NEW YORK – Quest Diagnostics on Thursday reported a 31 percent year-over-year drop in its COVID-19 testing revenues during the second quarter, while total revenues contracted 4 percent.
For the three months ended June 30, Quest's total revenues slipped to $2.45 billion from $2.55 billion a year ago but beat the consensus Wall Street estimate of $2.34 billion. Meanwhile, its COVID-19-related revenues fell to $355 million from $511 million a year ago. Sequentially, COVID-19 testing revenues were down 41 percent, Quest Executive VP Jim Davis said on a conference call following the release of the financial results.
The base business, which excludes COVID-19 results, rose 3 percent year over year to $2.10 billion from $2.04 billion.
Despite the drop in COVID-19 testing revenues during Q2, Quest Chairman and CEO Steve Rusckowski said, "demand for COVID-19 molecular testing is not going away anytime soon. It will continue into 2023."
Davis, who is CEO-elect and will succeed Rusckowski later this year, added that for full-year 2022, COVID-19 testing revenues are expected to be between $1.15 billion and $1.30 billion. He also noted that in July as the BA.4 and BA.5 variants became the main driver of COVID-19 infections, demand for molecular testing for the disease remained consistent with the demand seen in June.
To increase its share of COVID-19 molecular testing, Quest has been partnering with retail outlets and has established relationships with CVS, Walmart, and most recently Rite Aid, where patient specimens can be collected. About half of Quest's COVID-19 testing volume, Davis said, came from retail channels in Q2, and the firm estimates it performs about 8 percent of all COVID-19 molecular testing in the US, up from 4 percent in March.
Quest CFO Mark Guinan added that the company assumes it will perform 15,000 to 25,000 COVID-19 tests per day for the year.
Overall, total testing volume was down 1.4 percent in Q2 from a year ago, he said, while total base testing volume grew 2 percent year over year.
Recently, legislation was introduced in Congress to address what the lab industry has said is a flaw in how the Protecting Access to Medicare Act (PAMA) calculates reimbursements for laboratories. Called the Saving Access to Laboratory Services Act, or SALSA, the bill would institute a statistical sampling-based approach to collecting lab test pricing data under PAMA and stop price cuts scheduled under current law to go into effect at the start of 2023. It also would extend the time between price reporting periods from three years to four and place caps of 5 percent on both the annual cuts and increases a given test could see under PAMA.
SALSA, Rusckowski said, "could fix PAMA permanently," and the American Clinical Laboratory Association is coordinating meetings with legislators, as well as public advocacy efforts, to get the legislation passed.
He also said that last week the US Court of Appeals for the Federal Circuit sided with ACLA on a lawsuit filed by the association in 2017 against the federal government over PAMA. According to Rusckowski, the court called the exclusion of hospital pricing data from the calculation of PAMA reimbursement rates arbitrary and capricious.
However, the court stopped short of requiring the US Department of Health and Human Services to recalculate PAMA rates.
"While disappointing, we believe his favorable ruling will give Congress additional strong grounds to finally fix PAMA's many flaws by passing SALSA," Rusckowski said.
For Q2 2022, Quest posted a profit of $250 million, or $1.96 per share, compared to a profit of $650 million, or $4.96 per share, in Q2 2021. Adjusted EPS for the recently completed quarter was $2.36, beating the consensus Wall Street estimate of $2.30.
The firm exited Q2 with $790 million in cash and cash equivalents.
For full-year 2022, the Secaucus, New Jersey-based clinical laboratory company adjusted revenue guidance to a new range of $9.50 billion to $9.75 billion from a previous guidance of between $9.20 billion and $9.50 billion.
Reported EPS guidance was adjusted to a new range of $8.24 to $8.64 from a prior range of $7.88 and $8.38, while adjusted EPS guidance was adjusted to a new range of $9.55 to $9.95 from a previous range of $9.00 to $9.50.