NGNM: Q2 2009 Update

Strategic supply agreement with Abbott – major new initiative
to develop melanoma FISH test.
Posts 53% y-o-y revenue growth in Q2 2009

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Summary and Recommendation

NeoGenomics continued its double digit growth in the second quarter of 2009. Revenues increased 53% on a year-over-year basis through a favorable test mix and higher reimbursement rates. Flow Cytometry tests, which have the highest reimbursement levels, contributed 29% to the total revenue in Q2 09. This was 200 BPS above Q1. Reimbursement rates increased on average 8-10% for 2009.

Net Income was $8,061 and EPS was $0.00 a share, a modest decrease from the prior year as a result of the ongoing company investments in sales and marketing as it expands its product portfolio and geographic footprint.

These results differ slightly from our previous projections because NeoGenomics is currently restructuring its relationship with one of its largest customers (22% of total revenue). The immediate result is lower FISH test revenues, which will likely be offset by future test offerings. The renewed structure will provide an expanded scope of work and allow the company to expand service locations.

In late July, NeoGenomics announced a strategic supply agreement with Abbott Laboratories under which the company will develop a FISH-based skin cancer test with an early 2010 target launch date. Melanoma is the fastest growing form of cancer in the United States. The company estimates the revenue opportunity at $50-$100 million annually in four to six years. This highlights management’s ability to maintain a high growth trajectory with new opportunities. Successful launch of the melanoma test will enhance the value proposition of the company.

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OTC BB: NGNM