NGNM: Q4 2009 Updated Analyst Coverage

Expect 37% Top Line Growth In 2010 Aided By Melanoma FISH Test; Five Tests To Be Launched In 2010; Maintain BUY, $3.01 Target

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Highlights
• We expect the new Melanoma FISH test, launched in February to contribute approximately $3.2 million to revenue in 2010.
• Revenue in 4Q:09 increased 32% year-over-year from 7.8M to $5.9M in 4Q:08, we continue to expect 5 year revenue CAGR of 46%.
• A bolstered sales force in 2009 of 30 (from 17 in 2008) increased SG&A expenses and poises NGNM for solid distribution of upcoming tests, in our view.
• Results include approximately $500,000 in restructuring and other charges in 4Q:09, we do not expect similar charges in the first quarter.
• Management is in the process of restructuring a relationship with Response Genetics and wrote-off revenues booked earlier of approximately $250,000.

Summary

The launch of the Melanoma FISH Test has placed NeoGenomics on a fast paced growth trajectory. NeoGenomics has clearly positioned itself securely for the ride with a robust operating and sales platform.

NGNM reported continued double digit year over year growth of 31.7% in the fourth quarter primarily attributed to a higher number of tests per requisition. The number of tests also increased to a robust 34% versus 4Q:08. After adjusting for the revenue lost from one customer, NGNM grew the business by 60% year over year in 4Q:09 and 70% for 2009. The company expects to continue its aggressive investment in sales and marketing initiatives, pushing the newly introduced Melanoma test as well as the other tests expected to be launched later in 2010. The sales force will also continue to increase in 2010.

We expect strong momentum in the top line as a result of new tests, marketing efforts of partners and a matured sales force with higher productivity. NGNM’s margins are expected to be negatively impacted by costs associated with the launch of the Melanoma test in the first half of the year. We expect the cost to be rationalized in the second half as the test is absorbed and NGNM turns profitable.
We reiterate our admiration for NGNM’s management and its ability to drive growth and profitability. We remain enthusiastic about the company’s current progress and future plans and continue to rate NeoGenomics a BUY with a one-year price target of $3.01 per share.

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OTC BB: NGNM

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