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Quest Diagnostics Suggests Lab Staffing Crunch May Aid Hospital Strategy; Q1 Revenues up 2 Percent


NEW YORK – Quest Diagnostics suggested Tuesday that laboratory industry staffing shortages could redound to its benefit as hospital labs are forced to either scale back or sell off their lab operations.

On a conference call following the release of the company's Q1 2024 earnings results, Quest Chairman, President, and CEO Jim Davis observed that the company has seen particular strength in hospital reference testing as that portion of its business continued to grow at a faster rate than it had prior to the COVID-19 pandemic.

He said that this trend was driven in part by the lab business's much discussed workforce crunch, noting that hospitals "face persistent challenges with staffing certain roles in specialized fields like histology, microbiology, and cytotechnology."

While laboratory testing in areas like molecular infectious disease soared during the COVID-19 pandemic, the pandemic did little to counter the industry's preexisting staffing challenges and perhaps even worsened them as layoffs and furloughs at the beginning of the pandemic shrunk the pool of employees, and the closure of training programs negatively impacted the pipeline of future workers.

Davis said that Quest is more able than hospital labs to fill roles in hard-to-staff areas and is also able to supplement personnel using technologies like AI and automation. He added that the company has seen an uptick in its employee retention rates, noting that while turnover rates have not yet returned to pre-COVID levels, they have improved on the 20 percent threshold they hovered above in 2023.

In addition to driving more hospital testing to Quest, the staffing crunch also plays into the company's hospital outreach acquisition strategy, Davis said, noting that its pipeline of both lab service and outreach opportunities "remains very strong."


Davis also highlighted during the call strong growth in Quest's advanced diagnostics business, particularly in the areas of brain health and women's health.

Regarding brain health, he noted the release this week of Quest's blood-based test for the Alzheimer's disease marker phosphorylated-tau 217 (p-tau 181). The assay is included as part of Quest's AD-Detect portfolio, which also includes blood tests for amyloid beta (Aβ) and p-tau 181. Davis said that uptake of the AD-Detect Aβ assay has "exceeded expectations."

Regarding Quest's women's health business, he said that "prenatal genetics and carrier screening are doing very well," posting double-digit growth during the quarter.

David additionally noted that Quest is close to launching its "early experience program" for its Haystack MRD product through which it will offer access to the test to a group of roughly 20 cancer institutions in anticipation of a broader national launch later this year.

David also touched on the US Food and Drug Administration's plans to regulate laboratory-developed tests, reiterating Quest's opposition to the agency's move and questioning its legal authority in the matter. On Monday, the Office of Management and Budget said that it had finished its review of the FDA rule on LDTs, clearing the way for the agency to publish the final rule.

On Tuesday, Quest also announced its Q1 2024 earnings results, saying its revenues were up 2 percent year over year.

For the three months ended March 31, total revenues rose to $2.37 billion from $2.33 billion, beating the consensus Wall Street estimate of $2.29 billion.

Revenue from the company's Diagnostic Information Services business was $2.30 billion in Q1, up 2 percent from $2.26 billion in Q1 2023. The company said its Q1 base business revenue was up nearly 6 percent year over year.

Test volume as measured by requisitions was up 2 percent in the quarter, with organic volume up 1 percent and revenue per requisition essentially flat.

The Secaucus, New Jersey-based lab company posted a profit attributable to Quest of $194 million, or $1.72 per share, compared to a profit attributable to the firm of $202 million, or $1.78 per share, a year ago. Adjusted EPS for the recently completed quarter was $2.04, above the consensus Wall Street estimate of $1.85 per share.

In Q1, Quest's SG&A spending was up less than 1 percent to $440 million from $439 million.

Quest updated its outlook for full-year 2024, projecting net revenues of between $9.40 billion and $9.48 billion and adjusted EPS of between $8.72 and $8.97. Previously the company projected net revenues of between $9.35 billion and $9.45 billion and adjusted EPS of between $8.60 and $8.90.

Quest finished the quarter with $474 million in cash and cash equivalents.

In Tuesday morning trading on Nasdaq, Quest shares were up 4 percent to $5.63.