NeoGenomics at Leerink Global Healthcare: Strategic Transition and Growth

On Tuesday, 11 March 2025, NeoGenomics Inc. (NASDAQ: NEO) presented its strategic vision and financial results at the Leerink Global Healthcare Conference 2025. The discussion highlighted a positive quarter with robust clinical revenue growth and strategic changes, including a CEO transition. However, challenges persist in the nonclinical sector, requiring further attention.

Key Takeaways

• NeoGenomics reported strong clinical revenue growth, while nonclinical revenue saw declines.
• A CEO transition is underway, with Tony Zook taking the helm to focus on R&D and product commercialization.
• The Pathline acquisition is expected to enhance market share and service offerings in the Northeast.
• Revenue cycle management improvements were noted, though opportunities for enhancement remain.
• The company remains optimistic about future growth prospects and strategic direction.

Financial Results

• Clinical revenue grew by 15% in both Q4 and the full year, making up 85% of the total business.
• Nonclinical revenue decreased by 12% in Q4 and 7% for the year, partly due to challenges in selling radar.
• Full-year revenue was at the top end of original guidance and the midpoint of revised guidance.
• Adjusted EBITDA reached the top end of guidance, indicating strong financial health.
• Excluding radar, revenue growth would have been between 13.5% and 14%.
• Q1 2024 saw the strongest revenue growth at 14%, driven by the NeoComp solid tumor product.

Operational Updates

• The nonclinical business model has shifted to a more standardized approach with significant sales force changes.
• January and February bookings were robust, with a positive quality index.
• Radar version 1.1 has passed validation and verification, with a court case scheduled for October.
• The Pathline acquisition, valued at $20 million, is 85% oncology-focused and expected to be accretive in 2026.
• Pathline’s addition is anticipated to lower ASP and gross margins in 2025.

Future Outlook

• NeoGenomics is committed to a patient-centric strategy and oncology focus.
• Investments in R&D will continue, with a focus on MRD and pan-tracer programs.
• The launch of a liquid biopsy product is planned for Q2.
• The company anticipates biomarker legislation to benefit revenue and earnings.
• Managed care contract negotiations are ongoing to improve revenue cycles.

Q&A Highlights

• The leadership transition aims to maintain consistent strategy and capitalize on existing management strengths.
• Revenue and cost synergies from the Pathline acquisition are expected.
• The leadership team is deemed capable of managing a larger business scale.
• The NGS business is anticipated to become a significant player in the community setting over the next five to ten years.

In conclusion, NeoGenomics is poised for strategic growth with a focus on innovation and market expansion. For more detailed insights, please refer to the full conference call transcript.

Full transcript - Leerink Global Healthcare Conference 2025:

Puneet Sada, Host, Leerink: Alright. Great. So I’m Puneet Sada.

I cover life science tools and diagnostics here at Leerink, and it’s my pleasure to be hosting team NeoGenomics. Joining us on the stage here is, first of all, Chris Smith, Gartner’s CEO, Jeff Sherman, a CFO, also incoming CEO, Tony Zook, and Warren, Warren Stone, head of clinical service president. Great to have you guys here.

Chris Smith, CEO, NeoGenomics: Thank you. Thank you.

Puneet Sada, Host, Leerink: Yeah. To be here. So maybe just to as I was looking at, the discussion we had, you know, during the quarter, obviously, you know, solid quarter with revenues up, you know, 11%. Some challenges in what is now called, I’m calling it pharma services, division or you’re calling it nonclinical. And NGS, again, impressive.

Overall, you know, quarter from my perspective was was was was relatively good, but I think from a street perspective, maybe slightly weaker. You have raised your LRP ahead of that. And the key question, however, that kept keeps coming back as I’m sure, and, Chris, you have addressed that in other forums is is really the, you know, sort of the timing of the CEO transition. Maybe what if, I mean, if I would I would love if you could, you know, provide any additional comments on that, but I wanna hear more from Tony and and his his thinking and his strategy on that on that point. But, Chris, go ahead.

Chris Smith, CEO, NeoGenomics: Yeah. Why don’t we take it if it’s okay in three pieces? I’ll talk a little bit about the whole thing, then maybe Jeff the quarter, and then Tony can talk about Sure. His transition with the LRP. Look, I think at the end of the day, you’re right.

It was a very good quarter. We hit right in the middle of guidance. Mhmm. I think reputationally, candidly, we had put kinda nine quarters on the board. Most of those had been beat and raised type of things.

And I think as we started building out the business, we feel very good. And I told the the analyst on the call that we said we win the football game between six and eight points, and we won by seven. You wanted us to win by nine. So, but I think overall, really good quarter. I think the thing that impacted it was the nonclinical business.

We had thought about that business turning once Warren took it over last summer, really in the fourth quarter, and I think we were a quarter too late. Right?

Unidentified speaker: So I

Chris Smith, CEO, NeoGenomics: think it’s it’s taking us a little bit longer to turn that business, but very robust growth in clinical. We grew 9% in our units. We continue to grow the AUP, and so the clinical business really grew well. Look, as far as LRP, and then again, I went to one Tony to talk about it. I think our view was we had worked through that LRP.

And I think from a confidence to the market, we continued to feel good about it. And so we went out and shared that. So we were always gonna come out and talk about it. And I think it took us time to get to that 12 to 13% growth. You know, when we first had an investor day, in early twenty three, it was seven to nine.

We raised it to 10. We then settled, you know, 11 to 13. I just don’t think you can keep going back and raising the LRP. And since Tony was a part of the process with the strategy is why we kinda went out. But maybe can you give more color on the quarter?

And then Tony, are you good to talk about your thoughts on the LRP? Yes.

Jeff Sherman, CFO, NeoGenomics: I think with respect to Q4, you know, as Chris said, I mean, our clinical revenue continued to be very strong. So we grew clinical revenue 15% in the fourth quarter, ’15 percent for the year. Which is 85%

Chris Smith, CEO, NeoGenomics: of the total.

Unidentified speaker: Which is

Jeff Sherman, CFO, NeoGenomics: 85% of our total business. The non clinical piece, as we said, we were expecting a typical budget flush for the pharma business. We thought we had budgeted that or forecasted that conservatively. We just didn’t see it. We don’t think that is a neo specific issue.

That was really we’ve seen other input and reports that was more of a macro issue. And so for the year, we had started the year at 10% to 12% revenue growth and 21% to 24,000,000 in adjusted EBITDA. During the year, we raised our adjusted EBITDA twice to 37 to $40,000,000 and we raised our revenue to 11 to 13%. So we finished at the top end of our revenue original revenue guidance, the midpoint of our revised guidance and at the top end of our adjusted EBITDA guidance. And really, if you look at our nonclinical revenue for the year, it was down 12% in the fourth quarter, ’7 percent for the year.

Half of that decline in the nonclinical revenue was really the inability to sell radar. So just we weren’t able to go on and sell new clients for radar. And so if you look at that business just being flat for the year, that would have given us 13%, thirteen point five %, fourteen % growth. So as we kind of fast forward to 2025, again, we finished the year very strong clinical growth, expect that strong growth to continue into 2025. We do expect that the nonclinical business to return to growth, nominal growth, moderate growth.

But even doing that, I think it gives us confidence that we’ve got the positioning and the market presence to grow. We’ve also added over 30% more to our sales force that really happened in at the end of Q4 into Q4 into the beginning of Q1. That will be maturing in the back half of the year. And then finally, we have new product coming out, liquid biopsy, that we think is going to be similar and impact as the NeoComp solid tumor product was, so pretty significant impact. And finally, I would just say, if you look at Q1 last year, that was really the third quarter, third or fourth quarter where the NeoComp solid tumor product was ramping.

So our Q1 last year, we had 14% revenue growth. It was by far our strongest quarter last year because we had this product ramping. And so even the 8% to 10% growth that we’ve said for Q1 of ’twenty five is really on top of the strongest quarter last year. And so as that starts maturing, you know, the annualization will get much easier as we go Q2, Q3, Q4. So those are really all the things that give us confidence that the 2025 guide of of 11/2013 is very achievable.

Just continuing to do what we’re doing, seeing some stabilization in the non clinical business, particularly pharma, and then new sales reps and new products all are going to come together, we think, to give us that revenue growth for the year. And we expect that growth will accelerate as the year progresses.

Tony Zook, Incoming CEO, NeoGenomics: And as it relates to my own confidence in the LRP, for me, this transition has been actually quite easy because I’ve been on the board for two years. And as part of that, Chris has created a process where we were openly discussing the budget for any given year as well as the LRP. So all the underlying core assumptions have been discussed and rediscussed on multiple occasions. I focus very much on the key drivers. I spent a lot of time with Warren as we were I wanted to understand the sales force expansion activities from the very beginning, just upsizing to the hospital side and then when it came to the oncology Salesforce expansion as well.

I was very comfortable with the Salesforce effectiveness work streams that were ongoing. You know, I had the opportunity to see the launch planning, the timelines for each of those, which are key drivers. The NGS growth rate was another. And then the financial discipline that’s across the organization, has been well instilled. And now we see opportunities to get even further enhancements with the programs like LIMS, etcetera.

So, from my perspective, I was fully on board with the LRP. So therefore, there was no reason to delay so that I could do it as opposed to what’s right for the business and what’s right for the normal timing. So I’m I’m fully aligned to it.

Puneet Sada, Host, Leerink: Yeah. No. That’s that’s helpful perspective. Tony, I mean, you’re obviously familiar with the business. You’ve sat through a lot of meetings and understood, you know, as you described, you had a, you know, clear picture in into what this LRP means.

I mean, now you will be owning that LRP. So maybe just give us a a view on where your what do you see as your priorities, where you where where where which part of the organization or which part of the process and and whatnot where you’ll be spending a lot of your time?

Tony Zook, Incoming CEO, NeoGenomics: Yeah. I’d be happy to. Again, if I look to what I’ve seen over the last two years, what Chris and the management team have done is nothing short of stellar.

Unidentified speaker: You

Tony Zook, Incoming CEO, NeoGenomics: know, they were taking over a company in transition. And the initial focus was we got to do what we have to do to align the strategy and drive revenue. I’m fully aligned to the patient centric strategy and remaining in oncology and this this strong foundation that we have in the community hospital environment. It’s actually a position of strength. I don’t know that we emphasize it enough.

So I very much believed in that as the underpinning. As I mentioned, I believe very strongly as well in some of the financial discipline that’s been embedded across the company. And so I see the strategy moving forward very consistent to what is already in place. So don’t expect a big change there. My points of emphasis will be slightly different than where Chris is only because of this point in time.

We did not have the luxury over the last two years to spend a lot of energy in r and d. We now have an outstanding leader in Andrew that’s come on board. And so for my focus, it’s going to be over the next couple of years. Let’s make sure we have the portfolio that we’re going to thrive in, you know, three, four and five years from now, which means, of course, getting our programs through the current system with MRD, you know, pan tracer and then build from that

Unidentified speaker: foundation, but to do it in

Tony Zook, Incoming CEO, NeoGenomics: a very responsible way. And

Puneet Sada, Host, Leerink: and if you could elaborate in in terms of the communication to the rest of the organization, the employees, and I think there’s a this is a bit of a broader question, if I may ask, is really, you know, what’s been that conversation like in with on the employee side with the transition. The second, aspect of that is, I mean, a number of the senior leaders have, you know, signed, retention agreements and and, retention plans for several of the key employees. So just, you know, I think that’s the question that we continue to get is with any transition, what departures that one must expect from an investor point of view or anticipate from an investor point of view and then the, you know, the employee side too, if you could cover both of those.

Chris Smith, CEO, NeoGenomics: Yeah. Look, I would say, first of all, I think there was a mass overreaction to the market with with transitioning. I think a company is always bigger than one person. And I think at the end of the day, the leadership team we built is stellar probably for a business that can do 2 or $3,000,000,000.

Unidentified speaker: And it

Chris Smith, CEO, NeoGenomics: was always our intent. I think that’s one. I’d say the second thing would be, I’m a big believer the business is going well. You stay inside the company. If the business is not, you go outside.

We felt very good even though why we did look external. I think internally looking at some people and and including Tony. And I think the team felt very good about that. I think if you go outside, what happens to management team, what happens to strategy? I think the goal was to keep that, you know, kinda consistent.

And, Pete, when I think about this, I think companies are life cycles. Right? They’re breathing organisms, and we always talk about that we’re stewards of this business while we’re here, and and our goal is to leave it better when we leave. And in our life journey, we really went through a really heavy three year lift to turn this business around. And that got us to what we’re talking about now in this 12 to 13 or 11 to 13% this year growth.

But the next phase is really about the product and how you accelerate that growth. And I think it was important from a leadership perspective to bring in someone who had extensive experience in r and d, so organic development, but also commercialization of launching products because so much of the next three years is kind of around around the product. And I think for me, it was either leave now or leave three years from now. And I and that was really, I think, where where it came down to. And then we tried to pick a good transition where Tony could get out and meet investors while I was still here, get to meet teammates.

So I think team generally feels pretty good about it. It’s definitely different, but I think the team generally feels good. And I’d leave it to Jeff and Warren who are obviously key members of that team.

Tony Zook, Incoming CEO, NeoGenomics: The only point I’ll add and then they could jump in. I know whenever a new CEO comes in, there’s always this anticipated, oh, well, and he’s going to bring in or she’s going to bring in. I can only tell you what I’ve told people, which is one of the biggest attractions for me in taking this role is, hey, I love the culture of Neo. I love, you know, the passion that everybody has. I really respect the management team here.

It’s it’s a management team that was built not just for the business of today, but for the business of tomorrow. And so, I’ve been very impressed with their skills. I’ve been very impressed with the people that they have onboarded. And so we have outstanding talent at NeoGenomics. And, you know, I’m not coming in thinking, oh, my goodness, here’s a problem that we have.

I don’t feel that at all. There will be change. It’s inevitable, but it’s not going to be driven because I don’t think people are capable in the roles that they have. They’re more than relationships.

Jeff Sherman, CFO, NeoGenomics: Yeah. I think I would just add, you know, Warren and I joined around the same time a little bit over two years ago. And I think there’s been, you know, a significant, you know, upgrade in the leadership, below us as well. So as Tony said, we’ve we’ve brought in a lot of new people in the country in the company. The mission is the same.

Our strategy is the same. You know, I think the core team executing is the same. I think we’re energized coming off of two very strong years of continuing the momentum and are very, you know, I think very, very open to, you know, the growth pattern, you know, potential we see. And I think the confidence of the team going forward, you know, it’s a team that’s worked together. We enjoy working together, expect to be working together in the future.

And I think the new people we have brought on, which have been significant, probably more than half of our, you know, top 100 leaders have joined in the last two years. They have all contributed to to the growth and our expectation is, you know, we’ll we’ll continue to do that.

Puneet Sada, Host, Leerink: Where do you stand in, Chris, from your perspective in in the revenue cycle management? And that I’m asking that because, you know, with the prior management team, that was a big question mark. And you came in. You said that in, and this is an industry where, as I think you pointed out before and we’ve talked about it, that this is a lot of, maybe it’s the hobby genetics or whatever, however you framed it, you know. We’re not

Chris Smith, CEO, NeoGenomics: a nonprofit. You’re not

Puneet Sada, Host, Leerink: a nonprofit. Starbucks didn’t give

Chris Smith, CEO, NeoGenomics: me my coffee this morning.

Puneet Sada, Host, Leerink: Right? That’s right. Yeah. So, you put in that discipline and process. And so I’m trying to understand how much of that discipline and process I think that’s one of the key questions from the investor side is how much of that discipline process stays and sticks and and and continues on in a market that is more competitive every year versus when you came in?

Chris Smith, CEO, NeoGenomics: Look, I would say for a couple I think a % of it stays. I I would say, look, at the end of the day, I may have come in and talked about that. Jeff and his team are the ones that executed it. And I would say that we’re we’re only probably at a half time of the game. Like, there’s still a lot of runway in revenue cycle management, and it’s it’s also contracting.

And I think especially as you bring out some of these large panels, liquid biopsy, MRD, it’s gonna be more important that you’re with third party payers. But we have the unique position in the market that two thirds of our business is directly to hospitals. So we’re not going through the third party payers. Really, probably what 15% is through third party payers. So very different than our competitors.

But I would say, look, I don’t wanna speak for Tony, but I think we’re a % committed. But really, it was Jeff and his team that drove that. And I don’t know if you have anything else.

Unidentified speaker: Yeah.

Jeff Sherman, CFO, NeoGenomics: I I would add. I would say from a question from a process standpoint, there’s been a lot more rigor process analytics across the company over the last two and a half years. So I think we have taken a look at the whole company. I mean, I Chris really brought, you know, a sense of urgency and accountability, and I certainly expect that to continue. On the RCM front, there’s continues to be a significant opportunity there.

So I think we’ve done a good job, of closing the gap between expected payment and what we should be paid, but there are still challenges that we and others in the space face, particularly with large panel tests. And so as you look at large panel tests being denied, the state biomarker legislation, you know, will will be a tailwind there. More states are passing it. But I’ve been also careful to say, just because the state passes biomarker legislation, the payers don’t flip a switch and start paying us. We still have to be in the trenches kind of on the state by state, payer by payer basis.

But that’s a long term tailwind, and that will be a % accretive to revenue, gross margin and earnings because we’re doing that work today. And for that managed care book of business, we’re not being paid or it’s being denied, you know, significantly higher rates. So that that will be a tailwind. But we’re also continuing to do rate increases. And as Chris said, we’re also negotiating managed care increases.

So when we say we’re doing rate increases, that’s for that hospital business where we can implement a rate increase for our managed care negotiation. Obviously, more complex, and we have to go through a negotiation process when contracts are up. But that still represents an opportunity. And we have over 300 contracts. You know, we’ve added resources for our managed care contracting as well.

It represents still represents a multiyear opportunity to make sure we’re getting paid market rates and getting paid for the work we’re doing.

Puneet Sada, Host, Leerink: Great. I want to touch on a number of points. I mean, NGS being important one. But before that, maybe just on Pathline since that was announced recently. Simply put, it looks like it helps you gain share in the market with the capabilities that they had, and and and, I mean, in the Northeast.

So maybe just, you know, walk us through sort of, you know, how much of is how much in your view is that sort of share gain? And then what do you do in terms of what opportunity this unlocked for you? And what do you do with some of those assays that are non core to oncology?

Chris Smith, CEO, NeoGenomics: So, look, I I would say when we all came in together and you start to look at the business and learn the levers that’s being pulled. And one of the things that we find is that this is very much a service industry.

Unidentified speaker: Mhmm. You

Chris Smith, CEO, NeoGenomics: win and lose on customer experience.

Jeff Sherman, CFO, NeoGenomics: And one of the

Chris Smith, CEO, NeoGenomics: key components is turnaround time. Yeah. And when you’re doing a large panel, it’s a ten day turnaround time a day to ship it across the country is not a big deal. But flow, which is usually patients in the hospital, published 20 people, they’re about twenty four hours, but accounts went twelve hours. Losing overnighting something from New York down to Fort Myers is a challenge.

I think so. So number one, one of our big levers in the hospital is to win the flow business on turnaround time and then vertically the integrator for many. That was a challenge. And when you looked at New York, we were about 50% penetrated from market share as we would be in places like Florida, California or Texas. I think the other thing that drove it to number three state for cancer, just New York and highly dense.

So it was like an obvious thing. At some point, if you’re going to do your strategy, you’re going to have to get to New York. So we’ve been looking in New York for probably eighteen, fifteen, eighteen months.

Unidentified speaker: We’ve

Chris Smith, CEO, NeoGenomics: been looking at labs. Labs. We also looked at turning dirt. I think the challenge with turning dirt like we did in Raleigh is 10,000,000 to $12,000,000 We were able to go buy a $20,000,000 business for 0.5 times revenue. So basically the same with a customer base, 20,000,000 revenue and we’re rather than some of the reference labs that maybe just want the customer as we want the lab, we want the teammates, we put the whole bit.

So I think it’s going to have a significant impact in the Northeast to implement the strategy that’s worked incredibly well in places like Florida, Texas, California and those surrounding states.

Jeff Sherman, CFO, NeoGenomics: It’s also New York State approved, which is another big plus. So we expect to see both revenue synergies and cost synergies. And we said we expect it to be accretive in ’twenty six. So we’ll have some incremental transition costs and things. But we do expect it’ll be incremental to adjusted EBITDA in 2026.

Chris Smith, CEO, NeoGenomics: But I think it comes back to this discipline, right? So we could have probably bought last sooner at two times revenue. Look, we realize that there would be an opportunity that was right. So we continue to work towards that. And I think it helped a lot bringing Kareem to run BD to have a team that’s focused indirectly on it.

So I think it’s we feel really good about 85% of it is oncology. So there is about 15% and we’ll probably allow that to go for a while. Just just think because they are the same customers, so we don’t lose those customers. But but to be very clear, we’re not getting the cholesterol on triglyceride and perhaps in your business, right?

Puneet Sada, Host, Leerink: We’re Yeah.

Chris Smith, CEO, NeoGenomics: We went after this for cancer. Our strategy hasn’t changed, but we feel it was the right opportunity for us.

Jeff Sherman, CFO, NeoGenomics: Do you want to talk about going to Mark? Yes.

Warren Stone, Head of Clinical Service President, NeoGenomics: I was going to say, I think an important aspect is also a 30,000 foot square square foot lab. So it’s a large lab and creates a lot of opportunity for expansion and growth. So we will move certain modalities that Pathline don’t offer today into that lab.

Puneet Sada, Host, Leerink: Yeah. Those are next question.

Warren Stone, Head of Clinical Service President, NeoGenomics: To close so that we can offer a larger menu directly from that lab. Certainly, those those elements, those tests which have a shorter turnaround time, which Krish was mentioning. So that’s an important part. And there’s probably about 45% opportunity for growth and expansion there. So we feel over the sort of medium and long term, it creates the capacity we need to serve the Northeast.

But ultimately, the analysis that we’ve done is where the Northeast, we’re 50% penetrated relative to the other markets, in The United States. So it’s materially lower than what we see in in other markets. So and when we did the analysis, there was there were two aspects. It was proximity to customer to provide the service and then New York State, which requires a different registration for portfolio. And those were the two elements that we addressed through the Pathline acquisition.

And and in a very short space of time, customer outreach has been very positive in terms of the announcement. Yes.

Chris Smith, CEO, NeoGenomics: Remember also very dense

Unidentified speaker: in the third largest.

Chris Smith, CEO, NeoGenomics: So we’re not talking about Fargo dips or Yeah. You can probably look at a map and see potential. Our goal is not to try to open a hundred laps.

Unidentified speaker: Yeah.

Chris Smith, CEO, NeoGenomics: It’ll be very right and shot where we know that it’ll make a need need impact.

Puneet Sada, Host, Leerink: Does it impact your ASP?

Jeff Sherman, CFO, NeoGenomics: It will. Yeah. It will. It will lower the ASP in 2025, and it’ll lower our gross margins as well. And, you know, it’ll be slightly we’re not changing our adjusted EBITDA guidance.

There’ll be a slight negative impact in ’twenty five, and it’ll be accretive to adjusted EBITDA in ’twenty six. But you should expect a lower ASP because they’re doing a lot less NGS type of testing. So they’re doing a lower level of testing. But that’s what we’ll hope to we’ll hope expect to expand that over time and drive that ASP up over time.

Puneet Sada, Host, Leerink: So is there CapEx then toward We’re

Chris Smith, CEO, NeoGenomics: not changing any of our guide. Like, so Jeff said, that specific $20,000,000 is a lower gross margin. We’re not lowering our guide to

Tony Zook, Incoming CEO, NeoGenomics: the market.

Jeff Sherman, CFO, NeoGenomics: Yeah. And we’re not expecting we’ve given a range for CapEx $30,000,000 to $35,000,000 No change to our CapEx range. So immaterial CapEx needs. Got it.

Puneet Sada, Host, Leerink: Okay. Then let’s talk about NGS growth. I mean, what’s interesting in this market is that a number of companies are growing. And maybe I’ll I’ll start with Warren on this, and then, I want others to chime in a bit too. But, you know, is this you’re you’re growing NGS growth was 25%.

I think about 30% of your mix is NGS now. Clinical side. Clinical side of the business. Yeah. Clinical side of the business.

But it’s it’s a it’s a remarkable growth when you think about CGP market at this point in time from this, you know, sort of the genesis of the CGP market to now. It’s relatively one could say it’s highly penetrated. So we’ll maybe just talk talk to us about what’s driving the growth there. Is it concurrent testing? Is it sort of doing, you know, liquid and tissue?

And is it indication expansion? Or is it earlier lines of therapies? What is it?

Warren Stone, Head of Clinical Service President, NeoGenomics: Yeah. I think it’s multiple factors. And and today, we’re not benefiting from the concurrent testing because we haven’t actually launched a competitive product in order to do that. That’s a Q2 launch for liquid in this year, which we can touch on. But our current growth is really coming from three factors.

I think first and foremost, it’s important to point out that most of our targeting goes to the community. We don’t spend a lot of time in academic medical centers. So we address the community where roughly eighty percent of cancer patients are actually served and treated. And that still remains in terms of large CGP panels relatively for cancer therapy selection. So that’s why it’s underpenetrated.

But, for cancer therapy selection. So that’s why it’s under penetrated, but people are starting to adopt. So that’s convincing physicians to to actually use CGP as one of the growth drivers for us. The second area of growth driver for us is we do have a number of single gene and multimodality solutions for therapy selection and certain physicians are sort of upgrading to large panels. And that’s an upgrade for us and it often reflects in the mix that Jeff speaks about from an AUP point of view.

So that’s a second lever. And the third is competitive takeaway. We’re seeing more and more in the community setting that just administrative burden is a major problem in terms of practice profitability, and they’re looking to streamline processes, reduce the number of vendors that they’re dealing with, and they’re they’re looking to consolidate their their testing with as fewer providers as possible. And because of our unique position around heme, where they have few other alternatives of customers migrating towards us, and we try and wrap around services like interfaces and care pathways to make that workflow that much more seamless. When we introduce our PanTracer liquid test, which is latter part of Q2, that’s gonna allow for accelerated growth because we can then drive a concurrent testing strategy, particularly around early stage lung, which is in the guidelines.

Chris Smith, CEO, NeoGenomics: Yeah. And when you think about penetrated, you’re talking about penetrated. NGS, I don’t know, ten years has been out there.

Unidentified speaker: Mhmm. But

Chris Smith, CEO, NeoGenomics: a lot of the independent data that has only about 30 or 35% penetrated because a lot of it’s not in the community. You have to go to MD Anderson or Sloan Kettering, they’re doing NGS testing. But remember, our sweet spot is really in that community. Mhmm. And until it becomes guidelines, I look, one of the things I’m most excited about the business is the runway in NGS.

Yeah. We all love MRD, and it’s a sexy big market that’s gonna evolve over the next ten or twenty years. But I’m telling you, the NGS business, if you really research it, for the next five to ten years, we’ll become a significant player where we live every day in the community and in a much higher AUP. So we love how that gives us that

Puneet Sada, Host, Leerink: that Yeah. No. It’s it’s interesting because we had a panel from, oncologists from MD Anderson. They were saying, on the flip side, they’re seeing from their perspective, thirty to thirty five percent of oncologists are still not using.

Unidentified speaker: Yeah. You

Jeff Sherman, CFO, NeoGenomics: know? And I kind of

Chris Smith, CEO, NeoGenomics: joke that you build your business in cancer and MD Anderson, but but the money comes from Mobile, Alabama, and then you go South Carolina.

Puneet Sada, Host, Leerink: That’s where the volume is.

Chris Smith, CEO, NeoGenomics: Yeah. That’s where the volume Yeah. 80%.

Warren Stone, Head of Clinical Service President, NeoGenomics: Yeah. And and if you can imagine that 30 to 35% of physicians in an academic center are not using it, imagine what’s happening in the community. Mhmm.

Puneet Sada, Host, Leerink: Yeah. So, maybe on, you know, on that point, sort of, NGS, if you look at that market, given the penetration where you’re at, at, and and and and the growth we’re seeing. So when you think about the LRP, it kind of implies you you would have to grow faster than what you’re growing in ’24 and ’25, right, in the in the longer I mean, the if you put it the long longer LRP is even higher.

Chris Smith, CEO, NeoGenomics: Yeah. I think we do it at 25%.

Puneet Sada, Host, Leerink: Yeah.

Chris Smith, CEO, NeoGenomics: Right? So what

Unidentified speaker: I

Chris Smith, CEO, NeoGenomics: would say is there were certain quarters last year where we had above 35%. But I think 25%, we believe, is in the super spot. But we’re also gonna be bringing new products like liquid that will continue to to grow those normal modalities, the fish, the flow, the side of which only grow 2% to 4% is to grow those faster than market.

Jeff Sherman, CFO, NeoGenomics: Yeah. And again, just to go back to, you know, in ’twenty three, we grew 16%. In ’twenty four, we grew our clinical business 15%. We grew the overall business 12%. So our nonclinical business actually drove down the growth rate.

So as we look at 2025 and beyond, again, just getting that nonclinical back business back to growing even, you know, low single digits and continuing the momentum we’ve seen in clinical, gives us confidence in that long range, 13% plus growth rate.

Puneet Sada, Host, Leerink: Yes. How, core is nonclinical to you except a radar? How yeah. I mean, in terms of how important that

Chris Smith, CEO, NeoGenomics: is is non core, you mean

Puneet Sada, Host, Leerink: with this? Meaning the pharma business that you have that you’re where you’re serving

Unidentified speaker: Yeah.

Puneet Sada, Host, Leerink: With immunohistochemistry or you’re serving other products flow maybe in some of the clinical trials. Maybe just help us understand sort of how because obviously, that’s been I mean, it’s it’s been a it’s been a bit of a drag and not partly because of radar, but maybe just help us understand, you know, what’s been the drag there and why is this business is still core.

Chris Smith, CEO, NeoGenomics: Look. I think our go to market was wrong candidly. We made a leadership change last summer, asked Warren to pick that up. It took time to we probably changed out 70% of the sales force, but changed out that sales force. That was a sales force that used to be paid on bookings.

We’ve pivoted to now bookings and revenue. So I think a lot of that has to do it. But remember, it absorbs a lot overhead, pharma does. And a lot of those tests are very similar to tests that we’re running inside our clinical business either, so it’s it’s easy. But look, at the end of the day, I think we have to execute on every single area that we’re in.

And and, you know, unfortunately, we were not executing our pharma, so we had to take take measures to make a change. I I feel good about that. But I think it’s really an h is when you start to see that business.

Jeff Sherman, CFO, NeoGenomics: But even if you look at the pharma business, our previous ADX business, I mean, our revenue was down last year, but the gross profit and gross margins were up significantly. So we did do some rationalization of the business and got rid of unprofitable contracts. And I think as we think about the growth prospects there as well, you know, the ability to drive incremental revenue there. The LIMS project will also be helpful because historically, we’ve had separate lab staff working on the clinical business and the pharma business. And with one on multiple different LIMS systems, the fact that we’re moving to one LIMS system will actually make the will allow us to optimize the business as well and get a lot more operating efficiencies because the same same lab person can work on a clinical and a pharma sample together.

Whereas before, they haven’t been able to do that because of lending

Warren Stone, Head of Clinical Service President, NeoGenomics: systems. And maybe I’ll just I’ll build on that. So as as we change the business model as of January that we’ve rolled out, we moved away from a very much a bespoke business model for pharma. Everything was bespoke and we moved to a much more standardized model. And what that allows is it’s certainly gonna help the the buying process from a customer point of view.

But operationally, it aligns so much more with what we do on the clinical side Mhmm. That it’s really gonna allow for us to to leverage that scale along with the the clinical business, which should obviously optimize workflows and help to drive down some of the fixed costs that we have within the lab. So we’ve done a complete reposition to make that business much more attractive.

Jeff Sherman, CFO, NeoGenomics: Maybe just such as bookings

Chris Smith, CEO, NeoGenomics: in January.

Warren Stone, Head of Clinical Service President, NeoGenomics: So, yeah, one of the things we we a leading indicator in terms of performance is is bookings. And January was particularly, robust as was February for for that matter. It was robust in terms of incoming bookings, not only in the the value of the bookings

Unidentified speaker: Mhmm.

Warren Stone, Head of Clinical Service President, NeoGenomics: But also we look at the quality index of the booking. So what is the, how profitable are these bookings gonna be for us? So it’s and and the leading indicators are all pointing very positively at this stage. Early days, but very positive indicator.

Puneet Sada, Host, Leerink: Got it. Given the time, let me just quick rapid fire on the radar. Is it what’s the update there and radar two point o, so to speak?

Chris Smith, CEO, NeoGenomics: Yeah. Sure. So rapid fire, we’ve cleared validation and verification on 1.1. Mhmm. We as you know, we settled with Natera on the one lawsuit last year.

So we feel really good about that. We’ll submit MOLDIX bridging study that shows equivalency, probably late q two. And then we have the court case in October. So a lot of things are moving towards that. I would say on next gen or what you mentioned two point o significant movement continuing on the next gen technology.

But we believe that as we get through this court case and if it’s in our favor, we feel really good about that, that it’s gonna position us well for several years with that product line, why next gens are coming.

Puneet Sada, Host, Leerink: Okay. On the, ASP that you talked about earlier, obviously, there’ll be an impact. But when do you expect the ASP to start recovering back again this year?

Jeff Sherman, CFO, NeoGenomics: Yeah. I think there’ll be, I would say, a several quarter impact at least. I mean, so I wouldn’t expect it to start overall increase in just for the Pathline impact. I mean, it’ll increase because of NGS growth and the RCM initiatives and price increases. The Pathline impact, I would expect, as we start growing that NGS business, more that we’ll start getting some of of that back in 2026 as that NGS growth starts to grow and it starts to approach more of a normalized NEO ASP over time.

Puneet Sada, Host, Leerink: And just last one in terms of you said obviously, you were in a unique position with twothree of your revenue sort of on the clinical side coming from those contracts. How stable is that in terms of as you move more and more towards NGS liquid reimbursement of those products, maybe can you talk to us? Because obviously, the tech only model that was in place was well for, you know, the Right. Historical tests.

Chris Smith, CEO, NeoGenomics: I think it depends on how much of that business goes into the hospital versus the community oncologist. The hospital business we see if like today, our NGS, if we’re billing it to a hospital, we run it. It’s similar. It’s direct bill, and they pay us, and they file the reimbursement. But if more of our business becomes third party, then obviously, you have the impact.

But it’s a world you know, we today probably have over 300, payer contracts. So it’s not like we’re not we’re new to the game. It’s not like we have three tests. Because of our broad menu, we’ve been selling into third party for a long time. It’s just about adding a test onto an existing

Jeff Sherman, CFO, NeoGenomics: And that is where we expect the biomarker legislation, particularly in the large panel test, to be a tailwind for the next couple of years as well as states mandate coverage of that. That will be helpful as well to get paid. Got it. Okay. Alright, guys.

We’re at the Thank you.

Puneet Sada, Host, Leerink: Order the time. Thank you again. Thank you very much. Okay.

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