NeoGenomics Company Overview 03/16/2015
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This company presentation provides an overview of a cancer genetic testing services company. Key points include: - The company has experienced strong and consistent growth in revenue and test volume over the past 10 years through both organic growth and acquisitions. - It provides a broad menu of genetic and molecular testing services including next generation sequencing and is developing liquid biopsy tests. - The company has an experienced management team with experience in large reference laboratories. It is focused on innovation, cost management, and expanding its commercial footprint. - Financial results show increasing margins, productivity, and adjusted EBITDA despite lower average prices per test, demonstrating strong operating leverage as the business scales.
NeoGenomics Company Overview 03/16/2015
- 1. Company Overview Presentation March 2015 “Improving Patient Care through exceptional cancer genetic testing services!” Time Matters. Results Count!
- 2. 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. 2
- 3. 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 3
- 4. Experienced Management Team • Douglas VanOort, Chairman & CEO Chief Operating Officer, Quest Diagnostics Executive Vice President, Corning Life Sciences, Inc. • 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 Shovlin, Chief Operating Officer Chief Development Officer, Bostwick Laboratories President & Chief Executive Officer, Aureon Biosciences • 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 & General Manager, PathLogic 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. 4
- 5. Company Overview • Specialized oncology reference laboratory providing the latest testing technologies, global/tech-only options, and interactive education to the pathology community • Offer the complete spectrum of diagnostic services through nationwide network of laboratories • Dedicated to providing superior service, faster turn- around times, and complete attention to the needs of our clients and their patients • Founded and went public in 2001 • First to launch tech-only FISH services in 2006 • March 2009, Doug VanOort joined as CEO • December 2012, up-listed to NASDAQ • Recently completed acquisition of Path Logic based in West Sacramento, California • 65% CAGR in Revenue and Test Volume over last ten Years. Description Broad Menu of Genetic & Molecular Tests History 5 • 57 Custom FISH Panels • 215 IHC Stains and Custom Panels • 72 Molecular Markers • 23 Targeted NeoTYPE Molecular/FISH/IHC Panels • Full Suite of Next Generation Sequencing Panels 315 Gene Solid Tumor Discovery Panel 4,813 Gene Cancer Exome Profile • Cytogenetics • Flow Cytometry
- 6. 1,152 4,082 12,838 20,998 32,539 45,675 57,332 76,288 114,606 137,317 177,279 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $558 $1,885 $6,476 $11,505 $20,015 $29,469 $34,371 $43,484 $59,866 $66,467 $82,194 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Proven Track Record of Consistent Growth Base NEO* Annual Revenue Base NEO* Tests Performed ($, 000s) 6 * Base NEO represents organic revenue and test volume growth from legacy business and excludes the impacts from the PathLogic acquisition.
- 7. 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% 7
- 8. 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
- 9. Customer Targets Pathologists & Hospital Pathology Groups (about 75% of 2014 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 22% of 2014 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 2014 Revenue ) • Contract research/clinical trial support work for Pharma clients 9
- 10. Accelerating Pace of Innovation • 4 molecular tests • 3 FISH • FL – IHC menu • 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 send-outs • 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 • Began development of NeoLAB (Liquid Alternative to Biopsy) Prostate Cx test 2011 2012 2013 10 • 60 new/rev’d Molecular tests • 24 new NeoTYPE Next Generation Sequencing Profiles • 26 new IHC/ISH tests • Additional NeoLAB Prostate clinical studies • AML Extended FISH Panel • AML Favorable-Risk FISH Panel • MDS Extended FISH Panel • Plasma Cell Myeloma Risk Stratification FISH Panel • RET FISH • MET FISH • ALL Adult & Pediatric FISH Panels • HER2 Breast Equivocal FISH Panel • BRAF Translocation FISH • Chromosome 1 POC Ploidy • Launched robotic FISH/Cyto pre-processing platform 2014
- 11. Next Generation Sequencing and Liquid Biopsies Next Generation Sequencing • 21 tumor-specific hematologic and solid tumor profiles • 4 broad pan-tumor profiles (54 gene Myeloid Disorders Profile, 48 gene Precision Profile for Solid Tumors, 315+ gene Discovery Profile for Solid Tumors, Cancer Exome Profile • Tech-only FISH/Flow option available for select NeoTYPE Profiles • Comprehensive and clear reporting of key diagnostic, prognostic, therapeutic and clinical trials information relevant for informed decision making NeoLAB (Liquid Alternative to Biopsy) Prostate Text • Blood Plasma & Urine-based (no need for Prostate tissue) • Designed to inform which patients with elevated PSA should be biopsied • Pivotal validation study underway (800 - 1,000 patients) • Commercial launch expected in 2H 2015 • Expected pricing $400 - $600/Test 11
- 12. A Growing Commercial & Facility Footprint NV OR WA MT MN NE 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 RI NH AZ OH DE MD NY CA NJ MI MA SD States sending specimens in 2014 ME CT Irvine, CA 25k sf Nashville, TN 7k sf Ft. Myers, FL 45k sf Tampa, FL 5k sf W. Sacramento, CA 17k sf Fresno, CA 3k sf 12 SD
- 13. Large & Growing Clinical Trials Opportunity • World class Molecular Oncology menu opening up numerous opportunities to directly service pharmaceutical companies. − Leverages NEO Pathologist expertise, Lab systems, Tech-only model, comprehensive menus to further diversify into a new segment. − Ability to expand into world-wide markets − Potential for developing companion diagnostics − Access to market with higher AUP • Exclusive 5 year Agreement with Covance, with a two year renewal option. − NEO exclusively provides professional interpretations for all AP and Histology testing ordered with new trials worldwide − NEO exclusively provides all technical component FISH for samples tested in the U.S. − NEO eligible to provide technical component services for all U.S. based testing that is not otherwise performed by Covance’s Lab-within-a-Lab (LWL) facility at NEO 13
- 14. $10 • On July 8, 2014, NEO announced and closed the acquisition of Path Labs, LLC dba “Path Logic” for $6 million 2013 Revenue of $9.8 million Implied Enterprise Value/Revenue of 0.6x Includes $150,000 in capital lease obligations $5.85 million at closing paid with cash on hand and borrowings from its revolving credit facility with and $.60 million held in escrow • Path Logic will operate as a wholly-owned subsidiary of NeoGenomics Acquisition of Path Logic Strategic RationalePath Logic Overview Transaction Summary • A specialized AP laboratory serving California and the western United States • Sub-specialties in renal pathology, dermatopathology, women’s health and gastrointestinal and genitourinary pathology • Approximately 65 employees as of July 2014, including 9 in-house pathologists and 12 consulting pathologists • Founded in 1999 and headquartered in West Sacramento, California • NEO expects $3 – 4 million of revenue synergies by offering NEO tests to Path Logic customers and Path Logic tests to NEO customers • Additional cost synergies with increased run rate and NeoGenomics experience • Doubles pathology staff • Expansion of geographic footprint in Northern California with West Sacramento, California laboratory - Location to be added to NeoGenomics - Locations to be discontinued 14
- 15. 2015 Strategic Priorities • Next Gen Sequencing • Develop Prostate Cancer Test • Launch New Products • Grow Clinical Trials • Optimize Covance partnership • Higher Productivity • Lower Costs • Become a “Digital Lab” • Expand Sales Team • Add new clients • Improve Informatics Growth Get LEAN InnovateDiversify 15
- 16. Accelerating Cash Flow & Earnings ($, 000's) 2012 2013 2014 Total Consolidated Revenue $ 59,867 $ 66,467 $ 87,069 % Growth 37.7% 11.0% 31.0% Total Gross Profit 26,836 31,737 40,714 Gross Margin % 44.8% 47.7% 46.8% SG&A Expenses 25,624 28,563 38,496 Total SG&A as a % of Rev 42.8% 43.0% 44.2% Net Income/(Loss) $ 65 $ 2,033 $ 1,132 Diluted EPS $0.00 $0.04 $0.02 Adjusted EBITDA $ 5,997 $ 8,515 $ 9,176 % Growth 181.0% 42.0% 7.8% Base NEO* Summary Operating Metrics % Growth in Tests Performed 50.2% 19.8% 29.1% Avg. Revenue/Test $ 522 $ 484 $ 463 % Change -8.4% -7.3% -4.2% Avg. Cost of Goods Sold/Test $ 288 $ 253 $ 241 % Change -8.6% -12.2% -4.7% 16
- 17. Increasing Margins Despite Lower Avg Unit Prices – Base NEO* * For comparison purposes Base NEO exclude the impacts from the Path Logic Acquisition, which was completed on 7/8/14. (1) Productivity calculated as the average number of lab tests completed per month per laboratory FTE. 17 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% 47.9% 49.5% 46.4% 48.2% -23.7% 58.6% -40% -20% 0% 20% 40% 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 Q114 Q214 Q314 Q414 Gross Margin % Cum Change in Avg Rev/Test Cum Change in Productivity(1)
- 18. Operating Cost per Test & Adj. EBITDA Margin Cost Management & Operating Leverage – Base NEO* 18 $723 $642$642 $671 $649 $618 $576$565 $555 $531$512 $526 $482$478 $464 $466$439 $459 $442$457 $431 -12% -1% -2% -5% 0% -1% 5% 6% 8% 12% 12% 6% 10%11% 12% 13% 15% 9% 10% 14% 14% -15% -10% -5% 0% 5% 10% 15% 20% $0 $100 $200 $300 $400 $500 $600 $700 $800 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Cogs Cost/Test G&A Net of R&D Cost/Test S&M Cost/Test R&D Cost/Test * For comparison purposes Base NEO exclude the impacts from the Path Logic Acquisition, which was completed on 7/8/14.
- 19. Quarterly Financial Information (P&L) ($, 000's) Q4 13 Q1 14 Q2 14 Base NEO Q3 14(1)(2) Base NEO Q4 14(1) Consolid. Q4 14(3) Total Revenue $18,323 $ 18,182 $ 20,670 $ 20,835 $ 22,505 $ 24,998 % Growth (YoY) 23.0% 16.1% 32.5% 23.4% 22.8% 36.4% Total Gross Profit 9,163 8,710 10,240 9,664 10,842 11,470 Gross Margin % 50.0% 47.9% 49.5% 46.4% 48.2% 45.9% Total SG&A (Incl R&D) Exp 7,959 8,316 9,661 9,369 9,064 10,152 SG&A as a % of Rev 43.4% 45.7% 46.7% 45.0% 40.3% 40.6% Net Income/(Loss) $ 858 $ 102 $ 274 $ 23 $ 1,507 $ 1,047 Diluted EPS $0.02 $0.00 $0.01 NA NA $0.02 Adjusted EBITDA $ 2,733 $ 1,685 $ 2,114 $ 2,862 $ 3,174 $ 2,637 Operating Data – Base NEO % Growth in Tests (YoY) 27.8% 20.7% 39.8% 33.4% 23.4% Avg. Revenue/Test $ 470 $ 469 $ 455 $ 463 $ 468 % Change (YoY) -3.7% -3.8% -5.3% -7.5% -0.4% Avg. COGS/Test $ 235 $ 245 $ 229 $ 248 $ 243 % Change (YoY) -15.3% -6.7% -11.7% -3.9% 3.2% (1) For comparison purposes Q3 & Q4 Base NEO exclude the impacts from the Path Logic Acquisition, which was completed on 7/8/14. (2) Q3 SG&A includes $571,000 of one-time transaction expenses related to the PathLogic acquisition and the termination of the Company’s Credit Facility. (3) Q4 Consolidated Financials Include Path Logic. 19
- 20. Consolidated Balance Sheet ($, 000's) 12/31/13 9/30/14 (1)(2) 12/31/14 ASSETS: Cash & Cash Equivalents $ 4,834 $ 34,366 $ 33,689 Other Current Assets 22,657 22,877 24,820 Prop and Equip, Net 9,694 14,636 15,082 Other LT Assets 2,731 6,940 7,281 Total Assets $ 39,916 $ 78,820 $ 80,873 LIABILITIES & STOCK HOLDERS’ EQUITY: Current Liabilities $ 14,323 $ 13,954 $ 14,623 Long-Term Liabilities 3,882 5,801 5,845 Total Liabilities 18,204 19,755 20,468 Stockholders’ Equity 21,711 59,065 60,405 Total Liabilities and Stockholders’ Equity $ 39,916 $ 78,820 $ 80,873 (1) On July 8, 2014, NeoGenomics acquired the equity interests of Path Logic for $6.0 MM in an all cash transaction. (2) On August 20, 2014, NeoGenomics completed the sale of 8.05 million shares of common stock at $4.60/share, which resulted in net proceeds of $34.4 million after deducting the underwriters’ commissions and offering expenses. 20
- 21. Recent Share Price (3/12/15): $ 4.73 Common Shares Outstanding: 60.3 M Fully Diluted Shares: 64.9 M Avg. Daily Trading Volume (3 Mos.): 232,473 Current Market Cap: $285.2 M Less Net Debt: (24.6)M Enterprise Valuation: $260.6 M Key Financial Information 21
- 22. NeoGenomics Summary • Emerging leader in fastest-growing segment of lab testing industry • Robust competitive advantages and product portfolio • Strong Management Team with outstanding industry experience • Accelerating profitability driven by growth and operating leverage • Fragmented industry undergoing consolidation likely to present additional strategic opportunities • Recent Guidance(1): FY 2015 Revenue ($, MMs) $103 - 108 (1) Guidance incorporates an estimated $6-8 million reduction in revenue from the pricing of the new FISH CPT Codes by all Payers. 22