Q1 2021 Neogenomics Inc Earnings and to Discuss Acquisition of Inivata Ltd Call
Good morning, ladies and gentlemen, and welcome to the Neogenomics first quarter 2021 earnings call.
At this time, all participants have been placed on a listen only mode. The flow will be open for questions and comments after the presentation.
And it's now my pleasure to turn the floor over to your host Dell and Vmware, Sir the floor is yours.
Well, thank you Holly and good morning, everyone.
I'd like to welcome everyone to Neogenomics first quarter 2021 conference call.
A lot of exciting news to share today, but first let me introduce my fellow team members on the call.
Joining me this morning from our Fort Myers headquarters are Mark Mallon, our new Chief Executive Officer, Kathryn Mckenzie, our Chief Financial Officer.
George Cardoza President of our Pharma services Division Bill Bonello, President of our Informatics Division.
Doug Brown, our chief strategy, and corporate development Officer, and Charlie Edson, our manager of Investor Relations.
Also joining us this morning via phone from the United Kingdom is in Nevada, CEO, Dr. Clive Morris.
Before we begin our prepared remarks, Charlie will read the standard language about forward looking statements.
This conference call may contain forward looking statements, which represent our current expectations and beliefs about our operations performance financial condition and growth opportunities.
Any statements made on this call that are not statements of historical fact are forward looking statements.
These statements by their nature involve substantial risks and uncertainties certain of which are beyond our control.
Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect actual outcomes and results could differ materially from those indicated and the forward looking statements.
Any forward looking statements speak only as of today and we undertake no obligation to update any such statements to reflect events or circumstances. After today.
As a reminder, this call is being webcast live and recorded and will be referencing a slide presentation in conjunction with our remarks.
Because of the short delay between the live telephone audio and the presentation being shown on the webcast for the best experience. Please use either the webcast for both the audio and video content or if you're dialed in by telephone download the slides from our website and advanced and yourselves.
To access the webcast. Please visit the events section and the Investor Relations section of our website and a replay of the event will be available following the call.
Before turning the call back to Doug I want to let everyone know that we'll be making a copy of our prepared remarks for this morning's call available on the Investor Relations section of our web site. Shortly after the call is completed we also want to let everyone know that we are going to limit the number of questions to two per person and in order to give more people have asked us questions within the one hour that has been allotted for this call.
<unk>.
Well, thank you Charlie.
Today's call represents two very important milestones and our company's history. The acquisition is in Nevada, and Mark balance first conference call as the new CEO of Neogenomics.
Mark started a few weeks ago and the company has transitioned to Mark's capable leadership.
We will begin our call by discussing our acquisition of the Nevada.
I will review, our strategic rationale for acquiring and Nevada, and Clyde Morris and Nevada, as CEO will follow with a more in depth commentary.
Doug Brown will then share details on both the acquisition.
And the strategic financing, we announced this morning as well.
Catherine will then provide an overview of our quarter, one financial results and share some expectations about the impact of the univar and acquisition.
We will then transition to Mark Mallon to wrap up our formal remarks, Mark is excited to share. Some observations about his first few weeks, leading neogenomics and his vision for the future of our company.
We will then have time for questions and answers.
We are very excited about today's announcement.
The acquisition of innovator represents an important strategic move as we continue to position the company to achieve our vision to become the world's leading oncology testing and information company.
Channel leadership combined with Tech technology aggregation can be a powerful dynamic.
The combination of <unk> best in class technology, and Neogenomics unrivaled scale and access into the community oncology channel Fortifies, our already strong competitive position and oncology diagnostics and allows us to accelerate our growth trajectory.
Bolstering our comprehensive test menu with the addition of <unk>, leading liquid biopsy technology for detecting circulating tumor DNA will allow neogenomics to provide testing solutions to our physicians and their patients for diagnosis prognosis therapy selection and now on.
Also for post intervention detection of residual disease and for recurrence monitoring.
We also have greater opportunity to partner with our pharma clients as they develop therapies targeted to patients with residual disease and upon earlier detection of disease recurrence.
We have spent the greater part of the year with the team at in Nevada, as their commercial and strategic partner and as an investor serving on their board.
Now we are accelerating the exercise of our call option to combine our two organizations and bring more resource two in Nevada and product development.
We believe that much of the success of Neogenomics is due to our culture and our focus on patients and.
About a share is this focus and we have been impressed with the quality and cultural fit of the Nevada team.
Our common purpose is to save cancer patients' lives.
And we're convinced that we could accelerate the adoption of important diagnostic technologies for patients as part of the same organization.
Together, we provide physicians and pharma partners with an unparalleled spectrum of diagnostic tools to answer the broadest set of questions to diagnose and treat cancer patients and to develop new therapies.
Our clinical divisions broad offering of approximately 750 tests has resonated most with community physicians were greater than 80% of cancer patients are treated.
Our pharma division is unique and extensive test and technology offering has clearly resonated in the market as we have now worked with numerous clients, including each of the top 25 largest biopharma companies and the world.
Clearly our ability to serve our customers has strengthened with the addition of in Nevada is liquid biopsy technology and positions us for continued broad testing leadership in oncology diagnostics.
Liquid biopsy is an emerging diagnostic technology that over time has the potential to change how patients around the world are diagnosed and treated for their cancer.
Acquiring and Nevada positions us for leadership and this exciting new area of oncology diagnostics as it continues to develop.
Community Oncologists and pathologists are just beginning to use liquid biopsies and their practices and we expect utilization to grow significantly with emerging standards in the practice of medicine.
Perhaps most exciting as and.
Occasion of <unk>, CTD and <unk> technology is the detection of minimal residual disease and monitoring for recurrence.
We are particularly excited about the opportunity to develop and commercialize and Nevada is highly sensitive product branded radar to address this important patient need and a market, which some estimate to be in excess of $15 billion and the U S alone.
As shown on slide four.
And as many of you know we have built our company through both organic and inorganic growth and have a history of successful execution and integration of our acquisitions.
To achieve a leadership position and the market over the last several years, we acquired two important competitors and Clarient and genoptix, adding very important scale to our business.
Leveraging our scale and the clinical oncology market. We then successfully built out synergistic and complementary pharma services and informatics businesses.
These three business units each have double digit growth profiles and the combination has created a flywheel for our company's future organic growth.
We believe and Nevada soon to be our fourth business unit represents the continued acceleration of our strategy as we execute on our formula for oncology leadership and as the market for MRV develops we believe our long term growth will accelerate above historical levels.
As always leaving my office and Elisa VA Ho, California for the last time, a few days ago, I found and old investor presentation from around the time, we acquired Clarient and early 2016.
At that time, we described our plan to build on our solid core through innovation and business development, including a focus on pharma and clinical trials companion diagnostics next generation sequencing and liquid biopsy.
It's exactly five years since we presented that to investors and we did what we said, we would do and more and.
And now our company's growth.
<unk> is better than ever with greater opportunities ahead.
Most importantly, we increasingly have the potential to revolutionize oncology care to benefit millions of patients as they manage through their cancer journey.
With that.
I would like to introduce <unk> CEO Clyde Morris, who can walk through the innovative story.
<unk> has an impressive background with expertise in oncology and as a practicing physician.
And R&D and medical affairs within the global pharma industry.
And his year spend at in Nevada, leading the developmental success of the company.
Thank you Doug.
Good morning, everyone had the pleasure to represent and events are on the call today and the Deca.
<unk> commentary on the cultural fit between and Nevada on Neogenomics we're on.
Very excited about the combination.
Our approach and liquid biopsy platform and the Spinout from the University of Cambridge, and the U K and we have so far developed two leading assay and.
Company has been well supported by leading life science investors and the UK and and the U S and today, we have a talented team of about 90 people across and R&D facility and Cambridge UK and.
On the cap CLIA Laboratory and research Triangle Park North Carolina.
We believe that by combining our leading technology with a well capitalized and established oncology commercial engine like Neogenomics will accelerate our mission to deliver on our highly sensitive liquid biopsy products to the millions of cancer patients and both the U K SAR and the U S and around the world who need them.
On an overview of the and the vantage platform.
Please turn to slide five and the presentation.
As Doug mentioned, we've developed.
On liquid biopsy technology platform that is optimized to achieve the best in class sensitivity levels across multiple applications.
We have developed to commercial stage assets.
Ambition for us lung and radar.
And we will also bring new and complementary <unk>.
Indy regulatory and reimbursement capabilities to Neogenomics.
And vision for us lung into 37 and gene liquid biopsy next generation sequencing panel developed for patients with advanced non small cell lung cancer.
The test is being commercialized in the U S with Neogenomics since mid of last year.
And the uptake is growing steadily as community oncologists for a more comfortable with liquid biopsy testing.
Importantly, the feedback from oncologists on the quality of the test service levels and the turnaround time of seven come and today's from a blood draw to results.
Bold and positive.
The test is reimbursed by Medicare and <unk>.
$500 per test.
And with commercial insurance coverage and the test has reimbursement coverage for approximately 200 million lives and the U S.
Our second commercial assay is radar and this is.
And the tumor informed assay for residual disease, and recurrence testing and has pan cancer applicability.
The test was cap CLIA validated and on North Carolina facility in December of 2020.
On the test received breakthrough device designation from the FDA earlier this year.
Radar has been optimized to maximize sensitivity and on slide six you can see why this is so important.
The levels of circulating tumor DNA and early stage cancer, and very low and in the post surgical setting they are even lower.
Sensitivities and I have a crucial to success and the setting and radar has been specifically designed to provide this.
We track 48, known genetic variance from the patient's cancer to achieve this.
And equally important driver of our exquisite sensitivity compared to competitor platform to the core and vision technology and proprietary bioinformatics pipeline.
We believe the combination of these factors drive great performance and that these advantages will shine through and our clinical study performance.
Slide seven shows data from some recently published and presented studies for radar verses, two assays from well known leaders and the minimal residual disease testing landscape.
<unk> market, leading sensitivity down to zero and senior and 1% variant allele frequency and obviously assay to pick up evidence of recurrent cancer recurrence very early days.
And the data on the slide and lung and breast cancer, but we expect to be able to apply that technology equally into other solid tumors as well.
One of the published clinical data and high levels of sensitivity for radar on compelling perhaps the most exciting aspect about radar and I might be testing in general is the paradigm shifting impact it can have for patients along that comes to journey.
Slide eight shows a typical clinical journey for a solid tumor patients and the potential use cases for a test like right on for <unk> testing.
And the adjuvant post surgery setting radar can potentially be used to help select patients for adjuvant therapy based on the president and the presence of residual circulating tumor DNA and the blood, indicating that the patient has not been cured by the surgery.
And the future of the test may also be able to help optimize the dosing on duration of therapy.
Right now testing can also be used to monitor for disease recurrence for cancer patients the tower and remission.
Shown on the earlier slide molecular level I'm on D testing with a test and sensitive as radar has the ability to detect disease recurrence well before it would be identified by the current standards of cash such as imaging.
On a catching the recurrence of cancer earlier, and we believe that action may be taken earlier potentially improving the clinical outcomes for patients.
Overall, we believe were and the very early stages of a massive market being developed for them on testing.
On slide nine you can see that and the United States alone there are more than 1 million new cancer patients being diagnosed every year and these may benefit from <unk> testing.
Even using conservative assumptions around <unk> test utilization and pricing. We believe this translates into an estimated market opportunity and a $15 billion on mall.
And given over 80% of accounts market is and the community setting we expect debt. The majority of this market will develop when the and genomics has a leading market share.
While the clinical market and and it's very early stages of development Biopharma is highly interested and the application for MLD today and.
D testing postoperatively has the potential to revolutionize the way early stage oncology adjuvant clinical trials are conducted.
And the ability to quickly determine responses to therapy and clinical trials is appealing to patients on biopharma alike.
Really the potential for <unk> is immense and we have a detailed plan to become a major player in these markets.
On slide 10, we outline some other key milestones for radar we are already collaborating with pharma following our cap CLIA lab validation completed in December.
And we recently unveiled from data and breast cancer, and head and neck cancer on tables, ACR conference and we anticipate additional clinical data on <unk> in early June.
We believe we will be and are positioned to submit data through the multi X pathway for reimbursement around the turn of the year, which should allow us to commercialize and the clinical market and mid 2022, assuming six months review process.
I'll now turn it over to Doug Brown, who will provide a summary of the deal terms of the acquisition as well as details of the strategic financing that was announced this morning.
Thank you good morning on Slide 11, we are pleased to formally share with you. The terms of the Nevada acquisition terms, we agreed to with the Nevada as part of our commercial partnership agreement, we negotiated over a year ago. During the first few weeks of the pandemic.
As part of that agreement formed within a volatile last year, we announced we would be making a $25 million minority investment and the company that we would commercialize and envision first long for liquid biopsy and U S.
And we announced that we negotiated a fixed price call option to purchase the remaining equity of in Nevada, but until today, we had not share to the acquisition price of $390 million for our remaining interest valuations for highly advanced and proprietary liquid biopsy platforms like and Novartis have increased substantially since we struck a deal and may of 2020, and we feel.
Very fortunate with our timing and our ability to deliver what now appears to be a value based technology acquisition for our shareholders.
The date for the exploration of our purchase option was set for December 31, 2021 over the past 12 months, we have continued to gain confidence and the power and sensitivity of the <unk> liquid biopsy technology. We have also developed tremendous confidence and the talented team at and Nevada. As a result, we are exercising our option to purchase and Nevada.
Eight months ahead of plan.
We are confident that this important strategic move is the right one and in conjunction with todays acquisition announcement. We are pleased to also announce a private financing of $200 million.
We view this financing as a strategic capital raise which is represented by a syndicate of over a dozen and targeted investors, including existing and novartis shareholders existing neogenomics shareholders and importantly, new specialist investors with a focus on oncology. We are pleased to have attracted these leading investors who support the combination of channel and technology.
Leadership pro forma for today's transaction our balance sheet is quite strong we have greater than $550 million of cash on hand, providing ample flex flexibility to accelerate funding of technology development and Nevada, while we pursue further strategic opportunities.
I will now turn the call over to Kathryn Mckenzie to discuss some of the other details of our quarter one financial results. Thank.
Thank you Doug.
Might the impact of the ongoing pandemic total revenue in Q1 grew 9% year over year to $116 million and importantly, our core oncology revenues increased 7% year over year, driven by strong growth and NGF pharma services and informatics COVID-19.
COVID-19, PCR testing contributed less than $2 million of revenue during the quarter down from $9 million and quarter, four and $17 million and quarter three.
And we noted a significant decrease in demand for our COVID-19, overflow testing capacity and therefore made the decision to wind down our COVID-19 testing capabilities as.
As a reminder, we brought up COVID-19 testing to help address the shortage of U S capacity and expect that the service to be short term in nature and not part of our overall strategy as a leader and oncology testing.
And we discussed on our February earnings call, our core clinical cancer volume were noticeably impacted by the COVID-19 incidents and January and February.
However, our core volume showed meaningful signs of recovery in March as a record daily clinical volume translated to 19% growth versus March 2020.
Despite the challenging start for the quarter, we delivered 4% volume growth over Q1 2020.
And importantly, the strength continued into April with record daily volume and we are very encouraged that we will remain on a steady recovery as vaccine Rollouts continue and COVID-19 incidence rate decline.
Finally, we were pleased to see that clinical division revenue per test was $364 compared to $363 for the full year of 2020.
While we are encouraged and it's also worth noting that we are not all the way back to a full recovery. We continue to see a contrast, and volume growth for our business from areas of the country that are less restrictive versus those with more restrictions and we believe this bodes well for us as restrictions loosen nationwide over the course of 2021.
Pharma services grew 46% year over year, continuing its rapid growth trajectory.
As a reminder, last year's acquisition of the oncology assets of <unk> closed on January 10th 2020. So this growth is essentially all organic.
Not only did revenue conversion improve for this business and Q1, but demand continues to be very strong, we signed $31 million and new bookings during the quarter exiting the quarter with a record $218 million and backlog.
We continue to grow our robust portfolio of Biopharma customers and believe that pharma services is better positioned than ever before and poised for additional rapid growth ahead.
We have also rapidly integrated the Trapelo health organization into our Informatics Division, we are already leveraging our commercial capabilities to reach more customers, while we leverage our capabilities to further strengthen and already leading decision support tool for oncologists more to come on to Palo and the second half of the year.
Our gross margins were challenged in Q1, particularly in January and February due to less efficiency on lower volume we.
We have and challenged by the volatility and volume over the last year, including during the first quarter.
However, we continue to believe that our decisions to invest and our infrastructure are positioning us well to take share as volume returns.
Q1 gross margins were also impacted significantly by our decision to wind down our COVID-19 overflow laboratory.
This resulted in a $5 $3 million charge related to unused COVID-19 testing inventory.
Clinical gross margin in Q1 was 36, 2% when including COVID-19 exit charges and 41, 7% excluding these charges.
As we return to more consistent growth rates and a normalized economic environment, we expect to yield gross margins in line with historical rates with continued long term margin expansion opportunity overtime.
And Q1, we grew pharma services revenue by 46% year over year or $6 million.
Hawk, only increasing by 15% or $1 7 million over that same period.
Services gross margins improved from 17, 7% and Q1 of 2020 to 34, 9% and Q1 2020 one.
Operating expenses increased $5 million year over year to 50 $557 million and includes investment and and support for informatics payroll and payroll related costs acquisition costs and a write off for COVID-19, PCR testing laboratory equipment.
Adjusted EBITDA of $4 million and Q1 reflects lower gross margin on clinical volume volatility as previously discussed.
As well as continued investment and key initiatives, including our people infrastructure and strategic growth areas such as informatics.
Excluding our recently announced acquisitions, we expect our organic EBITDA contribution to increase and each of the succeeding three quarters of 2021.
Turning to the balance sheet, we exited quarter, one with $803 million and cash and marketable securities, which excludes an additional $11 million and restricted cash designated for construction of our new state of the Art Laboratory and global headquarters and Fort Myers, Florida.
Subsequent to the end of the quarter, we utilized $35 million and cash for the acquisition of propeller health, which closed in April.
Following the acquisition of Nevada, and incorporating the funds raised and the strategic financing announced today, we expect our cash balance and be in excess of $550 million. We believe this puts us on a strong position to continue to invest and these recently announced acquisitions and internal strategic priorities as well as per sale and.
Inorganic growth opportunities.
Given the positive trends on our business and the vaccine progress being made across the country. We are prepared to introduce full year 2021 guidance.
We expect consolidated revenue to be and the range of 490 million to $510 million for.
Presuming no further market dislocations from the COVID-19 pandemic, our topline growth for full year 2021 will be driven by pharma services annual growth and excess of 35% and by what we anticipate to be a very strong back half of the year for the entire business we.
We have projects that are back half revenue run rate could be in excess of $525 million.
Pro forma for the and Nevada, and Trapelo acquisitions full year adjusted EBITDA for 2021 is expected to be and the range of $10 million to $15 million.
We anticipate approximately $30 million and 2021 operating losses to fund the development of radar accelerate submission of radar for reimbursement and to further support the development and rollout of the Trapelo clinical decision support tool and related offerings. We.
We are very excited about both of our recently announced acquisitions and the innovation and they will provide for clinicians pharma partners and most importantly patients. However for 2021, we do not expect a material amount of revenue from these transactions, particularly for MRV, while the markets are evolving rapidly we are still and the early stages.
And radar is not expected to become a material portion of Neogenomics revenue until 2023 and 2020 for these.
These acquisitions are changing but near term profitability profile at Neogenomics. However, we believe that investing in the future of oncology is the right strategic move.
I will now turn the call back over to Dr. <unk>.
Well, thank you Catherine.
We certainly have a lot to be excited about at our company and within Nevada. The recent acquisition of Trapelo Health and the addition of Mark Mellon as our CEO.
Mark Mallon has a very talented executive with a wealth of experience and a broad skill set.
We interviewed and exhaustive list of capable leaders and we feel fortunate that we were able to recruit someone of <unk> caliber.
I'd like now to formally introduce mark to many of you for the very first time.
Thanks, Doug and thank you for the entire neo team for the warm and enthusiastic welcome.
Joining me on because I was inspired by the commission to make a major difference and the lives of cancer patients and because I was impressed by the incredible talent and passion of its value driven people.
And I clearly saw the opportunity for <unk> to become the leading cancer testing and information company and the world.
Two weeks into the role I can say my expectations have already been exceeded.
I've had a chance to visit our major labs, and Florida, and California, and I can see why neo is known for excellence and quality and customer service, we have fantastic teams urgently working on behalf of patients.
Been able to review the plans of all three divisions, and I see opportunities to accelerate growth and each of these businesses.
On a day with our R&D team and was excited by the science I saw both in terms of future assays and the opportunities to improve our quality and efficiency through automation and <unk>.
Finally on.
And already engaging with key stakeholders, especially our customers and our investors to make sure I am clear on their expectations for <unk> going forward.
The focus on my first 90 days will continue to be to learn about this great company.
And the opportunities ahead and to ensure the organization is focused on the key drivers of growth.
And the clinical division will be especially focused on our incredible portfolio of NDS assets, including our liquid biopsy tests. This portion of the business is already growing more than 30% annually and I think there are opportunities to accelerate growth further.
And I also believe there are multiple opportunities to simplify and automate our processes, while we ensure the successful launch of our new laboratory and Fort Myers.
And the fast growing pharma services Division, we've only just started opening up the business beyond the U S. We have and excellent newly staffed global sales team and outstanding Labs in Europe, and Asia ready to meet the high demand of our customers with testing and these growth markets.
And informatics will be laser focused on making Trapelo D decision support platform for oncologists, ensuring we have the right capabilities and this platform and a rapid rollout starting with our existing customers.
Finally, I am very excited about the announcement today to acquire and Nevada and <unk>.
Total will remain a separate business unit with <unk> as the president reporting directly to me I'll be working with <unk> and his entire and about our team to ensure we meet or exceed our timelines for gaining multi X approval and launching radar into our first opportunity areas. I believe radar represents an opportunity to build a leading franchise for neo and the <unk> market and.
No time to lose cancer patients and physicians, who care for them continued to desperately need faster better diagnostic results and insights.
I am confident that neo and meeting these needs will become the leading global cancer testing and information company.
Charlie back to you.
And at this point, we would like to open up the call for questions.
Incidentally, if you're listening this conference call via webcast, only and would like to submit a question. Please feel free to email on that Charlie Dot Hudson at Neogenomics Dot com during the Q&A session and we will address your questions at the end if the subject matter hasnt already been addressed by our call on list.
As mentioned that began on this call we would like to ask each person to limit the number of questions to two so that we may hear from everyone and still keep within the one hour allotted for this call.
Operator, you May now open up the call for questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pickup your handset of listening on speaker phone to provide optimum sound quality. Please hold while we poll for questions.
Your first question for today is coming from Puneet Zelda. Please announce your affiliation and pose your question.
Yes, hi, thanks for the news here from SVP Leerink.
So mark first of all congrats and great to have you on board and Doug will Miss working with you for sure.
Maybe my.
First question is actually on and Mardi clearly and important acquisition for the company.
Wanted to get your view in terms of the <unk>.
Where the market is this is.
Definitely.
Early entrants for Neogenomics into a market traditionally have taken a more measured approach and which youre and training or when the market is getting closer to the community setting maybe just talk to us about what are you seeing and the community setting where you're serving.
Number of oncologists.
And the expectation for sort of penetration there.
With the radar and with these other assays, including envision lung and if you could also provide a view into what would you do with the Neo lab assay is that going to be part of the overall liquid franchise.
And then lastly on and Marty if you can also provide in terms of what other types of clinical trials, both and Adjuvants and new Adjuvants.
But you are working on.
And what sort of data we should expect here any indications that you can provide there would be helpful.
Okay Puneet. Thank you very much further question.
We will try to answer those and ask a few of our teammates to weigh in.
First of all we do have two liquid biopsies. We currently have in the marketplace. One is the universe of envision first lung assay and the other is the Neo lab assay and both are gaining traction in the marketplace as we enter the community setting.
But in terms of the MLR D market penetration.
Mark why don't we turn that over to you.
Great question I think there's a couple of reasons that it makes sense for us to move to move now.
First of all we.
And the community setting of course, I think we have to be realistic. This is.
It will be a gradual uptick, but we're already seeing and increasing adoption of liquid biopsy and we're leading the way and we are building the capabilities to be able to do that and so we think as we bring <unk> on board and 'twenty, two and beyond will be a really great position to be part of that acceleration and get and early I.
I think a second important point and it's been the growth of our pharma services business. This is a tremendous asset for pharmaceutical companies and that is going to be something that also will accelerate the advanced advancement of the MRV category and as you've just heard we are already working with the top 25 pharmaceutical companies and I think combining and novartis capabilities with our capabilities will allow us to.
Great that market really really quickly and I think.
The last thing I want to highlight is to Halo and what that can mean for us and we put that together with our leading position and our clinical and with.
Radar.
One other things that I think is going to be critical getting community oncologists is support for making decisions on using the increasing number of tools and the whole point and what's so exciting about <unk> is it's that.
Two is exactly designed just to do that is to help oncologist make the right choices as they are dealing with now and increasing array of solutions. So I think we've got sort of all the pieces coming together to make this a success and where we're already strong and oncology now still we have to be realistic there'll be a gradual growth and this but we want to get on the ground.
For and I think we're ready to do it for those key reason.
And I think there was a question Doug about the market potential is that maybe something for five to talk about yes, Clive if you would.
Please address the question that Benita asked about clinical trials, and how you see and Mardi in the pharma space.
Thank you and thanks for the question for Nate.
And as you mentioned through the SA underwent its cap CLIA validation and concluded that in December of last year. So now we can obtain and moving from the analytical side into the clinical trials, we presented some early data from that and.
That can breast cancer at the AAC on virtual meeting recently.
One of those homes and archival cohort and moment and ongoing prospective study.
And we will have data and update to our lung cancer cohort. The lucid study and we initially presented preliminary data on last year, we will be updating that and with more complete data of the ESCO virtual meeting in early June.
And having.
The validation work as I say, we're now getting into increasing numbers of prospective studies as well as for the retrospective studies to use and.
Historical data and that's where they exist and they are across a number of different settings, and we have a number of academic collaborations and also the biopharma partnerships as well and they span multiple different tumor types and.
And so I think you can expect to see sort of unit and the future additional biopharma and relationships being being announced as well as data coming out from <unk>.
Sweet of.
The initial data will be from retrospective data sets of costs, but then increasingly ask for prospective studies set up and then and run through and report data to see those coming through.
And so we expect to see there is multiple different tumor types from across different collaborative type of arrangements.
Got it that's very helpful.
And and if I could just.
Briefly touch on.
<unk>.
As you look at it.
Little bit early still but as you look at the organization.
Where some of the most interesting opportunity and obviously you highlighted some and GFS on MLD would the acquisition here.
Where do you see opportunity and coming from some other pharma background, how do you see.
And what from your vantage point, how do you see this market shaping up and also if I could ask on.
There was an update on on Dr. <unk> devices departure. This morning, and just wanted to get a sense on what's the plan there in terms of.
Pursuing.
Pursuing for the next step CSO and.
Getting someone into the same thank you.
So.
But I will say for me the biggest opportunity with one and I highlighted initially which is I think we've got a great set of NTS and liquid biopsy assets.
And.
Have had success and already growing fast and 30%, but I think we can do more and the key is actually applying some of the lessons from pharma and from actually the <unk>, where we're going to be starting to have average.
And new services to support the uptake of these products, whether it's as simple as something like a mobile for broadly for the liquid biopsy of reimbursement support. These are a number of capabilities that are new to <unk>.
And we I.
I think we can accelerate those I think you've got to have increased focus and marketing you've got to have and increased focus on data generation. And example, again is already moving in that direction. We've got are going to be adding a small sales force basically focus on precision medicine to specifically focus on and.
Next generation sequencing products and liquid biopsy and and so those types of tactics that pharma has mastered that I'm going to be working with the team they've already started working on this but I think we can accelerate that further and this will apply in other parts of the business and.
Happy to look forward to talking more about that.
Other opportunities I mentioned earlier, maybe Doug talked about the Dr. West Yes, thanks for need for the question about Dr. Wei.
Grateful to have had Dr. <unk>, our chief Medical officer, and and as part of our company.
And part of Neogenomics through the Clarient acquisition, a number of years ago and has served as our chief Medical Officer and.
And Dr. Wei for those of you who didn't see we announced this morning has resigned to pursue other interests.
I would like to make a point here, we have and our company about 120, Mds and Phds all focused in oncology. So we have a very deep bench strength we have.
Capable.
Medical directors and leaders and our company.
Now with the addition of in Nevada, we bring we're bringing in a whole new type of technology and R&D leadership. In addition to leadership and R&D and and medical that we had here already.
So we're very excited about the team that we have we're very excited about the new people that are joining neogenomics from the end of other acquisition and we were very excited about our team going forward.
Okay, great. Thank you.
Your next question is coming from David Westenburg. Please announce your affiliation and pose your question.
Hi, This is David <unk> from Guggenheim Securities.
My two upfront for.
Slide 10 is great, but can you maybe walk us through this a little bit more in terms of are you youre going right to the App do you want to get this FDA approved.
And just to confirm that would you pursue a clear strategy.
And when you say expect it to be a significant component of revenue.
Can you give us a flavor in terms of or maybe even a little bit on.
Guide rails on on what exactly.
Significant revenue knee and so if you can help us just maybe still on the blank again, it's great slide on slide 10, but just those timeframes are helpful. And then also in terms of I didn't hear close date, and maybe I'm crazy.
<unk> searched close and in terms of is this is closed now or if its expected to close and the future.
Question is on in Nevada, and potential presentations to <unk> and <unk> can you give us any data or any kind of flavor on on presentations you might have and then in terms on the pharma business would you incorporate.
What would you incorporate and.
And novartis products into that pharmacy business and I am stop and there. There's obviously a lot of questions analysts on the call that need to ask questions. So on.
And David will thank you for those questions.
I'll take the easy one.
Those data for in Nevada should be around mid June we've got to go through the typical regulatory.
Approvals and.
In terms of FDA milestones and Timeframes.
I'll turn that over to Clive and ask him to address that question.
Thanks, Doug no happy to.
Good question, David and.
Throughout two distinct versus a parallel track type of activities. So they are for.
And if cap CLIA validated now generating data on it and Thats for <unk>.
<unk> says, we commend them.
Think of that for a moldy <unk> submission and then start commercializing that.
And it can be as a lab developed test and <unk> for the U S market and kind of.
Slide <unk> and anticipate that reimbursement next year and moving through the and.
The commercialization phases.
For the assay has been built to fold design history and.
On control et cetera to enable on FDA path and as we mentioned, we do have and FDA breakthrough device designation already so that's something we will look at and parallel and then bringing that through.
Sales for that and probably long that through and depends on clinical trials and calls for leading up to and that's <unk>.
Through the FDA and so antibody assets.
Given you are familiar with any of the path taken by companies like Foundation medicine, and the golf and 10 other defendants a similar approach to the overall two paths.
Thank you Clive and then David for your question about revenue.
Kathryn will address that.
David.
Revenue is still very early for and Nevada. There are some pharma opportunity that exists today, albeit it's still very minimal compared to Neogenomics total revenue and the clinical very much on the early stages for 2020, one, we're expecting less and 5 million and revenue, primarily driven by and vis vis <unk> first loans.
Going through the timeline on that Clive just mentioned, we're looking at the overall market opportunity as well as the timeline that it will likely take for that.
Really clinical oncology adoption and that's why we're saying it's going to come later on 2023, 2024, I would expect double digits and 2023, if not higher and then really we're looking at how that can grow over time.
Definitely as we get into 2020 for I think that there's significant opportunity for that to grow and on an accelerated pace as and.
<unk> really get through more for development and acceptance into the core oncology market and community setting.
Great and David I think Clive mentioned that there are ongoing retrospective and prospective trials for radar across multiple tumor types and you should expect to see more presentations and publications as we go forward through the.
The development of the radar product Ah Clive I Wonder if you could also comment on David's question relative to pharma collaborations.
Yes.
So a number of collaborations ongoing and as I say.
Spanned a number of different areas. So of course, there are opportunities with ambition for us to say and more of a patient selection and type of opportunity and then for radar.
We really see two different areas side, and certainly patient selection for adjuvant and clinical trials.
I think thats, a huge opportunity, but those familiar with the space no very large very long very expensive trials and because many of the patients for Nash trials on acuity.
And then he treatment effects on downlink to die by those patients who don't benefit and the cost of applying a test like radar enables you to select patients have known disease trials can be smaller and more rapid and you get the full benefit of your treatment effect.
So thats.
And really good opportunity and then similarly for early detection of response or using this as a if you like a surrogate marker of response to therapeutic. So you can get an early read on efficacy. So we're seeing traction for both of those types of studies and of course longer term.
And as potential for <unk>.
DNA Cte DNA detection and recurrence for example, and become a surrogate endpoint and so on right, but that's clearly on a longer term and.
Aspect. So we're pursuing all of these with quite a range of different pharma partners across a.
And a range of different tune and time.
Okay. Thank you Claire.
Your next question is coming from Alex Nowak, Please announce your affiliation and pose your question.
Great Good morning, everyone and as Alex from Craig Hallum.
And cancer screening rates are improving throughout the quarter. So going from March into April and now may whereas cancer testing volume going real time as states reopen and.
What are you building into the guidance as far as the recovery goes.
Yeah. Thanks for the question Alex So what we saw throughout Q1 was clearly depressed volumes and January and February and not only from COVID-19, but also from weather impact in February we saw a significant increase in March and April.
And we wanted to see the continued increase past March which was very encouraging and again and to manner. We're only a couple of days in but that trend is continuing now building and to the guidance is continued rebound and as clinical volumes as well as <unk>.
<unk> revenue recognition on the farm our backlog and continued growth. There. So we do expect that it's going to strengthen throughout the year, albeit I don't expect the acceleration to be as strong as it was from February to March, but we're seeing really good indicators as the economy is opening and COVID-19 rates are going down that way.
Returning to a more normalized growth rate.
That's great and then maybe expand on the decision support tool I know you want to speak on it later this year, but can you just help frame the picture out what are you seeing that total how's it going to be used in practice for bank policies and is it fair to say that that tool is going to help increase the stickiness of Neil's business and then ultimately the number of tests.
Ordered per requisition.
Yes, Alex we have integrated and are integrating now the Trapelo health acquisition as part of our Informatics Division and Bill Bonello is here and he'll address your question Hey, Thanks, a lot for the question. Alex We are very excited about the trapelo opportunity so what.
Trapelo has built is a precision oncology knowledge system and a clinical decision support system that helps.
Support oncologists as they make decisions about what are the appropriate.
Molecular tests that they should be ordering for solid tumor cancers, and then on the.
Flip side is they are trying to determine which therapies are most appropriate to utilize and the information that trapelo provides.
And is all based on exhaustive.
Combing of up to date clinical studies as well as incorporating a variety of differed oncology guidelines and so based on that information, which trapelo is curated data and make.
Series of recommendations.
To the to the oncologists.
Or at least guide them towards.
As evidenced supported.
We will be incorporating that tool into what we do at Neogenomics and we will.
Make it available to our practicing physicians when they.
Tap into our online orders, but we will also keep the tool available as a free standing lab agnostic tool, so that oncologists and pathologists can use this even when they're not ordering for neogenomics. The other very important component of the trip.
Hello solution is working with payers, we have the capability to provide something that we're referring to today as fast path.
Which basically helps the oncologist.
And the laboratory facilitate the prior authorization process and so when they go into the clinical decision support tool they can see which particular test set which particular laboratories.
Are most likely to be approved by the payer and no debt all of the supporting information.
And to get prior authorization will be provided automatically through the trapelo system. So we think this actually has an opportunity to sort of revolutionize the way that prior authorization and.
And utilization management works for those tests testing and therapy and the market.
And yes in the GAAP.
And literally think it will drive stickiness.
For Neogenomics as well.
That's great it seems like a great deal I appreciate it thanks, everyone.
Thank you. Thank you Alex Thanks.
Your next.
Question is coming from Brian Weinstein, Please announce your affiliation and pose your question.
Hey, good morning, guys, Brian Weinstein from Blair, Thanks for taking the questions.
I guess, just a high level one here to start with and then.
It is really around the use of comprehensive genomic profiling for therapy selection is still not in place why do we there's a lot of people going after that obviously and no. Other companies are doing well, but when we look at patients. They are still not for the most part getting comprehensive genomic profiling and with <unk>, we're talking to either less so so I'm curious about what efforts.
You guys are planning to take to help advance broader awareness and use of these technologies, which now you have a much bigger vested interest in.
Well, Brian and thank you for the question for.
First of all we are with our <unk>.
Pretty large sales team we're constantly.
Helping to educate the community both pathologists and oncologists about the benefits of comprehensive genomic profiling and Thats something that we do we offer solutions to to our physician clients as they think about new ways.
To treat patients with this emerging.
Our revolution that we're in and in terms of precision oncology.
I would say debt.
The explanation that Bill just gave about Trapelo is also important because trapelo is a tool that will help physicians.
Understand what is the best test to order and the most medically appropriate test order.
So that's a very important component of this whole move to genomics.
Profiling on a more comprehensive basis, and we think that that will also help us as we begin to commercialize the <unk> product and the future can I just add one point on to that I think those are two key let's say barriers to uptake or accelerators, depending on how you look at it right. So there is the education and supporting <unk>.
<unk> and making and then there's also the addressing sort of the reimbursable and access and I think.
<unk> already has capabilities to support both of those to Paolo will add to that the other third pieces. We do have to continue to build the data and <unk>.
Support behind use of things like.
Comprehensive genomic profiling and of course, MRV, and that's where I think obviously the work and Nevada is going to do and by having and potentially the best in class assets.
We're going to be aggressively and they already are.
For the positioning and clinical work to expand the data to support that and I think importantly, it's the partnership with farmers.
Sweet spot is going to be and working with them together to generate the data that is going to support and give physicians more and more confidence to use this diagnostic but because they are going to see that this is what you do to get to patients earlier with the right right therapy and I think.
Having the best in class assay with.
Neo is really growing incredibly strong position with pharma is going to allow us to play a big role and shaping that next wave of data generation and partnership with the pharma industry.
Great. Thank you for those answers and then just a quick one for Katherine did you say what the net impact was from in Nevada intra polo on EBITDA. This year. If you did I missed it and I would appreciate if you could just yesterday and there is no offense.
We're estimating it to be about $30 million for both of them together.
Together, okay, great. Thank you guys.
Your next question is coming from Mark Massaro, Please announce your affiliation and pose your question.
Hi, Thanks. This is Marc from BTG I guess.
Lots of news this morning, Mark Congrats on joining Neogenomics I guess, you spent over 20 years and various leadership positions and wearing a lot of hats with astrazeneca.
And as you know of course, Acs and one of the leading adopters of MRV testing and clinical trials work. So I guess can you speak to any experience you might have had in MLD at AZ.
And do you think you can leverage this experience to potentially work with Astrazeneca.
Recognizing that some other large companies like Natera and Archer are already working with AZ.
I'll stop there.
So thanks for that question.
And my involvement with AZ and oncology would have been the very early days of <unk>.
And didn't have a chance to work a lot on that during my time, there, but what I did have a chance to do particularly leading and the international organization and also work and global marketing is really think hard about how you bring new diagnostics to the market and enable a launch of new therapeutics.
And to actually change our practice of care do you think about it and so I was responsible for everything sort of outside of Japan, and North America and the EU. When we were starting the early stages of launching for Bristow and then part of it and we had to basically build out diagnostic net worth country by country to enable really the adoption of those new therapeutics and I think the if you.
Look at the track record of AZ and those markets.
It really due to the great teams that we had on the ground and their commitment to supporting diagnostics, we really made a lot of progress and I think theres going to be a similar real need is that partnership with pharma and really excellent local on the ground diagnostic labs, which in the U S as neo to bring that technology forward. So.
And as many things that go into it and we've talked some of the other factors, but that to me is one of the keys that made us so excited about neo and putting it together with <unk> technology for US. The key really is is that sort of interface with a great lab with physicians and supported.
And the right sort of resources behind it.
Great and my last question, obviously, congrats on the Nevada acquisition team.
It seems like a reasonable.
Certainly reasonable valuation.
Maybe for Doug Brown or others can you speak to other <unk>.
Strategic intents.
And when you look at the M&A landscape at large obviously you guys have been acquisitive can.
Can you just talk about the funnel and maybe comment about.
Valuation dynamics and the industry today.
Thanks, Mark it's Doug Brown here and.
And we're excited about and Nevada, but we're not done.
But we're going to integrate this for a little bit here, but things on our mind continue to be pharma and informatics.
And I do think the valuations are challenging and so we really got lucky with striking this deal in may of last year and.
So we continue to balance sort of our prudence and value and how we think about the M&A market with the valuations that are out there. So we're very pleased with what we announced today, but where we're going to continue to look at opportunities M&A.
Great. Thank you.
Your next question is coming from Jay Haas Zavon. Please announce your affiliation and pose your question.
Hey, guys. Good morning. This is day just for Morgan Stanley.
I have a.
Few questions on and Nevada for for clients perhaps.
Can you just walk us through your sort of big picture philosophy on two more informed versus tumor agnostic approaches to and Marty.
Do you see youre pursuing a tumor informed approach that comes with sort of.
<unk> limit of detection advantages, although that's sort of up for debate as well.
But then on the other hand, you do have the longer turnaround time versus a tumor.
Agnostic approach. So just wanted to get your sort of philosophy on that and then secondly, as it relates to commercialization and <unk> got a couple of competitors here.
Maybe even more coming to market and the next six months or so how do you think about accelerating those timelines I know the PR mentioned, the specialized and Jeff sales force. So perhaps you can if you can share some color on on the sizing and the hiring cadence that would that would be helpful.
Great.
Would you. Please take the first part of <unk> question around tumor and foreign versus tumor agnostic.
Certainly Doug and thanks for the question.
And shortly when you think about what people are doing with tumor informed or when people credit to standard assays with multi omics alright, thanks, you're really trying to overcome the really big dilution of DNA and the blood levels of circulating tumor DNA and very low.
As we've looked at this we believe that combining.
The technology and also the approaches we have with radar gets us to exceptional levels of sensitivity and I think levels.
And published or presented by by any of those to my awareness.
And you on it right theoretically there is more.
Next day for the upfront tasked with having to do the whole exome sequencing and building. The assay. We think that it is achievable within the window that normally occurs between surgery and then when patients are reviewed for.
Potential adjuvant therapies on trials and the adjuvant setting on.
And it and the region of Union for retail so when we think.
And that is achievable for us and it's important to remember that once you've formed the test it is actually that and a rapid turnaround time, because you only spent.
And the same as any standard liquid biopsy. So our view is that for one week turnaround test on state of the assets created so for recurrence monitoring and it's very compelling on the turnaround time.
I think ultimately it will be.
And informed by the data. So we're now building those clinical datasets, we showed on one of the slides.
The data, albeit from cross trial comparisons with two competitors to drive that and.
And but as we look and this we believe that tumor informed strategy and approach for heavily right out of the technology is and we think is very compelling and.
And we'll see how that develops over time.
Great. Thanks, Clive and Mark would you like to comment on the commercialization and.
Where we stand there.
Hi.
What I can say first of all we're not going to.
Leave any stone unturned in terms of making sure we maximize this opportunity. So we will make sure that we're able to be competitive from a commercial standpoint, and medical affair standpoint and generating.
And the data and the publications to support it and.
And we're not ready to say what that number of sales reps and I think actually we can get over focus on sort of the actual number of sales reps because I think.
EMEA was going to be able to bring which.
Sort of three prongs to the rapid launch of the so first of all we do have our base moving more than 100 and sort of commercially focused roles and people salespeople, but also the customer service type support that has allowed <unk> to be the leading company and community oncology marketplace and.
Debt platforms in place basically every customer that would be other customer potentially for MRV has already ordering products regularly.
Even on a weekly basis from Neil and we've got a fantastic commercial team driving that.
I think we will have specialty resources and fairly.
Bringing that board initially to support the envision assets and we.
We will do the work over the next few months and figure out what the right size of that is when we bring in and the MLR.
But then I also think.
With the and.
Nevada, and announcing the partnership and <unk>.
Cancer is a third key aspect that we're going to be able to again and go faster and again this isn't a little bit of a different category of only just sort of looking what are.
The sales representatives, we might have and that is leveraging people that already have a great position and in particular tumor type.
It can take I think one other thing that flows uptake is having to sort of get new people into offices and building.
Building relations building confidence and supporting the product and.
And I think they always had a track record and really doing a great job and partnerships and so I think we'll be looking to leverage that to as.
As a model for going forward. So we will have a three pronged approach, we're going to make sure. We don't share change it and I'm confident we can we can be successful.
Got it Super helpful and then.
And a quick.
Hello up Mark while I have you.
And the vast I mean, Doug has mentioned sort of Ngls informatics and pharma essentially now being about a third of Neogenomics revenue just philosophically, how do you see that mix evolving and over what timeframe like what's a good target number for say 2025 for that mix in your mind.
And one quick clean up question for Kathryn as well Catherine can you help us quantify the other related headwind that you saw on February just trying to get a better sense of underlying revenue trends and exit momentum you're on.
Heading into the back half of the year.
So yes.
Usually feel pretty confident and my forecasting ability for him.
13 days in I'm, not ready to give a split of the business on 2025, what I do feel confident as.
The growth rates, we have for all three businesses I think we can do better and.
So for sure it's going to be a bigger share on.
And both pharma and informatics.
Bigger share, but the other thing I am going to be really focusing on those what is the share of next gen sequencing and liquid biopsy of our clinical business and that and as a lever.
Really want to focus on driving further so you put those three pieces, together, which IC and sort of the real new business I think it could be a very substantial portion and by 2025.
Give me a little bit more time to work with the teams for frame that up but.
Yes, no question, it's going to be bigger the three pieces of the new business and.
And I think we can actually accelerate growth and all of those components. So sorry, if I didn't give you a specific for your life.
No problem and understandable.
And then from the weather impact.
We actually had one other big or supply chain disruptions I think we've ever had and.
And it was really.
Unfortunate that we've already had COVID-19 volatility to the and then add the weather on top of it and we actually had several thousand samples that were held up for broke up at a time and February and had a couple of million dollar impact in February we did see a lot of that volume come back in March.
But that did impact our overall operations and how we've worked through it and our overall margins both for January and February as well as marches on and we're working through that backlog is very challenging but excluding that we still saw the organic increase in March and in April. So we feel good that the volume we saw on March with not only the.
February samples coming in but with also with returns on that more organic growth.
Super helpful. Thanks, Catherine.
Great Day Hudson.
I think we are going to have to wrap up. This this Q&A period now we've gone a little longer than we typically do.
So.
As we end the call.
I would like to recognize approximately 1740 neogenomics team members around the world for their dedication and commitment to building a world class oncology diagnostics and information company and.
And on behalf of the whole team. That's here with me today 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 neogenomics. We thank you for your interest and our company.
Thank you.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.