Shares of NeoGenomics (NASDAQ:NEO) gained 74% in the first six months of the year, according to data provided by S&P Global Market Intelligence. The company, which sells cancer-focused genetic testing products and services to pharmaceutical companies conducting clinical trials and drug development, reported strong full-year 2018 and first-quarter 2019 operating results.
That continuation of solid growth isn't too surprising considering the company's recent trajectory, but investors have been treated to multiple positive surprises in the first half of 2019. For example, NeoGenomics increased its full-year 2019 financial guidance after a strong Q1 performance. The business now expects total revenue of $384 million to $400 million and could squeak out positive net income for the year, although it was already delivering operating profits.
The cancer-focused genetic testing pioneer reported record quarterly revenue of $95.6 million in Q1 2019, which marked a 51% increase from the year-ago period. Gross profit soared 73% in the same span despite the fact that cost per test increased 5% due to the integration of the recently acquired Genoptix.
NeoGenomics also formed a collaboration with QIAGEN that provides a possible glimpse of the future in cancer diagnostics. The pair will offer a new companion diagnostic test developed by QIAGEN to detect PIK3CA mutations, which are estimated to occur in 40% of breast cancer patients with HR+/HER2- mutations. Mutations in the PIK3CA gene are associated with tumor growth and resistance to endocrine treatment.
The test is called a "companion" diagnostic because it aims to detect mutations and provide patients quick access to Piqray, a recently approved drug targeting PIK3CA from Novartis. NeoGenomics will be the preferred laboratory partner of the pharmaceutical leader when it comes to the companion diagnostic test.
If NeoGenomics achieves even the low end of its full-year 2019 revenue guidance, then it will mark a steep increase from previous years. The business reported revenue of $232 million in 2016, $240 million in 2017, and $276 million in 2018. The acquisition of Genoptix and its immediate contribution in Q1 2019 certainly gives investors confidence in the new growth trajectory. And the intriguing new collaboration with QIAGEN shows the business can use its genetic sequencing assets to provide access to third-party companion diagnostics. That sets the stage for a significant long-term growth opportunity.