NEW YORK – Quest Diagnostics expects a return to revenue growth in 2024 with acquisitions and an emphasis on advanced diagnostics.
The company projects full-year 2024 revenues of between $9.35 billion and $9.45 billion, in line with the consensus Wall Street estimate of $9.39 billion. This would represent growth of between 1.1 percent and 2.1 percent, reflecting the continued expansion of its base testing business along with the continued dwindling of COVID-19 testing. EPS is expected to be in the range of $7.69 to $7.99, and adjusted EPS is expected to be between $8.60 and $8.90, below the consensus Wall Street estimate of $8.99.
During a conference call following the release of Quest's Q4 2023 results, President and CEO Jim Davis said the company will have "an intense focus on faster-growing clinical areas, including molecular genomics and oncology," and noted that in 2023 it saw double-digit growth in areas including advanced cardio-metabolic, prenatal and hereditary genetics, and neurology testing.
Acquisitions of hospital and independent labs will also continue to be a key growth driver for the company, said Davis, who announced Quest's acquisition of New York City-based independent lab Lenco Diagnostic Laboratories. According to a WARN report filed with the New York State Department of Labor, Lenco is laying off 185 of its 239 employees due to the acquisition, with those layoffs scheduled to take place April 15.
Davis also highlighted Quest's acquisition, announced in January, of Steward Health Care System's outreach laboratory business.
Discussing the company's advanced diagnostics business, Davis said Quest continues to develop the minimal residual disease testing assets it acquired via its purchase of Haystack oncology and that this process is continuing as expected with a commercial launch planned in the first half of the year. He also addressed questions around whether Natera's recent win in a patent infringement lawsuit against NeoGenomics and its Radar MRD assay might impact Quest's MRD efforts, saying that Quest has "no risk with respect to the IP on the underlying technology that we are using in Haystack."
Davis also highlighted Quest's Alzheimer's testing efforts, noting that the company has added the phosphorylated tau-181 marker to its Quest AD-Detect Alzheimer's blood test. He said there remained "one important blood-based biomarker" that the company plans to add to the test this year, "and that will complete our investment in Alzheimer's testing from a blood-based standpoint."
On the policy front, Davis reiterated Quest's commitment to reform of the Protecting Access to Medicare Act (PAMA) via the Saving Access to Laboratory Services Act (SALSA) and said that this is the highest priority this year for the company's trade association, the American Clinical Laboratory Association (ACLA).
Davis also expressed Quest's opposition to the US Food and Drug Administration's plans to regulate laboratory-developed tests, saying that the company believes the agency does not have legal authority to regulate these tests and that FDA oversight would slow diagnostic innovation and increase medical costs. He said that around 10 percent of Quest's tests are considered LDTs. If the FDA's plan to regulate LDTs does come to pass, it would require "further investments" on Quest's part to ensure compliance across its laboratories, but it would not be a "heavy lift," he said.
For the fourth quarter, Quest reported a 2 percent year-over-year decline in revenues.
Revenues for the three months ended Dec. 31 were $2.29 billion, down from $2.33 billion in the same quarter last year but above the consensus Wall Street estimate of $2.25 billion.
Base revenues grew 5 percent year over year to $2.25 billion from $2.15 billion, while COVID-19 testing revenues were down 80 percent to $37 million from $184 million.
Test volumes rose 2 percent during the quarter while revenue per test fell by 4 percent.
Net income for the quarter attributable to Quest was $192 million, or $1.70 per share, versus $101 million, or $.87 per share, in the fourth quarter of last year. Adjusted EPS was $2.15 and beat the analyst average estimate of $2.11 per share.
In the fourth quarter, Quest spent $407 million on SG&A, down 28 percent from $563 million in the same quarter last year.
For full-year 2023, revenues were $9.25 billion, down 6 percent from $9.88 billion in 2022, and above the consensus Wall Street estimate of $9.21 billion. Base business revenues grew 7 percent year over year to $9.03 billion from $8.43 billion, while COVID-19 testing revenues were down 85 percent to $223 million from $1.45 billion.
Test volumes decreased by 1 percent year over year while revenue per test fell 6 percent.
Net income attributable to Quest for 2023 was $854 million, or $7.49 per share, compared to $946 million, or $7.97 per share, in 2022. Adjusted EPS for the year was $8.71, matching the consensus analyst estimate.
In 2023, Quest spent $1.64 billion on SG&A, down 12 percent from $1.87 billion in 2022.
The company ended 2023 with $686 million in cash and cash equivalents.
Separately, Quest said that its board has authorized an increase to its quarterly dividend to $.75 per share from $.71 per share, payable on April 22 to shareholders of record on April 8. The annual dividend will now be $3.00 per share.
In morning trading on the New York Stock Exchange, Quest's shares were down 1 percent to $127.02.