Good morning. Dan Brennan from TD Cowen's Life Sciences Tools and Diagnostics franchise. Really pleased, day two kickoff for the thirty-fourth Annual Health Conference with the senior management team at NeoGenomics. We have with us on the stage, Jeff Sherman, CFO, Warren Stone, President of Clinical Services, and Vishal Sikri, who's President of Advanced Diagnostics. Gentlemen, welcome.
Thank you, Dan.
Thank you.
Glad to have you guys. Feel free, for those in the audience, if you want to send me an email. I'll check once or twice during the presentation and can try to weave in your questions. So basically, the first question is, you know, with Chris coming on board, management team got revamped, and certainly, you know, the performance has improved. The stock's done well. It's been a couple of years, you know, since Chris took over. Just maybe, you know, when we think about the broader opportunity set, you know, for NeoGenomics, dating back a couple of years ago to where we stand today, just maybe speak to a little bit of like, what, you know, what the new management team saw, and kinda how things have gone generally.
Yeah, I'll start, and then Warren-
Yeah
... Vishal can add in. So I think, you know, Chris is coming up on a little bit over 18 months as, as time and chair, as CEO. And I think what he saw and many of us saw was, you know, a very strong franchise and brand at NeoGenomics, with a very broad presence in the marketplace, and, and a strategy that made sense, but had some challenges on the execution side. And so as, as I look back, I've been here about 14, 15 months, I think Warren, about the same. You know, I think the first thing Chris came in and said was, "We need to focus on execution, focus on accountability, and really have a sense of urgency to address, you know, the, the challenges the company was facing." And I think as I look back through 2023, we've had a lot of success.
You know, first and foremost, I think reigniting growth in the company, and so the company had a strong platform to operate from, but had really seen growth slow, and we were losing market share. And so Warren can touch on the specifics, but I think we've re-accelerated growth in 2023, and we've had, you know, been able to impact a lot of different levers that drive the business. So we've seen modalities grow across the board faster than the market. We've seen NGS grow even faster on that side of our business. We've seen our mix, our revenue per test increase. We've had success with revenue cycle initiatives, and we saw a very strong growth in 2023, 16% overall revenue growth. And then we've also had good, good impact on the cost side.
So we've taken out costs, we've been more efficient, and so we were able to take a $48 million Adjusted EBITDA loss, you know, to basically a positive $3 million, you know, in one year. And I think focusing on operations and, and improving our turnaround time have all had an impact on, on driving the business. But first and foremost, I think it was a sense of urgency and, and accountability with the new leadership team, and then, the new leadership team figuring out what are the things we need to do to actually drive the business that really had an impact in, in 2023, and I'll let Warren , Vishal add anything as well.
It's a pretty good summary, Jeff. I think that maybe one of the other aspects was, I think, just talent. And I know it's a bit of a cliché, but I think Chris and, and the rest of us done a really good job of bringing people in that really know what good looks like and is able to sort of push the envelope in terms of what could be achieved. Where I think some of the organization was a little stale, a little complacent, and maybe didn't have much of kind of a vision in terms of where we could go. We all saw the potential in the organization. I think that's why we joined, and we've brought other people into the organization that see the potential, understand what good looks like, and we've all sort of enabled around achieving that, that sort of brighter future.
But I think touching on one of the key things that Jeff said, I think focus is also imperative. We're, we're opportunity rich, but we've done a really good job of identifying the select few things that if we do well, will deliver results, and I think that's what really what worked in 2023.
Yeah, and on the focus side, just to stress that, on the advanced diagnostics perspective, we had a lot of labs doing a lot of work all over the place, and there was not much rhyme and reason as to why we had opened a lab, especially in our international footprint perspective. So there was a lot of effort that we did in 2023 to consolidate our testing, making sure that we were offering the right service at the right time, at the right place, so we could actually help control and manage our costs accordingly. So there was a lot of effort that went into that.
I think the perspective of, you know, we think it's important that we grow top line and, and be profitable as well. I mean, they're not mutually exclusive for us. We think we can do both, can and should, do both.
Mm-hmm.
Maybe just as a follow-up to that: So Warren, you mentioned being really focused, identify a few things. What are the few—I mean, again, you talked about execution, talent. Maybe those are the kind of higher-level conceptual terms there, some tangible few things that you said are on the board for management?
Yeah, so I mean, I think the commercial strategy is probably one of the key things on the clinical side in 2023 that really made the difference. So we focused there extensively. We did a complete market analysis to understand kind of where are we effectively deployed, where are we under-penetrated, what kind of sales strategy we need, what type of sort of sales motions required, understood sort of our different customer profiles as well and have made significant investments there. So if you go back sort of 18 months, we've doubled the size of our commercial team to increase the presence.
We've done a lot in terms of investing in tools and systems to increase the productivity of those sales resources, and it's really the combination of those increased investments, increased productivity, and then the focus on execution that Jeff mentioned that has driven the results in 2023, and we expect that to obviously carry momentum into 2024. So on the clinical side, that's probably been one of the key ones. The second is really being a discipline around bringing new products to market. So we had a rich 12 new products or line extensions in 2023, and there's nothing that a commercial team likes more than new products to sell. So, you know, and a lot of those products were in the sort of NGS realm.
So again, part of the strategic focus, coming back to focus, let's develop new products, but let's make sure they're in the areas that we want to focus on strategically. So, new products has been something that has definitely been a tailwind for us in 2023, and a lot of those were annualized into 2024. So looking to see that being a driver moving forward.
And then on the ADX side, it was really a focus on, and Vishal can touch on this, on how do we really operate to take the business and, and focus on, you know, profitable customers and, and really optimize the business that we've had, and, and we had good success seeing strong margin expansion on the ADX side of the business, which impacted our top-line revenue a little bit, but significantly improved our margin profile.
Yeah, and we expect that to continue on an annualized perspective in 2024 also. So that's the nice thing. A lot of the steps we did in 2023 will carry over into 2024.
I think the last, maybe the last focus area, and surprise, Jeff didn't pick up on this: Revenue Cycle Management, getting paid for the work we've done. You know, that was something that I think we all walked in and said, like, "This is crazy how much work we do and not get reimbursed for." So we really put a significant focus on that, and that's every collect bottom line profits, because you've already incurred the cost, generally speaking, in terms of those tests. So we really focused on doing a better job there, and we've made some really good strides, but that's a journey. You know, we've. I equate this to a fruit tree.
We've probably taken some of the low-hanging fruit in 2023, and we now need a bit of a stepladder to get to the next level of fruit, and we'll probably need a cherry picker to get to the next level down the road, but there's still a lot of opportunity for us on the revenue cycle management side of things.
Give me just one more question from what's been discussed so far. You talked about when you came here, you were losing share in some areas. You've kind of turned that around. We'll get into some of the businesses here, but I'm just wondering, what could you call out in terms of relative share position back when you guys came in, and kind of, you know, what's been the biggest areas that you've been able to recapture share?
So again, I would look at share across two aspects. I think there's share from a portfolio perspective, and there's share from a customer segmentation point of view. And I'd say that NeoGenomics has traditionally always been very, very strong in the heme side of things, the modalities that really focus on, on heme. And we, we sort of saw a gradual erosion on some of those market shares, and I'd contribute that largely to, to two things: a lack of focus from a commercial execution perspective and a lack of focus from an operational execution point of view, and particularly as it relates to the turnaround time.
Melody's not here today, who looks after enterprise operations, but her and her team have done a phenomenal job of, of, again, investing in better processes, better systems and resources to improve turnaround time, which is by far the most important driver from a purchase perspective and also from a health outcomes point of view, turnaround time. So we've made massive strides, and we've reported about that quarter-over-quarter, and I believe we have one of the best turnaround times across our portfolio today, which certainly helps to regain business. But that was the sort of leading cause of erosion, and the work done in 2023 has helped us improve.
So, we still see ourselves as market leader across all Heme modalities, including NGS, but that strong position with regards to turnaround time is allowing us to take meaningful share on the solid tumor side of things. Now, whether it be solid tumor in FISH, which is attractive from an ASP perspective, or solid tumor from an NGS point of view, which is probably the most attractive.
So at a macro level, that's allowed us to... We've lost less business, we've gained greater share of market for our existing clients, and we're winning new business. So a combination of all those things are helping to drive the volume.
Great. And then maybe, you know, you, you kind of raised the long-term guide on the, on the 4Q call, 7%-10%+. I know you cited NGS as a, you know, kind of key driver there. Just kind of walk through a little bit in terms of just how you think about the addressable market growth. Was that a factor, or is it really just your own business that is enabling you to kind of grow faster?
I think the overall total addressable market we think is huge, and, you know, it's multi-billion in several different segments. I think when we initially gave guidance of 7%-9% in 2023, you know, the management team was probably three to five months in seat. And so we took a look at the market, saw the market was growing 6%-8%, you know, based upon our analytics and data, and thought we should be at least growing that fast or a little bit faster. You know, coming off of 16% growth in 2023, obviously, we executed, and it happened a little bit quicker than we expected.
And then looking at 2024, with the opportunities we saw with the core business, as well as the NGS growth profile, 10%-12% we thought made sense from a guidance perspective. Long term, you know, given the investments we've made in the sales force that Warren has talked about, sales optimization that we're working on, you know, greater penetration into the oncology market, as well as the opportunities we saw on the ADX side, and we're investing in more commercial resources on the ADX side as well in 2024, you know, we felt comfortable increasing the long-term guide to 10%+. So, you know, we think at that point, we're growing 30% faster probably than the market, and certainly with the traction we've seen on the NGS side, we think that's sustainable over time.
Got it. And then maybe just kind of flipping into some of the income statement, and then we'll get back to the businesses. So, you know, 2024 guide, you've got healthy growth margin expansion, and you still got, I think, 300 basis points of EBITDA expansion, kind of, you know, with your long-term guide as you get to mid- to high teens by 2026. Just what, when you think about discrete margin drivers, and I'm sure there's a lot of them here, versus top-line growth, what's the balance between how much of it it's really just growing faster versus you've identified all these areas?
Yeah, I think if you think about our overall economic model, we have an inherent operating leverage in the model, so just adding incremental volume for us is gonna drive gross margin. So, you know, we've got capacity in our footprint. You know, we've expanded our footprint. We have capacity in our footprint to add more volumes, with not a lot of incremental cost other than really direct supplies and a little bit of direct labor. So I'd say, one, there's inherent operating leverage, you know, in our model. Then, as we think about what are the drivers that are gonna continue to help drive margin expansion, the mix of business into higher-value modalities like NGS is certainly one. Revenue cycle and getting price increases as well are highly accretive from a margin profile. And then we're starting to deploy technology more on the operations side.
So I would say most of the turnaround time improvements, you know, that we saw was more manually driven in 2023. It was more, how are we staffing? How are we running the business? But we really haven't automated a lot of our labs yet. So we see our LIMS investments in 2024 and 2025 into one LIMS platform, as well as investing in more automation, is gonna help drive more margin improvement. And then finally, you know, as you look at our overall operating expenses, basically flat in 2023. So we had all this top-line growth, and we were able to achieve, you know, significant operating leverage on that side. And we think technology and investments can help us drive efficiency on that side as well.
You know, we've doubled the size of the sales force. We think by using more tools and processes, you know, we can effectively double the size of the existing sales force from a productivity standpoint, you know, over the next couple of years and get operating leverage on that as well. Warren, Vishal, please add anything.
Yeah, I mean, in terms of the automation side of things, we're in the early stages of that, so there's a lot of opportunity here to improve productivity just from that perspective and drive down costs. And I think that's where you'll see investment going into 2024 to help with that. But the LIMS component is a big part of the story. And, you know, as we get the new LIMS in place and the systems structured in the right way, we see huge opportunities to take that data also and package it in a way that will allow it to be attractive to outside parties, too. And that's just something that we haven't done to a large degree yet, and I think there's huge upside because of it.
Yeah, we have the informatics business under our ADX side, which has been growing nicely, and it's a high-margin business. And I think you think about the longitudinal data that we have going back, you know, probably 10 years plus, is a pretty significant asset as we think about that over time.
On the LIMS side, how much of that is just replacing people for automation, you know, for computers? You know, for technology? How much of that are other efficiency gains, and can you just give a little more color on what those are? You know, you talked about it on the 4Q call. Is there any size to the, you know, what the LIMS benefit could be?
Yeah, we haven't quantified yet. I'll let you know, Warren, talk more about the specifics, but I think the way to think about it is, you know, through legacy acquisitions, we had multiple LIMS platforms and also had a separate platform from the ADX side versus the clinical side. Now, we're moving to one. We moved to one unified platform. It's gonna allow us to share resources more effectively. It's gonna allow us to really track samples and be able to have our clients self-serve to figure out where their test is in our process, and it's gonna give us better real-time information on how to manage the business. So we think it's gonna be an 18- and 24-month project. It certainly, there's gonna be some OpEx that's implied, you know, baked into our 2024 guide.
But we think it's one of the single biggest things we can do to really streamline the whole operation of the company, one unified platform. And it isn't just the technology side. It's making from a process standpoint that we're doing things the same way across the country.
Yeah, if you think... I mean, just kind of back to your question on automation, I think it's two types of automation. If you think of sort of workflow automation, that's separate from what we're doing from a LIMS perspective. I mean, the LIMS is really the nervous system of a whole lab and how it works and how it connects together. And today, we really struggle to understand where the sort of leaks are within our workflows and what's taking longer, what's costing us more, because the system is very manual. And as Jeff said, it's a combination of multiple acquisitions that we've done.
And we believe by bringing all of our labs under a single LIMS system, we're gonna be able to get a lot more transparency in our, in our workflows, and we're able to identify areas to actually improve those workflows, therefore, taking time out, taking cost out, improving customer experience. And I think the other key aspect from a customer experience perspective is it's gonna provide transparency at every step along the way. So we're able to predict when results are gonna become available. We're able to identify early when a repeat needs to happen or if something needs to be reflexed or whatever the case is.
So it's gonna significantly enhance the experience we're able to provide to our physicians and our customers, which, I think, has been a critical differentiator for Neo, but it's gonna allow us to go to the next level.
Are there any key vendors you would discuss in terms of that are helping enabling the next generation LIMS for you guys?
Yeah, we're in the final stages, so we've gone through the initial, you know, process of identifying what our resources are. And we've come up with over 2,000 user requirements-
Mm.
and we're in the final stages of selecting a vendor. So we're in the-
Yeah.
- We're in that next phase of selecting a vendor, and we'll probably talk more about that over time.
Got it. So obviously, NGS, you've mentioned it a few times. That's been really strong growth for the company. You know, solid tumor side, you guys, you know, grew 35% in 3Q-
Yeah.
40% in the fourth quarter. Just what's the right way to think about, A, you know, kind of the durable growth rate as you look out, you know, beyond 2024? Like, what, you know, what can we envision your NGS business if we look back three years from now, like, what did it grow at? And then, B, just can you discuss a little bit about, like, where you're getting such strong growth? Is this customers just who are doing, like, older technology, and they're adopting NGS? Are you taking share? Just a little bit of color exactly-
I'll start-
What's going on.
Yeah. I think, you know, we think the overall market's growing 15%-20%. So certainly, our expectation is we're gonna be able to grow faster than that over time. I wouldn't speculate much, much more than that in terms of percentages. I think we've had good execution there, and then I'll let, I'll let Warren talk more about the specifics.
I think. I mean, where is the business coming from? And again, as I said, in last year, we launched a number of new products. three of those were meaningful NGS portfolio additions. So then that in itself is new business that's coming to Neo. But I think there's, in addition to new products, and there's two products that are slated for 2024 as well, in terms of new products from an NGS point of view. But in addition to that, I think there's 3 other things that are taking place. We have within our existing customer base, people are moving from other modalities into NGS, so FISH, for example. So there is a cannibalization aspect that is taking place. Also, single-gene panels to larger panels.
This is another trend that's taking place because they can identify more actionable markers. So it's a second trend, and then in some cases, to very large panels that are CDx, et cetera. So we are seeing a shift of existing customers up the portfolio spectrum. But we're also seeing a situation where a number of our customers in the past haven't been using us from an NGS perspective, particularly with regards to Solid Tumor, which is relatively new for us, and the product that we introduced in March of last year. So we've been able to, from a commercial strategy perspective, expand share of wallet at existing customers with new portfolio. And then the last area, which is where we're probably making most of our inroads, is with regards to Community Oncology. Neo traditionally hasn't been focused there.
We've been much more in the community hospital setting. So by addressing this new segment, it's an opportunity for us to acquire new customers. And here, we lead with the NGS, but we also make our entire portfolio available to customers. So it's really driven across those three things: moving customers up the portfolio spectrum, expanding share of wallet, and acquiring new customers.
Mm-hmm. I would just add to that, the improvements in turnaround time, especially on the NGS side-
Mm
... have played a big role here in terms of getting those new customers back, I mean, to us-
Yeah
... but also the customers we've lost, having them come back to us. This is a huge investment that the company did into ensure that our turnaround times were competitive compared to where they used to be. In NGS, in particular-
Yeah
...when you look at CGP, other companies are usually double in terms of turnaround times compared to where we are now. That is something that's a huge competitive advantage than what was there before.
So maybe just a two-parter there. So when the hospitals are already doing NGS and you're displacing, are you displacing their, typically their internal departments that were doing it, or are they leveraging some of the big CLIA labs, and you guys just have better customer service turnaround, whatever that might be? Just to kind of A, and then, and then B, you know, when we think about some of the new product launches, I think you're launching liquid assay.
Mm-hmm.
Just give a little bit color on like, you know, how meaningful that opportunity is for you.
I'll start on that bit.
Yeah.
I think in terms of—I mean, we're winning across multiple paths. It's sort of all of the above. I think the displacing internalized NGS, there's a few examples of that, but that's not the major trend. It's more the case of other providers of solutions that we're coming in and displacing. And why we—One of the key drivers is that we're able to provide a solution for all the oncology diagnostic testing. If it's oncology and it's diagnostics, we'll be able to provide it to them and driving a strategy of vendor consolidation to simplify the send-out strategy, to integrate through an interface and integrate into the EMR, and just drive ease of use and productivity savings on the part of the hospital, has really been one of our key strategies to drive share gain within that setting.
Mm-hmm. And on the liquid CGP side, we think actually it's a big opportunity, especially in the Community Oncology setting, right? So you have these oncologists that are seeing these patients. They have the capability to draw the blood right there and send a sample over to us for testing, and a lot of times we can actually get that sample tested before even the tissue even enters the door or that the tissue results are out. So it's a really nice... And they want us, a vendor that can actually provide both solutions together, and we have the capability of doing that. So in certain cancers, in particular, where the NCCN guidelines have been updated, like lung cancer, breast cancer, and so on, we're going to see more and more of that occurring.
and I think that's just going to expand, concurrent testing is going to be part of the business going forward. The other thing is that as the drugs approvals get earlier stage on, you know, from stage 4 to stage 3 to stage 2-
Mm-hmm
... it's much easier to treat with a blood sample that way, compared to looking at a tissue sample, because the tissue samples are just so much smaller in size. With a blood sample, you can do similar testing like you would be able to do with a larger tissue compared to smaller tissue sample.
Have you, like, leaned heavily on Illumina during this process? I mean, obviously, they're the global leader in sequencing. How much? Is there a partnership there as you kind of develop these new products? I know there are a lot of new competitors out there in sequencing. Just wondering kind of what you would say about the platforms and how integral or not they are towards kind of getting to the next leg of growth.
Yeah, we look at everything. This space is evolving quite quickly.
Mm.
I mean, that's the reality. There's a lot of companies with new technologies coming out of there. So we have a pretty robust R&D team, and a lot of it is through the acquisition of Inivata that we got, and they're experts in the liquid biopsy space. And, so I would say, you know, we obviously utilize the Illumina platform internally. We've said that, but we look at all options right now.
Mm-hmm. Maybe back to the first question. So NGS, given the growth that you've seen, it's been, you know, it's been very strong, obviously, you know, high thirties, 40% growth. What do you think is the right... You know, if we sat here three years from now and look back, like double digits, obviously, I don't know, kind of where do you think it'll play out, but just, can you help us frame the size of the opportunity and what are some good ways to think about what could transpire for Neo?
Yeah, like I said, I think with 15%-20% market growth and us growing it, you know, in the 30%-40% range, I think that growth rate over time, you know, probably makes sense somewhere in that range-
Mm
... as we continue to penetrate the market, but not trying to get too specific yet on long-term specifics.
Mm-hmm.
But I think given the penetration we have, you know, in the market, and the breadth of our menus and the ability to protect, expand, and acquire new clients, as Warren has laid out, we see that as a big driver. So the market dynamics, I think, are moving in that direction, as well as our focus-
Mm-hmm
... as a company. So I think combining those two are gonna allow us to see healthy growth there for many years to come.
In terms of the core, the core, basically, you know, non-NGS portfolio, which is, you know, been your bread and butter-
Mm
... you talked about a little bit of cannibalization with this.
Yeah.
Just how do we think about, like, what the growth rate of that business goes at, and how much cannibalization are you kind of baking in now in your updated income guidance?
Yeah, certainly, we look at that, and I will go back and say, you know, each of the modalities, including NGS, but each of the modalities, we're growing at what we believe ahead of market-
Mm
... in 2023. And, certainly, if we look at the plan that we've put in place, we expect a lot of that to continue. So despite the fact that there is cannibalization, we still believe that we'll be able to grow above market. But those modalities growing significantly slower, closer to the 3%-4%, is what we estimate from a market growth point of view, but it's looking to outstrip that.
... the cannibalization is, you know, we would characterize as good cannibalization-
Yeah, clearly.
because we're substituting much higher value tests for a lower value test. So it's going to be, you know, you may impact volumes at some level.
Correct.
Unit, unit volumes, but overall revenue and margin profile should be better with that.
Goes up.
So before we jump into MRD, question on LDT legislation, which obviously came up, but specifically for sequencing. It's unclear, you know, it could be pretty disruptive, but again, it looks like FDA wants to allow a long lead time in for however they do this, and they, you know, they downstage, you know, there'll be less kind of, you know, Class III, more Class II. So just speak a little bit to, like, how you're prepared for LDT legislation, and particularly with sequencing, where there's a huge effort here, how you think that plays out?
You want to start?
Yeah. So I'd say that, that again, different people have different views in terms of what's going to happen. Yeah, I think that the near perspective is it's a matter of when, not if. And we've actually been preparing for this for the greater part of a year now. So, as we've looked to expand our organization and bring new people to the leadership team, in particular, all of those people have 510(k) experience. Our head of quality comes from a med device background and very, very experienced in terms of this type of legislation and actually has done some consulting work with ACLA as well. So we've been preparing the ground, preparing a foundation so that once we actually understand what this legislation will look like, we can act quickly.
Mm-hmm.
Obviously, what gets grandfathered and that type of thing is a big determining factor in terms of what we do and how we act. But we think that right now, both from a resource perspective, a system, a tool point of view, we're ready to adjust our strategy as soon as we understand what the expectation is.
Mm-hmm.
So we've put the pieces in place in anticipation of something that could happen. As Warren said, we're not sure the ACLA. Well, part of the ACLA, and I still... There's still a view that, you know, this could be unconstitutional, and so there's legal remedies that could take place. But I think grandfathering for us would be an important component, and then you'll have multiple years to get ready for this. And then also from our perspective, as we have certain of our clients that have been insourcing tests, we actually think this could be a tailwind and a positive for us over time.
Very much, yeah.
because we think it's less likely that a hospital doing, you know, a few tests would probably want to go through an FDA approval process. So we actually think this could be a tailwind for us over time. And it's going to be a multi-year process, and I think the grandfathering is going to be important as well. So we think it's manageable in our existing resources, and probably a little bit of incremental spend over time.
So MRD, there's a lot of excitement about the market opportunity. You have Inivata, which, you know, has a highly sensitive approach, but clearly given, you know, some of the litigation issues, which you've talked about a couple of times now. But maybe just give us an update on... I know you've talked about the appeal hearing on March 29th, and we'll see how that goes. But just give us a sense of where we are with MRD and Neo today, and kind of what are the paths that could be taken, as, you know, 2024 unfolds?
Yeah, so, you know, March 29th, we'll wait and see what happens, and the timeframe is so with that. But look, we have said very openly that we will be in the MRD space. We believe that this is an important area to be in, not just from a business perspective, but from a patient perspective also. I mean, it's going to play a big role. We have invested in studies that have were started even before this litigation was there. We're continuing down those studies as we're allowed to. But on the R&D side, we're also looking at other opportunities as to, you know, getting into the space if the, as the legal process just works itself out. So we're not stopping. We're continuing the investment from our side, and we'll figure out as to what that timeframe looks like.
Mm-hmm.
It's an active program that we have ongoing.
In terms of the R&D, would it be something maybe, again, if, if there was... You were really prevented, or it was really handicapped severely with Inivata for whatever reason, would it be complementary, where you'd take Inivata and you'd tweak around, or it could be something completely new that we see?
Well, we're looking at both options, right? I mean, we're looking at options that are available from an R&D, internal R&D perspective, but also external opportunities that are out there.
Okay. So maybe on the advanced diagnostic side, you know, just on the pharma testing side of the business, clinical trial, you know, the structured data. You know, you talked about you reset contracts, right? And you had this, you know, consolidated some international ... So maybe, maybe just give us a flavor, because it is a very attractive business for a lot of peers, given the margin potential, given the synergies. Just kind of where do we stand on the advanced diagnostics business and, you know, how will that play out over the next couple of years?
Yeah, so, you know, walking into this in mid-2022, the reality was that it was, the business was going after every single type of contract out there.
Mm-hmm.
You know, profitability was not looked at as much as it should have been. We did do a lot of effort going through all of our contracts. We stopped reporting on the backlog because we couldn't figure out, you know, at that time, really, how does backlog correlate to revenue? We found very small correlations in that way.
Mm-hmm.
It was more just sign the contract and get it in place. I think we've done a much better job of that in 2023, and you saw that, that we still grew in 2023 compared to 2022 and previous years. Obviously, Q4, we had a very high Q4 2022, so that was a little bit of a disconnect right there, but over Q1, Q2, Q3, we had very good incremental growth. I do think that this is an attractive area for us to be in, and what's really nice about the advanced diagnostics and the pharma business in particular, it helps feed our R&D pipeline, which helps feed our clinical pipeline two, three years down the road because we're looking at new technologies they want us to invest in now, so that in three-four years, that turns into clinical testing.
I think it's a very nice cycle that we have within the business that we're in right now.
Great. Well, I think with that, we're out of time. So, gentlemen, thank you for being up here with us today.
Thanks, Dan, for having us. Appreciate it.
Thank you.
Thank you.
Thank you in the audience.
Thank you very much.