2014 03 11 neo company overview presentation
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The presentation provides an overview of NeoGenomics, a cancer genetic testing company. It highlights the company's consistent historical growth in tests performed and revenue. The management team has significant experience in large cap clinical laboratories. The company aims to continue expanding its test menu and market share through new product development and partnerships within the fast-growing cancer genetic testing industry.
2014 03 11 neo company overview presentation
- 1. 1 NASDAQ: NEO Company Overview Presentation March 2014 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 cancer genetics lab servicing Oncologists, Pathologists and Hospitals • Strategic client partnerships created by “Tech-Only” model • Dynamic, rapidly-growing and consolidating industry • Industry-leading revenue & test volume growth • Strong productivity and operating leverage leading to accelerating cash flow and net income • Strong Management Team with large cap lab experience
- 4. 44 Consistent Historical Growth 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Tests Performed $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual Revenue ($, 000s)
- 5. 55 Accelerating Cash Flow & Earnings ($, 000's) 2011 2012 2013 Total Revenue 43,484$ 59,867$ 66,467$ % Growth 26.5% 37.7% 11.0% Total Gross Margin 19,428 26,836 31,737 Gross Margin % 44.7% 44.8% 47.7% Sales & Marketing Exp as a % of Rev 16.0% 12.5% 13.1% Gen & Admin Exp as a % of Rev 28.4% 26.5% 26.2% R&D Exp as a % of Rev 1.2% 3.8% 3.7% SG&A Expenses 19,837 25,624 28,563 Total SG&A as a % of Rev 45.6% 42.8% 43.0% Adjusted EBITDA 2,134$ 5,997$ 8,515$ % Growth NA 181.0% 42.0% Net Income/(Loss) (1,177)$ 65$ 2,034$ Diluted EPS ($0.03) $0.00 $0.02 Summary Operating Metrics Avg. Revenue/Test 570$ 522$ 484$ % Change -4.9% -8.4% -7.3% Avg. Cost of Goods Sold/Test 315$ 288$ 253$ % Change -2.7% -8.6% -12.2%
- 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 Methodologies 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 Customer Targets Pathologists & Hospital Pathology Groups (about 72% of Revenue) • Enable community Pathologists to practice using sophisticated tools and tests • Innovative technical component (TC or “tech-only”) services – Flow, FISH, IHC • Outstanding Web-based Lab System & extensive training programs Oncologists & Clinician Groups (about 25% of Revenue) • Includes Hematologists, Oncologists, Dermatologists, Urologists • Disease Panels and comprehensive molecular menus • Increasing Opportunity to service larger practices with Tech-only model Clinical Trials & Other (about 3% of Revenue) • Contract research/clinical trial support work for Pharma clients
- 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
- 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® (Crizotinib) - 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 Size $10-12 Billion Hematopoietic Cancers Solid Tumor Cancers Total Testing Market: $3 - 4 Billion $7 - 8 Billion Est. Genetic Mkt. (TAM) ~$2 - 3 Billion ~$2 - 3 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 Neo Revenue Split: ~80% ~20%
- 12. 1212 Cancer Testing Market Characteristics • Cancer Genetics is high growth segment of lab Industry - ~15-20% annual test volume growth in genetics testing - ~6-8% annual test volume growth in related AP testing • Less than 400 Cancer 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 45k sf States sending specimens in 2013 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 28 new Molecular Assays Proprietary method for increasing sensitivity of Sanger sequencing 7 NeoTYPE MolDx Panels New Aperio Digital Image Analysis SVM for FISH (Patent App) Barrett’s Esoph. FISH (Patent App) NeoARRAY/SNP Cytogenetics Internalized 99% of send-outs 2013 40 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* More than 80 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 22. GNAS Mutation Analysis 23. MLH1 Promoter Methylation Analysis 24. MGMT Promoter Methylation Analysis FISH/ISH Assays: 1. ISH – Kappa ISH 2. ISH – Lambda ISH 3. NeoSITE Barrett’s Esophagus FISH 4. ROS1 FISH 5. NeoSITE Melanoma FISH 6. 1p/19q Deletion FISH Test 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. ASXL1 Mutation Analysis 37. PTPN11 Mutation Analysis 38. CSF3R Mutation Analysis 39. PTPN11 Mutation Analysis 40. STAT3 Mutation Analysis 41. ETV6 Mutation Analysis 42. NeoTYPE Lymphoma Profile 43. NeoTYPE MDS/CMML Profile 44. 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 • Expansion of Sales Team with seasoned Professionals • Growth of molecular assays, panels and Next Gen Sequencing • Recent expansion in FISH and advanced flow cytometry • New Image Analysis/Immunohistochemistry Platform • Exclusive strategic alliance with Covance for Clinical Trials • Proprietary NeoSCORE Prostate Cancer and other proprietary tests • M&A Opportunities Key Growth Drivers Over the Next 3 Years
- 17. 1717 Increasing Margins Despite Lower Average Unit Prices (1) Productivity calculated as the average number of lab tests completed per month per laboratory FTE. (2) The expiration of the Medicare Technical Component (TC) Grandfather Clause took effect on 7/1/12 and resulted in an ~11% YoY Reduction in Avg Rev/Test. 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%45.9%48.4% 50.0% -23.4% 56.5% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 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 Q213 Q313 Q413 Gross Margin % Cum Change in Avg Rev/Test(2) Cum Change in Productivity(1)
- 18. 1818 Operating Cost per Test & Adj. EBITDA Margin Cost Management & Operating Leverage $723 $642 $642 $671 $649 $618 $576 $565 $555 $531 $512 $526 $482 $478 $464 $466 $439 -12% -1% -2% -5% 0% -1% 5% 6% 8% 12% 12% 6% 10% 11% 12% 13% 15% -15% -10% -5% 0% 5% 10% 15% 20% $0 $100 $200 $300 $400 $500 $600 $700 $800 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Cogs Cost/Test G&A Net of R&D Cost/Test S&M Cost/Test R&D Cost/Test Total Cost/Test Adj EBITDA Margin %
- 19. 1919 Quarterly Financial Information ($, 000's) Q4 12 * Q1 13 * Q2 13 * Q3 13 Q4 13 Total Revenue 14,893$ 15,657$ 15,603$ 16,884$ 18,323$ % Growth (YoY) 15.5% 3.3% -0.1% 18.9% 23.0% Total Gross Margin 6,434 7,246 7,157 8,171 9,163 Gross Margin % 43.2% 46.3% 45.9% 48.4% 50.0% Sales & Marketing Exp 1,692 1,931 1,971 2,336 2,487 General & Administrative Exp 4,097 4,175 4,064 4,334 4,823 Research & Development Exp 448 835 616 340 649 Total SG&A (Incl R&D) Expenses 6,237 6,942 6,651 7,011 7,959 SG&A as a % of Rev 41.9% 44.3% 42.6% 41.5% 43.4% Net Income/(Loss) (113)$ 3$ 273$ 900$ 858$ Diluted EPS ($0.00) $0.00 $0.01 $0.02 $0.02 Adjusted EBITDA 1,439$ 1,794$ 1,825$ 2,163$ 2,733$ Summary Operating Data % Growth in Tests Performed (YoY) 35.3% 19.1% 12.7% 19.1% 27.8% Avg. Revenue/Test 488$ 488$ 480$ 501$ 470$ Avg. COGS/Test 277$ 262$ 260$ 258$ 235$ * YoY comparisons impacted by a reduction in revenue of $1.3 MM/Qtr as a result of the expiration of the TC Grandfather Clause.
- 20. 2020 Key Financial Information Recent Share Price (3/11/14): $ 3.46 Common Shares Outstanding: 49.1 M Current Market Cap: $168.0 M Fully Diluted Shares: 55.8 M 52 Week Low/High: $2.05/$4.69 Avg. Daily Trading Volume (3 Mos): 283,766
- 21. 2121 NeoGenomics Summary • Emerging leader in fastest-growing segment of lab testing industry • Robust competitive advantages and product portfolio • Strong Management Team with outstanding industry experience • Accelerating profitability driven by growth and operating leverage • Recent Guidance(1): Q1 2014(2) FY 2014(2) Revenue ($, MMs) $18.8 - $19.3 $73.0 - $77.0 EPS $0.01 – $0.02 $0.05 - $0.07 (1) Guidance is before factoring any potential impacts from a negative resolution of the issues re the National Correct Coding Initiative FISH edits. See 8-K filed on 2/19/2014 for additional information on this topic. (2) NeoGenomics preliminarily estimates that a negative resolution of the NCCI FISH edits issue would reduce revenue by approximately $3 million and net income by approximately $0.04 per share in FY 2014, with the impact more heavily concentrated in the first half of the year. Q1 revenue and EPS would be reduced by approximately $1.0 million and $0.02/share in the event of a negative resolution.
- 22. 2222 Implied 2014 Physician Fee Schedule Rates Based on our 24% Medicare payer mix through the first 9 months of 2013, we expect the Medicare 2014 PFS Rates to have less than a 3% impact to total revenue (1). CPT Proc Code Procedure Description National Unadj Rate 2011 National Unadj Rate 2012 National Unadj Rate 2013 2014 w/ Interim SGR Fix (1)(2) 2014 vs 2013 % change 88184 FLOW 1ST MARKER 83.92$ 82.71$ 88.80$ 87.77$ -1.2% 88185 FLOW EACH ADDL MARKER 50.29$ 50.04$ 54.10$ 53.73$ -0.7% 88189 FLOW INTERP 16 OR MORE MARKERS 103.29$ 102.45$ 106.49$ 110.69$ 3.9% 88367 FISH AUTOMATED PER PROBE 256.18$ 264.13$ 258.23$ 255.77$ -1.0% 88367-TC FISH AUTOMATED PER PROBE TECH 195.36$ 203.89$ 198.35$ 193.08$ -2.7% 88367-26 FISH AUTOMATED PER PROBE INTERP 60.82$ 60.25$ 59.88$ 62.69$ 4.7% 88368 FISH MANUAL PER PROBE 219.83$ 221.24$ 232.04$ 232.49$ 0.2% 88368-TC FISH MANUAL PER PROBE TECH 157.65$ 159.98$ 170.46$ 167.65$ -1.6% 88368-26 FISH MANUAL PER PROBE INTERP 62.18$ 61.27$ 61.58$ 64.84$ 5.3% 88360 MORPHOLOGY, EACH ANTIBODY MANUAL 123.33$ 120.49$ 127.25$ 130.04$ 2.2% 88360-TC MORPHOLOGY TECH, EACH ANTIBODY MANUAL 71.01$ 69.44$ 74.85$ 75.23$ 0.5% 88360-26 MORPHOLOGY INTERP, EA ANTIBODY MANUAL 52.32$ 51.06$ 52.40$ 54.81$ 4.6% 88342 IMMUNOHISTOCHEMISTRY 103.92$ 105.52$ 115.34$ 88342-TC IMMUNOHISTOCHEMISTRY TECH 62.86$ 64.67$ 73.15$ 88342-26 IMMUNOHISTOCHEMISTRY INTERP 41.11$ 40.85$ 42.19$ G0461 IMMUNOHISTOCHEMISTRY (1st Stain) 103.92$ 105.52$ 115.34$ 88.48$ -23.3% GO461-TC IMMUNOHISTOCHEMISTRY TECH (1st Stain) 62.86$ 64.67$ 73.15$ 57.67$ -21.2% G0461-26 IMMUNOHISTOCHEMISTRY INTERP (1st Stain) 41.11$ 40.85$ 42.19$ 30.81$ -27.0% G0462 IMMUNOHISTOCHEMISTRY (Add'l Stain) 103.92$ 105.52$ 115.34$ 68.42$ -40.7% GO462-TC IMMUNOHISTOCHEMISTRY TECH (Add'l Stain) 62.86$ 64.67$ 73.15$ 55.88$ -23.6% G0462-26 IMMUNOHISTOCHEMISTRY INTERP (Add'l Stain) 41.11$ 40.85$ 42.19$ 12.54$ -70.3% (1) Assumes no other Physician Fee Schedule (PFS) rule changes or limited coverage determinations for 2014. (2) Calculated using a 2014 CMS Conversion Rate of 35.8228 as enacted in the 'Pathway for SGR Reform Act of 2013’ on December 26, 2013. This SGR Fix is only in effect to 3/31/14 unless extended further by Congress.