Cases
NeoGenomics, Inc.
Securities Class Action
Overview
Overview
- Date:
- 1/4/2023
- Company Name:
- Neogenomics, Inc.
- Stock Symbol:
- NEO
- Class Period:
- FROM 2/27/2020 TO 4/26/2022
- Status:
- Filed
- Filing Date:
- 12/5/2022
- Court:
- U.S. District Court: Southern District of New York
Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, announces that a class action lawsuit has been filed against NeoGenomics, Inc. (“NeoGenomics” or the “Company”) (NASDAQ: NEO) in the United States District Court for the Southern District of New York on behalf of all persons and entities who purchased or otherwise acquired NeoGenomics securities between February 27, 2020 and April 26, 2022, both dates inclusive (the “Class Period”). Investors have until February 6, 2023 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
NeoGenomics provides cancer tests and testing services to doctors, clinics, hospitals, and pharmaceutical companies. Among the Company’s portfolio of tests are next generation sequencing (“NGS”) tests. NGS tests have become popular with pathologists in recent years because they can test multiple genes of a cancer simultaneously, making them more cost effective and efficient than older legacy tests that only look for a single specific genetic mutation.
Throughout the Class Period, NeoGenomics consistently misrepresented to investors that it had a “comprehensive menu” of cancer tests that positioned it as a “one-stop-shop” for pathologists that needed cancer testing. Moreover, the Company stated that it had “every kind of testing modality that you can use for cancer, including some of the fast-growing new ones, like next-generation sequencing,” and had “a competitive advantage” as a “go-to reference lab with a comprehensive menu for just about any kind of tests that you want to have done in cancer [] and we keep our test menu very advanced.”
NeoGenomics also consistently asserted during the Class Period that it could “leverage” the supposedly “fixed cost” structure of its business to improve profitability as revenue increased. NeoGenomics also repeatedly touted its “robust Compliance Program . . . overseen by our Board of Directors . . . to ensure compliance with the myriad of . . . laws, regulations and governmental guidance applicable to our business,” merely listing failure to comply among the many hypothetical risks that could impact the Company’s results.
These statements were materially false and misleading. In truth: (i) NeoGenomics was anything but a “one-stop-shop” for cancer testing because it did not offer the most technologically advanced NGS tests, which led to a significant decrease in revenue as current and prospective customers went elsewhere for their testing needs; (ii) the Company’s costs were not fixed because NeoGenomics needed to hire additional employees to process more complex customized testing demanded by customers utilizing the Company’s outdated portfolio of tests, leading to operational challenges, decreased lab efficiency, and increased testing turnaround times; and (iii) NeoGenomics violated federal healthcare laws and regulations related to fraud, waste, and abuse.
On November 4, 2021, NeoGenomics revealed that it was, “conducting an internal investigation with the assistance of outside counsel that focuses on the compliance of certain consulting and service agreements with federal healthcare laws and regulations” and had recently “notified the Office of the Inspector General of the U.S. Department of Health and Human Services of our investigation.” Additionally, the Company disclosed that it “accrued a reserve of $10.5 million for potential damage and liabilities associated with the federal healthcare program revenue received spanning multiple years.” On this news, the price of NeoGenomics common stock fell $8.18 per share, or 17.6%, from $46.53 per share on November 3, 2021 to $38.35 per share at the close of trading on November 4, 2021.
After the close of trading on November 4, 2021, NeoGenomics provided some limited additional details about the internal investigation, specifically that the “federal healthcare laws and regulations” at the center of the Company’s investigation “include those relating to fraud, waste and abuse.”
On March 28, 2022, NeoGenomics disclosed that “the Board of Directors and Mark Mallon, Chief Executive Officer, have agreed that Mr. Mallon will step down as CEO and member of the Board, effective immediately.” At the same time, the Company disclosed that it “currently expects revenue for Q1 2022 may be below the low end of its prior guidance of $118 - $120 million and EBITDA for Q1 2022 will be below the low end of its prior guidance of $(15) - $(12) million. The larger than anticipated EBITDA loss was primarily driven by higher than anticipated Clinical Services cost of goods sold. The Company intends to take immediate action to address performance and costs . . . Additionally, the Company has withdrawn its 2022 annual financial guidance issued February 23, 2022.” On this news, the price of NeoGenomics common stock fell $5.30 per share, or 29.8%, from $17.79 per share on March 28, 2022 to $12.49 per share at the close of trading on March 29, 2022.
Then, on April 27, 2022, NeoGenomics reported its first-quarter 2022 financial results including that revenue for the quarter was $117 million and EBITDA loss was $19 million, that “[c]onsolidated gross profit for the first quarter of 2022” had “decrease[d] 8.0% compared to the first quarter of 2021,” and that “[o]perating expenses increased by $34 million, or 59%, compared to the first quarter of 2021.” The Company explained that “higher payroll and payroll related costs to support the Company’s strategic growth initiatives” drove the decreased profit and increased operating expenses.
Also on April 27, 2022, NeoGenomics held a conference call to discuss its firstquarter 2022 results (the “1Q22 Earnings Call”). During the 1Q22 Earnings Call, the Company attributed its poor performance in substantial part to the fact that, “our test mix is weighted to legacy modalities and disease-specific NGS offerings, while the market is moving towards larger, more comprehensive panels” and “we’ve seen a notable decrease in lab efficiency over the course of the past year . . . largely attributable to increased complexity of both our product offerings and our lab processes, due in part to efforts to respond to customer requests for customization.” NeoGenomics further disclosed that it was “seeing increased competition on the NGS front as panels move or as customers move to demanding larger, more comprehensive NGS-only panels, and our offering is more oriented towards smaller targeted panels” and that the Company was “seeing bigger and bigger panels coming from some of these emerging companies . . . where we have not kept up.”
On this news, the price of NeoGenomics common stock fell $0.41 per share, or 3.8%, from $10.85 per share on April 26, 2022 to $10.44 per share at the close of trading on April 27, 2022.
If you purchased or otherwise acquired NeoGenomics shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Melissa Fortunato by email at investigations@bespc.com, telephone at (212) 355-4648, or by filling out the form below. There is no cost or obligation to you.
NeoGenomics provides cancer tests and testing services to doctors, clinics, hospitals, and pharmaceutical companies. Among the Company’s portfolio of tests are next generation sequencing (“NGS”) tests. NGS tests have become popular with pathologists in recent years because they can test multiple genes of a cancer simultaneously, making them more cost effective and efficient than older legacy tests that only look for a single specific genetic mutation.
Throughout the Class Period, NeoGenomics consistently misrepresented to investors that it had a “comprehensive menu” of cancer tests that positioned it as a “one-stop-shop” for pathologists that needed cancer testing. Moreover, the Company stated that it had “every kind of testing modality that you can use for cancer, including some of the fast-growing new ones, like next-generation sequencing,” and had “a competitive advantage” as a “go-to reference lab with a comprehensive menu for just about any kind of tests that you want to have done in cancer [] and we keep our test menu very advanced.”
NeoGenomics also consistently asserted during the Class Period that it could “leverage” the supposedly “fixed cost” structure of its business to improve profitability as revenue increased. NeoGenomics also repeatedly touted its “robust Compliance Program . . . overseen by our Board of Directors . . . to ensure compliance with the myriad of . . . laws, regulations and governmental guidance applicable to our business,” merely listing failure to comply among the many hypothetical risks that could impact the Company’s results.
These statements were materially false and misleading. In truth: (i) NeoGenomics was anything but a “one-stop-shop” for cancer testing because it did not offer the most technologically advanced NGS tests, which led to a significant decrease in revenue as current and prospective customers went elsewhere for their testing needs; (ii) the Company’s costs were not fixed because NeoGenomics needed to hire additional employees to process more complex customized testing demanded by customers utilizing the Company’s outdated portfolio of tests, leading to operational challenges, decreased lab efficiency, and increased testing turnaround times; and (iii) NeoGenomics violated federal healthcare laws and regulations related to fraud, waste, and abuse.
On November 4, 2021, NeoGenomics revealed that it was, “conducting an internal investigation with the assistance of outside counsel that focuses on the compliance of certain consulting and service agreements with federal healthcare laws and regulations” and had recently “notified the Office of the Inspector General of the U.S. Department of Health and Human Services of our investigation.” Additionally, the Company disclosed that it “accrued a reserve of $10.5 million for potential damage and liabilities associated with the federal healthcare program revenue received spanning multiple years.” On this news, the price of NeoGenomics common stock fell $8.18 per share, or 17.6%, from $46.53 per share on November 3, 2021 to $38.35 per share at the close of trading on November 4, 2021.
After the close of trading on November 4, 2021, NeoGenomics provided some limited additional details about the internal investigation, specifically that the “federal healthcare laws and regulations” at the center of the Company’s investigation “include those relating to fraud, waste and abuse.”
On March 28, 2022, NeoGenomics disclosed that “the Board of Directors and Mark Mallon, Chief Executive Officer, have agreed that Mr. Mallon will step down as CEO and member of the Board, effective immediately.” At the same time, the Company disclosed that it “currently expects revenue for Q1 2022 may be below the low end of its prior guidance of $118 - $120 million and EBITDA for Q1 2022 will be below the low end of its prior guidance of $(15) - $(12) million. The larger than anticipated EBITDA loss was primarily driven by higher than anticipated Clinical Services cost of goods sold. The Company intends to take immediate action to address performance and costs . . . Additionally, the Company has withdrawn its 2022 annual financial guidance issued February 23, 2022.” On this news, the price of NeoGenomics common stock fell $5.30 per share, or 29.8%, from $17.79 per share on March 28, 2022 to $12.49 per share at the close of trading on March 29, 2022.
Then, on April 27, 2022, NeoGenomics reported its first-quarter 2022 financial results including that revenue for the quarter was $117 million and EBITDA loss was $19 million, that “[c]onsolidated gross profit for the first quarter of 2022” had “decrease[d] 8.0% compared to the first quarter of 2021,” and that “[o]perating expenses increased by $34 million, or 59%, compared to the first quarter of 2021.” The Company explained that “higher payroll and payroll related costs to support the Company’s strategic growth initiatives” drove the decreased profit and increased operating expenses.
Also on April 27, 2022, NeoGenomics held a conference call to discuss its firstquarter 2022 results (the “1Q22 Earnings Call”). During the 1Q22 Earnings Call, the Company attributed its poor performance in substantial part to the fact that, “our test mix is weighted to legacy modalities and disease-specific NGS offerings, while the market is moving towards larger, more comprehensive panels” and “we’ve seen a notable decrease in lab efficiency over the course of the past year . . . largely attributable to increased complexity of both our product offerings and our lab processes, due in part to efforts to respond to customer requests for customization.” NeoGenomics further disclosed that it was “seeing increased competition on the NGS front as panels move or as customers move to demanding larger, more comprehensive NGS-only panels, and our offering is more oriented towards smaller targeted panels” and that the Company was “seeing bigger and bigger panels coming from some of these emerging companies . . . where we have not kept up.”
On this news, the price of NeoGenomics common stock fell $0.41 per share, or 3.8%, from $10.85 per share on April 26, 2022 to $10.44 per share at the close of trading on April 27, 2022.
If you purchased or otherwise acquired NeoGenomics shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Melissa Fortunato by email at investigations@bespc.com, telephone at (212) 355-4648, or by filling out the form below. There is no cost or obligation to you.
The individual or institution below (“Plaintiff”) has reviewed and agrees to the Bragar Eagel & Squire, P.C. (“BESPC”) retainer agreement and authorizes BESPC to prosecute an action on Plaintiff’s behalf under the federal securities laws or applicable state laws to recover damages on behalf of investors in Neogenomics. BESPC will prosecute the action on a full contingency basis and will forward all costs and expenses.
Case Updates
Retainer Agreement
This will confirm that you have retained Bragar Eagel & Squire, P.C. (“BESPC”) to represent you in connection with potential litigation against Neogenomics (the “Company”) and its directors and officers. BESPC has conducted an investigation and believes that there is a valid basis to assert claims against the Company and its directors and/or officers for violation of federal or state securities laws.
In making this agreement, BESPC is relying upon your representation that you purchased the Company’s shares during the period from 2/27/2020 to 4/26/2022 (the “Relevant Period”). Please provide us with documentation of your trading history in the Company’s stock by emailing a relevant copies of your brokerage statements to investigations@bespc.com. If you have any questions or need assistance, please call us at (212) 308-5858.
The terms under which we will represent you and your responsibilities as a potential representative plaintiff are set forth below.
You will have an obligation to remain knowledgeable about the litigation and participate in decisions concerning the progress of the litigation. If BESPC is appointed as lead counsel or in a similar capacity in the action, we will provide you with copies of all pleadings in the litigation for your review and approval, circumstances permitting, before they are filed with the court. BESPC will also promptly advise you of any significant developments in the litigation.
As a representative plaintiff, you cannot have any interest antagonistic to or in conflict with other Class members or the Company, as applicable, concerning the claims we are pursuing or any relationships with any of the named defendants that would in any way impair your ability or incentive to obtain the best possible result. You agree that neither you nor any of your affiliates or agents will trade stocks while in the possession of any material non-public information you may receive in connection with the litigation. In addition, as a representative plaintiff, you may be required to continue holding Company shares. Please contact us before buying or selling Company shares.
BESPC may associate with other counsel to assist in the prosecution of this litigation. Any recovery of fees and costs will be shared with such counsel, determined on a percentage basis or based upon the time spent on the matter, as approved by the court if applicable. The division of work and or fees among co-counsel will not affect the amount of fees received upon a successful completion of the litigation. From time to time, BESPC may utilize contract attorneys to supplement the work of its own employed attorneys. BESPC will supervise the work of all contract attorneys and adopt their work product as its own. You authorize BESPC, as we deem appropriate, to associate with other counsel and to hire experts and consultants to assist in the handling of your claims.
It is possible that you will not be appointed as a lead plaintiff or class representative in the action. However, we may wish to represent you in other litigation related to the wrongful acts giving rise to this case. In such event, we will contact you to discuss the scope of such representation and obtain your approval before moving forward. You also agree that we may contact you with respect to other potential matters on your behalf.
You understand that in the event we secure a recovery for a Class in a class action, you will only be entitled to your proportional share of such recovery as a Class member. You understand that you will not receive any special treatment or receive a greater share of any class-wide recovery based on your service as a named plaintiff or class representative. However, we may ask the Court to approve an additional award to you to compensate you for the time and effort you expend on this matter. Any such award is solely within the discretion of the Court.
BESPC will consult with you regarding any settlement negotiations and seek to obtain your approval for any proposed resolution of this litigation before entering into a final settlement agreement with defendants.
You expressly acknowledge that we have not made any representation to you, express or implied, concerning the outcome of any litigation or other matter in which we represent you.
If you are not chosen as a representative plaintiff and we do not choose to pursue other related litigation on your behalf, we will provide you with notification and this Agreement shall terminate. Otherwise, this Agreement shall remain in effect until the conclusion of the relevant litigation. However, you may terminate this Agreement at any time.
Upon termination, BESPC’s files and papers compiled in connection with its investigation and prosecution of this matter constitute the work product and property of BESPC over which it has complete control with respect to its use and/or disclosure.
This agreement sets forth the entire agreement between the parties and supersedes all other oral or written communications.
Please feel free to contact us at any time should you have any questions or comments in this regard.
In making this agreement, BESPC is relying upon your representation that you purchased the Company’s shares during the period from 2/27/2020 to 4/26/2022 (the “Relevant Period”). Please provide us with documentation of your trading history in the Company’s stock by emailing a relevant copies of your brokerage statements to investigations@bespc.com. If you have any questions or need assistance, please call us at (212) 308-5858.
The terms under which we will represent you and your responsibilities as a potential representative plaintiff are set forth below.
Your Responsibilities as a Representative Plaintiff
As a representative plaintiff, you will have a duty to represent the interests of similarly situated shareholders, i.e., the “Class,” and to participate in the prosecution of this litigation. You may also be asked to provide documents concerning your trading in Company stock and may be asked to sit for a deposition. Accordingly, you should preserve all documents that relate to this case until it has concluded or we inform you otherwise. Relevant documents include any information you have about the Company or your trading in Company stock, no matter how it is recorded or who is keeping it for you. If you have any questions about whether information should be retained, please contact us.You will have an obligation to remain knowledgeable about the litigation and participate in decisions concerning the progress of the litigation. If BESPC is appointed as lead counsel or in a similar capacity in the action, we will provide you with copies of all pleadings in the litigation for your review and approval, circumstances permitting, before they are filed with the court. BESPC will also promptly advise you of any significant developments in the litigation.
As a representative plaintiff, you cannot have any interest antagonistic to or in conflict with other Class members or the Company, as applicable, concerning the claims we are pursuing or any relationships with any of the named defendants that would in any way impair your ability or incentive to obtain the best possible result. You agree that neither you nor any of your affiliates or agents will trade stocks while in the possession of any material non-public information you may receive in connection with the litigation. In addition, as a representative plaintiff, you may be required to continue holding Company shares. Please contact us before buying or selling Company shares.
Contingency Fee and Advancement of Expenses
BESPC will prosecute this litigation on a contingency basis. You will not be responsible for paying any legal fees, costs, or out-of-pocket expenses arising out of or related to the prosecution of this litigation, regardless of the outcome of the matter. If there is a monetary recovery in this action, BESPC will, at the conclusion of the litigation or any segment thereof, apply to the court for approval of an award of attorneys’ fees and reimbursement of expenses. BESPC may also seek a fee if we obtain substantial non-monetary relief for the Class or the Company. The court will then award fees and disbursements (if any) from the proceeds of any judgment or settlement obtained in this litigation, based on factors considered relevant by the court. Such fees, costs, and disbursements will be paid from the entire settlement amount and not only from your share of the settlement amount.
Association with Counsel
BESPC may associate with other counsel to assist in the prosecution of this litigation. Any recovery of fees and costs will be shared with such counsel, determined on a percentage basis or based upon the time spent on the matter, as approved by the court if applicable. The division of work and or fees among co-counsel will not affect the amount of fees received upon a successful completion of the litigation. From time to time, BESPC may utilize contract attorneys to supplement the work of its own employed attorneys. BESPC will supervise the work of all contract attorneys and adopt their work product as its own. You authorize BESPC, as we deem appropriate, to associate with other counsel and to hire experts and consultants to assist in the handling of your claims.
Other Actions
It is possible that you will not be appointed as a lead plaintiff or class representative in the action. However, we may wish to represent you in other litigation related to the wrongful acts giving rise to this case. In such event, we will contact you to discuss the scope of such representation and obtain your approval before moving forward. You also agree that we may contact you with respect to other potential matters on your behalf.
No Special Treatment
You understand that in the event we secure a recovery for a Class in a class action, you will only be entitled to your proportional share of such recovery as a Class member. You understand that you will not receive any special treatment or receive a greater share of any class-wide recovery based on your service as a named plaintiff or class representative. However, we may ask the Court to approve an additional award to you to compensate you for the time and effort you expend on this matter. Any such award is solely within the discretion of the Court.
Settlement
BESPC will consult with you regarding any settlement negotiations and seek to obtain your approval for any proposed resolution of this litigation before entering into a final settlement agreement with defendants.
No Guarantee of Success
You expressly acknowledge that we have not made any representation to you, express or implied, concerning the outcome of any litigation or other matter in which we represent you.
Termination of This Agreement
If you are not chosen as a representative plaintiff and we do not choose to pursue other related litigation on your behalf, we will provide you with notification and this Agreement shall terminate. Otherwise, this Agreement shall remain in effect until the conclusion of the relevant litigation. However, you may terminate this Agreement at any time. Upon termination, BESPC’s files and papers compiled in connection with its investigation and prosecution of this matter constitute the work product and property of BESPC over which it has complete control with respect to its use and/or disclosure.
This agreement sets forth the entire agreement between the parties and supersedes all other oral or written communications.
Please feel free to contact us at any time should you have any questions or comments in this regard.