The COVID-19 bubble hasn’t yet burst; but it’s definitely begun to leak. Because of Omicron, declines in COVID-19 revenues weren’t as dramatic as expected in Q4 2021. But it’s only a matter of time before COVID-19 demand falls off the cliff, warn Quest and LabCorp. The Q4 earnings reports offer only a taste of the losses to come. And, yet, the outlook remains positive. Here’s a high-level overview of revenue trends, both COVID-19 and non-COVID-19 related.

Revenue Growth Slows Dramatically

What a difference a year makes. In Q4 2020, COVID-19 demand was cresting and lab companies with COVID-19 products were posting record—and ultimately unsustainable—revenue growth. Compared to this baseline, 15 of the 31 companies that had reported their earnings when we went to press posted negative or flat (i.e., 2% or less) top line revenue growth in Q4 2021.

Q4 Year Over Year Revenue Growth

Other companies reporting negative or flat growth: Exact Sciences (+2%), Fulgent Genetics (-14%), Meridian Biosciences (-5%), NeoGenomics (-1%), OraSure Technologies (+1%), and Ortho Clinical Diagnostics (+1%).

The Positive News

It could have been much uglier on both the top and bottom lines. Every company, including those with negative or flat Q4 growth, reported positive growth for the full year, often at very robust levels (excluding companies that are into Q1 of their 2022 fiscal year).

2021 Q4 vs Full Year Top Line Revenue Growth

Despite declining growth rates, all but four companies wound up meeting or exceeding their Wall Street Q4 top line revenues targets. The companies that came up short: Myriad Genetics, Ortho Clinical Diagnostics, Pacific Biosciences, and 10x Genomics. Only two companies missed their net earnings targets: Exact Sciences and 10x Genomics. In addition, even as the industry braces for the precipitous decline in COVID-19 revenues, no fewer than six major companies raised their full year guidance for 2022: Agilent Technologies, Becton Dickinson, Hologic, Siemens Healthineers, Thermo Fisher Scientific, and Hologic.

Labs Will Overcome Loss of COVID-19 Revenues

While it’s awkward to say, the truth is that the rise of the coronavirus has been an economic windfall for many lab companies, driving billions in new revenues. Those bounteous times are about to end. But the inevitable falloff in COVID-19 revenues will be far less disruptive to the industry than the pandemic was. For one thing, unlike the outbreak of coronavirus which caught the industry (along with everybody else in the world) by surprise, lab companies have had time to prepare for the falloff in COVID-19 demand. More significantly, as the pandemic recedes, people and institutions are getting back to the testing they had to defer. The return to normalcy is reflected in the Q4 numbers, with almost all companies reporting significant recovery in their core non-COVID-19 businesses, in many cases not only meeting but also exceeding pre-pandemic levels.

Bold face: Companies that met or exceeded average or consensus Q4 Wall Street revenue estimates

* Companies that raised their revenue or EPS guidance during Q4

** Companies that lowered their revenue or EPS guidance during Q4