Invitae cash-and-stock buyout of ArcherDX a done deal

UPDATE: Oct. 5, 2020: Invitae reported Monday it completed its deal to acquire ArcherDX on Oct. 2. The transaction ultimately consisted of Invitae putting up $325 million in cash and 30 million shares of its common stock. Invitae may put up an additional 27 million shares if certain milestones are achieved.

Jason Myers, CEO of ArcherDX, will serve as president of oncology at Invitae and was also appointed to Invitae's board.

Dive Brief:

Medical genetic testing company Invitae plans to acquire precision oncology-focused assay developer ArcherDX in a cash and stock deal valued at about $1.4 billion, per an announcement Monday morning. The combination is expected to be completed in the fourth quarter.
The acquisition gives Invitae a key foothold in cancer care, as it gains ArcherDX's in-development Stratafide DX product, meant to be a pan-solid tumor companion diagnostic, and its Personalized Cancer Monitoring (PCM) technology, which analyzes circulating tumor DNA to help track disease recurrence. Execs said they expect the combined company to post 50% to 60% growth over the next three to five years.
The deal comes about two weeks after ArcherDX indicated its intention to go public, filing a form S-1 with the U.S. Securities and Exchange Commission in which it estimated an addressable market worth $45 billion across therapy optimization and cancer monitoring opportunities.

Dive Insight:

Although the ArcherDX deal dwarfs previous M&A, the company has had a steady clip of acquisitions over the past year.

In March, Invitae added clinical decision support and analytics platform YouScript, pharmacogenetic testing company Genelex and AI software developer Diploid, which centers on diagnosing genetic disorders via next-generation sequencing data. Toward the end of 2019, the company acquired Clear Genetics to help it provide genetic testing services at scale. And last summer, Invitae announced the additions of Jungla, for its AI that in part provides RNA analysis, and Singular Bio, a company designing low-cost, non-invasive pre-natal screening technology.

Invitae management said the ArcherDX deal likely marks the end of the company's M&A activity for a while. "We're exhausted," Invitae CEO Sean George told investors on a call outlining the deal Monday morning. "The timing wasn't awesome for this even though it's an awesome combination."

The combined company will provide germline and somatic testing, liquid biopsy and tissue genomic profiling, Invitae said, thereby offering patients "a full suite of cancer testing for risk, therapy optimization and personalized cancer monitoring."

Invitae will pay $325 million in cash upfront and at least 30 million shares of its common stock, with the potential for an additional 27 million shares if certain milestones are met. The company values the overall deal at roughly $1.4 billion.

To help finance the deal, Invitae secured over $400 million in commitments from Perceptive Advisors and other life sciences investors. The company is also selling $275 million in common stock at $16.85 per share in a private offering and entered into an up to $200 million credit facility. Invitae expects to have $425 million in cash at the close of the deal.

Analysts at SVB Leerink called the deal "transformative" for Invitae and for the genetic testing space at large, and said ArcherDX fills "the biggest void" in Invitae's portfolio: somatic cancer testing.

"The somatic and oncology diagnostics space is undergoing transformation with the recognition that identification of markers drives therapy management for patients, and monitoring of cancer survivors will be a sizable market longer-term," analysts wrote in a note to investors Monday.

"We expect [Invitae] to become increasingly closer to biopharma with ArcherDx offerings, and based on management comments we expect the reproductive testing side of [Invitae's] business to also expand via Archer longer-term."

Since its 2013 founding, ArcherDX has been focused on increasing access to precision oncology products in local settings and assisting biopharma companies in drug development. The company raised $150 million across Series A, B and C funding. Its industry partners include Bristol Myers Squibb and AstraZeneca, wanting to leverage its PCM tool, and Illumina to co-market ArcherDX IVDs.

ArcherDX has received a handful of breakthrough device designations from FDA, including for PCM. The company has yet to obtain any regulatory approvals in the U.S. but announced in March it received Japanese regulatory OK for a companion diagnostic for Merck's lung cancer treatment Tepmetko.

In the first quarter of 2020, ArcherDX's year-over-year precision oncology product revenues were up 60% and pharma development service revenues were up 54%, for total quarterly revenue of close to $14.8 million. The company's total 2019 sales rose 78% compared to 2018's, according to the genomics company's June 5 S-1.