Good afternoon. I'm Tycho Peterson from the Life Science Tools Group. It's my pleasure to introduce our next company this afternoon, NeoGenomics. Tony, I'm going to maybe open it up with you. Just you've had a little bit of time in the CEO role here. Just talk about early learnings, how you're kind of thinking about stepping in, any big changes that need to happen.
No. I think it's been a really good introductory period for me. I had the opportunity to be kind of a distant cousin, watching the company for the last few years as a board member. Now that I've immersed myself in the company, I see a couple of areas that are even stronger than I envisioned originally. I think the history of NeoGenomics is well known, and their strength in the hospital community, especially in the heme side. I did not really appreciate how strong that feeling was until you actually get out with customers and see it firsthand. I think our strength is more pronounced, and I think it's more leverageable than I had thought coming in. You see it in different proof points.
The last five of our last more recent launches, you see this transition towards therapy selection, and 22% of our revenue now driven in those products in a short period of time. I think we have a stronger area of partnering and BD there than I had originally thought coming in.
You're obviously coming in off the board, but also with a pharma background. Maybe just talk a little bit about things that you bring to the table from the pharma perspective, other areas on the lab side that you can add value on.
Sure. I think first off, coming from the pharma side, it's been a minute, but I actually started in sales on the pharma side. I actually carried the bag. I carried that bag in both the hospital environment as well as the office side. I know what it's like when we talk about winning the customer experience and what that really takes, especially when you're dealing with a combination of undifferentiated and differentiated products. For example, I sold firsthand the hospital injectables. I know what it's like that you have to win on service, you have to win on contracting, you have to win on pull-through. I have a firsthand experience in that front. Likewise, I sold in the oncology sector. I had the opportunity to run MedImmune, our biologics arm.
When it comes to product development and bringing products forward, I understand the value of being very selective in your initial indication, building it out clinically. I think that's an area we can continue to improve at NeoGenomics.
Great. Maybe just touching on kind of recent results. It's been obviously a choppy tape. Anything as you kind of think about guiding messaging, how do you think about any changes there going forward?
Do you want me to?
Yeah. I think from a guidance perspective, we started the year and guided 11% and 13% revenue growth. We did the Pathline acquisition, and we added that to our overall revenue growth. I do think it's important to realize and then our long-range plan guide was 12% - 13%. When we announced our long-range plan guide, we were in the final phases of closing the Pathline acquisition. We already knew the Pathline acquisition was going to close. From a long-range plan perspective, we already had 200 basis points of that 12%- 13% growth rate really enCOMPASSed by the Pathline acquisition. We are going to be adding NGS there. One of the strategic rationales and drivers of the Pathline acquisition was the ability to pull in NGS volume that they are not currently getting today.
We found our penetration rates significantly lower in the Northeast quarter because of that lack of a lab with that 24-hour turnaround time. In terms of 2025 guidance, again, we guided to 11%-13% before Pathline. We did 12% revenue growth in 2024. We did 16% revenue growth in 2023. Our clinical business continues to grow nicely. We grew 15% in our clinical business in 2024. Q1 did have one less day due to the leap year versus 2024 due to the leap year. As we think about the growth trajectory and the growth drivers for the remainder of the year, there are a couple of key drivers for us. One is sales force expansion. We added 30 sales reps in the December to February time period. That is over a 25% increase. That is really focused on the community oncology segment, community practice segment.
That's going to help drive NGS growth in the back half of the year. We have new product launches, PanTracer Liquid, that we can go into more detail on as well. We have pricing success both in our direct client bill business as well as managed care pricing, also driving revenue growth in the back half of the year. We have a couple of other drivers, including our Adaptive partnership that we announced, as well as our Epic partnership as well, that will help us drive interfaces with our clients. When we do those interfaces, we've seen a material increase in revenue growth. Finally, I would say just the seasonal mix of our business, the second half, is always stronger than the first half.
There is a lot of drivers as we think about what is in our guidance range for 2025 and a lot of things we are executing on to achieve that guidance.
Maybe just to pick up on some of that. The 30 reps, I guess, how long do you think you're at until you're at full productivity? Are there other things you're doing to kind of drive in the community setting beyond the hires?
Sure.
That's a great question. We've done various sales force expansions over the last two and a half years. We're getting fairly good at it. We continue to analyze every tranche of new salespeople coming in to understand how do we drive to productivity faster. We're basically seeing right now that it typically takes six to nine months to get to productivity. That sort of range depends on kind of what was your background, were you in oncology diagnostics previously, was this your territory, what level of relationship you have, those sorts of things. It's within the six to nine months. It's important to note that we started to add these people in after Thanksgiving in November last year through to February of this year.
We really feel that Q3, we're in the sweet spot of that six to nine months. That's the one area. We track from a leading indicator perspective from a stage gate how people are progressing. It's not a light switch that come Q3, everything's great. It does ramp through quarter two as well. I think the second thing that we've been doing very effectively from a commercial organization point of view is investing in sort of back office capabilities and really trying to drive our full sales team of 140 people on the clinical side to greater productivity. A key aspect that we have focused on is what we call deciling, which is really at an NPI level or a physician level, understanding what their potential is. We do that by backing into their potential through how many prescriptions they're writing for certain therapies.
The more prescriptions they're writing, the higher their potential. We basically decile each physician between one and ten, with ten being a very high potential and one being a low potential. We literally say to our salespeople, "Here's your territory. Here's your customers within your territory. Here are the physicians in your territory. When you get to this customer, ask for this physician. When you get to that physician, talk about this product." It's literally that prescriptive. We actually are finding personally that between decile five and seven is our sweet spot. That's where we have the highest impact and highest probability of winning. We're targeting our people after that area. Not only are we going to get the benefit of these 30-odd people we've brought in, we're seeing the whole 140 sort of raise in effectiveness.
I do want to add too, from an operational execution standpoint, even with our record volume in Q1 and strong volume growth over the last two years, we have continued to improve our turnaround time meaningfully. From a client service perspective, both from a customer retention, a customer expansion, and the ability to acquire new customers, turnaround time remains a critical factor. It is an area we have focused a lot on and have seen a lot of success in. It is an area we are going to continue to focus on. It is not just the sales force training. It is also operational execution that is allowing us to drive higher volume growth.
Interesting. Are the reps, are they mostly pharma background? Are you kind of done for now? How do we think about incremental hires on the sales?
I think we have a fairly diverse background of salespeople. I mean, we've experimented with different skill sets, et cetera. We have certainly found that people that come out of the healthcare side of the business, so whether that is life science tools or biopharma or diagnostics, that's kind of where we see the biggest benefit. We've experimented outside of that, and that doesn't seem to be that successful. That's sort of where we're focusing in. Our strategy to add salespeople has really been in combination with sort of understanding our market penetration and understanding timing of new products. It's no coincidence that we added these 30 sales reps in the very end of last year and the beginning of this year to sort of coincide with the launch of PanTracer Liquid tissue, sorry, liquid test that we will launch next quarter.
Really want those sales reps in stride when that product comes to market. We'll be adding additional sales resources in the future as new products that are relevant and have a certain magnitude associated with them when those products come to market.
I guess just thinking about the back half of your ramp, we're modeling, I think, around 20% in clinical growth specifically, higher than you've had historically. How much should be coming from PanTracer and some of the new products?
Yeah. We have not disclosed discreetly. I mean, clearly, the sales force is going to be a big component of it and the maturation of that. We did announce we will be commercially launching PanTracer in Q3. There will be a ramp there. There will be some revenue from PanTracer clearly in the year. I think the sales force expansion will be a driver and just overall seasonality of the business as well. We did say we had some contract wins that are driving a higher volume of some lower value tests to begin with in Q1. As those contracts mature, we would expect a higher pull-through volume on the higher value tests as well as the year progresses.
Price.
Oh yeah, finally, price. Thanks, Warren. Price would be the final area. We did do a direct client bill price increase in the middle of Q1. We'll get the full year benefit of that. Managed care pricing is an area where we've had opportunities. We just haven't had a lot of success. We brought on a new leader on the managed care side about six months ago. We've had some recent success and some fairly large contracts that will start getting incremental revenue starting in June and July. That'll be 100% accretive to the revenue gross margin and adjust the EBITDA line.
Jeff, Pathline?
Finally, obviously, Pathline is the final piece. We said Pathline would be $12 million-$14 million of revenue for the year. I think we're in the midst of an integration. We closed on the acquisition April 1st. We are integrating. We also are validating some incremental new Neo tests at Pathline, which will take a couple of months. We're clearly excited about the opportunity to ramp and do our NGS work. We won't actually be doing the NGS testing in the Northeast. We'll get economies of scale doing the NGS testing in our existing labs.
Maybe just to pick up on some of that on PanTracer early days, how do we think about how you're positioning it relative to competitive offerings in the market? How should we also think about tissue add-ons and kind of expansion there?
Yes. Actually, I'll go backwards to go forward. Our entire therapy selection is now branded PanTracer. Within that, we have PanTracer tissue that was previously near comprehensive. We will later this month actually add a new asset there, which is PanTracer Tissue + HRD , which is specifically for the ovarian market. That is coming to market later this month. In Q3, we will PanTracer Liquid. in terms of positioning, in terms of lung testing, we are going to position this concurrently. We are recommending to physicians to order both the tissue and the liquid together because that is part of the guidelines today. We see a clear path to reimbursement on both of those. In terms of penetration, we have started with an early access program, which started in April. We got some really good insights from ordering physicians.
It was a group of about 85 ordering physicians around how we could optimize the assay, both in terms of clinically optimized, but also how we could address just the simple things on the report. We have made those changes. This month, we will significantly broaden that early access program to a significantly larger pool of physicians. We will not limit the number of tests that each physician can order. Our penetration strategy when we launch commercially is first and foremost to convert all EAP customers PanTracer Liquid because they are familiar with the test and have experienced it. That is the first conversion. The second is to go after the customers that are ordering PanTracer solid and say to them, "Use the liquid in conjunction with the solid with lung indications." Thirdly is to go after customers that are using none of our PanTracer portfolio.
A stepwise approach. Again, in conjunction with that deciling approach that I mentioned earlier. We know whether there are customer hours or not, whether they're a decile one to ten, and we can target very, very specifically in terms of who we want to go after.
How should we think about, I guess, guidelines around concurrent testing for liquid and tissue? I mean, how important are those going to be?
Certainly, I mean, again, I think it's very important to call out the fact that our strategy is to really focus in the community. Addressing community hospital and community oncologists. They definitely look towards the guidelines in terms of what to do. Think about the fact that in many of these practices, a single oncologist may be multidisciplinary. They may be seeing breast, lung, prostate, head, and neck. In some cases, there may be specific indications. The reality is they turn to guidelines to know what to do. That's just how they tend to operate and are typically slightly later adopters than what you see in the academic medical centers. Guidelines play a critical role. That's why a lot of our initial focus will be targeted towards the lung because that's what's in the guidelines today.
We're working by doing certain clinical studies, et cetera, to influence the guidelines to expand how liquid will be included in the guidelines in the future.
Any takeaways from ASCO? Obviously, you had a big presence, obviously, important for the PanTracer kind of rollout. Any kind of notable takeaways from the conference?
Yeah. I would say for me, at least, it was an interesting experience in that typically, I would spend the bulk of my time in scientific exhibits and then with pharma, just staying current in what's happening. This was an instance where I think I spent a disproportionate amount of time in a positive way, more with potential partnerships. This idea of recognition that we do have a strength in the community channel. We have seen a vast array of types of companies that would like to take more complete advantage of that. I probably came out of ASCO feeling more buoyant about the possibilities to do right-sized opportunities for us in licensing and BD.
I guess on that note, maybe just touch on the Adaptive partnership, COMPASS plus CHART. How does that work with clonoSEQ?
I think the way the relationship is structured today is that the Adaptive team with clonoSEQ focuses most of their commercial selling time on academic medical centers. As I said earlier, that's not where NeoGenomics typically plays. Yet our COMPASS product and CHART as well is very relevant in academic medical centers. They will be promoting our COMPASS and CHART solution within academic medical centers. That will drive incremental demand for COMPASS and CHART. It's really important to note that COMPASS is one of our highest value AUP products. Every additional unit we sell has a very high revenue associated with it. On the flip side of that, we obviously spend our time in the community oncology setting where we promote COMPASS.
Through voice of customer and other feedback we've collected, these physicians have said that they see a significant synergy between the combination of COMPASS and clonoSEQ, and largely because of the improved workflow around sample acquisition. Many of the samples for COMPASS and for clonoSEQ is a bone marrow, which is a very painful extraction. Today, if a physician would want to do a COMPASS and a clonoSEQ, they'd have to subject the patient to two bone marrow samples. That is pretty painful. With this new partnership, they're able to requisition both COMPASS and clonoSEQ on a single requisition and a single sample. They have told us that the combination of clonoSEQ and COMPASS will result in them ordering more COMPASS. It will drive incremental volume for COMPASS for us and important because it's a high AUP.
The operational side of things is we will run the COMPASS, and the remainder of the sample will be sent to Adent where they'll run the clonoSEQ. They'll send us the results back. We'll append our report because the physician will already have had it for COMPASS, and they'll get a complete report. Adent will continue to bill for clonoSEQ, and we will continue to bill for COMPASS. The economics and the benefits come from incremental volume of COMPASS and clonoSEQ.
Is there an EMR angle here as well? I mean, Adent is in the middle of an Epic rollout. They're going to do Flatiron. I mean, do you bring stuff to the table that can help them?
Yeah. I think interfaces for us is a critical part. I think today, ease of requisitioning a sample and also ensuring that results actually render in the EMR immediately to sort of streamline that workflow. Also, making the genomic data available to the physician so that they can do other types of interpretation, research, and analysis is important. We have over 300 bidirectional interfaces already established. We recently announced the further partnership with Epic, which will help us. We have a number of Epic interfaces already, but the Epic Aura partnership allows us to accelerate the implementation of an interface and also gets us access to the genomics module, which a lot of larger health systems are actually utilizing for analysis purposes. We will be bringing that to the table as well.
Maybe we can spend a minute on RaDaR 1.1. How do you differentiate? A similar question, I guess, I had to PanTracer. How do you differentiate in a market for MRD that's gotten fairly crowded?
Maybe, is it okay just to take a moment and first just kind of talk about our positioning and how we view the MRD marketplace and then get more specific into that?
Yeah. Perfect.
I would tell you that, as I said earlier, it's our goal to move more and more towards therapy selection and MRD. MRD is a marketplace that we intend to enter. We look at our strategy in maybe three kind of areas. I would say first and foremost, we are preparing for 1.1. We can't go into great detail. Obviously, there is a litigation that will culminate in October. We have continued to do all the work necessary behind the scenes so that the bridging work that's necessary for MolDX and validations and all of that will have been completed and submitted so that we are prepared. Regardless of that outcome, though, we have already initiated our work for next generation MRD. That will be a completely different platform.
The challenge there is we're going to make sure that we've studied the white spaces, know where there's IP areas that we can pursue, and then increase sensitivity along with that test. We could see a world where we have both 1.1 and next-generation MRD in the marketplace, enhanced sensitivity versus, and there might be cost differentials. The third part of that stool is we continue to look for business development opportunities. We are going to stay very focused on tissue informed. It's where we have a capability, but we could leverage others, tissue naive as an example. Those three elements will make up the foundation of how we want to enter and compete in the MRD space over time. We can get more specific on the questions around RaDaR 1.1.
Our strategy, and it comes back to sort of the focus around tissue informed, is really around sensitivity. Right from the outset, when we launched RaDaR 1.0, and we're not on the market at the moment because of the preliminary injunction, but it was really to go after cancers that shed less. As a result, if they're shedding less, you need a higher sensitivity assay. We continue to focus down that path, driving towards greater sensitivity. You'll see us going after indications like head and neck, breast, lung, et cetera, is where we'll target from our perspective. That's the first. Secondly, we'll continue to leverage our breadth of portfolio and the continuous expansion of our sales force within the community.
I agree that there has been more entrance into the market, that's clear, but we still see the market to only be sort of 5% penetrated. It's really the early adopters that are making use of the test today. Most of those are actually in the academic medical centers. Lots of opportunity for us to penetrate within the community.
Sensitivity, obviously, matters most. How do you think about turnaround time, some of the other stuff that's going to be important for the companies?
Sure. I mean, turnaround time is something that we differentiate on significantly today. We always optimize our workflows around improved turnaround time. Again, we do not have an asset on the market today, so I cannot provide specifics. I can just say that we recognize the importance of turnaround time. It is a golden thread that runs through all of our business, and we will do the same with our RaDaR 1.1 product when we come to market.
Do you expect to come into surveillance? How do you think about getting into surveillance post-launch?
Yeah. I think the starting point for us will certainly be from a surveillance perspective, but expect to pretty soon enter into neoadjuvants and adjuvants as well within certain cancer types. Again, this is where the sensitivity assay is important. Even though the RaDaR 1.1 assay would arguably be one of the most sensitive assays on the market, some of the lower shedding cancers in the adjuvant and neoadjuvant setting would need even a more sensitive assay. That is why Tony mentioned the fact that the next gen will be even more sensitive to address those adjuvant and neoadjuvant and lower shedding cancers.
How do you think about guidelines and importance there? I mean, you've got decent market that's emerged without guidelines yet, so yeah.
Yeah. I fully agree. It's actually quite incredible in terms of how much penetration is taking place without any guidelines. I think guidelines around colorectal are coming. The good news is there's been a lot of groundswell around this. The awareness, and we saw that at ASCO. I don't know what the exact stat was, but it felt like every second session I went to had something to do with ct DNA. It's highly relevant in the minds of physicians today. It's getting a lot of groundswell without guidelines. I come back to what I said earlier, and the community physicians lean on guidelines to know what to do. It is imperative to get broad adoption that we all work collectively to get this into the guidelines.
Yeah. To get to that double-digit adoption rate, it's going to be necessary.
Yeah. That is where I think it is positive that more people are entering the MRD market because there is going to be a groundswell to drive towards guidelines.
Maybe just a question on margins. As we think about balancing R&D, SG&A with hitting EBITDA guidance, 70%, I think the full year of EBITDA comes in the back half of the year. Talk about some of the assumptions there and how does the Epic integration plan to margins assumptions for the year too?
Yeah. Our back half is always heavily weighted towards earnings, looked at the last few years. I'd say our normal trajectory is to see Q1 being the softest and starting to build in Q2 and Q3 and Q4 being heavier weighted from an overall % perspective. Incremental new product launches will help drive margin profile in the back half of the year, as well as the expansion of the sales force that we talked about earlier. We are investing in automations. We have our LIMS project underway as well. We're progressing as the year goes on. We're doing modalities as we progress throughout the year. We'll get incremental benefits throughout the year. We'll get more benefits in 2026 from the LIMS project, where we were going from eight LIMS live information systems to one.
Today, we still have clinical and pharma staff operating discreetly on different LIMS platforms. We will be able to get operating efficiencies as well from that. We also see a big opportunity from a margin perspective to automate more of our business. We are investing in automation. Some of the pricing increases I talked about earlier will help drive margins in the back half of the year as well. I think our traditional mix is to be heavily weighted towards the back half of the year, the sales force expansion, new product launches, pricing, Adaptive. There are a lot of things that will be driving the increase in earnings profile in the back half of the year.
I think if you just extend that view another couple of years, right, I think you talked a little bit about G&A.
That is an area for us that we can get much better at over time. As Jeff said, the LIMS is just the beginning. There is opportunity for ongoing automation to get rid of all the redundancies that are across the organization from all of the multiple acquisition programs. We think there is plenty of opportunity for ongoing improvement over the next few years. Of course, site rationalization as well and modification. We see opportunity.
Are there other big kind of opportunities within the lab, whether it's new technology to kind of drive additional efficiencies?
I think there's, I'd probably say there are four pillars for us. The first one is we have obviously a fixed cost sort of model. The more volume we drive, we dilute the fixed cost. That's the one aspect. There is significant opportunity in terms of our site network strategy. Today, we're too fragmented. I think as we look to consolidate that, that's going to drive significant efficiencies. We are, I would say, in the second or potentially third innings with regards to automation and robotics in terms of the lab. As volumes continue to grow the way they are, there becomes a real opportunity for us to use robotics and automation more effectively. The last one for us, which is also material and making some good strides already, is around digital pathology and AI and using AI to sort of support medical interpretation.
There's four areas. I think it's sort of a great roadmap over the next two to four years to continue to drive operational efficiency.
Great. Maybe in the last minute, we can just hit on capital deployment. Given valuation, how do you think about buybacks, additional M&A like Pathline, and yeah, as well as paying down debt?
Yeah. I mean, we brought on Kareem's in the audience, a corporate development strategy leader last year. We said we're going to be focusing on licensing and partnerships and tuck-in acquisitions. Pathline certainly checked that box. We did pay off our convert in May. That was a $200 million convert that we paid off in May. We do expect we'll be producing positive free cash flow in 2026. As we think about taking that balanced approach to growing top line, incremental investments in our sales force, investments in R&D, and investments in partnerships and licensing, all those are factors that we take into account. We think producing positive free cash flow in 2026 is going to increase our ability to reinvest in the business.
I think, look, we'll always evaluate where the stock is as another investment opportunity, but we're trying to balance that with making sure we're positioning for long-term growth of the business.
Great. I think we'll leave it at that. Thanks.
Thanks for having us.
Thank you.