DX Earnings Report: Lab Companies Finish Year Strong but Growth Slows for Established Firms

The diagnostics industry capped a robust 2018 with most companies posting strong fourth quarter results. Of course, every silver lining has a cloud. While widespread, gains weren’t evenly distributed with the smaller and newer genomics firms enjoying the most dramatic gains. Discounting revenue boosts from new strategic acquisitions, growth was far more modest among the larger establishment firms particularly testing behemoths like Abbott, LabCorp and Quest that felt the sting of PAMA and private payor reimbursement cuts.

Gainers

Of the 28 companies that had reported Q4 earnings when we went to press, all but three saw growth during the period. Only two of the firms reporting Q4 growth fell short of their average Wall Street estimate, but they were notable:

• Abbott, which reported flattish 1% growth in molecular diagnostics sales; and
• Qiagen which is still settling in after divesting business lines to concentrate on core NGS and molecular testing.

Additionally, some of the firms that met their Wall Street targets had a less than stellar Q4, including Luminex which despite exceeding its $79.4 million top-line target by a solid $1.7 million, shocked the market by coming in way short on the bottom line with $0.04 rather than the expected $0.09 earnings per share. It was also a relatively tough quarter for LabCorp which hit its $2.79 billion target on the nose thanks to 10% growth in its recently acquired Covance drug development business which offset a 3% decline in core diagnostics revenues. 

The Hottest Companies

Recent acquisitions also helped Becton Dickinson (C.R. Bard), Danaher (Cepheid), Myriad Genetics (Counsyl) and PerkinElmer (Euroimmun) post double-digit growth (exception: Danaher grew 5%). Arguably, though, the most impressive performances came in the form of organic growth by the relatively small molecular and genomics test firms including:

• Exact Sciences which grew 71% for the year ($454.5 million) thanks to the red-hot Cologuard colon cancer test;
• Consumer genetic testing firm Invitae which posted 78% growth for the quarter and over 200% growth for the year;
• NeoGenomics where genetic cancer and other testing volume continues to grow by double digits almost every quarter; and
• Veracyte which increased sales by 32% for the quarter and 28% for the year and is now just under $100 million in revenues.

Decliners

Three companies had declining sales in the quarter, including:

• Meridian Bioscience was down 2% to $51.5 million overall (2% in diagnostics), which company officials attributed to “volume pressures in molecular products and pricing in certain gastrointestinal lines” which offset the modest gains in immunoassay and blood chemistry diagnostics revenues;
• Quest Diagnostics declined 1% thanks to PAMA Medicare price cuts, increased payor denials and uncollectible patient balances—although Quest did grow 2% for the overall year, its $7.53 billion in revenues came below the Wall Street estimate of $7.57 billion; and
• OraSure Technologies fell 3% in the quarter which belied its solid 9% growth for the entire year ($181.7 million, or $2.4 million above the $179.3 million average Wall Street estimate).

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This article, including a detailed chart summarizing Q4 and full year 2018 earnings of each reporting lab company, originally appeared in G2 Intelligence, Laboratory Industry Report, March 2019