Dive Brief:
- Labcorp on Thursday reported a roughly 10% organic revenue decline in the fourth quarter, driven by a 15% decrease in COVID-19 testing, which was partially offset by modest growth for the company's base business.
- CEO Adam Schechter told investors on Thursday that while coronavirus-related test volume was greater than anticipated in the fourth quarter, it is significantly less now than in December or in January. Looking ahead to 2022, CFO Glenn Eisenberg said Labcorp's COVID-19 testing revenue is anticipated to plummet 60% to 75% this year, while providing guidance that diagnostics revenue will decline 11.5% to 17.5% compared to 2021.
- Quest Diagnostics, Labcorp's main rival, last week reported fourth-quarter financial results that included an 8.5% decline in diagnostics revenue compared to the prior year, reflecting "low revenue" from coronavirus testing, and partially offset by continued growth in its base business. COVID-19 testing revenues in 2022 are forecasted to decline approximately 64% to 75%. CEO Steve Rusckowski said the company this year "expects to see continued demand for COVID-19 testing services, albeit at lower levels than the last two years."
Dive Insight:
Both Labcorp and Quest are looking to the recovery of their respective base businesses in 2022 to offset the lost COVID-19 revenues. The lab giants are hoping the disruption the pandemic caused to routine testing and healthcare will subside.
Quest's full-year 2022 guidance includes an expected overall revenue decline of 12% to 17% versus the prior year, while base business revenues are anticipated to increase approximately 3.5% to 6%.
Labcorp's CFO Eisenberg told investors that in 2022 the company expects to "drive continued profitable growth" in its base business, while COVID-19 testing volumes are expected to decline throughout the year.
Quest CFO Mark Guinan said the company's 2022 guidance "does not currently anticipate another COVID wave," while it remains ready for any future surges. Guinan noted also noted that the U.S. public health emergency was again extended another 90 days through April.
"We assume average reimbursement for COVID-19 molecular testing to hold relatively steady through this period. While the public health emergency could continue to get renewed beyond April, additional extensions are not captured in our guidance," the CFO said.
Eisenberg said Labcorp expects the strongest demand for coronavirus tests will be in the first quarter, with the trend "clearly to be lower" in the second half of the year compared to the first half.
While Labcorp sees COVID-19 testing declining 60% to 75% in 2022, Schechter emphasized "there's a multitude of ways to be within that range" and that the company's diagnostics business environment remains volatile.
"As we go through this year, we don't know if there'll be another variant and/or another surge. But the other thing that could be is that the price stays where it is and there's not a surge, and you could get to our range through that," Schechter said. "If there is a price decrease, if the emergency is not declared again after April, you could see another surge that would offset a price increase if the emergency situation is released."
Quest announced last week that its board of directors has appointed James Davis, executive vice president of general diagnostics, to be the company's next CEO. Davis in November will replace Rusckowski, who will have served in that role for more than a decade.
Rusckowski announced during last week's earnings call that CFO Guinan is planning to retire in 2022, after more than eight years in the role, and that the company has begun the process of selecting a replacement.
