NGNM: Q4 2010 Updated Analyst Coverage
A Strong Pipeline Of Tests And Successful Sales Implementation Will Drive
The Top-line And Profitability In 2011, In Our View; Maintain BUY, $2.50 Target
Click here to download the report.
We increase our target price to $2.50 (from
$2.40) and contend that NGNM remains
operationally strong and expect NGNM to
return to profitability in 2011.
Revenue in 2010 increased 16.6% year-overyear
to $34.4 million (from $29.5 million). We
expect 18.3% y-o-y growth in 2011 to $40.7
million and continue to expect a 5-year
revenue CAGR of 30%.
Sales and marketing initiatives are now in
place and are expected to drive sales
momentum and productivity. Case volumes
are expected to increase 15.3% from 57,332
in 2010 to 66,103 in 2011.
The gross margin contracted two percentage
points to 45% in 4Q:10 from 47% a year
earlier but is expected to stabilize with
marginal improvement in 2011, reflecting the
ease of pricing pressures and a favorable
change in test mix resulting from the launch
of many new tests for the year.
We expect the average revenue per test to
increase nearly 2% in 1Q:11 to $610.8 on a
year over year basis and remain relatively flat
for 2011. With the managed care contracting
process largely completed, we expect
modestly favorable average Medicare
reimbursement rates to offset any negative
influences to Average Revenue per Test.
We expect an uptick in Melanoma FISH Test
revenue driven by focused marketing and
sales initiatives such as direct sales to
dermatologists and a medical publication. We
also expect the new tests to be launched in
the year to add a fresh impetus to the top
line.
We contend that NGNM’s new cost cutting
initiatives and productivity improvements will
yield a moderate profit in 2011 and expect
EPS of $0.01 for 2011.
Summary
We increased our short-term forecasts to reflect
NGNM’s:
I. Stronger sales and marketing infrastructure
II. New cost initiatives in place
III. Issue of new shares at $1.50 per share
IV. Significant new product pipeline,
V. High premium for similar firms (reflected in
higher transaction multiples).
We reiterate that NGNM is a solid long-term
investment and remains an undervalued gem. We
note that management's disciplined approach to
sustainable growth and determination to drive longterm
value for the shareholders instead of short-term
profit has gained momentum.
Please download to read the full report.
|
OTC BB: NGNM
 
More information about the covered company
is available at:
www.neogenomics.com
|
