Invitae’s August 2016 investor deck serves as a masterclass in articulating a 'flywheel' business model within the complex biotech sector. By focusing on the relationship between decreasing COGS (dropping from $1,250 in Q1 2015 to $500 in Q2 2016) and increasing billable report volume (growing from 2,200 to 12,100 in the same period), Invitae demonstrates a clear path toward profitability despite negative gross margins at the time. The deck effectively shifts the narrative from a one-time diagnostic service to a 'Genome Management' platform intended to capture value over a patient's lifetime.…
Key takeaways
- Invitae explicitly targets the commoditization of genetic testing by lowering prices to increase market access (Slide 3).
- The company demonstrates a significant reduction in COGS per sample, falling from $1,250 in Q1 2015 to $500 by Q2 2016 (Slide 11).
- Volume growth is a primary metric, with billable reports increasing from 2,200 in Q1 2015 to 12,100 in Q2 2016 (Slide 11).
- Gross margin per billable report showed steady improvement, moving from -$465 in Q2 2015 to -$82 in Q2 2016 (Slide 13).
- The product roadmap shows a massive expansion in content, growing from >200 genes in 2014 to a target of >20,000 genes for whole exome sequencing (Slide 15).
- Invitae identifies a massive total addressable market by citing 1 billion doctor visits and 4 billion prescriptions written per year as opportunities for preventive genetics (Slide 17).
- The long-term strategy shifts from testing to 'Genome Management,' aiming to build a 'customer for life' through neonatal, pediatric, and adult health monitoring (Slide 19).
- Payer adoption is highlighted as a key milestone, with Medicare and Aetna specifically named as national partners (Slide 9).
Executive Summary: The Industrialization of Genetics
The Invitae Investor Overview from August 2016 represents a pivotal moment in the company's history. At this stage, Invitae was focused on proving that genetic testing could be scaled like a technology product rather than a bespoke medical service. The deck is heavily data-driven, focusing on the unit economics of testing and the strategic 'flywheel' of cost reduction leading to volume expansion. It successfully frames negative margins not as a failure, but as a necessary phase of aggressive market capture.
Slide 1: Title and Mission
The cover slide establishes a clear, high-level mission: "Bringing genetic information into mainstream medical practice." The use of a collage of diverse human faces in the background reinforces the idea that genetics is a universal health concern, not just a tool for rare disease specialists. The branding is clean and professional, appropriate for a publicly-traded or late-stage private biotech company.
Slide 3: The Core Thesis
Invitae outlines three fundamental pillars for their business. First, the biological fact that everyone has a unique genome impacting their health. Second, the market inefficiency: 4,000 medically important tests exist, but most are "over-priced and under-utilized." Third, the solution: high-quality, low-priced testing will expand the market to everyone with healthcare access. This slide sets the stage for a volume-based business model.
Slide 5: Historical Context of the Problem
This slide uses a bubble chart to visualize the "Diagnostic Odyssey." It plots the Number of Genes Involved against the Complexity of Diagnosis. Historically, as complexity increased (from Sickle-cell anemia to Exomes/Genomes), costs rose exponentially. Invitae uses this to show the barrier they are breaking; by commoditizing the 'high cost' end of the spectrum, they unlock the ability to solve more complex diagnostic problems for more people.
Slide 7: The Three-Phase Growth Platform
Invitae categorizes its growth into three distinct buckets: Genetic Testing (consolidating the market), Genome Network (sharing information to advance outcomes and monetizing permission-based sharing), and Genome Management (building infrastructure to manage info over a customer's lifetime). This is a classic 'land and expand' strategy, moving from a commodity service to a sticky, high-value platform.
Slide 9: Q2 2016 Operational Update
This slide provides a dense list of recent wins. Key highlights include a "~ million dollar improvement in gross margin" and "Over 25% quarter over quarter growth." Crucially, it mentions that the "payer dynamic has changed," noting that Medicare and Aetna are now on board. This addresses a major risk for biotech investors: reimbursement. The mention of "Leapfrogging" to whole exome sequencing (20,000 genes) signals a technological lead over competitors still focused on small panels.
Slide 11: The Flywheel in Motion
This is arguably the most important slide in the deck. It uses a circular flow diagram to link four key metrics:
COGS per sample: Dropping from $1,250 (Q1:15) to $500 (Q2:16). · Content on assays: Increasing from >200 genes (2014) to >1000 genes (2016). · Volume by Billable Reports: Growing from 2,200 (Q1:15) to 12,100 (Q2:16). · Payer Contracts: Listing Aetna, Medicare, and 100+ institutional contracts.
The visual proof that costs are falling while volume and content are rising is a powerful indicator of a scaling business.
Slide 13: Path to Profitability
Invitae does not hide its losses. Instead, it charts the "Gross margin per billable report" from Q2 2015 to Q2 2016. The chart shows a clear upward trend from -$465 to -$82. By showing this trajectory, the company makes a compelling case that they are on the verge of positive unit economics. This transparency builds trust with sophisticated investors who understand the costs of scaling infrastructure.
Slide 15: Measuring Success and Future Targets
This slide reiterates the flywheel but adds future-looking targets. It highlights the goal of accelerating to a "medical exome of 20,000 genes" and driving COGS below $500 by Q4 2016. It also sets a volume target of 50K-70K reports. This provides investors with clear benchmarks to measure management's performance in the coming quarters.
Slide 17: Market Size and Economic Opportunity
To justify the scale of the investment, Invitae points to the broader healthcare economy. They list massive annual figures: 1.6 million new cancers, 1.5 million heart attacks, 1 billion doctor visits, and 4 billion prescriptions. By placing genetic testing at the intersection of these events, they suggest that their Total Addressable Market (TAM) is essentially the entire healthcare system.
Slide 19: Building a Customer for Life
The final slide in this set details the "Genome Management" vision. It breaks down the patient journey into Store, Learn, Share, Participate, and Donate. It then lists specific medical milestones—Neonatal, Medical Conditions, Medications, Having Kids, Injuries, and Aging—where Invitae's data becomes relevant. This transforms the company from a lab into a lifelong health partner, significantly increasing the potential Lifetime Value (LTV) of a customer.
What Works in This Deck
Quantitative Rigor: The deck is unafraid of hard numbers. By providing specific COGS and margin figures (Slide 11, 13), Invitae moves the conversation from abstract 'potential' to concrete 'operational progress.' This is essential for a company in a high-CAPEX industry.
The Flywheel Narrative: The recurring use of the circular diagram (Slides 11 and 15) helps investors internalize the company's business logic. It clearly explains how technological advancement (more genes) leads to lower costs, which leads to higher volume, which leads to better payer coverage.
Strategic Evolution: The deck does a great job of moving from the 'what' (genetic tests) to the 'so what' (lifelong genome management). This justifies a higher valuation than a simple diagnostic lab would typically command.
What Is Missing
Team Slide: In this 10-slide subset, there is no mention of the leadership team or their scientific credentials. In biotech, the pedigree of the founders and the scientific advisory board is often as important as the data.
Competitive Landscape: While the deck mentions that other tests are "over-priced," it does not name specific competitors or explain how Invitae's technology (e.g., NGS vs. older methods) differs from other major labs like Myriad Genetics or Quest Diagnostics.
The Ask: There is no slide in this subset detailing how much capital is being raised or how it will be allocated. While this might be in the full 20-slide version, its absence here leaves the 'call to action' unclear.
Founder Takeaways
Visualize Your Unit Economics: If you are losing money on every sale but scaling fast, you must show the trajectory of your margins. Invitae’s Slide 13 is a perfect example of how to turn a negative (losses) into a positive (a clear path to break-even).
Define Your Flywheel: Every founder should be able to draw a diagram like Slide 11. What are the 3-4 variables in your business that, when improved, automatically drive the others? If you can't explain your business as a self-reinforcing loop, you may not have a scalable model.
Connect to the Macro: Don't just talk about your product; talk about the economy it lives in. Invitae’s use of "1 billion doctor visits" (Slide 17) helps investors see the forest, not just the trees. It frames the company as a systemic solution rather than a niche tool.
Frequently asked questions
- What was Invitae's primary value proposition in 2016?
- Invitae's value proposition centered on bringing genetic information into mainstream medical practice by offering high-quality, low-priced testing. They argued that existing tests were overpriced and under-utilized. By lowering the cost, they aimed to dramatically increase the total market size, eventually transitioning from a testing company to a genome management platform that provides value over a patient's entire lifetime.
- How did Invitae demonstrate its operational efficiency?
- The deck uses a specific 'flywheel' chart on Slide 11 to show the correlation between three metrics: COGS per sample, content on assays, and volume of billable reports. They showed that as they added more genes to their tests (>1000 by 2016), their cost per sample dropped significantly (to $500), which in turn drove a 5.5x increase in billable report volume over six quarters.
- What were the financial health indicators shown in the deck?
- While the company was not yet profitable on a per-report basis in mid-2016, the deck highlights a positive trend. Slide 13 shows gross margin per billable report improving from a loss of $465 in Q2 2015 to a loss of only $82 in Q2 2016. This trajectory was used to convince investors that the company was approaching a break-even point through scale.
- Who were the key partners mentioned in the presentation?
- Invitae emphasized its success in securing payer contracts to ensure reimbursement. Slide 11 lists Aetna, Medicare, and Blue Cross Blue Shield (BCBS) in five states, along with the BCBS Federal Employee Program and Tufts Health Plan. They also noted having over 100 institutional contracts, which is critical for a diagnostic company's revenue stability.
- What is 'Genome Management' according to this deck?
- Genome Management is Invitae's long-term business model described on Slide 19. It involves moving beyond a single test to a lifetime relationship where the company stores, helps the patient learn from, and shares genetic data. This includes applications for neonatal screening, clinical diagnostics for medical conditions, pharmacogenetics (PGx) for medications, and carrier testing for family planning.
