Why Shares of Invitae Dropped 13% on Tuesday

What happened

Shares of Invitae (NVTA -13.00%), a maker of medical genetic tests, fell 14% on Tuesday. The stock closed at $4.00 on Monday, then opened on Tuesday at $3.70, before falling to a daily low of $3.45 around 11 a.m., then rising to $3.48 at Tuesday’s close.

The stock is down more than 77% this year and has a 52-week low of $1.83 and a 52-week high of $32.93. Invitae’s shares have been highly volatile and, earlier this month, shot up 277% the day it released second-quarter earnings. The company has been popular with retail investors and has occasionally shot up due to short squeezes, only to fall back again.

So what

The drop comes a day after the company announced a collaboration with international research program Simons Searchlight. The deal connects data culled by Invitae’s Citizen patient medical records with outcomes and biospecimens from Simons Searchlight. The point is to build a better dataset that will help researchers to treat rare neurodevelopmental diseases. The news buoyed the stock, pushing it to $4.00 for the first time since Aug. 18. Investors gladly sold on the news a day later, especially on a day when the market was down in general.

It’s interesting to note that Invitae CEO Ken Knight reiterated Tuesday that the company is continuing to look at cost-cutting ways to get the company back to being cash-flow positive, which was a big topic in the company’s second-quarter report. That may take a while as the company has been hemorrhaging money for quite some time.

Now what

There’s plenty to be concerned about with this biotech stock, as evidenced by its second-quarter report. It listed $313 million in cash, 67% less than it was just six months ago. Through six months, the company said it lost $11.75 in earnings per share (EPS), compared to positive EPS of $0.17 a year ago. On the other hand, the company reported $260 million in revenue through six months, up 18% year over year. The company started its cost-cutting mantra in July, so it may take a while for a turnaround to show, if it ever does.

Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Invitae. The Motley Fool has a disclosure policy.

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