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NeoGenomics Poised to Grow in 2013
By Grant Zeng, CFA
Visibility and Liquidity Increased Through NASDAQ Capital Market Listing
On December 6, 2012, NeoGenomics’ (NasdaqCM:(NEO)) common stock was approved for listing on the NASDAQ Capital Market and commenced trading on the NASDAQ Capital Market on December 10, 2012 under the new ticker symbol "NEO".
The transition to the NASDAQ Capital Market is a significant milestone for NeoGenomics and reflects the strong revenue and operating income growth the Company has achieved over the last several years. We think the upgrading is important to the Company and its shareholders in the following matters:
Trading on a NASDAQ Capital Market will raise the Company’s visibility and gain liquidity at the same time. NeoGenomics shares have been traded OTC for a long time. Trading OTC is often viewed as highly risky and less liquid to most investors especially to institutional investors. As a result, many institutional investors are restricted from buying shares traded OTC.
The successful upgrade to be listed in the NASDAQ Capital Market increases both visibility and liquidity of the Company. As a result, many institutional investors can buy its shares now.
Another way to attract institutional investors is through the inclusion in an index. After being listed on NASDAQ Capital Market, NeoGenomics could have the potential to be added into a small cap index, especially in a small cap biotech index. Inclusion in an index will further raise NEO’s visibility and liquidity. At the same time, NeoGenomics will be automatically included in some index funds which mirror the index which includes NEO. This makes NEO more suitable for a broader group of investors.
New FISH TEST Will further Stimulate Top Line Growth
On December 17, 2012, NeoGenomics, Inc. (NEO) announced that it has validated and launched a laboratory developed Fluorescent in Situ Hybridization (FISH) assay NeoSITE for the surveillance of patients with Barrett's Esophagus (BE). The test is highly sensitive for the detection of the presence of esophageal cancer or high grade dysplasia indicative of precancerous changes.
BE is a very large market for NeoGenomics. Approximately 3 million Americans suffer from BE in the United States, a condition which can be a precursor to esophageal cancer. Endoscopic examinations with multiple tissue biopsies to look for dysplasia and cancer have long been considered the standard surveillance procedure for BE patients. However, current data suggests that an esophageal "brushing" may be more effective than a traditional tissue biopsy, because it allows for the collection of cells from a larger area of the esophagus for testing, which results in less sampling error. Esophageal brushings are also generally easier and less costly to obtain than tissue biopsies.
NeoGenomics' NeoSITE BE FISH test was designed specifically to be performed on brushing samples and can be used as an objective and easier means to aid in routine surveillance of BE patients. The Company performed an extensive trial to validate this new test in which the test showed initial sensitivity of 86% and specificity of 67% when the Company's proprietary algorithms were used to assist with interpreting the FISH results. Reported sensitivity and specificity levels were even higher when brushing samples were obtained from nodules rather than pan-brushing.
With the commercial launch of NeoSITE, NeoGenomics becomes the first lab in the US to offer this important FISH test on a national basis. The new test will further grow its top line in the coming quarters.
There is Further Room for Share Price Appreciation
2012 has been a banner year for NeoGenomics (NEO). The Company’s shares reached all-time high on September 25 at $3.20 per share. Currently, NEO shares are trading at about $2.88 per share. The Company’s share price has more than doubled since we initiated our coverage on October 7, 2011 at $1.06 per share, an appreciation of 172%.
We think the momentum will continue in the coming quarters and share price could appreciate further in 2013. Our optimism is based on the fact that the Company has achieved strong financial performance in fiscal year 2012 and that continued success is widely expected for 2013 and beyond.
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