Dive Brief:
- LabCorp Tuesday morning reported third-quarter revenue of $3.9 billion, a 33% increase over the prior year fueled by strong demand for COVID-19 testing and recovery in the company's base business.
- CEO Adam Schechter said LabCorp's routine business has "recovered well" as people resume preventive medical visits and move forward with elective surgeries and other procedures, noting that non-COVID-19 volumes were down about 9% for the third quarter.
- Given those improvements, LabCorp will return $132 million in Coronavirus Aid, Relief, and Economic Security Act it received from the federal government. The move follows Quest Diagnostics' announcement last week it's giving back $138 million in CARES monies. But unlike Quest, LabCorp continues to not provide 2020 guidance due to "unpredictability" in the pandemic environment.
Dive Insight:
Despite COVID-19's ongoing impact on operations, LabCorp's business lines outside of COVID-19 PCR and antibody testing continue to recover from severe springtime lows. The quarter's 1.1% reduction in organic base business revenue was offset by a 32.6% growth contribution from coronavirus-related testing, for an overall 31.5% organic revenue increase during the quarter.
The company also reported that its drug development business is improving. Revenue for the third quarter was $1.24 billion, an increase of 5.7%.
Based on the current and expected strength of LabCorp's businesses, Schechter said the company is opting to return the $56 million in second-quarter CARES funds and an additional $76 million it received in the third quarter. Those monies were critical in the early months of the pandemic when LabCorp's base business was "significantly impacted and the future was uncertain," according to Schechter.
CFO Glenn Eisenberg noted that the $76 million in CARES Act funds was excluded from third-quarter earnings but included in cash flow, while adding that LabCorp has "reversed the $56 million" relief monies received in the second quarter from the company's third-quarter revenue.
Due to the rosier turn in 2020 performance and future expectations, Eisenberg said LabCorp is reinstating its share repurchase program. But despite the positive recent business trends, there continues to be "significant uncertainty" for the rest of 2020 related to COVID-19 and the flu season "resulting in an unusually wide range of potential financial outcomes."
Still, Schechter told investors LabCorp is "encouraged that people are returning to their routine care and that drug development trials continue to ramp up in the fourth quarter." Nonetheless, the company continues to not provide 2020 guidance.
By contrast, LabCorp's main rival Quest raised its full-year 2020 outlook last week, expecting revenue to reach between $8.8 billion and $9.1 billion, an increase of about 13.9% to 17.8% compared to the prior year. The previous outlook forecasted revenue between $8.4 billion and $8.8 billion.
Compared to LabCorp's results, Quest last week reported third-quarter revenue of $2.79 billion, a 42.5% increase compared to the prior year, similarly due to strong demand for COVID-19 testing and a recovery in its routine business.
LabCorp and Quest have each conducted about 22 million COVID-19 molecular and antibody tests to date.
Schechter said LabCorp is "preparing accordingly" for anticipated COVID-19 and flu outbreaks in the coming months, and touted an emergency use authorization from FDA for combined flu and COVID-19 tests.
