NEW YORK – Coming off an active year for lab acquisitions, Laboratory Corporation of America expects the pace of such deals to accelerate even further.
During a conference call Thursday morning following the release of the company's Q4 2023 financial results, Chairman and CEO Adam Schechter, said its strong deal pipeline has led it to raise its long-term guidance for inorganic growth to between 1.5 and 2.5 percent from a historic guidance of 1 percent to 2 percent.
"There's no doubt that the acceleration of the hospital and local laboratory partnerships has enabled us to grow faster than we have grown in the past," he said.
Giving an overview of the company's acquisition pipeline, Schechter said that while there was no single opportunity as large as its $400 million agreement with St. Louis-based health system Ascension in 2022, "there are quite a few health systems that, when you add them up, become meaningful."
Labcorp looks "to do as many of these hospital, local, regional laboratory deals as we can do because they are so sensible to do," he said. "They return their cost of capital really quickly. They are accretive in the first year. We know how to do them really well."
During the quarter, Labcorp announced an agreement to acquire the outreach laboratory business and select operating assets, including laboratory service centers, of Massachusetts-based Baystate Health, as well as a deal to acquire ambulatory lab draw stations and a stat lab from California healthcare system Providence Health & Services.
Schecter also addressed the major policies issues facing the lab industry in 2024, reiterating the company's opposition to the US Food and Drug Administration's plans to regulate laboratory-developed tests. He said that the company's preference would be to revive efforts to pass the Verifying, Accurate, Leading-edge IVCT Development (VALID) Act, noting that Labcorp "was very supportive of VALID."
He also said he hoped Congress will in 2024 pass the Saving Access to Laboratory Services Act (SALSA), which would reform aspects of the Protecting Access to Medicare Act (PAMA), but added that the company will push for another one-year delay of PAMA implementation if SALSA doesn't pass.
The company also released its fourth quarter and full-year 2023 financial results.
Labcorp's Q4 2023 revenues were up 4 percent year-over-year.
Total revenues for the quarter ended Dec. 31 were $3.03 billion, up from $2.93 billion in the same quarter last year and slightly above the consensus Wall Street estimate of $3.02 billion.
Diagnostics revenues for the fourth quarter were $2.35 billion, up 3 percent from $2.29 billion in the same quarter last year. The company's biopharma lab services business saw revenues rise 7 percent to $694.8 million in the quarter from $648.8 million in the fourth quarter of 2022.
Organic diagnostic revenues were up 2 percent year over year, with a decline in COVID-19 testing offset by growth in the company's base testing business. Test volumes, measured by requisitions, were up 2 percent year over year during the quarter. Organic volumes were up less than 1 percent as acquisition-related volume contributed 2 percentage points of growth and a rise in base testing volumes contributed 3 percent. This was offset by a decline in COVID-19 testing volumes, which contributed a nearly 3 percent headwind.
Labcorp's net loss for Q4 2023 was $166.8 million, or $1.95 per share, compared to net earnings of $76.4 million, or $.42 per share, in the same quarter last year. Adjusted EPS for Q4 2023 was $3.30, beating the consensus Wall Street estimate of $3.26.
The company's SG&A costs were $532.9 million, up 17 percent from $455.4 million in the same quarter last year.
For full-year 2023, revenues were $12.16 billion, up 3 percent from $11.86 billion in 2022 and above the consensus Wall Street estimate of $12.15 billion.
The diagnostics division posted $9.42 billion in revenues, up 2 percent from $9.20 billion in 2022. Full-year revenues in the biopharma lab services business rose 3 percent to $2.77 billion from $2.70 billion.
Acquisitions contributed roughly 2 percent of growth to full-year 2023 revenues, while foreign currency translation contributed a positive impact of less than 1 percent, Labcorp said. Organic revenues rose by almost 1 percent year over year. Growth in the company's base business contributed 9 percentage points of growth, while COVID-19 testing declined by 8 percent.
Net earnings for the year was $419.2 million, or $4.33 per share, compared to $1.28 billion, or $10.94 per share, in 2022. Adjusted EPS for full-year 2023 was $13.56, beating the consensus Wall Street estimate of $13.54.
The earnings figures reflect Labcorp's spinoff of its Covance clinical research business during 2023, the company said.
For 2023, Labcorp spent $2.02 billion on SG&A, up 15 percent from $1.76 billion in 2022.
The company finished 2023 with cash and cash equivalents of $536.8 million.
For 2024, Labcorp projected year-over-year revenue growth of 4.7 percent to 6.5 percent and adjusted EPS of between $14.30 and $15.40. It expects growth in its diagnostics business of 3.2 percent to 4.8 percent and in its biopharma lab services business of 5.5 percent to 7.5 percent.
In Thursday morning trading on the New York Stock Exchange, Labcorp shares were down 4 percent to $219.38.