Fort Myers-based NeoGenomics takes action to rebuild itself

·5 min read

NeoGenomics has laid the foundation for rebuilding itself.

But it has a lot more work to do.

That's the takeaway from the local company's second-quarter earnings call on Tuesday.

The Fort Myers-based cancer-focused testing and research lab reported losses of more than $35 million, or 28 cents a share, in the quarter, as it continued to face operational challenges and higher costs.

After adjustments for one-time gains and costs, losses still came in at 16 cents a share.

Yet, the struggling company had some significant accomplishments in the quarter. That included finding and hiring a new CEO — checking off the publicly-traded company's top priority.

in case you missed it: Fort Myers-based NeoGenomics names new CEO at pivotal time

More: NeoGenomics sees rough first quarter and sees 2022 as a 'rebuilding year'

And: Fort Myers-based NeoGenomics announces departure of CEO after disappointing quarter

NeoGenomics’ new Global Headquarters
NeoGenomics’ new Global Headquarters

The new CEO Chris Smith, an industry veteran, starts Monday, in what has been described as a rebuilding year for NeoGenomics.

In the latest earnings call, Lynn Tetrault, who has served as interim CEO, gave an update on the state of the business and discussed its top priorities.

She shared that NeoGenomics has already made "excellent progress" on its second priority — to stabilize its leadership team and its "workforce as a whole, with the addition of "exceptional talent" in recent months.

"The leadership team and I have prioritized visible leadership and meaningful engagement with our people at all levels. I am confident that the organization is stabilized, and that the leadership team is motivated, aligned and stronger than ever," she said.

As for its third priority, to improve operational performance, the company has now developed a plan to drive betterment over the next 18 months. That plan is called Project Catalyst.

"We have already taken several near-term actions that I would describe as “no regrets” type changes that any new executive would agree are necessary," Tetrault said.

Lynn Tetrault
Lynn Tetrault

An example of one of those necessary changes? Introducing automation into the company's laboratory processes, which has already resulted in productivity gains, Tetrault said.

As the company launches more comprehensive Project Catalyst initiatives, she said, the new CEO will be "heavily involved."

The plan focuses on four key areas: Lab optimization, people and capabilities, competitive growth and insights and analytics. Each area, or pillar, will be overseen by a leader on the executive team.

"Over the past two months, we have engaged employees at all levels to identify initiatives to drive improvements in efficiency and effectiveness in these key areas. We have identified a number of critical projects, each led by an internal 'change agent,'" Tetrault said.

The leadership team is still evaluating initiatives, developing project plans and figuring out timing.

"Some projects are already underway, and others will kick off in the coming months," Tetrault said.

While assisting with the CEO transition, Tetrault will resume her role as an independent chairwoman of the company's board.

On the earnings call, she introduced the new chief executive Smith, who she described as the company's  "most exciting development."

With more than 30 years of experience in the health care sector, Smith, 59, most recently served as CEO of Ortho Clinical Diagnostics, a global provider of tests for screening, diagnosing, monitoring and confirming diseases.

"Chris stood out from the others because of his dynamic and inspiring leadership style. What especially impressed us is how mission-driven and patient-focused Chris is, coupled with his passion for leading through people and culture," Tetrault said.

In his brief comments on the call with analysts, Smith described NeoGenomics as "ideally positioned to bring world-class cancer care to where it is needed the most."

"As I join NeoGenomics officially on Monday, I plan to spend the next few months out in the market with customers, patients and our teammates, both in our laboratories and in the field, to gain a deep understanding of the flow of our business. I am excited to get started," he said.

In late March, NeoGenomics announced Mark Mallon stepped down as its CEO and as a member of its board — "effective immediately."

At the same time, the company revealed it had seen a rough start to the new year, as the first quarter drew to a close.

The board hired Russell Reynolds, a leading executive search and leadership advisory firm, to help find Mallon's replacement.

NeoGenomics faced many challenges last year, namely the departure of its longstanding chairman and CEO, continued disruptions from COVID and shifting dynamics in the marketplace.

In the first quarter of this year, the company reported wider losses of $49 million, or 40 cents a share, which it attributed primarily to operational challenges and higher costs, largely driven by "significant wage and supply cost inflation."

The company faced the same difficulties in the second quarter. Operating expenses increased by $8 million, or 11%, over the year.

On a bright note, Bill Bonello, NeoGenomics' chief financial officer, said in the call that the company has the ability to pass on some of its higher costs caused by inflation.

"We anticipate that we will see some benefit from price increases during the second half of the year," he said.

Consolidated revenue increased 3% to $125 million in the second quarter, beating analysts' expectations.

In addition to higher operating costs, NeoGenomics took a hit from charges related to its acquisition of Inivata, resulting in a loss.

Inivata, a  leader in liquid biopsy, continues to operate as a separate division alongside NeoGenomics' clinical, pharmaceutical and informatics divisions.

Adjusted losses for the second quarter came in 6 cents lower than a Zacks Consensus Estimate of 22 cents.

Since the quarterly earnings announcement, shares have traded higher, settling at $12.73 on Wednesday, up 85 cents from the previous close.

Shares, however, have lost more than 70% of their value over the past year, according to an analysis by Yahoo Finance.

Founded in 2001, NeoGenomics handles testing for pathologists, clinicians, oncologists and hospitals throughout the country.

The company also offers biopharmaceutical and clinical trial services, serving drug companies and other enterprises seeking to develop new cancer treatments and therapies.

NeoGenomics has more than 2,100 employees at multiple locations in the United States and abroad, including its local headquarters and lab.

At the end of July, the company moved its last clinical testing operation from its previous lab in Fort Myers to its new multimillion-dollar global headquarters off Alico Road, just west of Interstate 75.

This article originally appeared on Fort Myers News-Press: NeoGenomics in Fort Myers has new leadership, plan to rebuild itself