NEW YORK – Laboratory Corporation of America on Thursday reported 4 percent year-over-year revenue growth companywide for the third quarter while the company's diagnostics revenues were up less than 1 percent
Total revenues for the quarter were $2.93 billion, up from $2.83 billion in the third quarter of 2018, and above the consensus Wall Street estimate of $2.91 billion.
Growth was driven by acquisitions, which accounted for almost 3 percent of growth, and strong performance in the company's Covance drug development business, which posted revenue growth of about 9 percent and organic growth of 5 percent. Organic revenues were up companywide more than 2 percent.
In diagnostics, revenues were up slightly at $1.76 billion compared to $1.75 billion in Q3 2018. Organic growth was less than 1 percent, and included a negative impact from the Protecting Access to Medicare Act (PAMA) of 1.5 percent. Acquisitions contributed a fraction of 1 percent to revenue growth, with disposition of businesses decreasing revenues slightly more than 1 percent.
Organic volume growth was less than 1 percent, with a change in managed care contracts contributing a negative impact of 1 percent. Revenue per requisition increased by 1 percent, excluding the disposition of businesses.
The company's Covance unit saw revenues grow by about 9 percent year over year to $1.18 billion, with organic growth of almost 5 percent. Revenue from the company's companion diagnostics business grew nearly 20 percent year over year, David King, LabCorp's chairman and CEO, said on a conference call following release of the quarterly results.
While the negative impact of PAMA on the company's Q3 revenues was relatively modest, King said that the law "was affecting the industry" with smaller providers particularly impacted.
This has provided acquisition opportunities for larger players like LabCorp. King noted that the company has "a robust acquisition pipeline and remain[s] focused on strategic value creating acquisitions."
This week the company completed the acquisition of South Bend Medical Foundation's diagnostic testing business.
King provided updated the company's expansion into the retail setting, noting that it now has 58 Walgreens-LabCorp locations in nine states and another 75 additional locations in the process of opening.
He added that the company has expanded its Pixel by LabCorp tool, which now includes 28 test panels comprising more than 100 analytes.
King also noted that LabCorp has continued to work to integrate its diagnostics and drug development offerings to enable it "to both reduce [health systems'] lab testing costs and bring them meaningful clinical research opportunities."
He cited as an example the ability to combine LabCorp's patient population data with Covance's protocol design experience to improve clinical trial patient recruitment and noted that "this approach enabled us to win nine studies, principally focused on oncology, from a single sizeable customer."
During Q3 2019, net earnings attributable to LabCorp were $220.7 million, or $2.25 per share, compared to $318.8 million, or $3.10 per share, in the same quarter last year. Adjusted EPS for the quarter was $2.90 and beat the analysts' average estimate of $2.85.
The company's SG&A costs were $401.5 million, up 5 percent compared to $381.8 million in the same quarter last year.
For full-year 2019, LabCorp changed its revenue growth range to between 1.5 percent and 2 percent year over year compared to an earlier range of between 1 percent and 2 percent.
LabCorp diagnostics is anticipated to see revenue decline of 0.5 percent to 1.5 percent year over year, changed from a previous guidance of a decline of between 2 percent and 3 percent.
The company narrowed its adjusted EPS guidance for the year to $11.20 to $11.30, compared to a previous guidance of $11.10 to $11.40.
LabCorp ended the quarter with $361.1 million in cash and cash equivalents.
The company's shares were down 3 percent in Thursday morning trading on the New York Stock Exchange to $164.22.