"It's an area where the U.S. Food and Drug Administration (FDA) has been able to lay down the clearest lines of how the world of diagnostics and the world of drugs come together," he says. He also floats at least one non-oncology idea with the characteristics important to him as an investor.
His best idea is NeoGenomics Laboratories (NGNM:OTCBB), which offers oncology diagnostic services. The company is a true beneficiary of escalating intricacy and specificity of tests. The company works as a regular reference lab where its own pathologists will interpret test results and deliver them to the oncologist. It also provides technology to pathologists in communities where infrastructure and advanced instrumentation may not be available. DeGeeter points out that in the last quarter of 2011 NeoGenomics realized 50% year-over-year growth, "And that's really all coming from test volume growth, which is benefitting from this explosion in testing for oncology."
DeGeeter does not limit himself to oncology. He has found a very interesting idea in Sequenom Inc. (SQNM:NASDAQ), which has developed and marketed a noninvasive test to screen for Down syndrome (trisomy 21; an extra chromosome #21). The company's lead product MaterniT21 detects circulating fetal nucleic acids in maternal blood and is intended for use during the first and second trimesters of pregnancy. Launched in October 2011, the test is very sensitive and has effectively taken genomic sequencing from the academic lab to the clinic, where it is now on track to becoming a routine diagnostic tool in obstetric practice. "So far, admittedly early, it has exceeded our expectations to date in terms of commercial adoption," says DeGeeter. "It's a large market, with more than 4 million pregnancies a year in the U.S."
I ask about market-moving catalysts or other events that might be on the horizon for Sequenom. It turns out that there are intellectual property lawsuits pending against the company. "I don't know that 12 months from now we'll have explicit clarity," he says, "But I think we'll have some movement on the legal front, and people will begin to make some interpretation based more on sound fact and feedback from judicial proceedings as to what a potential outcome might be in some of those cases and how that will affect the competitive landscape." But there are incremental milestones on the pathway as well, and those would be agreements with major national payers for reimbursement. In April a deal was reached with MultiPlan, Inc. (private), the U.S. leader in providing healthcare cost management solutions. More than 900,000 healthcare providers are contracted with MultiPlan.