Q3 2025 NeoGenomics Inc Earnings Call
Speaker #3: Good morning , everyone , and welcome to the Neogenomics . Third quarter 2025 financial results . Call . At this time , all participants are in a listen only mode .
Speaker #3: And the floor will be open for questions following the presentation . If anyone should require operator assistance during this conference , please press Star Zero on your telephone keypad .
Speaker #3: Please note this conference is being recorded . I will now turn the conference over to your host , Priya Rahman , Senior Vice President of Finance at Neogenomics Inc .
Speaker #3: The floor is yours .
Speaker #4: Thank you . Jenny , and good morning , everyone . Welcome to the Neogenomics Inc . Third quarter 2025 Financial results . Call .
Speaker #4: With me today to discuss the results are Anthony Zook Chief Executive Officer and Jeff Sherman , Chief Financial Officer . Additional members of the management team will be available for the Q&A portion of our call .
Speaker #4: This call is being simultaneously webcast for reference . Concurrent with today's call , we posted a short slide presentation in the investor tab on our website at IR .
Speaker #4: Com . During this call , we will make forward looking statements regarding our future financial and business performance . Business strategy the timing and outcome of reimbursement decisions and financial guidance .
Speaker #4: We caution you that the actual events or results could differ materially from those expressed or implied by the forward looking statements . These forward looking statements made during the call speak only as of the original date of this call , and we undertake no obligation to update or revise any of these statements .
Speaker #4: Please refer to the information disclosed on the Safe Harbor Statement slide in the deck posted on our website , as well as the information under the heading Risk Factors .
Speaker #4: In our most recent forms 10-K , 10-q and 8-K that we filed with the SEC . To identify important risks and other factors that may cause our actual results to differ materially from the forward looking statements , these documents can be found in the investor section of our website or on the SEC website .
Speaker #4: During this call , we will also refer to certain non-GAAP financial measures that involve adjustments to GAAP results . The non-GAAP financial measures presented should not be considered an alternative to the financial measures required by GAAP should not be considered measures of liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies .
Speaker #4: Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measures in a table available in the press release .
Speaker #4: We issued this morning and in the slide deck available in the investor section of our website . I will now turn the call over to Tony .
Speaker #5: Thanks , Brie . Well , good morning everyone . Thank you for joining us today . I'll begin with a discussion of Q3 highlights and key business growth drivers .
Speaker #5: Before turning the call over to Jeff for a deep dive into the financials . We'll then open the call for your questions . During the third quarter of 2025 , we again delivered record clinical volumes and revenues while making meaningful progress advancing our NGS and MRD long term growth initiatives , including securing a favorable court ruling in our ongoing litigation with Natera that paves the way for a full clinical launch of our radar Street MRD assay .
Speaker #5: I'll cover these initiatives in more shortly . Taking a step back for those who may be new to the story , having spent much of my first two quarters as CEO engaged in conversations with key stakeholders , I'm as optimistic as ever about the significant opportunities that are in front of us as a leader in cancer testing .
Speaker #5: Importantly , we continue to differentiate ourselves in the community setting with both hospitals and oncologists . We're approximately 80% of all cancer care is delivered .
Speaker #5: We've built a geographically balanced lab network that allows us to be responsive to customer needs , including offering some of the fastest test turnaround times in the industry when faster , more accurate treatment decisions can have a material impact on patient outcomes .
Speaker #5: Our recent acquisition of Pathline , a New York state approved lab based in new Jersey , gives us a meaningful presence in the northeast , which is the number three cancer care market in the US .
Speaker #5: We believe the addition of Pathline allows us to offer significantly faster turnaround times , a larger and relevant New York State approved test menu , and an enhanced physician experience in the northeast region , where we have historically been under-penetrated .
Speaker #5: The integration continues to proceed according to the plan that we communicated when we announced the transaction in March , including the validation of critical turnaround , time sensitive assays , which was completed during the third quarter .
Speaker #5: We remain detail acquisition will have in accelerating our growth in the northeast , and we're on track to capture operational efficiencies and synergies that we anticipate will be accretive to profitability beginning in 2026 .
Speaker #5: Together with our world class commercial team , we have deep relationships with hospitals , cancer centers and oncologists across the country . We're winning the customer experience by enabling precision oncology in the community setting .
Speaker #5: Where adoption of next generation testing has historically lagged behind NCI designated cancer centers . Our customers increasingly view us as the partner of choice for all of their testing needs , as their patients advance along their cancer care journey .
Speaker #5: We offer one of the broadest menus in the industry , with more than 500 tests focused solely on oncology . Our menu spans everything from diagnostics to next generation sequencing .
Speaker #5: For therapy selection to MRD for cancer recurrence and monitoring . This makes Neo an ideal partner for institutions and practices who are looking to consolidate , send down testing to simplify operational workflows and improve patient experience .
Speaker #5: The therapy selection and MRD markets represent more than $40 billion of addressable market opportunity , both of which are growing rapidly and are relatively under-penetrated .
Speaker #5: Needless to say , the ongoing investments that we make in R&D , as well as the potential BD partnerships are focused on these areas .
Speaker #5: This is particularly true of MRD, where we think we can create significant value while introducing innovation to the cancer testing market where it's needed most in the community setting.
Speaker #5: We also remain committed to our next gen MRD research program focused on generating IP that is entirely separate and distinct from our radar portfolio .
Speaker #5: Given our broad menu and strong brand recognition in the community setting , coupled with a competitive MRD test , we believe we will capture market share over time as we add additional indications to this modality .
Speaker #5: While Jeff will provide a detailed review of our financials in a moment , I'd like to hit a few highlights from our third quarter .
Speaker #5: Our clinical business continued to perform well , driven by volume and share gains in key segments . As expected . Non-clinical revenue declined in the quarter due to lower revenue from pharma and biotech customers .
Speaker #5: Total revenue for Q3 was $188 million , representing double digit growth of 12% year over year . Our clinical business continued its robust growth , generating revenue growth of 15% , excluding the Pathline acquisition .
Speaker #5: The clinical performance was driven by effective execution of our commercial strategy , protect , expand and acquire . In the third quarter , we again saw sequential improvement in AUP , a record quarter for test volumes and NGS revenue growth of 24% , well ahead of the low to mid teens NGS market growth rate .
Speaker #5: The five NGS products launched in 2023 contributed 24% of clinical revenue in the quarter . We continued to see demand for our non NGS modalities as well , with all modalities growing above market , which represented which resulted in record volumes up 10.4% versus prior year on a same store basis .
Speaker #5: The non-clinical portion of our business accounted for less than 9% of our total revenue in the third quarter and was down from the prior year, consistent with our expectations.
Speaker #5: Turning now to our radar Street test in August , the District Court for the Middle District of North Carolina granted our motion for summary judgment that all of Natera's asserted patent claims are invalid for claiming ineligible subject matter .
Speaker #5: The court dismissed the claims against Neogenomics with prejudice and entered a declaratory judgment of invalidity of both . Of Natera's asserted patents . The ruling paves the way for us to broadly commercialize Radar Street , formerly radar 1.1 .
Speaker #5: We launched Radar Street for biopharma customers in Q3 , and while some of these efforts could result in bookings in Q4 of 25 of 25 , the lead times necessary to obtain samples make it more likely that we'll begin recognizing revenue from biopharma customers in 2026 .
Speaker #5: We have received approval for Radar Street in subsets of head and neck and breast cancer. We're preparing for a robust launch of this important assay in the clinical oncology setting in Q1 of 2026.
Speaker #5: We estimate that MRD cancer surveillance and monitoring represents a $30 billion addressable market , growing at a 30% kegger . And with the market penetration of less than 10% , we believe we are well positioned as the cancer testing partner of choice in the community setting to capitalize on this lucrative market and deliver a differentiated and integrated MRD solution to our oncology customers .
Speaker #5: In parallel with our radar Street launch preparedness activities , we continue to focus our R&D investments in next generation MRD , demonstrating our long term commitment to the MRD space as well as complementary targeted partnerships that allow us to fill in MRD product gaps that we don't currently address .
Speaker #5: In an effort to deliver a unique , industry leading MRD portfolio to the market . Now , turning to Pan Tracer , our liquid biopsy genomic profiling test that delivers comprehensive , clinically actionable insights from a simple blood draw .
Speaker #5: Pan tracer is a non-invasive , blood based test that analyzes circulating tumor DNA to identify key genomic alterations that inform treatment decisions in patients with advanced stage solid tumors .
Speaker #5: Pan tracer . Together with our pan tracer tissue test form , a comprehensive portfolio capable of delivering a holistic genomic picture of the patient in support of therapy selection with an average turnaround time of just seven days .
Speaker #5: Pan tracer empowers real time decision making . Recall that last quarter we elected to delay the commercial launch of Pan Tracer Lab so that we could incorporate learnings from our evaluation assessment program to improve the product profile in preparation for a full clinical launch .
Speaker #5: We allowed select physicians to use the assay on a limited basis ahead of commercial availability . The EAP , which was very well subscribed and helped us further enhance the assay clinically and optimize the launch by testing and identifying the opportunities to streamline logistics reporting and customer support .
Speaker #5: With the benefit of the valuable lessons we garnered from our EAP, we launched the product in late July, three months later than expected.
Speaker #5: Based on the interest we're seeing , I believe the delay allowed us to introduce a better product , which will further support the strong NGS volumes we are capturing this year , and position us well for continued growth in 2026 .
Speaker #5: We continue to work with mold on our pan tracer submission and will provide additional updates as they become available . As it pertains to our full year 2025 guidance , based on the strength in our clinical business and expected performance in our non-clinical business , that I just reviewed , we are reiterating the revised guidance for consolidated revenue , adjusted EBITDA and net loss that we provided last quarter .
Speaker #5: I'm incredibly optimistic about our future , particularly as we continue to innovate in the large and rapidly growing NGS and MRD markets and further leverage our leading presence in the community setting , where as much as 80% of cancer care is delivered to patients .
Speaker #5: And with that , I'll hand it over to Geoff to further discuss our results from the quarter . Thanks .
Speaker #6: Tony , and good morning . Third quarter . Total revenue grew sequentially by 4% from Q2 and increased by 12% over prior year to 188 million total clinical revenue continued with strong double digit growth and increased by 18% from prior year .
Speaker #6: This strong clinical growth was partially offset by non-clinical revenue declining by 27% versus the prior year , driven by weakness in the pharma revenue .
Speaker #6: Tony spoke about adjusted gross profit improved by 5.2 million , or 7% , over prior year . Adjusted EBITDA was 12.2 million , the ninth consecutive quarter of positive earnings .
Speaker #6: Clinical volumes and revenues continued with robust growth in the quarter. Total test volumes increased by 15% in the third quarter, with AUP growth of 3%.
Speaker #6: Same store revenue without contribution from Pathline was 167 million , representing growth of 15% , driven by a 10% increase in test volumes and a 4% increase in AUP .
Speaker #6: We are continuing to see strength across our portfolio , with above market growth rates across the modalities we offer . NGS revenues grew by 24% over prior year in the quarter , and accounted for 33% of total clinical revenue year to date .
Speaker #6: NGS revenues grew by 22% over the prior year. Average revenue per clinical test increased sequentially from Q2 by $15, or 3%, and was up by 3% from the prior year.
Speaker #6: Excluding Pathline , AUP increased by $17 , or 4% from Q2 , and was also up 4% over prior year . A larger percentage of higher value tests , including NGS , as well as recent managed care pricing , increases , are helping to drive higher AUP .
Speaker #6: Total operating expenses in the quarter were 107 million , an increase of 11 million , or 12% . We recorded an additional 7 million in impairment charges related to the planned sale of Trapelo , with the balance of the cost increase due to higher compensation costs driven by the expansion of the commercial sales team .
Speaker #6: Cash flow from operations was a positive 9 million in the quarter , and we ended the quarter with total cash of 164 million , up slightly from Q2 .
Speaker #6: Our balance sheet and expected cash flow will enable us to continue to invest in our business , to drive organic growth , increase operating efficiencies and fund future business development opportunities , including licensing and partnerships .
Speaker #6: We continue to see traction from the investments we have made to expand and enhance our commercial organization with our strong test volume growth , the Lims project remains on track and we expect to deliver operating efficiencies in 2026 and 2027 through the consolidation of multiple limb systems and reduction in redundant operating costs , as well as streamlining our lab operations .
Speaker #6: We remain committed to driving long term shareholder value through targeted investments in the business and improved operational execution . As Toni noted , we are reiterating our full year guidance that we updated in the second quarter .
Speaker #6: We expect full year consolidated revenue will be in the range of 720 to 726 million , representing growth of 9 to 10% over full year 2024 .
Speaker #6: We anticipate adjusted EBITDA to be in range of 41 to 44 million , representing growth of 3 to 10% , and we expect full year net loss to be in the range of 116 to 108 million , representing an increase of 37 to 47% as compared to our full year 2024 net loss of 79 million .
Speaker #6: We will release our 2026 guidance when we report our full 2025 full-year earnings in February 2026. With that, I'll turn the call back to Tony.
Speaker #5: Thanks , Jeff . To recap , during the third quarter , we again delivered strong clinical volumes and revenue while advancing NGS and MRD initiatives that we believe will contribute to accelerating growth in 2026 and beyond .
Speaker #5: We believe our unwavering focus on delivering a superior customer experience in the community , setting its resonating in the marketplace . And as we continue to expand our menu of tests , community oncologists and pathologists will continue to view us as a partner of choice for their cancer testing and send out consolidation needs .
Speaker #5: We remain committed to innovation and operational excellence , which we believe will drive sustainable and profitable growth for our company and improve outcomes for patients .
Speaker #5: Thank you for your continued interest in Neogenomics . Operator . This concludes our prepared remarks . So please open the line for questions .
Speaker #3: Thank you very much . At this time , we will be conducting a question and answer session . If you would like to ask a question , please press star one on your phone keypad .
Speaker #3: Now , a confirmation tone will indicate that your line is in the queue . You may press star two . If you would like to remove your question from the queue for any participants using speaker equipment , it might be necessary to pick up your handset before you press the keys .
Speaker #3: Please wait a moment while we poll for questions . Thank you very much . Your first question is coming from David Wessenberg of Piper Sandler .
Speaker #3: David , your line is live .
Speaker #7: Thank you very much, and congrats on a strong quarter, particularly with that clinical revenue growth. So, how do you feel?
Speaker #7: I'm going to start with , Jeff . How comfortable do you feel with the guidance . And can you remind us what's the latest on pan tracer liquid .
Speaker #7: Is there any chance you could see some revenue from it this year ? And just want to confirm that that was removed from the guidance .
Speaker #7: So if we get revenue from it this year it would be upside to your estimates .
Speaker #6: Yeah . Thanks , Dave . So you know , we gave thoughtful guidance for the year in Q2 . You know we believe we had a good third quarter and believe we're in a good position to meet Q4 expectations in terms of liquid .
Speaker #6: Tony was pretty clear last quarter that we did not need approval for liquid biopsy . From all the to hit our guide , and that that is still the case as we look at our performance now in the fourth quarter .
Speaker #7: Gotcha . And now I know you're not giving 26 , but you gave a lot of good commentary on MRD . And you hinted that you will be contributor to revenue in 26 .
Speaker #7: Can you give us a a sense for when you expect certain reimbursements ? I mean , I know there's some competitive stuff you want to be , you know , a little bit careful with , but , you know , just in the sense of the magnitude and timing of some of those , what you're going to get in MRD .
Speaker #7: And then can you give us a , a sense on how much commercial muscle you'll put behind these launches . And , you just as a reminder , I mean , I think with breast , you know , you have a lot of expansion indication .
Speaker #7: Do you think , you know , could you get expansion in that indication ? This year . So next year . So thank you very much .
Speaker #7: And again congrats . And I'll hop off after this . Thank you .
Speaker #5: Thanks David . It's Tony . I'll take a crack at a couple of these . And then I'll certainly I can look to Warren to add a little bit more color as well .
Speaker #5: First on 26 , as you appropriately say , we'll talk 26 in 2026 . But I will give you a sense of of what we see as some of the , the , the growth drivers that we anticipate for 2026 .
Speaker #5: And then I will pull that back to your conversation around liquid biopsy and Radar Street. So, at the highest level, you should expect the growth drivers for 2026 to be, in large part, quite similar to what we had in 2025.
Speaker #5: We expect our ongoing strong clinical performance relative to volumes to continue, and so that will certainly be a growth driver for us.
Speaker #5: We expect ongoing earnings growth rate , as Jeff commented in his remarks , we had 24% growth in revenue and NGS , and that was out the full ability of pan Tracer Lab included within that mix .
Speaker #5: And so we have every expectation that NGS will continue to be a growth driver for us , as you rightfully mentioned , Pan tracer LWB combined with the pan tracer family , we believe will be drivers moving forward .
Speaker #5: You know , we can't really speculate as to the timing of HLB reimbursement , but nonetheless , we see early , early signs of a positive uptake for the product .
Speaker #5: And we believe once reimbursement is secured , that will be a growth driver for us . We'll see revenue build through the course of the year with obviously more of that becoming evident in the second half .
Speaker #5: The sales force that you mentioned , we are beginning to see , you know , the full benefit of now the sales force expansion efforts that we have put in place .
Speaker #5: And we expect that to be a continued driver for us . And then on the Radar Street front , we've already launched Radar Street in the pharma sector .
Speaker #5: We're having good early conversations with that . As you might expect , the lead times on that book of business takes considerably longer .
Speaker #5: So we would expect kind of a slow revenue build in 2026 . And most of that revenue becoming evident in the back half of 2026 .
Speaker #5: And with multi X approval , with the current indications , we expect a full launch of Radar Street in the clinical setting in Q1 .
Speaker #5: That will also be a build for us through the course of the year. And of course, there's still a path line in our RCM initiatives.
Speaker #5: And so we still see a healthy list of of growth drivers for us in 26 . And relative to sales , I think Warren and Beth and their teams have done a phenomenal job in onboarding the existing representatives that we have .
Speaker #5: You know , I will tell you that we still believe that that is the right size for the indication mix that we have .
Speaker #5: But as we continue to invest and we will invest in new indications , flow , you should probably believe that we will be looking at options to upsize that sales force , as it is under index , especially in the oncology side of our sales force .
Speaker #5: But we don't anticipate that coming on too early . That will be , again , a build probably more in the latter half , indicative of the new indications that we will be submitting .
Speaker #5: And when they might come online , which would be more than likely second half . So that's kind of a high level of the drivers .
Speaker #5: And again , we'll get more detail on these things in 26 . When we talk around February time . Okay Dave .
Speaker #7: Yeah . Thank you . That was a ton of detail . So thanks .
Speaker #3: Yeah . Thank you very much . Our next question is coming from Andrew Backman of William Blair . Andrew , your line is live .
Speaker #8: Great . Hi , guys . Good morning . Thanks for taking the question . Maybe on the NGS side of things . So the growth rates here imply that you're obviously taking share or growing the market or some combination of both .
Speaker #8: Can you maybe just sort of talk to us about where you're seeing the most wins on the customer side of things ? What types of accounts where you're winning ?
Speaker #8: And then also on the product side , what products are you leading with , where you're able to sort of capture , share and begin to capture some share there ?
Speaker #8: Thanks .
Speaker #5: Yeah , thanks .
Speaker #9: Thanks , Andrew . Certainly , as you said , the growth rate of 24% implies a pretty meaningful share capture . You know , most of that business are in quarter three was coming out of the community setting and largely from the oncology practice .
Speaker #9: Certainly we still we still see opportunity within the community hospital setting . But as we onboard new practices , bring on new oncology , ordering physicians , and we see repeat order rates , we're seeing a compounding effect .
Speaker #9: So largely coming from that oncology setting in terms of focus areas . Certainly the pan tracer family has been a core focus for us .
Speaker #9: You know , we launched liquid as we've mentioned , but at the same time we're introduced the pan tracer family , which includes pan tracer tissue pan tracer tissue , plus HRT .
Speaker #9: And obviously pan tracer liquid , which is our solution for therapy selection on the solid tumor side . And we're seeing really strong growth within that category as we make that a priority .
Speaker #9: But we're certainly not losing sight of sort of what got us here , which is our heme NGS portfolio . And that continues to grow very effectively as well .
Speaker #9: But there's a subset of 5 to 7 products which are ultimately our key focus area from a therapy selection perspective . And all of them are seeing attractive growth .
Speaker #6: And then just from a tech expand , acquire perspective , you know , from an acquirer , new oncologists coming on board , we're seeing a good lift from recently brought on oncologists in 2025 .
Speaker #6: We tracked that closely . And we're seeing reorder rates and higher penetration amongst that . So we are seeing success in the acquirer aspect of our strategy as well .
Speaker #5: You guys see Andrew the last cap off point I think Warren was just hitting on it towards the end . You know NGS just strategic for us is extremely important that we continue that penetration into the therapy selection markets .
Speaker #5: You know , as Warren highlighted , the top five products now represent almost a quarter of our clinical revenue . And NGS in totality is almost a third of our total clinical revenue .
Speaker #5: And so it aids us in ORP and a whole lot of other areas . And so it's going to be a continued point of emphasis for us moving forward .
Speaker #5: So thanks for the call .
Speaker #8: Great . Thanks . And then if I could follow up just just as one other question here on the limbs rollout , and I also think that your , you're integrating with epic in some accounts .
Speaker #8: Obviously those are multi-year processes to roll out here . But anything you can maybe share with respect to benefits that we should start to see from these initiatives into 2026 , just in practical terms , what does this do for your business ?
Speaker #8: Thanks .
Speaker #5: Yeah . Why don't Warren and I will tag team on that one ? Andrew , I would say first from a organizational perspective , you're going to hear me speak quite a bit about ongoing need for simplification across the organization .
Speaker #5: I think that , you know , the model that we have today with multiple locations and unfortunately , multiple limb systems , it works against us in that regard .
Speaker #5: And so moving towards a common limbs program , it aids certainly within the organization , not just the lab team , where they'll be able to , you know , be able to see where , you know , particular test in in any given time along the continuum organizationally , as you say , we can retire .
Speaker #5: You know , eight limb systems that were in place prior to that . So there's certainly a cost benefit . And then across other parts of the organization as well , because in order to kind of offset the , you know , the the complication of multiple limb systems , we do a lot of things in other organizations that require a bit of a heavy lift that I think the limb system provide some efficiencies for as well .
Speaker #5: And so I think the early view is we should start to see some of these efficiencies coming through in the latter part of 26 .
Speaker #5: And the later the better benefit being more evident in 27 and 28 and beyond . But it is just one step of many relative to simplification that we think could help us from a contribution , perspective .
Speaker #5: And that'll want to give a little added color .
Speaker #9: Yeah . So let me start with the epic , Andrew . So first of all , I will start by saying we have over 340 interfaces in place already today .
Speaker #9: Some of them have an epic already, but we're establishing the Epic oral solution, and that will go live towards the end of this year.
Speaker #9: And we'll see fairly rapid customer onboarding in the early parts of 2026 and beyond. So excited about the acceleration nature that the Epic oral solution will bring to us.
Speaker #9: And we've seen very strong sort of revenue growth and ongoing adoption when we put interfaces in place in general , and we believe it'll be the same with epic aura .
Speaker #9: So certainly that's a key strategy for us moving forward . And enables growth and stickiness . Coming back to the limb side of things , as Tony said , I think a strategy to simplify , we have sort of five key priorities operationally , simplification and margin expansion , one of which is being limbs .
Speaker #9: I'll touch on two of the benefits that I anticipate are seeing value in in 2026 . The first one is our ability to be able to proactively equip physicians , ordering physicians and practices to understand sort of test status and more particularly , the ability to do add ons , etcetera , that they can do themselves versus having to come through customer service .
Speaker #9: So just ultimately creating a more seamless experience for the ordering physician or the practice , so to speak . That's one area . The second one is the lymph system .
Speaker #9: We're putting in place AI that has sort of integration into it, and it'll allow us to identify areas of, I'm going to call it leakage.
Speaker #9: You know , productivity leakage within our workflows . And we can identify this . And obviously look to streamline the workflow to to iron out those areas that sort of lack or have opportunity for , for productivity .
Speaker #9: So it really is going to deliver insights to our workflow that we don't have today . That allow for further productivity .
Speaker #8: Great. That's all good color. Thank you.
Speaker #3: Thank you very much. Our next question is coming from Mason Carrico of Stevens. Mason, your line is live.
Speaker #8: Hey guys .
Speaker #10: Thanks for taking the questions here on your NGS business . You've called out share gains . You guys often quote NGS revenue growth .
Speaker #10: I was curious if you'd be willing to give us a bit of insight into how NGS volume growth has trended , just to give us a better view on gains .
Speaker #10: So when we look at NGS revenue growth , 24% this quarter , I think 23% last quarter , how much has been driven by volume versus ASP ?
Speaker #10: Because I assume you guys are benefiting from ASP to some degree as expands for those assays .
Speaker #6: Yeah , we haven't disclosed that . The volume per se , but I would say it is more volume driven . There is some some growth , but it's more volume driven than AUP growth .
Speaker #6: And I think as we're , you know , continuing to see penetration there and getting , you know , the ability to , to be access our strong commercial channel , I think that's where we're seeing , you know , that volume uptick .
Speaker #6: I think bringing on the liquid , you know , we're actually seeing good uptake between the two of them as well . Liquid and solid .
Speaker #6: And so I think we're we're well positioned to continue to get those gains .
Speaker #10: Got it . Thanks . That's helpful . And when you think about revitalizing growth within your pharma business , could you just talk about how much of that is in your control versus how much relies on a snapback and spend across the broader sector ?
Speaker #10: I guess . What do you view as kind of the key internal initiatives that you'll need to execute on to ? Re-accelerate growth in that segment ?
Speaker #5: Yeah , Mason , I'll take a crack and then , you know , Warren again , could add additional detail . I would say that , you know , for us , a big part of the opportunity lies in the portfolio and bringing that portfolio forward , you know , and so we have now the opportunity to represent products like we have Radar Street now available to us within the pharma segment .
Speaker #5: And of course , you know , the liquid biopsy and pan tracer family , it affords us opportunities to have conversations and get a little bit more relevant in those conversations as well .
Speaker #5: As I said to you before , I think a lot of those conversations are are generating interest . But because of the lag times , I would still expect that some of the challenges that we see in our business in 25 will continue into 2026 .
Speaker #5: And we see a return to growth opportunity in 27 . And anything that would lead that to happen a bit faster would represent upside .
Speaker #5: As far as things in our control , there are things still in our control and that's a heavy focus on execution , excellence .
Speaker #5: And we have on boarded a leadership team that is taking the bull by the horns . And I think that part is very much in our control to drive the right conversations with the right customers .
Speaker #5: And that , I think , is something that we acknowledge that we had to improve upon . And I'm pleased to see that that action is taking root across the organization .
Speaker #5: And with that , I'll turn to Warren to add any other color .
Speaker #9: I think Tony hit most of the high points . I'd say that certainly we're we're preparing our execution so that we can offer an attractive value proposition to our target customers in the biopharma space .
Speaker #9: Certainly , the inclusion of radar has made us a significantly more attractive partner , which is enabling access for us to to focus on both radar but other sort of high value products .
Speaker #9: NGS , etc. . So we're certainly gearing our commercial organization around that focus , coupled with underpinning that with a sound customer experience , which is again , a key driver for pharma sponsors from a market perspective .
Speaker #9: Certainly we're we're going to continue to work to execute effectively as the market rebounds . We feel that that would be a compounding effect to the recovery of the business .
Speaker #6: But this is a long sales cycle . You know , product area . And so just to reiterate what Tony said last quarter , we expect , you know , pharma to be soft in Q4 as well as throughout 2026 as well .
Speaker #10: Got it . That makes sense . Thank you .
Speaker #3: Thanks very much . Our next question is coming from Don Brennan of TD Cowan . Don , your line is live .
Speaker #8: Hey , this is .
Speaker #11: This is Tom on for Dan . Thanks for taking the question . And congrats on the quarter . Just just a question . Now on on you know , what is driving the acceleration in your base clinical business .
Speaker #11: It looks like it's ticked up on a volume basis this year versus prior years . I so basically the non NGS business you know what is driving that is that is that better bundling .
Speaker #11: Is that better turnaround times . To your point this is a business that everyone thought would be kind of cannibalized quite aggressively by NGS .
Speaker #11: So just want to understand how you're driving that growth and how sustainable that acceleration could be going forward . Thank you Tom .
Speaker #9: Thanks . Thanks for the question . I think a couple of facets highlight here . First of all , I would again come back to effective execution of our protect expand , acquire strategy .
Speaker #9: We continue to do a great job of protecting existing customers . And that's sort of driven through , you know , just continuous focus on customer experience , whether that be from operational perspective or just end to end .
Speaker #9: As we look at it from requisition to to results . So protect has really been a key factor . But we're seeing accelerated wins on the expand side and the acquire side of things .
Speaker #9: And I attribute that to to two aspects . First and foremost it's new products that I'll we bring into the portfolio . And we speak significantly , obviously , about the NGS side of things .
Speaker #9: But don't forget about products like Claudin 18 and C-met , which have been critical sort of fillers to to actually round out our offering .
Speaker #9: So new products is certainly a key driver . And I think lastly , and very importantly , we communicated in Q4 of last year around the sales force expansion and sort of said that this was going to be a 6 to 9 month sort of ramp to productivity .
Speaker #9: And what you're seeing right now is just follow through on exactly what we had said . We starting to see increased productivity from those added sales resources , which are focused on the protect , expand , acquire strategy and the new products we're bringing to market .
Speaker #9: And these things are operating in concert with one another, delivering the type of numbers that you reflected on.
Speaker #6: Yeah , the only thing I would add to that is , you know , even with record volumes , our operational execution and turnaround times continue to improve .
Speaker #6: So that remains kind of a vital component of our go to market strategy for retaining and growing and expanding business .
Speaker #11: Great . And then just one follow up on kind of the launch of Pan Tracer into next year and just trying to scope out the potential for acceleration there .
Speaker #11: So , you know , should we be treating this as kind of 20 , 23 all over again ? Or is a sales force now appreciably larger ?
Speaker #11: You know , should we expect a larger acceleration given this is quite a hot , hot area in general ? In , in in oncology diagnostics , just any anything to help frame your expectations versus your kind of solid tissue launch in 2023 would be really helpful .
Speaker #11: Thank you .
Speaker #9: Yeah , certainly I as a as an organization , we've matured since 2023 . We've also expanded commercially as well . And so I think using 2023 as sort of a proxy would probably be a good starting point at this , this , this junction .
Speaker #9: And probably layering on some , some additional factors like the sales force expansion would be a way to look at it .
Speaker #6: And the majority of the sales force expansion was in the community segment . So that really positions us well to have the coverage we need for these new products .
Speaker #11: Okay , great . Thank you very much .
Speaker #3: Thank you very much . Our next question is coming from Subbu Nambi of Guggenheim Securities . Subbu , your line is live .
Speaker #10: Hi guys . This is Thomas on for Subbu . Thanks for taking our questions . Maybe I can ask both up front . So first , are you still expecting stronger performance in the data business ?
Speaker #10: On the non-clinical side in fourth quarter ? And maybe just some color on why that should show strength based on what you've seen so far this year .
Speaker #10: What you're what you're seeing in the funnel to be comfortable with that . And then second , can you just talk specifically for clinicians in the community setting on how radar has been received following the favorable summary judgment ?
Speaker #10: What's the chatter like there ? Thank you .
Speaker #6: Yeah . On the data business , Q4 is historically , you know , the strongest quarter in that business . That business actually did grow in the third quarter , you know , double digit growth in the third quarter .
Speaker #6: And so we are expecting that business , you know , to see sequential growth over Q3 in the fourth quarter . Now .
Speaker #9: Yeah , again , I just want to reiterate that we have not clinically launched radar as yet in the clinical setting . However , obviously the news with regards the the outcome of the summary judgment has has certainly circulated through the the community oncology setting .
Speaker #9: And I'd say the the vibe is is increasingly positive about the fact that we can reenter the market . Again . It comes back to the fact that we believe we have one of the most sensitive assays in the market , but also the portfolio effect , the ability to consolidate all of your needs within the community .
Speaker #9: Oncology setting within a single vendor . So this helps round out that that sort of value proposition for us .
Speaker #5: Yeah , I think that's an important point . Just to reinforce , you know , we've always said this preferred partner of choice in the community setting and that that speaks to a balance of breadth of portfolio and innovation as well .
Speaker #5: And we look at that breadth of portfolio beyond just heme , solid tumor and MRD . We look at breadth of portfolio in MRD as well .
Speaker #5: And so for us to be in a position to be able to offer flow MRD , to have an outstanding NGS partner , MRD with adaptive and now radar Street .
Speaker #5: And don't forget , we're going to continue to invest in our next gen MRD program . So as a suite of products , it also fits well into our overall strategy .
Rounds out our our larger portfolio across, diagnosis and therapy selection. Now, we have mrd as well, and as Tony mentioned, it's not just uh, radar St. It's it's the partnership with the data but the fact we have uh, uh, flow mrd, uh, on the hymn side as well. But in addition to that, it's, it's the work that we're doing from a bidirectional interface perspective. It's the work we're doing around client. If the customer experience because those are the 2 areas which are are sort of critical finding drivers we hear over and over again that uh these Community oncology practices are looking to remove friction from their practices. So they can focus on sort of top of license type activities and they look for vendors that offer this frictionless experience and we believe the combination of consolidating your oncology, send out requirements to a single lab along with best-in-class. Customer experience makes for a very, very attractive value proposition.
Yeah, I just think overall from, you know, if you go back, historically, when we are on the market for a few years with radar Pharma, you know, we hit 6 7 million dollars a year, you know, after a couple years so there will be a ramp in for primary, uh, in radar, uh, as we're kind of re-engaging in the market.
Perfect, thanks so much.
Thank you very much.
And our next question is coming from Punnett suda from lying Penny to your line is life.
Yeah, hi guys. Um um, how are you thinking about the AUP with as you bring this, you know, amrd on board. And then, um, you know, maybe just elaborate to us, sort of um, you know, as, as you think about look looking at the competitive landscape. Um, CCP has continued to grow for, uh, a number of, um, companies that are serving products in this in the marketplace. So, um, uh, are you seeing anything different in competitively and the NGS out of the business?
So, I'll start with a and then let Warren, you know, talk about, uh, the the competitive Dynamics, uh, pin. So I I think, you know
Obviously getting moldy X approval. Was was a good, you know, first time, you know, first step, um, for for radar, uh, we're also working to get commercial approval as well and and you know, as is the challenge with some larger panel tests, you know, that will that will take time to get commercial coverage, you know, for for radar as well, you know, others being in the space and having more uh, overall acceptance, I think is a positive. So I think it will be, you know, it will be a driver for AUP over time. Um, but probably more starting in the back half of of next year and into 26.
Just offering that we have both across solid tumor and hem that creates the differentiation for us in the marketplace.
Got it. And then just, um, on the Cog side, can you talk a bit about, um, the lovers you have, um, to reduce the cogs as you, as you bring on these new assays? Um, you know, there's obviously a push and pull there. So, just wondering how are you thinking about the uh, overall, uh, cost per test?
Yeah, thanks. Yeah. I think, you know, even in Q3 we we've got some LBX volume and limited reimbursements. So we're actually, you know, recovering the clogs, you know? And and, and Q3 for LBX as our volume increases from, from some of these larger, uh, panel tests, we will see operating costs, efficiency, just by the number of tests. You know, we can do at at 1 time. I think a few of the other things we've talked about, uh, today will also be drivers of cogs the lens. Consolidation, you know, consolidating multiple lens systems. You know, uh, streamlining the lab, uh, we have a dedicated, you know, process on lab Automation. And so, we, the ability to automate processes and use technology and newer, lab equipment to drive efficiencies, uh, as well under way, and we see good uptick there. Um, being able to digitize more lab processes, you know, to improve the customer experience as well. Uh, and then digital pathology we see efficiencies and revenue opportunities, uh, with digital pathology.
And finally, look, we we we still have a fair amount of capacity in our lab footprint. So, you know, we've got the lab in Fort Meyers, you know, we we've got uh, new lab we expanded in in North Carolina. RTP we have new lab in the Northeast so just incremental volume coming in. We can get operating efficiencies, you know, on a relatively large, you know, fixed cost footprint. Uh, so we have a multi-year opportunity to, to drive, uh, margins. There, I add maybe 2 points to just make substantiate, which if you're saying about larger volume and The Leverage there. So I mean we've always focused on turnaround time because that's a differentiated for us. Uh and as a result, we hadn't moved to the largest blow panels and we hadn't moved to the Nova seeks. Those are are both initiatives that we have in focus for us in 2026. So they're 2 really tangible examples. In terms of how incremental volume can help to drive down costs. Yeah and the last piece I would say is you know from a cost per test perspective.
Um, pathline has a higher overall cost per test than than Legacy Neo uh because of that lack of of incremental volume. So the ability to to streamline Powerline and actually pump and incremental volume in, there will bring down that cost per test as well.
So early.
Okay, thank you.
Thank you very much. Our next question is coming from Mark? Msaro of btig, Mark, your line is live.
Oh yes, this is Vivian on for Mark. Thanks for the time. Um, I'll just keep it to 1 on radar. Um, could you just remind us what indications you're pursuing here in addition to head and neck and breast cancer? And any Cadence of reimbursement that you're expecting there? Any further milestones? We should be looking for out to 26. Thanks.
We have secured have been subsets of head and neck, which is HPV Negative Edge of it and surveillance. And, uh, in breast, it's HR positive and her 2, negative surveillance, 5 years out. So, those are the 2 that we go to market relative to new indication areas. I, I will tell you, we have every intention we have done, we have been doing ongoing work in R&D and so we will be making additional submissions, uh, for, uh, indications expansion for radar St. I won't go into the specifics about those, for, for the obvious reasons. But, uh, we plan to be moving forward with those. Um, and as well, we are continuing our next gen mrd program as well. And we we see those the necessity of having both radar St and nextg because, you know, having an ultra sensitive option for low shedding, uh, cancers.
Is going to be an important aspect as well. And and so we see the the indication flow a little bit different for NG for our next gen uh program that we would with radar SC. So we're we're trying to avoid redundancy and overlap in spend relative to those indications. So you should expect us to, uh, add uh, indication submissions, uh, in the short term, which we believe could be manifest in the second half of 2026.
Perfect, thanks for the caller.
Thank you very much.
Hi everyone. This is Joseph on from Mike. Um, I guess just two from me. Um, just looking at pricing AUP. Obviously, you guys have seen many consecutive quarters of improvement there.
Um, you know, while small path line is a, is a headwind there. And I did hear what you guys said concerning, you know, just volume coming through at a, at a higher rate will improve cogs, but I know NGS bringing NGS into their. Um, you know, is the plan or was the plan? It was just kind of curious if you could remind us on on the timeline for that, um, is that a 2026? Uh, you know, plan or is that already in the works to to bring NGS or more NGS into the uh path line lab.
Yeah, so just just to be clear on the path line lab. So the NGS is going to be done at our other sites. So the fast turnaround tests enable us to capture more NGS work, uh, the the timelines for doing that NGS, work, enable us to, to send those out to our other labs, uh, in Florida and California and still meet our our time frame. So we're actually going to gain, you know, operating leverage by, by pumping more volume into our existing sites as a pull through through through the path line, uh, site. Yeah. And, and just as a follow-up, you know, on that path line is, as we said the strategy there was always to give us opportunity to deal with the under penetration, that's Northeast. Uh, and we have made really good progress there.
So all the legal integration and the assay validations have been completed. And so now we can offer, you know, a more complete complement of the Neo portfolio and take advantage of the pathline sites for the more rapid. Turnaround testing needs that are up there but as Jeff said, taking advantage of our footprint and the efficiencies we gain in our other lab sites and so, um, we're confident and I know our selling team is excited about the prospects that they are generating. We we see a healthy, uh, new customer list, beginning to emerge in. That's why we are uh of the belief that it will be a growth driver for us in 26 and Beyond.
Okay, okay. Okay, great. That's very clear. Um, I guess maybe just 1 quick 1, um, NGS. Growth, specifically, I know the target. There is 25%, or more. Um, you know, very near that Target, obviously, you know, above market growth right now.
Um, but we have seen acceleration there and, and NGS growth. The last 2 quarters. I'm just curious how you're thinking of the next quarter of 4225 and 2026. Is it, you know, back on that, that Target of of over 25%, um, is the target more. Just above 20% at this point and just kind of curious to your guys' thoughts there.
Yeah. We so we gave a guide for the back half of the year. We didn't have a queue for a specific guide. Uh, you know, we expect to see continued good growth in NGS, but we haven't broken out the specifics on that.
Okay, fair enough. Um yeah, congrats on the the great quarter.
Thank you. Thank you very much.
Thank you very much. Well, that
Continued. Our question and answer session.
I would now like to turn the floor back to Tony Zuck for clothing comments.
Again, I just like to thank you everybody for joining us on the call. As we said it was a good quarter. Um, we have focused on operational excellence and I'm pleased to say that uh the teams in both our, our commercial organization and our lab, that performed extremely well. And we're very proud of all the work that people in Neo are doing to advance Cancer Care. Uh, for all the patients in the community. Once again, thank you for your time, everyone. And we'll look forward to some 1-on-1, follow-ups.
Thank you very much. This does conclude today's conference. You may disconnect your phone line at this time, and have a wonderful day. We thank you for your participation.