NeoGenomics Company Overview Presentation | 07-27-2015

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Company Overview Presentation July 2015 “Improving Patient Care through exceptional cancer genetic testing services!” Time Matters. Results Count!

Transcript of NeoGenomics Company Overview Presentation | 07-27-2015

Company Overview Presentation July 2015

“Improving Patient Care through exceptional cancer genetic testing services!”

Time Matters. Results Count!

Forward-looking Statements

This presentation contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934; and the Private Securities Litigation Reform Act of 1995. The words “may”, “would”, “could”, “will”, “expect”, “estimate”, “anticipate”, “believe”, “intend”, “plan”, “goal”, and similar expressions and variations thereof are intended to specifically identify forward-looking statements. All statements that are not statements of historical fact are forward-looking statements.

Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The risks that might cause such differences are identified in our filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise the forward looking statements made in this presentation to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events.

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Investment Highlights

Fast growing cancer genetics lab servicing Oncologists, Pathologists and Hospitals

Strategic client partnerships created

by “Tech-Only” model

Dynamic, rapidly- growing and consolidating industry

Industry-leading revenue & test volume

growth

Most Comprehensive Cancer Testing Menu in Industry

Strong Management Team with large cap

lab experience

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Experienced Management Team

• Douglas VanOort, Chairman & CEO Chief Operating Officer, Quest Diagnostics Executive Vice President, Corning Life Sciences, Inc.

• Maher Albitar, M.D., Chief Medical Officer & Director of R&D Med. Dir. for Hematopathology & Oncology and Chief of R&D, Quest Nichols Institute; Director of Leukemia and Molecular Laboratory, MD Anderson Cancer Center

• Robert Shovlin, Chief Operating Officer Chief Development Officer, Bostwick Laboratories President & Chief Executive Officer, Aureon Biosciences

• Steven Jones, Director, EVP – Finance, & Chief Compliance Officer Chairman, Aspen Capital Group; Managing Member, Medical Venture Partners Vice President, Merrill Lynch Investment Banking

• George Cardoza, Chief Financial Officer CFO, Protocol Global Solutions; Controller, Central Region, Quest Diagnostics

• Robert Horel, Vice President & General Manager, PathLogic Regional Mgr., US Labs; Product Specialist, Ventana Medical Systems; Pilot, U.S. Navy

• Steven Ross, Chief Information Officer Vice President Technology, Chico’s FAS, Inc.

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Company Overview

• Specialized oncology reference laboratory providing the latest testing technologies, global/tech-only options, and interactive education to the pathology community

• Offer the complete spectrum of diagnostic services through nationwide network of laboratories

• Dedicated to providing superior service, faster turn-around times, and complete attention to the needs of our clients and their patients

• Founded and went public in 2001

• First to launch tech-only FISH services in 2006

• March 2009, Doug VanOort joined as CEO

• December 2012, up-listed to NASDAQ

• Recently completed acquisition of Path Logic based in West Sacramento, California

• 65% CAGR in Revenue and Test Volume over last ten Years.

Description Broad Menu of Genetic & Molecular Tests

History

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• 57 Custom FISH Panels

• 215 IHC Stains and Custom Panels

• 72 Molecular Markers

• 23 Targeted NeoTYPE Molecular/FISH/IHC Panels

• Full Suite of Next Generation Sequencing Panels 315 Gene Solid Tumor Discovery Panel

4,813 Gene Cancer Exome Profile

• Cytogenetics

• Flow Cytometry

1,152 4,082 12,838

20,998

32,539

45,675

57,332

76,288

114,606

137,317

177,279

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

$558 $1,885

$6,476

$11,505

$20,015

$29,469

$34,371

$43,484

$59,866

$66,467

$82,194

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Proven Track Record of Consistent Growth

Base NEO* Annual Revenue Base NEO* Tests Performed ($, 000s)

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* Base NEO represents organic revenue and test volume growth from legacy business and excludes the impacts from the PathLogic acquisition.

U.S. Cancer Testing Market Size $10-12 Billion

Hematopoietic Cancers Solid Tumor Cancers

Total Testing Market: $3 - 4 Billion $7 - 8 Billion

Est. Genetic Mkt. (TAM) ~$2 - 3 Billion

~$2 - 3 Billion

Patients in Treatment: 850,000 7.0 million

New Diagnoses/Yr.: 150,000 1.45 million

Specimen Types: Bone Marrow (350K/Yr)

Per. Blood (150K/Yr) Lymph Nodes

Tiss. Biopsies (8-10MM) Fine Needle Aspirates

Other Bodily Fluids

Neo Revenue Split: ~80% ~20%

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NeoGenomics’ Cancer Testing Services

Key Testing Methodologies

• Cytogenetics: chromosome analysis − “Neighborhood view of 46 houses from 1000 feet”

• Flow Cytometry & IHC: cell surface marker analysis − “Single house view from 500 feet”

• Fluorescence in-situ Hybridization (FISH): gene analysis − “Door and window view of one house”

• Molecular Testing: DNA/RNA analysis − “View of serial number on door lock”

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Customer Targets

Pathologists & Hospital Pathology Groups (about 75% of 2014 Revenue ) • Enable community Pathologists to practice using sophisticated tools and tests • Innovative technical component (TC or “tech-only”) services – Flow, FISH, IHC • Outstanding Web-based Lab System & extensive training programs

Oncologists & Clinician Groups (about 22% of 2014 Revenue ) • Includes Hematologists, Oncologists, Dermatologists, Urologists • Disease Panels and comprehensive molecular menus • Increasing Opportunity to service larger practices with Tech-only model

Clinical Trials & Other (about 3% of 2014 Revenue ) • Contract research/clinical trial support work for Pharma clients

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A Growing Commercial & Facility Footprint

NV

OR

WA

MT

MN

NE

ND

ID

WY

OK

KS CO UT

TX

NM

SC

FL

GA AL MS

LA

AR

MO

IA

VA

NC

IN

KY

IL

MI WI

PA

WV

VT

RI

NH

AZ

OH DE MD

NY

CA

NJ

MI

MA SD

States sending specimens in 2014

ME

CT

Irvine, CA 25k sf

Nashville, TN 7k sf

Ft. Myers, FL 45k sf

Tampa, FL 5k sf

W. Sacramento, CA

17k sf

Fresno, CA 3k sf

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SD

Large & Growing Clinical Trials Opportunity

• World class Molecular Oncology menu opening up numerous opportunities to directly service pharmaceutical companies.

− Leverages NEO Pathologist expertise, Lab systems, Tech-only model, comprehensive menus to further diversify into a new segment.

− Ability to expand into world-wide markets

− Potential for developing companion diagnostics

− Access to market with higher AUP

• Exclusive 5 year Agreement with Covance, with a two year renewal option.

− NEO exclusively provides professional interpretations for all AP and Histology testing ordered with new trials worldwide

− NEO exclusively provides all technical component FISH for samples tested in the U.S.

− NEO eligible to provide technical component services for all U.S. based testing that is not otherwise performed by Covance’s Lab-within-a-Lab (LWL) facility at NEO

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Accelerating Pace of Innovation

• 4 molecular tests • 3 FISH • FL – IHC menu

• 10-color Flow Cytometry • Implemented State-of-the-art

MolDx platform in lieu of Kits • 28 new Molecular Assays • Proprietary method for

increasing sensitivity of Sanger sequencing

• 7 NeoTYPE MolDx Panels • New Aperio Digital Image

Analysis • SVM for FISH (Patent App) • Barrett’s Esoph. FISH

(Patent App) • NeoARRAY/SNP

Cytogenetics • Internalized send-outs

• 40 new Molecular tests • Add’l NeoTYPE Panels • Next Generation

Sequencing (48 genes) • ROS1 FISH • NeoSITE Melanoma FISH • Plasma/Urine-based

Prostate Test (Patent App)

• SVM-based Cytogenetics Analysis System

• SVM-based Automated FISH Analysis System v2

• Began development of NeoLAB (Liquid Alternative to Biopsy) Prostate Cx test

2011

2012

2013

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• 60 new/rev’d Molecular tests • 24 new NeoTYPE Next

Generation Sequencing Profiles

• 26 new IHC/ISH tests • Additional NeoLAB Prostate

clinical studies • AML Extended FISH Panel • AML Favorable-Risk FISH

Panel • MDS Extended FISH Panel • Plasma Cell Myeloma Risk

Stratification FISH Panel • RET FISH • MET FISH • ALL Adult & Pediatric FISH

Panels • HER2 Breast Equivocal

FISH Panel • BRAF Translocation FISH • Chromosome 1 POC Ploidy • Launched robotic FISH/Cyto

pre-processing platform

2014

Next Generation Sequencing and Liquid Biopsies Next Generation Sequencing

• 26 tumor-specific hematologic and solid tumor profiles

• 5 broad pan-tumor profiles (54 gene Myeloid Disorders Profile, 48 gene Precision Profile for Solid Tumors, 73 gene Cancer Susceptibility Profile for inherited mutations, 315+ gene Discovery Profile for Solid Tumors, 4813 gene Caner Exome Profile

• Germline testing for BRCA1/BRCA2 for familial breast cancer and Lynch Syndrome for colorectal cancer

• Comprehensive and clear reporting of key diagnostic, prognostic, therapeutic and clinical trials information relevant for informed decision making

NeoLAB (Liquid Alternative to Biopsy) Prostate Text • Blood Plasma & Urine-based (no need for Prostate tissue)

• Designed to inform which patients with elevated PSA should be biopsied

• Pivotal validation study underway (800 - 1,000 patients)

• Commercial launch expected in 1H 2016

• Expected pricing $400 - $600/Test

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2015 Strategic Priorities

• Next Gen Sequencing

• Develop Prostate Cancer Test

• Launch New Products

• Grow Clinical Trials

• Optimize Covance partnership

• Higher Productivity

• Lower Costs

• Become a “Digital Lab”

• Expand Sales Team

• Add new clients

• Improve Informatics

Growth Get LEAN

Innovate Diversify

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Avg Rev/Test & Adjusted EBITDA – Base NEO*

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* For comparison purposes Base NEO exclude the impacts from the Path Logic Acquisition, which was completed on 7/8/14.

9.1% 8.7%

12.2%

4.9%

-7.0%

-5.0%

-8.4% -7.3%

-4.1%

$659

-$1,243

$562

-$103 -$566

$2,134

$5,998

$8,515

$9,804

-15%

-10%

-5%

0%

5%

10%

15%

-$10,000

-$7,000

-$4,000

-$1,000

$2,000

$5,000

$8,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Change in Avg Rev/Test (%) Adjusted EBITDA ($, 000's)

32% Reduction in Operating Costs per Test Over the Last 5 years!

Cost Management & Operating Leverage – Base NEO*

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* For comparison purposes Base NEO exclude the impacts from the Path Logic Acquisition, which was completed on 7/8/14.

$651

$575

$512 $461 $446

-2%

5%

10%

13% 12%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

$0

$100

$200

$300

$400

$500

$600

$700

2010 2011 2012 2013 2014Cogs Cost/Test G&A Net of R&D Cost/TestS&M Cost/Test R&D Cost/TestTotal Cost/Test Adj EBITDA Margin %

Increasing Margins Despite Lower Avg Unit Prices – Base NEO*

* For comparison purposes Base NEO exclude the impacts from the Path Logic Acquisition, which was completed on 7/8/14. (1) Productivity calculated as the average number of lab tests completed per month per laboratory FTE.

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45.9%

44.7% 44.8%

47.7% 48.0%

-28.1%

40.6%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

35%

40%

45%

50%

55%

2010 2011 2012 2013 2014

Gross Margin % Cum Change in Avg Rev/Test Since 2009 Cum Change in Productivity Since 2009 (1)

Cum

Cha

nge

in A

vg R

ev/T

est &

Pro

duct

ivity

Gro

ss M

argi

n

Accelerating Cash Flow & Earnings

($, 000's)

2012

2013

Base NEO* 2014

Consolidated 2014

Total Consolidated Revenue $ 59,867 $ 66,467 $82,193 $ 87,069 % Growth 37.7% 11.0% 23.7% 31.0%

Total Gross Profit 26,836 31,737 39,455 40,714 Gross Margin % 44.8% 47.7% 48.0% 46.8%

SG&A Expenses 25,624 28,563 36,411 38,496 Total SG&A as a % of Rev 42.8% 43.0% 44.3% 44.2%

Net Income/(Loss) $ 65 $ 2,033 $1,906 $ 1,132 Diluted EPS $0.00 $0.04 NA $0.02

Adjusted EBITDA $ 5,997 $ 8,515 $9,803 $ 9,176 % Growth 181.0% 42.0% 15.1% 7.8%

Base NEO* Summary Operating Metrics % Growth in Tests Performed 50.2% 19.8% 29.1%

Avg. Revenue/Test $ 522 $ 484 $ 463 % Change -8.4% -7.3% -4.2%

Avg. Cost of Goods Sold/Test $ 288 $ 253 $ 241 % Change -8.6% -12.2% -4.7%

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* For comparison purposes Base NEO exclude the impacts from the Path Logic Acquisition, which was completed on 7/8/14.

Recent Share Price (7/24/15): $ 6.08

Common Shares Outstanding: 60.4 M

Fully Diluted Shares: 66.7 M

Avg. Daily Trading Volume (3 Mos.): 455,411

Current Market Cap: $367.2 M

Less Net Debt: (21.7)M

Enterprise Valuation: $345.5 M

Key Financial Information

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NeoGenomics Summary

• Emerging leader in fastest-growing segment of lab testing industry

• Robust competitive advantages and product portfolio

• Strong Management Team with outstanding industry experience

• Accelerating profitability driven by growth and operating leverage

• Fragmented industry undergoing consolidation likely to present additional strategic opportunities

• Recent Guidance(1): FY 2015

Revenue ($, MMs) $100 - 103

(1) Guidance incorporates an estimated $8-9 million reduction in revenue from the pricing of the new FISH CPT Codes by all Payers.

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