By Dietrich Knauth
NEW YORK (Reuters) - Invitae (OTC:NVTA) Corp received court approval on Thursday to run a five-month bankruptcy sale process, allowing the genetic testing company to find a buyer and exit from Chapter 11 by late July.
U.S. Bankruptcy Judge Michael Kaplan approved the Softbank-backed company's proposed bid procedures at a court hearing in Trenton, New Jersey, setting an April 10 deadline for initial bids and scheduling an auction for April 17.
Invitae, which filed for bankruptcy protection on Tuesday, intends to seek court approval of the sale on May 6 and expects to close the transaction by July 21.
Invitae does not expect equity shareholders to receive any recovery in its bankruptcy, according to court documents. It has about $1.5 billion in debt. Its bankruptcy petition estimated that its total assets are worth between $500 million and $1 billion.
Invitae began reaching out to potential buyers in December, and it has already received some initial bids, Invitae attorney Nicole Greenblatt told Kaplan.
Greenblatt said Invitae went bankrupt because it took on too much debt to fund its expansion from 2019 to 2021. Invitae made 13 acquisitions during that period, increasing its debt by $1.5 billion and leaving the company ill-prepared for a recent rise in interest rates, increased competition, and declining demand for elective genetic tests.
"While these acquisitions helped Invitae expand into new markets and round out its product portfolio and improve customer experience, they also required large sums of capital for investment and significant operating expenses," Greenblatt said.
Invitae began taking steps to reduce its debt in 2022, terminating 1,200 employees, downsizing office space and testing labs, and selling off unprofitable, non-core businesses, the company said in court filings.
Invitae's divestitures included companies that it acquired during its $1.5 billion acquisition spree, such as Ciitizen, an AI-focused patient network business that Invitae acquired in 2021 for $325 million.
Those moves saved Invitae approximately $326 million in annual costs, but were not enough to turn a profit, according to court filings. Invitae reported a $1.3 billion net loss for the first nine months of 2023.