NeoGenomics Company Overview highlights. It includes investment highlights, Consistent historical growth charts, accelerating cash flow & earnings, management team, testing services, customer targets, formula for success, industry dynamics, U.S. cancer market size, cancer testing market characteristics, key growth drivers...
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NeoGenomics Company Overview Presentation 2013
1. NASDAQ: NEO
Time Matters. Results Count!
Company Overview Presentation
December 2013
“Improving Patient Care
through exceptional cancer
genetic testing services!”
1
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 forwardlooking statements.
Investors and prospective investors are cautioned that any such forwardlooking 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
•
Strong Management Team with large cap lab experience
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
3
5. Accelerating Cash Flow & Earnings
2010
2011
2012
$ 34,371
16.6%
$ 43,484
26.5%
$ 59,867
37.7%
Total Gross Margin
Gross Margin %
15,783
45.9%
19,428
44.7%
26,836
44.8%
Sales & Marketing Exp as a % of Rev
Gen & Admin Exp as a % of Rev
R&D Exp as a % of Rev
SG&A Expenses
Total SG&A as a % of Rev
21.8%
31.2%
1.5%
18,746
54.5%
16.0%
28.4%
1.2%
19,837
45.6%
12.5%
26.5%
3.8%
25,624
42.8%
($, 000's)
Total Revenue
% Growth
Adjusted EBITDA
% Growth
$
Net Income/(Loss)
Diluted EPS
Summary Operating Metrics
Avg. Revenue/Test
% Change
(566)
2,134
NA
$
5,997
181.0%
$ (3,303)
($0.09)
$ (1,177)
($0.03)
$
65
$0.00
$
$
$
522
-8.4%
600
-7.1%
$
570
-4.9%
5
6. Management Team
•
Douglas VanOort, Chairman & CEO
•
Maher Albitar, M.D., Chief Medical Officer & Director of R&D
•
Robert Gasparini, Director & Chief Scientific Officer
•
Steven Jones, Director, EVP – Finance, & Chief Compliance Officer
•
George Cardoza, Chief Financial Officer
•
Robert Horel, Vice President, Sales & Marketing
•
Steven Ross, Chief Information Officer
Operating Partner, Summer Street Capital Partners;
Chief Operating Officer, Quest Diagnostics
Med. Dir. for Hematopathology & Oncology and Chief of R&D, Quest Nichols Institute;
Director of Leukemia and Molecular Laboratory, MD Anderson Cancer Center
Director of Genetics, U.S. Labs; Worldwide Marketing Mgr., Ventana Medical Systems;
Asst. Director, Prenatal Diagnostic Center (Harvard)
Chairman, Aspen Capital Group; Managing Member, Medical Venture Partners;
Vice President, Merrill Lynch Investment Banking
CFO, Protocol Global Solutions; Controller, Central Region, Quest Diagnostics
Regional Mgr., US Labs; Product Specialist, Ventana Medical Systems; Pilot, U.S. Navy
Vice President Technology, Chico’s FAS, Inc.
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7. 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”
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8. Customer Targets
Pathologists & Hospital Pathology Groups (about 74% 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 21% 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 5% of Revenue)
•
Contract research/clinical trial support work for Pharma clients
8
9. NeoGenomics Formula for Success
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
Market Share Gains
• Attract New Customers
– Promote key advantages of
“tech-only” model
– Partner with Clinician Offices
• Grow existing customer base
New Products &
Solutions
• Continue to expand test menu
• Sublicensing of HDC products
– Cytogenetics/Flow/IHC systems
– Prostate/colon/pancreatic Cx Tests
– International opportunities
– Sales force productivity
• Proprietary test development
– Increase share of wallet
• Disruptive technology for select solid
tumor cancers
– Promote product education
– Capitalize on competitor turmoil
• Seek new R&D partnerships
Superior Financial Model
• Sustainable revenue growth opportunity
• Significant degree of operating leverage in
the business model
9
10. Industry Dynamics
–
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
U.S. Population Demographics
Diagnostic testing can significantly lower
healthcare costs and improve clinical outcomes
–
•
Boomer Impact on Cancer Market
Molecular diagnostics transforming lab services
industry and fueling rapid growth
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
30%
Current
25%
Percent Of Population
•
20%
20%
20%
2030
2040
2050
22%
16%
17%
18%
16%
15%
10%
26%
19%
25%
25%
16%
11%
13%
12%
13%
1990
2000
2010
5%
0%
1980
Age 60 and older
2020
Age 65 and older
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11. U.S. Cancer Testing Market Size $10-12 Billion
Hematopoietic Cancers
Solid Tumor Cancers
$3 - 4 Billion
$7 - 8 Billion
~$1 - 2 Billion
~$1 - 2 Billion
Patients in Treatment:
850,000
7.0 million
New Diagnoses/Yr.:
150,000
1.45 million
Bone Marrow (350K/Yr)
Per. Blood (150K/Yr)
Lymph Nodes
Tiss. Biopsies (8-10MM)
Fine Needle Aspirates
Other Bodily Fluids
~80%
~20%
Total Testing Market:
Est. Genetic Mkt. (TAM)
Specimen Types:
Neo Revenue Split:
11
12. Cancer Testing Market Characteristics
• Cancer Genetics is high growth segment of lab Industry
- ~20% annual growth in genetics testing
- ~8% annual 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
Caris Diagnostics
Genoptix
Clarient
Genzyme Genetics
Acquiror
Miraca
Novartis
GE Healthcare Svcs
LabCorp
TV/LTM Rev
3.5x
1.7x
5.8x
2.5x
12
13. A Growing Commercial & Facility Footprint
VT
WA
ME
MT
ND
MI
NH
MN
OR
ID
NY
SD
WI
MI
WY
IA
NE
IL
CO
CA
KS
MO
IN
WV
AZ
KY
SC
AR
NM
MS
TX
CT
VA
NC
OK
RI
NJ
DE
MD
OH
NV
UT
PA
MA
AL
Nashville, TN
7k sf
GA
LA
Irvine, CA
18k sf
FL
States sending specimens since Jan 2012
Tampa, FL
5k sf
Ft. Myers, FL
45k sf
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14. Accelerating Pace of Innovation
2011
4 molecular
tests
2012
2013 (In Progress)
10-color Flow Cytometry
25-35 new Molecular tests
Add’l NeoTYPE Panels
3 FISH
Implemented State-of-the-art
MolDx platform in lieu of Kits
30 new Molecular Assays
ROS1 FISH
FL – IHC menu
Proprietary method for increasing
sensitivity of Sanger sequencing
7 NeoTYPE MolDx Panels
Plasma/Urine-based
Prostate Test (Patent App)
New Aperio Digital Image Analysis
SVM for FISH (Patent App)
Barrett’s Esoph. FISH (Patent App)
NeoARRAY/SNP Cytogenetics
Internalized 99% of send-outs
Next Generation
Sequencing (48 genes)
NeoSITE Melanoma FISH
SVM-based Cytogenetics
Analysis System
SVM-based Automated
FISH Analysis System v2
14
16. Key Growth Drivers Over the Next 3 Years
• 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
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17. Productivity Increases Keeping Margins Stable
100%
42.8%
50%
90%
40%
80%
30%
70%
20%
60%
10%
50%
47.3% 48.4%
46.1%
44.8% 45.2%
44.7% 44.6% 43.9% 44.5%
47.1% 47.2%
41.5%
48.4%
43.2%46.3% 45.9%
0%
-10%
40%
-20%
30%
-18.4%
Gross Margin %
Cum Change in Avg Rev/Test(2)
Q3 13
Q2 13
Q1 13
Q4 12
Q3 12
Q2 12
Q1 12
Q4 11
Q3 11
Q2 11
Q1 11
-50%
Q4 10
0%
Q3 10
-40%
Q2 10
10%
Q1 10
-30%
Q4 09
20%
Cum Change in Productivity(1)
(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.
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