I haven't posted for a long time but have held steady with my investment here. The co. has such a long history of missteps that none of the recent good news is convincing to me and apparently to investors in general. That said, the recent news (revenue, drug outcomes and NDA) will eventually lead to a more consistent and increasing revenue stream. Oncologists don't ignore ASCO findings. The co. will simply have to show the street "the money" to convince all that it is worth more.
Jones still owns or has rights to own 3.5 million shares. the 346K shares are personally owned by him and his wife (in trust) and by a fund he owns, but he has many more shares noted in a filing from Dec 2012. Steve is not stupid, sells shares about once a year, and the current sale is less than 2% of his holdings and options.
The bottom line for outpatient service providers, like me, is a 16.7% decrease in reimbursement levels. I haven't found the section on lab services and don't know the codes, so will wait until sharper eyes weigh in on the fees that affect NEO.
If you all have not been tracking this, the Center for Medicare Svcs intends to announce medicare part B reimbursement schedules for Calendar Year 2014 on 11/27 (tomorrow). As a part B provider who is keeping his ears to the rail, there is a VERY negative tone amongst my professional peers just because of the timing (The day before Thanksgiving at the end of the day, with no access to markets or legislators after the announcement), and I suspect the market has a similar negative view of this strategy as well; CMS is "slipping us bad news when the fewest possible people will be looking.
Good catch hgrvy. 16% of co.'s revenue is significant and effectively represents our growth rate. If the CVD is modest, this will be a wash, but I suspect that the CVD deal will be worth much more than $2.5 million per quarter. I'm thinking that it will be worth at least $10 million/quarter by Q2, 2014 when the contract terminates.
I agree with both of your (yags and hgrvy) responses to a point. CVD was so specific in the announcement (and note, the announcement came from them, not NEO) that I have a sense of confidence that I have not had in the past. Consider, CVD is a big player in the CRO space and they can charge premium prices (compared to insurance reimbursement) for their lab services. I cannot but think that this means that NEO will also get a premium in reimbursement for their services and this will serve both to add to profitability AND buffer them from the uncertainty of medicare reimbursement. The deal essentially diversifies NEO's business in a VERY positive way.
The lack of market response to the Covance deal is interesting but not concerning to me. The following are simply musings but I think might have significant credence.
1. Knowing mgmt. like I do, this deal would not have been signed and announced without specific protocols ready to start. Recall that VanOort stated clearly that the CRO business would have an impact on 2014, with an increasing impact as the year progressed. My read is that some business will ensue immediately, and that there will be a build out of lab space, with attendant increased business as the build out is completed. My guess is that NEO will benefit from this in an additional way, as they will have more space and infrastructure to provide more CLINICAL services as well. Remember, the announcement included worldwide sites for collaboration and buildout.
2. Covance is a mid-cap co. by market cap, but 30X larger than NEO. They have $320 million in cashflow and over $136 million in free cashflow. It is not out of the question that CVD is using their money and market makers to accumulate NEO stock to become a beneficial owner ( 5%) before the end of the quarter when they would have to announce. If this is the case, I would expect quite a pop if/when such an announcement is made.
3. NEO is, right now, a tiny fish in the genetics testing/lab marketplace. The CVD deal will make them a small fish, but one with some bonafides. Pure speculation, but if the CVD deal runs the course I would expect, NEO's revenues will be closer to $200 million in 2015 rather than $125 million (which is simply MY estimate given their growth history.)
An announcement like this will surely come with either new coverage and/or upgrades with increased price targets. Covance does $2.3 billion in business, if we can capture, just 5% of the business, it will be worth north of $100 million.
HUGE win!!!. Van Ortt and his team are delivering on the promise that research-based revenue stream WILL be a part of 2014 and a growing part of 2014. Great diversification with GREAT partner!
I had an extra $100 sitting in my vanguard account, so bought a small position in HDC today. In fact, my purchase of 2300 shares was the only trade for the co. today. Just a little side bet on NEO's ability to make SVM technology work. If it does, HDC should pop to about .50-1.00/share, and I'll take my winnings. If not, $100 is not that much to wager.
Always a risky kind of investment, just hope for all of our sakes that the SVM technology pans out, it will be a win for all of us.
I do not follow HDVY-HDC at all with the exception of some surface review of their business and reports, but have to say that, upon closer inspection, they are a clusterf$#k from a board standpoint which translates to an operational standpoint as the co. is little more than a group of genetics experts, fractal math experts and computer programming experts. The last 8-K form presented to shareholders on 10/17/13 is a real funny read and it looks like the co. has only one egg, and its in our basket. I sure hope that Bob, Steve and the rest of management got to HDC while they were still thinking clearly, and that Dr. Albitar understands what they do (I suspect that THIS is the key upside as I'm sure Dr. Albitar is the one who saw the real potential for the HDC algorithms for diagnostics) because the 10/17/13 8-K reads like a bunch of teenagers who are throwing insults at eachother. Angelamlsu, I hope that you got in CHEAP!
You all are too kind with all the compliments. I really don't know the specifics regarding the SVM technology but agree that Dr. Albitar appears to have the knowledge base and wearwithall to take what is effectively a mathematical model of genetics data and make it worth a clinical application. How much is it worth? Well, if it saves clinical time and money, is sensitive and specific, and is robust enough to be stand alone (read here that it is tough enough to crack that other companies won't figure out their own way of doing the same thing without buying a license), then the licensing will be attractive and the revenue will be significant. Nothing on the order of 100's of millions, but certainly in the 10's of millions range, given the size of the industry. When you can add that kind of revenue without any real cost, it runs right down to the bottom line. It also distinguishes the co. as having something unique besides a good clinical lab practice, and THAT will have an impact on share price.
Not that I go in much for conspiracy theories, however, market makers for our co. may be wanting to accumulate as many shares as possible to try to make the most of the pop. Having a second day of 10X normal volume is a VERY good sign, in general, I'd love to see some follow through tomorrow. If that happens, the breakout might be significant.
Two things strike me as potential miniblockbuster additions to our bottom line. First, while the co. has been touting work with big pharma in the past, nothing has really materialized. Now, Gasparini is now publicly stating that there WILL be a revenue stream moving forward and further, the revenue stream will accelerate during 2014. Second, the development of the proprietary Support Vector Machine (SVM) technology, if it works right, will be a revenue stream INDEPENDENT of the clinical work that the co. has. If this is worth it, other co.'s will pay for it as it will add significant cost savings in-house.
Hi old friends. What follows are the highlights from today's CC that I jotted down: Feel free to chime in with yur thoughts:
-30 new molecular tests and profiles in 2013,
-70 new molecular tests since 2012,
-Essential focus-Cancer profile 20 new tests within next year, both concise and comprehensive; concise based on NextGen, and Sanger Sequencing,
-New testing technologies: developing NexGen for clinical use in next several months and Beta testing of their proprietary Support Vector Machine (SVM) technology that automates cytogenetic testing. If it works, they look at licensing technology out.
-Expect increase in clinical trial presence in the next quarter, with increasing revenue starting Q4, then acceleration of revenue in this segment as 2014 progresses
-Proprietary Test Development: Prostate test via blood plasma and urine: Diagnosis and distinguish between high grade vs low grade Ca’s. Currently in phase II of clinical trials; expect launch in first ½ of 2014.
-Test volume growth back up after 4 quarter slowdown
-Update on medicare: Seeks to change both lab and physician schedule, most important for NEO is the physician end. Co and industry has been very active in opposing and there has been strong opposition in general. A total of 10,000 letters and petitions. Letters from congress with over 100 congressional signatures were also sent to CMS. Decision is supposed to come from CMS in Nov, 2013.
-Financials-TC grandfather clause over
-Gross margins 48.2%
-Cash on hand $4.9, $7.3 of credit = $12.2 million available cash
-Paid down $672,000 in credit and still raised cash on hand
-New molecular fee schedule will increase revenue for genetics fees by 10% starting Oct.1st
-CMS “Albatross” and plans: Binary decision point, plans in the event it goes through-cost cutting, otherwise, just executing the business plan.
-NexGen platform: Driver genes driven by therapeutic market and latest literature
-Revenue growth from new tests from 2013; ½ of growth in Q3 is from tests new in last 18 months.
6-8 new sales staff in 2014, including 2 new clinical trials reps expected to be hired.
Agree with both of you. Any new news of business development (e.g. new business partnerships or acquisition of labs) will further add to our increasing value.