Today: San Francisco biotech company Invitae increases the size of its initial public offering to pull in more than $100 million, then gains in its first day on Wall Street. Also: Zynga plunges after earnings report.
The Lead: Invitae passes the test, gains in market debut
Invitae invited Wall Street to invest in its genetic-testing idea, and received a warmer response than expected.
The San Francisco biotech startup increased the size and price of its first bundle of shares at the last minute Wednesday, selling 6.35 million shares at $16 apiece, a million more shares than previously expected and a dollar higher than the previous price range. Once the stock reached the New York Stock Exchange floor Thursday morning, investors bid it up to more than $17, and the stock closed with a 6.3 percent gain at $17.01.
Invitae was founded as a spinoff from one of Silicon Valley’s most successful biotechnology companies, Redwood City-based Genomic Health, which came in at No. 112 on the SV150 in 2014. Genomic Health founder Randal Scott, who also served as CEO of that company, cofounded Invitae and took over as CEO of the startup to lead it on a mission to offer cheaper, faster genetic tests.
“As the price of DNA sequencing has declined, the amount of genetic information that can be generated per dollar has increased exponentially, enabling the generation, analysis and storage of more comprehensive genetic information than ever before,” the company said in its IPO filing with the Securities and Exchange Commission.
After originally being incorporated as Locus in 2010, Invitae launched in 2012 and offered its first test in 2013. The company currently runs tests for hereditary diseases with a focus on cancers that run through family bloodlines, charging $1,500 with a turnaround time of about three weeks, but founders hope to get the price under $1,000.
While 23andMe’s genetic tests focused on directly testing consumers have received a lot of press, they have also faced scrutiny and shutdown from the Food and Drug Administration. Invitae takes a different approach, not allowing consumers to simply mail in a sample and receive a result, but mandating that the test go through a medical professional.
Invitae’s popularity is growing — After running 200 billable tests in the first quarter of 2014, orders grew to 1,100 in the third quarter and 1,800 in the fourth quarter. It has also had success with health-care providers, recently being approved as a Medicare provider and signing reimbursement contracts with Blue Shield and SelectHealth.
Revenue growth has been slow, however, as the company does not recognize revenue paid by health-care providers until they receive the actual payment, which may be long after the test is run. The company brought in less than $1 million in the first nine months of 2014, at $729,000, though it billed for $2 million worth of tests in the third quarter alone.
In the first three quarters of 2014, Invitae posted a net loss of $32.2 million, continuing to burn through $207 million in venture financing, and the IPO funding will be used to further research and development, increase marketing of its products and other corporate needs. Genomic Health is one of the investors in Invitae, owning 9 percent of the company before the offering, and investors Baker Brothers, BlackRock and Thomas, McNerney also own considerable stakes.
The banks running the IPO, led by JPMorgan, have access to an additional cache of nearly 1 million shares that could be sold, which would boost Invitae’s total gross take to nearly $117 million. The late boost in offering size could have been because one early investor decided to take a larger stake, a possibility Invitae mentioned in its IPO filing.
The amount of money raised makes Invitae the second largest IPO from Silicon Valley in 2015, trailing only Los Altos cloud-software company Box, which raised at least $175 million in January. It raised more than two previous biotech IPOs this year — Avinger and Zosano Pharma — and continues a hot market for biotechnology IPOs, while seeing two potential genetic-testing rivals, AltheaDx and AutoGenomics, delay their IPOs this week.
SV150 market report: Zynga slides after earnings
Wall Street had a strong day and got a boost from Silicon Valley tech firms, but Zynga plunged after releasing earnings after the trading session closed.
Zynga managed to grow revenues year-over-year after struggling to do so for the past two years, but continuing failure to grow its user base led to another stock slide. The San Francisco gaming company posted a loss of $45.1 million, or 5 cents a share, on sales of $192.5 million, while active users decline both from the year-ago quarter and the previous three months. Zynga lost users despite launching a new Words With Friends game and its first game in a licensing agreement with Looney Tunes. The company showed off its next hope for a comeback with its first game from NaturalMotion, acquired a year ago for $527 million — “Dawn of Titans,” Zynga’s first foray into action strategy games like the hit “Clash of Clans.” The company also said it would close its China studio, laying off 71 employees, a common theme for Zynga of late. The company’s shares plunged more than 10 percent after closing with a 5.3 percent decline at $2.66.
After missing analyst estimates by a mile in Wednesday’s earnings report, Tesla Motors fell 4.7 percent to $202.88. Cisco Systems had a much better post-earnings trading session, gaining 9.4 percent to $29.46 after new products helped the company beat expectations. FireEye jumped 11 percent to $39.63 as the Milpitas company’s revenues continued to grow, and Nvidia increased 7.2 percent to $22.30 after its earnings report.
Facebook announced a new feature that allows users to declare a “Legacy Contact” to take over their account after death, and share fell 0.4 percent to $76.23. Twitter gained 1 percent to $47.95 after announcing the acquisition of Niche on Wednesday afternoon, giving the company a bridge between brands and popular social-media users. Apple again moved to a record high, gaining 1.3 percent to $126.46 while seeking to fight abuses in its supply chain. LinkedIn fell 0.3 percent to $267.17 after announcing the impending closure of its APIs, and Hewlett-Packard added 0.5 percent to $38.37 while planning an online-only annual shareholders meeting.
Up: Cisco, Nvidia, Salesforce, Yelp, SunPower, Workday, VMware, SanDisk, EA, Yahoo, Adobe
Down: NetApp, Zynga, Tesla, eBay, Applied Materials, Facebook, LinkedIn
The SV150 index of Silicon Valley’s largest tech companies: Up 27.44, or 1.59 percent, to 1,748.32
The tech-heavy Nasdaq composite index: Up 56.43, or 1.18 percent, to 4,857.61
The blue chip Dow Jones industrial average: Up 110.24, or 0.62 percent, to 17,972.38
And the widely watched Standard & Poor’s 500 index: Up 19.95, or 0.96 percent, to 2,088.48
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