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LabCorp Q1 Revenues Grow 17 Percent Fueled by Acquisitions

NEW YORK (360Dx) – Laboratory Corporation of America today reported 17 percent year-over-year revenue growth for the first quarter of 2018, powered largely by acquisitions.

LabCorp revenues for the quarter ended March 31 were $2.85 billion, up from $2.41 million in the same quarter last year, meeting analysts' estimates.

In the company's diagnostics division, revenue for the quarter was $1.77 billion, an increase of 8 percent over revenue of $1.64 billion in the same quarter last year, fueled by acquisitions, organic volume, and the benefit form foreign currently translation of approximately 30 basis points, the company reported.

Acquisitions completed by the company since the year-ago quarter include the acquisition of Pathology Associates Medical Laboratory and the purchase of the assets of Mount Sinai's Clinical Outreach Laboratories. Yesterday, LabCorp announced that it had extended its relationship with Mount Sinai Health System with a new agreement to standardize inpatient laboratory services across seven acute care hospitals.

LabCorp's net earnings for the quarter were $173.2 million, or $1.67 per share, down from $183.0 million, or $1.75 per share, for Q1 last year. The company's adjusted EPS were $2.78, beating analysts' average estimate of $2.65.

The company's SG&A expenses were $397.0 million, up 16 percent from $341.5 million in the same quarter last year.

In response to questions about whether the company's diagnostic M&A pipeline may grow stronger due to the price pressures of lower Medicare prices for lab tests resulting from the implementation of the Protecting Access to Medicare Act, executives were cautious.

"On the PAMA side there is certainly activity in the pipeline. There is certainly engagement of a number of parties that are looking at operations," said David King, chairman and CEO, during a conference call following the release of the Q1 results. "At the same time, we have to recognize that we as LabCorp and as an industry through [the American Clinical Laboratory Association] and our industry colleagues, have been working very aggressively with the court system and with the legislative system to fix the error that [the Centers for Medicare & Medicaid] made with PAMA."

The company's quarterly revenues were partially offset by the new PAMA prices, according to Glenn Eisenberg, LabCorp executive VP and CFO. The company has estimated that the impact from PAMA would be approximately $70 million for 2018, evenly spread through the four quarters. First quarter results confirmed that estimate, he said.

Revenues for the company's Covance unit were $1.08 billion for the quarter, up 40 percent from revenues of $770 million in the first quarter last year, impacted largely by the company's acquisition of Chiltern last year. The Covance unit has also seen increasing interest in companion diagnostics and now has a backlog in that area that exceeds $300 million, King said.

King noted the company recently announced an extension of its partnership with Walgreens, which will expand LabCorp patient service centers to 10 new stores in Florida by the end of May.

"We are talking about a number of what we think are very attractive options to expand the things we are doing with Walgreens beyond just the drawing of blood in stores," King said, adding that he would provide more details over the next couple of quarters.

Looking ahead to the rest of this year, in the second quarter, the company expects to bring testing to consumers' homes through an at-home self-collection device, King said. "This device will be validated to provide results equivalent to a venous blood draw," he said.

Also this year, LabCorp plans to expand its LabCorp Express electronic check-in kiosks to all its service centers. The kiosks are currently available in more than 600 patient service centers.

LabCorp reported $361.8 million in cash and cash equivalents as of the end of the quarter.

In midday trading, LabCorp's shares were trading at $171.85, up more than 3 percent from yesterday's close of $166.08.