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On Thursday, 13 March 2025, NeoGenomics Inc (NASDAQ: NEO) participated in the Barclays 27th Annual Global Healthcare Conference. The company outlined its strategic focus on innovation and growth, emphasizing its commitment to community oncology and future technological advancements. Despite challenges in reimbursement and market penetration, NeoGenomics aims to leverage both organic and inorganic growth strategies.
Key Takeaways
- NeoGenomics is committed to the community oncology setting, serving 75-80% of patients.
- The company reported double-digit revenue growth and significant margin expansion.
- NeoGenomics’ NGS segment grew by 34% last year, now making up 30% of clinical revenues.
- The MRD market is a major focus, with NeoGenomics investing in both tumor-informed and tumor-naive strategies.
- The acquisition of Pathway is expected to strengthen the company’s presence in the Northeast.
Financial Results
The company reported strong financial performance, with double-digit top-line revenue growth and significant margin expansion. The NGS segment, a crucial part of NeoGenomics’ portfolio, grew by 34% year-over-year and now accounts for approximately 30% of clinical revenues. The company is targeting a multi-year opportunity to increase revenue per test, driven by the NGS mix, which represents about 60% of their growth.
Operational Updates
NeoGenomics is strategically focused on the community oncology setting, which serves 75-80% of patients. The company is expanding its portfolio into therapy selection and MRD testing, including a recent agreement with Adaptive for ClonalSeq technology. The acquisition of Pathway, a 30,000 square foot lab in New Jersey, is expected to enhance customer experience and turnaround times for flow tests, while also increasing NGS volume from the region.
Future Outlook
The company is balancing innovation with the need for reimbursement and clinical utility. The MRD market, estimated at $30 billion with only 5% penetration, is a significant focus for NeoGenomics. The company is investing in next-generation MRD technologies and has clinically validated NeoGenomics radar 1.1, which is awaiting MolDX approval.
Q&A Highlights
During the conference, CEO Tony Zook emphasized the importance of a patient-centric approach, stating, "There is this patient-centric idea across NeoGenomics that’s contagious." Chief Commercial Officer Warren Stone highlighted the attractiveness of the therapy selection market, valued at over $12 billion, and the nascent MRD market, estimated at $30 billion. CFO Jeff Sherman discussed the company’s success in the NGS segment, which grew significantly above market growth.
In conclusion, NeoGenomics remains focused on innovation and strategic growth in the community oncology setting. For more detailed insights, readers are encouraged to refer to the full conference call transcript.
Full transcript - Barclays 27th Annual Global Healthcare Conference:
Luke Sergai, Analyst, Barclays: Good morning, everybody. I’m Luke Sergai, covering Youth Life Sciences Diagnostics for Barclays. Sorry, I had something caught my throat when I said that. With me, I have Tony Zook, CEO incoming CEO of NeoGenomics.
We have Jeff Sherman, CFO and we have Warren Stone, Chief Commercial Officer. Thank you again for everybody for making that.
Warren Stone, Chief Commercial Officer, NeoGenomics: Thanks for
Jeff Sherman, CFO, NeoGenomics: having us.
Warren Stone, Chief Commercial Officer, NeoGenomics: Thank you.
Luke Sergai, Analyst, Barclays: Yes, it’s a pleasure. So, Tony, I guess, as you’re coming into the seat, talk about things that you are excited to carry on. And I mean, you guys are kind of at an inflection point anyway in transition and building out the business. So talk about things that you obviously don’t want to disrupt what’s going right, fix what’s going wrong if there is anything, but just kind of give the overlay of the land of what you see as incoming and plan?
Tony Zook, CEO, NeoGenomics: Yes. No, I appreciate the question. I think first and foremost, I’ve had the advantage of being on the board for the last few years. So, I’ve seen the outstanding work that Chris and the management team have done in taking a business and getting it laser focused. They have a compelling mission.
There is this patient centric idea across NeoGenomics that’s contagious. People really believe in what we’re trying to achieve. They’ve also, I think, invested very, very wisely in building up the sales force and taking advantage of the opportunities that are found within the portfolio. And so I looked at the opportunity and thought, wow, you have an outstanding management team that’s built not just for today, but for the growth that we anticipate. I think the way Warren and his team have leveraged the portfolio, there is a real strength for NeoGenomics in our selling channel, especially in that community hospital environment.
And I think that’s something that we will continue to leverage over time. And so I have the opportunity of coming in and being able to say full throated, this isn’t a change, right? This is just the evolution of what is the next steps of the strategy, because I think the foundational elements are outstanding. And so I try to tell people right away what’s not changing, right? The financial discipline that the company has exhibited.
They’ve done a lot of work and Jeff can go into more detail. And so we’re not throwing that away. We want to make very, very prudent decisions as we continue to drive the business forward. The focus on our sales force efficiencies and the sales force excellence and launch excellence parameters that Warren’s put in place that’s not changing. Our oncology focus that’s not changing.
I think what we will do is start to evolve, right? We want to make sure that we’re not just surviving but thriving into the future as well. So that means bringing an element of innovation into the portfolio. And again, doing it responsibly over time, I think, is probably an area that we will start to shift our attention and we have an outstanding leader in Andrew. And so bringing new technologies into the company will be a priority, both organically and when it’s right in organically.
Luke Sergai, Analyst, Barclays: Got you. And let’s talk about building on that foundation. One of your competitive modes or where you’re very good at strategically is in that community setting. Talk about why that is why your decision was to go into that market because a lot of others are going into the big academic medical centers. Just talk about like the positioning there and competitively and why you guys are
Tony Zook, CEO, NeoGenomics: working with more help? Yes.
Warren Stone, Chief Commercial Officer, NeoGenomics: So we obviously, market segmentation is about decisions and the intel that we have and many market research documents point to the fact that 75% to 80% of people served in the community. So that’s where the bigger population is. And sort of within the community settings, the sort of standard of care is very much guideline driven. Oncologists, pathologists, interventional radiologists look to guidelines, NCCN and other guidelines to really direct how they go about their diagnostic testing and then ultimately their treatments. And we for because of the prevalence, the eighty percent of the population going to the community and the fact that it’s guideline driven give us a very clear path in terms of what are the tests that we need to have within our menu, how do we need to ensure that they fit with the guideline needs.
And that in itself then drives a secondary benefit around sort of reimbursement which translates into profitability.
Luke Sergai, Analyst, Barclays: Right. And as you talk about adding innovation around that and you’re talking about building out the portfolio, talk about I know you’re obviously focusing on oncology. And as that continues to move into more of the community setting, talk where in your portfolio are you planning to continue to innovate and add? Where can we see that evolution of the business go?
Warren Stone, Chief Commercial Officer, NeoGenomics: Yes. Great question. I mean, as we look at the continuum, maybe starting at a high level, you have hereditary cancer screening, you have early detection, diagnosis, therapy selection and then surveillance or MRD. We’re incredibly strong in the diagnosis side of things and have a good foothold in therapy selection. Our strategic intent is to continue to sort of move to the right.
So we get further entrenched in therapy selection. It’s an attractive space. We believe it’s $12 plus billion, only about 35% penetrated and growing because there’s more and more therapies that are coming to market from pharma companies, both in the solid tumor and the heme space. So that’s definitely an area of focus for us and investing there. And then further to the right, MRD is the next area where we’re investing heavily, both internally in terms of our own R and D capabilities, but also looking externally.
And very recently, we signed an agreement with Adaptive on their ClonalSeq, which is an MRD technology on the heme side. So because of the strength of our channel into the community that you touched on, where Adaptive only focuses on the academic medical centers or largely focuses on academic medical centers, it was a perfect fit to leverage our channel to bring their product to the community setting. But expect us to invest more, as Tony said, from a portfolio point of view into therapy selection and MRD.
Jeff Sherman, CFO, NeoGenomics: And we’re really trying to take kind of a balanced approach of growing double digit from a top line revenue perspective, seeing significant margin expansion. And then that ultimately that adjusted EBITDA or earnings is helping to fuel and drive that incremental investments that both Warren and Tony were talking about.
Tony Zook, CEO, NeoGenomics: I think it’s interesting as well because you bring up our strength which is in that community setting and Warren is also now making investments as well in the community oncology marketplace. So, we’re going to have a very strong foothold there. And a lot of these technologies on markets, the penetration rates are very, very low still. There is still tremendous runway in NGS and MRD is in our view a nascent market, especially when you look at the community hospitals. So, we think we’re well positioned to compete in those and we’re going to take advantage of our strength.
Jeff Sherman, CFO, NeoGenomics: And in that NGS segment, I mean, last year we grew that 34%. So, it’s about 30% of our clinical revenues growing, we believe, significantly above the market growth. So, we’re seeing more expansion there. We’re capturing market share. We’re seeing expansion of share while at existing customers.
And that’s really building on our commercial footprint, commercial go to market strategy and channel. We believe we can continue to capitalize on adding new tests into that channel to further drive revenue and earnings growth.
Luke Sergai, Analyst, Barclays: And on the therapy selection, as you think about your biopharma relationships and getting that and building that portfolio out, what areas or indications are you guys going to continue to focus on? What areas you see as a bigger opportunity in that community setting? Because I mean, we’re talking about some pretty crowded and competitive markets, especially the MRD setting, which we’ll touch on eventually. But like are there indications that you see an opportunity that you can work with pharma and get those therapy selection, which is where you’re really strong, particularly suited to the community setting versus other parts of the or other segments of the market? Yes.
Warren Stone, Chief Commercial Officer, NeoGenomics: I think our strategy is broad based. It’s not only in terms of partnering with pharma to sort of identify and develop biomarker specific tests, I think that’s one avenue that we would look at. But also sort of larger more pan cancer solutions where one product that we could offer at scale would address multiple needs. And sort of that’s a longer sort of strategy because my earlier comment with regards to guidelines, those sorts of large panels are no longer not in guidelines as yet. I believe it will come in the future.
But in the interim, until that starts to sort of fully emerge, we continue to focus on some of the smaller panels, more targeted indication panels, whether it be breast, lung, you pick the indication in the stage. So our philosophy is really to A, meet our customers and in this case, it’s the community oncologist, the community pathologist, sort of where they are. Today, it’s very much a guideline driven strategy, but we definitely see this evolution to larger panels and we’re skating to where that pack is going to be with products that we’ve recently launched and will launch later this year to satisfy that need.
Luke Sergai, Analyst, Barclays: Got you. And we’re just we’ve talked about the growth of the NGS business in the community setting. I mean, this is I’ve covered the space for a long time. And we’re talking about sequencing moving into the clinic. It seems like it’s always three years down the road, right?
And every year we’ve been saying, oh, in three years, we’ll have a lot more sequencing. Yeah. It’s taken a really long time to hit that community setting. And the growth that you guys are seeing is well above what we’ve seen from the market. So like where do you think we are in that adoption rate of broader adoption of sequencing based testing in that community setting?
And like is that inflecting? And then as you guys think about your position there, it’s like we should even expect this to accelerate, not to put it like guidance around anything?
Warren Stone, Chief Commercial Officer, NeoGenomics: Yes, it really does vary. Certainly adoption in terms of large panel and sequencing tests, the adoption is greater in academic medical centers. There’s no question about that. And it sort of peters out as you go into the community and it’s driven by different things. I would say, and it’s a high proxy for you, independent oncology practices in Petruca, Kentucky, as an example, probably has the least adoption, because they really only influenced by the guidelines.
But if you have an affiliated oncology practice that’s linked to a community hospital, they’re probably getting pressure from their administrators to actually start to move to later technology. So their adoption is a little higher. But we still feel the market is only 30%, thirty five % penetrated. And as I said earlier, about a $12,000,000,000 market. So it’s a large market.
It’s probably growing high single digit, low double digit and only 30%, thirty five % penetrated. So a huge opportunity in the community and our footprint both from a commercial standpoint, but also an operational standpoint is incredibly well suited to address that demand today and in the future.
Jeff Sherman, CFO, NeoGenomics: And then there’s also a reimbursement angle as well, particularly with larger panel tests, which are more challenging to get paid for from managed care companies, state biomarker legislations that have been passed, ultimately, we believe will be a tailwind requiring the coverage of these larger panel tests. So, reimbursement component will be helpful to drive further adoption as well in the future.
Luke Sergai, Analyst, Barclays: Yes. I mean, that’s always been the pricing issue and not the issue, but the pricing dynamic. And for the testing it adopted, it was from a diagnostic company, it’s like you have to have a very strong fortitude because you’re coming up with an incredible technology, giving it away for free, hoping to get paid for it. And doctors, once you get reimbursed, it’s always going to be more expensive or have a co pay and doctors say, oh, I don’t want to do that to my patient. So driving that clinical utility is number one, but then education and converting them.
So talk like how much of the commercial work is out there still educating these guys or Or are we kind of like they’re like starting to come to you and saying, oh, I read about this test. Can do you guys offer this? Like where are we in that?
Warren Stone, Chief Commercial Officer, NeoGenomics: Yes. So it’s a delicate balance and it’s an evolution. I’ll start off by saying we have contracts with more than 300 commercial payers. So we clearly understand the need to limit those for patients. It’s a fundamental concern for practicing physicians that their patients don’t get these outrageous And we leverage that by making sure we’ve got a comprehensive network of third party payers.
And as I said, over 300. And again, we have the one set of portfolio, which is guidance and will ensure that your patient does not get a bill. So we always have that option. But at the same time, our salespeople are working in terms of developing that market and talking to that oncologist around the benefits of a larger panel and how that will help to inform their treatment decisions or talking to them about the benefit of a liquid panel that allows not only to understand the tumor specific mutations, but also the tumor microenvironment around it. So using these different diagnostic solutions in combination can also help to inform their therapy decisions, etcetera.
So it is an education in the community setting. We do that through our commercial organization and we do that at conferences. We do that through other marketing activities to bring people along. But what’s important is, we have choices for those practicing physicians and we want to meet them where they are. And we’re ready on both in both elements where they are today and where they’re likely to be in the future.
Tony Zook, CEO, NeoGenomics: Got it. As you said, it’s a balance, right? So you are educating, but at the end of the day, you also have to get paid for what you do. And I think that this is where again NeoGenomics over the last few years has instilled a much stronger awareness and disciplined in that regard. I think Jeff and his team have done an outstanding job in a lot of our RCM initiatives and just in the pricing strategies and how they position the company and that a high proportion of our business is in the hospital.
It does give us some advantages in that space.
Luke Sergai, Analyst, Barclays: It’s a great segue into the price dynamic. You guys have 4% last year. I mean, not bad. So talk about the strategies that are working right now and the sustainability and how we should think about this over the next three years, four years?
Jeff Sherman, CFO, NeoGenomics: Yes. If you look at our revenue per test, a significant portion, almost 60% of our revenue per test increase has really been driven by the mix of moving into the higher value test of NGS. And we certainly expect that trend to continue. We expect to be growing faster than market in that segment of the business. Our clinical business, roughly about 60% of our clinical business, we’re billing hospitals directly for the care.
We’re not billing a third party payer. And we’ve been able to do price increases in that business over the last couple of years and expect we’ll be able to do an annual type of price increase there. The balance is managed care and we’ve had some success in getting managed care increases as well. Those take longer. They’re more challenging, but we still think we have good upside there.
And then the last piece really is just RCM initiatives. As Tony just mentioned, we’ve spent a lot of time and resources just working on denials, prior authorizations, medical necessities, etcetera. The state biomarker legislation that I talked about earlier will also help. So, we think we have a multi year opportunity to continue to get paid more for the work we’re already doing, which will be fully flowing to revenue, gross margins and adjusted EBITDA and see that’s going to help drive long term revenue and earnings growth for many years to come.
Luke Sergai, Analyst, Barclays: Got it. And as you talked we keep coming back to the innovation, you’re kind of the idea is like, okay, we’re going to offer these community settings where the guidelines are, right? Because that’s where you’re getting reimbursed and keeping your pricing. But how do you balance to stay ahead of developing the test where you think the guidelines are going, right? I mean, you talk about MRD, where would you like to invest there?
Like where talk about the portfolio you’re building? And as that comes through, like talk about timing and how you think that that market ultimately shakes out for
Tony Zook, CEO, NeoGenomics: you? I’ll start. Can I get you guys?
Jeff Sherman, CFO, NeoGenomics: Yes. So if you look at our I mean, our R and D, a significant amount of our current R and D spend is actually focused on MRD. So, we have just come out with a new version of our radar 1.1. It’s been clinically validated. We’re going to be submitting that from MolDX approval shortly.
And we’re in litigation on this one. And so we have a court case expected in October on 1.1. We feel good about our case. We believe we have prior art for the two patents at hand. And we’ll see where that plays out.
That’s kind of our 2025 strategy in terms of MRD. But really for next generation MRD, we have Andrew Lechowiak, who’s actually here in the audience, help leading our drive. And it is the research team that really developed the radar platform, still with the company in Cambridge, in The UK, and really working on the next generation of MRD investments in technology. And we’ve done a full sweep of the landscape. It will be entirely new platform, building on the knowledge we have, but clearly understanding what’s in the space from an IP perspective today.
So, we’ve committed, we’re going to be in MRD. And so, it isn’t just working on 1.1, which we’ll have clarity on in October with our core case. It’s really investing in the next generation of MRD as well. And we’re committed to do that. And I think our kind of balanced approach of growing learnings, growing revenues and reinvesting that is going to help drive that as well.
Warren Stone, Chief Commercial Officer, NeoGenomics: I think maybe I’ll build on that only by saying, I mean, one of the big bondages that we have is we’re only in oncology. So we’re very focused already. And our strategy is very clearly and that continuum I mentioned earlier is to move to the right. And although therapy selection is a very attractive market, 12 plus billion, MRD is even more attractive. We estimated at about 30,000,000,000, others have estimated larger and that’s still very nascent.
It’s probably 5% penetrated, it’s not in any guidelines. And I think you will see that the investments that we will make both organic and inorganically will largely center in that space, targeting tumor informed strategies because that allows for increased sensitivity, but also recognizing that there is a very clear space for tumor naive and those are the sort of primary areas where you’d like to see investment in the future.
Tony Zook, CEO, NeoGenomics: The only thing I would add to that conversation, Luke, is that you don’t always have to be the first mover into the marketplace, right? They should be rewarded for it. They took the risk. Congratulations. But I think as long as we find the white space that we can penetrate, we’re quite comfortable coming in.
If it’s a year or two later, that’s okay because then we bring the power of an entire organization in a portfolio that others can’t match. And so, we have to balance that risk of trying to be the first mover all the time and be very selective at those decisions.
Luke Sergai, Analyst, Barclays: And from when you’re talking about that white space, I mean, are you talking about specific indications? Are you talking about certain gaps in where that the community setting kind of gives you an advantage? Like, so talk about both of those.
Warren Stone, Chief Commercial Officer, NeoGenomics: I think it’s on both of those levels. I do think there’s different indications. And again, it’s not only looking at indications, it’s also looking where within indications. Are you thinking about this as a neoadjuvant, an adjuvant or a surveillance play with an MRD? So one can look at it from that perspective.
And there’s still many opportunities, particularly in lower shedding cancers, head and neck, I O, lung to a lesser extent where there actually isn’t there isn’t that much precedence. So there is a number of white spaces from an indication point of view. But the other aspect is to a large extent today community is very much a white space under penetrated, very low utilization of solid tumor MRD within the community setting. And again, we’re very well placed because the greater majority of our business today comes from that setting. And we’re starting to see the awareness of MRD as a therapeutic tool starting to surface, but there’s a long way to go still.
So I’d say that the market that we penetrate or address strategically is white space per se.
Luke Sergai, Analyst, Barclays: I got you. And from the community setting, you have a few large reference labs that serve a lot of those. Yes. And so talk about the access getting the access to the blood, right? I mean, not like they like to draw blood for somebody else’s test.
So this has been kind of an unknown or little secret that you guys been dealing with that.
Warren Stone, Chief Commercial Officer, NeoGenomics: Yes, it’s something we like the way you said it’s a secret. One of our biggest advantages here is that we started our journey in heme cancers. And many would say, well, heme cancers are the market is less attractive. Yes, it is. It’s a smaller market.
But pharma now today is also starting to have many more therapeutics for heme cancers too, which will increase the growth rate there. But the reality is all of these community settings are needing to deal with us because we have a relatively unique solution for heme cancer. So we’re there. That’s our access strategy. Once we’re in, we use that as a mechanism to pull through additional business.
And our commercial strategy is very simply protect, expand, acquire. So protect the business you’ve got, put wrap around services and provide a high degree of customer experience. But once you’re there, expand share of wallet. So increase same store sales. That’s exactly our strategy that’s worked very effectively in the community.
And the last element is acquire. That’s about identifying new customers that are not supporting us yet today and acquiring them. And it’s the same strategy. Once we’re in, we work hard to protect by providing a very high degree of customer experience and start to expand. So it’s a very simplistic, yet very effective strategy and he in certain instances is our Trojan horse to do that.
Tony Zook, CEO, NeoGenomics: And Warren, maybe you could just take a moment if you don’t mind on geographic opportunities to present themselves with this strategy as well like pipeline? Yes.
Warren Stone, Chief Commercial Officer, NeoGenomics: So actually very recent, it’s a great call, I tell you. So I mean, we look at The United States as well and we look at it geographically in terms of where we have a highest penetration, our lowest penetration. And when we did that analysis, one of the elements that sort of stood out for us was a relatively low penetration in the Northeast Of The United States. So think Pennsylvania, New York and sort of up. And this perplexed us for a while and we actually realized that there were two primary drivers that were limiting our penetration.
The first one was that New York State requires a different set of registration for tests. And we were a little late at ensuring some of our key tests were registered and we’re working actively on that. But secondly, we realized that not having a lab presence in the Northeast was limiting our ability to offer a good customer experience on short turnaround tests, particularly flow, which is critical in that first line decision making from a therapy point of view. The turnaround time is sort of twenty four to twelve hours. And if you’re wasting six to twelve of those hours in logistics and not testing, you’re going to struggle from a competitiveness perspective.
So earlier this week, we actually announced the definitive agreement to acquire Pathway to roughly a 30,000 square foot lab in New Jersey, which is going to allow us to offer the same level of experience that we offer in many other parts of the country now in the Northeast. So that represents a meaningful opportunity for growth for us
Luke Sergai, Analyst, Barclays: in the future as well.
Jeff Sherman, CFO, NeoGenomics: And was part of our what we said we were going to do from a growth perspective, from a corp dev business development perspective, kind of fit in line a tuck in acquisition, roughly around $20,000,000 of revenue. We got it for less than 0.5 times revenue. So a good fiscal acquisition, but actually a good beachhead to grow market share and actually pull in more of that NGS volume. So it fits very well into our strategy of how do we grow the business.
Luke Sergai, Analyst, Barclays: Yes. I mean, it’s like clearly a strategic bolt on. You’re gaining your presence. Thank you. This is a great conversation.
Warren Stone, Chief Commercial Officer, NeoGenomics: Thanks for having me. Thank you. Appreciate
Luke Sergai, Analyst, Barclays: it. Yes. Great.
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