Expectations assume that 2Q20 will deliver the maximum impact of COVID-19 on company results.
Invitae's description of the collapse in demand in the last 2 weeks of March matches most of the commentary we've heard from other companies. The company commented that they hit a bottom in April which has been followed by "slight" week over week increases. Consensus assumes after a -28% sequential decline in 2Q20, improve sequentially (+49%) and year over year (+14%) in 3Q20, followed by a full recovery in 2021. We think this recovery path is overly optimistic. While the company has withdrawn 2020 guidance consensus is assuming close to 100% recovery by the end of 2020.
- Physician capacity is likely to contract permanently
- Declines in employment, incomes, and insurance coverage will impact consumer demand
- Consumer reluctance to enter health care settings with COVID-19 still present will persist for several more quarters
- Sales effort will continue to be hampered by COVID-19 restrictions
- BRCA share gains will moderate
NVTA carries a cash balance of $484M with an additional $100M in burn expected by the end of the year and ~$120M more in 2021 which is great as they continue on their inorganic growth strategy. But at 6.5X EV/sales and with consensus sales estimates likely to be revised lower from here, we are maintaining the short. Key to remaining short will be the claims trajectory week to week. The overlay in our claims data (chart below) should provide an early indication how re-opening is progressing.
All data available upon request. Please reach out to with any inquiries.
Thomas Tobin
Managing Director
Twitter
LinkedIn
William McMahon
Analyst
LinkedIn
