NeoGenomics, Inc. Announces Revolutionary New 'Tech-Only FISH' Service For Pathologists

FT. MYERS, Fla., Dec. 18 /PRNewswire-FirstCall/ -- NeoGenomics, Inc. today announced that it has unveiled a "technical only (Tech-only) FISH" service aimed at pathologists across the country. This service allows pathologist customers to participate in the revenue stream derived from fluorescence in-situ hybridization (FISH) testing by letting them professionally analyze and interpret FISH test results on specimens where the technical component of such testing was performed at NeoGenomics Laboratories.

Robert Gasparini, the Company's President and Chief Scientific Officer, had the following to say, "Our Tech-only FISH product is the first of its kind in the nation and we expect that it will significantly change the way FISH testing services are performed in the U.S. FISH is currently one of the fastest growing genetics tests in the country, and by designing a product offering that allows pathologists to partner with us and participate in the revenue stream, we believe we can further accelerate the adoption rates for FISH. Over the last 3-4 years, FISH has become a valuable tool and widely accepted technology in diagnosing cancers. Until now, pathologists really had no way to participate in this revenue stream unless they were willing to open up a full-service, high-complexity, CLIA-certified FISH laboratory with a significant investment in expensive equipment and then staff it with highly-trained and nationally-certified genetic technologists. With our new product, we can help pathologists enter into the FISH market by teaching them to interpret the technical results that come out of our laboratory. Thus they can enter the market and participate in a meaningful part of the revenue stream without incurring the significant up front costs of setting up and operating a genetics-testing laboratory."

Mr. Gasparini went on to say, "The value proposition of this new Tech-only FISH service is compelling for pathologists. A typical FISH test ordered by a physician involves looking for an average of 3.5 genes using specially designed FISH DNA "probes". The Medicare reimbursement for the professional component of FISH testing is approximately $70 per probe, depending on the State in which the service is performed. Thus, a pathology practice can make incremental revenue on average of approximately $245 per FISH test by performing the professional component themselves. This means that an average size pathology practice, sending out 100 FISH cases per month, can pick up an extra $24,500/month of revenue by participating with us in this new product and incur very limited incremental costs."

"Even more important than the economics, however, is the fact that our interests are much more closely aligned with the interests of our pathologist customers. For years there has been a growing tension between the impersonal mega-laboratories and the local pathology practices which control large numbers of specimens. In many cases, these larger laboratories have sought to by-pass pathologists altogether and go directly to the end physicians who order the tests. Indeed, the larger laboratories seem to be in a race to the bottom with one another. As they bid more and more aggressively against one another to win the large managed care contracts, the only way they can hope to make money is to dramatically increase their volumes. Unfortunately, for a lot of pathologists, this practice has resulted in many of the larger labs by-passing them and going directly to their customers in order to control 100% of the testing revenue. Thus pathologists have increasingly begun to think of certain larger lab vendors as more competitors than partners. Our new product addresses this issue head on. NeoGenomics wants to partner with our pathologist customers, and we have no interest in stealing any of their customers."

Mr. Gasparini finished by saying, "In my last position before joining NeoGenomics, I was part of the team that introduced the tech-only flow cytometry product nationally. This product dramatically increased adoption rates for flow cytometry testing, and today it is the norm in the industry. We believe that Tech-only FISH will undergo a very similar adoption curve. Although we began beta testing this product 10 months ago, we just started to roll it out formerly last month to all of our pathology customers. I am happy to report that virtually 100% of our existing customers have embraced this partnership model and this new product has allowed us to pick up five new customers in the last month alone. In addition to our Tech-only FISH product, our previously announced Genetic Pathology Solutions (GPS) product is also being warmly received by customers. The GPS product involves a much more extensive sales process, but we have already picked up seven large oncology practices since announcing it in late September."

Steven Jones, the Company's Acting Chief Financial Officer, commented, "If you liked the GPS product, you are going to love the Tech-only FISH product. We are seeing faster adoption rates for this product than any other new product we have ever launched. When we perform only the technical component of FISH testing we are still able to generate approximately $400 - $500 of revenue per test, depending on the number of genes for which we are testing. Thus, although we are partnering in the overall revenue stream, we are still able to generate average revenue per test that is close to our overall corporate average. More importantly, we are able to maintain 50-60% gross margins on this technical component of FISH testing. As a result, we believe this product will enable us to significantly increase our testing volumes and revenue without materially impacting the economics of our business."

Mr. Jones went on to say, "I am also pleased to report that our reference lab business has now stabilized. As we have previously discussed, our customer mix began to evolve after we launched the GPS product and certain reference labs began to significantly reduce their volumes with us because of a perception that we are now competing with them. Our revenue from reference labs bottomed out in October at a level that is about 35% of what it was earlier in the year. We saw a modest increase in reference lab revenue in November and December looks to be on par with November."

Mr. Jones continued, "Although our reference lab revenue has now stabilized, we expect that it will be down approximately $200,000 in the fourth quarter from where it was in the third quarter and down approximately $600,000 from where it was in the second quarter. This further decrease in Q4 is because it took until early October for this revenue stream to fully bottom out and thus the fourth quarter will have three full months of minimal reference lab revenue, whereas in Q3, it was still declining monthly throughout the quarter. In total, this customer mix evolution after the introduction of GPS has resulted in approximately $1.0 million less revenue from reference labs in the second half of the year than what was expected earlier in the year. However, even with this impact, we still expect that our revenues for FY 06 will come in at approximately $6.5 million which is the midpoint of the guidance that we released in July of this year and that our fourth quarter revenues will be up sequentially 10-15% from where they were in the third quarter. This effectively means that the growth in the rest of our non-reference lab business has now fully made up for the lost revenue from reference labs, which we believe speaks volumes about the strength and growth trends of the rest of our business.

As we discussed in our Q3 earnings release, we expected that the introduction of the GPS product would negatively impact our revenue from reference labs, and we consider this disruption to be largely non-recurring in nature. We consciously chose to begin refocusing our business model on higher margin oncology, pathology and urology customers in Q3, and we subsequently developed two new compelling products to facilitate this transition. As a result, we now have a considerably higher percentage of our total revenue derived from these types of customers than just six months ago. This is a very positive development for our business and our shareholders. In addition to being higher margin customers, they are significantly less prone to switching than the reference lab customers. Furthermore, we have many more numbers of customers than we did earlier in the year and thus we have no where near the exposure to customer concentration issues that we did just six months ago. While this customer mix evolution occurred much faster than we originally anticipated, the good news is that we are now largely through it and revenue growth in future quarters should no longer be impacted by this negative influence."

Mr. Jones finished by saying, "With respect to net income for FY 06, we are withdrawing our previous guidance issued in July of this year. During the third and fourth quarters, we became aware that some extremely talented individuals from one of our larger laboratory competitors were beginning to seek employment elsewhere. Rather than let these individuals go to another laboratory, we decided to advance our 2007 hiring plans and take advantage of this rare and golden opportunity. As a result of the evolution of our customer mix impacting our revenues, the additional costs we incurred to launch two new products, and the advancement of our 2007 hiring plans into Q4 06, we expect that fourth quarter earnings per share will either be flat or a loss of $0.01/share. Thus we expect our full year earnings per share for FY 06 will differ from previously released guidance by approximately $0.01 - $0.02 per share as well. Although these impacts are going to negatively affect our net income in the fourth quarter, we expect that our overall amount of net income will still remain positive for the full year FY 06 and our new products and new personnel should allow us to scale our business much faster in FY 2007. Indeed, we expect to post considerably stronger results as early as Q1 07 as our new products and personnel begin to favorably impact our business and the normal seasonality trends in our South Florida business begin to work in our favor. Furthermore, we are reiterating our previously issued FY 2007 revenue and earnings guidance at this time."

About NeoGenomics, Inc.

NeoGenomics, Inc. is a high-complexity CLIA-certified clinical laboratory that specializes in cancer genetics diagnostic testing, the fastest growing segment of the laboratory industry. The company's cancer genetic testing services include cytogenetics, fluorescence in-situ hybridization (FISH), flow cytometry, morphology studies, anatomic pathology and molecular genetic testing. Headquartered in Ft. Myers, FL, NeoGenomics has labs in Nashville, TN, Irvine, CA and Ft. Myers and services the needs of oncologists, pathologists, urologists, hospitals and other reference laboratories throughout the United States. For additional information about NeoGenomics, visit http://www.neogenomics.org.

Interested parties can also access additional investor relations material, including an in-depth equity research report, from the American Microcap Institute at http://www.americanmicrocapinstitute.com/ngnm/ or from Hawk Associates at http://www.hawkassociates.com. An investment profile about NeoGenomics may be found at http://www.hawkassociates.com/ngnmprofile.aspx.

Forward Looking Statements

Except for historical information, all of the statements, expectations and assumptions contained in the foregoing are forward-looking statements. These forward looking statements involve a number of risks and uncertainties that could cause actual future results to differ materially from those anticipated in the forward looking statements, including, but not limited to, the Company has incurred significant losses since its inception and has experienced negative operating margins and negative cash flows from operations, any adverse effect or limitations caused by governmental regulations, the company's ability to attract and retain qualified personnel, to initiate and develop client relationships, to gain market acceptance of service offerings, as well as other risks described from time to time in the company's filings with the Securities and Exchange Commission. Although the Company has used its best efforts to be accurate in making those forward-looking statements, there can be no assurance that the assumptions made by management will materialize. In addition, the information set forth in the Company's Form 10-KSB for the fiscal year ended December 31, 2005 describe certain additional risks and uncertainties that could cause actual results to vary materially from the future results covered in such forward-looking statements. The company undertakes no obligation to publicly revise or update the forward-looking statements to reflect new information, subsequent events or otherwise.

CONTACT: Investor Relations: Steven C. Jones, Director of InvestorRelations of NeoGenomics, Inc., +1-239-325-2001, sjones@neogenomics.org; orFrank N. Hawkins or Julie Marshall, both of Hawk and Associates, Inc. forNeoGenomics, Inc., +1-305-451-1888, info@hawkassociates.com

Web site: http://www.neogenomics.org/