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NeoGenomics Posts 4 Percent Increase in Q3 Revenues

NEW YORK (360Dx) – NeoGenomics today reported a 4 percent year-over-year increase in its total third quarter revenues, as clinical testing revenues grew less than 1 percent. 

For the three months ending Sept. 30, total revenues rose to $63.1 million from $60.8 million in the year-ago period, but fell short of the consensus Wall Street estimate of $63.9 million. 

Clinical testing revenues inched up to $56.2 million from $55.7 million in Q3 2016, and pharma services revenues rose 38 percent to $6.9 million from $5.0 million a year ago. 

The firm reported it received 98 million requisitions in its clinical genetic operations, and performed 163.3 million tests during the recently completed quarter, up from 90.3 million requisitions and 140.1 million tests performed a year ago. In the PathLogic business, there were 3.5 million requisitions, down sharply from 14.7 million requisitions in Q3 2016, as NeoGenomics divested that operation on Aug. 1. The company also said that hurricanes Harvey and Irma depressed test volume by more than 1 percent and tamped down revenues by about $1 million in the third quarter. 

On a conference call with analysts following the release of the earnings, NeoGenomics Chairman and CEO Douglas VanOort said the firm was disappointed in its performance for the quarter and "did not not deliver what our investors were expecting, and we accept full accountability for that." He added, however, that there were positive trends during the quarter, and the firm remains excited about its growth prospects.

Hurricanes Harvey and Irma resulted in lab closures, as well as "serious" disruptions, he noted. VanOort also said that while NeoGenomics sold PathLogic at a loss, it will result in a greater focus and more profitability going forward.

Further, the firm saw a $1.3 million revenue adjustment that reflected revenues for tests that were "quantity not sufficient," meaning there was insufficient patient specimen for the tests to be performed. VanOort said "there is no excuse for this," and added that NeoGenomics has implemented enhanced accounting procedures to ensure it won't happen in the future as well as new technologies that allow testing to be done using "much less" sample volume.

Lastly, results from the quarter fell short of investor expectations due to higher-than-expected bad debt expenses, resulting from payor dynamics. In particular, VanOort said on the call, Medicare refuses to pay for NeoGenomics' molecular tests, and insurers are increasingly asking for prior authorization for such tests before they will reimburse for them. Some payors are also refusing to pay for next-generation sequencing-based tests, especially disease-specific multigene molecular panels, such as those offered by NeoGenomics.

The firm's Q3 net loss widened to $7.8 million, or $.10 per share, from $5.6 million, or $.07 per share, a year ago. On an adjusted basis, the company reported EPS for Q3 2017 of $.01, short of the consensus Wall Street estimate of $.02. 

During Q3, NeoGenomics increased its R&D spending 34 percent year over year to $1.3 million from $967,000. SG&A costs grew 20 percent to $29.9 million from $25.0 million a year ago. 

At the end of the quarter, NeoGenomics had $12.2 million in cash and cash. 

For the fourth quarter, the company is guiding for total revenues in the range of $65 million to $67 million, with a net loss per share of $.03 to $.04. On an adjusted basis, NeoGenomics is expecting Q4 EPS of $.04 to $.05. Analysts are expecting Q4 revenues of $67.1 million and EPS of $.04. 

NeoGenomics' shares fell 2 percent to $8 in afternoon trading on the Nasdaq.