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LabCorp Q1 Revenues Up 1 Percent But COVID-19 Impact Leads to Loss

NEW YORK (360Dx) – Laboratory Corporation of America today reported a 1 percent year-over-year rise in Q1 revenues.

LabCorp revenues for the quarter ended March 31 were $2.82 billion, up from $2.79 billion in the same quarter last year and above the consensus Wall Street estimate of $2.74 billion.

The increase in revenues was due to acquisitions, which contributed 3 percent. Organic revenues fell 2 percent during the quarter, driven by an estimated negative impact from the COVID-19 pandemic of 5 percent, a 1 percent negative impact from the Protecting Access to Medicare Act, and a fraction of a percent negative impact from the disposition of a business.

In the company's diagnostics division, revenue for the quarter was $1.70 billion, a decrease of 1 percent from revenue of $1.72 billion in the same quarter last year. According to LabCorp, the Protecting Access to Medicare Act of 2014 (PAMA) cut diagnostics revenues by around 1 percent during the quarter and the impact of COVID-19 was negative 5 percent. Organic revenues were down just under 3 percent.

Total volume, as measured by test requisitions, was down roughly 4 percent, with organic volume down 6 percent. That was largely driven by the COVID-19 outbreak, which the company estimated depressed volumes by 7 percent. Demand for testing was down 50 percent to 55 percent by the end of the quarter compared to normal daily levels.

Revenues for the company's Covance unit were $1.14 billion for the quarter, up 7 percent from $1.07 billion in Q1 2019.

On a conference call following release of the results, LabCorp President and CEO Adam Schechter noted that while the company saw increasing COVID-19 testing demand during the quarter, this "did not nearly offset the decline in other testing," and added that the company was taking a number of steps to mange expenses during the outbreak.

LabCorp CFO Glenn Eisenberg outlined a number of these steps, which he said included suspending the company's share repurchase program and reducing capital spending as well as employee furloughs, delaying hiring, reducing temporary and contract workers or limiting hours, a suspension of discretionary merit adjustments and 401k plan contributions.

Eisenberg noted that LabCorp received $56 million through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which he said would help support increased spending related to ramping up COVID-19 testing capacity.

According to Schecter, the company currently has a capacity of 60,000 molecular SARS-CoV-2 tests per day and continues to expand that capacity. He added that it can currently perform 50,000 serology tests per day and expects to be up to 200,000 tests per day by mid-May.

He said the company is not currently using its full 60,000 per day PCR test capacity, though he added that he believed that testing demand would increase as states began working to reopen businesses.

Schechter also cited the launch of LabCorp's home collection kit for COVID-19 testing using its LabCorp by Pixel platform. The kit is the first home collection kit to receive Emergency Use Authorization from the US Food and Drug Administration and is currently available to healthcare workers and first responders who may have been exposed to the virus or have symptoms consistent with infection, he said.

He noted that even assuming the company hits 200,000 serology tests and 100,000 molecular tests per day in coming months, this will not close the gap left by declines in routine testing.

That "is still a very small number compared to the 530 million or so tests that we do a year across all of our testing," he said. "So, unless we start to see that come back, it will be hard for these tests to make up for the difference."

Net losses attributable to LabCorp for the quarter were $317.2 million, or $3.27 per share, compared to a net gain of $185.6 million, or $1.86 per share, for Q1 last year. The company's adjusted EPS were $2.37, beating analysts' average estimate of $1.95.

The company's SG&A expenses were $395.5 million, up less than 1 percent from $393.8 million in the same quarter last year.

LabCorp reported $323.6 million in cash and cash equivalents as of the end of the quarter.

The company said it was withdrawing its 2020 full year guidance due to uncertainty from the COVID-19 pandemic.

In morning trading on the New York Stock Exchange, LabCorp's shares were up less than 1 percent at $176.72.