INVITAE CORP, 10-K filed on 2/26/2021
Annual Report
v3.20.4
Cover Page - USD ($)
$ in Billions
12 Months Ended
Dec. 31, 2020
Feb. 19, 2021
Jun. 30, 2020
Cover [Abstract]      
Entity Registrant Name Invitae Corporation    
Document Type 10-K    
Document Annual Report true    
Document Transition Report false    
Document Period End Date Dec. 31, 2020    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001501134    
Entity File Number 001-36847    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 27-1701898    
Entity Address, Address Line One 1400 16th Street    
Entity Address, City or Town San Francisco    
Entity Address, State or Province CA    
Entity Address, Postal Zip Code 94103    
City Area Code 415    
Local Phone Number 374-7782    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Title of 12(b) Security Common Stock, $0.0001 par value per share    
Trading Symbol NVTA    
Security Exchange Name NYSE    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 4.0
Entity Common Stock, Shares Outstanding   196,654,925  
Amendment Flag false    
Documents Incorporated by Reference Items 10 (as to directors and Section 16(a) Beneficial Ownership Reporting Compliance), 11, 12, 13 and 14 of Part III incorporate by reference information from the registrant’s proxy statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the registrant’s 2021 Annual Meeting of Stockholders.    
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 124,794 $ 151,389
Marketable securities 229,186 240,436
Accounts receivable 47,722 32,541
Inventory 32,030 6,648
Prepaid expenses and other current assets 20,200 11,384
Total current assets 453,932 442,398
Property and equipment, net 66,102 37,747
Operating lease assets 45,109 36,640
Restricted cash 6,686 6,183
Intangible assets, net 981,845 125,175
Goodwill 1,863,623 126,777
Other assets 13,188 6,681
Total assets 3,430,485 781,601
Current liabilities:    
Accounts payable 25,203 10,321
Accrued liabilities 86,058 64,814
Operating lease obligation 8,789 4,870
Finance lease obligation 1,695 1,855
Total current liabilities 121,745 81,860
Operating lease obligation, net of current portion 48,357 42,191
Finance lease obligation, net of current portion 3,123 1,155
Debt 104,449 0
Convertible senior notes, net 283,724 268,755
Deferred tax liability 51,538 0
Other long-term liabilities 841,256 8,000
Total liabilities 1,454,192 401,961
Commitments and contingencies (Note 8)
Stockholders’ equity:    
Preferred stock, $0.0001 par value: 20,000 shares authorized; 125 shares issued and outstanding as of December 31, 2020 and 2019 0 0
Common stock, $0.0001 par value: 400,000 shares authorized; 185,886 and 98,796 shares issued and outstanding as of December 31, 2020 and 2019, respectively 19 10
Accumulated other comprehensive income (loss) 1 (9)
Additional paid-in capital 3,337,120 1,138,316
Accumulated deficit (1,360,847) (758,677)
Total stockholders’ equity 1,976,293 379,640
Total liabilities and stockholders’ equity $ 3,430,485 $ 781,601
v3.20.4
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Preferred stock, authorized (in shares) 20,000,000 20,000,000
Preferred stock, issued (in shares) 125,000 125,000
Preferred stock, outstanding (in shares) 125,000 125,000
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock, authorized (in shares) 400,000,000 400,000,000
Common stock, issued (in shares) 185,886,000 98,796,000
Common stock, outstanding (in shares) 185,886,000 98,796,000
v3.20.4
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Total revenue $ 279,598 $ 216,824 $ 147,699
Cost of revenue 198,275 118,103 80,105
Research and development 240,605 141,526 63,496
Selling and marketing 168,317 122,237 74,428
General and administrative 324,573 79,070 52,227
Loss from operations (652,172) (244,112) (122,557)
Other expense, net (32,332) (3,891) (2,568)
Interest expense (29,766) (12,412) (7,030)
Net loss before taxes (714,270) (260,415) (132,155)
Income tax benefit (112,100) (18,450) (2,800)
Net loss $ (602,170) $ (241,965) $ (129,355)
Net loss per share, basic and diluted (in dollars per share) $ (4.47) $ (2.66) $ (1.94)
Shares used in computing net loss per share, basic and diluted 134,587 90,859 66,747
Test revenue      
Total revenue $ 272,310 $ 212,473 $ 144,560
Other revenue      
Total revenue $ 7,288 $ 4,351 $ 3,139
v3.20.4
Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net loss $ (602,170) $ (241,965) $ (129,355)
Other comprehensive income (loss):      
Unrealized income (loss) on available-for-sale marketable securities, net of tax 10 (4) 166
Comprehensive loss $ (602,160) $ (241,969) $ (129,189)
v3.20.4
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common stock:
Accumulated other comprehensive income (loss):
Additional paid-in capital:
Additional paid-in capital:
Revision of prior period, adjustment
Accumulated deficit:
Accumulated deficit:
Cumulative effect of accounting change
Balance, beginning of period at Dec. 31, 2017   $ 5 $ (171) $ 520,558   $ (398,598) $ 11,241
Increase (Decrease) in Stockholders' Deficit              
Unrealized income (loss) on available-for-sale marketable securities, net of tax     166        
Common stock issued in private placement, net       5,353      
Common stock issued in connection with public offering, net   3   112,438      
Common stock issued on exercise of stock options, net       2,741      
Common stock issued pursuant to exercises of warrants       6,539      
Common stock issued pursuant to employee stock purchase plan       3,231      
Common stock issued or issuable pursuant to acquisitions       6,455      
Warrants issued pursuant to loan agreement       383      
Stock-based compensation expense       20,850      
Net loss $ (129,355)         (129,355)  
Balance, end of period at Dec. 31, 2018 161,839 8 (5) 678,548   (516,712)  
Increase (Decrease) in Stockholders' Deficit              
Unrealized income (loss) on available-for-sale marketable securities, net of tax     (4)        
Common stock issued in connection with public offering, net   2   204,024      
Common stock issued on exercise of stock options, net       3,456      
Common stock issued pursuant to exercises of warrants       181      
Common stock issued pursuant to employee stock purchase plan       5,833      
Common stock issued or issuable pursuant to acquisitions       133,942      
Equity component of convertible senior notes, net       75,488      
Stock-based compensation expense       36,844      
Net loss (241,965)         (241,965)  
Balance, end of period at Dec. 31, 2019 379,640 10 (9) 1,138,316   (758,677)  
Balance, end of period (Reclassification of stock payable liabilities) at Dec. 31, 2019         $ (10,387)    
Increase (Decrease) in Stockholders' Deficit              
Unrealized income (loss) on available-for-sale marketable securities, net of tax     10        
Common stock issued in private placement, net       263,628      
Common stock issued in connection with public offering, net   9   263,685      
Common stock issued on exercise of stock options, net       10,730      
Common stock issued pursuant to exercises of warrants       974      
Common stock issued pursuant to employee stock purchase plan       8,871      
Common stock issued or issuable pursuant to acquisitions       1,524,227      
Warrants issued pursuant to loan agreement       27,000      
Stock-based compensation expense       110,076      
Net loss (602,170)         (602,170)  
Balance, end of period at Dec. 31, 2020 $ 1,976,293 $ 19 $ 1 $ 3,337,120   $ (1,360,847)  
Balance, end of period (Reclassification of stock payable liabilities) at Dec. 31, 2020         $ (10,400)    
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities:      
Net loss $ (602,170) $ (241,965) $ (129,355)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 39,050 16,206 13,540
Stock-based compensation 158,747 75,948 20,850
Amortization of debt discount and issuance costs 17,204 4,416 0
Impairment losses 0 0 2,925
Remeasurements of liabilities associated with business combinations 92,348 0 0
Benefit from income taxes (112,100) (18,450) (2,862)
Debt extinguishment costs 0 8,926 5,266
Post-combination expense for acceleration of unvested equity 91,021 0 0
Other 1,425 1,095 1,168
Changes in operating assets and liabilities, net of businesses acquired:      
Accounts receivable (2,814) (6,131) (5,291)
Inventory (7,832) 1,645 (2,848)
Prepaid expenses and other current assets (2,010) (6,624) 1,403
Other assets 895 2,026 (163)
Accounts payable 10,186 1,558 (417)
Accrued expenses and other long-term liabilities 17,548 16,297 3,564
Net cash used in operating activities (298,502) (145,053) (92,220)
Cash flows from investing activities:      
Purchases of marketable securities (280,258) (260,917) (9,680)
Proceeds from sales of marketable securities 12,832 0 19,965
Proceeds from maturities of marketable securities 277,487 34,500 32,458
Acquisition of businesses, net of cash acquired (383,753) (33,846) 0
Purchases of property and equipment (22,865) (20,047) (5,970)
Other (4,026) 0 (1,000)
Net cash provided by (used in) investing activities (400,583) (280,310) 35,773
Cash flows from financing activities:      
Proceeds from public offerings of common stock, net of issuance costs 263,688 204,024 112,441
Proceeds from issuance of common stock, net 284,203 9,470 17,511
Proceeds from issuance of convertible senior notes, net 0 339,900 0
Proceeds from issuance of debt, net 129,214 0 93,909
Payments of debt extinguishment costs 0 (10,638) (4,609)
Loan payments 0 (75,000) (60,000)
Other (4,112) (2,985) (2,100)
Net cash provided by financing activities 672,993 464,771 157,152
Net increase (decrease) in cash, cash equivalents and restricted cash (26,092) 39,408 100,705
Cash, cash equivalents and restricted cash at beginning of period 157,572 118,164 17,459
Cash, cash equivalents and restricted cash at end of period 131,480 157,572 118,164
Supplemental cash flow information:      
Interest paid 12,130 4,731 6,231
Supplemental cash flow information of non-cash investing and financing activities:      
Equipment acquired through finance leases 4,463 1,892 0
Purchases of property and equipment in accounts payable and accrued liabilities 1,869 2,422 510
Warrants issued pursuant to debt agreement 27,000 0 383
Common stock issued for acquisitions 1,157,958 108,573 6,445
Consideration payable for acquisitions 940,829 21,449 $ 0
Operating lease assets obtained in exchange for lease obligations, net $ 14,058 $ 4,261  
v3.20.4
Organization and description of business
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and description of business Organization and description of businessInvitae Corporation ("Invitae," “the Company," "we," "us," and "our") was incorporated in the State of Delaware on January 13, 2010, as Locus Development, Inc. and we changed our name to Invitae Corporation in 2012. We offer high-quality, comprehensive, affordable genetic testing across multiple clinical areas, including hereditary cancer, cardiology, neurology, pediatrics, personalized oncology, metabolic conditions and rare diseases. To augment our offering and realize our mission, we have acquired multiple assets including four businesses in 2020, which expanded our suite of genome management offerings and established a broader entry into oncology therapy selection and personalized cancer monitoring.In October 2020, we completed the acquisition of ArcherDX, Inc. (“ArcherDX”). ArcherDX is a genomics company democratizing precision oncology by offering a suite of products and services that are accurate, personal, actionable and easy to use in local settings, thereby empowering clinicians to control the sample, data, patient care and economics. ArcherDX’s development platform, including its proprietary Anchored Multiplex PCR, ("AMP"), chemistry at the core, is enabling clinical tests and services that allow for therapy selection and cancer monitoring in community locations for the first time at scale. Invitae operates in one segment.
v3.20.4
Summary of significant accounting policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of significant accounting policies Summary of significant accounting policies
Principles of consolidation
Our consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base these estimates on current facts, historical and anticipated results, trends and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those judgments, estimates and assumptions. We evaluate our estimates on an ongoing basis.
Significant estimates and assumptions made by management include the determination of:
revenue recognition;
the fair value of assets and liabilities associated with business combinations;
the impairment assessment of goodwill and intangible assets;
the valuation of our 2.00% convertible senior notes due 2024 issued in September 2019 ("Convertible Senior Notes");
the recoverability of long-lived assets;
our incremental borrowing rates used to calculate our lease balances;
stock-based compensation expense and the fair value of awards and warrants issued; and
income tax uncertainties.
Concentrations of credit risk and other risks and uncertainties
Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. Our cash and cash equivalents are held by financial institutions in the United States. Such deposits may exceed federally insured limits.
Significant customers are those that represent 10% or more of our total revenue for each year presented on the consolidated statements of operations. Our revenue from significant customers as a percentage of our total revenue was as follows:
 Year Ended December 31,
202020192018
Medicare19 %25 %22 %
No customers represented more than 10% of accounts receivable as of December 31, 2020 or 2019.
Cash, cash equivalents, and restricted cash
We consider all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds, U.S. treasury notes and government agency securities.
Restricted cash consists primarily of money market funds that secure irrevocable standby letters of credit that serve as collateral for security deposits for our facility leases.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):
December 31,
20202019
Cash and cash equivalents$124,794 $151,389 
Restricted cash6,686 6,183 
Total cash, cash equivalents and restricted cash$131,480 $157,572 
Marketable securities
All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date. Short-term marketable securities have maturities one year or less at the balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive loss. Realized gains and losses and impairments, if any, on available-for-sale securities are included in other expense, net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in other income (expense), net.
For marketable securities in an unrealized loss position, we assess our intent to sell, or whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria are met, the security’s amortized cost basis is written down to fair value through other income (expense), net.
Accounts receivable
We receive payment from patients, biopharmaceutical partners, third-party payers and other business-to-business customers. See Note 3, "Revenue, accounts receivable and deferred revenue" for further information.
Deferred revenue
We record a contract liability when cash payments are received or due in advance of our performance related to one or more performance obligations. See Note 3, "Revenue, accounts receivable and deferred revenue" for further information.
Inventory
Our inventory consists of raw materials, work in progress, and finished goods, which are stated at the lower of cost or net realizable value on a first-in, first-out basis. We periodically analyze our inventory levels and expiration dates, and write down inventory that has become obsolete, inventory that has a cost basis in excess of its net realizable value, and inventory in excess of expected sales requirements as cost of revenue. We record an allowance for obsolete inventory using an estimate based on historical trends and evaluation of near-term expirations.
Business combinations
We apply Financial Accounting Standards Board ("FASB"), Accounting Standards Codification ("ASC") 805, Business Combinations, which requires recognition of assets acquired, liabilities assumed, and contingent consideration at their fair value on the acquisition date with subsequent changes recognized in earnings; requires acquisition-related expenses and restructuring costs to be recognized separately from the business combination and expensed as incurred; requires in-process research and development to be capitalized at fair value as an indefinite-lived intangible asset until completion or abandonment; and requires that changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of provision for taxes.
We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. The tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the business combination date, including identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. We base the estimated fair value of identifiable intangible assets acquired in a business combination on independent third-party valuations that use information and assumptions provided by our management, which consider our estimates of inputs and assumptions that a market participant would use. Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, estimated cost savings, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.
In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under ASC Topic 480, Distinguishing Liabilities from Equity, we recognize a liability equal to the fair value of the contingent payments we expect to make as of the acquisition date. We remeasure this liability each reporting period and record changes in the fair value as general and administrative expense.
Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in our operating results from the date of acquisition.
Intangible assets
Amortizable intangible assets include trade names, non-compete agreements, patent licensing agreements, favorable leases, developed technology, customer relationships, and rights to develop new technology acquired as part of business combinations. Customer relationships acquired through our business combinations in 2017 are amortized on an accelerated basis, utilizing free cash flows, over periods ranging from five to 12 years. All other intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives ranging from two to 15 years. All intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment.
Goodwill
In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), our goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Under ASC 350, we perform annual impairment reviews of our goodwill balance during the fourth fiscal quarter or more frequently if business factors indicate. In testing for impairment, we compare the fair value of our reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, we will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. We did not incur any goodwill impairment losses in any of the periods presented.
In-process research and development
Intangible assets related to in-process research and development costs (“IPR&D”) are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. If and when development is complete, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. During this period, the assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts.
During the fourth quarter and if business factors indicate more frequently, we perform an assessment of the qualitative factors affecting the fair value of our IPR&D projects. If the fair value exceeds the carrying value, there is no impairment. Impairment losses on indefinite-lived intangible assets are recognized based solely on a comparison of the fair value of an asset to its carrying value, without consideration of any recoverability test. We have not identified any such impairment losses to date.
Leases
Under ASC 842, Leases, we determine if an arrangement is a lease at inception. Operating leases are included in operating lease assets and operating lease obligations in our consolidated balance sheets. Finance leases are included in other assets and finance lease obligations in our consolidated balance sheets.
Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments. The operating lease asset also includes any lease payments made and is adjusted for lease incentives. Our lease terms may include options to extend or terminate the lease which are recognized when it is reasonably certain that we will exercise that option. Leases with terms of 12 months or less are not recorded on our balance sheet. Lease expense is recognized on a straight-line basis over the lease terms, or in some cases, the useful life of the underlying asset. We account for the lease and non-lease components as a single lease component.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between three and seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the term of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations in the period realized.
The estimated useful lives of property and equipment are as follows:
Furniture and fixtures7 years
Automobiles7 years
Manufacturing and Laboratory equipment5 years
Computer equipment3 years
Software3 years
Leasehold improvementsShorter of lease term or estimated useful life
Long-lived assets
We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. There were no long-lived asset impairment losses recorded for any period presented.
Fair value of financial instruments
Our financial instruments consist principally of cash and cash equivalents, marketable securities, accounts payable, accrued liabilities, finance leases, and liabilities associated with business combinations. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued and other current liabilities approximate their current fair value due to the relatively short-term nature of these accounts. Based on borrowing rates available to us, the carrying value of finance leases approximate their fair values. Liabilities associated with business combinations are recorded at their estimated fair value.
Revenue recognition
We recognize revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. All revenues are generated from contracts with customers. We utilize the following practical expedients and exemptions:
Costs to obtain or fulfill a contract are expensed when incurred because the amortization period would have been one year or less, and
No adjustments to promised consideration were made for financing as we expect, at contract inception, that the period between the transfer of a promised good or service and when the customer pays for that good or service will be one year or less.
Test revenue
Test revenue is comprised of testing services and sales of distributed precision oncology products.
The majority of our test revenue is generated from genetic testing, in addition to somatic testing for therapy selection and personalized cancer monitoring. These testing services provide analysis and associated interpretation of the sequencing of parts of the genome. Test orders are placed under signed requisitions or contractual agreements, and we often enter into contracts with biopharmaceutical partners, other business-to-business customers (e.g., hospitals, clinics, medical centers) and insurance companies that include pricing provisions under which such tests are billed. Billing terms are generally net 30 to 60 days.
While the transaction price of diagnostic tests is originally established either via contract or pursuant to our standard list price, we often provide concessions for tests billed to insurance carriers, and therefore the transaction price for patient insurance-billed tests is considered to be variable and revenue is recognized based on an estimate of the consideration to which we will be entitled at an amount for which it is probable that a reversal of cumulative consideration will not occur. Making these estimates requires significant judgments based upon such factors as length of payer relationship, historical payment patterns, changes in contract provisions and insurance reimbursement policies. These judgments are reviewed each reporting period and updated as necessary.
We look to transfer of control in assessing timing of recognition of revenue in connection with each performance obligation. In general, revenue in connection with the service portion of our diagnostic tests is recognized upon delivery of the underlying clinical report or when the report is made available on our web portal. Outstanding performance obligations pertaining to orders received but for which the underlying report has not been issued are generally satisfied within a 30-day period.
We also generate test revenue through the sale of our precision oncology products, which is comprised primarily of sales of our distributed research use only ("RUO ") and in vitro diagnostics ("IVD") products for therapy selection. We recognize revenue on these sales once shipment has occurred. Product sales are recorded net of discounts and other deductions. Billing terms are generally net 30 days.
Shipping and handling fees billed to customers are recorded as revenue on the consolidated statements of operations. The associated shipping and handling costs are recorded as cost of revenue.
Other revenue
Other revenue is primarily generated from pharma development services provided to biopharmaceutical companies related to companion diagnostic development as well as through collaboration agreements and genome network contracts.
Contracts for companion diagnostic development consist primarily of milestone-based payments along with annual fees and marked-up pass-through costs. The arrangements are treated as short-term contracts for revenue recognition purposes because they allow termination of the agreements by the customers with 30 to 120 days’ written notice without a termination penalty. Upon termination, customers are required to pay for the proportion of services provided under milestones that were in progress. We recognize revenue in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenue over time based on the progress made toward achieving the performance obligation, utilizing both input or output methods, depending on the performance obligation, including labor hours expended, tests processed, or time elapsed, that measure our progress toward the achievement of the milestone.
We also enter into collaboration and genome network contracts. Collaboration agreements provide customers with diagnostic testing and related data aggregation reporting services that are provided over the contract term. Collaboration revenue is recognized as the data and reporting services are delivered to the customer. Genome network offerings consist of subscription services related to a proprietary software platform designed to connect patients, clinicians, advocacy organizations, researchers and therapeutic developers to accelerate the understanding, diagnosis and treatment of hereditary disease. Such services are recognized on a straight-line basis over the subscription periods. Amounts due under collaboration and genome network agreements are typically billable on net 30-day terms.
Cost of revenue
Cost of revenue reflects the aggregate costs incurred in delivering our genetic offerings and includes expenses for personnel-related costs including stock-based compensation, materials and supplies, royalties, regulatory fees, commercialization fees, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation, information technology costs, amortization of acquired intangibles and utilities.
License Agreements
We have entered and may continue to enter into license agreements to access and utilize certain technology. We evaluate if the license agreement results in the acquisition of an asset or a business and then determine if the acquired asset has the ability to generate revenues or is subject to regulatory approval. When regulatory approval is not required, we record the license as an asset and amortize it over the estimated economic life. When regulatory approval is required, we record the amount paid as a research and development expense.
Income taxes
We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Significant judgment is required in determining the net valuation allowance which includes our evaluation of all available evidence including past operating results, estimates on future taxable income and acquisition-related tax assets and liabilities.
We historically established a full valuation allowance against our deferred tax assets due to the uncertainty surrounding realization of such assets. In 2020, we released approximately $112.1 million of our valuation allowance to account for acquired intangibles that support the future realization of some of our deferred tax assets. Due to the overall increase of deferred tax assets, our valuation allowance has also increased from the prior year.
Stock-based compensation
We measure stock-based payment awards made to employees and directors based on the estimated fair values of the awards and recognize the compensation expense over the requisite service period. We use the Black-Scholes option-pricing model to estimate the fair value of stock option awards and employee stock purchase plan (“ESPP”) purchases. The fair value of restricted stock unit (“RSU”) awards with time-based vesting terms is based on the grant date share price. We grant performance-based restricted stock unit (“PRSU”) awards to certain employees which vest upon the achievement of certain performance conditions, subject to the employees’ continued service relationship with us. The probability of vesting is assessed at each reporting period and compensation cost is adjusted based on this probability assessment. We recognize such compensation expense on an accelerated vesting method.
Stock-based compensation expense for awards without a performance condition is recognized using the straight-line method. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, our stock-based compensation is reduced for estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
We account for stock issued in connection with business combinations based on the fair value on the date of issuance.
Advertising
Advertising expenses are expensed as incurred. We incurred advertising expenses of $11.4 million, $9.9 million and $0.6 million during the years ended December 31, 2020, 2019 and 2018, respectively.
Comprehensive loss
Comprehensive loss is composed of two components: net loss and other comprehensive income (loss). Other comprehensive income (loss) refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity, but are excluded from net loss. Our other comprehensive income (loss) consists of unrealized gains or losses on investments in available-for-sale securities.
Net loss per share
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. Potentially dilutive securities, consisting of preferred stock, options to purchase common stock, common stock warrants, shares of common stock pursuant to ESPP, common stock issuable in connection with our Convertible Senior Notes, RSUs and PRSUs, are considered to be common stock equivalents and were excluded from the calculation of diluted net loss per share because their effect would be antidilutive for all periods presented.
Prior period reclassifications
We have reclassified certain amounts in prior periods to conform with current presentation.
Immaterial correction of an error
We determined the historical classification of certain acquisition-related obligations as equity and the subsequent measurement of such obligations was inappropriate and instead should have been classified as liabilities and subsequently measured at fair value with changes recognized in other expense, net during the year ended December 31, 2020. We determined that the impact of the error to previously issued consolidated financial statements was not material and have corrected the immaterial error in the current period financial statements. The impact of this correction was an increase to other long-term liabilities of $10.1 million, a corresponding decrease to additional paid-in capital of $10.4 million and an increase to other income, net of $0.3 million.
Recent accounting pronouncements
We evaluate all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability. ASUs not included in the disclosures in this report were assessed and determined to be either not applicable or are not expected to have a material impact on our consolidated financial statements.
Recently issued accounting pronouncements not yet adopted
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. This new standard is effective for our interim and annual periods beginning January 1, 2022, and earlier adoption is permitted. We may elect to apply the amendments on a retrospective or modified retrospective basis. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
Recently adopted accounting pronouncements
In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires measurement and recognition of expected credit losses for financial assets. This guidance became effective for us beginning in the first quarter of 2020 and was adopted using a modified retrospective approach, with certain exceptions. The adoption of Topic 326 did not have a material impact on our consolidated financial statements as credit losses are not expected to be significant.
As part of our adoption of Topic 326, we assess our accounts receivables for expected credit losses at each reporting period by disaggregating by payer type and further by portfolios of customers with similar characteristics, such as customer type and geographic location. We then review each portfolio for expected credit losses based on historical payment trends as well as forward looking data and current economic trends. If a credit loss is determined, we record a reduction to our accounts receivable balance with a corresponding general and administrative expense.
In accordance with Topic 326, we no longer evaluate whether our available-for-sale debt securities in an unrealized loss position are other than temporarily impaired. Instead, we assess whether such unrealized loss positions are credit-related. Our expected loss allowance methodology for these securities is developed by reviewing the extent of the unrealized loss, the issuers’ credit ratings and any changes in those ratings, as well as reviewing current and future economic market conditions and the issuers’ current status and financial condition. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in other income (expense), net. Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive income (loss).
On January 1, 2019, we adopted the provisions of ASC Topic 842, Leases, using the modified retrospective approach in accordance with Topic 842. Adoption of Topic 842 had a material impact on our consolidated balance sheets, but did not have an impact on our consolidated statements of operations. We elected the package of practical expedients permitted under the transition guidance which, among other things, allowed us to carry forward the historical classification of leases in place as of January 1, 2019. We did not identify any material embedded leases with the adoption of Topic 842 and therefore the implementation of Topic 842 primarily focused on the treatment of our previously identified leases.
Prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under previous lease guidance, ASC 840, Leases. Under ASC 840, we rented facilities under operating lease agreements and recognized related rent expense on a straight-line basis over the term of the applicable lease agreement. Some of the lease agreements contained rent holidays, scheduled rent increases, lease incentives, and renewal options. Rent holidays and scheduled rent increases were included in the determination of rent expense recorded over the lease term. Lease incentives were recognized as a reduction of rent expense on a straight-line basis over the term of the lease. Renewals were not assumed in the determination of the lease term unless they were deemed to be reasonably assured at the inception of the lease. We recognized rent expense beginning on the date we obtained the legal right to use and control the leased space.
v3.20.4
Revenue, accounts receivable and deferred revenue
12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue, accounts receivable and deferred revenue Revenue, accounts receivable and deferred revenue Test revenue is generated from sales of diagnostic tests and precision oncology products to four groups of customers: biopharmaceutical partners; patients who pay directly; patients' insurance carriers; and other business-to-business customers (e.g., hospitals, clinics, medical centers). Test revenue is generated in two ways: through a centralized lab and decentralized through the shipment of reactions to biopharma partners and other business-to-business customers. We refer to the set of reagents needed to perform a next-generation sequencing test as a "reaction." Amounts billed and collected, and the timing of collections, vary based on the type of payer. Other revenue consists principally of revenue recognized under contracts for pharma development services and other collaboration and genome network agreements and is accounted for under the provisions provided in ASC 606, Revenue from Contracts with Customers.
Our revenue as disaggregated by payer category and revenue subtype is as follows (in thousands):
 PatientBiopharma partnerOther business-to-businessYear Ended December 31, 2020
 InsuranceDirect
Test revenue:
Centralized$181,026 $23,972 $26,228 $32,736 $263,962 
Decentralized— — 837 7,511 8,348 
 Total test revenue181,026 23,972 27,065 40,247 272,310 
Other revenue— — 4,488 2,800 7,288 
Total revenue$181,026 $23,972 $31,553 $43,047 $279,598 

 PatientBiopharma partnerOther business-to-businessYear Ended December 31, 2019
 InsuranceDirect
Test revenue:
Centralized$153,827 $17,597 $10,876 $30,173 $212,473 
 Total test revenue153,827 17,597 10,876 30,173 212,473 
Other revenue— — 2,077 2,274 4,351 
Total revenue$153,827 $17,597 $12,953 $32,447 $216,824 

 PatientBiopharma partnerOther business-to-businessYear Ended December 31, 2018
 InsuranceDirect
Test revenue:
Centralized$96,352 $13,589 $6,231 $28,388 $144,560 
 Total test revenue96,352 13,589 6,231 28,388 144,560 
Other revenue— — 1,565 1,574 3,139 
Total revenue$96,352 $13,589 $7,796 $29,962 $147,699 
We recognize revenue related to billings based on estimates of the amount that will ultimately be realized. Cash collections for certain tests delivered may differ from rates originally estimated. As a result of new information, we update our estimate quarterly of the amounts to be recognized for previously delivered tests which resulted in the following increases to revenue and decreases to our loss from operations and basic and diluted net loss per share (in millions, except per share amounts):
 Year Ended December 31,
 202020192018
Revenue$4.4 $4.1 $4.5 
Loss from operations$(4.4)$(4.1)$(4.5)
Net loss per share, basic and diluted$(0.03)$(0.05)$(0.07)
Impact of COVID-19
Our billable volumes decreased significantly in the second half of March 2020 as compared to the first few months of 2020 as a result of COVID-19 and related limitations and priorities across the healthcare system. Our daily test volumes have consistently increased from the low in March 2020, although we are currently still experiencing changes in product mix due to the impact of COVID-19. COVID-19 could have a material impact on our financial results for the foreseeable future, particularly on product mix and as a result, the revenue we recognize. We have reviewed and adjusted for the impact of COVID-19 on our estimates related to revenue recognition and expected credit losses.
Approximately 8% of our workforce as of March 31, 2020 was impacted by a reduction in force in April 2020 in an initiative to manage costs and cash burn that resulted in one-time costs in the second quarter of 2020 of $3.8 million. In addition, effective May 2020, we have reduced the salaries of our named executive officers by approximately 20%, which reductions ceased as of January 2021.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law which was a stimulus bill intended to bolster the economy, among other things, and provide assistance to qualifying businesses and individuals. The CARES Act included an infusion of funds into the healthcare system, and in April 2020, we received $3.8 million as a part of this initiative. This payment was recognized as other income (expense), net in our consolidated statement of operations during the year ended December 31, 2020. We also received $2.3 million in January 2021 which we recognized as other income (expense), net during the three months ended March 31, 2021. At this time, we are not certain of the availability, extent or impact of any future relief provided under the CARES Act.
Accounts receivable
The majority of our accounts receivable represents amounts billed to pharmaceutical partners and other business-to-business customers for test and other revenue recognized, and estimated amounts to be collected from third-party insurance payers for genetic testing revenue recognized. Also included are amounts due under the terms of collaboration and genome network agreements for diagnostic testing and data aggregation reporting services provided and proprietary platform access rights transferred.
We also record unbilled revenue for revenue recognized but yet to be billed for services provided to biopharmaceutical companies related to companion diagnostic development. The amount is a contract receivable and is included in accounts receivable on the consolidated balance sheets; unbilled revenue was $4.3 million and nil as of December 31, 2020 and 2019, respectively.
Deferred revenue
We record a contract liability when cash payments are received or due in advance of our performance related to one or more performance obligations. The deferred revenue balance primarily consists of advanced billings for pharma development services, including billings at the initiation of a performance-based milestones, and recognized as revenue in the applicable future period when the revenue is earned. Also included are prepayments related to our consumer direct channel. We recognized revenue of $1.4 million from deferred revenue for the year ended as of December 31, 2020. In addition, we recognized deferred revenue of $4.8 million upon the acquisition of ArcherDX in October 2020, $2.0 million of which was recognized as revenue during the year ended December 31, 2020.
v3.20.4
Business combinations
12 Months Ended
Dec. 31, 2020
Business Combinations [Abstract]  
Business combinations Business combinations
Singular Bio
In June 2019, we acquired 100% of the fully diluted equity of Singular Bio, a privately held company developing single molecule detection technology, for approximately $57.3 million, comprised of $53.9 million in the form of 2.5 million shares of our common stock and the remainder in cash.
We granted approximately $90.0 million of restricted stock units ("RSU") under our 2015 Stock Incentive Plan as inducement awards to new employees who joined Invitae in connection with our acquisition of Singular Bio. $45.0 million of the RSUs are time-based and vested in three equal installments in December 2019, June 2020, and December 2020, subject to the employee's continued service with us ("Time-based RSUs") and $45.0 million of the RSUs are performance-based RSUs ("PRSU") that vest upon the achievement of certain performance conditions. Since the number of awards granted is based on a 30-day volume weighted-average share price with a fixed dollar value, these Time-based RSUs and PRSUs are liability-classified and the fair value is estimated at each reporting period based on the number of shares that are expected to be issued at each reporting date and our closing stock price, which combined are categorized as Level 3 inputs. Therefore, fair value of the RSUs and PRSUs and the number of shares to be issued will not be fixed until the awards vest.
During the years ended December 31, 2020 and 2019, we recorded research and development stock-based compensation expense of $29.1 million and $14.7 million, respectively, related to the Time-based RSUs, and $19.4 million and $24.4 million, respectively, related to the PRSUs based on our evaluations of the probability of achieving performance conditions. As of December 31, 2020, the Time-based RSUs and PRSUs had a total fair value of $43.9 million and $43.8 million, respectively, based on a total estimated issuance of 3.5 million shares and expectation of the achievement of the performance conditions. As of December 31, 2020, 2.0 million of the Time-based RSUs and 1.2 million of the PRSUs had vested with a total fair value of $75.0 million which was recorded in common stock issued or issuable pursuant to acquisitions in the consolidated statements of stockholders' equity.
Jungla
In July 2019, we acquired 100% of the equity interest of Jungla, a privately held company developing a platform for molecular evidence testing in genes, for approximately $59.0 million, comprised of $44.9 million in the form of shares of our common stock and the remainder in cash.
We may be required to pay contingent consideration based on achievement of post-closing development milestones. As of the acquisition date, the fair value of this contingent consideration was $10.7 million including cash and common stock. These milestones are expected to be completed within two years of the date of acquisition, two of which were completed during the year ended December 31, 2020. The material factors that may impact the fair value of the contingent consideration, and therefore, this liability, are the probabilities and timing of achieving the related milestones and the discount rate we used to estimate the fair value, which are Level 3 inputs not supported by market activity. Significant changes in any of the probabilities of success would result in a significant change in the fair value, which will be estimated at each reporting date with changes reflected as a general and administrative expense. As of December 31, 2020, the fair value of this contingent consideration was $7.1 million.
Upon acquisition, we had a stock payable liability related to our acquisition of Jungla which represents the hold-back obligation to issue 0.2 million shares subject to indemnification claims that may arise. This liability was adjusted at each reporting period based on the fair value of our common stock, which is a Level 3 input, with the change recorded in other income (expense), net. During July 2020, the hold-back shares were remitted in full to the former owners of Jungla.
Clear Genetics
In November 2019, we acquired 100% of the equity interest of Clear Genetics, a developer of software for providing genetic services at scale, for approximately $50.1 million. Of the cash and stock purchase price consideration issued, $0.2 million of cash and approximately 0.4 million shares of our common stock were subject to a 12-month hold back to satisfy indemnification obligations that were released during the year ended December 31, 2020.
Diploid
In March 2020, we acquired 100% of the equity interest of Diploid, a developer of artificial intelligence software capable of diagnosing genetic disorders using sequencing data and patient information, for approximately $82.3 million in cash and shares of our common stock. Of the stock purchase price consideration issued, approximately 0.4 million shares are subject to a hold-back to satisfy indemnification obligations that may arise. We included the financial results of Diploid in our consolidated financial statements from the acquisition date, which were not material for the year ended December 31, 2020.
The following table summarizes the purchase price recorded as a part of the acquisition of Diploid (in thousands):
Purchase Price
Cash transferred$32,323 
Hold-back consideration - common stock7,538 
Common stock transferred42,453 
Total$82,314 

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by us. While we believe that our estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed through our acquisition of Diploid at the date of acquisition (in thousands):
Cash$124 
Accounts receivable26 
Developed technology41,789 
Total identifiable assets acquired41,939 
Accounts payable(30)
Deferred tax liability(10,250)
Net identifiable assets acquired31,659 
Goodwill50,655 
Total purchase price$82,314 

Based on the guidance provided in ASC 805, Business Combinations, we accounted for the acquisition of Diploid as a business combination and determined that 1) Diploid was a business which combines inputs and processes to create outputs, and 2) substantially all of the fair value of gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets.
Our purchase price allocation for the acquisition is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available, primarily related to our deferred tax liability assumed in connection with the acquisition. Additional information that existed as of the acquisition date but at the time was unknown to us may become known to us during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date.
We measured the identifiable assets and liabilities assumed at their acquisition date fair values separately from goodwill. The intangible asset acquired is developed technology related to Diploid's artificial intelligence technology platform. The fair value of the developed technology was estimated using an income approach with an estimated useful life of nine years. As of the acquisition date, we recorded a stock payable liability of $7.5 million to represent the hold-back obligation to issue 0.4 million shares subject to indemnification claims that may arise. This liability is adjusted at each reporting period based on the fair value of our common stock, which is a Level 3 input. As of December 31, 2020, the value of this liability was $17.7 million with the change recorded in other income (expense), net.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Diploid resulted in the recognition of $50.7 million of goodwill which we believe relates primarily to expansion of the acquired technology to apply to new areas of genetic testing. The goodwill created as a result of the acquisition of Diploid is not deductible for the foreign local tax purposes.
In June 2020, we granted 0.2 million RSUs with a fair value of $3.6 million under our 2015 Stock Incentive Plan as inducement awards in connection with our acquisition of Diploid. These RSUs vest in two equal installments, in April 2021 and April 2022. The value of the awards was recognized as research and development stock-based compensation upon grant in June 2020 as there were no ongoing obligations required by the award recipients.
Genelex and YouScript
In April 2020, we acquired 100% of the equity interest of Genelex and YouScript to bring pharmacogenetic testing and integrated clinical decision support to Invitae. We acquired Genelex for approximately $13.2 million,
primarily in shares of our common stock. Of the stock purchase price consideration issued, approximately 0.1 million shares are subject to a hold-back to satisfy indemnification obligations that may arise. We acquired YouScript for approximately $52.7 million, including cash consideration of $24.5 million and the remaining in shares of our common stock. Of the purchase price consideration for YouScript, approximately $1.4 million and 0.5 million shares of our common stock are subject to a hold-back to satisfy indemnification obligations that may arise. We included the financial results of Genelex and YouScript in our consolidated financial statements from the acquisition date, which were not material for the year ended December 31, 2020. We recorded $1.7 million of transaction costs related to the acquisition of Genelex and YouScript as general and administrative expense during the year ended December 31, 2020.
We may be required to pay contingent consideration in the form of additional shares of our common stock in connection with the acquisition of Genelex if, within a specified period following the closing, we achieve a certain product milestone, in which case we would issue shares of our common stock with a value equal to a portion of the gross revenues actually received by us for a pharmacogenetic product reimbursed through certain payers during an earn-out period of up to four years. As of the acquisition date, the fair value of this contingent consideration was $2.0 million in the form of shares of our common stock. The material factors that may impact the fair value of the contingent consideration, and therefore, this liability, are the probabilities and timing of achieving the related milestone, the estimated revenues achieved for a pharmacogenetic product and the discount rate we used to estimate the fair value, which are Level 3 inputs not supported by market activity. Significant changes in any of the probabilities of success would result in a significant change in the fair value, which is estimated at each reporting date with changes reflected as general and administrative expense. As of December 31, 2020, the fair value of this contingent consideration was $1.2 million.
The following table summarizes the purchase prices recorded as a part of the acquisition of Genelex and YouScript (in thousands):
Genelex
YouScript
Total
Cash transferred$972 $24,462 $25,434 
Hold-back consideration - cash— 1,385 1,385 
Hold-back consideration - common stock781 5,392 6,173 
Contingent consideration1,994 — 1,994 
Common stock transferred9,463 21,464 30,927 
Total$13,210 $52,703 $65,913 
Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by us. While we believe that our estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed through our acquisitions of Genelex and YouScript at the date of acquisition (in thousands):
GenelexYouScriptTotal
Cash$33 $24 $57 
Accounts receivable221 56 277 
Prepaid expenses and other current assets— 70 70 
Operating lease assets— 355 355 
Developed technology9,209 25,716 34,925 
Total identifiable assets acquired9,463 26,221 35,684 
Current liabilities(320)(481)(801)
Deferred tax liability— (2,600)(2,600)
Other long-term liabilities— (163)(163)
Net identifiable assets acquired9,143 22,977 32,120 
Goodwill4,067 29,726 33,793 
Total purchase price$13,210 $52,703 $65,913 
Based on the guidance provided in ASC 805, Business Combinations, we accounted for the acquisitions of Genelex and YouScript as business combinations and determined that 1) Genelex and YouScript were businesses which combine inputs and processes to create outputs, and 2) substantially all of the fair value of gross assets acquired were not concentrated in a single identifiable asset or group of similar identifiable assets.
Our purchase price allocation for the acquisitions is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available, primarily related to our deferred tax liability assumed. Additional information that existed as of the acquisition date but at the time was unknown to us may become known to us during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date.
We measured the identifiable assets and liabilities assumed at their acquisition date fair values separately from goodwill. The intangible assets acquired are the developed technologies related to Genelex's and YouScript's technology platforms. The fair value of the developed technologies were estimated using an income approach with an estimated useful life of eight years. As of the acquisition date, we recorded stock payable liabilities of $6.2 million to represent the hold-back obligation to issue shares subject to indemnification claims that may arise. These liabilities are adjusted at each reporting period based on the fair value of our common stock, which is a Level 3 input. As of December 31, 2020, the value of this liability was $21.6 million with the change recorded in other income (expense), net.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisitions of Genelex and YouScript resulted in the recognition of $33.8 million of goodwill which we believe relates primarily to future functionality and expansion of the acquired technologies. Of the goodwill recognized, $29.7 million related to the YouScript acquisition is not deductible for tax purposes.
ArcherDX
In June 2020, we entered into a definitive agreement with ArcherDX, a genomics analysis company democratizing precision oncology, and in October 2020, the closing conditions were met and the transaction was consummated. Under the terms of the agreement, we acquired 100% of the equity interest of ArcherDX for $2.3 billion, comprised of $2.0 billion in the form of our common stock, $2.0 million in liabilities, and the remainder in cash. We incurred $20.9 million of transaction costs related to the acquisition of ArcherDX which we recorded as general and administrative expense during the year ended December 31, 2020.
We may be required to pay contingent consideration based on achievement of post-closing development and revenue milestones. As of the acquisition date, the total fair value of the contingent consideration was $945.2 million, $933.6 million of which was included in the purchase price and $11.6 million recognized as non-recurring post-combination compensation expense. Of this $933.6 million, $925.1 million would be in the form of shares of our common stock which will be priced at the time of the milestone achievement, and the remainder in cash. The milestones are expected to be completed within approximately two years from the date of the acquisition, with one of them being achieved during November 2020 which resulted in the issuance of 5.0 million shares of our common stock and a cash payment of $1.9 million. This milestone achievement subsequent to the acquisition date resulted in the recognition of $40.6 million general and administrative expense. The material factors that may impact the fair value of the contingent consideration, and therefore the liability, are (i) the estimated number of shares issued, (ii) the volatility assumptions of our common stock used in the Monte Carlo simulation, (iii) the probabilities and timing of achievement of milestones and (iv) discount rates, all of which are Level 3 inputs not supported by market activity. Significant changes in any of these inputs may result in a significant change in fair value, which is estimated at each reporting date with changes reflected as general and administrative expense. As of December 31, 2020, the fair value of the contingent consideration representing the remaining milestones was $788.3 million.
In connection with the acquisition, all of ArcherDX's equity awards outstanding and unvested prior to the acquisition became fully vested per the terms of the agreement. The acceleration of vesting required us to allocate the fair value of the equity attributable to the pre-combination service to the purchase price and the remaining amount of $125.8 million, inclusive of $11.6 million in contingent consideration, to non-recurring post-combination expense which we recognized as general and administrative expense during the year ended December 31, 2020.
We included the financial results of ArcherDX in our consolidated financial statements from the acquisition date, which contributed $16.2 million and $24.8 million of revenue and net loss, respectively, during the year ended December 31, 2020.
The following table summarizes the purchase price and post-combination expense recorded as a part of the acquisition of ArcherDX (in millions):
Purchase PricePost-combination Expense
Cash transferred$335.3 $22.5 
Contingent consideration and liabilities incurred935.6 12.3 
Common stock transferred1,060.6 91.0 
Total$2,331.5 $125.8 
Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by us. While we believe that our estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed through our acquisition of ArcherDX at the date of acquisition (in millions):
Cash$9.1 
Accounts receivable12.1 
Inventory17.6 
Prepaid expenses and other current assets6.8 
Property and equipment, net17.1 
Operating lease assets7.9 
Intangible assets803.8 
Other assets0.7 
Total identifiable assets acquired875.1 
Accounts payable(4.6)
Accrued liabilities(18.0)
Operating lease obligations(1.3)
Operating lease obligations, net of current portion(7.4)
Deferred tax liability(151.1)
Other liabilities(13.6)
Net identifiable assets acquired679.1 
Goodwill1,652.4 
Total purchase price$2,331.5 
Based on the guidance provided in ASC 805, Business Combinations, we accounted for the acquisition of ArcherDX as a business combination and determined that 1) ArcherDX was a business which combines inputs and processes to create outputs, and 2) substantially all of the fair value of gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets.
Our purchase price allocation for the acquisition is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available, primarily related to our deferred tax liability assumed in connection with the acquisition. Additional information that existed as of the acquisition date but at the time was unknown to us may become known to us during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date.
We measured the identifiable assets and liabilities assumed at their acquisition date fair values separately from goodwill. The intangible assets acquired are the developed technology related to ArcherDX's artificial intelligence technology platform, IPR&D for its STRATAFIDE and PCM products, ArcherDX's customer relationships in place at the time of acquisition, and the ArcherDX tradename. We also acquired the right to develop new technology through an existing agreement for the development and commercialization of sequencing-based companion diagnostics between ArcherDX and a vendor. The fair value of our intangible assets acquired as of the acquisition date and the method used to value these assets as well as the estimated economic lives for amortizable intangible assets were as follows (in millions, except estimated useful life which is in years):
Fair valueEstimated useful lifeValuation methodAmortization expense
Customer relationships$17.3 12.0With-and-withoutSelling and marketing
Tradename21.1 12.0Relief from royaltySelling and marketing
Developed technology233.6 12.0Multi-period excess earningsCost of revenue
Right to develop new technology19.4 15.0Cost approachResearch and development
In-process research and development512.4 n/aMulti-period excess earningsNot applicable
Total$803.8 
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of ArcherDX resulted in the recognition of $1.7 billion of goodwill which we believe relates primarily to the anticipated benefits of synergies created through the acquisition and assembled workforce. The acquisition of ArcherDX advances our objectives to create a comprehensive offering that provides testing services for disease risk, therapy selection and personalized cancer monitoring to enable precision approaches to cancer treatment. Goodwill created as a result of the acquisition of ArcherDX is not deductible for tax purposes.
We recorded an income tax benefit of $109.5 million in the three months ended December 31, 2020 due to net deferred tax liabilities assumed in connection with our acquisition of ArcherDX which provided a future source of income to support the realization of our deferred tax assets and resulted in a partial release of our valuation allowance.
In connection with the acquisition, we granted inducement awards of Invitae common stock to new employees who joined Invitae in connection with our acquisition of ArcherDX with an estimated fair value of $112.2 million, net of estimated forfeitures. These awards vest upon the achievement of the contingent consideration milestones discussed above and are subject to the employee’s continued service with us, unless terminated without cause in which case vesting is only dependent on milestone achievement. As the number of shares that are expected to be issued are fixed, the awards are equity-classified. During the year ended December 31, 2020, we recorded $41.2 million in stock-based compensation expense based on our probability of milestone achievement. Included in the stock-based compensation expense is $2.1 million related to the acceleration of stock-based compensation expense due to the termination of an employee without cause whereby the employee's continued service is not required.
Pro forma financial information (unaudited)
The audited pro forma financial information in the table below summarizes the combined results of operations for Invitae and ArcherDX as though the companies had been combined as of January 1, 2019. The pro forma amounts have been adjusted for:
transaction expenses incurred by ArcherDX and us,
depreciation expense resulting from the fair value of the acquired property and equipment,
amortization expense resulting from the acquired intangible assets,
the elimination of historical interest expense incurred by ArcherDX on its debt and debt-like items and the incurrence of interest expense related to the issuance of debt in connection with the acquisition,
lease expense resulting from the step-up in the operating lease obligation and operating lease asset,
nonrecurring post-combination expense,
income tax benefits resulting from the deferred tax liabilities acquired, and
the 26.3 million shares of our common stock issued upon the closing of the ArcherDX transaction.
The following unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved as if the acquisition had taken place as of January 1, 2019 (in thousands):
Year Ended December 31,
20202019
Revenue$327,233 $267,389 
Net loss(685,589)(355,818)
v3.20.4
Goodwill and intangible assets
12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and intangible assets Goodwill and intangible assets
Goodwill
The changes in the carrying amounts of goodwill were as follows (in thousands):
Balance as of December 31, 2019$126,777 
Goodwill acquired - Diploid50,655 
Goodwill acquired - Genelex4,067 
Goodwill acquired - YouScript29,726 
Goodwill acquired - ArcherDX1,652,398 
Balance as of December 31, 2020$1,863,623 
Intangible assets
The following table presents details of our acquired intangible assets as of December 31, 2020 (in thousands):
 CostAccumulated
Amortization
NetWeighted-Average
Useful Life
(in Years)
Weighted-Average
Estimated Remaining
Useful Life
(in Years)
Customer relationships$41,075 $(8,292)$32,783 10.88.8
Developed technology397,563 (31,013)366,550 10.610.0
Non-compete agreement286 (229)57 5.01.0
Tradename21,085 (447)20,638 12.011.8
Patent licensing agreement496 (103)393 15.011.9
Right to develop new technology19,359 (323)19,036 15.014.8
In-process research and development542,388 — 542,388 n/an/a
 $1,022,252 $(40,407)$981,845 10.910.2
Acquisition-related intangibles included in the above table are finite-lived, other than in-process research and development which has an indefinite life, and are carried at cost less accumulated amortization. Customer relationships related to our 2017 business combinations are being amortized on an accelerated basis, in proportion to estimated cash flows. All other finite-lived acquisition-related intangibles are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized. Amortization expense was $26.6 million, $7.7 million, and $5.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Intangible assets are carried at cost less accumulated amortization. Amortization expense is recorded to cost of revenue, research and development, sales and marketing and general and administrative expense.
The following table summarizes our estimated future amortization expense of intangible assets with finite lives as of December 31, 2020 (in thousands):
2021$46,910 
202245,401 
202344,388 
202444,110 
202542,356 
Thereafter216,292 
Total estimated future amortization expense$439,457 
In December 2020, we entered into an agreement to acquire technology focused on informing clinical decisions for $2.9 million. We accounted for this transaction as an asset acquisition of developed technology which will be amortized over eight years, initially to research and development expense. In connection with this transaction, we granted approximately $6.2 million of RSUs under our 2015 Stock Incentive Plan as inducement awards to new employees who joined Invitae. These RSUs are time-based and vest in two equal installments in December 2021 and December 2022, subject to the employee's continued service with us. For $5.4 million of these awards, the number of awards granted are based on the lower of the 20-day volume weighted-average share price prior to the vesting date and the date of close, both with a fixed dollar value, and therefore, these RSUs are liability-classified and the fair value is estimated at each reporting period based on the number of shares that are expected to be issued at each reporting date and our closing stock price, which combined are categorized as Level 3 inputs. Therefore, fair value of these RSUs and the number of shares to be issued will not be fixed until the awards vest. During the year ended December 31, 2020, we recorded research and development stock-based compensation expense of $0.2 million related to the RSUs based on an estimated issuance of 0.1 million shares
v3.20.4
Balance sheet components
12 Months Ended
Dec. 31, 2020
Balance Sheet Related Disclosures [Abstract]  
Balance sheet components Balance sheet components
Inventory
Inventory consisted of the following (in thousands):
December 31,
 20202019
Raw materials$21,324 $6,569 
Work in progress8,847 79 
Finished goods1,859 — 
Total inventory$32,030 $6,648 
Property and equipment, net
Property and equipment consisted of the following (in thousands):
December 31,
 20202019
Leasehold improvements$26,516 $18,352 
Laboratory equipment45,342 24,873 
Computer equipment10,939 5,995 
Software566 2,611 
Furniture and fixtures1,967 1,198 
Automobiles58 58 
Construction-in-progress12,061 10,795 
Total property and equipment, gross97,449 63,882 
Accumulated depreciation and amortization(31,347)(26,135)
Total property and equipment, net$66,102 $37,747 
Depreciation expense was $10.5 million, $7.1 million and $8.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Accrued liabilities
Accrued liabilities consisted of the following (in thousands):
December 31,
 20202019
Accrued compensation and related expenses$25,221 $16,440 
Deferred revenue6,378 1,429 
Compensation and other liabilities associated with business combinations25,600 30,560 
Other28,859 16,385 
Total accrued liabilities$86,058 $64,814 
Other long-term liabilities
Other long-term liabilities consisted of the following (in thousands):
December 31,
 20202019
Deferred revenue, non-current1,380 — 
Compensation and other liabilities associated with business combinations, non-current825,976 8,000 
Other13,900 — 
Total other long-term liabilities$841,256 $8,000 
v3.20.4
Fair value measurements
12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair value measurements Fair value measurements
Financial assets and liabilities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The authoritative guidance establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.
The three-level hierarchy for the inputs to valuation techniques is summarized as follows:
Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.
Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.
Level 3—Unobservable inputs that reflect the reporting entity’s own assumptions.
The following tables set forth the fair value of our consolidated financial instruments that were measured at fair value on a recurring basis (in thousands):
 December 31, 2020
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueLevel 1Level 2Level 3
Financial assets:   
Money market funds$83,109 $— $— $83,109 $83,109 $— $— 
U.S. Treasury notes164,894 (15)164,886 164,886 — — 
U.S. government agency securities64,291 — 64,300 — 64,300 — 
Total financial assets$312,294 $16 $(15)$312,295 $247,995 $64,300 $— 
Financial liabilities:
Stock payable liability$39,237 $— $— $39,237 
Contingent consideration796,639 — — 796,639 
Total financial liabilities$835,876 $— $— $835,876 
December 31, 2020
Reported as:
Cash equivalents$76,423 
Restricted cash6,686 
Marketable securities229,186 
Total cash equivalents, restricted cash, and marketable securities$312,295 
Accrued liabilities$10,592 
Other long-term liabilities$825,284 
 December 31, 2019
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Level 1Level 2Level 3
Financial assets:
Money market funds$39,396 $— $— $39,396 $39,396 $— $— 
Certificates of deposit300 — — 300 — 300 — 
U.S. Treasury notes150,627 — (15)150,612 150,612 — — 
U.S. government agency securities193,302 — 193,308 — 193,308 — 
Total financial assets$383,625 $$(15)$383,616 $190,008 $193,608 $— 
Financial liabilities:
Contingent consideration$11,300 $— $— $11,300 
Total financial liabilities$11,300 $— $— $11,300 
December 31, 2019
Reported as:
Cash equivalents$136,997 
Restricted cash6,183 
Marketable securities240,436 
Total cash equivalents, restricted cash, and marketable securities$383,616 
Accrued liabilities$3,300 
Other long-term liabilities$8,000 
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented. The total fair value of investments with unrealized losses at December 31, 2020 was $109.3 million. None of the available-for-sale securities held as of December 31, 2020 have been in an unrealized loss position for more than one year. At December 31, 2020, the remaining contractual maturities of available-for-sale securities ranged from one to nine months. Interest income generated from our investments was $4.0 million and $5.2 million during the years ended December 31, 2020 and 2019, respectively.
Our certificates of deposit and debt securities of U.S. government agency entities are classified as Level 2 as they are valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third-party data providers, including but not limited to benchmark yields, interest rate curves, reported trades, broker/dealer quotes and reference data.
Stock payable liabilities relate to certain indemnification hold-backs resulting from business combinations that are settled in shares of our common stock. We elected to account for these liabilities using the fair value option due to the inherent nature of the liabilities and the changes in value of the underlying shares that will ultimately be issued to settle the liabilities. The estimated fair value of these liabilities is classified as Level 3 and determined based upon the number of shares that are issuable to the sellers and the quoted closing price of our common stock as of the reporting date. The number of shares that will ultimately be issued is subject to adjustment for indemnified claims that existed as of the closing date for each acquisition. Changes in the number of shares issued and share price can significantly affect the estimated fair value of the liabilities. During the year ended December 31, 2020, the change in fair value related to stock payable liabilities recorded to other income (expense), net was expense of $37.5 million.
v3.20.4
Commitments and contingencies
12 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and contingencies Commitments and contingencies
Leases
In 2015, we entered into an operating lease agreement for our headquarters and main production facility in San Francisco, California which commenced in 2016. This lease expires in 2026 and we may renew the lease for an additional ten years. This optional period was not considered reasonably certain to be exercised and therefore we determined the lease term to be a ten-year period expiring in 2026. In connection with the execution of the lease, we provided a security deposit of approximately $4.6 million which is included in restricted cash in our consolidated balance sheets. We also have other operating leases for office and laboratory space in California, Colorado, Massachusetts, New York and Washington and internationally in Australia and Israel. We expect to enter into new leases and modify existing leases as we support continued growth of our operations.
We have entered into various finance lease agreements to obtain laboratory equipment. The terms of our finance leases are generally three years and are typically secured by the underlying equipment. The portion of the future payments designated as principal repayment and related interest was classified as a finance lease obligation on our consolidated balance sheets.
Supplemental information regarding our operating and finance leases were as follows:
 Year Ended December 31,
 20202019
Weighted-average remaining lease term:
Operating leases5.4 years6.5 years
Finance leases2.6 years2.0 years
Weighted-average discount rate:
Operating leases10.6 %11.8 %
Finance leases4.8 %5.5 %
Cash payments included in the measurement of lease liabilities (in millions):
Operating leases$11.6 $10.2 
Finance leases$2.0 $2.1 
The components of lease costs, which were included in cost of revenue, research and development, selling and marketing and general and administrative expenses on our consolidated statements of operations, were as follows (in thousands):
 Year Ended December 31,
 202020192018
Operating lease costs$11,329 $10,329 $9,648 
Sublease income— (173)(156)
Finance lease costs2,084 1,546 1,820 
Total lease costs$13,413 $11,702 $11,312 
Future payments under operating and finance leases as of December 31, 2020 are as follows (in thousands):
Operating leasesFinance leases
2021$14,338 $2,006 
202213,788 1,908 
202313,229 1,199 
202413,407 26 
202511,672 — 
Thereafter9,499 — 
Future non-cancelable minimum lease payments75,933 5,139 
Less: interest(18,787)(321)
Total lease liabilities57,146 4,818 
Less: current portion(8,789)(1,695)
Lease obligations, net of current portion$48,357 $3,123 
Debt financing
In November 2018, we entered into a Note Purchase Agreement (the "2018 Note Purchase Agreement") pursuant to which we were eligible to borrow an aggregate principal amount up to $200.0 million over a seven year maturity term which included an initial borrowing of $75.0 million in November 2018. We received net proceeds of $10.3 million after terminating and repaying the balance of our obligations of approximately $64.7 million with our previous lender.
In September 2019, we settled our obligations under the 2018 Note Purchase Agreement in full for $85.7 million, which included repayment of principal of $75.0 million, accrued interest of $2.4 million, and prepayment fees of $8.9 million which were recorded as debt extinguishment costs in other expense, net in our consolidated statement of operations during the year ended December 31, 2019.
In October 2020, we entered into a credit agreement with a financial institution under which we borrowed $135.0 million (the "2020 Term Loan") concurrent with the closing of the ArcherDX transaction (the "closing date"). The 2020 Term Loan is secured by a first priority lien on all of our and our subsidiaries' assets (including our intellectual property), and is guaranteed by our subsidiaries, in each case, excluding certain excluded assets and immaterial foreign subsidiaries. The 2020 Term Loan bears interest at an annual rate equal to LIBOR, subject to a 2.00% LIBOR floor, plus a margin of 8.75%. The 2020 Term Loan will mature on (i) June 1, 2024 if at such time our Convertible Senior Notes are outstanding and are due to mature on September 1, 2024 (provided that if, prior to such date, the maturity date of at least 80% of the Convertible Senior Notes is extended to a date that is prior to September 1, 2025 the maturity date for the 2020 Term Loan will be automatically extended to a date that is 90 days prior to such Convertible Senior Notes maturity date as extended), or (ii) otherwise, on June 1, 2025. The full amount of the 2020 Term Loan is due upon maturity. If the 2020 Term Loan is prepaid (whether such prepayment is optional or mandatory), we must pay a prepayment fee of 6% if the prepayment occurs prior to the third anniversary of the closing date or 4% if the prepayment occurs after the third anniversary of the closing date and we must also pay a make-whole fee if the prepayment occurs prior to the second anniversary of the closing date. In connection with the 2020 Term Loan, we issued warrants to purchase 1.0 million shares of our common stock with an exercise price of $16.85 per share, exercisable through October 2027. The warrants, which were classified as equity, were recorded at an amount based on the allocated proceeds and do not require subsequent remeasurement. In October 2020, these warrants were exercised in full through net settlement resulting in the issuance of 0.7 million shares.
The credit agreement contains customary events of default and covenants, including among others, covenants limiting our ability to incur debt, incur liens, undergo a change in control, merge with or acquire other entities, make investments, pay dividends or other distributions to holders of our equity securities, repurchase stock, and dispose of assets, in each case subject to certain customary exceptions. In addition, the credit agreement contains financial covenants that require us to maintain a minimum cash balance and minimum quarterly revenue levels.
Debt discounts, including debt issuance costs, related to the 2020 Term Loan of $32.8 million were recorded as a direct deduction from the debt liability and are being amortized to interest expense over the term of the 2020 Term Loan. Interest expense related to our debt financings, excluding the impact of our Convertible Senior Notes, was $7.4 million, $5.7 million and $6.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Convertible Senior Notes
In September 2019, we issued, at par value, $350.0 million aggregate principal amount of 2.00% Convertible Senior Notes due 2024 in a private offering. The Convertible Senior Notes are our senior unsecured obligations and will mature on September 1, 2024, unless earlier converted, redeemed or repurchased. The Convertible Senior Notes bear cash interest at a rate of 2.0% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2020.
Upon conversion, the Convertible Senior Notes will be convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. Our current intent is to settle the principal amount of the Convertible Senior Notes in cash upon conversion, with any remaining conversion value being delivered in shares of our common stock. The initial conversion rate for the Convertible Senior Notes is 33.6293 shares of our common stock per $1,000 principal amount of the Convertible Senior Notes (equivalent to an initial conversion price of approximately $29.74 per share of common stock).
If we undergo a fundamental change (as defined in the indenture governing the Convertible Senior Notes), the holders of the Convertible Senior Notes may require us to repurchase all or any portion of their Convertible Senior Notes for cash at a repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased plus accrued and unpaid interest to, but excluding, the redemption date.
The Convertible Senior Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding March 1, 2024, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the Convertible Senior Notes on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (3) if we call any or all of the Convertible Senior Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after March 1, 2024 until the close of business on the business day immediately preceding the maturity date, holders may convert their Convertible Senior Notes at any time, regardless of the foregoing circumstances. As of December 31, 2020, none of the above circumstances had occurred and therefore the Convertible Senior Notes could not have been converted. However, these notes were convertible at the option of the holders during the quarter beginning on January 1, 2021 due to the sale price of our common stock during the quarter ended December 31, 2020.
We may not redeem the Convertible Senior Notes prior to September 6, 2022. We may redeem for cash all or any portion of the Convertible Senior Notes, at our option, on or after September 6, 2022 and on or before the 30th scheduled trading day immediately before the maturity date if the last reported sale price of the Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The Convertible Senior Notes consisted of the following (in thousands):
December 31,
20202019
Outstanding principal$350,000 $350,000 
Unamortized debt discount and issuance costs(66,276)(81,245)
Net carrying amount, liability component$283,724 $268,755 
As of December 31, 2020, the fair value of the Convertible Senior Notes was $586.0 million. The estimated fair value of the Convertible Senior Notes, which are classified as Level 2 financial instruments, was determined based on the estimated or actual bid prices of the Convertible Senior Notes in an over-the-counter market. We recognized $22.0 million and $6.5 million of interest expense related to the Convertible Senior Notes during the years ended December 31, 2020 and 2019, respectively.
Guarantees and indemnifications
As permitted under Delaware law and in accordance with our bylaws, we indemnify our directors and officers for certain events or occurrences while the officer or director is or was serving in such capacity. The maximum amount of potential future indemnification is unlimited; however, we maintain director and officer liability insurance. This insurance allows the transfer of the risk associated with our exposure and may enable us to recover a portion of any future amounts paid. We believe the fair value of these indemnification agreements is minimal. Accordingly, we did not record any liabilities associated with these indemnification agreements at December 31, 2020 or 2019.
Other commitments
In the normal course of business, we enter into various purchase commitments primarily related to service agreements and laboratory supplies. At December 31, 2020, our total future payments under noncancelable unconditional purchase commitments having a remaining term of over one year were as follows (in thousands):
 Amount
202123,064 
202220,372 
202319,451 
20249,220 
20254,530 
Thereafter25,501 
Total$102,138 
In December 2020, we entered into a lease agreement in San Francisco, California for additional office and lab space. We determined the lease commencement date to be in January 2021 when we took possession of the leased premises. Total lease payments over the course of this lease will be $45.0 million and are included in the purchase commitments above.
Contingencies
We were not a party to any material legal proceedings at December 31, 2020, or at the date of this report except for matters listed below which are related to ArcherDX which we acquired in October 2020. We cannot currently predict the outcome of these actions. The outcome of any such proceedings, regardless of the merits, is inherently uncertain. If we were unable to prevail in any such proceedings, our consolidated financial position, results of operations, and future cash flows may be materially impacted. In addition, we are and may from time to time become involved in various legal proceedings and claims arising in the ordinary course of business. While we believe any such claims are unsubstantiated, and we believe we are in compliance with applicable laws and regulations applicable to our business, the resolution of any such claims could be material.
Natera, Inc.
On January 27, 2020, Natera filed a lawsuit against ArcherDX (a subsidiary of Invitae effective October 2, 2020) in the United States District Court for the District of Delaware, alleging that ArcherDX’s products using AMP chemistry, and the manufacture, use, sale, and offer for sale of such products, infringe U.S. Patent No. 10,538,814. On March 25, 2020, ArcherDX filed an answer denying Natera’s allegations and asserting certain affirmative defenses and counterclaims, including that U.S. Patent No. 10,538,814 is invalid and not infringed. On April 15, 2020, Natera filed an answer denying ArcherDX’s counterclaims and filed an amended complaint alleging that ArcherDX’s products using AMP chemistry, including STRATAFIDE, PCM, LiquidPlex, ArcherMET, FusionPlex, and VariantPlex, and the manufacture, use, sale, and offer for sale of such products, infringe U.S. Patent No. 10,538,814, U.S. Patent No. 10,557,172, U.S. Patent No. 10,590,482, and U.S. Patent No. 10,597,708, each of which are held by Natera. Natera seeks, among other things, damages and other monetary relief, costs and attorneys’ fees, and an order enjoining ArcherDX from further infringement of such patents. On May 13, 2020, ArcherDX filed an answer to Natera’s amended complaint denying Natera’s allegations and asserting certain affirmative defenses and counterclaims, including that the asserted patents are invalid and not infringed. On June 3, 2020, Natera filed an answer denying ArcherDX’s counterclaims. On June 4, 2020, ArcherDX filed a motion seeking dismissal of Natera’s infringement claims against STRATAFIDE, PCM, and ArcherMET, and for a judgment that U.S. Patent No. 10,538,814, U.S. Patent No. 10,557,172, and U.S. Patent No. 10,590,482 are invalid. On August 6, 2020, Natera filed another complaint against ArcherDX in the United States District Court for the District of Delaware alleging that ArcherDX’s products using AMP chemistry, including STRATAFIDE, PCM, LiquidPlex, ArcherMET, and VariantPlex, and the manufacture, use, sale, and offer for sale of such products, infringe U.S. Patent No. 10,731,220. Natera seeks, among other things, damages and other monetary relief, costs and attorneys’ fees, and an order enjoining ArcherDX from further infringement of the patent. On October 13, 2020, the court issued an order denying ArcherDX's motion for dismissal of Natera’s infringement claims against STRATAFIDE, PCM, and ArcherMET, and declined to enter judgment that U.S. Patent No. 10,538,814, U.S. Patent No. 10,557,172, and U.S. Patent No. 10,590,482 are invalid. On January 12, 2021, the court issued an order granting Natera leave to amend its complaint to add Invitae as a co-defendant and plead allegations that ArcherDX and Invitae induce end-users to infringe the patents-in-suit. Natera filed its Second Amended Complaint on the same day, with service completed on January 15, 2021. ArcherDX and Invitae filed answers to the Second Amended Complaint on January 26, 2021 and February 5, 2021, respectively, denying Natera's allegations and restating certain affirmative defenses and counterclaims of non-infringement and invalidity. The litigations have now been consolidated for all purposes, are ongoing, and trial has been scheduled for May 2022.
QIAGEN Sciences
On July 10, 2018, ArcherDX and the General Hospital Corporation d/b/a Massachusetts General Hospital, which we refer to as MGH, filed a lawsuit in the United States District Court for the District of Delaware against QIAGEN Sciences, LLC, QIAGEN LLC, QIAGEN Beverly, Inc., QIAGEN Gaithersburg, Inc., QIAGEN GmbH and QIAGEN N.V., which is collectively referred to herein as QIAGEN, and a named QIAGEN executive who was a former member of ArcherDX’s board of directors, alleging several causes of action, including infringement of the ’810 Patent, trade secret misappropriation, breach of fiduciary duty, false advertising, tortious interference and deceptive trade practices. The ’810 Patent relates to methods for preparing a nucleic acid for sequencing and aspects of ArcherDX’s AMP technology. On October 30, 2019, with the permission of the Court, ArcherDX amended ArcherDX’s complaint to add a claim for infringement of the ’597 Patent. The ’597 Patent relates to methods of preparing and analyzing nucleic acids, such as by enriching target sequences prior to sequencing, and aspects of ArcherDX’s AMP technology. The QIAGEN products that ArcherDX alleges infringe the ’810 Patent and the ’597 Patent include, but are not limited to, QIAseq Targeted DNA Panels, QIAseq Targeted RNAscan Panels, QIAseq Index Kits and QIAseq Immune Repertoire RNA Library Kits. ArcherDX is seeking, among other things, damages for ArcherDX’s lost profits due to QIAGEN’s infringement and a permanent injunction enjoining QIAGEN from marketing and selling the infringing products and from using ArcherDX’s trade secrets. On December 5, 2019, QIAGEN and the named QIAGEN executive submitted their answer denying the allegations in ArcherDX’s complaint and asserting affirmative defenses that, among other things, the ’810 Patent and ’597 Patent are not infringed by QIAGEN’s products, that both patents are invalid, and that the complaint fails to state any claim for which relief may be granted. This litigation is ongoing, and trial is currently scheduled for August 2021.
v3.20.4
Stockholders' equity
12 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Stockholders’ equity Stockholders’ equity
Shares outstanding
Shares of convertible preferred and common stock were as follows (in thousands):
 Year Ended December 31,
 202020192018
Convertible preferred stock:
Shares outstanding, beginning of period125 3,459 3,459 
Conversion into common stock— (3,334)— 
Shares outstanding, end of period125 125 3,459 
Common stock:
Shares outstanding, beginning of period98,796 75,481 53,597 
Common stock issued in private placement16,320 — 374 
Common stock issued in connection with public offering24,005 11,136 17,103 
Common stock issued on exercise of stock options, net2,659 468 351 
Common stock issued pursuant to vesting of RSUs5,304 2,683 1,369 
Common stock issued pursuant to exercises of warrants968 31 1,099 
Common stock issued pursuant to employee stock purchase plan671 455 566 
Common stock issued pursuant to acquisitions37,163 5,208 1,022 
Common stock issued upon conversion of preferred stock— 3,334 — 
Shares outstanding, end of period185,886 98,796 75,481 
2018 Sales Agreement
In August 2018, we entered into a Common Stock Sales Agreement (the “2018 Sales Agreement”) with Cowen and Company, LLC (“Cowen”), under which we could offer and sell from time to time at our sole discretion shares of our common stock through Cowen as our sales agent, in an aggregate amount not to exceed $75.0 million. Cowen may sell the shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, including without limitation sales made directly on The New York Stock Exchange, and also may sell the shares in privately negotiated transactions, subject to our prior approval. Per the terms of the agreement, Cowen receives a commission equal to 3% of the gross proceeds of the sales price of all shares sold through it as sales agent under the 2018 Sales Agreement. In March 2019, we amended the 2018 Sales Agreement to increase the aggregate amount of our common stock to be sold under this agreement to an amount not to exceed $175.0 million.
During the year ended December 31, 2020, we sold a total of 3.6 million shares of common stock under the 2018 Sales Agreement at an average price of $26.33 per share, for gross proceeds of $93.7 million and net proceeds of $90.7 million.
During the year ended December 31, 2019, we sold a total of 0.8 million shares of common stock under the 2018 Sales Agreement at an average price of $25.71 per share, for gross proceeds of $20.2 million and net proceeds of $19.5 million.
During the year ended December 31, 2018, we sold a total of 4.3 million shares of common stock under the 2018 Sales Agreement at an average price of $14.13 per share, for aggregate gross proceeds of $61.1 million and net proceeds of $58.9 million.
Public offerings
In January 2021, we issued, in an underwritten public offering, an aggregate of 8.9 million shares of our common stock at a price of $51.50 per share, for gross proceeds of $460.0 million and net proceeds of approximately $434.3 million.
In April 2020, we issued, in an underwritten public offering, an aggregate of 20.4 million shares of our common stock at a price of $9.00 per share, for gross proceeds of $184.0 million and net proceeds of $173.0 million.
In March 2019, we sold, in an underwritten public offering, an aggregate of 10.4 million shares of our common stock at a price of $19.00 per share, for gross proceeds of $196.7 million and net proceeds of $184.5 million.
Private placement
In August 2017, in a private placement to certain accredited investors, we issued 5.2 million shares of common stock at a price of $8.50 per share, and 3.5 million shares of our Series A convertible preferred stock at a price of $8.50 per share, for gross proceeds of approximately $73.5 million and net proceeds of $68.9 million. The Series A preferred stock is convertible into common stock on a one-for-one basis, subject to adjustment for events such as stock splits, combinations and the like. During the year ended December 31, 2019, 3.3 million shares of Series A convertible preferred stock were converted to 3.3 million shares of common stock.
In connection with our acquisition of ArcherDX, in June 2020 we entered into a definitive agreement to sell $275.0 million in common stock in a private placement at a price of $16.85 per share. The private placement closed in October 2020, concurrently with our acquisition of ArcherDX. We received proceeds of $5.0 million from the private placement during September 2020 and the remainder of the proceeds were received in October 2020.
Common stock warrants
As of December 31, 2020, we had outstanding warrants to purchase common stock as follows:
WarrantIssuance DateExpiration DateExercise
Price
Per Share
Number of Shares of Common Stock Underlying Warrants
Warrants issued in exchange for CombiMatrix Series F warrantsNovember 2017March 2021$5.95 214,154 
The exercise price of warrants issued in exchange for CombiMatrix Series F warrants was determined pursuant to the terms of the acquisition.
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Stock incentive plans
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock incentive plans Stock incentive plans
Stock incentive plans
In 2010, we adopted the 2010 Incentive Plan (the “2010 Plan”). The 2010 Plan provides for the granting of stock-based awards to employees, directors and consultants under terms and provisions established by our Board of Directors. Under the terms of the 2010 Plan, options may be granted at an exercise price not less than the fair market value of our common stock. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of our common stock on the grant date, as determined by our Board of Directors. The terms of options granted under the 2010 Plan may not exceed ten years.
In January 2015, we adopted the 2015 Stock Incentive Plan (the “2015 Plan”), which became effective upon the closing of our initial public offering (“IPO”). Shares outstanding under the 2010 Plan were transferred to the 2015 Plan upon effectiveness of the 2015 Plan. The 2015 Plan provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 through January 1, 2025. In addition, shares subject to awards under the 2010 Plan that are forfeited or terminated will be added to the 2015 Plan. The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, stock units, stock appreciation rights and other forms of equity compensation, all of which may be granted to employees, including officers, non-employee directors and consultants. Additionally, the 2015 Plan provides for the grant of cash-based awards.
Options granted generally vest over a period of four years. Typically, the vesting schedule for options granted to newly hired employees provides that 1/4 of the award vests upon the first anniversary of the employee’s date of hire, with the remainder of the award vesting monthly thereafter at a rate of 1/48 of the total shares subject to the option. All other options typically vest in equal monthly installments over the four-year vesting schedule. Upon the acquisition of ArcherDX, any option that was outstanding was converted into a fully vested option to purchase a share of our common stock which resulted in the issuance of 3.7 million options.
RSUs generally vest over a period of three years. Typically, the vesting schedule for RSUs provides that 1/3 of the award vests upon each anniversary of the grant date, with certain awards that include a portion that vests immediately upon grant. In June 2019, we granted Time-based RSUs in connection with the acquisition of Singular Bio which vest in three equal installments over a period of 18 months and PRSUs that vest based on the achievement of performance conditions. In December 2020, we granted RSUs in connection with an asset acquisition which vest in two equal installments in December 2021 and December 2022, subject to the employee's continued service with us.
Under our management incentive compensation plan, in July 2019 we granted PRSUs to our executive officers as well as other specified senior level employees based on the level of achievement of a specified 2019 revenue goal. One-third of the 0.8 million shares that were ultimately awarded under this plan vested during the year ended December 31, 2020 and the remaining shares will vest through March 2022. In June 2020, we granted 0.3 million PRSUs under this plan which are based on the level of achievement of a specified 2020 cash burn goal. Upon achievement of the specified 2020 cash burn goal, 0.3 million shares were ultimately awarded and began vesting in 2021 over a one year period. These PRSUs had a grant date fair value of $4.2 million based on an estimated issuance of 0.3 million shares and expectation of the performance conditions. During the year ended December 31, 2020, $2.1 million was recorded as stock-based compensation expense related to the awards. No PRSUs were granted during the year ended December 31, 2018.
Activity under the 2010 Plan and the 2015 Plan is set forth below (in thousands, except per share amounts and years):
 Shares Available For GrantStock Options OutstandingWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Balance at December 31, 20195,444 3,542 $9.49 6.1$24,966 
Additional shares reserved9,019 — 
Options granted(4,005)4,005 $3.74 
Options cancelled11 (11)$7.05 
Options exercised— (2,659)$4.04 
RSUs and PRSUs granted(1)
(3,502)— 
RSUs and PRSUs cancelled480 — 
Balance at December 31, 20207,447 4,877 $7.75 6.8$166,130 
Options exercisable at December 31, 20204,432 $6.86 6.6$154,907