NeoGenomics to acquire Inivata for $390M as Q1 revenues grow 9 percent

NeoGenomics on Wednesday reported a 9 percent year-over-year rise in its first quarter revenues driven by growth in both its clinical and pharma services segments.

Separately, the firm announced that it has agreed to acquire the remaining equity stake in liquid biopsy startup Inivata for $390 million.

For the three months ended March 31, Fort Myers, Florida-based NeoGenomics recorded revenues of $115.5 million compared to $106.0 million a year ago, beating the consensus Wall Street estimate of $112.4 million.

Clinical services revenues grew 4 percent to $96.5 million from $93.0 million a year ago.

Within clinical services, test volume (excluding requisitions, tests, revenue, and costs for pharma services and COVID-19 PCR tests) grew 4 percent year over year to 260,941 from 250,376 a year ago. The number of requisitions received were up about 5 percent year over year to 151,145 from 144,319. Average revenue per test decreased about 2 percent to $364 from $371.

Meanwhile, pharma services revenues grew 46 percent to $19.0 million from $13.0 million a year ago, driven primarily by an increase in revenues related to clinical trials and informatics.

“Our pharma division’s unique and extensive testing and technology offering has clearly resonated in the market, as we have now worked with multiple clients, including each of the top 25 largest biopharma companies in the world,” Douglas VanOort, executive chairman of NeoGenomics’ board of directors, said during a call with investors following the release of earnings. “Our ability to serve our customers, with the addition of Inivata’s liquid biopsy technology … positions us for broad testing leadership in oncology diagnostics.”

VanOort, who retired as NeoGenomics’ CEO in April, also noted during the call that chief medical officer Lawrence Weiss has resigned from the firm “to pursue other interests.”

“We’re grateful to have had Dr. Weiss as our chief medical officer and as part of our company. He became [CMO] as part of the Clarient acquisition a number of years ago,” VanOort said. “We have, in our company, about 120 MDs and PhDs all focused on oncology. So we have … a very capable [group of] medical directors and leaders in our company.”

NeoGenomics posted a net loss of $22.1 million, or $.19 per share, for the quarter, compared to a net loss of $7.0 million, or $.07 per share, a year ago. On an adjusted basis, NeoGenomics reported a loss of $.04 per share, falling short of the consensus Wall Street estimate of a gain of $.01 per share.

For Q1 2021, NeoGenomics’ research and development costs rose 19 percent to $2.5 million from $2.1 million a year ago. Its selling, general, marketing, and administrative expenses rose 9 percent to $54.2 million, up 9 percent from $49.6 million in the year-ago quarter.

NeoGenomics finished the quarter with $612.0 million in cash and cash equivalents.

Inivata acquisition
NeoGenomics also announced Wednesday that it has agreed to acquire the remaining stake in Inivata for $390 million. The acquisition follows a $25 million minority equity investment by NeoGenomics in Inivata last May.

The acquisition will be funded with balance sheet cash and through a $200 million private placement of equity led by a group of institutional investors consisting of legacy shareholders, existing NeoGenomics investors, and a “number of leading oncology-focused specialist investors,” NeoGenomics said in a statement. The private placement provides for the sale of 4.4 million shares of NeoGenomics’ common stock at a price of $45 per share and is expected to close concurrently with the acquisition in June 2021.

Inivata is currently developing two liquid biopsy assays, InVisionFirst-Lung for advanced lung cancer detection and RaDaR for minimal residual disease detection, on its InVision platform.

As part of the acquisition, Inivata will become a liquid biopsy-focused division alongside NeoGenomics’ clinical, pharma, and informatics divisions, and current Inivata CEO Clive Morris will become president of Inivata and report to NeoGenomics CEO Mark Mallon.

“NeoGenomics has spent the better part of the last year working in partnership with the exceptional team of professionals at Inivata while conducting confirmatory due diligence on the business and its world-leading liquid biopsy platform technology,” Mallon said in a statement. “We are exercising our option to purchase Inivata eight months ahead of plan at what we believe is an attractive value in today’s M&A marketplace for liquid biopsy companies.”

“Our two organizations have highly complementary capabilities … and we are excited to combine with NeoGenomics following a successful year of working together,” Morris said in a statement. “By leveraging our combined resources, we expect to accelerate the development of our promising RaDaR minimal residual disease assay and bolster commercialization efforts with biopharma before driving a successful launch into the clinical setting.”

NeoGenomics also acquired Trapelo Health in March for $65 million, with plans to offer the firm’s clinical decision support system to providers, payers, and labs to help precision oncology across all healthcare settings.

In April, NeoGenomics partnered with Amgen as part of a new program to expand biomarker testing access to all advanced or metastatic non-small cell lung cancer patients. Genome Web