NGNM Company Overview Presentation July 2013
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NeoGenomics provides cancer genetic testing services to oncologists, pathologists, and hospitals. It has experienced strong and consistent growth in revenue and tests performed annually through expanding its test menu, increasing sales force productivity, and gaining market share. The company aims to continue its growth by launching new tests, pursuing partnerships and acquisitions, and capitalizing on the large and growing market for cancer genetic testing fueled by an aging population and advancements in targeted therapies.
NGNM Company Overview Presentation July 2013
- 1. 1 NASDAQ: NEO Company Overview Presentation July 2013 Time Matters. Results Count! “Improving Patient Care through exceptional cancer genetic testing services!”
- 2. 22 Forward-looking Statements This presentation contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934; and the Private Securities Litigation Reform Act of 1995. The words “may”, “would”, “could”, “will”, “expect”, “estimate”, “anticipate”, “believe”, “intend”, “plan”, “goal”, and similar expressions and variations thereof are intended to specifically identify forward-looking statements. All statements that are not statements of historical fact are forward-looking statements. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The risks that might cause such differences are identified in our filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise the forward looking statements made in this presentation to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events.
- 3. 33 Investment Highlights • Fast growing pure-play, cancer genetics lab • Servicing: Oncologists, Pathologists and Hospitals • “Tech-Only” model creates strategic client partnerships • Rapidly growing industry undergoing consolidation • Strong Management Team with large cap lab experience • Industry leading revenue & test volume growth driven by new test innovation and increasing sales force productivity • Increasing productivity and operating leverage leading to accelerating cash flow and net income
- 4. 44 Consistent Historical Growth $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual Revenue ($, 000’s) 0 20,000 40,000 60,000 80,000 100,000 120,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 Tests Performed (000’s)
- 5. 55 Accelerating Cash Flow & Earnings ($, 000's) 2010 2011 2012 Total Revenue 34,371$ 43,484$ 59,867$ % Growth 16.6% 26.5% 37.7% Total Gross Margin 15,783 19,428 26,836 Gross Margin % 45.9% 44.7% 44.8% Sales & Marketing Exp as a % of Rev 21.8% 16.0% 12.5% Gen & Admin Exp as a % of Rev 31.2% 28.4% 26.5% R&D Exp as a % of Rev 1.5% 1.2% 3.8% SG&A Expenses 18,746 19,837 25,624 Total SG&A as a % of Rev 54.5% 45.6% 42.8% Adjusted EBITDA (566)$ 2,134$ 5,997$ % Growth NA 181.0% Net Income/(Loss) (3,303)$ (1,177)$ 65$ Diluted EPS ($0.09) ($0.03) $0.00 Summary Operating Metrics Avg. Revenue/Test 600$ 570$ 522$ % Change -7.1% -4.9% -8.4%
- 6. 66 Management Team • Douglas VanOort, Chairman & CEO Operating Partner, Summer Street Capital Partners; Chief Operating Officer, Quest Diagnostics • Maher Albitar, M.D., Chief Medical Officer & Director of R&D Med. Dir. for Hematopathology & Oncology and Chief of R&D, Quest Nichols Institute; Director of Leukemia and Molecular Laboratory, MD Anderson Cancer Center • Robert Gasparini, Director & Chief Scientific Officer Director of Genetics, U.S. Labs; Worldwide Marketing Mgr., Ventana Medical Systems; Asst. Director, Prenatal Diagnostic Center (Harvard) • Steven Jones, Director, EVP – Finance, & Chief Compliance Officer Chairman, Aspen Capital Group; Managing Member, Medical Venture Partners; Vice President, Merrill Lynch Investment Banking • George Cardoza, Chief Financial Officer CFO, Protocol Global Solutions; Controller, Central Region, Quest Diagnostics • Robert Horel, Vice President, Sales & Marketing Regional Mgr., US Labs; Product Specialist, Ventana Medical Systems; Pilot, U.S. Navy • Steven Ross, Chief Information Officer Vice President Technology, Chico’s FAS, Inc.
- 7. 77 NeoGenomics’ Cancer Testing Services Key Testing Modalities Cytogenetics: chromosome analysis - “Neighborhood view of 46 houses from 1000 feet” Flow Cytometry & IHC: cell surface marker analysis - “Single house view from 500 feet” Fluorescence in-situ Hybridization (FISH): gene analysis - “Door and window view of one house” Molecular testing: DNA/RNA analysis -“View of serial number on door lock”
- 8. 88 Business Model Targets Pathologists and Hospital Pathology Groups (71% of Q1 Revenue) • Innovative technical component (TC) only services – Flow, FISH, IHC • Enables community pathologists to compete with large labs • Rapid turnaround-time and web-based reporting • Extensive training programs Oncologists and Clinician Groups (23% of Q1 Revenue) • Includes Oncologists, Dermatologist, Urologists • Specialized high level of service and outstanding quality for clinicians • Genetic Pathology Solutions™ (GPS) reporting – all relevant case data on one page report • Increasing Opportunity to service larger practices with Tech-only model Other (6% of Revenue) • Contract research/clinical trial support work for Pharma clients • Reference laboratories
- 9. 99 Industry Dynamics & Demographics • Aging U.S. population and prevalence of cancer • Diagnostic testing reduces healthcare costs and improves clinical outcomes • Emergence of molecular diagnostics • Targeted therapeutics and companion diagnostics • Capitalize on new healthcare paradigm • Attract New Customers – Promote key advantages of “tech-only” model – Partner with Clinician Offices • Grow existing customer base – Sales force productivity – Increase share of wallet – Promote product education – Capitalize on competitor turmoil • Sustainable revenue growth opportunity • Significant degree of operating leverage in the business model New Products & Solutions Market Share Gains • Continue to expand test menu • Sublicensing of HDC products – Cytogenetics/Flow/IHC systems – Prostate/colon/pancreatic Cx Tests – International opportunities • Proprietary test development • Disruptive technology for select solid tumor cancers • Seek new R&D partnerships Superior Financial Model NeoGenomics Formula for Success CONFIDENTIAL
- 10. 1010 • Molecular diagnostics transforming lab services industry and fueling rapid growth – Molecular diagnostics enable physicians to better diagnose diseases and predict therapeutic efficacy • Clinical Benefits: Effective treatment at an early stage increases patient survival rates • Healthcare Savings: a) forego spending on ineffective therapies and b) effective intervention at an early stage generally lowers overall treatment cost – Need for companion diagnostics being driven by rising drug costs and an increase in targeted therapeutics • Xalkori® - Cost of ~$90,000 annually to treat non-small cell lung cancer. 50 – 61% effective for the ~3% of the population with certain genetic characteristics • Diagnostic testing can significantly lower healthcare costs and improve clinical outcomes – Diagnostics represents only 2-3% of total healthcare spend but influence approximately 70% - 80% of physician decisions • Cancer prevalence expected to increase as U.S. population ages – 77% of all cancers diagnosed are in people age 55 or older, the fastest growing segment of the US 16% 17% 16% 18% 22% 25% 25% 26% 11% 13% 12% 13% 16% 19% 20% 20% 0% 5% 10% 15% 20% 25% 30% 1980 1990 2000 2010 2020 2030 2040 2050 PercentOfPopulation Age 60 and older Age 65 and older Current U.S. Population Demographics Boomer Impact on Cancer Market Industry Dynamics
- 11. 1111 U.S. Cancer Testing Market: $10-12 Billion Hematopoietic Cancers Solid Tumor Cancers Total Testing Market: $3 - 4 Billion $7 - 8 Billion Est. Genetic Mkt. (TAM) ~$1 - 2 Billion ~$1 - 2 Billion Patients in Treatment: 850,000 7.0 million New Diagnoses/Yr.: 150,000 1.45 million Specimen Types: Bone Marrow (350K/Yr) Per. Blood (150K/Yr) Lymph Nodes Tiss. Biopsies (8-10MM) Fine Needle Aspirates Other Bodily Fluids TAM % Neo Addresses: 90-100% 50-60% Neo Revenue Split: ~80% ~20%
- 12. 1212 Cancer Testing Market Characteristics • Highest growth segment of lab Industry - ~20% annual growth in genetics testing - ~8% annual growth in related AP testing • Approx. 360 Genetic Labs in the U.S. - 2/3 affiliated with academic institutions - Approximately 20% perform 80% of testing - Only 15-20 labs with national reach • High pace of consolidation - Recent examples include: Target Acquiror TV/LTM Rev Caris Diagnostics Miraca 3.5x Genoptix Novartis 1.7x Clarient GE Healthcare Svcs 5.8x Genzyme Genetics LabCorp 2.5x
- 13. 1313 NV OR WA MT MN NE SD ND ID WY OK KS COUT TX NM SC FL GAALMS LA AR MO IA VA NC IN KY IL MI WI PA WV VT ME RI NH AZ OH DE MD NY CA NJ CT MI MA Irvine, CA 18k sf Nashville, TN 7k sf Ft. Myers, FL 31k sf States sending specimens since Jan 2012 Tampa, FL 5k sf A Growing Commercial & Facility Footprint
- 14. 1414 2011 4 molecular tests 3 FISH FL – IHC menu 2012 10-color Flow Cytometry Implemented State-of-the-art MolDx platform in lieu of Kits 30 new Molecular Assays Proprietary method for increasing sensitivity of Sanger sequencing 7 NeoTYPE MolDx Panels New Aperio Digital Image Analysis SVM for ALK FISH (Patent App) Barrett’s Esoph. FISH (Patent App) NeoARRAY/SNP Cytogenetics Internalized 99% of send-outs 2013 (In Progress) 25-35 new Molecular tests Add’l NeoTYPE Panels Next Generation Sequencing (48 genes) ROS1 FISH NeoSITE Melanoma FISH Plasma/Urine-based Prostate Test (Patent App) SVM-based Cytogenetics Analysis System SVM-based Automated FISH Analysis System v2 Accelerating Pace of Innovation
- 15. 1515 Solid Tumor Assays* Hematopoietic Assays* New Assays Launched in 2012/2013 Molecular Assays: 1. IDH1 & IDH2 Mutation Analysis 2. c-KIT Mutation Analysis 3. PIK3CA Mutation Analysis 4. NRAS Mutation Analysis 5. TP53 Mutation Analysis 6. NeoARRAY SNP/Cytogenetic Profile 7. KRAS Mutation Analysis 8. BRAF Mutation Analysis 9. EGFR Mutation Analysis 10. Microsatellite Instability Analysis 11. NeoTYPE Breast Profile 12. NeoTYPE Colorectal Profile 13. NeoTYPE Gastric Profile 14. NeoTYPE Lung Profile 15. NeoTYPE Solid Tumor (Other) Profile 16. TPMT Genotyping 17. UGT1A1 Genotyping 18. Kit/PDGFRa Mutation Analysis 19. HRAS Mutation Analysis 20. PTEN Mutation Analysis 21. HOXB13 Genotyping FISH/ISH Assays: 1. ISH – Kappa ISH 2. ISH – Lambda ISH 3. NeoSITE Barrett’s Esophagus FISH 4. ROS1 FISH 5. NeoSITE Melanoma FISH Molecular Assays: 1. BCR-ABL1 Translocation, t(9;22) 2. ABL1 Kinase Domain Mutation Anal 3. IgVH Mutation Analysis 4. FLT3 Mutation Analysis 5. NPM1 Mutation Analysis 6. JAK2 V617F Mutation Analysis 7. JAK2 Exon 12-14 Mutation Anal 8. BCL2 Translocation, t(14;18) 9. BCL1 Translocation, t(11;14) 10. MPL Mutation Analysis 11. MPN Reflex Panel 12. DNMT3A Mutation Analysis 13. RUNX1-RUNX1T1 (AML1-ETO) Translocation, t(8;21) 14. SF3B1 Mutation Analysis 15. B-Cell Gene Rearrangement 16. T-Cell Gene Rearrangement 17. CBFB/MYH11 Translocation, inv(16) 18. PML-RARA Translocation, t(15;17) 19. CEBPA Mutation Analysis 20. WT1 Mutation Analysis 21. NeoTYPE CLL Prognostic Profile 22. NeoTYPE AML Prognostic Profile 23. ETV6-RUNX1 (TEL-AML1) Translocation, t(12;21) 24. CARD11 Mutation Analysis 25. CD79B Mutation Analysis 26. MYD88 Mutation Analysis 27. RUNX1 Mutation Analysis 31. NOTCH1 Mutation Analysis 32. EZH2 Mutation Analysis 33. Chimerism/DNA Fingerprinting Analysis 34. TET2 Mutation Analysis 35. CBL Mutation Analysis 36. PTPN11 Mutation Analysis 37. CSF3R Mutation Analysis 38. PTPN11 Mutation Analysis 39. STAT3 Mutation Analysis 40. NeoTYPE Lymphoma Profile 41. NeoTYPE MDS/CMML Profile 42. NeoTYPE Spliceosome Profile FISH/ISH Assays: 1. NHL FISH Panel (Revised) 2. MYC/IgH t(8;14) 3. CLL FISH Panel (Revised) 4. MDS FISH Panel (Revised) 5. MPN FISH Panel (Revised) 6. AML FISH Panel (Revised) 7. Eosinophilia FISH Panel 8. IGH/MAFB FISH 9. PTEN FISH BOLD = Multi-assay tests customizable to meet client needs (assays may also be ordered individually). * Certain assays may be useful in both solid tumor and hematopoietic cancers. Each assay listed in area of primary use.
- 16. 1616 • Additional Sales Representatives • Lab Collaboration Initiatives (LCI’s) with large Oncology groups - Recent addition of 4 Oncology Business Development Mgrs • New Aperio Image Analysis Platform (just starting full scale roll-out) • Further penetration of Solid Tumor Market (IHC, etc.) • Continued outsize growth in molecular assays and panels • Accelerating growth in 10 color flow cytometry • Significant traction in clinical trials support work • Next generation sequencing • NeoSCORE Prostate Cancer Test • Other proprietary tests • M&A Opportunities Key Growth Drivers Over the Next 3 Years CONFIDENTIAL
- 17. 1717 Productivity Increases Have Offset Changes in Average Revenue/Test to Keep Margins Stable (1) Productivity calculated as the average number of lab tests completed per month per laboratory FTE. (2) The Medicare Technical Component Grandfather expiration took effect on 7/1/12, which resulted in a 7.3% sequential decrease in Avg. Unit Price. (2) 47.3% 48.4% 46.1% 44.7% 44.6% 43.9% 44.5% 44.8% 45.2% 47.1% 47.2% 41.5% 43.2% 46.3% -20.5% 43.4% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Gross Margin % Cum Change in Avg Rev/Test Cum Change in Productivity(1)
- 18. 1818 Operating Cost per Test & Adj. EBITDA Margin $723 $642 $642 $671 $649 $618 $576 $565 $555 $531 $512 $526 $482 $478 -12% -1% -2% -5% 0% -1% 5% 6% 8% 12% 12% 6% 10% 11% -15% -10% -5% 0% 5% 10% 15% $0 $100 $200 $300 $400 $500 $600 $700 $800 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Cogs Cost/Test G&A Net of R&D Cost/Test S&M Cost/Test R&D Cost/Test Total Cost/Test Adj EBITDA Margin % Cost Management & Operating Leverage Have Resulted In a 33% Reduction in Total Costs Per Test
- 19. 1919 Quarterly Financial Information ($, 000's) Q4 11 Q1 12 Q2 12 Q3 12 * Q4 12 * Q1 13 * Total Revenue 12,893$ 15,160$ 15,611$ 14,202$ 14,893$ 15,657$ % Growth (YoY) 47.3% 72.2% 49.2% 25.5% 15.5% 3.3% % Growth (QoQ) 13.9% 17.6% 3.0% -9.0% 4.9% 5.1% Total Gross Margin 5,834 7,144 7,367 5,892 6,434 7,246 Gross Margin % 45.2% 47.1% 47.2% 41.5% 43.2% 46.3% Sales & Marketing Exp 1,801 2,036 1,934 1,839 1,692 1,931 General & Administrative Exp 3,530 3,750 4,066 3,930 4,097 4,175 Research & Development Exp 127 497 528 808 448 835 Total SG&A (Incl R&D) Expenses 5,459 6,283 6,528 6,576 6,237 6,942 SG&A as a % of Rev 42.3% 41.4% 41.8% 46.3% 41.9% 44.3% Net Income/(Loss) 152$ 603$ 551$ (975)$ (113)$ 3$ Diluted EPS $0.00 $0.01 $0.01 ($0.02) ($0.00) ($0.00) Adjusted EBITDA 1,055$ 1,775$ 1,943$ 842$ 1,439$ 1,794$ Summary Operating Data % Growth in Tests Performed (YoY) 57.2% 74.9% 57.1% 41.7% 35.3% 19.1% Avg. Revenue/Test 572$ 563$ 541$ 502$ 488$ 488$ * Quarterly financials impacted by a reduction in revenue of $1.3 MM/Qtr as a result of the expiration of the Medicare TC Grandfather Clause.
- 20. 2020 Key Financial Information Recent Share Price (7/1/13): $ 3.98 Common Shares Outstanding: 48.7 M Current Market Cap: $193.8 M Diluted Shares (MRQ, Pro Forma): 50.9 M Fully Diluted Shares: 55.8 M Non-affiliate Float Shares: 41.1 M 52 Week Low/High: $1.55/$4.20 Avg. Daily Trading Volume (3 Mos): 194,395
- 21. 2121 NeoGenomics Summary • Emerging leader in the fastest growing segment of the lab testing industry • Robust competitive advantages and product portfolio • Strong Management Team with directly relevant industry experience • Accelerating profitability propelled by revenue growth and increased operating leverage • Q2 2013 guidance: $15.8 - $16.4 million of revenue with $0.00 – $0.01 per share of net income • Fiscal 2013 guidance: $68 - $73 million of revenue with $0.03 - $0.05 per share of net income