All right. So, I'm Dave Westenberg, the Life Science Tools and Diagnostics Analyst here at Piper. Up next here we have NeoGenomics. Very happy to present NeoGenomics CEO Tony Zook and COO Warren Stone. Thank you very much for both coming. So your clinical business is performing better than I've ever seen it. Can you give us a one- to two-minute explanation of what's everything going right in the clinical business?
Sure. Sure. Well, as you know, we made some investments in our sales force earlier in the year that we knew would take that six month- nine month ramp. Happy to say that team's really been delivering quite well. So we saw our overall clinical volume was up around 15%. You know, we saw revenues were up about 18%. You know, take it down a little bit, ex-Pathline and total revenue about 12%. So we see all of that as really positive indicators that the sales force productivity is kicking in. The other key metric for us is, you know, strategically we wanted to further penetrate therapy selection and then ultimately the MRD market. And so we closely monitor our NGS penetration rate.
And so we've seen that those five products that we initially highlighted now represented about 24% of our clinical revenue and, more importantly, our total NGS now, Dave, is up to about a third of our clinical revenue. So we see that as all very positive indicators. We also expected that with that ongoing penetration we could see some uplift in AUP. And then, of course, the Pathline integration work. So a lot of factors were working quite well for us on the clinical side of the business.
Okay. I think the only other thing that I'll add that we've done really well of late is we're on focus on the customer experience and turnaround time and more integration into workflow, etc. That's really allowed us to protect our existing customer base that much more effectively. So when we win net new business based on new products, etc. coming in, that becomes incremental and that's been supporting the growth that Tony was talking about.
Let's dive into the NGS business. It's grown up for a couple probably above market rates. I mean, I think the market rate of NGS is probably in the teens, maybe low twenties. How sustainable is this market? How is your growth, considering you are growing faster than the market, obviously taking share? How much of that is coming from share wins versus maybe just faster penetration, for example? You know, you are in the community clinic more than others, so maybe you're just, you know, in the right market. So if you can help us kind of break that down, that'd be helpful.
Yeah. I would say it's a little bit of both, but I think the latter part of your question, the fact that we focus in the community, where we see still opportunity for ongoing penetration, and so you're right. We have performed quite well there with 24% growth. That's rather high considering the market, and we expect that we should be able to continue to drive above market growth, for the foreseeable future, because in addition to what we have existing in the portfolio, of course, we are now emphasizing the PanTracer Family. And PanTracer LBX is just really coming online, and that will become, you know, important for us going into 2026. And so we see that as a contributing factor to the total PanTracer that will continue to drive growth for us in the NGS segment.
Then you combine that with the sales force activities, and we'll get the full benefit of a year of their work in the field. We see that as opportunity. And I think, you know, another area for us is this Pathline acquisition. Remember, Pathline really didn't do a lot of NGS. And so we have the opportunity now to solidify our presence in the Northeast and then pull our portfolio up through, you know, the Northeast. And so we think that could be a contributing factor to us as well. So we're confident.
Right. So, Northeast is an area of under penetration that you.
Correct.
Think you can make a good impact in.
Yeah.
Yeah.
That's helpful. Maybe I can just go a little bit further on NGS. One of the trends that we're seeing emerging is some insourcing of NGS.
Mm-hmm.
I mean, how do you feel about your positioning in the community that, you know, makes you a little bit maybe more unique to insourcing in NGS?
Yeah. I think, certainly I think that there is companies out there that are seeking to place solutions with regards to NGS and internalize. It's certainly been very prevalent in these sort of academic centers for a number of years, but less so we see in the community. Simply because it's a scale aspect. You've got to flow full flow cells, in order to make it economically viable. And if you're not filling flow cells, you're really deteriorating turnaround time. So, it's probably less prevalent in the community than we would see in the academic space. But, again, we always come back to our superior customer experience that I touched on earlier and our breadth of portfolio, which really positions us as an attractive consolidation partner for all oncology send-out needs.
Gotcha.
Taking the NGS theme, you know, and I know, Tony, you kind of mentioned the expansion of the sales force that's kind of helped you this year.
Mm-hmm.
I think you have, you know, additional product enhancements, launches in 2026, maybe some expanded indications that's gonna help you. So can you walk us through why 2026 could be another good growth year for you in clinical?
Yeah. I think if we step back, you know, and I'll include some of the obvious things in addition to that. I think, you know, first and foremost, you know, we will have RaDaR ST that comes into the marketplace. And, you know, there we will launch with our two initial indications.
Mm-hmm.
Which are subsets of head and neck and breast. But we haven't just been waiting, you know, in the MRD space. So we plan to fortify that indication with additional indication flow that should become available to us in the latter part of 2026. And so, we'll see RaDaR ST, two indications plus growth there. So that'll be an area of opportunity for us. Liquid biopsy certainly is an area of opportunity for us. And the PanTracer, we see that there are still opportunities for us to enhance that portfolio, make some modest improvements in that that should also help generate and drive additional growth for us. And so I think those would be kind of the two big drivers. And then, Warren, if you wanna go into any more detail on some of the other little minor changes that you're making.
Yeah, maybe just to round out the PanTracer, I mean, we repositioned our therapy selection solid tumor portfolio under the PanTracer umbrella based on feedback from the community oncologists' advisory boards, etc., that our portfolio just felt a little clunky, for lack of a better word, and they wanted it to streamline it. So we've really pulled together the PanTracer Family, which ultimately includes PanTracer Tissue, PanTracer Tissue plus HRD for ovarian cancer, and now PanTracer liquid. And what we've seen with this rebranding, repositioning, and clearer messaging, we've really seen a category grow, and the early indications are really positive. Not only are we seeing the growth coming from the liquid biopsy, but we're seeing the solid tumor and HRD growing as well.
So really, really excited in terms of what that's gonna bring in 2026 along with this, the sales force that we invested in this year that's gonna ramp Pathline. Again, another reason to be positive where we finished the integration of Pathline. We validated the tests in the lab in Ramsey, N.J . So we're now very well positioned to execute against that strategy and address this under penetration that we see in this Northeast market. So that in itself is gonna be a great growth opportunity. And then we continue to supplement the portfolio with maybe small but very relevant things like c-MET and Claudin- 18 for new therapies that are coming out so that, again, we're staying relevant with the needs of what the community oncologists require and everything within our menu being actionable.
Gotcha.
Well, you know, I wanna stick maybe on the topic of clunky versus is gonna be more aerodynamic. I don't know.
Vision.
You know, we are hearing a lot of Guardant and Tempus are both kinda talking about growth by apps. So can you kind of maybe think about, you know, the not being too clunky, but at the same time giving physicians kind of more a bigger offering or a better offering?
Yeah. I think we've gotta meet our customers where they are, at the end of the day. And I don't think that every customer's gonna love the app solution, but there are certainly customers out there that will. And as we conclude our sort of customer experience journey, we will too bring an app to market, but it's not first on our priority list. We're updating our portals, making sure that the information that they need there is actionable and relevant, including sample tracking capabilities, self-service capabilities. Because today we see the majority of our customers actually asking for bidirectional interfaces to integrate solutions into the EMR, including ordering and resulting. But secondarily, they like the solution of the portal.
And then there are those that sort of like the mobile version, and that's where the app comes into play. So it's something that's on our roadmap, but it's certainly not imminent. It's not a short-term initiative that we're looking at.
Yeah.
Well, you know, everything has been going really, really well in the clinical business. In fact, I would argue I've covered Neo since 2019, I think. You know, I think it's better than I've ever seen. But we do have to point out that, you know, there has been some headwinds in biopharma.
Sure.
So, you know, how do you plan on stabilizing biopharma and maybe re-accelerating growth or, you know, maybe getting any growth or?
Yeah. Yeah. No, it's a fair question. I, I think for us, you're right. You know, we, we haven't seen that. We've seen the erosion of that form of business for the better part of two years, and I think for us, you know, first thing we need to do is just try and put it in perspective against the rest of the business because it does cloud at times what has been very strong performance on the clinical side. You know, just for everyone else just to put it in context, you know, our non-clinical business represents about 9% of our business, and the pharma is about 6% of that. That being said, you know, we anticipated that the erosion would continue through 2025. We said we expected some modest erosion in 2026, but the return to growth opportunity would be in 2027 and beyond.
And the reason we are fairly confident in that is, you know, we see an emerging portfolio that is better suited towards pharma. RaDaR ST is just one example of that. We now have the opportunity to again be relevant in some of these conversations around studies and etc. And then new offerings like Palettra and others, I think, are giving our teams a portfolio that they can be competitive with. We did have execution issues. You know, that's true. And so we wanted to address that. We have a new body of leaders that are in place and, you know, committed to turning that business around. And as you say, if we just get that business to flat, then the full weight of the clinical growth, I think, becomes more apparent. And so, we're putting still a lot of energy into it.
But the cycles there are longer. We're having the conversations with RaDaR ST now. They've been promising, you know, but by the time that translates into real patient flow, it's probably the latter half of 2026 to be just fair and set right expectations for everybody.
Yep. Well, and I think the mixture of benefits, I mean, you know, at 6%, 9% of revenue, they're.
I think that's the key point to reinforce.
Yeah.
You know, it's the pharma business per se, sort of 6%-7% of revenue. It's not material in the bigger scheme of things.
Yeah.
Got it, and then, you know, you talked about that long-term growth target of 10%.
Yeah.
Can you help us get there with breaking it out between, you know, industry growth, mix shift versus just flat-out share gains?
Yeah. I think, in large part, you are seeing share gains. If you just look to take, you know, beyond NGS, right? NGS is clearly a combination of new and share gains.
Mm-hmm.
You know, that 24% growth is driven in large part by volume, right? And so, you know, we are making inroads and penetration into the market. And I would expect that should continue with PanTracer LBX coming in to aid that portfolio growth.
Mm-hmm.
But if you look to our other modalities, even the markets that are growing, you know, in that, you know, 4% and 5% range, we are still seeing 6% and 7% growth. And so, in large part across our modalities, we continue to see share penetration. I think what it'll put us in is in a good place where now, as I've said to people in our one-on-ones, you know, I think Neo used to historically be, "Here's the factory. Let's just pump as much volume as we can get through that," right? Because that's how we gain efficiencies and margin and everything else. I think we will be in the unique opportunity now to start saying, "Let's get the right volume through the system," right?
Because as we continue to penetrate NGS and MRD and we realize these share gains across modalities, I think we can start to move away from some of these maybe high volume but low value adding, you know, contracts that, you know, at times cloud impact on AUP and other things. And so I think it's a combination of us continuing to grow share in the dominant markets, NGS, therapy selection and MRD, and allowing our, you know, some of the lower values to still perform above market. And that's been our history, and we, we're committed to doing that.
Gotcha. Just a quick question on that. I mean, how are markets like IHC and FISH still growing?
Yeah.
Yeah. I think, let me speak to that a little. I would say that certainly the IHC side of things with sort of new therapies coming out, it's kind of given a bit of a rejuvenation to IHC in certain instances. And if you think of antibody-drug conjugates, IHC will probably be the technology that's used to actually link to that particular therapy. So that's what's sort of maintaining the life of IHC. I think the flip side on FISH is it's still very much what's in the regulations and the guidelines. And you know, in the community where we operate, the physicians, whether it be a pathologist or an oncologist, really turn towards guidelines as their first sort of course of action.
And with more and more people, unfortunately, being diagnosed with cancer, it is driving increased demand for FISH, etc. But I think underneath in your comment there, there is a potential for some of that to be cannibalized with newer technologies coming out, NGS as an example. But we're still winning based on our commercial strategy of protect, expand, acquire. We're protecting our business well and finding opportunities to win new business.
Let's talk about RaDaR ST. You got the favorable court ruling. You're back up in the market. Can you talk about the commercial launch trajectory for 2026 and what are the key milestones and thoughts on reimbursement, timing, and etc.?
Sure. I'll kick it off and then.
Yeah.
Warren, please just jump in. First and foremost, you know, we did the bridging work in anticipation of a positive court ruling. So we were able to then leverage the previous work done with RaDaR 1.0 for RaDaR ST. And so we were able to submit and secure reimbursement for RaDaR ST currently with the two indications for head and neck, HPV negative, and for breast, you know, the HR-negative, and HER2- negative. And so those will be the initial points of entry for us going into the marketplace. As I had mentioned to you before, we're not stopping there. We will be adding additional indication flow for RaDaR ST, and we anticipate those to become available to us in the latter part of 2026.
Initially launching in the subsets of head and neck and breast, as those anticipated new indications come online, we would also begin to ramp up our sales force to take more complete advantage of that, just like we did with NGS, right? You'll see a slow build of our oncology sales force, not the hospital one, but we'll build that up to take more complete advantage of it. The final point relative to just MRD in general is that we will continue to invest as well in our next-generation MRD program as well so that we'll have RaDaR ST and then an ultrasensitive option as well because we think at some point the market does bifurcate. For the lower-shedding cancers, a more sensitive option might make a lot of sense. It'll probably be at a different price point.
But we're committed to that space and believe that, having a full portfolio of offerings is important.
And, and.
Warren, if you wanna go into more detail on reimbursement.
Yeah. I think maybe a couple of points if I could, and I'll touch on reimbursement as well. So, I mean, really excited about being able to back on the market again with RaDaR ST, and we were just gaining traction in 2023 when we needed to pull the product from a injunction perspective. So excited to be back. I think head and neck HPV- negative is an interesting space in that, to our knowledge, there's nobody else that has MolDX approval for the head and neck HPV- negative. Yet there's been a number of providers that have had success with head and neck HPV positive.
And as we've polled a number of the treating physicians, whether they be ENTs or Oncologists, they started to see the utility of using MRD as a solution within their treatment toolbox but haven't got an HPV- negative solution. So and fortunately, there are PLA codes out there that can give us indication as to which treating physicians are actually using MRD for HPV positive. So that's gonna be a targeting strategy for us for our RaDaR ST. And although it's a smaller indication, roughly 20,000 new diagnoses a year in a prevalent population of about 60,000, it's still an attractive market, especially based on the fact that there's nobody else offering a solution there.
On the breast side, it's a much larger market, sort of 210,000 new diagnoses each year and a prevalent population of more than a million, about 1.1 million based on our calculation. So very attractive space, which is still underpenetrated, particularly in the community. We think less than 8%. So, exciting to be back. From a reimbursement perspective, we have MolDX reimbursement for those two indications. And ultimately, the initial setup and first time point, our reimbursement rates are a few dollars shy of $3,900. Subsequent time points at $1,158. So we feel it's an attractive position to be entering the market with.
Perfect. Well, maybe we can move to PanTracer PanTracer LBX. What are your expectations for 2026? What are the key differentiators in the product? And, you know, I'm just gonna ask, when should we expect reimbursement?
Yeah. Yeah. Yeah. You know, it's great.
We haven't had that question today.
Yeah. Yeah. We have not had that one at all. On the reimbursement front, again, I wish I could update you with, you know, more frontline news, but, you know, we continue to have ongoing dialogues with MolDX. We just can't peg an exact date. What we have noticed is across, you know, the landscape, it's taken closer to 12 months to run through the various cycles with MolDX. And so we're hopefully well past the halfway mark.
Mm-hmm.
And it's really purposely why we didn't include any revenue for 2025. But we do expect it to be a contributor for 2026. Relative to its impact, you know, we believe that the PanTracer Family is gonna be a big part of the growth driver for us with NGS. And so, we expect to be still well above market growth for 2026 with the addition of PanTracer LBX into the NGS portfolio.
Gotcha. Well, maybe we can talk about some of the catalysts and data readouts that could be happening over the next few 12 months, say. I mean, we have San Antonio Breast Cancer Symposium. We have ASCO GI Cancers Symposium. We have ASCO. We have ESMO. Anything to look out for for big studies that you have reading out that could be needle movers and either MRD or liquid biopsy?
Yeah. So, I would it's two that I would refer to. Actually, the first one is this weekend down in ASH. We've got a study reporting out with regards to myeloid malignancies, and it's basically the use of large panel NGS for actionable fusions. And you know, we haven't spoken much about the heme side of our business, but it is a space where we are the market leader and we continue to grow well above market. And actually, myeloid malignancies is probably our largest category of business. So we're very excited about that study that's this weekend. And then you mentioned San Antonio Breast Cancer Symposium, which I think is in the following week. And, and here, one of the studies that we've been participating in for quite some time is the VIVE study, and there's a subset of that which is called Healing Heroes.
And we actually got a study reporting out there, which is with regards to molecular relapse in HR-positive breast cancer five years removed. So it's gonna talk about the utility, the clinical utility of our RaDaR ST indication that we'll be launching in quarter one next year. So those are two initial exciting readouts we'll have more at ASCO as well.
Gotcha.
All right. No, that sounds great. So, sorry. I think this one was for Jeff. He's not here today.
That's all right.
You're even a positive, but not generating a ton of cash flow.
Yeah.
Do you anticipate a continued growth, focus on growth and scaling, in a way you generate more cash?
Totally.
Sorry.
I gotta answer it the way Jeff would versus how I'm gonna answer it. I would tell you that I think, yes, we will be cash flow positive. Yes, we will see EBITDA growth. But I also want to say that there is opportunity here, and we have now opportunities for RaDaR ST with these additional clinical work. We see next-gen MRD with some additional clinical work. I see opportunity for us to make, again, correct investments in sales force and take advantage of those indication areas. And I think as well in the digital space for us, there is a lot of efficiency gains that we can have with the appropriate investments. And so what I would tell you is that we will continue to be very, you know, judicious with how we spend money.
Mm-hmm.
because once you get cash flow positive, you don't wanna give it away. But at the same time, I don't wanna strangle the growth opportunities. And so we're gonna try and hit the right balance. But, you know, we're. It's not a harvest. We're not gonna say, "Wow, let's just do whatever we can do to cut costs," because we see there's more opportunity now and the horizon there has been in a long time for Neo. We wanna take advantage of that.
Got it. Well, maybe we can continue that. I mean, do you see the investments you're making in OpEX benefiting in some of the gross margins? And can you talk about how some of that leverage plays out?
Yeah. I think there's plenty of opportunity for us. I think, you know, we're still in the early days here of what we can do from a gross margin perspective. And I think we're still in the early days of some of the investments we made in 2025 and how they're gonna continue to pay off for us in 2026.
Yeah.
So yeah, I think that there's opportunity here, Dave. I think, you know, what we've been doing in the LIMS program is just one example of that, right? You know, I don't know people that truly appreciate, you know, when we offer our portfolio of over 500 products across multiple modalities. Unfortunately, that also meant eight operating LIMS systems, right, because we never integrated. And so simply moving in that direction alone will yield some value for us in 2026. But by the end of 2027, you can shut down eight LIMS systems and you start to gain efficiencies. And then you look at what we could do in other areas of digital pathology with AI and advancing some of our work in automation.
I think there's still plenty of room here for us to seize opportunity, not just on top-line revenue, but at the same time become more efficient from a gross margin perspective.
Got it. Well.
I think there's one more large one to touch on operationally if I turn to it and get there. It's really around the NGS side of things, which today is about a third of our business and growing rapidly. We don't use the NovaSeq X platform yet from Illumina. We tend to standardize on the 6,000. And we're kinda getting and we've done that because we wanted sort of flexibility and to drive turnaround time benefits. But we're getting to a point of scale now where it's absolutely obvious that we need to pivot and move to NovaSeq X. And we'll start that journey in 2026. And that's gonna be a rich source of gross margin improvement as well.
Got it. All right. No, thank you. You know, and maybe you can talk to that AI you introduced, your new spatial proteomics platform at ASCO. What, how is AI playing a role in your business?
I think there's a number of areas. So, I mean, the spatial proteomics, which is AI-based, was a stepping stone. And one of the big areas where we're tapping into now is with digital pathology. And actually, we've done a number of use cases whereby we can use AI for medical interpretation. It's AI-assisted medical interpretation. And today our medical team is one of our largest expense within our organization. And some of the use cases sort of indicate to upwards of 35% productivity savings there. So that's the biggest sort of really material short-term opportunity that we're tapping into. But we see massive efficiency opportunities across our billing processes, across our customer service processes, as well. So, certainly an area which will create both gross margin and OpEx leverage for us moving forward.
Perfect. We're right at time.
Great. There you go. Just right on the buzzer.
Thank you so much.
There you go.
Thanks for.
Dave, thank you. Appreciate it.