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Quest Reports Flat Q3 Revenue Growth

NEW YORK (GenomeWeb) – Quest Diagnostics reported Q3 revenues today of $1.89 billion, meeting analysts' average revenue estimate, but representing flat revenue growth versus $1.88 billion in Q3 2015 on a reported basis.

Quest's Diagnostic Information Services revenues grew 2 percent compared to a year ago. Volume, measured by the number of requisitions, also grew 2 percent versus the prior year and revenue per requisition was flat.

The firm reported net income for the quarter of $192.0 million, or $1.34 per share, compared to $342.0 million, or $2.35 per share, in Q3 2015, narrowly missing analysts' average estimate of $1.35 per share. Quest said that in the third quarter of 2015, reported net income benefited from a gain on the contribution from Q Squared Solutions, a clinical trials joint venture with Quintiles.

"We continue to make progress with our expanded hospital systems relationships, and in professional lab services HCA began to contribute to growth in the third quarter," said Steve Rusckowski, Quest president and CEO, in a conference call today to review Q3 financial results.

"As we announced earlier this year, we're managing an in-patient laboratory operation for six Denver-area hospitals in the Healthone system of HCA. Revenues from this engagement will continue to increase throughout the end of the year. Our professional lab services agreement with RWJBarnabas Health in New Jersey and Clinical Laboratory Partners, the outreach lab business we acquired from Hartford Healthcare in Connecticut, both continued to perform well and grow revenue in this quarter. … We also continued to deliver solid growth in prescription drug monitoring and infectious disease testing, including Zika."

Quest's SG&A expenses were up around 2 percent at $409.0 million compared to $402.0 million in Q3 2015.

The firm ended the quarter with $406.0 million in cash and cash equivalents.

Quest forecasted that 2016 revenues will be around $7.51 billion, representing relatively flat revenue growth over 2015 on a reported basis, and an increase of around 3 percent over 2015 on an equivalent basis, which excludes the 2015 revenue contribution from the Celera and Focus Diagnostics products businesses. The firm said that it expects that reported earnings per share for 2016 will be between $4.47 and $4.52, up from its previous guidance of between $4.18 and $4.33.

On the earnings call, Rusckowski expanded on the areas of growth for Quest.

"In infectious diseases, we continue to see solid growth in fourth-generation HIV testing as well as hepatitis C testing for screening and genotyping to help doctors determine the type, dose, or duration of treatment," he said. "Turning to Zika, we complemented our proprietary PCR test with a new antibody test licensed from the Centers for Disease Control [and Prevention].

"Quest will become Ancestry's first CLIA-approved lab partner to provide DNA testing, enabling Ancestry DNA subscribers to build their family tree based on ethnic origins. Over time, we intend to explore additional opportunities with Ancestry to guide people on building and understanding their family health tree."

"We're very excited about the recent launch of IBM Watson Genomics from Quest Diagnostics, a new service that helps advanced decision medicine by combining cognitive computing with genomic tumor sequencing. The service helps match patients with cancer therapies and clinical trials based on the tumor's unique DNA," he added. 

In Thursday morning trade on the New York Stock Exchange, shares of Quest were up around one percent at $83.83.