NEW YORK – NeoGenomics showed signs of a bounce back from its shaky start to 2022 this week, reporting on Tuesday that its second quarter revenues were up nearly 3 percent year over year.
The company saw total revenues of $125.1 million for the three months ended June 30 compared to $121.7 million in the same period of 2021.
Clinical Services revenue was $105.6 million, up 4 percent from $101.4 million, and though clinical test volume decreased by 3 percent year over year, this was offset by an increase in average revenue per test, which rose about 8 percent to $387.
Pharma Services revenue dropped 4 percent to $19.4 million from $20.3 million, but company executives said that the firm's backlog of samples is growing, and it is working to speed up revenue conversion.
The company is also in the process of validating and implementing a broader clinical next-generation sequencing cancer testing assay to fulfill evolving market demand and better compete in the precision oncology space.
On a call with investors, Lynn Tetrault, interim CEO and board chair, said that NeoGenomics has been working hard since April to "diagnose the causes of underperformance" it faced earlier this year.
She said the company has developed a specific plan to drive improvements over the next 18 months and has already taken practical steps that she described as "no regrets-type changes that any new executive would agree are necessary."
NeoGenomics had surprised investors at the end of March with an announcement that CEO and board member Mark Mallon would leave the company, effective immediately, and giving a heads-up that its Q1 2022 financial results were expected to fall below what it had projected.
Regrouping from a subsequent drop in share price, the company said in April that 2022 would be a rebuilding year, focused on development of broader NGS panels and improvements to its laboratory processes.
The firm announced in July that it had found its new CEO, Chris Smith, most recently CEO of Ortho Clinical Diagnostics.
According to Tetrault, NeoGenomics made "excellent progress" over the last few months in stabilizing not only the company's leadership but its workforce as a whole.
Other personnel changes during Q2 included the appointment of Vishal Sikri as president and chief commercial officer of the company's Inivata division, which is advancing a solid tumor liquid biopsy assay technology for minimal residual disease detection and monitoring called Radar.
Tetrault said that NeoGenomics has been having "productive discussions" with the Centers for Medicare and Medicaid Services and recently resubmitted Radar for reimbursement review in colorectal cancer last month.
"We believe that our latest submission meets the criteria needed to garner reimbursement in the syndication, and we are hopeful that we will receive coverage for CRC in the coming months," she said. In parallel, the company is pursuing reimbursement in additional cancer types and anticipates filing a second submission for breast cancer in the first half of 2023.
Researchers shared data at the annual meeting of the American Society of Clinical Oncology earlier this year from a study using Radar to monitor early-stage breast cancer patients for the emergence of circulating tumor DNA, showing that the assay could pick up the first signs of late recurrence, long before clinical symptoms emerge.
Tetrault said that buzz at the meeting was significant, and NeoGenomics is working to add more evidence for the technology with several studies ongoing.
"We are in late-stage discussions with many biopharma companies to incorporate Radar into their clinical studies and are making progress with finalizing these negotiations," she added.
Two other MRD assays are already reimbursed by Medicare — Natera's Signatera and Guardant Health's Guardant Reveal. Vishal Sikri, NeoGenomics' chief commercial officer, said that the company believes it is well positioned to compete not just in colorectal cancer but in other cancer types, across indications from recurrence prediction to therapeutic monitoring.
Addressing the firm's drop in clinical testing volume compared to Q2 2021, NeoGenomics' President of Clinical Development David Sholehvar said that while there was an impact from the COVID-19 pandemic, the company sees internal factors as the larger cause.
"We're not discounting a hangover from COVID, but we believe that that volume decline is mostly in our control and the parts of the business that we're actively trying to improve on," he said.
Among specific changes NeoGenomics has been making in the wake of its disappointing first quarter are shifts to outdated test procedures and the adoption of new automation tools.
Tetrault said that ancillary testing was one area the firm identified as ripe for correction. "There are instances where our process in certain tests had evolved to include an early readout from a faster turnaround time methodology on a specific gene that is later duplicated as part of a larger panel, she said. While this early readout may have made sense at one time, evolving technology has made it less and less impactful. "We are also incurring duplicate and unnecessary costs due to running multiple tests without the corresponding ability to bill for both instances," Tetrault said, so the firm is working hard to root these redundancies out.
New automation moves include brining a new cytogenetics artificial intelligence software online. "While it's still early days in implementation, we are already seeing productivity gains for sites that have gone live with the software," she said.
NeoGenomics' R&D spending was $8.6 million in Q2, more than double the $3.5 million reported in the same quarter of 2021. The firm's SG&A costs bumped up about 4 percent to $75.1 million from $71.9 million
Its net loss for the quarter was $35.3 million, or $.28 per share, compared to net income of $75.9 million, or $.59 per share, in the second quarter of 2021. NeoGenomics noted that the positive cash flow in Q2 2021 reflected a $97 million gain on the company's prior investment in, and loan receivable from, a non-consolidated affiliate due to the acquisition of Inivata.
The firm's adjusted net loss for the quarter was $20 million, or $.16 per share, beating analysts' consensus estimate for a loss per share of $.22.
NeoGenomics ended the quarter with cash, cash equivalents, and marketable securities of $466 million.