Hello, everyone. Thank you for coming. My name is Zach Conti. I'm a member of the Healthcare Investment Banking team at J.P. Morgan. It's my pleasure to introduce you to NeoGenomics. Today, here we have Chris Smith, the CEO. We've got Jeff Sherman, CFO, Vishal Sikri , President, Advanced Diagnostics, Warren Stone, President of Clinical. I'll hand it off. Thank you.
Thanks, Zach, and for all of you loyal investors, I appreciate you being here, considering it's 7 to 0, Michigan over Washington in the Q1 . I actually asked, could I put a slide in?
Is it really the score?
It's yeah, it really is the score. I hope I didn't blow it if you're not recording it, but I know it's been a long day, so appreciate you being here. We're gonna give you an update on the business and kinda the state of the business. I will say from a financial perspective, we haven't changed our 2023 guidance, and our last time we reported results was Q3, and we didn't pre-release. So I'll give you more probably up year-to-date type of thing, financials as through Q3. But let's jump in. Look, I think from our company perspective, obviously, we've got our Safe Harbor. I'm sure everybody has this memorized in this room at this point, but look, I...
We always lead with our mission, and I think I see some familiar faces in the room that have gotten to know us a little bit. And we really believe this at the heart and soul of the company, that we really have the ability to change and make an impact on people's lives. And we talk about you can go anywhere and make money, but there's very few places where you can change the world. And it really is that, I think, that motivating factor that helps the team move forward every single day. And when you think about cancer, you look at the prevalence and how it's on the rise, and one in two men and one in three women will get cancer in their lifetime.
So, you know, when you think about from a business perspective, you wanna be in growing, sometimes underserved, but growing markets. And if you think about this market, cancer in itself is probably growing between 6% and 8% a year. So it is generally a good growth business, unfortunately. But when you look at how that relates into our opportunities, these are the categories that we really compete in. If you look at the diagnostics testing, it's about $9 billion. Pretty penetrated, it's about 90% penetrated. That, that would be things like flow and FISH and Cyto. And it's about—we think it's growing probably around 4%, 5% a year. If you look at therapy selection, obviously, this has been the big growth.
This is NGS, this is what's been going on in the market, and we'll talk a lot about that throughout the day. That business is growing anywhere from 15%-20% a year, but it's still relatively underpenetrated. It's only about 20% penetrated from a perspective. And so a lot of the things that you see in the first diagnostic testing is moving into NGS as it continues to grow. The third big category that we compete in is MRD. Again, we'll talk about this as we go throughout the day, but that's gonna be about a $20 billion market, and it's significantly underpenetrated, less than 5%, but it's growing faster than 25% a year. And then the final one is really, what we look at, is pharma services, because we have a pharma business.
And if you look at the top 30 pharma companies, they're spending about $150 billion in R&D, so really good opportunities in that space. And you can see what these drivers, the market drivers down at the bottom. That's what's gonna continue to move this business forward, which is, we think it's a really great place to be with our company. We think we have an incredibly unique position in the market. And what I mean by this, if you think about these large clinical reference labs, the Quest, the Labcorp of the world, they're growing single digits and making money, and they offer several thousand tests a lot of times. If you think about the other side of our industry, it's kind of these niche oncology companies.
These are companies that are growing double digits, but historically burning a lot of cash. Most of them are losing tens of hundreds of millions of dollars, and they have a limited menu, maybe 15-20 tests. And if you think about our business, we have the ability, we think, to go right kinda down the middle. We think there's a unique opportunity to have a business that grows high single, low double digits from a revenue perspective, and grows in the mid-teens from a profitability perspective. You know, we'll talk a lot today about having over 600 tests. So you can see from a competitive perspective, when we're out calling on, especially on community hospitals, community oncologists, we have a, a wide array of, of oncology tests.
We really are, I think, the industry leader when you look at specialty companies in the oncology space, and for several reasons. You can see here's a, it lists a few of them, but we have a I mentioned, a comprehensive test menu, approximately 600 tests. One of the things that's relatively new is that we're starting to drive more and more innovation. That happened through the Inivata acquisition of RaDaR a few years ago. If you go back to Neo, 10, 15 years ago, wasn't really probably an innovator, was a fast-to-market follower, but on lab-developed tests, we're continuing to do that. If you think about our business, about 80%-83% of our business is in our clinical services, and that's really selling to community oncologists and pathologists, our full array of products.
Today, we have two sales forces calling on that group because they are very different buying patterns. If you think about a pathologist or a hospital compared to a group practice community oncologist. So what we've decided to do over the last really 18 months is segment our sales force as that community oncologist continues to grow. We generate over 100 million data points every year, so data is significantly important. We'll talk about our informatics business in a little while. We have about 2,200 teammates, and we have this broad network of labs, and that is a real differentiator for us in the market. While there is cost associated with having multiple labs, we believe it gives us a key differentiator on turnaround time and on service.
If you think about the way that we think about the business, it's the right test for the right patient at the right time. That's one of the reasons that we have this lab footprint that you see there. To give you an example, our goal is, if you're living in Paducah, Kentucky, to get the same type of cancer testing care that you would get at Sloan Kettering. That's what I think has made NeoGenomics successful in the years, and that's what we continue to do, and that's why you kind of see this footprint that we manage today from a lab perspective. If you think about as we move into 2024, we talk about really four strategic pillars in the company. I'm going to talk primarily about three of them today.
The fourth is enhance our people and culture in the company, and look, that I would say is our greatest asset, is our team. But I'm gonna talk to you about kind of the financial drivers of the business. The first is we have to profitably grow kind of our core business. That's that clinical service business, that's that community oncologist or community hospital. And to do that, it's really a focus on increasing our volume. It's one of the things that we've done really nicely this year, is started growing that volume at or above market, but it's also continuing to move NGS at a more rapid rate. Later in the deck, you'll see a slide that talks about 25% of our clinical service revenue is in NGS and is growing faster than 35%.
That's one of the reasons, if you follow our company, you've seen this lift in the average selling price, is our ability to continue to shift that mix. The second is we need to win commercially, and I think it's one of the great strengths of the company, is our commercial organization. It's not just the ability to win in that new space, which is oncology, come to the kind of community oncologists and group practices, but it's really our ability to optimize the selling organization. Let me just give you an example. Gartner will come in and give you an evaluation of how does a company perform from a sales effectiveness and efficiency perspective.
Best in class is north of 50, which means that a salesperson is spending more than 50% of their time selling, and they may be spending, you know, the other 50% doing minutia, things like administrative. When we came together as a leadership team about a year ago, we were only at about 25% penetrated. So while we have 100 full-time people today in the field, we believe by continuing to drive efficiencies and bringing tools in to support that organization, we can accelerate our selling time, and that's the key for us as we go into 2024. Then the last one is we got to continue to win on revenue cycle management. We talk a lot about this. I think if you're going to be in this space, it needs to be core competency, something we've really committed to.
It's one of the reasons you see us driving at a higher AUP increase quarter- on- quarter compared to a lot of our peers, because I think you got to get paid for the work that you do. And historically, in this industry, I think a lot of companies have accepted that, you know, you don't have a prior authorization, run the test anyway. And our view is, look, we need to make sure that we're doing things the right way to continue to drive that. So, so revenue cycle would be a big one. If you think about our, our next business, it's really this advanced diagnostics, and one of the things we need to do is accelerate that advanced diagnostics. Vishal is with me today and will be with us for Q&A.
But if you think about this group, it's really what I call the tip of the spear. It's where we're driving R&D, it's where all our new innovation is coming out of, and we need to continue to bring new products to market. You see that in late 2024, early 2025, we'll bring two key markets-- products to market. One will be this new Neo Comprehensive solid tumor, and then the other one will be our liquid biopsy CGP product. We need to continue to develop evidence, both clinically and from a reimbursement perspective, to drive payer coverage for MRD. So MRD is starting to get covered by Medicare, but it's still early days with the private payers, and so much of this business sits with private payers.
And while we today have over 200 contracts with private payers, it's going to be important that we continue with MRD to bring those products forward. And then the last one, we've talked very openly about improving pharma margins. We did that with a big focus for us in 2023. It continues to be a focus in 2024. We made a conscious decision earlier in 2023 to move away from unprofitable business and bring that business back to being profitable, and that's been a huge win for us in 2023, but it'll continue in 2024. And then the last one is we need to drive value creation. And, look, everybody thinks about the shareholders, but it really isn't just the shareholders, it's the stakeholders of the company. So it's the teammates, it's our customers, it's our patients, as well as the shareholders.
And to do that, we've spent a lot of time improving the gross margin this year, and we got to keep driving operating efficiencies. We've publicly gone out and say that we needed do about $10-$12 million in value capture this year. If you look at 2023, we probably will have more north of $25 million that we picked up through value capture. So it's really right-sizing this business from a cost perspective. LIMS, lab management system is important for us. We, over the last five years, have done about four acquisitions that all had different lab management systems. We're moving all that onto one platform. It'll probably be about a 24-month project, but it really starts this year.
As a matter of fact, that group came together in late fall, where we carved people out of their day jobs and moved them over onto this team. So rather than, you know, putting it on the side of your desk and getting to it, we've actually carved out a large number of people to help us implement our new lab management system. Automation and digital is a huge, I think, opportunity for us. When we acquired Inivata, that RaDaR lab was pretty automated, but the NeoGenomics of the old had not brought a lot of automation into the market, and so I think bringing in automation. And then finally, it's around FDA readiness. I think, look, it's been in every meeting that we've had with investors today, is what's going to happen with the FDA around lab-developed tests.
And look, our view is that the FDA is trying to come, and so they're coming. So if you look at our leadership team, they all come out of regulated, regulated environments. They're all our new teammates, including the head of quality. All our new technology from a R&D perspective is under design control. So we, we believe that you got to be ready if and when the FDA comes. I mentioned these two businesses. I'm just going to touch on them briefly, but I think this slide does a great job of highlighting them. The first one's our clinical service business, which is just north of 80%. One is, again, back to this portfolio and, and having the ability to offer 600 tests.
And if you think about in that category, we are the market leader in heme, and heme today still makes up about 35% of the cancer market. So our ability to use that leadership as we start to expand more into things like NGS for solid tumor, it gives us the ability to do that. There's commercial execution. I talked a lot about this. How do we, you know, become more efficient with our selling organization? There's a lot of activities that are going on there. Making sure that we have scalable business support. So I think as our business continues to grow, making sure that we have the fundamentals in place through the CRM system and other things with our customers, like, connectivity to the customers, becomes incredibly important. And then the last one is just this whole thing around operational excellence, and-...
Look, when we all came together about 15 months ago, we were not winning on turnaround time from a company perspective. If you think about this business, it's a service business. The number one driver is turnaround time to hospitals and patients. You don't want a patient coming in for a follow-up appointment and not have the results. So we've spent a lot of time and energy of taking that from a, I would say, not the premier leader, to becoming the leader. And to give you an idea, you know, NPS, some of you guys may follow Net Promoter Score, but we're at about 70 in this category in this group, which is pretty high in our industry. And so I think the team has done a good job on executing these four, and we'll continue to do that.
If you pivot to the advanced diagnostics, this is where I talked about earlier, the tip of the spear. It's really where the R&D sits and reports up to Vishal. It's where we run our pharma service business, because historically, pharma companies are moving before the clinical on new technologies. A great example is MRD or RaDaR, that they moved in that business long before physicians. Informatics, I've talked about the data points that we capture and the ability of taking all that data and being able to repackage it and sell it, especially to pharma customers. And finally, about what we're gonna be doing around new technology and some of the things that are coming in the future. I do want to spend a minute on MRD and RaDaR a little bit, because we do think it's kinda changing the paradigm.
This is a great pull together of multiple studies that compared us to the standard of care, which historically has been imaging, and how much earlier you can detect cancer with an MRD product. And you can see whether it's breast, head, neck, or lung, you're picking it up significantly faster. So we're one of the believers that we think MRD will be the NGS 5-10 years from now, the way NGS is today, and so I think it's important to be there with a sensitive, informed assay. And this just gives you a highlight of what's going on with RaDaR. So today we have 28 studies underway.
We, we have validated that product for breast, lung, colorectal, and head and neck, and we've gotten one approval from Medicare on a limited indication for breast, but we have three other submissions currently sitting with MolDX, which is expanded breast, head and neck, and lung. So a really good opportunity there. This gives you an update on how we're doing through Q3. So this is not the Q3 numbers. This is, would be year to date. Through the Q3 , our business was up about 18%. You can see our adjusted EBIT is up 88%. I think some other things that jump off the page is cash flow from operations, ex- you know, growth of 60%, and then that whole thing about NGS, growing that NGS business faster than 35% is giving us that return.
And that's where you see the tenth quarter in a row where we had improvement on our ASP. This is what the current guidance is. Again, this has not been updated. This was through Q3, but you can see that we raised. We beat our quarterly consensus and then raised guidance. So we should finish the year 15%-16% up on revenue, and you can see adjusted EBIT up about 92%-98%. So pretty nice range of how we've been continuing to improve that business. If you look at the adjusted EBIT, again, I don't know how many of you follow the company, but we lost approximately $50 million in 2022, and our goal was to cut that in half. And so you can see we've been performing significantly faster from the adjusted EBIT.
It's really about getting leverage on this business and understanding the levers that we can pull to drive operating profit, which is obviously revenue growth, but also a lot of things that we're doing fundamentally inside the business. So look, the momentum continues. I love this slide because I think this talks about as we started to come together as a team, which was really Q3 of last year, but you can see consistently growing each quarter. The green bar is the midpoint of guidance. I will say that so far this year, we've beaten guidance every quarter. I'm not saying that. I want to make sure you saw the forward-looking statement, but the business has continued to perform well. And then, how are you converting it into adjusted EBIT?
You can see we had publicly gone out and said, "We'll make money in Q4." We actually made money in Q3, so we're ahead of our timeline. But we really see that momentum continuing as we move into 2024. Look, just the key takeaways, and then we'll get to Q&A, because I think that's really where the meat of these presentations is, is that, look, it is a huge addressable market, and we have a great leadership position with over 600 tests. We're continuing to bring new innovations to market, but it really is about giving that community oncologist or community hospital the ability to access that care that you'd get at an MD Anderson or a Sloan Kettering.
There's strong volume and revenue, I think, so we've got a tailwind as we move into from 2023 into 2024, and feel really good about where we're headed this year. And I think we're really well positioned to win in this space and build long-term sustainable growth. So on that, I'm gonna pause. I can check the score, but you guys have phones also. I know Zach, who's hosting this, is a Michigan grad, so it's killing him to be here. But, let's turn it over to you, Zach, and the team for Q&A.
Yeah. Thanks a lot, Chris. Just have a few questions, and then we'll open it up to everyone else. But, you know, just given the PI, you know, how does this impact your, your MolDX strategy, moving forward?
I'm sorry, start the question again.
No worries. Just given the PI, like, how does this impact-
Yep
Y our MolDX strategy moving forward?
Yeah, so some of you may know that, RaDaR is out, has been out on the market, and one of our competitors filed an injunction that had been awarded. And so, today, that actually, that injunction is not in effect because there are a few things from an administrative perspective that the judge had to redo. But look, our thing is we're continuing to run the business. We feel really good about our legal position. I've got Ali over here, who's kinda our GC and runs business development, and can step in, but I think we feel good about our position. And so as we go through kind of what we would call the appeal process, we're gonna continue to invest and do the things at MolDX, because I think we feel very good about where we're positioned.
That's great. And, like, just given your past experience, you know, Cochlear, Ortho, you know, how are you able to leverage that, and how will you be able to use that for Neo?
Yeah. So, I see Brian here. It's good to see a familiar face, from Ortho. But look, I think obviously the businesses are a little bit different, but there are some similarities. I'll go to kind of talk about Ortho Clinical Diagnostics first, and, and similar to Neo, had a great franchise. So if you think about Neo, we kinda built this special oncology testing business. Ortho had a great franchise, it'd been around 80 years, but it had kinda lost its way from a commercial perspective, had lost its way from an R&D perspective, and the company was 7.6 times levered, had been bought out by Carlyle out of J&J. And so it really was also about driving operating efficiency. If you think about Neo, it's about how do we optimize the commercial organization, drive faster revenue?
I think without question, it was about investing in the right R&D projects, but also getting that operating leverage. So I think very, very, those two, very similar. Look, if I think about Cochlear or cochlear implants, when I was CEO there, that was really a significantly underserved market, where only 5% of the people that need a cochlear implant got one. So it was really about how do you pioneer and build a brand and build a category? So it was a market share leader, great franchise, around 40 years, but no one was getting one. So if you think about MRD, you think about NGS, these low penetration rates, it's how do you make the category grow faster, would probably be the one that would be most similar to Cochlear.
Nice. And then I guess one other question would be, like, kinda touched on—you touched on it last question, but, you know, 2023, you guys really did a great job turning it around. You know, you touched on a lot of the major drivers, you know, the spears being a major driver as well. But, you know, how do you see that going into 2024, and, like, what kind of drove 2023 that you think will continue into 2024?
Yeah, look, I think, and again, it's good to have the group here because I think they can... Maybe we can break this into multiple parts, and Warren can talk about clinically, Vishal in the ADX, and then Jeff financially. But look, I think the biggest play here was execution, and I think we brought in a new leadership team that needed time and grade. And so they come in, and they assess their business, and a lot of times they had to make changes. And so and when you think about Neo, or a company that loses its way, sometimes what got you here is not gonna get you there. And I think we're building the business to be a billion-dollar revenue business, and so I think it's about continuing to execute on those things.
You guys wanna just maybe go down the line? Would that be okay, just-
Oh, yeah.
Like, talk about what do we do in 2024, and-
Well, maybe, sorry, starting a little bit in terms of 2023. So, I mean, we identified a number of initial focus areas in 2023 that or certainly outlasted 2023 and run into 2024, and probably in some instances, into 2025. First and foremost, it was really around customer experience. We knew that, you know, in order to be successful in the longer term, from a clinical service business, because as Chris said, this is a service business, customer experience was absolutely imperative. So starting to build strong and robust processes around customer experience. Second was operational excellence. You know, just making sure that we were able to deliver the types of turnaround time in a sustainable manner to meet the client demands. Commercial execution was a big one.
We wanted to put an organization in place that would be able to effectively execute against the strategy. And, you know, the last element was really around the people and the culture within the team, and we've systematically started to build on that. But if you synthesize that out and take a look at the sort of three things that we really wanted to focus on in 2023 to be successful, we wanted to drive volume, because ultimately, that created fixed cost leverage for us throughout our operational facilities, and that obviously helped the bottom line. We wanted to drive increase or incremental growth above market and NGS, because that's a higher value test. Again, that drove profitability and supported bottom line. And then lastly, we wanted to get paid for the work we did.
And then larger, the whole RCM initiative, which ultimately, any work that we did there had an immediate bottom line effect. So the combination of executing against those three things really drove top line revenue and improved bottom line profitability. The positive execution came from those four pillars that I spoke about earlier. Those four pillars will remain in 2024, and I think a lot of the executional focuses will be similar, but better.
Mm-hmm. You wanna talk about your business?
Yeah, I think on the ADX side, look, in 2023, we launched multiple products, which I thought were going to be competitive in 2023, and we'll continue to do that in 2024. The two big ones where we focused on in, in 2023 was on the s- heme side of the business, which is a large panel on the myeloid side, which my, heme is our biggest portion of our business from an NGS perspective, because Neo started off in heme. On the solid tumor side, we launched, we launched our largest panel for solid tumors on the NGS side, so that's gonna carry us over, going into 2024 as well. But the biggest focus, I would say, for us, has been the improvement in our gross margins on the pharma side.
We spent a lot of effort in improving our operations, how we do business with pharma, making sure that we focused on our high-value contracts, but also worked in the efficiencies within the company. So we have spent a lot of time, addressing that, and that will continue also into 2024, because we do still see some upside there. And then on the informatics side, that's an area of the business, which is relatively new within Neo, but we have a lot of clinical data that we generate, that we also license out to pharma and to AI companies. And if, you know, paid any attention to the space in the last, year, the AI companies are making a lot of noise, and there's a lot of value within the healthcare system that we can partner up with AI in this space.
We'll probably see that continue also into 2024.
You want to say just financially?
Yeah, I think financially, a couple of things. First, I think with Chris coming on board from a just a leadership perspective, having a sense of urgency and having accountability throughout the company really increased. So I think from a starting point, we started with that. And then I think from a strategy standpoint, we were focused on what were the levers that we could pull as an executive team and actually drive performance, and you've heard a couple of them. Certainly volume and commercial execution was one. We set out a strategy there, executed well against it. From a revenue cycle perspective and a pricing perspective, you know, we started getting pricing increases, really a focus on that, starting to get paid more for the work we're doing, 100% accretive to both gross margin and the bottom line.
And then really focusing from an operating efficiency standpoint, how do we get more efficient? We took out over $25 million in costs at the beginning of the year, and we went through a period of time where costs were just growing faster than revenue, and it was not in a sustainable trajectory. So we really had to focus on where were the investments we can make to actually drive operating leverage, both on a gross margin perspective and from a below-the-line OpEx perspective. And I think starting from a position of strength fiscally, with a capital structure and balance sheet that were, you know, I think well-positioned, improving our financial performance, significantly improved our cash flow performance, and I think positions us well as we exit 2023 to continue to see that momentum into 2024.
Awesome. I'll open it up to the floor. Does anyone have any questions?
We'll see how many real football fans are in here. You score? It's-
7-3, the last I checked.
7-3, Mich- oh, 17-3, Michigan. Game's almost over. You guys can hang around.
Wow!
Yeah.
I guess I got, like, one other question.
Okay.
This would be more for Vishal. You know, you guys have two products that you guys mentioned that you're going to be launching, I think, in 2024 and 2025.
Mm-hmm.
You know, how do you think that's going to impact your... the business, and do you think that'll be, like, a dynamic, I guess, strategic opportunity for you going forward?
Yeah. I mean, we're looking at our next generation solid tumor product, especially, focusing on that and getting that out in 2024, early 2025. But I... In the solid tumor space, right, I mean, there's a lot of drugs that are coming onto the market, which need targeted testing in general. So, and tissue really does become an issue. I know everybody says that tissue is the issue, but as we catch these cancers earlier and earlier, to be able to get more information from that sample becomes even more important. So we've done a lot of effort internally, looking at how do we get more DNA, RNA out of a sample? How do we make sure that we work on library prep procedures that give us much more efficiency out of it and cost effectiveness out of it?
And then, how do we improve the turnaround time for that sample from the time we get it from the lab to the time we report out those results?
Mm.
All that matters, because to Lauren's earlier point, that customer experience is absolutely critical in this space. What I really love about Neo, in particular, is that if you look at our breadth of menu that we have-
Mm
W e can get one tissue sample, and we can offer that oncologist, that patient, that hospital, a FISH result, an IHC result, a NGS result, or a single gene result, all from that same sample, depending on what that clinical need is. And, you know, that's one of the values that we get with Neo that other labs typically cannot offer.
Good. Question over there.
Thanks. Yeah. I'm wondering, is there an opportunity for you guys to work with... You know, there, there's a lot of, as you highlighted in your presentation, a lot of niche oncology labs out there that might not have the resources to access the market. Talk a little bit about decisions that you may make about, utilizing some of those tests to drop in your bag, or if that's not part of the strategy in a forward-looking way.
Yeah. Thanks, Matt. Look, I would say that last year we were pretty committed and focused, that we said: Look, A&A, M&A is not a strategy. There wasn't a business development group when I came in, and I think it was about getting the house in order. I mean, this was a good franchise. I think the team has done that. So we've just have created that business development group as we go into 2024, and I think we will look for things opportunistically. We like the idea of dropping additional innovative technologies into our bag. I think we have the pipeline. The old saying is, you necessarily don't need the oil if you own the pipeline. I think we've got a very good distribution system, especially where the market's growing, which is in these community settings.
So I think we would be opportunistic if the right things came along. I think careful about it, because, and you've heard me say this, you dive into digestion, not starvation, in acquisitions. But I think now that with the team having time and grade, I think we feel like we're prepared to find the right thing.
Maybe one more from me. If you could talk a little bit about informatics. You mentioned it as an opportunity. You know, part of the challenge that we hear from so many companies is, you know, do you have the data? Do you have access? Do you have patient releases? Do you have all the things that you need? And then, do you have it in a standardized way where you can look at kind of one patient versus another? And it seems to be a huge problem for a lot of companies.
Yeah, BlueJeans.
Yeah.
Do you want to take that, Vishal?
So it all starts with your LIMS system. So I would say this is where, you know, one of the investments that we're making, and we started this already in 2023, but that will definitely speed up in 2024, is putting into place a new LIMS system, which is a multi-year journey for a lab our size. But that is a lot of investment is going into that to standardize that information going in so that everybody is able to access it in the same way. But it doesn't preclude us from even doing the work that we're doing right now. If you look there was an announcement yesterday morning or this morning, with our collaboration with ConcertAI in the heme space, right? They come to us because of the testing that we have on the heme side.
We're the biggest reference lab on the heme side of things, and they have a lot of the data that goes along from a claims perspective and so on, so we can collaborate together in putting that together. So there's ways to still work with partners on the informatics side, but I would say our LIMS portion will be a big step forward for us to get to where I call the true value that can come out of the informatics side of the division.
Yeah, I get asked a lot, where are we in the turnaround from an innings perspective? And I kind of been using around—we're probably around the third inning. We're not in the seventh inning. But I would say that we're just taking the mound in Informatics, right? It's the opportunity is huge, and we've, we have all these data points, and the challenge today is the number of data scientists you need to, to carve it up from 8 different LIMS systems. So I think the ability to move to one LIMS and consolidate that data in a useful way is a big opportunity. So I think we're just scratching the surface there.
So you touched on it in the presentation, but I'd love to hear a little bit more detail around the risk of LDT oversight, and what does the engagement look like with the FDA? And if push should come to shove, and the FDA ratchets up the plan to oversee LDTs and regulate them, what does the risk look like to Neo?
Yeah. So, look, we're on the ACLA board, as are a lot of our peers, you know, Quest, Labcorp, Myriad, Exact Sciences, ARUP. Look, I think the belief is that as an organization, we're—I think we're collaborating to understand what this means in the industry, and look, a lot of people think it's not constitutional, so we'll see. So when the ruling comes out, we'll see what happens from a legal, you know, perspective. Look, our view is it probably ultimately becomes a reality. Maybe that's because I grew up in medical devices, and I've never lived without the FDA, so I just think they want to be involved in things that are—that are healthcare related. Look, I definitely think there's a risk for companies, but I think it becomes a couplefold.
Number one, the current proposal from FDA is that you'd have 3 years just to even submit, and you wouldn't even have to have approval. You would have to submit under that timeframe. And there's a lot of analysis that went on in the comments that the FDA couldn't even handle the amount of load that they would inherit, depending on how far they go on grandfathering. You know, for somebody like us, I kind of see it a couple different ways. I think depending on how far they go on grandfathering, I think that'd be great. I think internally, I'm not saying that this is based on science, but it's based internally. We think things like NGS and MRD will have to go through the FDA because of the complexity of those tests. I will say that those are all now going under design control.
But we think there's a really upside for companies that are in front of this, and let me give you an example. A lot of business today, or challenges, are hospitals wanting to internalize NGS testing. Again, it's one thing if you're MD Anderson or Sloan Kettering; it's another thing if you're Paducah Memorial. Do you really want the FDA walking into your lab, doing it, you know, a site inspection? So I think the companies that move quickly and are prepared, I think are going to be the ones that come out ahead. But we'll see. I think it'll be there's going to be a long time before we see how this thing shakes out, and a lot of heavy lift. Any other thoughts, comments, questions? All right. Well, thank you guys for staying with us today.
Thank you.
and have a great rest of the meeting.