Gene tester Invitae has been clear about the company’s ambitions to make genetic information a standard part of medical practice at all stages of patient care. The San Francisco company is now aiming to offer genetic testing at the earliest stages of life by acquiring two companies that specialize in screening prospective parents and newborns.
Invitae (NYSE: NVTA) has reached an agreement to acquire Good Start Genetics, a Cambridge, MA-based company that screens parents-to-be to determine whether they are carriers for genetic disorders that could be passed on to a child. In a second deal, Invitae will acquire CombiMatrix (NASDAQ: CBMX), an Irvine, CA, company that screens women and newborns for genetic abnormalities. Invitae announced both deals after the markets closed on Monday.
Invitae separately announced plans to raise $73.5 million in a private offering of stock to some current investors and some new ones at the price of $8.50 per share. The company says it will use the cash to finance additional acquisitions and expand its menu of genetic tests.
Spun out of Redwood City, CA-based Genomic Health (NASDAQ: GHDX) in 2012, Invitae’s initial focus was on cancer screening. But unlike its parent, which develops new genetic tests, Invitae aims to aggregate related tests, and offer them as a service that doctors can order on behalf of their patients. In 2015, Randy Scott, who was then Invitae CEO and is now the company’s executive chairman, told Xconomy that Invitae would be a one-stop shop for tests that could be turned around faster and priced lower than other tests on the market.
Invitae started out by offering test panels for inherited diseases, but the company has expanded its testing capabilities in recent years. Last year, the company reported $25 million in revenue. When Invitae launched its first product four years ago, the company tested just 200 genes. In its 2016 annual report, the company projected that its test menu would expand to more than 20,000 genes in 2017. The company also said in the report that it planned to expand into carrier and newborn testing. The Good Start and CombiMatrix deals will enable Invitae to offer those services.
Good Start was formed in 2007 from research at Harvard University. Though carrier testing is dominated by diagnostics giants LabCorp (NYSE: LH) and Quest Diagnostics (NYSE: DGX), Good Start aimed to distinguish itself by pairing next-generation sequencing with a broad library of genetic and health information. The company claims that this combination provides results that are more detailed and more accurate than those of competitors. Good Start says it has processed 1.7 million tests since its tests commercially launched in 2012.
CombiMatrix started as a supplier of genetic analysis instruments, but the company found it tough to compete against larger companies offering the same tools. In 2009, CombiMatrix pivoted to cancer diagnostics. The company now offers molecular diagnostics focused on family health, such as genetic screening for embryos prior to implantation, prenatal diagnosis, miscarriage analysis, and screening for pediatric developmental disorders. In 2016, CombiMatrix reported $12.6 million in revenue from its diagnostics services.
The Good Start acquisition is expected to close in early August. Invitae will issue Good Start shareholders approximately 1.65 million shares of Invitae common stock. At Monday’s closing stock price of $9.28, Good Start shareholders stand to receive approximately $15.3 million. The company will also pay $18.3 million to cover Good Start’s outstanding debt. In addition to that payment, Invitae will also cover $6 million in Good Start’s expenses related to the deal.
CombiMatrix shareholders are set to receive $27 million worth of Invitae stock. Invitae is also offering an additional $6 million in company shares to those who hold warrants to buy CombiMatrix stock, though the specific details of the warrant exchange have not yet been determined. The CombiMatrix acquisition is expected to close in the fourth quarter.
Invitae has scheduled a conference call for 8 a.m. Eastern time Tuesday to discuss the acquisitions.