Leerink starts Neogenomics at OP; PT $18

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Leerink initiated coverage of Neogenomics (NASDAQ:NEO) with an “outperform” rating and price target of $18. The stock closed at $12.84 on August 20.

Analyst Puneet Souda writes that Neogenomics is a “uniquely positioned one-stop shop oncology testing service provider, with faster turnaround times versus its competition and a tech-only model that has helped it grow to the current levels.” 

Mr. Souda expects the company to deliver a 13% compound annual growth rate in sales and about 25% adjusted earnings EBITDA growth over the longer-term. 

“We see value in Neogenomics’ faster-growing (about 20% year-over-year) biopharma services business (about 10% of sales) that has the potential to grow much larger, given broader demand from oncology and immunotherapy clinical trials seeking biomarker screening, assay development and potentially companion diagnostics longer-term,” he added.

Mr. Souda said Neogenomics continues to deliver mid-teens growth in oncology testing volumes that account for about 90% of its business – countering years of price declines that appear to be stabilizing. 

“We view Neogenomics’ efforts to develop a single-site FDA-approved multi-gene panel as a longer-term call option that is much in-line with its strategy to bolster the biopharma services business,” he added.

Stephen Kilmer