NeoGenomics, Inc. (OTCBB: NGNM) Enters into Strategic Supply Agreement with Abbott for Development of a Melanoma Cancer Test

NeoGenomics, Inc. (OTC BB: NGNM), a leading provider of cancer genetics testing services has entered into a Strategic Supply Agreement with Abbott (NYSE: ABT). The Agreement provides for Abbott to supply materials for NeoGenomics to develop its own FISH (fluorescence in situ hybridization)-based test for the diagnosis of melanoma. In a separate transaction, Abbott has also acquired 9.6% of NeoGenomics common stock for $4.8 million.

Under terms of the Strategic Supply Agreement, NeoGenomics will evaluate and select from Abbott’s proprietary single FISH probes to develop and commercialize a test for melanoma diagnosis in the United States. Once the probes have been identified by NeoGenomics, Abbott will supply them (some on an exclusive basis) over the course of a ten-year term.  The agreement may be expanded, under certain circumstances, to include up to two additional tests for other cancers.

According to the American Cancer Society, approximately 68,000 new cases of invasive melanoma will be diagnosed this year in the United States. Melanoma typically starts as an abnormal mole on the skin and is easily cured if caught and removed early. Once it spreads to other parts of the body, however, it is particularly deadly. NeoGenomics intends to develop a FISH test to distinguish benign versus malignant melanoma. The goal for the new test is to provide the ability to more accurately diagnose malignant melanoma and provide more accurate prognostic information, thus assisting dermatologists in better managing patient care. 

“We are delighted to have entered into this strategic agreement with Abbott.  Melanoma is the most serious form of skin cancer, and its incidence continues to rise significantly. We are very pleased to have this opportunity to research, develop and offer a new genetic test to help clients better diagnose and treat patients who may suffer from melanoma,” said Douglas VanOort, Chairman and Chief Executive Officer for NeoGenomics.

With more than one million skin cancers diagnosed annually, distinguishing melanoma from other less severe forms of skin cancer is vital. In particular, it has been reported that current diagnostic tools and techniques for detecting cutaneous melanoma can be especially difficult in cases arising in association with a nevus (mole), and that 30-50% of cutaneous melanomas occur with an associated nevus. A FISH test for melanoma has the potential to improve existing diagnostic techniques in cases that are ambiguous, borderline or difficult to diagnose. NeoGenomics estimates that this new melanoma test represents a $50-$100 million annual revenue opportunity in the next 4-6 years.
 
“Influencing the existing cancer testing market in the US is a challenge, but all of us here at NeoGenomics believe the timing, scientific literature and market conditions are right for this new melanoma FISH test,” said Robert Gasparini, President and Chief Scientific Officer of NeoGenomics. “We believe this new melanoma FISH test will complement our existing portfolio of FISH products. We also believe dermatopathologists will have a high level of interest in offering this test to their customers.”
 
While this new test is still in the development phase, NeoGenomics currently anticipates bringing a FISH test to market in early 2010 after completing a rigorous validation process. In the event that Abbott develops and obtains FDA approval for its own FISH-based melanoma test, the Strategic Supply Agreement provides a means by which NeoGenomics may offer the FDA-approved test to its customers instead of the laboratory developed test being offered by NeoGenomics.
 
In addition to the Strategic Supply Agreement, NeoGenomics and Abbott executed a Common Stock Purchase Agreement and a Registration Rights Agreement pursuant to which Abbott has invested $4.8 million to acquire 3,500,000 common shares of NeoGenomics at a price of $1.362 per common share. These Agreements prohibit Abbott from selling or otherwise transferring its shares at any time during the 180-day period immediately following the closing of the transaction.
 
Company Overview
NeoGenomics, Inc. is a high-complexity, clinical laboratory that specializes in cancer genetics diagnostic testing, the fastest growing segment of the laboratory industry.  The company services oncologists, pathologists, and hospitals throughout the United States and offers four primary types of testing services: FISH testing (Fluorescence in situ Hybridization), which analyzes abnormalities at the gene level; cytogenetics testing, which analyzes human chromosomes; flow cytometry testing, which analyzes clusters of differentiation on cell surfaces, and molecular testing, which analyzes abnormalities in DNA. NeoGenomics state-of-the-art genetic testing is provided at three facilities in Ft. Myers, Florida; Nashville, Tennessee; and Irvine, California.   Each of NeoGenomics’ laboratories is fully licensed under the Clinical Laboratories Improvement Act, as amended (CLIA), and is accredited by the College of American Pathology (CAP).  NeoGenomics is competitive through intense client focus, differentiated products and markedly faster turnaround times.
 
NeoGenomics Primary Services

1.  Cytogenetics testing is the study of the structure of chromosome material:

•  Acute Leukemias, lymphomas, chronic myeloid, and lymphoid disorders are examined cytogenetically in order to establish the exact nature of the acquired genetic change
•  Turnaround time: 3-5 days vs. industry Avg of 7-10 days
   

  2.    Fluorescence in situ Hybridization (FISH) testing includes the following:

• Bone marrow testing for hematological cancers such as leukemia and lymphoma
• Solid tumor testing such as HER2 for breast cancer, UroVysion for bladder cancer, and cervical cancer testing
• Lymph node testing
• Peripheral blood testing
• FISH Turnaround Times: 24-72 hours vs. industry Avg of 3 – 5 days

 
  3.    Flow cytometry testing is a rapid way to measure the characteristics of individual cells:

• Hematopoietic cells (blood, bone marrow, core biopsies, lymph nodes) are labeled with selective florescent antibodies and quantified according to their antigens
• Turnaround time is 12-24 hours vs. industry average of 24-72 hours

 
Competitive Advantages

• Fastest turnaround times in the industry
• Highly focused, after-test support to physicians requesting consultation
• Differentiated products provide significant advantage versus competition.
• Advanced testing algorithms expedite accurate diagnostic and prognostic genetic test results
• Laser focused on addressing the cancer genetics market, the fastest growing segment of the laboratory testing industry

 
Genetics Testing Market

• Medical testing laboratory market is composed of three primary segments: clinical laboratory testing, anatomic pathology testing, and genetic/molecular testing
• Genetic testing segment is estimated to be growing in excess of 25% per year, key drivers include the following:
  • Cancer is primarily a disease of the elderly and 3-4 million baby boomers/year will turn 60 every year for the next 15 years in the US (6-8 people/minute on average) and one of every four senior citizens is diagnosed with some form of cancer.
  • The discovery of new genes linked to cancer every year is driving rapid development of new tests.
  • Genetic tests are highly accurate (99%+ accurate and the medical community has embraced their efficacy).
  • Genetic tests often allow for earlier diagnoses, which allows for more cost effective treatment options to be explored.
• Total cancer testing market is estimated to be $10 billion to $12 billion nationwide
  • NeoGenomics currently addresses approximately 40-50% of this market, or $4-6 billion