Just two weeks after filing for a $100 million initial public offering, ArcherDx agreed to be acquired by Invitae for up-to-approximately $1.4 billion, in a deal the companies said would create a global leader in cancer genetics and precision oncology.
The combined company will bring germline and somatic testing, liquid biopsy technologies and services, as well as tumor tissue genomic profiling onto a single platform, Invitae and ArcherDx said.
The companies said they intended to accelerate adoption of genetic testing, transforming care for cancer patients, by enabling precision approaches from diagnostic testing to therapy optimization and monitoring, through what they said would be the most comprehensive suite of products and services available.
“From the beginning, Invitae’s goal has been to aggregate the world’s genetic tests into a single platform in service of our mission to bring comprehensive genetic information into mainstream medicine. Today, we take another major step forward in that effort,” Invitae co-founder and CEO Sean George, PhD, said in a statement. “By joining together, we will unite world-class capabilities in the hands of a talented team with complementary expertise and strong brands in service of a shared goal to improve healthcare for patients.”
Investors apparently shared George’s enthusiasm about the planned acquisition, touching off a buying spree that sent shares of publicly-traded Invitae up about 45% as of 2:36 pm, to $27.10 from its previous closing price Friday of $18.71, before the price dipped to $26.50 or a roughly 42% increase.
“We see this acquisition as not only transformative to NVTA [Invitae], but as an impactful one to the overall genetic testing space with the sizable combination of germline (hereditary) testing with the somatic (oncology dx),” Puneet Souda, senior research analyst at SVB Leerink covering Life Science Tools and Diagnostics, wrote in a note to investors this morning.
Invitae and ArcherDx reason that the combined company will be ideally positioned to serve a variety of customers ranging from individuals and community clinicians to biopharmaceutical partners, distribution partners, reference laboratories, and academic centers.
Building on strengths
The combined company will be able to draw upon Invitae’s strengths in diagnostic and hereditary risk testing, its relationships with clinicians caring for cancer patients—and its central laboratory, which can support customers who prefer to send samples out for processing, and can use services including reporting, clinician consultation and genetic counseling for patients.
Regions and customers where local control of patient reporting is either desired or required can, by contrast, make use of ArcherDX’s decentralized model. The combined organization will offer breadth and flexibility in serving customers in more than 95 markets.
“ArcherDX and Invitae share a foundational belief in the power of genomic information to impact care. We are thrilled to unite with Invitae to form the leading hub for precision oncology, diagnostics, therapy optimization and monitoring, with an opportunity to accelerate both patient care and shareholder value,” added ArcherDx CEO and co-founder Jason Myers, PhD.
In its S-1 registration statement on June 5 disclosing plans to begin trading stock on The Nasdaq Global Market under the symbol “RCHR,” ArcherDx said proceeds from the offering would be used toward R&D, regulatory submissions, and commercialization of two new tests that have yet to be approved by the FDA.
One is STRATAFIDE, a pan-solid tumor companion diagnostic (CDx) which, according to the company, is the first multi-gene, pan-solid tumor companion diagnostic designed to accept both tissue and blood samples. STRATAFIDE has been developed to identify actionable genomic alterations in tissue or blood, including alterations targeted by emerging therapies undergoing clinical trials, therapies already recommended in clinical guidelines such as those of the National Comprehensive Cancer Network (NCCN), and therapies approved by the FDA.
Also under development by ArcherDx is the Personalized Cancer Monitoring (PCM) platform, designed to enable local labs to assess therapy success and identify disease recurrence much earlier than current standard of care such as imaging or antigen test modalities, making successful treatment more likely.
Both STRATAFIDE and PCM have received the FDA’s Breakthrough Device designation.
PCM is one of ArcherDx’s five RUO product lines. The other four consist of DNA-based VariantPlex, RNA-based FusionPlex, ctDNA-based LiquidPlex and RNA-based Immunoverse, which the company collectively refers to as ArcherPlex. ArcherDx uses a product development platform based on its proprietary Anchored Multiplex PCR, or AMP, chemistry. In addition, the company offers Assay Designer and Designer Pro as services to clinical and biopharmaceutical customers, enabling them to customize biomarker targets and develop new applications.
Invitae has agreed to acquire ArcherDX for 30 million shares of Invitae common stock and $325 million in cash upfront, plus up to an additional 27 million shares of Invitae common stock tied to achieving milestones not specified in the companies’ M&A announcement, for an overall transaction valued at approximately $1.4 billion. The transaction, which has been unanimously approved by the Boards of Directors of both companies, is expected to close in several months, subject to customary closing conditions including approval by the stockholders of Invitae and ArcherDX.
In announcing the planned acquisition, Invitae noted that broad adoption of precision oncology has until now been limited, particularly in regional and community settings where approximately 85% of patients receive care, according to “The current state of molecular testing in the treatment of patients with solid tumors,” a study published last year in CA: A Cancer Journal for Clinicians.
“We believe this will help NVTA position for 50%–60% annual revenue growth for years to come as these markets materialize and as genetic testing becomes standard of care.”
Rising revenue, samples, net losses
That revenue growth would be consistent with how Invitae has performed recently. Invitae reported a 58% jump in total revenue during the first quarter, to over $64.2 million from nearly $40.6 million, as the company accessioned more than 154,000 samples, up nearly 64% increase over the 94,000 samples in Q1 2019 and more accessioned samples in a single quarter than in all of 2017. Billable volume exceeded 151,000.
However, Invitae saw its quarterly net loss multiply to $98.527 million, compared with about $37.7 million. The company acknowledged it had begun to be impacted by the global COVID-19 pandemic, and also recorded a year-over-year tripling of its R&D expenses, which zoomed to approximately $55.7 million, and a 74% year-over-year jump in its selling and marketing expenses to $42.1 million.
For all of last year, Invitae increased its annual revenue approximately 47%, to $216.8 million from about $147.7 million. The company accessioned more than 482,000 samples, including approximately 148,000 during Q4, with approximately 469,000 billable reports, of which 147,000 occurred during the final three months of 2019.
Headquartered in Boulder, CO, ArcherDx has developed more than 325 unique research-use only (RUO) products that have been sold to over 300 academic and reference laboratories, as well as more than 50 biopharmaceutical companies and contract research organizations (CROs) across 40 countries. Those products have facilitated the analysis of over 375,000 samples, the company said.
Among ArcherDx’s partners are biopharma giants that include AstraZeneca, Bayer, and Bristol-Myers Squibb (BMS).
ArcherDx finished Q1 with a net loss of $19.3 million and total revenue of about $14.8 million, compared with a roughly $5.4 million net loss on revenue of just over $9.4 million a year ago. For all of 2019, ArcherDx reported a net loss of nearly $41 million on total revenue of about $50.6 million for all of last year, and a net loss of approximately $5.6 million and nearly $28.5 million in total revenue for 2018.
Closing in “several months”
The deal, which has been unanimously approved by the boards of both companies, is expected to close in “several months,” Invitae and ArcherDx said, subject to customary closing conditions including approval by stockholders of both companies.
Invitae said it had arranged a strategic financing with more than $400 million in commitments from a syndicate of life sciences investors led by Perceptive Advisors.
Invitae also entered into a definitive agreement to sell $275 million in common stock in a private placement at a price of $16.85 per share. The private placement is being supported by key existing investors in Invitae and ArcherDx, including Casdin Capital, Deerfield Management, Driehaus Capital Management, Farallon, PBM Capital, Perceptive Advisors, Redmile Group, Rock Springs Capital, Soleus Capital, and an additional unnamed institutional investor.
The private placement is expected to close concurrently with the proposed combination, subject to the satisfaction of customary closing conditions, Invitae and ArcherDx said.
Invitae added that it also entered into a fully committed credit facility for up to $200 million with Perceptive Credit Opportunities Funds, subject to certain customary closing conditions.
Since the filing of its Q1 quarterly report, Invitae has sold under its at-the-market (ATM) financing facility approximately 2.6 million shares of common stock for aggregate gross proceeds of $46 million, at an average price of $17.59 per share.
Invitae said it currently expects to have approximately $425 million at the close of the deal, with an annualized near-term forward cash burn that is expected to be approximately $130 million.