NEW YORK – Despite disappointing but expected revenue declines in the second quarter, the team at NeoGenomics believes its new comprehensive liquid biopsy offerings, along with its COVID-19 testing, will help drive growth throughout the rest of the year.
Fallout from the COVID-19 pandemic resulted in a 14 percent revenue decline in the second quarter, financial results that CEO Douglas VanOort called "poor, as expected" on a conference call to discuss the earnings Tuesday morning. But the dip in revenue during the quarter was accompanied by other milestones for the company that will likely help right the ship.
The main update NeoGenomics' executive team emphasized was its expanded suite of liquid biopsy tests. The firm is now offering multiple solid tumor liquid biopsy tests, including Inivata's InVisionFirst-Lung test for non-small cell lung cancer, the NeoLab solid tumor liquid biopsy test, and Qiagen's Therascreen PIK3CA companion diagnostic test.
NeoGenomics announced in May it had partnered with Inivata to commercialize the InVisionFirst-Lung test and had also made a $25 million investment in the Cambridge, UK-based firm, gaining a seat on its board of directors and an option to buy the company outright.
VanOort noted on the earnings call that in addition to working with Inivata to commercialize the lung test, NeoGenomics would also help commercialize the firm's in-development minimal residual disease RaDaR test.
Inivata's next-generation sequencing test looks at alterations in 37 genes and provides results in one week. The test received a local coverage determination from Medicare Administrative Contractor Palmetto GBA last year, with other contractors later following suit.
The firm's NeoLab Solid Tumor Liquid Biopsy test is a pan-cancer NGS test for genomic profiling that, along with the 14 other NeoLab tests, is intended for patients with hematologic diseases that have opportunities for biomarker evaluation when bone marrow biopsy isn't an option and peripheral blood counts are low.
Qiagen's Therascreen PIK3CA RGQ PCR Kit is a companion diagnostic approved by the US Food and Drug Administration for alpelisib (Novartis' Piqray). It detects 11 mutations in the PIK3CA gene using genomic DNA extracted from breast tumor tissue or circulating tumor DNA isolated from whole blood plasma in patients with breast cancer. NeoGenomics validated the test for tissue testing last year and said it will soon launch the companion diagnostic for plasma testing in situations where tumor tissue can't be used. George Cardoza, the president of pharma services, noted NeoGenomics' experience in the companion diagnostics sphere and emphasized that the firm is uniquely positioned for CDx due to its large share in the oncology market and its ability to help commercialize tests.
NeoGenomics has only been offering the full suite of liquid biopsy tests since the end of June, but VanOort said the firm is now "better positioned for growth than we were before the pandemic hit," partially as a result of the increased liquid biopsy options that have strengthened the firm's NGS product portfolio.
VanOort also said the firm is providing "even more education than we typically do" during a product launch to help clients get more comfortable with liquid biopsy. Many of the firm's clients have used liquid-based tests in the past, but many are new to the technology, so there's "a fair amount of education we're doing," he said.
NeoGenomic CMO Lawrence Weiss said that although there are a lot of liquid biopsy offerings already out in the market, the "day is early" and he expects to see more growth in liquid biopsy than in tissue offerings. Weiss added that he has high expectations for their liquid biopsy portfolio over the next two years.
VanOort noted the market is growing for liquid biopsy and said NeoGenomics' strong position in the oncology market will continue to drive demand for liquid biopsy. "We compete on the basis of having, we think, the most comprehensive oncology test menu," he said. "Many of our clients use us as a one-stop shop for their cancer testing needs, and we believe that we will have good penetration of our liquid biopsy tests because first they're very high quality and second because we are a trusted partner with our clients."
Weiss added that for the minority of tissue specimens that have insufficient results, the firm can easily recommend its liquid biopsy tests as an alternative. The quick turnaround time for liquid biopsy tests was another selling point, especially during the COVID-19 pandemic when turnaround times have been increasing.
Throughout the pandemic, NeoGenomics has also been offering COVID-19 testing, which VanOort said will likely help drive growth through the rest of the year. Currently, the firm has the capacity for 10,000 tests per day, which it may scale up depending on demand, VanOort said. NeoGenomics has ramped up its testing in July, he noted. It performed 2 million COVID-19 tests during the second quarter using the Abbott m2000 and an unspecified Thermo Fisher Scientific platform.
The firm is acting as a network reference laboratory for its commercial and hospital lab partners, performing the molecular testing but not the front-end logistics of sample collection or the back-end reporting of the results, VanOort said. As a result, the average revenue per test is lower, but the cost per test is also lower. Because the firm is operating as a network lab, VanOort said there aren't sales and marketing, or administrative costs associated with the firm's COVID-19 testing.
It is benefitting from COVID-19 testing revenue, but VanOort emphasized that it is "short-term in nature" and not part of the firm's overall strategy. "Our intent is to partner with the lab industry to help the country combat this crisis," he said.
Both VanOort and CFO Kathryn McKenzie said they expect COVID-19 testing to result in profits in the third and fourth quarters. VanOort noted that the firm had devoted much of its Carlsbad, California facility and redeployed 50 employees working there to perform COVID-19 testing, as well as hiring some temporary employees.
There was an uptick in COVID-19 testing volume at the end of the quarter, VanOort said, and the volume has "grown considerably" in the first few weeks of the third quarter. He also noted that if the firm can continue building capacity and meeting demand, its projected 20 percent growth rate for the third quarter will be met easily.