NGNM: Q1 2010 Updated Analyst Coverage

Launch of Melanoma FISH Test in 1Q:10 And Five New Tests For 2010 Position NGNM For Growth

Click here to download the report.

Highlights
• A highlight of the NGNM story has been the Melanoma FISH Test, which we expect to be a growth catalyst in 2011.
• Revenue in 1Q:10 increased 22% year-over-year to $8.4 million from $6.9 in 1Q:09, we expect a 5 year revenue CAGR of 42%.
• The gross margin improved 100 basis points sequentially reflecting improving operating efficiencies.
• A maturing sales force is expected to drive test numbers; Test volumes are expected to increase 34% to 15,200 in 2Q:10 from 11,316 in 2Q:09.
• Insurance reimbursements remain under pressure in the short term and we expect average revenue per test to decline 15.7% as a result, but is offset by greater test volumes.
• NGNM remains on track with the launch of five new molecular tests for 2010 and second Abbott test early 2011.
• NGNM’s financial position is robust. The company has a healthy cash balance of $2.7 million as of March 31, 2010, along with available credit under various facilities. NGNM has $1.6 million in long-term debt.

Summary

NeoGenomics remains poised for growth as revenue in 1Q:10 exceeded our projections by 4%. This disparity was due to higher than expected test volumes. Test volumes continue to grow rapidly with the aid of a bolstered and maturing sales force and innovative products. We contend NGNM’s focus on marketing efforts and the ability to maintain its competitive advantages will continue to provide strong momentum to the top line. However, contracts with insurance payers are expected to dampen reimbursement rates. We expect this softness to be offset by greater test volumes. As the tests become more mainstream and endorsed by insurance providers and the contracts with insurers mature reimbursement rates will increase over time.
We expect operating expenses to rationalize as a percent of total revenue and decline as NGNM gains scale and higher productivity from a trained workforce. The company’s new CRM software and training programs are expected to yield improved productivity during the second half of this year. We reiterate our admiration for NGNM’s management and their ability to drive growth and profitability.
NGNM remains focused on three primary initiatives;
1) Growing its sales and marketing team and increasing productivity
2) Driving continued gains through operating efficiencies
3) Developing new tests
We reiterate the strength and scalability of the business model and continue to see significant traction going forward.

Please download to read the full report.

OTC BB: NGNM

More information about the covered company
is available at: www.neogenomics.com