NEW YORK – NeoGenomics on Thursday reported a 3 percent year-over-year decline in its third quarter revenues due to the discontinuation of PCR-based COVID-19 testing.
For the three months ended Sept. 30, total revenues reached $121.3 million, down from $125.4 million in Q3 2020 and short of the consensus analysts' estimate of $125.1 million.
Excluding the prior-year's COVID-19 testing revenue, the firm's total revenues were up 12 percent, NeoGenomics said in a statement.
In a conference call to discuss the firm's financial results, CEO Mark Mallon said that he believes the business would've grown faster if not for the COVID-19 Delta variant. He added that the firm has a "significant geographic presence" in the southeast and south US, where the variant had the most pronounced impact.
CFO Kathryn McKenzie added that Florida and Texas, two states hit hard by the Delta variant, represent 20 percent of the firm's total revenue. She also said that higher COVID-19 incidents led to reduced patient visits to oncologists and canceled screening appointments, impacting incoming testing volume.
Mallon said NeoGenomics expects to see higher rates of growth as COVID-19 infection rates continue to decline, noting that the current challenges are "transient" and that he remains "very optimistic" regarding the firm's growth prospects.
Clinical services revenues fell 6 percent to $102.2 million from $108.7 million a year ago, while pharma services revenues rose 14 percent to $19.1 million from $16.7 million. Excluding COVID-19 PCR testing, clinical services revenue increased 11 percent year over year, the firm said.
In NeoGenomics' clinical operations, clinical test volume grew 7 percent year over year. The average revenue per test grew 4 percent to $375 from $359. This year, the firm expects to serve more than 4,000 healthcare providers and 500,000 patients, Mallon said.
The increase in pharma services revenue was related to research studies and informatics, NeoGenomics said. Mallon noted on the call that the firm has a backlog of $261 million in pharma services.
McKenzie added that the company experienced COVID-19-related delays in pharma services but that the vast majority of products were simply delayed, rather than canceled. She noted that the year-to-date growth rate "remained healthy" at 36 percent year over year.
In Q3 2020, the company's R&D spending nearly quadrupled to $7.4 million from $2.0 million in Q3 2020, while its SG&A costs rose 68 percent to $79.5 million from $47.4 million.
Mallon said that the company is doubling the size of its customer-facing salesforce, partially in preparation for the launch of its RaDaR minimal residual disease assay, which is expected to be commercially available by the middle of 2022.
NeoGenomics posted a net loss of $20.3 million, or $.17 per share, during Q3 2021 compared to a profit of $2.6 million, or $.04 per share, a year ago. Its adjusted loss per share was $.08, slightly above the consensus Wall Street estimate of a loss of $.09 per share.
The net loss for Q3 2021 includes an $18 million gain related to the acquisition of Inivata. Excluding that item, the net loss for the quarter was $38 million.
NeoGenomics finished Q3 with $340.6 million in cash and cash equivalents and $202.1 million in marketable securities.
During the call, McKenzie disclosed that NeoGenomics is voluntarily conducting an internal compliance investigation related to consulting and service agreements. The firm notified the Office of the Inspector General of the US Department of Health and Human Services this month based on the preliminary results, and the review is ongoing, she said.
NeoGenomics has accrued a reserve of $10.5 million for potential damages and liabilities, she added, although she said there is "not going to be a meaningful impact on revenue" as a result of the investigation.
The Fort Myers, Florida-based company also revised its full year 2021 guidance. It now expects consolidated revenues to be between $482.5 million and $487.5 million compared to a previous guidance of $490 million to $510 million.
It also now expects between a net loss of $800,000 and a net income of $4.2 million for the year compared to previous expectation of a net loss of between $65 million and $70 million.
The lowered guidance is the result of the Delta variant impact being larger and longer than the company had expected, McKenzie said. The firm expects the Q3 reduction in sales team access, as well as delays in clinical trials, to have a flow-through impact on Q4 revenues, she added.
Also on Thursday, the company announced that William Bonello would take over as CFO on Jan. 1, 2022, and that Kathryn McKenzie will be named chief sustainability and risk officer on the same date. McKenzie currently serves as CFO, while Bonello serves as president of the informatics division.