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1 NASDAQ: NEO Navigating for Growth Executive War College May 1, 2014

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Page 1: Executive War College › wp-content › uploads › EWC14.Post_.… · early stage increases patient survival rates 1980 – Healthcare Savings: a) forego spending on ineffective

1

NASDAQ: NEO

Navigating for Growth Executive War College

May 1, 2014

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Forward-looking Statements

This presentation contains statements which constitute forward-looking

statements within the meaning of Section 27A of the Securities Act, as

amended; Section 21E of the Securities Exchange Act of 1934; and the

Private Securities Litigation Reform Act of 1995. The words “may”, “would”,

“could”, “will”, “expect”, “estimate”, “anticipate”, “believe”, “intend”, “plan”,

“goal”, and similar expressions and variations thereof are intended to

specifically identify forward-looking statements. All statements that are not

statements of historical fact are forward-looking statements.

Investors and prospective investors are cautioned that any such

forward-looking statements are not guarantees of future performance and

involve risks and uncertainties, and that actual results may differ materially

from those projected in the forward-looking statements as a result of

various factors. The risks that might cause such differences are identified

in our filings with the Securities and Exchange Commission. We undertake

no obligation to publicly update or revise the forward looking statements

made in this presentation to reflect events or circumstances after the date

of this presentation or to reflect the occurrence of unanticipated events.

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NeoGenomics Background

• Specialized Cancer-Genetics lab

• Serving Oncologists, Pathologists, Hospitals, BioPharma

• Strong growth in client base, test volume, & revenue

• About 350 full-time employees

• Most comprehensive cancer test menu in America

• NASDAQ listed

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Volume doubled since 2010 and was record-setting in Q3 ’13…

Quarterly Test Volume and Revenue ($ in millions)

* * *

* Includes impact of TC Grandfather Expiration, which resulted in $1.3 less revenue per quarter. Refer to page 28 for more detail.

0.5 0.8 1.3 1.6 2.7

3.5 3.3 3.4 4.2 4.5

5.7 6.7 6.9

8.1 8.4 9.5

10.5 11.3 11.2

12.7 14.0 14.5 14.5 14.4

15.4

18.4 20.0

22.6

26.9

28.8 28.3

30.5 32.1 32.5

33.7

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Millio

ns

Th

ou

san

ds

Test Volume (000's)

Revenue

NeoGenomics History of Growth

FINAL FILE TO SHOW Q4/Q1 GROWTH INFO TO FOLLOW

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Dynamics in Oncology Testing

NEO

Demographics And Cancer

Physician consolidation

and in-sourcing

Regulatory Challenges

Managed Care

Technological and Scientific

Advances

Reimbursement Pressure ObamaCare

Precision Medicine

Barriers to

Entry

Volume

Drivers

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Strategic Approach

• Relentless Innovation “Precision Medicine”

• Process Improvements Reimbursement-pressured industry

• Flexible Business Model Dynamic market

• Segmentation Tailored customer demands

• Engaged culture Operational excellence

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Strategic Approach

• Relentless Innovation “Precision Medicine”

• Process Improvements Reimbursement-pressured industry

• Flexible Business Model Dynamic market

• Segmentation Tailored customer demands

• Engaged culture Operational excellence

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• Enables physicians to better diagnose

diseases and predict therapeutic efficacy

– Clinical Benefits: Effective treatment at an

early stage increases patient survival rates

– Healthcare Savings: a) forego spending

on ineffective therapies and b) effective

intervention at an early stage generally

lowers overall treatment cost

– Companion diagnostics: being driven by

rising drug costs and an increase in targeted

therapeutics

16%17% 16%

18%

22%

25% 25% 26%

11%13% 12% 13%

16%

19% 20% 20%

0%

5%

10%

15%

20%

25%

30%

1980 1990 2000 2010 2020 2030 2040 2050

Perc

en

t O

f P

op

ula

tio

n

Age 60 and older Age 65 and older

Current

U.S. Population Demographics

Boomer Impact on Cancer

Market

Demand for “Precision Medicine”

Transformation driven by Molecular

diagnostics

Cancer prevalence expected to increase

77% of all cancers diagnosed are in people age 55

or older, the fastest growing segment of the US

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2013

• 34 new Molecular tests

• 5 new NeoTYPE Panels

• Next Gen Sequencing (48 genes)

• 10 new FISH tests and profiles

• 3 new IHC profiles and tests

• Plasma/Urine-based Prostate Test

(Patent App)

• SVM-based Cytogenetics Analysis

• SVM-based Automated FISH Analysis

Relentless Innovation

2012

• 10-color Flow Cytometry

• Implemented State-of-the-art

MolDx platform in lieu of Kits

• 30 new Molecular Assays

• Proprietary method for increasing

sensitivity of Sanger sequencing

• 7 NeoTYPE MolDx Panels

• New Aperio Digital Image Analysis

• SVM for FISH (Patent App)

• Barrett’s Esoph. FISH (Patent App)

• NeoARRAY/SNP Cytogenetics

• Internalized 99% of send-outs

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PNH, High Sensitivity Flow (revised) – March 25

CD52 Campath Sensitivity – December 20

FISH Molecular

ETV6-RUNX1 (TEL-AML1) Translocation, t(12;21) – January 7

TPMT Genotyping – January 15

UGT1A1 Genotyping – January 21

PDGFRa Mutation Analysis – February 4

KIT / PDGFRa Molecular Reflex Panel (GIST) - February 4

HRAS Mutation Analysis – February 11

Chimerism/DNA Fingerprinting Analysis – February 18

PTEN Mutation Analysis – February 25

MYD88 Mutation Analysis – March 4

CD79B Mutation Analysis – March 11

CARD11 Mutation Analysis – March 18

NeoTYPE Lymphoma Profile – March 18

RUNX1 Mutation Analysis – March 25

NeoTYPE MDS/CMML Profile – April 1

CBL Mutation Analysis – April 1

SRSF2 Mutation Analysis – April 1

U2AF1 Mutation Analysis – April 1

ZRSR2 Mutation Analysis – April 1

NOTCH1 Mutation Analysis – May 1

NeoTYPE™ Spliceosome Mutation Profile – May 6

NeoTYPE™ AML Prognostic Profile, add RUNX1 – May 11

NeoTYPE™ CLL Prognostic Profile, add NOTCH1 – May 11

NeoTYPE™ Solid Tumors, add PTEN Mutation & FISH - May 11

HOXB13 Genotyping – May 13

EZH2 Mutation Analysis – May 20

TET2 Mutation Analysis – June 3

ACSF3R Mutation Analysis – June 17

PTPN11 Mutation Analysis – June 24

STAT3 Mutation Analysis – July 1

ETV6 Mutation Analysis – July 15

MLH1 Promoter Methylation Analysis – August 5

GNAS Mutation Analysis – August 12

MGMT Promoter Methylation Analysis – September 30

IHC Panels + ISH

ROS1 FISH – January 28

NeoSITE Melanoma FISH – March 25

Eosinophilia, MPN FISH (new) – April 8

AML, CLL, MDS FISH (revised) – April 8

PTEN FISH – May 7

IgH/MAFB t(14;20) – May 7

1p/19q Deletion FISH for Gliomas – July 15

High-Grade/Large B-Cell Lymphoma FISH Panel – November 4

XY FISH for Engraftment – November 4

MDM2 FISH for Liposarcoma – November 4

Heme IHC Panels (3 new & 6 expanded) – March 18

CMV ISH – August 26

High-Grade/Large B-Cell Lymphoma IHC Panel – November 4

FLOW

Relentless Innovation New Assays Launched in 2013/2014

IHC Panels + ISH

NEXT GEN SEQUENCING

Solid Tumor Profile

MDS Panel

CALR

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Future Relentless Innovation

• NeoTYPE Next-Gen Cancer Profile (48 Genes, 54 Genes to follow)

• NeoSCORE Prostate Test (Plasma Based) - Diagnostic, Prognostic, Inform Therapy

- Based on licensed SVM technology

• Additional SVM-based NeoSCORE Tests – 2014 (Plasma Based) - Colon, Pancreatic

• Automated Cytogenetics Analysis System based on SVM

• Constant Stream of new Molecular Tests

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Strategic Approach

• Relentless Innovation “Precision Medicine”

• Process Improvements Reimbursement-pressured industry

• Flexible Business Model Dynamic market

• Segmentation Tailored customer demands

• Engaged culture Operational excellence

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Higher Productivity vs. Lower Reimbursement

(1) Productivity calculated as the average number of lab tests completed per month per laboratory FTE. (2) The expiration of the Medicare Technical Component (TC) Grandfather Clause took effect on 7/1/12 and resulted in an ~11% YoY Reduction in Avg Rev/Test.

47.3% 48.4% 46.1% 44.7% 44.6% 43.9% 44.5% 44.8% 45.2%

47.1% 47.2%

41.5% 43.2% 46.3% 45.9% 48.4%

50.0%

-23.4%

56.5%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Q

4 0

9

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Q2

12

Q3 1

2

Q4 1

2

Q1 1

3

Q2 1

3

Q3

13

Q4

13

Gross Margin % Cum Change in Avg Rev/Test(2) Cum Change in Productivity(1)

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Lower Costs and Higher Profitability

Operating Cost per Test & Adj. EBITDA Margin

$723

$642 $642 $671

$649 $618

$576 $565 $555

$531 $512 $526 $482 $478 $464 $466 $439

-12%

-1% -2%

-5%

0% -1%

5% 6%

8%

12%

12%

6%

10% 11% 12% 13%

15%

-15%

-10%

-5%

0%

5%

10%

15%

20%

$0

$100

$200

$300

$400

$500

$600

$700

$800

Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413

Cogs Cost/Test G&A Net of R&D Cost/Test S&M Cost/TestR&D Cost/Test Total Cost/Test Adj EBITDA Margin %

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Future Process Improvements

• “Digital Lab”

• Automated Platforms

• Lean Manufacturing

• Information Technology

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Strategic Approach

• Relentless Innovation “Precision Medicine”

• Process Improvements Reimbursement-pressured industry

• Flexible Business Model Dynamic market

• Segmentation Tailored customer demands

• Engaged culture Operational excellence

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Flexible Service Offering

• Cytogenetics

• Flow Cytometry --- Global or Technical Only

• Immunohistochemistry --- Global or Technical Only

• Digital Pathology --- Global or Technical Only

• FISH --- Global or Technical Only

• Molecular --- Individual genes, panels, Next Gen

• Information Technology, Informatics, Assay Development

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Technical-Only Services

• NeoGenomics performs either global or the technical

component (and our partners perform the professional

component)

• Allows Community & Hospital-based pathologists to be involved

• Extensive menus for IHC, Flow Cytometry and FISH

• Extensive training and client education available

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Flexibility through Facilities and Coverage

Sales Representatives Facilities

Irvine, CA

25k sf

Ft. Myers, FL

49k sf

Nashville, TN

5k sf

Tampa, FL

6k sf 27 Sales and Business

Development Professionals

covering the U.S.

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Information Technology Flexibility

20

Online Ordering

• Request Orders Online and reduce overall error rates and increase Specimen Tracking and Logistics Visibility

• Integration of 3rd party utilities to streamline redundant processes and capture all necessary patient data in a centralized location

Remote Printing

• Remote accessioning capability

• Increased efficiency

Testing Alerts

• Faxing, Email and text notifications.

Bar Coding

• Sample tracking with bar codes

• Track specific Specimens with Bar-coding labels while supporting Specimen Tracking Needs

System Integrations

• System integrations/interfaces with EMR/EHR systems

• Capability of interfacing with Clients EMRs to maintain contiguous and closer to real time patient updates

• EMR Orders may be linked to the Online Orders Request to minimize redundancy

Web Based LIS System

• Software customizable to your workflow.

• Scalable as your practice grows.

Report Capabilities

• Interfacing of results via HL7 (any proprietary system)

• Secure Batch transmission of PDF reports

• Comprehensive Report Building pulling different methodologies into one page summary report.

• Available with any testing referred to Neo, not just bone marrow samples.

Access Control

• User Access Control (granular system access per user)

• Granular Client Access (Covance & Covance Sub Clients)

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NeoGenomics - Current Market Share

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More Industry Consolidation Dynamic Market

• Less than 5 publicly traded cancer Genetic Labs left in the U.S.

Date Acquiror Target Value Value/Revenue

6-12 LabCorp MEDTOX $250 2.2x

10-11 Miraca Caris Life Science 725 3.5x

3-11 Quest Celera 344 2.4x

2-11 Quest Athena 740 6.7x

1-11 Novartis Genoptix 470 1.6x

11-10 Sonic CBL Path 124 1.5x

10-10 GE Clarient 580 5.3x

9-10 LabCorp Genzyme Genetics 925 2.5x

Transactions – since 2010

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Strategic Approach

• Relentless Innovation “Precision Medicine”

• Process Improvements Reimbursement-pressured industry

• Flexible Business Model Dynamic market

• Segmentation Tailored customer demands

• Engaged culture Operational excellence

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Segmentation by Customer Type

Pathologists & Hospital Pathology Groups

• Sophisticated tools and tests to enable community Pathologists to practice

• Web-based Lab System & Innovative technical component (“tech-only”) services

• Ability to offer one-stop-shop cost effective testing

• Extensive training programs

Oncologists & Clinician Groups

• State of the art testing menus

• Comprehensive Disease Profiles

• Electronic interface to EMR Systems

Clinical Trials for BioPharma Industry

• Exclusive partnership with Covance to offer comprehensive WW clinical trials lab testing

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Segmentation by Customer Type

NEO

Pathologists

Large Systems

Other Clinicians

Managed Care

Academic Centers

Oncologists Hospitals

BioPharma

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BioPharma Segment

• Leverages Pathologists expertise, Lab systems, Tech-only

model, comprehensive menus for new segment.

• Ability to expand into world-wide markets

• Potential for developing companion diagnostics

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Strategic Approach

• Relentless Innovation “Precision Medicine”

• Process Improvements Reimbursement-pressured industry

• Flexible Business Model Dynamic market

• Segmentation Tailored customer demands

• Engaged culture Operational excellence

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Values

Quality

Integrity

Accountability

Teamwork Employee Focused

Customer Focused

Results Focused

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Employee Satisfaction

Employee Survey

Results

2010 2011 2012 2013

Total Survey

Respondents 170 253 252

Overall Satisfaction 72% 81% 82% 91%

Would recommend Neo

as a good place to work 78% 92% 87% 90%

Willing to give extra

effort to help Neo

succeed

97%

Employee Retention 66% 79% 81% 86%

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NeoGenomics Share Perfomance

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32 NASDAQ: NEO

THANK YOU!