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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2022
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                        to
 Commission File No. 001-36847
 
nvta-20220630_g1.jpg
Invitae Corporation
(Exact name of the registrant as specified in its charter)
 
Delaware27-1701898
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
 1400 16th Street, San Francisco, California 94103
(Address of principal executive offices, Zip Code)
 (415374-7782
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, $0.0001 par value per share
NVTA
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b 2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
Non-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  
The number of shares of the registrant’s common stock outstanding as of August 5, 2022 was 235,266,077.




TABLE OF CONTENTS
 





PART I — Financial Information
ITEM 1. Condensed Consolidated Financial Statements
INVITAE CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
June 30,
2022
December 31,
2021
Assets  
Current assets:  
Cash and cash equivalents$303,626 $923,250 
Marketable securities423,137 122,121 
Accounts receivable82,586 66,227 
Inventory49,073 33,516 
Prepaid expenses and other current assets35,825 33,691 
Total current assets894,247 1,178,805 
Property and equipment, net132,935 114,714 
Operating lease assets117,977 121,169 
Restricted cash10,026 10,275 
Intangible assets, net1,107,821 1,187,994 
Goodwill 2,283,059 
Other assets27,520 23,551 
Total assets$2,290,526 $4,919,567 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$26,751 $21,127 
Accrued liabilities93,772 106,453 
Operating lease obligations13,388 12,359 
Finance lease obligations5,340 4,156 
Total current liabilities139,251 144,095 
Operating lease obligations, net of current portion142,509 124,369 
Finance lease obligations, net of current portion6,294 5,683 
Debt117,862 113,391 
Convertible senior notes, net1,467,443 1,464,138 
Deferred tax liability11,341 51,696 
Other long-term liabilities19,921 37,797 
Total liabilities1,904,621 1,941,169 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock24 23 
Accumulated other comprehensive loss(1,334)(7)
Additional paid-in capital4,815,383 4,701,230 
Accumulated deficit(4,428,168)(1,722,848)
Total stockholders’ equity385,905 2,978,398 
Total liabilities and stockholders’ equity$2,290,526 $4,919,567 
See accompanying notes to unaudited condensed consolidated financial statements.
1



INVITAE CORPORATION
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenue:    
Test revenue$133,182 $111,496 $252,679 $210,772 
Other revenue3,440 4,816 7,634 9,161 
Total revenue136,622 116,312 260,313 219,933 
Cost of revenue110,340 89,331 207,456 164,822 
Research and development115,146 106,454 243,382 186,812 
Selling and marketing62,749 56,964 122,893 108,204 
General and administrative52,858 38,303 104,132 110,820 
Asset impairment2,317,864  2,317,864  
Change in fair value of contingent consideration(2,004)(303,349)(1,850)(366,970)
Total cost and operating expenses2,656,953 (12,297)2,993,877 203,688 
(Loss) income from operations(2,520,331)128,609 (2,733,564)16,245 
Other income, net7,326 2,024 17,765 6,489 
Interest expense(14,019)(13,407)(28,004)(21,800)
Net (loss) income before taxes(2,527,024)117,226 (2,743,803)934 
Income tax benefit(3,563)(16,560)(38,483)(23,360)
Net (loss) income$(2,523,461)$133,786 $(2,705,320)$24,294 
Net (loss) income per share, basic$(10.87)$0.66 $(11.75)$0.12 
Net (loss) income per share, diluted$(10.87)$0.53 $(11.75)$0.11 
Shares used in computing net (loss) income per share, basic232,117 204,110 230,304 199,083 
Shares used in computing net (loss) income per share, diluted232,117 264,921 230,304 216,595 

See accompanying notes to unaudited condensed consolidated financial statements. 
2



INVITAE CORPORATION
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net (loss) income$(2,523,461)$133,786 $(2,705,320)$24,294 
Other comprehensive (loss) income:
Unrealized (loss) income on available-for-sale marketable securities, net of tax(549)(16)(1,327)33 
Comprehensive (loss) income$(2,524,010)$133,770 $(2,706,647)$24,327 
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
3



INVITAE CORPORATION
Condensed Consolidated Statements of Stockholders' Equity
(in thousands)
(unaudited)

 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Common stock:
Balance, beginning of period
$23 $20 $23 $19 
Common stock issued
1 — 1 1 
Balance, end of period
24 20 24 20 
Accumulated other comprehensive (loss) income:
Balance, beginning of period(785)50 (7)1 
Unrealized (loss) income on available-for-sale marketable securities, net of tax(549)(16)(1,327)33 
Balance, end of period(1,334)34 (1,334)34 
Additional paid-in capital:
Balance, beginning of period
4,749,402 3,829,553 4,701,230 3,337,120 
Common stock issued in connection with public offering, net
— — — 434,263 
Common stock issued on exercise of stock options, net
172 1,192 597 2,952 
Common stock issued pursuant to exercises of warrants
— — — 1,242 
Common stock issued pursuant to employee stock purchase plan
5,637 7,974 5,637 7,974 
Common stock issued or issuable pursuant to acquisitions and equity awards issued in connection with such acquisitions3,609 89,054 5,269 163,876 
Stock-based compensation expense
56,563 45,706 102,650 101,540 
Reclassification of equity component of convertible senior notes— — — (75,488)
Balance, end of period
4,815,383 3,973,479 4,815,383 3,973,479 
Accumulated deficit:
Balance, beginning of period
(1,904,707)(1,453,334)(1,722,848)(1,360,847)
Cumulative effect of accounting change— — — 17,005 
Net (loss) income(2,523,461)133,786 (2,705,320)24,294 
Balance, end of period
(4,428,168)(1,319,548)(4,428,168)(1,319,548)
Total stockholders' equity
$385,905 $2,653,985 $385,905 $2,653,985 
    

See accompanying notes to unaudited condensed consolidated financial statements.
4



INVITAE CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Six Months Ended June 30,
 20222021
Cash flows from operating activities:  
Net (loss) income$(2,705,320)$24,294 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Asset impairment2,317,864  
Depreciation and amortization64,247 35,262 
Stock-based compensation103,901 106,337 
Amortization of debt discount and issuance costs7,776 6,492 
Remeasurements of liabilities associated with business combinations(18,043)(372,722)
Benefit from income taxes(38,483)(23,360)
Post-combination expense for acceleration of unvested equity and deferred stock compensation3,320 2,959 
Amortization of premiums and discounts on investment securities1,178 3,465 
Other3,721 1,808 
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable(16,359)(6,953)
Inventory(15,557)2,048 
Prepaid expenses and other current assets(2,134)(8,346)
Other assets(2,104)(2,165)
Accounts payable6,575 3,781 
Accrued expenses and other long-term liabilities7,186 8,255 
Net cash used in operating activities(282,232)(218,845)
Cash flows from investing activities:
Purchases of marketable securities(605,454)(325,957)
Proceeds from maturities of marketable securities301,933 127,738 
Acquisition of businesses, net of cash acquired (134,006)
Purchases of property and equipment(36,970)(20,154)
Other (1,880)
Net cash used in investing activities(340,491)(354,259)
Cash flows from financing activities:
Proceeds from public offerings of common stock, net 434,263 
Proceeds from issuance of common stock6,234 11,717 
Proceeds from issuance of convertible senior notes, net 1,116,850 
Finance lease principal payments(2,677)(2,126)
Other(707)(1,060)
Net cash provided by financing activities2,850 1,559,644 
Net (decrease) increase in cash, cash equivalents and restricted cash(619,873)986,540 
Cash, cash equivalents and restricted cash at beginning of period933,525 131,480 
Cash, cash equivalents and restricted cash at end of period$313,652 $1,118,020 
Supplemental cash flow information of non-cash investing and financing activities:
Equipment acquired through finance leases$4,472 $2,578 
Purchases of property and equipment in accounts payable and accrued liabilities$9,177 $5,016 
Common stock issued for acquisition of businesses$ $163,876 
Operating lease assets obtained in exchange for lease obligations, net$4,495 $80,157 

See accompanying notes to unaudited condensed consolidated financial statements.
5



INVITAE CORPORATION
Notes to Condensed Consolidated Financial Statements

1. Organization and description of business
Invitae 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 and businesses that further expanded our test menu and suite of genome management offerings and accelerated our entry into key genomics markets. Invitae operates in one segment.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full fiscal year or any other periods.  
2. Summary of significant accounting policies
Principles of consolidation
Our unaudited condensed 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.
Prior period reclassifications
We have reclassified certain amounts in prior periods to conform with the current period presentation.
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, restricted cash, marketable securities and accounts receivable. Our cash and cash equivalents are primarily held by financial institutions in the United States. Such deposits may exceed federally insured limits.
6



Cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash reported within the consolidated balance sheets are reconciled to the amounts reported in the consolidated statements of cash flows as follows (in thousands):
June 30, 2022June 30, 2021
Cash and cash equivalents$303,626 $1,107,745 
Restricted cash10,026 10,275 
Total cash, cash equivalents and restricted cash$313,652 $1,118,020 
Restricted cash serves as the security deposits for the Company's leases.
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 our finance leases approximates their fair values. Liabilities associated with business combinations are recorded at their estimated fair value.
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 October 2021, the FASB issued ASU 2021-08, Business Combinations ("Topic 805"): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments of this ASU require entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC Topic 606 as if it had originated the contracts. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and should be applied prospectively to all business combinations occurring after the date of adoption. Early adoption is permitted by us at any time. We are currently evaluating the impact this guidance will have on our consolidated financial statements and the timing of adoption.
Recently adopted accounting pronouncements
In August 2020, the FASB issued ASU 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, with early adoption permitted. We elected to adopt the amendments on a modified retrospective basis effective January 1, 2021, which required a cumulative-effect adjustment to retained earnings. The cumulative-effect adjustment resulted in a decrease in accumulated deficit of $17.0 million related to the reversal of the equity component and associated issuance costs as well as adjustment of the related amortization costs of our convertible senior notes due 2024. Reporting periods beginning on or after January 1, 2021 are presented under this new guidance while prior periods have not been adjusted and continue to be reported in accordance with our historic accounting under U.S. GAAP. See further information about our convertible senior notes in Note 8, “Commitments and contingencies.”
7



3. 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 biopharmaceutical 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 biopharmaceutical development services and other collaboration and genome network agreements and is accounted for under the provisions provided in ASC Topic 606.
Our revenue as disaggregated by payer category and revenue subtype is as follows (in thousands):
Three Months Ended June 30, 2022
 PatientBiopharma partnerOther business-to-businessTotal
 InsuranceDirect
Test revenue:
Centralized$80,966 $10,420 $17,047 $13,641 $122,074 
Decentralized  1,393 9,715 11,108 
 Total test revenue80,966 10,420 18,440 23,356 133,182 
Other revenue  2,239 1,201 3,440 
Total revenue$80,966 $10,420 $20,679 $24,557 $136,622 
Three Months Ended June 30, 2021
 PatientBiopharma partnerOther business-to-businessTotal
 InsuranceDirect
Test revenue:
Centralized$71,254 $10,523 $8,688 $12,172 $102,637 
Decentralized  214 8,645 8,859 
 Total test revenue71,254 10,523 8,902 20,817 111,496 
Other revenue  1,768 3,048 4,816 
Total revenue$71,254 $10,523 $10,670 $23,865 $116,312 
Six Months Ended June 30, 2022
 PatientBiopharma partnerOther business-to-businessTotal
 InsuranceDirect
Test revenue:
Centralized$152,870 $22,577 $30,010 $26,306 $231,763 
Decentralized  2,736 18,180 20,916 
 Total test revenue152,870 22,577 32,746 44,486 252,679 
Other revenue  5,193 2,441 7,634 
Total revenue$152,870 $22,577 $37,939 $46,927 $260,313 
8



Six Months Ended June 30, 2021
 PatientBiopharma partnerOther business-to-businessTotal
 InsuranceDirect
Test revenue:
Centralized$132,145 $19,472 $19,260 $22,348 $193,225 
Decentralized  596 16,951 17,547 
 Total test revenue132,145 19,472 19,856 39,299 210,772 
Other revenue  4,830 4,331 9,161 
Total revenue$132,145 $19,472 $24,686 $43,630 $219,933 
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. In subsequent periods, we update our estimate of the amounts recognized for previously delivered tests which resulted in the following increases to revenue and decreases to our net (loss) income from operations and basic and diluted net (loss) income per share (in millions, except per share data):
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenue$1.2 $4.2 $2.4 $8.5 
(Loss) income from operations$(1.2)$4.2 $(2.4)$8.5 
Net (loss) income per share, basic$(0.01)$0.02 $(0.01)$0.04 
Net (loss) income per share, diluted$(0.01)$0.02 $(0.01)$0.04 
Impact of COVID-19
We expect the COVID-19 pandemic may continue to impact our business. We have reviewed and adjusted, when necessary, for the impact of COVID-19 on our estimates related to revenue recognition and expected credit losses.
Accounts receivable
The majority of our accounts receivable represents amounts billed to biopharmaceutical 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. This contract receivable was $7.7 million and $4.3 million as of June 30, 2022 and December 31, 2021, respectively, and was included in prepaid expenses and other current assets on the consolidated balance sheets.
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 biopharmaceutical development services, including billings at the initiation of 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. During the three and six months ended June 30, 2022, we recognized revenue of $2.9 million and $2.5 million, respectively, from deferred revenue recorded in prior periods. The current contract liability was $5.2 million and $9.4 million as of June 30, 2022 and December 31, 2021, respectively, and was included in accrued liabilities on the consolidated balance sheets. The long-term contract liability was $2.6 million and $0.7 million as of June 30, 2022 and December 31, 2021, respectively, and was included in other long-term liabilities on the consolidated balance sheets.
9



Performance obligations
Test and other revenue is generally recognized upon completion of our performance obligation when the customer obtains control of the promised good or service, typically a test report or upon shipment of our precision oncology products or other contractually defined milestone(s). The Company has applied the practical expedient in relation to information about our remaining performance obligations, as we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date. Most remaining performance obligations are primarily related to Personalized Cancer Monitoring ("PCM") services included in test revenue in our consolidated statement of operations and are generally satisfied over one to six months.
4. Business combinations
ArcherDX
In October 2020, we acquired ArcherDX, Inc. ("ArcherDX"), a genomics analysis company democratizing precision oncology. Under the terms of the agreement, we acquired ArcherDX for upfront consideration consisting of 30.0 million shares of our common stock and $325.0 million in cash, plus up to an additional 27.0 million shares of our common stock payable in connection with the achievement of certain milestones. During the three months ended March 31, 2021, Invitae and the sellers of ArcherDX reached an agreement to reduce the purchase price by $1.2 million based on the final acquired net working capital. This adjustment was recorded during the three months ended March 31, 2021 and reduced the contingent consideration liability and goodwill by approximately $1.2 million.
We were required to pay contingent consideration based on achievement of post-closing development and revenue milestones. The material factors that may impact the fair value of the contingent consideration, and therefore the liability, are (i) the estimated number of shares to be issued, (ii) the volatility of our common stock, (iii) the probabilities of achievement of milestones within the timeframes prescribed in the acquisition agreement and (iv) discount rates, all of which are Level 3 inputs not supported by market activity with the exception of the volatility of our common stock. Significant changes in any of these inputs may result in a significant change in fair value, which is estimated at each reporting date. Of the five milestones, one milestone was achieved in November 2020, which resulted in the issuance of 5.0 million shares of our common stock and a cash payment of $1.9 million, and three milestones were achieved or deemed to be achieved during the three months ended June 30, 2021, which resulted in the issuance of 13.8 million shares of our common stock and a cash payment of $3.3 million in July 2021. The remaining milestone is based upon receiving U.S. Food and Drug Administration ("FDA") clearance or approval of a therapy selection in vitro diagnostic ("IVD") product, which per the terms of the acquisition agreement, must be completed by March 31, 2022, subject to certain extensions (the "ArcherDX Final Milestone"). With respect to the ArcherDX Final Milestone, the liability was reduced to nil as of June 30, 2021 from $262.5 million as of March 31, 2021 and $287.7 million as of December 31, 2020, with the offsetting change recorded as changes in fair value of contingent consideration in our consolidated statements of operations. The removal of the liability balance and the associated change in fair value of contingent consideration was a result of our reassessment of the steps necessary to achieve clearance or approval based on FDA feedback received principally in the three months ended June 30, 2021. In April 2022, an agreement was entered into with the previous ArcherDX stockholders to extend the date for achievement of the ArcherDX Final Milestone to March 31, 2023. We do not believe achievement of the conditions prescribed in the acquisition agreement will occur within this timeframe. We expect FDA clearance or approval of a therapy selection IVD at a later date subject to resolution of the necessary steps. As such, no liability was recorded as of June 30, 2022.
In connection with the acquisition, we granted awards of common stock to new employees who joined Invitae in connection with our acquisition of ArcherDX that vested upon the achievement of the contingent consideration milestones discussed above and were subject to the employees' continued service with us, unless terminated without cause in which case vesting was only dependent on milestone achievement. As the number of shares that were expected to be issued are fixed, the awards are equity-classified. During the six months ended June 30, 2022, we recorded stock-based compensation expense of nil related to the ArcherDX milestones. During the three months ended June 30, 2021, we recorded a net $1.2 million in stock-based compensation expense related to the ArcherDX milestones, which includes $28.3 million related to milestones achieved in the three months ended June 30, 2021, $2.6 million due to an accounting modification of certain awards whereby the employee's continued substantive services were no longer required, offset by a reversal of $29.7 million recognized in prior periods related to the determination that the ArcherDX Final Milestone would not be achieved within the specified timeframe prescribed in the acquisition agreement. During the six months ended June 30, 2021, we recorded a net $41.8 million in stock-based compensation expense related to the ArcherDX milestones, which includes $38.5 million related to milestones achieved in the three months ended June 30, 2021, $33.0 million due to an accounting modification of
10



certain awards whereby the employee's continued substantive services were no longer required, offset by a reversal of $29.7 million recognized in prior periods related to the determination that the ArcherDX Final Milestone would not be achieved within the specified timeframe prescribed in the acquisition agreement.
One Codex
In February 2021, we acquired 100% of the equity interest of Reference Genomics, Inc. d/b/a One Codex ("One Codex"), a company developing and commercializing products and services relating to microbiome sequencing, analysis and reporting, for upfront consideration consisting of $17.3 million in cash and 1.4 million shares of our common stock, of which approximately 0.2 million shares were subject to a hold-back to satisfy indemnification obligations that may have arisen following the closing. These shares subject to a hold-back were issued to a third-party at the closing date to hold in escrow until the escrow period is complete, and as such were classified as equity. In February 2022, the amounts held back to satisfy indemnification obligations were released in full to the former shareholders.
Genosity
In April 2021, we acquired 100% of the fully diluted equity of Genosity Inc. ("Genosity"), a company providing genomic laboratory services, for approximately $196.0 million, consisting of approximately $120.0 million in cash and 1.9 million shares of our common stock. In connection with this transaction, we granted restricted stock units ("RSUs") having a value of up to $5.0 million to certain continuing employees and recognized $0.5 million and $0.9 million in stock-based compensation expense for the three and six months ended June 30, 2022, respectively. We recognized $0.2 million in stock-based compensation expense for both the three and six months ended June 30, 2021.
Pursuant to the terms of the acquisition, we agreed to provide additional shares in the event that our common stock share price decreased after the acquisition, but prior to filing a resale registration statement. At the time of the acquisition, we estimated this provision to be $7.0 million. On filing the resale registration statement during the period ended June 30, 2021, the fair value was $3.2 million and the difference of $3.8 million was recorded in general and administrative expense.
Ciitizen
In September 2021, we acquired 100% of the equity of Ciitizen Corporation ("Ciitizen"), a patient-centric health technology company, for approximately $308.3 million, consisting of approximately $87.4 million in cash and 6.3 million shares of our common stock, of which approximately $10.4 million in cash and 0.8 million shares are subject to a hold-back to satisfy indemnification obligations that may arise following the closing. As of June 30, 2022, the value of the stock payable liability was $1.9 million with the $4.4 million six month fair value change recorded as income in other income, net. In connection with this transaction, we granted RSUs having a value of up to $246.9 million to certain continuing employees. During the three and six months ended June 30, 2022, we recorded stock-based compensation expense of $25.1 million and $50.0 million, respectively, primarily in research and development expense.
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 certain aspects of 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.
5. Goodwill and intangible assets
Goodwill
The changes in the carrying amounts of goodwill were as follows (in thousands):
Balance as of December 31, 2021$2,283,059 
Impairment(2,283,059)
Balance as of June 30, 2022$ 

11



Intangible assets
The following table presents details of our acquired intangible assets as of June 30, 2022 (in thousands):
June 30, 2022
 
Cost
Accumulated
Amortization
Net
Weighted-Average
Useful Life
(In Years)
Customer relationships$41,515 $(15,398)$26,117 10.8
Developed technology1,174,506 (128,243)1,046,263 10.6
Non-compete agreement286 (286) 0.0
Trade name21,085 (3,086)17,999 12.0
Patent assets and licenses495 (153)342 15.0
Right to develop new technology19,359 (2,259)17,100 15.0
 $1,257,246 $(149,425)$1,107,821 10.7
The following table presents details of our acquired intangible assets as of December 31, 2021 (in thousands):
December 31, 2021
 
Cost
Accumulated
Amortization
Net
Weighted-Average
Useful Life
(In Years)
Customer relationships$41,515 $(13,096)$28,419 10.8
Developed technology662,106 (81,902)580,204 10.2
Non-compete agreement286 (286) 0.0
Trade name21,085 (2,207)18,878 12.0
Patent assets and licenses495 (136)359 15.0
Right to develop new technology19,359 (1,613)17,746 15.0
In-process research and development542,388 — 542,388 n/a
 $1,287,234 $(99,240)$1,187,994 10.4
Acquisition-related intangibles included in the above tables are generally 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. During the six months ended June 30, 2022, the Company launched the ArcherDX STRATAFIDE and PCM products resulting in the reclassification of $512.4 million of the related in-process research and development (IPR&D) intangibles to developed technology intangibles, which are finite-lived and amortizable. Amortization expense was $30.0 million and $13.5 million for the three months ended June 30, 2022 and 2021, respectively, and $50.2 million and $25.6 million for the six months ended June 30, 2022 and 2021, respectively. Amortization expense is recorded in cost of revenue, research and development, and selling and marketing expense.
The following table summarizes our estimated future amortization expense of intangible assets with finite lives as of June 30, 2022 (in thousands):
2022 (remainder of year)$59,381 
2023118,461 
2024118,183 
2025116,429 
2026116,396 
Thereafter578,971 
Total estimated future amortization expense$1,107,821 
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In December 2021, we acquired 100% of the equity interest of Stratify Genomics Inc., a cancer risk stratification company, for $29.0 million consisting of 1.0 million shares of common stock, $4.2 million in assumed liabilities, and $8.0 million in cash. We accounted for this transaction as an asset acquisition, as substantially all of the fair value is concentrated in the developed technology acquired. As goodwill is not recorded under an asset acquisition, an $8.7 million deferred tax liability arising from book/tax basis differences increased the value of the assets acquired above the purchase price. As a result, the fair value of the developed technology is $37.5 million, which will be amortized over eight years to cost of revenue. The remaining purchase price of $0.2 million is the fair value of cash and cash equivalents.
In July 2021, we acquired 100% of the equity interest of Medneon LLC, a digital health artificial intelligence company, for $34.1 million consisting of 0.4 million shares of common stock, $4.9 million in assumed liabilities, and $12.9 million in cash. We accounted for this transaction as an asset acquisition, as substantially all of the fair value is concentrated in the developed technology acquired. The fair value of the developed technology is $33.9 million, which will be amortized over eight years to cost of revenue. The remaining purchase price of $0.2 million is the fair value of cash and cash equivalents.
Impairment assessment
Goodwill and indefinite-lived intangible assets are assessed for impairment on an annual basis and whenever events and circumstances indicate that these assets may be impaired. We evaluate the fair value of long-lived assets, which include property and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the asset may not be fully recoverable. In testing for goodwill impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that the carrying value exceeds its fair value, we perform a quantitative goodwill impairment test to compare to the fair value of our reporting unit to its carrying value, including goodwill. 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. Factors that may indicate potential impairment and trigger an impairment test include, but are not limited to, current economic, market and geopolitical conditions, including a significant, sustained decline in our stock price and market capitalization compared to the net book value, an adverse change in legal factors, business climate or operational performance of the business, or significant changes in the ability of a particular asset (or group of assets) to generate positive cash flows for our strategic business objectives.
During the three months ended June 30, 2022, as a result of the significant, sustained decline in our stock price and related market capitalization and lower than expected financial performance, we performed an impairment assessment of goodwill, IPR&D intangible assets, and long-lived assets, including definite-lived intangibles.
For our goodwill, we measured the fair value of the reporting unit utilizing the discounted cash flow method under the income approach. This approach relies on significant unobservable inputs including, but not limited to, management's forecasts of projected revenue associated with future cash flows, discount rates, and control premium. Based on this analysis, we recognized a non-cash, pre-tax goodwill impairment charge of $2.3 billion during the three and six months ended June 30, 2022, which was included in asset impairment on the condensed consolidated statements of operations.
We also identified indicators of impairment related to the IPR&D intangible asset initially recognized as part of the acquisition of Singular Bio, Inc. ("Singular Bio") that it was more likely than not that the asset is impaired. The Company identified conditions during the period ended June 30, 2022 such as alternative technologies and uncertainties around the desired outcome of our in-development asset and other economic factors that raised issues with the realizability of our asset. As a result of our evaluation, we recognized a non-cash, pre-tax impairment charge of $30.0 million during the three and six months ended June 30, 2022 related to the IPR&D intangible asset. Additionally, we recognized an impairment loss of $4.8 million during the three and six months ended June 30, 2022 related to specific equipment that is no longer being utilized on this project and has no alternative future use. The impairment charges are recorded in asset impairment in the condensed consolidated statements of operations.
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.
A recoverability test was performed for the long-lived assets, including definite-lived intangibles, using the undiscounted cash flows approach, which included significant unobservable inputs including management's
13



forecasts of projected revenue associated with future cash flows, and residual value. The cash flow estimates reflected the Company’s assumptions about its use of the long-lived assets and eventual disposition of the asset group. We determined that our long-lived assets held and used, including intangible assets that are subject to amortization, did not have identifiable cash flows that are largely independent of the cash flows of other assets and liabilities and of other asset groups, because the assets are highly interrelated and interdependent. Therefore, the Company evaluated its long-lived assets for impairment on an entity-wide level. The long-lived assets passed the recoverability test as of June 30, 2022.
6. Balance sheet components
Inventory
Inventory consisted of the following (in thousands):
 June 30, 2022December 31, 2021
Raw materials$41,828 $27,178 
Work in progress6,322 5,342 
Finished goods923 996 
Total inventory$49,073 $33,516 
Property and equipment, net
Property and equipment consisted of the following (in thousands):
June 30, 2022December 31, 2021
Leasehold improvements$72,952 $31,159 
Laboratory equipment65,740 61,317 
Computer equipment17,199 15,452 
Furniture and fixtures2,259 2,130 
Construction-in-progress32,323 52,039 
Other2,311 925 
Total property and equipment, gross192,784 163,022