A Tale of Two Labs: Natera & Invitae

A look at the genetic testing playbook on specialization vs. sprawl

May 26, 2025

Welcome to Health & Wealth! If you’re new, you can subscribe for free to learn about genomics, life science companies, and my fresh insights on the innovation theme park of biology — delivered directly to your inbox:

Article Highlights

Natera has surpassed Illumina in market capitalization, becoming the first genomics diagnostics company to eclipse the sequencing giant, while Invitae fell from a $12 billion valuation to bankruptcy and a sale for less than $300 million.
Natera’s focus on high-margin niches like minimal residual disease (MRD) testing has driven record growth, processing over 1 million MRD tests in 2024 and achieving a 62% gross margin.
Invitae’s ambition to be a one-stop shop for genetic testing unraveled due to a sprawling portfolio, failed acquisitions, mounting debt, and operational inefficiencies.
As sequencing costs drop, the shift toward whole genome sequencing could change the rules of the game again, creating opportunities for companies with scale and consumer-focused strategies.

Natera has overtaken Illumina in market capitalization, now valued at $21B versus the sequencing giant’s $13B — marking the first time a genomics-based diagnostics company has eclipsed Illumina, the industry’s long-standing titan.

Meanwhile, Invitae, once valued at $12B at its peak in 2021, has been sold to Labcorp (bankruptcy sale) and Natera (reproductive health assets) for less than $300 million combined.

This isn’t just a story of two companies — it's a case study in how strategic focus can create billion-dollar winners while unchecked ambition can lead to financial ruin.

So, how did these two labs diverge in their paths?

It comes down to their divergent strategies in times of distress. Natera executed a disciplined, high-margin strategy by specializing in reimbursable oncology testing, while Invitae overextended itself with an ambitious but unsustainable vision of genetic testing for all.

Let’s take a closer look.

Natera’s “Go Deep and Specialize” Approach

Natera has honed in on tests that not only address critical clinical needs but also capture a premium in reimbursement. A core driver of growth is their minimal residual testing (MRD) — a test used to detect recurrence in cancer patients who have received therapy. It’s the main thing they focus on during earning calls these days:

“[We have] a pretty big presence from a commercial standpoint in women's health, and we built that over the last 12 years or so… But largely, yes, we're focusing on helping oncology patients, and we see that Signatera is really making an impact on care, and we're seeing that it's at the very early stages, and that's where a lot of the spending is going.”
— Steve Chapman, Natera CEO Q3 2024 Earnings Call

The number of cancers approved has expanded, including colorectal, breast, bladder, lung, skin, ovarian, fallopian, and peritoneal. What’s impressive is the steep growth in volume — in 2024, over 1 million MRD tests were processed, up 200% from the previous year.

Over 90% of Natera’s revenue comes from insurance providers. As I mentioned before, oncology, particularly somatic oncology like MRD, is typically better reimbursed than other genomic specialties.

Management has attributed the record 62% gross margin in Q3 2024 to an increase in the average sales price (ASP) for Signatera from ~$800 to $1,050. This is much higher than the average ASP for “run-of-the-mill” hereditary testing, which is closer to $300-500 and tends downward over time with mature products.

What further makes MRD a high-margin test is most of the upfront cost of goods sold (COGS) comes from the first test (tumor markers are customized to the patient). Any subsequent testing for recurrence monitoring is higher margin given the same ASP.

Natera’s focus appears to resonate with investors — with the highest price-to-sales ratio out of genomics-based diagnostics companies as of 2024. The company’s 2024 revenues increased by 56%, and it is cash flow positive, moving toward profitability. Their playbook concentrates on fewer, more profitable niches to improve unit economics. Key questions going forward for Natera are:

Can Natera maintain its lead in MRD as competitors enter the space?
Will margins hold as test volumes increase?
Can Natera successfully diversify beyond MRD?
How will they navigate long-term reimbursement risks?

Invitae’s “Everything for Everyone” Dilemma

Where Natera chose depth, Invitae bet on breadth — a strategy that ultimately proved unsustainable.

Invitae set out with grand ambitions to be the one-stop shop for genetic testing — to become the go-to trusted scientific partner whenever people have a question about their health that genetics can help answer. While the genetic testing industry has remained highly fragmented and siloed, Invitae wanted to deliver genomic information to people at the right place, at the right time.

Invitae believed the full impact of genomics depended on a vast, interconnected database of patient data — a flywheel that would generate increasingly useful insights over time.

In practice, this meant bringing together automation, software, a database, and expertise to properly read, analyze, store, and deliver genomic information in a comprehensive platform.

Invitae’s proposed genomics flywheel, not unlike Jeff Bezos’ Amazon flywheel

While the flywheel was conceptually strong, adoption of comprehensive genetic testing was slower than Invitae projected, leading to weaker-than-expected demand relative to their cost structure.

If their investments played out and operating expenses were kept lean, COGS could have reached $200 or lower by 2026, with average ASP around mid to high $300s to reach operating leverage. Management did try to pivot strategies but was likely a little too late:

“We made a decision, a conscious decision, really starting about 18 months ago that we were changing the commercialization, go-to-market from volume at all costs to a focus on growing profitable volume… And secondly, we've been really dedicated and focused on process improvement internally, whether it's supply chain logistics, whether it's our laboratory processes and efficiencies.”
— Ken Knight, Invitae CEO Q3 2023 Earnings Call

Ultimately, its broad portfolio led to increased operational costs and deteriorating margins over time, reporting a $1.3 billion net loss for the first nine months of 2023. Towards the end, even revenue growth remained flat.

Beyond its unsustainable business model, Invitae’s aggressive acquisition spree only worsened its financial instability. The company took on $1.5 billion in debt, betting that its acquired companies would generate synergies that never materialized.

For example, Invitae acquired Ciitizen, a consumer health technology platform enabling patients to collect, organize, and share their medical records digitally, for ~$325 million. The goal was to integrate this into Invitae’s patient-consented health data platform. But by January 2023, Invitae divested Ciitizen as part of strategic cost-cutting measures. Beyond Ciitizen, Invitae’s $1.4B acquisition of ArcherDx in 2020 aimed to expand into oncology but struggled with integration issues, legal troubles, and declining reimbursement for liquid biopsy.

The net result was a company spread too thin in a market that remains too price-sensitive and undifferentiated.

A new era of genomic testing with new players

So are platform genomics companies dead? I don’t think so — the story of genetic testing is far from over. While specialization may have won out this round in complex, reimbursement-sensitive markets, sequencing costs are dropping (for real this time), and it will change the rules of the game yet again.

Most testing today is performed on targeted gene panels, but the market will shift to whole genome sequencing, favoring those with scale. We’ve finally reached cost parity, and the age of consumerism with personal genomic data is likely just beginning.

The next phase of genetic testing could favor scaled players or upstarts leveraging AI-driven genomic insights for the everyday consumer.

Health & Wealth