Okay, we're going to kick it off. I'm Tycho Peterson from the healthcare team. It's my pleasure to introduce NeoGenomics. We've got the whole gang here, Tony, Abhishek, and Warren. Welcome to you all. Maybe, Tony, just starting with a quick recap of 1Q earnings a month ago. Just walk through, you had beats on revenue and margins. What's working well, and how do you think about momentum rest of the year?
Thanks for the question and thanks for having us. I would say it was a really strong execution quarter for us. We had our overall revenue was up about 11%, year-over-year. We had, for the quarter, our clinical business was really a driver there, Tycho. We did about 14% growth, that was extremely strong. The big underlying driver within the clinical side is NGS, which we've highlighted now represents over a third of our business. That was growing at 26%. We had anticipated that AUPs would show a step-up increase, in fact, towards the upper single digit, that's exactly where we came out. Volume was actually a good driver for us as well. We expected kind of low, it ended up at mid-single digits. Volumes were actually quite strong across the business as well.
Of course, strategically, we were able to secure reimbursement for PanTracer LBx to complement the PanTracer family. That was a really good outcome for us for the quarter, as well as the re-entry of RaDaR ST. On a number of different fronts, both financially, AUP, and volume, and then strategically with reimbursement, it was a really strong quarter for us.
Maybe just, Tony, stepping back, you've been CEO now for a little over a year. Just talk a little bit about the top actions you've made to set up the organization for success here, and what are the strategic priorities for the next nine, 12 months ahead?
Yeah, sure. Well, Warren might be better to opine on what impact I've had. I would say when I came on board, Tycho, I truly believe that the strategy was a solid strategy. We knew where we wanted to go. Like a lot of organizations, I think Neo had the affliction of trying to do too many things, right? You try and do too much, and you advance a lot of little ideas instead of the right big ideas. For me, it's always a constant mantra of focus and clarity. Any time we can simplify, we should. To me, at the end of the day, what is it we want to do? We want to drive revenue, and we want to increase margin. It really comes down to those type of simple mantras into the organization.
On the revenue side, where did we want to go? We wanted to be equally well-known for not just the breadth of the portfolio, but the quality of it, and that it was beginning to come from our own labs. We were too dependent on BD and acquisition. Really, a strong focus on the development side of our organization. I'm very happy with the progress we've made. We now see the PanTracer family has come through the system, with LBx, with PanTracer Pro. We saw RaDaR ST, the reintroduction of RaDaR ST, but equally, two additional indications submitted to MolDX. I think the effort that's gone into the development side of the house is beginning to bear fruit.
On the gross margins side, I think the best decision I made was asking Warren to step in and lead not just commercial, but commercial and the lab, so that we got this integrated teamwork happening at the lab. There's a lot of work that's going on in the lab of the future concepts to drive gross margins. We sit here today looking forward with a unique opportunity to say we can expand our revenue growth and, at the same time, expand margins. It's a good place to be because we, again, just focus, focus.
Abhishek, maybe similar question for you. You made it through your first quarter here as CFO. Congrats. Let's just talk a little bit about your priorities here as you stepping into the role.
No, absolutely. I think it's the same, what Tony basically just kind of elaborated. My top priority is to basically make sure that we continue to fuel the revenue growth. That stays the most important one. How do we make the rightful investments in our sales team, in our innovation, and the pipeline of the products that we need to continue to have to be staying ahead of the market there? That's the number one. Number two, as I step in, I see a lot of opportunity for us as we look for the growth margin expansion and using the operating leverage to actually drive the adjusted EBITDA margins more meaningfully. Those are the two key pieces that I would continue to work on.
Why don't we flip to ASCO? You had a busy conference, eight abstracts. High- level, talk about, from your meetings, feedback, sentiment, and some of the presentation takeaways.
Yeah. Thank you, Tycho. We had a very exciting ASCO, actually. Come directly from there, to be frank. We only wrapped up at lunchtime on Tuesday. Every year we've seen an improvement in terms of the value we see from ASCO, and we've been working hard in terms of the abstracts that we present at ASCO and obviously the meetings that we coordinate, both in terms of around those abstracts, but also in terms of the larger business. I come back very enthusiastic. We were oversubscribed in terms of the number of meetings that we could actually take. The interest in NeoGenomics is stronger than ever, both from a clinical perspective, but also on our non-clinical, so pharma and ODS. Yeah, we've really used those four days to significantly advance our pipelines and also identify a number of new opportunities.
Really optimistic as we start to head into the second half of the year.
Maybe just talk on some of the data. You've got SURVIVE HERoes basically pointing toward treating patients to the point of molecular relapse ahead of imaging.
Yeah.
Talk about how you're moving forward with an interception model.
Yeah. I think for us, this data is becoming, as we all know, critically important in terms of adoption, et cetera. Those are studies that we've had for a long time, and we're starting to see the sort of interim report outs, and that's going to be critical as we expand our coverage from a RaDaR ST perspective in the breast space. Expect more to come on that, certainly in the second half of this year and the beginning of next year.
How about real-world evidence? I think you had a poster just bridging the gap between clinical utility and coverage for unreimbursed?
I mean, the amount of people that actually came to see that presentation was incredible. I think it's just a demonstration of how physicians recognize the challenges associated with getting paid. There was a simple poster that basically said, here was, I think it was a sample set of 3,500 tests that we had resulted but didn't get paid for. Then we looked at how many of those actually had actionable mutations in them, and how many of those actually resulted in a different treatment. Of 3,500, there was roughly, I'm rounding here, roughly 500 actionable mutations. Of those 500, almost 300 of those patients had a change in treatment as a result of the testing that we provided. Again, shows the utility of the testing and why it should be reimbursed.
It was incredible to see the sort of groundswell that's starting to form around reimbursement. Hopefully, that's a positive indication for us in terms of getting better reimbursement for CGP and large panel testing, because that's still the biggest source of denial today.
Maybe we could just touch on RaDaR ST and early traction launched it late February. You gave some metrics on the 1 Q call on, I think, 29% return customers, 34% cross-selling. Just talk a little bit about momentum in the field.
Yeah. Absolutely. Those, we were really excited to be back on the market. We launched at the end of February of this year, been on the market roughly three months. Uptake has been really good. We're encouraged to see some past users of RaDaR when we were in the market in 2023. Roughly 29% of the users that we've seen in 2026 is from that tranche in 2023. That was very encouraging. We're seeing a good attachment rate, a little north of a third, where RaDaR's coming in but coming in with other CGP testing and add-on as well, which was, again, for us, a demonstration of the value of the portfolio that we have. That was really pleased to see that. I think additional aspect's not a surprise.
We're seeing most of our volume coming in in the head and neck HPV negative because we're first to market there and there's been some success on the HPV positive side. Those physicians were looking for a solution on HPV negative, and we've seen the strongest demand there, followed by breast, which is obviously the other indication that we've launched. We're seeing some good demand, although we're not actively promoting this at this stage. We are accepting testing for the two additional indications that we have submitted to MolDX in December of last year. We anticipate approval by the end of this year, so we're accepting those tests because we want to prime the pump and starting to see some really good traction building there as well. We've got well over 30 physicians now that have ordered a double-digit number of tests.
We're seeing repeat usage, et cetera, which is encouraging. The primary two focuses for us is really around increasing number of physicians that are using the test and getting into workflow. Embedding it into the bidirectional interfaces and EMR so that we can simplify the workflow. Laser-focused on that for the rest of the year. Outlook looks very promising.
Maybe just on that latter point, talk about next steps on workflow, just EMR integration.
We spoke earlier this year about the fact that we're now part of Epic Aura. This was important because although we have a lot of Epic interfaces today, probably over 100, they were bespoke HL7 interfaces. It's harder to actually maintain and update the compendium. The beauty with Epic Aura is updating compendiums, and actually initial establishment as well, significantly easier. We knew that we're going to have to update compendiums much faster as we bring RaDaR out and additional indications becoming available. We timed that implementation of Aura accordingly. We have a number of physicians or physician practices and hospitals that now have RaDaR in their compendium, and we continue to work to drive growth.
Just thinking that you mentioned the one-third attach rate, do you think that's kind of where we stabilize, or does that go up or down over time?
It's interesting because we're only a quarter in, but we've seen a pretty consistent trend here. It hasn't decreased, and as we bring on new physicians, the same trend seems to stick. Initially, it seems to be a good position at this juncture. I think it's too early to tell, and probably, by the end of this year, get nine months under the belt, we'll probably have a much more robust metric to use there.
You've got it in mid-single- digit millions in revenues from RaDaR this year. Just talk a little bit about what that assumes for volumes and ASPs, and other toggles there.
Yeah, I would say, Ty, on that one, too early. We are not calling out very separately, the volumes and the ASP, because we are just assuming $5 million, mid-single digit there for the RaDaR. Once we have little bit more traction on this one, then we'll start to provide more color on the volumes and AUPs.
Can you maybe just touch on the margin profile? How we think about full-scale margins for RaDaR?
For RaDaR, I would say that as we kind of get to the scale, it's going to be very similar to some of the other companies that we have seen in this particular space, where you will be seeing some headwinds on the gross margin because you will not have the coverage from the commercial payers. As the good news with NeoGenomics is that we have a lot of contracts. We have 300+ contracts with our payers. That gives us an easy foot in the door, and we are already having those conversations with those commercial payers to be able to kind of get the policy and the coverage.
Initially, in the first year or two, yes, this will be a little bit of a gross margin headwind that we plan to offset with many of the other initiatives that we can get into the details so that we kind of keep the balance of the gross margin and the profitability. In the short term, we'll see some headwinds.
The only thing I would add to that, Ty, I mean, this will be expected on most of any new product launch, right? Your first 18, 24 months, you take a little bit. When we prioritize where we want to take our R&D spend, I would also tell you one of the highest priorities for us is label expansion. Not just for RaDaR ST, but for the next gen MRD as well, because you get the added benefit of not just opportunity that you could drive revenue, but you then g et the bad debt kind of question off the table.
I think any investments that we continue to make on the D side will be heavily biased towards, at least in the MRD segment, label indication expansion for those various reasons.
Maybe just. Oh, go ahead, Warren.
I was going to say, I was going to add on a little bit on the gross margin. Obviously, in terms of reimbursement plays a big role in terms of what gross margin you get, but I do think there is still meaningful opportunity around how we improve our sort of gross margin efficiency. Today, we still run on the 6,000. We will move to the X, so that's going to both improve turnaround time, which is obviously critically important for patients and physicians, but also it'll significantly drive down costs as well, because there's probably a 30% leverage there that we can go after as well. Yeah, it'll probably be somewhat dilutive initially, but it's going to be very attractive in the medium term.
Is that transition happen this year? The X?
Not for RaDaR. It'll happen early next year, but we're moving other modalities this year, so we'll be focusing on our liquid biopsy first this year, moving to NovaSeq X. That'll be complete in the third quarter, and we're also moving our heme NGS large panel onto NovaSeq X as well this year. That may roll into the first quarter next year, but we'll have most of the benefit for 2027.
You touched on some of the newer indications, IO monitoring, non-small cell lung. You're seeking MolDX coverage, obviously. Just talk a little bit about how we think about additional data, how you think about the clinical opportunity, and how you differentiate in those areas.
We haven't confirmed those indications.
Okay
Just to be clear, I'm not going to confirm or deny that those are accurate at this point. You would've seen that there was a lot of that data at ASCO and other AACR, et cetera, so I understand what's leading to that point. I think again, we're really excited about those new indications coming to market in the second half of the year. It more than doubles our opportunity, and importantly, we have a robust data set in terms to help seed the market and convert the market at the end of the day. Again, based on the data, you can see that we have the ability to detect down to 1 ppm, which is really coming through in the data, which puts us in a strong position as we expand indications.
Maybe spend a minute on sales channel. I think you've talked about hiring 25 new reps. Just talk about pacing of the hiring, how you think about the channel you're ultimately going to need here.
Yeah. It's a great question. Same we talk about regularly internally. We've committed to adding 25 additional, what we call oncology sales specialists, those are the teams that goes directly after the oncology segment. They largely promote solid tumor therapy selection, MRD and heme therapy selection, so a narrower portfolio. That'll take our total sales team to 165. Those should be on board within the third quarter of this year, so we've started that process already. Sort of as we expand on indications even further, and we've looked at the sort of reach aspects and the opportunity from a reach perspective, I think you should anticipate further expansion into 2027 as well.
Yeah. Tycho, the only point I would add because we've gotten questions kind of around not just this year, but what is the outlook on sales force in other areas of the company? Where would we see some kind of change in kind of P&L management? What I would say at the highest level, first and foremost, where are we under- indexed? It's certainly on the selling side, right? Today, we're at like around 13% of revenue on sales marketing. We should continue to invest pragmatically in the selling force, right? That's an area that we should expect as a percentage of revenue. It might increase just a little bit. The other areas and on the R&D side, we've only been at about 5% of revenue. Even if you just break it out as a percentage of NGS, it's still relatively low versus competitors.
We'd like to see some stepwise increase on the D side of our investment levels. Where's the trade-off going to come? We think we're in the early innings on efficiency plays within NeoGenomics. We anticipate our G&A as a percent to come down rather significantly over the next 18 to 24 months. As well, because we can leverage efficiencies, AI, a lot of other areas, the head count numbers are relatively flat, if not down in other parts of the company, to offset some of these things. We think we'll end up with a healthier P&L, better sales force coverage, and a more productive R&D group.
Okay. Let's hit on PanTracer. You've launched in both tissue and liquid. How do you think about the interplay between the two? Are you sensing a paradigm with greater transition over to liquid?
Great question. We get that often, and again, we sort of got reimbursement on our liquid assay in March of this year, and that was sort of when we put the pedal to the metal, so to speak, in terms of promotion out there. Just to level set everybody, we're laser focused on the community with our PanTracer portfolio, which includes the tissue and the liquid. Today, we still see very much a tissue- first type mindset in the community. With the exception in lung, and it is guideline- driven as to why we see that exception, where we see a fair amount of concurrent testing across lung, where tissue and liquid are done together. Most of the existing PanTracer tissue users seem to be using it as a reflex space. We have a QNS/TNP where there's no tissue available, they move to liquid.
That's sort of been our positioning strategy. For new customers that were maybe not adopters of the PanTracer family or PanTracer tissue, we are seeing sort of a liquid first approach there as well. Part of this is the fact that we seem to be able to secure the block relatively easy compared to other peers in the market, largely because of a very, very strong relationship with pathology. We don't have big lead times to get the block, so turnaround times between liquid and solid tumor are not significantly different.
I think you've talked about tissue actually growing faster since you rolled out liquid. I guess, how sustainable is that acceleration that you're seeing?
Yeah. Very good point. I think overall, the category of our PanTracer family is growing really, really well. I want to put that out there. Certainly, as a percentage, liquid biopsy is growing the fastest because it's a small base, but PanTracer tissue, there's been a gear change or a step change as a result of the introduction of liquid. Again, we focused on the community, and we still see a lot of runway ahead of us in terms of the PanTracer family portfolio, including tissue. There are still many physicians out there that have adopted sort of single gene or targeted panel approaches, that there's a conversion opportunity. Unfortunately, there's still many patients that get their relative therapy without any form of NGS today. I think the opportunity is rife.
On the sustainability question, I guess through two lenses. If we look at 2026, and then we look beyond. What we said in the guide, if you recall last year, our NGS growth rate was about 22%. We said that this year, we weren't quite sure when we would get LBx. We anticipated it to be in Q1 or right thereabouts. We said we should at least match our NGS growth rate in 2026 on the bigger base. Once we secured LBx, I think we would safely say we'd be disappointed if we didn't surpass the 22% growth rate that we experienced last year.
This year, we think our NGS growth rate will be at least, but surely should be better for the year. Looking forward, over the next few years, we don't see why we wouldn't continue to outpace market growth rather significantly. Not committing to a final number yet, we think certainly it's sustainable over the next few years.
Can you maybe just stepping back, talk about the strategy to differentiate? I mean, therapy selection, MRD, you've got a number of incumbents here. These are increasingly crowded markets. How do you differentiate with RaDaR and PanTracer and ultimately defend share on the community side too?
Yeah. I think for us, it's all about the portfolio play is first and foremost. We have breadth of portfolio, which stems diagnosis, therapy selection, and MRD across solid tumor and heme. We have a very strong position in heme. We believe we are market leaders of heme. Ultimately, that gets us access. We also have well over 330 odd bidirectional interfaces in place already serving those customers. The portfolio is really what we drive. We're also known for a very strong customer experience that we offer. We continue to survey customers, et cetera, to get feedback. NPS scores in sort of high 70s, low 80s, and low 80s for oncologists in particular. They appreciate the breadth of portfolio and the frictionless experience that we provide to them. We've been very successful coming back to our commercial strategy of protect, expand, acquire.
We protect our existing customers, then we expand share of wallet or same store sales, however you want to phrase it. Whenever we bring a new product in, the first place we go to is existing customers who have a very good affinity with NeoGenomics, appreciate the value proposition, and we layer in the additional product. Since 2023, when we put the strategy in place, there's been strong evidence that it works really, really well, and it's continuing to work on PanTracer liquid and early signs on MRD signal the same thing.
On the heme business, we tend to think about that as about a billion-dollar market, 40% penetrated or so. I guess, how do you think about the runway that's left here? Is there an opportunity to accelerate the conversion of that TAM, expand it potentially? I know, I think we think about double-digit kind of growth in line with the market for you guys.
I think that's actually a really great question. Coming out of ASCO, one of the things that I always do when I wander around and assess the market is I look at the pharma companies, and I look at what therapies they've got in phase III clinical trials, both on solid tumor and on heme. There's been an emerging trend over the last couple of years that there's more and more heme trials that are in phase III clinical trials or later, which is an indication that there are more therapies coming to market. More therapies coming to market means more therapy selection testing. I do believe that the outlook from a therapy selection perspective in heme is particularly robust, driven by the onset of more and more therapies becoming available. Exciting space to be.
In the pharma services business, you left the guidance there unchanged, but you've talked about some green shoots. Maybe just talk about what you're seeing in the market, what's giving you some optimism, and do new product introductions in MRD and liquid biopsy provide some additional upside here?
Yeah. I'll kick us off, and then Warren can go into more detail relative to bookings and things of that nature. Again, just to level set everyone, the pharma side of our business is a relatively small percent by 5%-6% of our business. What we anticipated coming into this year is we have seen the last two years of almost 20% declines in that business year-over-year.
We thought that this would be a year that we could get that to flat to low-mid single digits, and that's still the anticipation for this year. We believe that it's a business by the close. It'll be 4%-5% year-over-year decline, but poised for growth going into 2027. The reason we're confident in that stems from, first off, we take accountability for on the execution side. We have a new management team in place. It's really hitting on all cylinders now.
As Warren will go into more detail, we are beginning to see bookings and things of that start to work its way through the system. Plus, as he's already highlighted at the macro level, much less resistance and more investment happening in the space. Warren, any more additional details you'd like to provide?
Yeah. No, I think that's great. You've covered a lot, Tony. I think just coming out of ASCO, it's a good barometer for me as well in terms of two things. I think there is more optimism in the pharma biotech space today than what there was a year ago. Despite all the macroeconomic geopolitical, I think people are just leaning into this and realizing that it's a bumpy world out there, but they're leaning in. I think we've seen increased demand for our testing from the pharma perspective that we're seeing in the bookings coming in. We're seeing increased bookings, and that for us is a leading indicator of revenue to come.
What is attractive for us, the bookings value, so the profitability and the value of the bookings are increasing too, so that's another positive indicator for us as we head into the second half of the year and into 2027. We expect this year, pharma will still be marginally down, low single digits, but a return to growth in 2027.
It is nice to have a seat at the table, though.
Yeah.
I think that is some of the added benefit of having RaDaR ST, having LBx. You at least are now with more relevant topics in front of pharma that you could then extend with IHC and other areas. So, that's b een a good positive signal for us.
want to hit on Pathline briefly. It has been a year or so since you did the deal. Maybe just talk about how that has played out relative to expectations and what improvements have you brought to the business since you acquired it.
I think strategically, it's done everything we could've hoped for and more. I think if you recall when we go back, the rationale for this was to be able to better serve customers in the Northeast area of the country. When you step back and you looked at the growth maps across the country, it's not a surprise that where we can provide greater service and rapid turnaround time, you have a greater market share penetration. That was not the case for us in the Northeast. We were lagging there from a growth perspective versus the other regions. The way to offset that was to strengthen the presence, be able to provide customers that rapid turnaround time when they needed it. That's what led ultimately to the Pathline acquisition, which we got at a really good price.
I think the team there, with Warren's help through the labs as well as through everyone, we've been able to onboard the tests as fast as we would've expected, if not even a little bit better. That integration has gone extremely well. The biggest proof of the pudding is what's happened to the growth rate in Northeast. Our Northeast region last quarter grew 1.5x faster than the other regions. It is showing that progress is being made.
I can provide one customer quote, just in the interest of time. I had dinner in Long Island last night with a customer who has been a longstanding customer, but we've struggled to really win a meaningful share of their business. The quote from this customer was, "The acquisition of the Ramsey site has been transformational in the service we provide.
I want to make sure we hit on capital deployment quickly before we wrap here. Just given where the stock is today, how are you thinking about buybacks versus paying down debt, as well as maybe additional bolt-on deals?
I think the first priority for us is to get the convert behind us, Tycho. We are basically talking to the leading banks. What I'm hearing is that this probably is one of the best times for the convert refinance. We are looking at a wide variety of options here, not necessarily just the convert. We have the $445 million in bank. We would want to leverage our balance sheet a little bit. At the same time, we would want to make sure that we are not diluting or potentially diluting our shareholders. Evaluating the options and giving our financial profile, where we are a solid double-digit grower, a positive adjusted EBITDA, hopefully, we will be free cash flow positive by the end of this year.
We are in a position of strength, and we look forward to getting this past us well ahead of its maturity. This stays the first priority. I think on the M&A and the other pieces, I would say that we'll look for more the partnerships for now because we have a lot of products that we have recently brought to the market, and there's a lot of work that needs to get done. We have a lot of shots at goal from the pipeline standpoint as well, with some of the MRD on the RaDaR side, the next-gen MRD that we're talking about, as well as some of the other actions that we are taking on the heme WGS side.
Maybe just last one quickly on the longer-term outlook here. For this year, guiding 30% EBITDA growth, 100 basis points in margin expansion. In the past you've talked about mid-50s GMs, mid to high teens EBITDA margins. Is that still the right profile of the business?
I would say that yes, if you take a longer-term view, then that would be the right profile to think about. Again, for the short term, as we ramp up our RaDaR and some of the other testing, we will basically have to make sure that we continue to look forward as to how we drive the balance and expand our margins. There are multiple ways that we can potentially do it. For example, on the gross margin, we are looking at expanding that because our AUP growth has been pretty strong. That's the first driver. The second one, of course, we have been talking about the lab of the future, where we have the digital pathology and the lab automation as number one. Number two, moving towards the NovaSeq X would be the other piece.
The third and the fourth would be footprint rationalization as well as the strategic sourcing. There are multiple drivers to be able to drive the gross margin expansion. Looking at the operating leverage, going back to what Tony basically said, that we look to make investments in the sales and perhaps the D side of the R&D line. We would want to drive the gross margin as a percent of revenue in a much more efficient manner so that we get the leverage benefit to be able to drive those benefits to the adjusted EBITDA line more meaningfully as we move forward in 2027 and beyond.
Great. I know we're over time. We'll leave it at that. Thanks.