates something around that some recovery later in the year. Again, our details on that are as easy as you might imagine. So can't offer really a whole lot there. But I think our Q2 outlook that's roughly where we’re kind of thinking Q2 is going to play out. And that's again, the moves we've made, are to accommodate that because by the time you account for the topline hit, the COGS resulting the burn is going to be higher, right. As we flow through all of the expenses and charges with the with the OpEx moves we've made. Then, some between recovery and cost savings accruing, that burn will go down toward the end of the year. That is the only thing we're sure of. The extent of which and the pace of which and the path to exactly how to get there is still pretty – it's pretty uncertain.

Okay, understood. Last one from me. Just on new script and Gen X I believe one of the key strategic rationales for these acquisitions was, not just to add pharmacogenomics, but to have an important offering that would appeal especially to closed healthcare systems and allow you to, basically use that as a way to more forcefully get in the door and potentially be the vendor of choice for all your solutions? If I'm thinking about that, right, on one hand I could see where that just completely stalls in the early goings given what's going on. On the other hand, I could see where maybe there's some instances where demand for pharmacogenomic testing actually increases given there is some association between pharmacogenomics and some of the early treatment options for COVID-19. So I guess the question is, is it too early to say that this is working given what's going on or are there some signs that even in the midst of a pandemic, you're making progress?

I think it's the latter. And I want to give credit where credit's due. We've been stewards of that capability for all of two weeks now.

Right?

The teams, Christine and Chris and the teams – use script from Genelex, had been doing a lot of prep work ahead of time. And so, the short answer is, it's the latter. A little more color on that is, we had mentioned, and actually, I do want to answer your question, there is an aspect of adding pharmacogenomics, which is just simply when we say it is our mission to aggregate all the world's genetic information we need all the world's genetic information and PGx is genetic information, therefore, we added it. Now that's kind of a throwaway comment. The timing and the rationale kind of came. As we observed, I'd say as I’d say, PGx enthusiasts for the last 15 years as we observed the inbound demand over the last year and a half it become clear that in particular integrated systems, ACOs, payers, anybody footing the cost of polypharmacy and adverse gene drug events, or all of a sudden. In the last year, so we saw demand and inquiry in that inquiry of that increase. So we noticed our customers asking a lot more about this. And the teams that use script in Genelex we're actually making pretty good headway marching toward getting reimbursement, having to find broader panels for broader sets of genetic information, clinical decision support for not just gene drug, but gene drug-drug polypharmacy. And in fact, in the very early days – we are now signing health systems at large for that polypharmacy in addition to the rest of our menu, seeing interest of integrating it into a comprehensive reproductive arc, reproductive genetics arc, a comprehensive reproductive – a comprehensive cancer care package, and we're pretty – we like what we see there by virtue of those same, those types of – those types of customers being very interested in this integrating it widely, as well as payers, and governments. And so yes, I think, while it's a relatively rough time to kind of get all that integration going, we're liking what we see so far. And, again, we'll see what we can do in pharmacogenomics going forward.

Okay, thanks again.

Yep.

The next question comes from Tycho Peterson of JPMorgan. Please go ahead, your line is open.

Hi, guys, this is Casey on for Tyco. First question is, can you talk about what the cumulative revenue contribution was in the quarter from the Jungla, Clear Genetics and Singular Bio deals?

The short answer is that while we can say Singular Bio deal the answer is none. We're not going to – that capability we have coming out sometime next year. And then again Jungla and Clear, Clear is very difficult to breakout what additional revenue or volume we’re driving. Although again, as Katherine mentioned, we do see pickup in new customer accounts and new account types without going to counseling, but we don't break that out as a kind of subsection of our business. And Jungla, while we can say anecdotally, some key deals we’ve won as a result of having the capabilities that Jungla team brought. Again, it's difficult to say amongst the broader feature sets, how do I allocate revenue, because of Jungla to that, albeit we can say as we mentioned before, it does save us, especially where buses in the case of labor to call buses and report on phases about 40%, 40% of the time, which translates directly to cost. So those are financials that we can attach to those three acquisitions. Again we view them really much more as capabilities integrated in the platforms. They continue to allow us to take more share and reduce costs to have a kind of definitive lasting cost advantage for an ever increasing menu of genetic information.

Okay, got it.

And then speaking of integration, we actually have been able to integrate the Jungla technology to reissue reports for some of those that we had historically. And now be able to call some of those variants so those pretty significant well as use that technology moving forward. So we have integrated that concept, and although you can't see that we've won, a particular client or another, when we thought a little bit about how that is working and how that's received in the market.

Okay. And then my other question was, how is the COVID-19 pandemic affected the somatic launch timeline, if at all?

Yes so, we mentioned a pullback on future investments. That would be one of them. I'd say and maybe we can just categorize some general future investments. We're, as we entered the year, we're in hyper growth mode, a fair amount of what we are investing in on a development side of things are actually things that we don't really discuss publicly, just early enough where it's not something to talk about with it, within the real value in talking about it. So there was a lot of that. There was pulled back, the majority of it was that type of development investments, but indeed we did some shifting resources to near term, gross profit generation. We did – we have slowed down for example, dramatic developments, and some others that we've talked about working on. And again, that's just a balance there to kind of see which side of our COVID scenario outlook we're going to end up on. With any fortune here in the coming months, we'll be on the earlier side of it we can get back at it at full speed. We think we'll have, we think we can do somatic testing exactly what we've done in inherited genetic testing for cancer. But right now, we're just being really conscious, kind of as Shelly pointed out, really calibrating the OpEx for the topline.

Got you, thank you guys.

Your next question is from Kevin DeGeeter of Oppenheimer. Please go ahead, your line is open.

Hi, guys thanks for taking my question. I guess good news coming about your relative appetite for business throughout here. I get it we're definitely in a cost constrained mode. But you had sort of alluded various points to looking at large transactions, that would move the needle from an operation perspective? And if one were to think about that in the context of, getting to greater scale more quickly is that, is strategically more palatable in light of some of the difficult decisions you've had to make around COVID or is it just operationally more difficult to foresee how one would implement, a transaction that created a more kind of structural change, perhaps to the Invitae business model?

Yes no it's a, it's a really intriguing question – kind of as we've talked about M&A being a key part of the growth strategy and the types of M&A we would do, we definitely in the current uncertainly in our scenario outlook for COVID impact and certainly as we kind of experienced all together the economic ramifications, yes I think acquisitions that add to our platform, albeit generate cash flows in the distant future are probably things that will put off or delay acquisitions, which purely by us market share. I think are still things that we are careful about not sure that is the best use of shareholder equity to buy what we have so far demonstrated we can take. With that said, I think, the idea that there are acquisitions or opportunities out particularly in the next probably a year or a year and a half, that could actually in a very short period of time lead to both greater operating leverage, a better top line and improved gross profit generation. Of course, I mean, those are absolutely things that we sit in because I think know if you're really starting to experience in our P&L dynamic, the benefits of scale, the benefits of diversity and the benefits of a wide, a broad product offering. And you know, I think that's kind of that silhouette that you identified is definitely something that we're still considering because we just think it's advantageous on all fronts.

Perfect, one more then I get back in the queue. And can you just comment about trends for the international markets get to 11% of volume in the quarter? Are you seeing similar general magnitude of decline and recovery? Are there different trends we should consider when modelling out that portion of revenue?

I think international is growing slightly better than the rest of our entire domestic business. We have, as we mentioned, we have invested in that a little more seriously in recent months. We're not pulling back on that investment as much and just because we think there's so much unmet need there. With that said, kind of on a country-by-country basis, it really is a pretty. It's a diverse set of impacts and recoveries that we're seeing. And so I think on the whole, it basically is going to look like everything else even though on a country-by-country basis, it's wildly different. I'd say the difference between countries is much more dramatic than for example, the difference between states and zip codes on the domestic side. But when you average it all out, it's basically the same.

Fair enough, Thanks for taking the questions.

Sure thing.

Your next question is from Jeffrey Cohen of Ladenburg Thalmann. Please go ahead. Your line is open.

Hi, and thanks for taking the questions. Bob had previously spoken about the World Congress Cardiology, the paper that was presented, and I've wondered if you could talk a little more about Cardiology patient, cardiomyopathy, which we know is a few million patients and if you could talk with us or walk us through what you're expecting in cardiology as far as any future studies and competition with DTC and potentially payers and how they may fit in on guidelines now and in the future?

Yes. Sure. I'll be happy to. So first, the cardiomyopathy arrhythmia Detect program has allowed us to have thousands of patients, who probably would not have been tested, come into Detect to have comprehensive testing done. And we're finding approximately 20% to 25% of those patients have a clear pathogenic, likely pathogenic mutation, primarily in hypertrophic cardiomyopathy genes and some dilated cardiomyopathy genes. I think there is a couple things driving this. First is, the availability of treatment for cardiac amyloid is driving the need to make a not only a specific diagnosis, put a genotypic diagnosis to know that it isn't a mutant form of TTR. Is it a wild type TTR. What is it that's being responsible because there is different medications for these different applications. The other is that cardiologists I think after many years of not really wanting to do genetics from the point of view of dealing with the family, they really just wanted to take care of the patient in front of them. That is changing. There is a growing number of genetic counselors, who are focused on cardiology. I'd say there were six or seven years ago, there may be a handful. Now there is a bunch. There is a whole cardiology interest group that meets at the Heart Rhythm Society, and meets at the American Heart Association meetings et cetera. And that is growing in the recognition that your patient is a member of our family, and that there's important information not only finding other people in the family, who might be at risk, but also being able to tell other people in the family that they're not at risk for a problem, such as ARVC or hypertrophic cardiomyopathy. So I think cardiology is probably somewhere around 10 to 15 years behind oncology, in its adoption of cancer of testing. Part of that is driven by the fact that there has been less precision medicine available in cardiology, but that is now changing. And part of is just a difference in perception. The impact of hereditary breast and ovarian cancer unawareness of hereditary cancer has been enormous and is now spread into pancreatic, prostate, colon. And that awareness is now just starting to infiltrate cardiology. So I think the opportunity is enormous. In terms of DTC it is very clear. When you use a genotyping platform to pick a few common variants that are found in a couple of the genes, essentially 96% of the time, patients that we diagnose in Detect that is having a pathogenic or likely pathogenic mutation in a cardiomyopathy gene, 96% of them would have been missed if they had simply taken the DTC test. So, the DTC test - not just in cardiomyopathy, but also in familial hypercholesterolemia, in a variety of other areas are just really grossly insensitive and are not really doing the people who are taking those tests, a medical or clinical service.

Yes, Jeff, just to sum it up on numbers, call it around 420 million cases of cardiovascular diseases in the global markets we serve, 30% of them have a direct link to genetics. And so kind of as Bob has laid out that picture, if you think about it, even though cardiovascular testing is a really nice and growing segment of our business, it's basically not even started yet. So it's very big. And that's when we point to that opportunity just in cardiovascular let alone the other diseases, we definitely see a lot of potential there.

Got you, okay. And then secondly from me, if you could talk about the, some commentary about the home tests and saliva tests, can you talk about specific trends in growth and tests there, and perhaps current tests and platforms which could be transitioned also for home, if that includes saliva and or blood collection at home?

So our teams are highly focused on transitioning all of our ordering clients and their patients over to saliva. And so that's been a really important shift that I think has helped us maintain the volume during this period. So that's been the main focus in addition to the deployment of Gia in early April. Those two efforts really are what's driving the continuity of care during this time and what we think is going to help us throughout the future of this pandemic, ensure that people still have access to genetic testing. You know, I think it's encouraging now that cancer centers are starting to open again regionally. We'll be able to see more volume coming from those areas as well. The at-home testing through our direct channel, we've seen, you know, kind of a steady utilization of that, particularly for women, who are trying to conceive or who are pregnant. So the carrier testing in that channel has been really the focus. We are launching a campaign this week to consumers educating them about the ability to order testing and have it delivered to their home, specifically for that carrier segment. So more to come on that as we launched that campaign.

Perfect. Those are for me, thanks for taking the questions.

Your next question comes from Bruce Jackson of Benchmark Company. Please go ahead. Your line is open.

Hi, good afternoon, and thank you for taking my questions. You mentioned that there are some regional patterns in terms of the ordering and I was wondering if you could give us some color on the how you classify those regions? Is it the stay-at-home orders? Is it the restrictions on elective procedures or is there something else that differentiates the different regions?

Yes. Again, I think it's pretty hard to peel away, but in general, it's - if you think on the nation, or the country level ex-US or call it state or even kind of metropolitan area, local level that domestic - county level domestic, it really does seem that there is some correlation to stay-at-home orders relative degree of kind of severity of impact a new cycle. But, so that's generally it. But I would say I would just caution everybody. We have also seen in the same counties two similar kind of equipped size and your medical institutions, one which barely dropped volume and all on once with one which almost dropped 100% of the volume. And then we've seen some zip codes or states where we've seen state homeowners lifted or ignored. And a lot of volume comes back and others where that has happened and still nobody is heading into the clinic. So there is definitely, it's a very, very complex equation as to what leads to people coming back and it's clear when we look account by account, and I think that's why it's also I think as we're all looking at it. What we would advise people is pegging volume or revenue recovery to stay-at-home orders being lifted is what we do know in the weeks, last three or four weeks that is not the exact equation. But as we see more and kind of get a better trend line we will be - we will of course be letting people know. But right now, it's pretty difficult to tell what is the equation for volume coming back on an account by account basis.

Okay, that's helpful. And then a follow-up question on the home collection kits. Is this becoming a bigger part of the mix as the test volume comes out of the COVID-19 trough, and can you tell us a little bit about - do you have - is there any sort of margin advantage to having the home collection kits versus the standard collection?

Yes, the short answer is the last part is not really. Kind of all else being equal it is kind of a similar COGS stack. When you can do the shipping, the logistics, the kit cost and all that it's about the same. However, the more of that we moved to online stack, I think as Lee pointed out, the more of that, that goes online, we do get better OpEx leverage, better customer service leverage, sales support, account follow up and our billing is cleaner, which translates to better building performance of the payers, which of course, as you know 70% of our business is little less than 70% of our business is a good thing. So the costs themselves are not that much better, but everything else is better when it's done online on the floor when all the information can be gathered electronically. And again, I think, we've certainly experienced, we've had accounts that have been I would say, maybe reluctant either by for specific reasons or just habit. To do this kind of thing in the force environment actually are enjoying shorter wait times, shorter waitlist to get into the office higher account throughput or clinic throughput, patients they can serve. And there then everything else is easier. We've invested in the ability to take a lot of their legwork on a patient-by-patient basis off of their shoulders. They don't get paid for it anyway. And I think that could be a silver lining in all this is that we might see a structural shift coming out of this to more online at home remote. I think we're guessing that's where it's going to come out. And it's a little early to say, but I think that probably will be the short answer. The long answer to your question is, it's about the same cost, improves operating leverage and we think is probably going to be a trend that is different coming out COVID than going into it.

Okay, Sean could I just add one comment to that? I've done about six webinars over the last five, six weeks with genetic counselors around the country, probably constituting a couple of hundred have called in. And it is very clear that the home genetic counseling, and the ability to get testing done at home is extremely attractive to patients. Patients feel like they're stuck. We've gone back in time to when doctors made house calls. And so our ability to support counseling and testing from home, I think is going to be an ongoing benefit and a plus, even after the stay-at-home business starts to go away.

That's great. Thank you very much.

There are no further questions at this time. I will turn the call back over to the presenters for closing remarks.

Thank you for joining today's conference call. We look forward to speaking with you at upcoming conferences.

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