US Court Prohibits NeoGenomics To Sell Type Of Diagnostic Kits To Detect Smaller Number Of Cancer Cells, Favoring Natera In Lawsuit

Shares of NeoGenomics Inc NEO fell Thursday after the company received a preliminary injunction from a North Carolina district court, which prohibits the company from selling its RaDaR technology.

In the suit, Natera Inc NTRA alleged that NeoGenomics' RaDaR infringed on Natera's patent.

NeoGenomics said in a statement Thursday morning that the company plans to appeal the ruling.

The injunction bars NeoGenomics from "making, using, selling, or offering for sale in the U.S… the accused RaDaR assay" or "any assay or product not more than colorably different" from the NeoGenomics RaDaR assay. In addition, the order prohibits NeoGenomics from "promoting, advertising, marketing, servicing, distributing or supplying" RaDaR to induce infringement by others. 

NeoGenomics may continue to offer RaDaR for existing patients and clinical trials, studies, or projects already in process.

The news follows an order in a separate matter earlier this month by the Delaware Federal District Court, which issued a permanent injunction against Invitae Corporation NVTA and its Personalized Cancer Monitoring (PCM) product. 

Needham expressed disappointment regarding the preliminary injunction, stating that it disrupts a crucial long-term growth factor for NEO.

The transformation and enhanced expansion in NEO's Clinical Services and Advanced Diagnostics sectors have been pivotal, driving substantial improvements in growth. 

These advancements are considered the primary drivers behind NEO's notable share price performance in 2023, with RaDaR's influence being comparatively smaller.

William Blair notes that the development is expected to negatively impact stock sentiment since a significant aspect of the NeoGenomics narrative was centered around the exciting potential for long-term growth attributed to RaDaR.

This decision and the uncertainty surrounding RaDaR's potential return to the market raise doubts about the extent of the long-term potential upside in the model.

Price Action: NEO shares are down 18.60% at $16.69, and NTRA shares are up 2.58% at $62.80 on the last check Thursday.