NEO Company Overview Presentation


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NEO Company Overview Presentation

  1. 1. 1NASDAQ: NEOCompany Overview PresentationMay 2013Time Matters. Results Count!“Improving Patient Carethrough exceptional cancergenetic testing services!”
  2. 2. 22Forward-looking StatementsThis presentation contains statements which constitute forward-lookingstatements within the meaning of Section 27A of the Securities Act, asamended; Section 21E of the Securities Exchange Act of 1934; and thePrivate 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 tospecifically identify forward-looking statements. All statements that are notstatements of historical fact are forward-looking statements.Investors and prospective investors are cautioned that any suchforward-looking statements are not guarantees of future performance andinvolve risks and uncertainties, and that actual results may differ materiallyfrom those projected in the forward-looking statements as a result ofvarious factors. The risks that might cause such differences are identifiedin our filings with the Securities and Exchange Commission. We undertakeno obligation to publicly update or revise the forward looking statementsmade in this presentation to reflect events or circumstances after the dateof this presentation or to reflect the occurrence of unanticipated events.
  3. 3. 33Investment 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 bynew test innovation and increasing sales force productivity• Increasing productivity and operating leverage leading toaccelerating cash flow and net income
  4. 4. 44Consistent Historical Growth$0$10,000$20,000$30,000$40,000$50,000$60,000200420052006200720082009201020112012Annual Revenue ($, 000’s)020,00040,00060,00080,000100,000120,000200420052006200720082009201020112012Tests Performed (000’s)
  5. 5. 55Accelerating Cash Flow & Earnings($, 000s) 2010 2011 2012Total Revenue 34,371$ 43,484$ 59,867$% Growth 16.6% 26.5% 37.7%Total Gross Margin 15,783 19,428 26,836Gross Margin % 45.9% 44.7% 44.8%Sales & Marketing Exp as a % of Rev 21.8% 16.0% 12.5%Gen & Admin Exp as a % of Rev 31.2% 28.4% 26.5%R&D Exp as a % of Rev 1.5% 1.2% 3.8%SG&A Expenses 18,746 19,837 25,624Total SG&A as a % of Rev 54.5% 45.6% 42.8%Adjusted EBITDA (566)$ 2,134$ 5,997$% Growth NA 181.0%Net Income/(Loss) (3,303)$ (1,177)$ 65$Diluted EPS ($0.09) ($0.03) $0.00Summary Operating MetricsAvg. Revenue/Test 600$ 570$ 522$% Change -7.1% -4.9% -8.4%
  6. 6. 66• Molecular diagnostics transforming lab servicesindustry and fueling rapid growth– Molecular diagnostics enable physicians to betterdiagnose diseases and predict therapeutic efficacy• Clinical Benefits: Effective treatment at an early stageincreases patient survival rates• Healthcare Savings: a) forego spending on ineffectivetherapies and b) effective intervention at an early stagegenerally lowers overall treatment cost– Need for companion diagnostics being driven by risingdrug costs and an increase in targeted therapeutics• Xalkori® - Cost of ~$90,000 annually to treat non-small celllung cancer. 50 – 61% effective for the ~3% of thepopulation with certain genetic characteristics• Diagnostic testing can significantly lowerhealthcare costs and improve clinical outcomes– Diagnostics represents only 2-3% of total healthcarespend but influence approximately 70% - 80% ofphysician decisions• Cancer prevalence expected to increase as U.S.population ages– 77% of all cancers diagnosed are in people age 55 orolder, the fastest growing segment of the US16%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 2050PercentOfPopulationAge 60 and older Age 65 and olderCurrentU.S. Population DemographicsBoomer Impact on Cancer MarketIndustry Dynamics
  7. 7. 77U.S. Cancer Testing Market: $10-12 BillionHematopoieticCancersSolid Tumor CancersTotal Testing Market: $3 - 4 Billion $7 - 8 BillionEst. Genetic Mkt. (TAM) ~$1 - 2 Billion ~$1 - 2 BillionPatients in Treatment: 850,000 7.0 millionNew Diagnoses/Yr.: 150,000 1.45 millionSpecimen Types: Bone Marrow (350K/Yr)Per. Blood (150K/Yr)Lymph NodesTiss. Biopsies (8-10MM)Fine Needle AspiratesOther Bodily FluidsTAM % Neo Addresses: 90-100% 30-40%Neo Revenue Split: ~80% ~20%
  8. 8. 88Cancer Testing Market Characteristics• Highest growth segment of lab Industry- ~20% annual growth in genetics testing- 8-10% 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 RevCaris Diagnostics Miraca 3.5xGenoptix Novartis 1.7xClarient GE Healthcare Svcs 5.8xGenzyme Genetics LabCorp 2.5x
  9. 9. 99Business Model TargetsPathologists and Hospital Path Groups• 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 programsOncologists and Clinician Groups• Specialized high level of service and outstanding quality for clinicians• Genetic Pathology Solutions™ (GPS) reporting – all relevant casedata on one page report
  10. 10. 1010NeoGenomics’ Cancer Testing ServicesKey Testing ModalitiesCytogenetics: chromosome analysis- “Neighborhood view of 46 houses from 1000 feet”Flow Cytometry & IHC: cell surface markeranalysis- “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”
  11. 11. 1111• Hired Dr. Maher Albitar as Chief Medical Officer (Jan 12)• Entered into exclusive worldwide license to Health Discovery Corp’s IPrelating to pattern recognition technology, biomarker discovery, and gene& protein-based tests for cancer LDTs (Jan 12)- Targeted initial focus areas: prostate, pancreatic and colon cancer tests;automating cytogenetics and flow cytometry analysis• 10 Color flow cytometry (Q2 12)• Increased IHC menu to 140 antibodies and 21 diagnostic panels (2012)• 49 New Molecular Assays and NeoTYPE MolDx Panels (2012 - present)• SVM-based test for ALK lung cancer FISH (Sep 12)• NeoARRAY/SNP Cytogenetics Test (Nov 12)• New Aperio Digital Imaging Platform (Q4 12)• Barrett’s Esophagus FISH Test (Dec 12)Recent Innovation
  12. 12. 1212Molecular Assays Launched in 2012Solid Tumor Assays Hematopoietic Assays1 IDH1 & IDH2 Mutation Analysis2 c-KIT Mutation Analysis3 PIK3CA Mutation Analysis4 NRAS Mutation Analysis5 TP53 Mutation Analysis6 NeoARRAYSNP/CytogeneticProfile7 KRAS Mutation Analysis8 BRAF Mutation Analysis9 EGFR Mutation Analysis10 Microsatellite Instability Analysis11 NeoTYPE Solid Tumor Profiles:Breast, Colorectal, Gastric,Lung & Other12 BCR-ABL1 Translocation, t(9;22)13ABL1 Kinase Domain MutationAnalysis14 IgVH Mutation Analysis15 FLT3 Mutation Analysis16 NPM1 Mutation Analysis17 JAK2 V617F Mutation Analysis18 JAK2 Exon 12-14 Mutation Analysis19 BCL2 Translocation, t(14;18)20 BCL1 Translocation, t(11;14)21 MPL Mutation Analysis22 DNMT3A Mutation Analysis23RUNX1-RUNX1T1 (AML1-ETO)Translocation, t(8;21)24 SF3B1 Mutation Analysis25 CBFB/NYH11, inv(16)26 PML-RARA Translocation, t(15;17)27 WT1 mutation Analysis28 NeoTYPE CLL Prognostic Profile29 NeoTYPE AML Prognostic Panel
  13. 13. 1313Accelerating Pace of Innovation20114 molecular tests3 FISHFL – IHC menu201210-color Flow CytometryImplemented State-of-the-artMolDx platform in lieu of Kits29 new Molecular testsNeoTYPE MolDx PanelsDigital Image AnalysisSVM for ALK FISHBarrett Esophagus FISHNeoARRAY/SNP CytogeneticsInternalized 99% of send-outs2013 (Planned)20-30 new Molecular testsAdd’l NeoTYPE PanelsNext Generation SequencingROS1 FISHNeoSITE Melanoma FISHPlasma/Urine-basedProstate TestSVM-based CytogeneticsAnalysis SystemSVM-based Automated FISHAnalysis System v2
  15. 15. 1515Industry Dynamics& Demographics• Aging U.S. population andprevalence of cancer• Diagnostic testing reduceshealthcare costs and improvesclinical outcomes• Emergence of molecular diagnostics• Targeted therapeutics andcompanion diagnostics• Grow existing customer base– Salesforce productivity– Increase share of wallet– Promote product education• Attract New Customers– Promote key advantages of“tech-only” model to community-based hospitals– Partner with Clinician Offices• Sustainable revenue growth opportunity• Significant degree of operating leverage inthe business modelNew Products &TerritoriesMarket Share Gains• Continue to expand test menu• Sublicensing of HDC products– Cytogenetics/Flow systems– International opportunities• Proprietary test development• Mergers & AcquisitionsSuperior Financial ModelKey Growth Drivers
  16. 16. 1616Management Team• Douglas VanOort, Chairman & CEOOperating Partner, Summer Street Capital Partners;Chief Operating Officer, Quest Diagnostics• Maher Albitar, M.D., Chief Medical Officer & Director of R&DMed. 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 OfficerDirector of Genetics, U.S. Labs; Worldwide Marketing Mgr., Ventana Medical Systems;Asst. Director, Prenatal Diagnostic Center (Harvard)• Steven Jones, Director, EVP – Finance, & Chief Compliance OfficerChairman, Aspen Capital Group; Managing Member, Medical Venture Partners;Vice President, Merrill Lynch Investment Banking• George Cardoza, Chief Financial OfficerCFO, Protocol Global Solutions; Controller, Central Region, Quest Diagnostics• Robert Horel, Vice President, Sales & MarketingRegional Mgr., US Labs; Product Specialist, Ventana Medical Systems; Pilot, U.S. Navy• Steven Ross, Chief Information OfficerVice President Technology, Chico’s FAS, Inc.
  17. 17. 1717Productivity Increases Have Offset Changes inAverage 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%Q409Q110Q210Q310Q410Q111Q211Q311Q411Q112Q212Q312Q412Q113Gross Margin % Cum Change in Avg Rev/Test Cum Change in Productivity(1)
  18. 18. 1818Quarterly Financial Information($, 000s) 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$% Growth (YoY) 47.3% 72.2% 49.2% 25.5% 15.5% 3.3%% Growth (QoQ) 13.9% 17.6% 3.0% -9.0% 4.9% 5.1%Total Gross Margin 5,834 7,144 7,367 5,892 6,434 7,246Gross Margin % 45.2% 47.1% 47.2% 41.5% 43.2% 46.3%Sales & Marketing Exp 1,801 2,036 1,934 1,839 1,692 1,931General & Administrative Exp 3,530 3,750 4,066 3,930 4,097 4,175Research & Development Exp 127 497 528 808 448 835Total SG&A (Incl R&D) Expenses 5,459 6,283 6,528 6,576 6,237 6,942SG&A as a % of Rev 42.3% 41.4% 41.8% 46.3% 41.9% 44.3%Net Income/(Loss) 152$ 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.
  19. 19. 1919Key Financial InformationRecent Share Price (5/3/13): $ 3.67Common Shares Outstanding: 48.7 MCurrent Market Cap: $178.7 MDiluted Shares (MRQ, Pro Forma): 50.9 MFully Diluted Shares: 55.8 MNon-affiliate Float Shares: 41.1 M52 Week Low/High: $1.55/$4.20Avg. Daily Trading Volume (3 Mos): 228,349
  20. 20. 2020NeoGenomics Summary• Emerging leader in the fastest growing segment of thelab testing industry• Robust competitive advantages and product portfolio• Strong Management Team with directly relevant industryexperience• Accelerating profitability propelled by revenue growthand increased operating leverage• Q2 2013 guidance: $15.8 - $16.4 million of revenuewith $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