Shares of cancer genetics testing services firm NeoGenomics, Inc. (NASDAQ: NEO) plunged almost 30% on Tuesday following the company’s announcement on Monday that Mark Mallon will step down as CEO and member of the company’s board with immediate effect.
In a press release, the company said, “This mutual agreement was not the result of any disagreements about strategy with management or the board, inappropriate action by CEO, or any violation of company policy or any accounting irregularity.”
Lynn Tetrault, Esq., currently the Non-Executive Chair at NeoGenomics, has been appointed Executive Chair. Further, the company has set up an Interim Office of the CEO, which includes Chief Culture Officer Jennifer Balliet, Chief Strategy and Corporate Development Officer Douglas Brown, and CFO William Bonello.
These executives will carry out their new responsibilities along with their current roles.
Meanwhile, the Florida-based company expects its first-quarter revenue to come in below the earlier-announced guidance range of $118 million to $120 million. It also anticipates EBITDA loss to be wider than its guidance of a loss of $12 million to $15 million due to “higher-than-anticipated Clinical Services cost of goods sold.”
Additionally, NeoGenomics has withdrawn its guidance for full-year 2022. The company is scheduled to release its first-quarter results on April 27.
About NeoGenomics
NeoGenomics’ cancer genetics diagnostic testing services include cytogenetics, fluorescence in situ hybridization, flow cytometry, immunohistochemistry, anatomic pathology, and molecular genetics. It has laboratories in Florida, California, Tennessee, and Texas.
Wall Street’s Take
After the company made the announcement, Craig-Hallum analyst Alexander Nowak maintained a Buy rating on the stock and lowered the price target to $26 from $30 (108.2% upside potential).
Commenting on the CEO’s resignation, Nowak said, “It’s likely that recent lackluster financial performance and lack of clinical lab experience played a substantial role in the decision.”
“The ongoing struggles at NEO are not a major surprise to us, with consistently disappointing results pointing to underlying challenges more than just COVID. We have tentatively pegged the RaDaR Medicare reimbursement date (expected in the second half of 2022) as when we should start to see a recovery in NEO shares, and look to better confirm the thesis once the new CEO is in position,” he added.
Meanwhile, Derik de Bruin of Bank of America Securities downgraded the rating on NeoGenomics to Hold from Buy and reduced the price target from $25 to $18 (44.1% upside potential).
In a research note to investors, the analyst said, “NeoGenomics’ core oncology test volumes have not recovered as expected.”
Based on seven Buys and three Holds, NeoGenomics has a Moderate Buy consensus rating. NEO’s average price target of $22 implies 76.1% upside potential from current levels. Shares have lost 74.1% over the past six months.
Takeaway
Investors should wait until there is more visibility into who will be the next CEO of NeoGenomics and how will the incoming CEO leverage the company’s strength in cancer testing to turn it around.
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