Q1 2020 Earnings Call

Thank you for holding ladies and gentlemen, you're in line for the Neogenomics first quarter 2020 earnings conference call others timing ours took adding additional participants it won't get started momentarily. We thank you for your patients enough that you. Please continue to homes.

[music].

Good day, ladies and gentlemen, and welcome to the Neogenomics first quarter 2020 earnings conference call I lines have been placed I don't listen only mode on the floor I'll be up in for your questions and comments. Following the presentation at this time and it's my pleasure just turned to flirt your house for today. Mr. Dug then art, Sir the floor is yours.

Well. Thank you just didn't get the morning, everyone.

I'd like to welcome everyone to Neogenomics first quarter 2020 conference call.

Turning me from our Fort Myers headquarters, when social distancing precautions in place.

Answering Mckenzie or Chief Financial Officer, Rob shut when president of our clinical Division.

[noise] and build anello president of our Informatics Division and director Investor Relations.

Joining the call via phone for locations across the country or George Cardoza President of our farmers services Division, Dr. Larry Weissert Chief Medical Officer.

And dark Brown are cheap strategy incorporate development officer.

Before we begin are prepared remarks build but ellow read the standard language about forward looking statements.

This conference call me contain forward looking statements, which represent our current expectations and beliefs about our operations performance financial condition and growth opportunities.

Payments made on this call that are not statements of historical back or forward looking statements. These statements by their nature involved substantial risk and uncertainties certain of which are beyond their control.

Shouldn't one or more of these risks or uncertainties materialize or shouldn't be underlying assumptions prove incorrect actual outcomes in results can differ materially previous indicated in the forward looking statements.

Any forward looking statements week's only as of today and we undertake no obligation to update any such statements to reflect events or circumstances. After today.

If we're trying to call back together that went to let everyone knows that we will be making a copy of our prepared remarks for this morning's call.

<unk> and the Investor Relations section of our website. Shortly after the call is completed we also want to let everyone know that we're going to limit the number of questions do two per person in order to give more people a chance to ask questions within the one hour that has been allocated for this call.

The sport Red for taste called will be a little different.

<unk> <unk>.

Oh, Yeah, that's a bunch of the cold at night.

And the either <unk> or business.

Katherine Mckenzie, well then provide more detail.

Satchel results.

But some thoughts about our strategy <unk>.

Upbringing growing the business in these difficult times.

Well then of course have time for questions and answers.

Let's begin with a discussion.

Our response to the Coen 19 pandemic.

Fortunately, we were in a relatively good position going into this challenging time I've covered 19.

Our business is strong it's profitable we are they good solid balance sheet with available borrowing capacity.

We had positive momentum going into this crisis with both rather than you and volume tracking at or above expectations. Prior to the onset does the virus.

We strongly believe that we will come out of this crisis with positive momentum as well.

Our services are critical for cancer patients, we fully expect bad when it is safe for cancer patients to see three men and when there are other colleges and hospitals resume more normal patients schedules again artists values and growth rates will gradually return to normal levels.

In responding to the crisis or guiding principle has been first to secure the safety and wellbeing of our employees and nearby to maintain the continuity of our critical oncology testing for cancer patients.

[noise]. Our response was also influenced by our desire to emerge from this crisis in a relatively superior competitive position.

As a result, rather than implementing layoffs ordered furloughs, we focused on short term actions to invest in our workforce strengthen our culture and focus on the initiatives in strategies designed to strengthen our long term competitiveness.

[noise] to protect our employees early on we <unk> fighter laboratories in facilities adjusted laboratory shifts to put a space and distance between our people restricted visitors to facilities restricted employee travel and implemented an emergency paid off time policy for employees, who.

Personally affected by the virus.

We also quickly implemented a remote work environment and provide training and support for that.

For the past several weeks, we have had well over two thirds of our employees working productively from huh.

We communicated extensively with our employees and implemented a comprehensive array of actions in response to employee feedback as well as medical scientists in governmental guidance.

We have also been managing our supply chain carefully to ensure that we have adequate inventory to continue testing.

In certain cases, we added most of supply to our inventory close.

These actions have worked.

In Port really all of our main lab facilities have remained open throughout this crisis.

I've been able to continue all of our testing services with excellent quality and turn around time without interruption or delay.

We've also responded by doing our part to help our country.

Oh, we aren't on college G. company, we do have extremely strong expertise in molecular testing and had a dedicated a number of r. and D. and laboratory experts can develop koby 19 testing capabilities.

Like some other commercial laboratories, we are now offering the P.C.R. test and are ramping our capacity quickly.

Within a week, we will have the capacity to perform over 5000, Cobiz nine clue P.C.R. a cast per day.

If there is demand we couldn't quickly ran betta significantly higher well you also have invested in instrumentation, another but not to be able to offer the Kobe 19, Surajit test and should be ready soon.

At this point it is too early guesstimate the financial impact from the Kobe 19 test offer.

We do know that testing is critical to help people safely get back to work a number of organizations have reached out to us for help and we are doing this because we feel it's the right thing to do.

[noise] overall, our team feels very good about the actions that we have taken in response to cope with 19.

However, the pandemic has had an impact on our business.

Although clinical test volume was quite strong for most of the quarter. It was only 7% for the full quarter compared with last year because in the last two weeks of March it was down by approximately 20%.

In April clinical tests volume declined slightly more and it was down between 25 per cent in 30% year over year, although it it as it appeared to stabilize and a week over a week basis.

The volume decline is understandable.

And many reasons or the country oncology practices reduce their hours of operation and postponed or cancelled patient appointments.

Similarly, many hospitals reduce surgeries as a devoted resources to cope with 19 preparations and urgent needs.

Cancer patients some of whom have compromised immune systems were reluctant to see physicians, even if they were available.

We believe this is a temporary condition.

We have also seen an impact or from a service, it's a bit sperm of services division revenue as some clinical trials projects and our backlog of sign contracts hadn't been delayed due to cope with 19.

Sponsors that told us that they are unable to start certainly knew clinical trials as that effort typically involves visiting enrollment sites to train onsite staff.

Clinical trials typically accounted for about 50% of our business.

The other half of our farmers services business is largely in support of pharma companies research and development work and that has not been affected by that endemic so far.

Significantly and encouragingly, we have not seen an impact on the amount of new farmers services contracts, we are signing.

In fact, we sign contracts for an additional $28 million, a new business during the quarter or second highest bookings quarter of all time.

[noise] like most companies Neogenomics has not been immune to the index this unprecedented situation.

Unlike a lot of companies, though we have not furloughed employees or reduce our employee levels.

Although it may reduce short term profitability, we're investing in our people and our culture.

We're providing more training more development and even a small cash bonus of appreciation to those employees that are on the front line working in one of our laboratories. During this critical time.

Our employees are responding very positively and we believe the level of the employee engagement and our culture is a strong is ever.

A strong team isn't important competitive spread of our company.

[noise] I think you would be as proud as I am about our Neogenomics employees response to this unprecedented situation.

Throughout this crisis. They have continued to provide critical testing services to cancer patients with excellent quality turnaround time and customer service my hat's off to them.

Oh now turn the call over to Catherine Mckenzie or Chief financial officer to discuss some of the details of quarter one financial results.

Thank you died in the morning, everyone.

I will give a brief overview on first quarter financial results.

<unk> increased 11% you every year to 106 million.

First quarter results include modest contribution from the acquisition you Division as human longevity on on January.

But you have this acquisition with completed on December 10th <unk>. That's it out. This is all are falling reflect that and that is Alan 19 comparison.

We estimate that the curve at 19 pandemic reduced first quarter revenue my approximately $4 million.

Reductions in clinical services testing volume and delays environments services work.

And the fourth quarter clinical division testifying increase.

You're 7% every year.

Hard to the impact of comic 19, we were once again see <unk> all Catholic modalities.

Color strength and next generation thing with me and molecular testing.

We estimate a cover 19 situation reduce uncle volume I at least 4% during the quarter.

<unk> uncle volume down approximately 20% and the last two weeks of Mars and between 25% and 30% in April.

Clinical division revenue for task was essentially flat Oh, you every year and wonderfully $371.

I haven't you pretend not significantly impacted by the common 19 pandemic.

Pardon the services revenue increase 39%, yeah pretty year $13 million.

Increases primarily do yeah, two additional next generation sequencing mark associated with our acquisition of the ontology Division assets I'm human longevity.

I'll discuss Empire call, we did have to very large projects complete you quarter for last year.

<unk>, how large projects that have been scheduled to start late in the corner have been delayed by several months you to cope with 19.

Despite the challenging environment, a pharmacy and continue to find new contract and grow the backlog sign contracts.

<unk> quarter or $28 million and the <unk> increase 47% you every year to $148 million.

<unk> H.L.I. oncology increase that lot by approximately $15 million <unk>.

Excluding the contribution from H.L. ontology, the back locker approximately 32%.

But the first quarter medical services gross margin was down approximately 300 basis points, you're over here to 47.4% and our average cost. That's all animal task also known as our costs protests increased by 7% you every year at $195.

[noise] impacts are mainly due to the lower than expected volume level and additional expenses costs by 19.

Farm of services <unk> decrease the 17.7% and the first corner, primarily again lower revenue, resulting from the timing project.

As a reminder, we have been building an independent testing capacity for the firemen services business support our draft production and this has resulted in a temporarily negative impact apartments, San Francisco's margin.

Well the sign a contract backlog of more than 145 million a fireman services business has reached it yeah whats necessitated on testing infrastructure, we believe that having pharma testing de couple from animal testing on hands on I shouldn't say in both division overtime.

However, that's transfers all kind of short term decreases in cost effectiveness and each division.

Esquire also reflects the acquisition of young college to eat that there's an asset from H.L. I I'm January 10th 2020, and we expect the acquisition it'd be that we'd have to grant margin this year.

That's marginal is often impacted by costs associated with the club in 19 pandemic.

Continued to in fact, the warmest everything to dress Martin what stands a level at whereabouts identical division margin overtime.

General and administrative expenses increase 13% or $4 million you every year 10 $36 million and large part due to the addition, eight <unk> and the associated acquisition related expenses.

Yeah, the marketing costs increased 18% you every year to $13 million driven by the expand that side of our overall sales team and commissions I'm higher revenue.

Well, we will continue to fonder key growth and you shouldn't we are being prudent and evaluating our operating expense and other off and reducing or delaying certain capital expenditure where appropriate.

Fourth quarter, adjusted you, but that was $7.1 million, which was approximately $1 million lower than the guy that we've provided February and shortfall relative to garden is due entirely to the club in 19 impact.

As we just got than our last earning Paul first quarter and shopping even though it's negatively impacted by a number of factors. In addition to the club at 19 and.

Well the significantly our form of services revenue with lower than normal definitely does the timing up new project starts and stops I.

As I noted earlier, our new business when remain robot.

We accident quarter, Wow, what $125 million in cash, including $39 million and restrict the cat designated for construction of our new state of the our laboratory level headquarters in Port Meyers, Florida.

Cash was produced by approximately $37 million during the corner, but he acquisition I'll be in college, you division assets of human longevity.

And at the corner with 104 million in total that including our financing applications.

Approximately 103 million available borrowing capacity on our credit facilities.

D.S.S. increase to five days sequentially to 86 days due to revenue from retroactive rate increases cared late in the corner and timing Alpharma informatics were happening.

Cash used in operations with approximately $7 million for the corner cash from operations was reduced by approximately $6 million from increases in inventory as the adjust that our supply chain management strategy for a little bit 19 environment.

$3.3 million for costs related to the construction of our new Fort Myers headquarters, which is included in operating cash flow as well as acquisition related expenses.

As a reminder, we went through our well you're 2020 financial guidance on April 9th 2020 and line of a covert 19 pandemic.

<unk> Hi commentary on our key Crow initiative.

Thank you Catherine.

Oh wait to take you.

Take some time to discuss further our strategy for operating in growing to business in these difficult times.

We believe that we are well positioned competitively with excellent growth potential and plans and we are continuing to invest in important and compelling rose initiatives.

Obviously were closely monitoring and containing our costs.

Well well, we're continuing construction of our Fort Myers Laboratory and headquarters facility. We are substantially scaling back were postponing plans for changes and upgrades to all other facilities where are not hiring unless it's strategically important.

We are continuing to invest in automation as that will allow us to continue our long term improvement in cost per test.

Whoa volume levels remain lower than normal we are aging employees in activities do better prepare for that gross bye.

Sustainably improving processes to approve turn around time enhanced customer service strengthen our test menu and decrease costs.

Our sales team is also engaged in value added activities and planning and I must say they are fired up.

As I mentioned, we are also redeploying a certain number of employees to be able to perform Kobe 19, P.C.R.M. serology testing in order to help fill the capacity to support America's needs.

We realize that so many question our decision to retain employees during this temporary volume slowdown.

And we're also aware that.

We'll have a short term in packs on earnings. However, we believe it this is an investment worth taking.

[noise] based on our experience in this business, having an experience skilled and loyal workforce is necessary to accommodate their rebounded test volume, we expect as the crisis waves.

We feel fortunate that our company is strong enough that we can invest our workforce in this current environment and we believe this investment will allow us to retain our strong company culture for years to come.

Strategically, we intend to beep prudently aggressive.

We will continue to make growth investments, particularly and next generation sequencing pharma services informatics and companion diagnostics.

Next generation sequencing remains an area that particular focus for US we plan to continue our substantial investment in this area and expect to introduce several new products and 2020.

[noise] liquid biopsy is one area of a particular interest for us.

Although the market is still a relatively small we expected to grow quickly [noise].

Validation of a pancancer S.A. is proceeding and we expect to introduce a pancancer liquid biopsy <unk> by the middle of this year.

We are also expand they are offering of our in a based next generation sequencing essays.

For both solid tumor and he mental logic malignancies.

We are developing a rabid next generation sequencing panel design for acute myeloid leukemia, which often requires prompt treatment.

Panel will replace the rabbit A.M.L. therapeutic handle comprised of both single gene molecular and fish essays that we released earlier in the mall.

Finally, we continued to investigate essays for identifying minimal residual disease particular <unk> neoplasms.

[noise] another area focus is farmer services, while we're seeing so near turned US near term disruption in clinical trials projects do 10 delays and the timing of clinical trials, we continue to sign new contracts for future work.

Are abroad global testing capabilities to perform both research type work.

Into clinical trials support continues to be and strong demand.

Multiplexed immunohistochemistry expand inflow cytometry and new next generation sequencing capabilities are unique.

And companion diagnostic projects are growing rapidly.

As many as you know we made an important strategic move to expand our from a service is next generation sequencing capabilities, where the acquisition of the ontology division assets of human longevity in early January.

This lab provides germline whole x. and whole genome sequencing specifically for pharma companies.

Business generated approximately $10 million of revenue in 2000 in 19 and ended the year with a backlog of approximately $15 million I've signed contracts.

Thus far in 2020.

Businesses performing in line with our initial forecasts despite the Kobe 19 situation.

We're also continuing to invest in our informatics division both in terms of product development and early commercial engagement.

We spent this division to be an incremental source of revenue in the long term, while strengthening our competitive position in both the clinical and farmer services divisions.

We are still in the very early innings in terms of product development, but we already have significant engagement from various stakeholders, including local pharmaceutical firms large national health systems and major managed care airs.

Unfortunately, we continue to create synergistic opportunities across our three divisions, particularly with regard to companion diagnostics.

We have agreements with several large pharmaceutical companies to provide day, one commercial launch services and advanced analytical support for convenient diagnostic testing associated with drugs in the late stage quite white.

Few ads <unk> same ability.

Two taken on college inconvenient test across the continuum from development through clinical trials and into the market.

Well, we will be particularly sensitive to what would it be in this current environment. We will continue to consider selected strategic financially prudent acquisitions and investments, particularly in the areas of growth opportunity that I just discussed.

In summary, the short term environment will be challenging we're seeing an impact on revenue in both or clinical information services divisions.

And we are likely to see a near term impact on earnings.

However, these near term challenges are entirely attributable to the Kobe 19, pandemic and shouldn't dissipate when time.

We remain excited about our long term opportunities for growth.

Are leading position in the market is providing is proving.

Offer significant sustainable competitive advantages today, and we are working hard to make our competitive position even stronger in the future as we pursue word vision to become the world's leading on college G. Diagnostics company.

[noise] Oh, no hand, the call over to build Badillo do lead us through a question and answer session.

At this point, we'd like to open the call for questions Incidentally, if you're listening to the conference call <unk> only and would like to submit a question. Please feel free to email us build a an aloe antnio genomics dot com during the key when a session and we'll address your questions at the end they have the subject matter has already been.

Dress by our call and listeners as mentioned at the beginning of this call we would like to ask each person to limit their questions did too. So that we may hear from everyone and still keep within the hour allowed in protocol. Operator, you may now open they call support question.

Thank you ladies and gentlemen, if you did have a question or comment is star one on your telephone keypad at this time.

Using a speaker phone, we asked that were opposing your question.

That to provide the bass sound quality.

Again, ladies and gentlemen for any questions or comments is star one on your telephone keypad.

I'll go first Tiffany Suda, an S.C. mealy rink.

Oh, Hi, Doug. Thanks, So first on the recovery a sort of post cold, but I know timing is a hard to nailed down there, but did you get with a sense of the strength of recovery that we should expect here among the <unk> in the community setting you know after all your majority of the clinical but.

That you have isn't the community setting and you have good visibility there could you give us a sense of sort of what what we should expect as as we get into sort of the you know close the apex off quoted here and and the broader country.

[noise] yeah. So good morning couldn't eat thanks for the question.

Yeah that the timing of recovery is uncertain I think we get all agree and it will differ geographically.

I would say there's no reason to believe that our growth rates won't return to what we have explained in the past.

When the Pandemics subsides. So we expect fully that are clinical division will return to the mid teens volume growth.

We've experienced in the past, we expect better Afirma Division would return to the same kind of growth rates that we've experienced a and we expected you know greater than 20 per cent revenue growth. There if anything I would say that they're reimbursement environment in the clinical division looks better.

Then it has previously and our Fuhrman division new sales activity is every bit as strong as we we could have hoped.

You know I I think that we should look to what's happening state by state.

Hospitals are are beginning to reopen I <unk> I think when we started to see hospitals perform elective surgeries again that will be a good sign I think physician offices when they open yeah for more normal business hours, so that will be a good sign and we.

Fully expect when those things happen to see or return to our normal kinds of volume growth rates.

Okay. Thank them and on farm a service to I mean, it's great to see the strengthen the contracts here and farmers services could you help us understand our our those new trial starts that are being planned to doing these times are those who are planned <unk> and and and how should we think about I sort of the recovery.

<unk> farm the services again timing is hard to say here, but what are you hearing from the farm of customers and what is the appetite for those customers a longer term as we you know as me remote or some sort of a poster <unk> in the post cobot environmental what what do you think that be type will be there.

For affirmative services Division sales team is just.

Doing a great job and for the quarter I think Catherine mentioned news I did that we had $28 million in new sales a new bookings those are signed contracts, which is on the pace with you know he's back better than we would have expected there are delayed.

He's in setting up trials are certainly there are delays and setting a new trials and even trials that haven't been existing has slowed down some but.

But the pace of activity and new sales or is it really considers both the clinical trials part of our business as well as their research and development side of our business and we don't really see a slow down in the appetite for farmers pharma companies do engage us.

In in their in support for their drug development activities at all.

Okay, great and if I could squeeze in the last one on the N.G.S. focus which is a big important driver for you here could you just update us briefly on the F.D. and why and how should we on the multi gene Pal that you have submitted it to F.D.N. and also on the regulatory timeline for the liquid biopsy.

See I say, if you could elaborate you know what should we expect this year if any updates. Thank you.

We continue make a good progress on the F.D.A. a submission we are engaged with the F.D.A., we have a good dialog with them or we made a lot of outrage story infrastructure.

Frankly, a lot of those upgrade story infrastructure are benefiting to some extent already are pharma business, because we have no F.D.A. compliance systems in place.

I would say you know it is a complicated process I think we're working systematically and rigorously through the process and we're making good progress with our with our multi Jean panel submission to the F.D.A.

Regarding liquid biopsy.

We haven't been as as we said before validating A.A.P.I.N. cancer liquid biopsy product that validation is going quite well and we would expect.

Before the end of the second quarter to have a liquid biopsy product of Pancancer test available now I would say that we're also looking very closely at other liquid biopsy products and initiatives and trying to understand how best to.

To develop those products and add those products to our product line.

There's one other thing I I would mention and that's that last year, we invested a lot of money in in next generation sequencing. We upgraded both are solid tumor and our he meant to logic a ass days. We're we're very pleased bad recently in the last a month or so we <unk>.

See the designation.

For our solid tumor panel to be a comprehensive profile and we've gone through rigorous validation for that and the reimbursement actually is improved from what we've seen before so we're seeing a lot of progress with our next generation sequencing essays and work and work continuing to invest.

In this area.

Mm.

Okay next to Brian Weinstein.

<unk>.

You guys come morning things, taking the question first question is <unk>, what do you can call. This means for competition in the industry. How do you expect this covered 19 situation to change that will hit the further consolidation of the industry and and do you think at your points to pick up share as a result.

Thank you for the question Brian.

You know all of what we've said our investment in our workforce or investment in our long term strategy is all design.

Two.

Ensure that you if you don't mix emerges from this crisis in a superior competitive position because we fully believe that the stronger players are going to be able to strengthen their position over the last you know several years are meant a lot of smaller players.

I'd have.

Began operations and or losing a lot of money and and are relying on capital markets to support their operations and and we've never subscribe to that theory.

And so as I mentioned, you know we're coming into this crisis in a relatively strong position through.

Through their prices, we are really investing to make our position even stronger I think that there will be consolidation. We are I think in a very good position to to continue to consolidate the market and you can bet that we're looking very carefully at that.

Okay, and then I'm just curious what it means for your clinical because patients who maybe usually referred to the lab. After something is found in kind of a break from blood work situation associated with the Weldments is it happening when they do come back.

Yeah tourists warming stage, how how does that impact your business if it all versus seeing patients that are kind of earlier in the diagnosis.

Mm.

Well, we've had a sort of an internal debate, Brian about you know whether when a crisis Wayne's we good bolis of specimens and and let me give you both sides of that debate on one side you know as you point out the specimens that we receive our from cancer patients or ill.

And they need to be tested and they're going to continue to be tested in that they haven't been tested they're gonna you know need to go to the doctor to get tested so that would suggest that are volume will you know recover very quickly on the other hand, we have to understand there are practical limitations on the capacity of physicians to have yeah.

Office hours infer surgeries to take place there's only limited capacity. So <unk> you know there there are two sides of that debate in our political division, but I think as the <unk>, we return to more normal levels as I said, there's no reason to expect that our growth rates low return to.

The rage that we've experienced in the past.

And frankly, you know we're encouraged by some of what we're seeing on the reimbursement side. So you know is there there are some encouraging signs out there longer term.

Mm.

Can I see here just a real quick one in.

Kind of care that came in I know that they were <unk> maybe certain.

Providers for for Medicare fee for service did you guys get anything like that not referring to P.P.P., but just a a separate thing.

Yes, we received recently $3.9 million from the Medicare program. This is not the program that it provides reimbursement for you know, it's a paycheck provider or protection program. This is a Medicare program C.M.S. program.

Designed to support a providers that have build of Medicare in 2000 in 19 at a particular rage based on their <unk> their their buildings last year. So that was a $3.9 billion or received a couple of weeks ago.

Okay next to injure Cooper with Raymond James.

Okay. Just a few for me I think we had some of that the highlights already but you know when you talk about expenses tied directly to come up in 19 and investing in.

Your employees and all those things can you help us slice out you know what was maybe a little bit unusual on the quarter above and beyond and how much of that might her sister personal burst watch just sort of lack of overhead overhead absorption when we margins.

Yeah. So what do you think about our infrastructure, we have about 25% backing flat with our volume stuff between supply of commission.

<unk> currently out and they produced travel, but a lot of that not a lot of bad but some of that gets off that I. When you were mentioning is the one time, even as far as you know spanking out the lab can create them in a fish unseen and productivity as well as cost format and half the amount or something at that there's no time.

Inexpensive that it takes just to make sure that we are insurance 18 lobbying up our employees first so there are some offset caught me think about how much. We can really control. We do have about 25% variable costs that are more closely tied with their revenue when the task, but again, we are being very prudent and then.

Wrath of our operating expenses and watching very closely the timing that you know planned expenses and making sure we're being printed on which initiative. We are continuing in which we may be plus timing.

Yeah, just to build up Mad you know in addition, we're <unk> piloting even as we speak code 19 testing for our own employees to make sure that they continued to kind of work safely, we've given to expand or premium pay to some of our workers.

There are a variety of things that we've done that will.

You know in in support of our culture in our in our workforce. The other thing that we've done as we've added expenses to bring a covert 19 testing for both molecular and Surajit testing and and I think you know we're we're as I mentioned you know we have capacity now for the molecular test and we'll.

Have a capacity very shortly for a very high quality antibody test.

Okay. That's that's super helpful. And then I guess jumping to farm the corner is maybe a little bit stronger than than we expected. So just curious if there's anything in particular that that may be accelerated or anything like that relative to what you talked about in the last quarter and then to you guys are call you a talked about.

A significant number new trials starts in April I know you've talked about these you know pushing a little bit two major projects, which is maybe a little bit more detail on some of the dynamics there and you know if you look at the the backlog as it builds any sort of aging of that or or commentary on when you <unk> you know to get started.

Normal on on some of that would be great.

Yeah, I will answer part of it and then maybe ass George if he can [laughter] answer remotely to to help fill in the store the the quarter was stronger Andrew than we expected it to be when we when we caught with a investors back as the eye toward the end of February.

And I think that the speech to the diversity of our farmer services business. So not only is geographically global yeah in in structure, but we also have a fair amount of research oriented activities as well as clinical trials activities. So while they're clinical trials have slowed down.

A research related activities, both in next generation sequencing and and multiplex Immunohistochemistry word has actually increased a little bit and we we saw a lot of stress as the quarter ended.

In terms of the trial starts in backlog, let me turn it over the George to ask for his input.

Yeah, No and I just piggy back on the 1000 said you know we are fortunate to have a fairly diverse you know offering in terms of product offering a not only did we see strength across the what Doug mention but we also saw a a nice uptick and and data and then fanatics I'd salesmen rarely seen an increase in that from our farmers sponsors as well which has been helpful.

And on the clinical trials side, Yeah, I mean, I think you know we we've even heard from frustration from some sponsors layer.

Unfortunately, the sites just aren't able to enroll the patients the way they use do so one in particular said as soon as somebody state start to open up that's where they're going to go first step to open up some sites others, and then maybe a little bit more cautious and they're figuring more maybe July or August. So you do kind of have the spectrum, but I think the demand is still there for the for the clinical trial.

I think if anything there's there's almost frustration on the farm aside for you know they want to move forward on these projects and unfortunately the site you know our our close card sounds that are limiting hours limiting elected you know visit and that really is cutting down the patient flow one of our biggest sponsors a top 20 farm out from the outset across all there.

In College I.

Trials or think about a 50% reduction in patient flow. So you know they're seeing it but certainly there. They are hope is is that that ramps up but as soon as possible and I I do think yeah, when the coming months and they're going to push hard to try to get those numbers up discuss they can.

[noise] [noise] great. That's a that's very helpful. We've got.

<unk> Craig how in capital.

[noise] right. Good morning, everyone a dog of the lower testing volumes do you think this is all lost revenue or should there be a a catch up in q. Thank you for clothes, you know cancer doesn't go away. So I've got to imagine there's gonna be some sort of catch up wants to states clinics and last start to reopen here.

You know Alex it that's the subject of great debate among started team as I as I mentioned I think you know there is one school of thought that says yes. These patients knee testing if they haven't had testing they're going to want to get testing as soon as possible and I I think you know that's a compelling Oregon.

<unk> to suggest that are volume will come back strong on the other hand, we really do have to understand that there are a practical limitations of capacity by physicians by community based psychologist and by hospitals in their surgery centres. So yeah. There's a there's a sort of a cap on how much that.

10 come back, but you're absolutely right. The work we do is for cancer patients patients, who are ill and they need to be tested and it's an essential service and that's why we're <unk>. We're so confident that our business is going to return to normal when things return to normal.

That's helpful and is there any timeline for when you would expect to launch the men minimal residual disease task than what sort of additional investment at work needs to be done there to get that test ready for prime time.

The let me explain it first of all that we already have a minimal residual disease tested by a test <unk> on flow cytometry, which is useful and we we we you know we're we're marketing that and then continue to market it the the M.R. and D.

Test that a lotta people talk about our next generation sequencing base and we are investing in M.R.D. next generation sequencing to compliment or a close cytometry were there are a number of innovations in this area. You know we're looking at internal development.

Into as well as soon as potentially.

Yeah, <unk> external sources for that.

We expect that M.R.D. is going to be important testing.

Huh.

Test you know in the future, but there's a lot of development that has to take place really in the near term to to make that a viable commercially.

Okay I understood. Thank you.

Mhm.

Once again.

Star One if you had a question or comment.

I'll go next to Checkup Johnson, it's D. and.

Hey, Thanks for taking the question and thanks for your efforts on on the pandemic you mentioned that you and me with lung cancer can you hear me.

Jacob how are you there.

Can you hear me now.

You seem to have lost Jacob Jess.

Yeah.

Oh may have to Paul night at Jenny Oh, No. We we lose every yes are you there.

Yes, you are connected I can hear you.

<unk>.

Okay, Hey, Oh go ahead [laughter] ask your question I guess, we'll manage this on our own.

Oh I ask for questions just kidding.

[laughter].

The the backlog build as I look at your success on the farm a size pharmaceutical services side is it on call a g. is it your technical capabilities, what one or what's creating the winds success.

Versus.

Appears do you think Doug or George.

Oh, yeah support off.

The L.T. and certainly we we do have an outstanding sales team, but I I also think it's it's it's sort of our comprehensive strategy now does it talked about this energies between the divisions. You know we we do have the number one tradition in oncology. So yeah, that's extremely attractive farm affirm to work with Neogenomics on on all their up front research and phase.

Files and then when we reached a day one neo is out there you know helping them with with literally thousands of oncologists anthropologist, bringing the test to market. So I think holistically. If you look at the strategy what kind of any any position where you know they can get quite service pre F.D.A. approval, but then they've got the same partner, helping them to launch that and I I do think it's very.

Powerful and it really is helping drivers sales.

And does when you look at the the states across the U.S. of course, I I know eight or so we're allowing elective surgeries as of may 1st.

Is it a patient's just not going in or or dockers not in at a clinical settings in your view.

Yeah, Hey, this is <unk>. So we've seen a mixing the different geography, we've seen on college he practices that ever just their hours to say just days each week or even our only seeing new patients on Fridays only.

And they have cancelled six month and annual follow up appointment and we've seen you know cancer patients, whose elective yeah or are considered an elective even though you want to imagine to be no treatments are being pushed off right. Now. So it's done upset until those patients can get access to ontology practices and.

Aspinall, you know, we we need to wait for that to return to normal to see the volume.

And lastly, do you see within these guidelines I see elective surgery, which are obviously not much to do with you but are using guidelines as well surrounding.

Clinical lab openings state by state or are they getting that specific.

Well, Paul might [laughter] I I been surprised at the definition, sometimes of elective surgery Uh huh.

We've we've seen cases, where cancer patients you know have have not been able to have surgery and yeah.

Actually because it was described as elective, but I've heard cases of for example, you know.

<unk> with prostate cancer or breast cancer that were on able to get surgery or the surgery was postponed because the situation. So I wouldn't say in response to the question about clinical laboratory.

Most clinical laboratory, so I know, especially the large commercial laboratories and labs like Neo genomics I put in place enough protections for people that they're less it continued to stay open.

We've certainly had that situation you know we worked very hard to maintain the operation of our laboratories and.

You know, we we continued to work hard to make sure that we're able to deliver the kind of service with the same kind of quality same kind of turn around time in fact, our turnaround time is frankly improved during this this endeavor.

So thanks for the question Paul.

Okay. Thank you bye-bye.

Well get a checkup Johnson at Stevens.

You hear me now.

Yeah.

Great. Thank thank same question. He first mention that rely on Saturday with beat dilutive too gross margins.

Project. The added your Karma services backlog from human longevity think different from your legacy business in terms of Christ in in marks in north towards the system some excess capacity.

<unk> would you want yeah I'm trying to answer that is like yeah. No. Absolutely you know I generally the margins are fairly comparable to what we've seen historically on the on the farm. It died I really don't think there's a bunch of the different there yeah that laboratory.

It's a beautiful laboratory, but it's well under a capacity right now and and that was yeah. One of the reasons that it was attractive to buy I think we we did yeah. We looked at we've got 37% internal growth last year. So we were looking for a laboratory. We had this space to grow a matter of fact, we are bringing up fish inside of genetics testing and that facility on all the way as well so.

I certainly our goal is to fill out lab off it is yeah well on your capacity here you know we we knew this is gonna be to live in the first year. I think we had you know just 1.4 million of depreciation just send the first quarter, so and that doesn't affect you better but it certainly had a big impact on a on the market that you're seeing so, but you know where it's still very bullish about the yeah. The lab.

<unk>, it's beautiful and certainly our goal is to fill it up and that in the next year.

Got it that thing so that towards and this one maybe you as well, but I I was getting your lives in a format services on regarding pets that in you mentioned that.

You have increase your work on back vaccines in the past year.

<unk> person doing any hope at work in your Karma services segment, and then you just in general how much that scene work do you do in Karma services today.

Yeah.

Yeah, the bite year ago, we we actually started down that path because you know it it obviously or things like H.T.V.. We had seen cases, where you know vaccines are you know certainly trying to prevent cancer I am. We also had you know request from our sponsors silly sorta migrated into that but certainly now the the demand coal is has gone up substantially huh.

And yes, we do actually have a couple of Kobe projects than that in our Houston facility. So yeah. The dream would be one of the projects. We work on actually is what the world's waiting for but you know certainly you know it's still a fairly small part of our business, but that's that's the one that we think has very break world growth prospects for next year.

Right. Thanks to take my question.

Thank you Jacob.

Well go next to see the younger I need them.

Hi, Good morning did you got an update on your informatic strategy and are you planning to continue to spend at the level, but you Gotta do initially.

Yeah, I I will take that and then bill may want to a way in here as well.

So we are investing in informatics, we feel great about our strategy informatics I think today, we have.

A little over 25 folks maybe 26 folks in the division so it isn't investment, but I must say that the engagement the level of engagement there were getting from pharma companies in front of pairs is proving that well what we're doing is relevant.

To their business now I would say that guys George said, even in a quarter one we experienced more [laughter] revenue.

Derived from our Informatics war than we expected and we're really bullish on the the the prospects here even in the short term. So we expected to this division might you know in the long term be a real revenue generator for us, but even in the short term.

This is starting to impact or business and generate some some revenue and all of that revenue by the way you know once we cover the 28 26 folks that we have a division really falls to the bottom line.

Yeah, and I haven't been doesn't really covered highlights there I would just say we put together I I believe an exceptionally good team with a lot of experience M.. We're you know in the very early stages of a building. Some some products that we think and services that we think are going to be really help.

Oh to various stakeholders and you know.

As we get later in the year, hopefully, we'll be able to showcase some of those for you and we're we're we're feeling good about where we're at on a revenue side so far.

Hello.

As far as good a couple of in 19 patient testing opportunity was this direction on the federal government and and how how should we frame reimbursement or whether it's a P.C.R. test sort of <unk>.

[noise] the government 18 testing that we brought we we felt we shouldn't do.

As a good corporate citizen.

And we've been working on this for Awhile I mentioned, the kind of capacity, we have for the molecular test and bringing at the Surajit test.

So we did not do this at the direction of the government, but we certainly are working very closely with American clinical Laboratory Association and members to work with the government to make sure that we have enough to testing capacity in this country.

Now in terms of the the reimbursement.

Reimbursed for for the molecular test.

Has recently been increased I think it started out in Oh reimbursement rate of around $51 and it's been increased to around $100.

During this crisis and I I believe the the Surajit test. There's some discussion right now most you know C.M.S. and H.H.S. about the level of reimbursement for that I don't think that's been determined yet there is some cross war discussion.

And and other things, but but we don't really know an answer yet, but we expect to know that reimbursement rate relatively soon.

Mm.

[laughter] could you you sound to offer what platform you will be providing.

Neurology.

Yes, we're we're we're using the Abbott <unk>, we using the habit test for <unk>, we're using a thorough Fisher test for primarily for the the P.C.R. test.

Okay.

Thanks.

Mm.

Okay next temporaries Jackson adventure aren't company.

Hi, Good morning, just to follow up question on the continued diagnostics tests that you couldn't be launching later this year I was wondering if you could provide us with some details on the launch kittens.

What kind of cancers their targeted toward are these can be single marker tester panel testing.

You know to the extent you can provide some more information on that program that'd be great.

Yeah, Bruce Sweet.

Put this in context, and maybe a bill or rubs can can build on my comments. So we have.

Ah roughly 30 containing diagnostic projects in our pipeline add neogenomics and these are projects with a variety of pharmaceutical companies. They would involve our farmers services Division and also as George pointed out or clinical division.

Now we've had a variety of project sponsored testing programs with pharma. Some that we've been operating for you know several quarters and some that were beginning to operate now and we have a number of projects in the pipeline. So we're very bullish about our capability.

Any in companion diagnostics and.

I know Robert build you have specifics yeah, I I would add on this is Rob I would add that we have a handful where we have signed contracts and we're putting together all the market planning, but it's really contingent upon F.D.A. approval of the drugs. So the timing now isn't isn't definitive right. Yeah. So we're plan.

Running for this year, but it's you know depending upon the farm accompanying after yeah.

Mm.

And then just a quick follow up on that could cope with 19 slowed down the the approval of those drugs or or are these late stage programs, where they just have to get through the F.D.A.

Well, we don't have a lot of his ability, yes to the discussions between our farm appliance N.E.S.T.A. relative to those companion projects I think a lot of these are moving along <unk> have moved along the way well and we we really don't know whether cobin 19 is going.

I have an impact on those.

Right. That's it for me thank you very much.

Okay. Thanks Bruce.

Well no actually I wasn't holding I'll turn the conference back to Mr. Banorte for any additional are closing comment.

Great. Thank you just so as we end the call I'd really like to recognize the approximately 1685 neogenomics team members around the world.

So dedicated and committed to helping us build a world class psychology diagnostics company and on behalf of already or genome Exteme I want to thank you for your time joining us this morning and for those of you listening that are investors or are considering an investment in New York <unk>. We thank you for your interest in our company.

Mmm.

[noise], ladies and gentlemen that will conclude today's call. We thank you for your participation disconnect at this time and have a great thing.

Thank you.

[noise] [noise].