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, 2021

☐ 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

Invitae Corporation

(Exact name of the registrant as specified in its charter)

 

Delaware	27-1701898
(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)

 (415) 374-7782

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name 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 filer ☐ Smaller reporting company ☐ Emerging 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 July 30, 2021 was 217,339,666.

TABLE OF CONTENTS

		Page No.
PART I: Financial Information
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Stockholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II: Other Information
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 6.	Exhibits	80
SIGNATURES		81

PART I — Financial Information

ITEM 1. Condensed Consolidated Financial Statements.

INVITAE CORPORATION

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	1,107,745	$	124,794
Marketable securities	422,473		229,186
Accounts receivable	55,714		47,722
Inventory	29,982		32,030
Prepaid expenses and other current assets	28,089		20,200
Total current assets	1,644,003		453,932
Property and equipment, net	82,760		66,102
Operating lease assets	120,844		45,109
Restricted cash	10,275		6,686
Intangible assets, net	1,057,389		981,845
Goodwill	2,060,889		1,863,623
Other assets	19,303		13,188
Total assets	$	4,995,463	$	3,430,485
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	31,244	$	25,203
Accrued liabilities	88,045		86,058
Operating lease obligations	11,930		8,789
Finance lease obligations	2,422		1,695
Total current liabilities	133,641		121,745
Operating lease obligations, net of current portion	122,840		48,357
Finance lease obligations, net of current portion	3,540		3,123
Debt	108,920		104,449
Convertible senior notes, net	1,460,873		283,724
Deferred tax liability	50,998		51,538
Other long-term liabilities	460,666		841,256
Total liabilities	2,341,478		1,454,192
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock	20		19
Accumulated other comprehensive income	34		1
Additional paid-in capital	3,973,479		3,337,120
Accumulated deficit	(1,319,548)		(1,360,847)
Total stockholders’ equity	2,653,985		1,976,293
Total liabilities and stockholders’ equity	$	4,995,463	$	3,430,485

See accompanying notes to unaudited condensed consolidated financial statements.

1

INVITAE CORPORATION

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue:
Test revenue	$	111,496	$	45,099	$	210,772	$	108,177
Other revenue	4,816		1,092		9,161		2,262
Total revenue	116,312		46,191		219,933		110,439
Cost of revenue	89,331		42,952		164,822		83,374
Research and development	106,454		74,963		186,812		130,631
Selling and marketing	56,964		39,520		108,204		81,640
General and administrative	38,303		26,006		110,820		49,828
Change in fair value of contingent consideration	(303,349)		4,832		(366,970)		4,832
Income (loss) from operations	128,609		(142,082)		16,245		(239,866)
Other income (expense), net	2,024		(21,436)		6,489		(16,728)
Interest expense	(13,407)		(5,485)		(21,800)		(10,936)
Net income (loss) before taxes	117,226		(169,003)		934		(267,530)
Income tax benefit	(16,560)		(2,600)		(23,360)		(2,600)
Net income (loss)	$	133,786	$	(166,403)	$	24,294	$	(264,930)
Net income (loss) per share, basic	$	0.66	$	(1.29)	$	0.12	$	(2.35)
Net income (loss) per share, diluted	$	0.53	$	(1.29)	$	0.11	$	(2.35)
Shares used in computing net income (loss) per share, basic	204,110		129,023		199,083		112,765
Shares used in computing net income (loss) per share, diluted	264,921		129,023		216,595		112,765

See accompanying notes to unaudited condensed consolidated financial statements. 

2

INVITAE CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

 

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income (loss)	$	133,786	$	(166,403)	$	24,294	$	(264,930)
Other comprehensive income (loss):
Unrealized income (loss) on available-for-sale marketable securities, net of tax	(16)		(722)		33		581
Comprehensive income (loss)	$	133,770	$	(167,125)	$	24,327	$	(264,349)

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,
	2021		2020		2021		2020
Common stock:
Balance, beginning of period	$	20	$	10	$	19	$	10
Common stock issued	—		3		1		3
Balance, end of period	20		13		20		13
Accumulated other comprehensive income (loss):
Balance, beginning of period	50		1,294		1		(9)
Unrealized income (loss) on available-for-sale marketable securities, net of tax	(16)		(722)		33		581
Balance, end of period	34		572		34		572
Additional paid-in capital:
Balance, beginning of period	3,829,553		1,182,033		3,337,120		1,138,316
Common stock issued in connection with public offering, net	—		217,486		434,263		217,486
Common stock issued on exercise of stock options, net	1,192		1,026		2,952		2,171
Common stock issued pursuant to exercises of warrants	—		35		1,242		62
Common stock issued pursuant to employee stock purchase plan	7,974		4,527		7,974		4,527
Common stock issued or issuable pursuant to acquisitions	89,054		60,053		163,876		102,506
Stock-based compensation expense	45,706		22,057		101,540		32,536
Reclassification of equity component of convertible senior notes	—		—		(75,488)		—
Reclassification of stock payable liabilities	—		—		—		(10,387)
Balance, end of period	3,973,479		1,487,217		3,973,479		1,487,217
Accumulated deficit:
Balance, beginning of period	(1,453,334)		(857,204)		(1,360,847)		(758,677)
Cumulative effect of adoption of ASU 2020-06	—		—		17,005		—
Net income (loss)	133,786		(166,403)		24,294		(264,930)
Balance, end of period	(1,319,548)		(1,023,607)		(1,319,548)		(1,023,607)
Total stockholders' equity	$	2,653,985	$	464,195	$	2,653,985	$	464,195

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,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	24,294	$	(264,930)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	35,262		14,500
Stock-based compensation	106,337		81,124
Amortization of debt discount and issuance costs	6,492		7,337
Remeasurements of liabilities associated with business combinations	(372,722)		26,749
Benefit from income taxes	(23,360)		(2,600)
Post-combination expense for acceleration of unvested equity	2,959		—
Other	5,273		(536)
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable	(6,953)		4,939
Inventory	2,048		(4,432)
Prepaid expenses and other current assets	(8,346)		1,383
Other assets	(2,165)		942
Accounts payable	3,781		9,185
Accrued expenses and other long-term liabilities	8,255		3,585
Net cash used in operating activities	(218,845)		(122,754)
Cash flows from investing activities:
Purchases of marketable securities	(325,957)		(115,350)
Proceeds from sales of marketable securities	—		12,532
Proceeds from maturities of marketable securities	127,738		89,965
Acquisition of businesses, net of cash acquired	(134,006)		(57,576)
Purchases of property and equipment	(20,154)		(10,854)
Other	(1,880)		(1,334)
Net cash used in investing activities	(354,259)		(82,617)
Cash flows from financing activities:
Proceeds from public offerings of common stock, net	434,263		217,489
Proceeds from issuance of common stock	11,717		6,760
Proceeds from issuance of convertible senior notes, net	1,116,850		—
Other	(3,186)		(1,904)
Net cash provided by financing activities	1,559,644		222,345
Net increase in cash, cash equivalents and restricted cash	986,540		16,974
Cash, cash equivalents and restricted cash at beginning of period	131,480		157,572
Cash, cash equivalents and restricted cash at end of period	$	1,118,020	$	174,546
Supplemental cash flow information of non-cash investing and financing activities:
Equipment acquired through finance leases	$	2,578	$	—
Purchases of property and equipment in accounts payable and accrued liabilities	$	5,016	$	1,570
Common stock issued for acquisition of businesses	$	163,876	$	75,682
Consideration payable for acquisition of businesses	$	—	$	16,813
Operating lease assets obtained in exchange for lease obligations, net	$	80,157	$	4,046

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, 2020. The results for the three and six months ended June 30, 2021 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.

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

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):

	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	1,107,745	$	124,794
Restricted cash	10,275		6,686
Total cash, cash equivalents and restricted cash	$	1,118,020	$	131,480

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 approximate their fair values. Liabilities associated with business combinations are recorded at their estimated fair value.

Prior period reclassifications

We have reclassified certain amounts in prior periods to conform with current presentation. During the current period, we have disclosed the change in fair value of our contingent consideration separately in our statements of operations; these amounts are general and administrative in nature and were disclosed in general and administrative expense previous periods.

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 adopted accounting pronouncements

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 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 existing convertible senior notes due in 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 GAAP. See further information about our Senior Convertible 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 Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers.

Our revenue as disaggregated by payer category and revenue subtype was as follows (in thousands):

	Three Months Ended June 30, 2021
	Patient				Biopharma partner		Other business-to-business		Total
	Insurance		Direct
Test revenue:
Centralized	$	71,254	$	10,523	$	8,688	$	12,172	$	102,637
Decentralized	—		—		214		8,645		8,859
Total test revenue	71,254		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

	Three Months Ended June 30, 2020
	Patient				Biopharma partner		Other business-to-business		Total
	Insurance		Direct
Test revenue:
Centralized	$	31,270	$	4,298	$	4,289	$	5,242	$	45,099
Total test revenue	31,270		4,298		4,289		5,242		45,099
Other revenue	—		—		477		615		1,092
Total revenue	$	31,270	$	4,298	$	4,766	$	5,857	$	46,191

8

	Six Months Ended June 30, 2021
	Patient				Biopharma partner		Other business-to-business		Total
	Insurance		Direct
Test revenue:
Centralized	$	132,145	$	19,472	$	19,260	$	22,348	$	193,225
Decentralized	—		—		596		16,951		17,547
Total test revenue	132,145		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

	Six Months Ended June 30, 2020
	Patient				Biopharma partner		Other business-to-business		Total
	Insurance		Direct
Test revenue:
Centralized	$	75,061	$	10,089	$	8,600	$	14,427	$	108,177
Total test revenue	75,061		10,089		8,600		14,427		108,177
Other revenue	—		—		929		1,333		2,262
Total revenue	$	75,061	$	10,089	$	9,529	$	15,760	$	110,439

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. We update our estimate of the amounts to be recognized based on new information evaluated on a quarterly basis. Updates to our estimates resulted in the following changes to revenue, income (loss) from operations and basic and diluted net income (loss) per share (in millions, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue	$	4.2	$	0.9	$	8.5	$	2.3
Income (loss) from operations	$	4.2	$	(0.9)	$	8.5	$	(2.3)
Net income (loss) per share, basic	$	0.02	$	(0.01)	$	0.04	$	(0.02)
Net income (loss) per share, diluted	$	0.02	$	(0.01)	$	0.04	$	(0.02)

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 the current COVID-19 pandemic continues to impact our business operations and practices. While we expect that it may continue to impact our business, we experienced limited disruption during the second quarter of 2021. We have reviewed and adjusted, when necessary, for the impact of COVID-19 on our estimates related to revenue recognition and expected credit losses.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law as 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; in April 2020, we received $3.8 million as a part of this initiative, and in January 2021, we received an additional $2.3 million. These payments were recognized as other income, net in our consolidated statement of operations in the periods received. At this time, we are not certain of the availability, extent or impact of any future relief provided under the CARES Act.

9

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 $3.7 million and $4.3 million as of June 30, 2021 and December 31, 2020, 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, 2021, we recognized revenue from deferred revenue recorded in prior periods of $2.3 million and $2.6 million, respectively.

4. Business combinations

Singular Bio

In June 2019, we acquired 100% of the fully diluted equity of Singular Bio, Inc. ("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.

In June 2019, 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 ("PRSUs") 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 these awards and the number of shares issued are not fixed until the awards vest.

During the three and six months ended June 30, 2021, we recorded research and development stock-based compensation expense of nil related to the Time-based RSUs, and income of $0.5 million and expense of $1.9 million, respectively, related to the PRSUs based on our evaluation of the probability of achieving performance conditions, primarily due to the change in value of our common stock. During the three and six months ended June 30, 2020, we recorded research and development stock-based compensation expense of $10.9 million and $18.5 million, respectively, related to the Time-based RSUs and $18.9 million and $30.1 million, respectively, related to the PRSUs. As of June 30, 2021, the Time-based RSUs and PRSUs had a total fair value of $43.9 million and $45.7 million, respectively, based on a total estimated issuance of 3.6 million shares and expectation of the achievement of the performance conditions. As of June 30, 2021, all of the Time-based RSUs and 1.5 million of the PRSUs had vested with a total fair value of $84.3 million, which was recorded in common stock issued or issuable pursuant to business combinations in the consolidated statements of stockholders' equity upon issuance.

Jungla

In July 2019, we acquired 100% of the equity interest of Jungla Inc. ("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.

10

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. 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 used to estimate the fair value. 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 a general and administrative expense. As of June 30, 2021, the fair value of this contingent consideration was $3.6 million representing the fair value of the remaining milestone, which was achieved in July 2021.

Diploid

In March 2020, we acquired 100% of the equity interest of Orbicule BV ("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.

As of June 30, 2021, we had a stock payable liability related to our acquisition of Diploid of $14.2 million, which represents 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, with the change recorded in other income (expense), net.

Genelex and YouScript

In April 2020, we acquired 100% of the equity interest of Genelex Solutions, LLC ("Genelex") and YouScript Incorporated ("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 were 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 remainder 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 were subject to a hold-back to satisfy indemnification obligations that may arise.

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 June 30, 2021, the value of this liability was $7.8 million with the change recorded in other income (expense), net. In April 2021, the amounts held back to satisfy indemnification obligations for Genelex were released in full to the former shareholders.

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. 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 used to estimate the fair value. 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. As of June 30, 2021, the fair value of this contingent consideration was $1.6 million.

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.

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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 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. 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 STRATAFIDE, which per the terms of the acquisition agreement, must be completed by March 31, 2022, subject to certain extensions (the "ArcherDX Final Milestone"). 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. Significant changes in any of these inputs may result in a significant change in fair value, which is estimated at each reporting date. As of December 31, 2020, the fair value of the contingent consideration related to ArcherDX was $788.3 million. As of June 30, 2021, the fair value of the contingent consideration representing the remaining milestones was $423.9 million, which includes the three milestones achieved or deemed to be achieved during the three months ended June 30, 2021 and paid in July 2021 discussed above. With respect to the ArcherDX Final Milestone, the liability has been reduced to zero 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. As a result of our reassessment, we do not believe achievement of the conditions will occur prior to the expiry date for achievement under the timeframe prescribed in the acquisition agreement. We expect FDA clearance or approval of STRATAFIDE at a later date upon resolution of the necessary steps.

In connection with the acquisition, we granted awards of Invitae common stock to new employees who joined Invitae in connection with our acquisition of ArcherDX that 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 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 employees' 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 will 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 certain awards whereby the employees' 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 will 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 are subject to a hold-back to satisfy indemnification obligations that may arise 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. We included the financial results of One Codex in our consolidated financial statements from the acquisition date, which were not material.

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The following table summarizes the purchase price and post-combination expense recorded as a part of the acquisition of One Codex (in thousands):

	Purchase Price		Post-combination Expense
Cash transferred	$	16,504	$	783
Hold-back consideration - common stock	8,113		359
Common stock transferred	58,774		2,600
Total	$	83,391	$	3,742

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 One Codex at the date of acquisition (in thousands):

Cash	$	1,549
Accounts receivable	684
Developed technology	23,841
Customer relationships	440
Total identifiable assets acquired	26,514
Other liabilities	(415)
Deferred tax liability	(6,150)
Net identifiable assets acquired	19,949
Goodwill	63,442
Total purchase price	$	83,391

Based on the guidance provided in ASC 805, Business Combinations, we accounted for the acquisition of One Codex as a business combination and determined that 1) One Codex 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 were developed technology related to One Codex's microbiome and infectious disease platform and its customer relationships in place at time of acquisition. The fair value of the intangible assets was estimated using an income approach with an estimated useful life of nine years.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of One Codex resulted in the recognition of $63.4 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 One Codex is not deductible for tax purposes.

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 the remainder in shares of our common stock. In connection with this transaction, we granted RSUs having a value of up to $5.0 million to certain continuing employees. We included the financial results of Genosity in our consolidated financial statements from the acquisition date, which were not material.

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The following table summarizes the purchase price recorded as a part of the acquisition of Genosity (in thousands):

	Purchase Price
Cash transferred	$	119,959
Liabilities assumed and other consideration	8,774
Common stock transferred	67,308
Total	$	196,041

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 Genosity at the date of acquisition (in thousands):

Cash	$	906
Accounts receivable	355
Developed technology	76,500
Other assets	3,732
Total identifiable assets acquired	81,493
Other liabilities	(2,852)
Deferred tax liability	(17,600)
Net identifiable assets acquired	61,041
Goodwill	135,000
Total purchase price	$	196,041

Based on the guidance provided in ASC 805, Business Combinations, we accounted for the acquisition of Genosity as a business combination and determined that 1) Genosity 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. Pursuant to the terms of the acquisition, we incorporated a provision 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 acquisition we estimated this provision to be $7.0 million. On filing the resale registration statement the fair value was $3.2 million; the difference of $3.8 million was recorded as an expense in general and administrative expense during the three months ended June 30, 2021.

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 asset valuations and 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 were developed technology related to Genosity's genomic laboratory services and sequencing software in place at time of acquisition. The fair value of the intangible assets was estimated using an income approach with an estimated useful life of twelve years.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Genosity resulted in the recognition of $135.0 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 Genosity is not deductible for tax purposes.

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5. Goodwill and intangible assets

Goodwill

The changes in the carrying amounts of goodwill were as follows (in thousands):

Balance as of December 31, 2020	$	1,863,623
Goodwill adjustment	(1,176)
Goodwill acquired	198,442
Balance as of June 30, 2021	$	2,060,889

Intangible assets

The following table presents details of our intangible assets (amounts in thousands, useful lives in years):

	June 30, 2021							December 31, 2020
	Cost		Accumulated Amortization		Net		Weighted-Average Useful Life	Cost		Accumulated Amortization		Net		Weighted-Average Useful Life
Customer relationships	$	41,515	$	(10,696)	$	30,819	10.8	$	41,075	$	(8,292)	$	32,783	10.8
Developed technology	498,259		(52,628)		445,631		10.7	397,563		(31,013)		366,550		10.6
Non-compete agreement	286		(258)		28		5.0	286		(229)		57		5.0
Tradename	21,085		(1,327)		19,758		12.0	21,085		(447)		20,638		12.0
Patent assets and licenses	496		(122)		374		15.0	496		(103)		393		15.0
Right to develop new technology	19,359		(968)		18,391		15.0	19,359		(323)		19,036		15.0
In-process research and development	542,388		—		542,388		n/a	542,388		—		542,388		n/a
	$	1,123,388	$	(65,999)	$	1,057,389	10.9	$	1,022,252	$	(40,407)	$	981,845	10.9

Acquisition-related intangibles included in the above table 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. Amortization expense was $13.5 million and $5.7 million for the three months ended June 30, 2021 and 2020, respectively, and $25.6 million and $9.2 million for the six months ended June 30, 2021 and 2020, respectively. Amortization expense is recorded in cost of revenue, research and development, selling and marketing and general and administrative expense.