Invitae Corp. has inked a definitive agreement to acquire Genosity Inc., a genomics company with a technology platform for next-generation sequencing (NGS) assays, for approximately $200 million in cash and stock. Separately, the medical genetic testing company reported a $1.15 billion investment, led by Softbank Group subsidiary SB Management, to support ongoing growth initiatives.

Invitae shares (NYSE:NVTA) hit a high of $42.37 Monday, before closing at $40.40, up $1.20 or 3.06%.

San Francisco-based Invitae expects the Genosity platform to accelerate the development and launch of its oncology products, including three tests that won FDA breakthrough device designation. Genosity, of Inselin, N.J., offers a suite of highly specialized NGS capabilities for cancer development and clinical care and currently works with Invitae on a number of projects and clinical trials. Its portfolio includes the Astra platform for noninvasive monitoring of patients with solid tumors, Integrated Genome Toolkit (IGT), a HIPAA-compliant NGS lab workflow software, and fee-for-service NGS services including whole-exome sequencing, whole genome sequencing and tumor profiling.

As SVB Leerink analyst Puneet Souda noted, the IGT, existing biopharma NGS services and recently launched Astra minimal residual disease (MRD) assays will likely be folded into Invitae’s offerings, and Genosity’s technology will speed the launch and global dissemination of Invitae’s PCM (personalized cancer monitoring) assay for MRD and cancer recurrence, pending approval. The PCM test won FDA breakthrough status in January of 2020.

“The [Genosity] software platform helps drive the capacity, speed and efficiency that is needed to service mainstream medicine at an effective cost and with both central and decentralized offerings,” Souda wrote. Recalling its June 2020 purchase of Archerdx Inc., he said “NVTA continues to drive industry consolidation with the acquisition of Genosity, while also adding to its growing capabilities of software and LIMS (Laboratory Information Management System) capabilities to enhance their operations.”

Financial terms

Under the terms of the agreement, Invitae will pick up Genosity for approximately $120 million in cash and roughly $80 million in shares of its common stock. In connection with the transaction, Invitae will grant restricted stock units having a value of up to $15 million to certain continuing Genosity employees.

The boards of both companies have approved the transaction, which is expected to closed in the second quarter of this year.

“Each individual cancer is unique. The way we diagnose and treat it must be as well,” said Robert Nussbaum, Invitae’s chief medical officer. “Our goal is to move as quickly as we can toward the day where each cancer patient receives timely, comprehensive genetic information that is used to guide their care from diagnosis to monitoring for disease recurrence. Together with Genosity, we believe our combined novel capabilities and capacity will help us reach that day sooner for patients around the globe.”

The separately announced $1.15 billion investment will take the form of convertible senior notes. Under the terms of this agreement, the notes will have an initial conversion price of $43.18 per share of Invitae common stock, which represents a 20% premium to the company’s five-day trailing volume-weighted average price as of April 1, 2021. The notes are set to mature on April 1, 2028, unless previously converted, and will bear 1.5% annual interest.

Latest acquisition

SVB Leerink’s Souda said Invitae could use the hefty infusion to finance more acquisitions. “With a busy and proven M&A history, we believe NVTA will remain active on the acquisition front, continuing to look for opportunities to bring value-added capabilities to their platform.”

The acquisition of Genosity follows four deals last year. In addition to Archerdx, the company scooped up clinical decision support platform Youscript Inc. for about $79.3 million, pharmacogenetic testing outfit Genelex Corp. for about $20.7 million and Belgium-based Diploid, which develops artificial intelligence software to diagnose genetic disorders, for about $95 million.

Invitae co-founder and CEO Sean George underscored the company’s vision of mainstreaming genetics in medical care. “This investment will help us continue to fuel our growth, including expanding our platform, services and menu through both in-house development and the addition of complementary companies and technologies as we work to build a differentiated platform uniquely capable of driving the transition to personalized care.”

The companies financial picture is strong. In 2020, Invitae generated revenue of $279.6 million, representing year-over-year growth of 29%. In January, the company netted proceeds of $434 million in an equity offering, boosting its year-end cash holdings of $360.7 million to nearly $800 million.