NeoGenomics Laboratories (NEO 3.07%), the leading oncology testing company, reported strong growth in the fourth quarter but gave muted profit guidance for the next quarter, and shares fell 10%. Revenue increased 39.7% to $106.9 million, and the company earned $0.06 per share, compared with break-even results in the period a year ago. Analysts were expecting the company to earn $0.06 on revenue of $104.2 million.

Revenue from the company's clinical services division, which provides laboratory services for oncologists, pathologists, and hospitals, increased 41.7% to $93.4 million. The pharma services division, which supports research and development by pharmaceutical companies, grew revenue 27.5% to $13.5 million, and reported an increase in backlog of 31.8% to $130.3 million. Much of the overall revenue growth came from an acquisition, but the company said in the conference call that organic revenue growth exceeded 20%.

NeoGenomics has been investing in its capabilities to offer next-generation gene sequencing, which is increasingly being used in precision medicine to identify cancers and determine the best treatment. The company highlighted particular strength in next-generation and molecular testing, which grew 50% in the quarter and helped grow clinical division revenue per test by 11%.

Image of a DNA molecule in a test tube.

Image source: Getty Images.

NeoGenomics forecast full year 2020 revenue between $464 million and $474 million, 15% growth at the midpoint and above the analyst consensus estimate of $448 million. But CEO Doug VanOort said that profits in the first quarter will be significantly below what the company would normally expect, due to the timing of some large projects by pharma customers that won't be starting up until late March or April.

Profits will also be reduced as NeoGenomics invests in a newly formed informatics division, which will provide clinical decision support to physicians treating cancer patients, and will create a new source of revenue beginning later this year for this leader in the precision treatment of cancer.