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NeoGenomics Q4 Revenue Remains Flat but Core Business Grows 7 Percent

NEW YORK – NeoGenomics on Wednesday morning reported that its Q4 revenues for 2021 remained flat year over year.

The Fort Myers, Florida-based firm reported revenues of $125.7 million for the three-month period ended Dec. 31, essentially flat compared to revenues of $126.0 million in the same period in 2020 and meeting the consensus Wall Street estimate of $125.8 million. Excluding COVID-19 PCR testing, Q4 revenues increased 7 percent year over year.

During the quarter, clinical services revenues dropped 3 percent to $104.1 million from $106.8 million in the year-ago quarter, although excluding COVID-19 PCR testing, they grew 6 percent. Pharma services revenues were $21.7 million, up 13 percent from $19.3 million in the same quarter last year.

On a conference call to discuss the firm's financial results, CEO Mark Mallon said that NeoGenomics processed almost 1.1 million clinical tests in 2021, 2 percent more than in 2020. In the clinical division, average revenue per test increased 4 percent to $383, and the clinical business accounted for more than 80 percent of the company's revenues in 2021. Mallon noted that the average customer account ordered more than 250 tests during the year.

The company's clinical business was heavily impacted by the rise of the Omicron variant in January, he said, which will likely affect the firm's first quarter earnings, though volumes have picked up in February as Omicron waned.

The pharma services backlog rose to $267 million in 2021, and NeoGenomics booked $172 million in new signed contracts, Mallon said. While the COVID-19 pandemic has slowed the pace of converting backlog into revenue, he said the firm believes many of those projects will convert to revenue as conditions normalize.

NeoGenomics CFO Bill Bonello said on the call that revenue conversion was "difficult" as clinical trials aren't enrolling, or at a much slower pace, but he noted that the "winds of activity" were picking up.

Mallon added that the company's informatics business was largely unaffected by COVID-19. NeoGenomics acquired Trapelo Health, which offers a precision oncology clinical decision support system, for $65 million last March.

NeoGenomics also acquired Inivata last May, for $390 million, and its RaDaR test for minimal residual disease and recurrence is expected to add to the pharma backlog over time, he noted. In addition, multiple datasets from clinical studies of the test are scheduled to be published in 2022.

The company's net loss for the quarter was $41.8 million, or $.34 per share, compared to a net income of $15.4 million, or $.13 per share, in the same quarter the previous year. Its adjusted EPS for the quarter was a net loss of $.14 per share, in line with analysts' average estimate.

NeoGenomics's research and development costs more than quadrupled to $8.5 million compared to $2.1 million in the same quarter a year ago. Its selling, general, marketing, and administrative expenses were $78.3 million, up 57 percent from $49.8 million in the year-ago quarter.

Revenues for full-year 2021 were $484.3 million, up 9 percent from $444.4 million in 2020 and essentially in line with the average analysts' estimate of $484.7 million. Excluding COVID-19 PCR testing, revenues increased by 16 percent, driven by an increase in clinical testing volumes and growth in the pharma services segment, particularly in the areas of research studies and informatics. Clinical testing revenue was up 6 percent to $404.2 million from $382.3 million, while pharma services jumped 29 percent to $80.2 million from $62.1 million.

NeoGenomics' net loss for the year was $8.3 million, or $.07 per share, compared to a net income of $4.2 million, or $.04 per share, in 2020. Adjusted EPS for 2021 was a net loss of $.27 per share, slightly missing the consensus Wall Street estimate of a net loss of $.26 per share.

In 2021, NeoGenomics spent $21.9 million on research and development, more than tripled from $8.2 million in 2020. Its selling, general, marketing, and administrative expenses were $283.9 million, up 48 percent from $191.7 million in 2020.

The company ended the year with $316.8 million in cash and cash equivalents and $199.0 million in marketable securities.

Bonello said the firm expects Q1 revenues between $118 million and $120 million due to the significant impact of Omicron. He noted that the company has kept its lab fully staffed, so it is able to handle volume increases as COVID-19 declines, but the overhead from keeping the lab at full capacity will result in a "big hit" on profitability and revenues.

He also mentioned that wage and supply cost inflation would likely impact Q1 financial results, but that Q1 results will not represent the firm's underlying growth. He said NeoGenomics is anticipating Q1 to be a "significant outlier," and that the firm expects to see both growth and profitability increase throughout 2022.

For 2022, NeoGenomics is forecasting consolidated revenues between $530 million and $550 million and a net loss between $118 million and $133 million. Bonello said the guidance range was intentionally wide because the COVID-19 pandemic remains difficult to predict. He noted that the lower range of the guidance allows for the continuation of the pandemic's impact throughout the year, while the high end assumes COVID-19 recovery.

In morning trading on the Nasdaq, NeoGenomics shares were up 2 percent at $19.05.