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NeoGenomics Q3 Revenues Jump 142 Percent

This article has been updated to include comments from NeoGenomics' earnings call.

NEW YORK (GenomeWeb) – NeoGenomics today reported a 142 percent increase in its third quarter revenues on continued growth in clinical genetic testing volume, driven by its acquisition of Clarient.

For the three-month period ended Sept. 30, the company's revenues increased to $60.8 million from $25.1 million in the same period last year, falling just short of analysts' consensus estimate of $61 million.

Contributing to the increase was a 124 percent rise in clinical testing revenues to $55.7 million from $24.9 million — growth the company attributed to the inclusion of Clarient, which was acquired in 2015 from GE Healthcare's Life Sciences business.

Still, base test volume — which excludes the impact from Clarient — made significant gains, growing approximately 25 percent, NeoGenomics Chairman and CEO Douglas VanOort said during a conference call to review the Q3 results. He added that breaking out the relative contributions of Clarient and base test volume is getting more difficult as the integration of the two companies nears completion.

"Other than the inevitable few weeks delay here and there, we have executed [the integration plan] … on time and within budget," he said. "Now we're much further down the road and the integration risk is much lower … [with] client retention levels extremely high."

VanOort added that Clarient customer migration to the NeoGenomics' Laboratory Information System is expected to wrap up by year-end, with full facility consolidation completed by early next year, all of which will yield "major improvements in costs, productivity, and efficiencies in 2017."

Revenues from the NeoGenomics' pharma services unit jumped to $5 million from $251,000. Although this represents a $1.8 million pullback compared with Q2 that was partially due to contract timing, revenues from this division are expected to "bounce back nicely" in the fourth quarter, VanOort said. 

VanOort noted that pharma services revenues currently represent about 10 percent of the company's overall revenues, but that is expected to change as NeoGenomics invests in the unit. Part of that investment includes the anticipated opening of a European facility, which will be officially announced in the next several months.

"This business has great long-term potential and we are investing in it," he said.

NeoGenomics' Q3 net loss attributable to common shareholders surged to $5.6 million, or $.07 per share, from $125,000, or breakeven per share, a year earlier. On an adjusted basis, NeoGenomics posted earnings per share of $.04, beating analysts’ consensus estimate of $.03.

The company's loss in the quarter included $3.7 million related to an amortization of preferred stock "beneficial conversion feature" and $1.8 million in deemed dividends on preferred stock.

The firm’s R&D spending rose to $967,000 from $871,000 a year earlier, while SG&A costs increased to $25 million from $10.1 million, primarily due to the effects of the Clarient acquisition.

NeoGenomics finished the third quarter with cash and cash equivalents totaling $28.9 million.

Looking ahead, NeoGenomics said it has revised its guidance for fiscal 2016 and now expects consolidated revenue in the range of $245 million to $250 million. Adjusted net income is expected to be between $13 million and $15 million, or between $.14 and $.16 per share.

During early morning trading on the Nasdaq, shares of NeoGenomics were down 1 percent at $7.26.