DX Earnings Report: Lab Market Consolidates but Survivors Stay Strong
PAMA and private payor rate cuts and increased market competitiveness are fueling consolidation and driving smaller, independent labs (other than specialty labs) into near extinction. But the big, established companies continue to chug along, not only via acquisition revenues but
PAMA and private payor rate cuts and increased market competitiveness are fueling consolidation and driving smaller, independent labs (other than specialty labs) into near extinction. But the big, established companies continue to chug along, not only via acquisition revenues but organically—albeit at slightly lower year-over-year rates. Meanwhile, many of the genetic and molecular testing firms are making significant strides despite the current softness in the consumer market. Here’s an overview of the key trends from FY 2019 Q3.
Gainers
Continuing recent patterns, the vast majority of companies reported at least some revenue growth during the period (37 v. 6). Not surprisingly, the emerging genetic and molecular firms are posting the most dramatic quarterly growth rates. It’s also not surprising that the vast majority of these firms have yet to become profitable. Thus, of the 15 firms that reported double-digit revenue growth for the quarter, all but 3 had negative earnings per share (EPS). The exceptions:
Bold face: Companies that met or exceeded average Q3 Wall Street revenue estimates
* Companies that raised their revenue or EPS guidance during Q3
** Companies the lowered their revenue or EPS guidance during Q3
- Genomic Health, which reported 11% growth and positive net EPS of $0.48;
- NeoGenomics with 51% top-line growth and adjusted EPS of $0.07; and
- Castle Biosciences, which cracked the quarterly $10+ million revenues line for the first time with 300% growth and a surprising positive adjusted EPS of $0.05 (smashing the average Wall Street estimate of -$0.30 per share).
- Qiagen, which was expecting earnings of between 4% and 5%, had to settle for 1% top-line growth due to what the company described as “significantly weaker-than-expected developments in China;” after the disappointing earnings news, the company announced the departure of its long-time CEO and a strategic pivot by partnering with former competitor Illumina for NGS kit development;
- Myriad Genetics, which posted a 9% revenue decline of $186.3 million, well below the Wall Street expectation of $202.1 million; and
- Fluidigm, which surprised the Street by coming in $2.3 million shy of its $28.7 million target thanks to a 9% decline caused by weakness in mass cytometry sales.
- Bruker, which posted 12% growth and $521.1 million in earnings, easily smashing its Wall Street estimate of $496.7 million thanks to strong sales in mass spectrometry solutions and microbiology;
- ExactSciences, which continues to ride Cologuard and now adds OncotypeDX to its potent genetic screening cancer product mix via the recently completely acquisition of Genomic Health;
- Guardant Health, which benefited from the powerful combination of higher test volume and revenues per test to post $60.8 million, surprising Wall Street analysts that were expecting earnings in the range of $45.4 million;
- Natera, which had what its CEO described as a “transitional quarter,” by posting revenues of $77.9 million (as opposed to $74.0 million expected), nearly 20% growth, driven by higher sales of its Panorama noninvasive prenatal and Horizon carrier screening tests; and
- NeoGenomics, which posted $104.7 million, surpassing average estimates of $99.1 as a result of a 35% increase in test volume and 15% increase in average revenue per test.
| COMPANY | FY 2019 Q3 | DX Segment Performance | ||
| Total Revenue (vs. Wall Street) | YOY Revenues | EPS (vs. Wall Street) | ||
| Abbott Laboratories | $8.08 billion ($8.10 billion) | +5% (8% on organic basis) | Adjusted +$0.84 (+$0.84) | Core lab revenues up 8% to $1.18 billion, molecular down 8% to $111 million, POC up 6% to $144 million, rapid diagnostics down -1% to $477 million |
| Agilent Technologies (FY Q4) | $1.37 billion ($1.33 billion) | +6% | Adjusted +$.89 (+$.85) | Diagnostics and genomics group (DGG) up $13 million to $269 million driven by pathology, companion diagnostics + pharma demand for oligo manufacturing |
| Adaptive Biotech* | $26.1 million ($22.1 million) | +52% | Net -$.11 (-$.24) | Sequencing, including clonoSeq testing, up 38% to $11.7 million; biopharma partnership up 65% to $14.4 million. Company went public in June 2019 |
| Becton Dickinson (FY Q4) | $4.58 billion ($4.56 billion) | +4% | Adjusted +$3.31 (+$3.30) | DX systems up 7% to $409 million. Strong molecular sales including double-digit growth in BD Max platform and ID-AST microbiology solutions |
| Bio-Mérieux | $727.2 million | +13%, 10% organic | Not reported | Molecular biology up 26% to $166.5 million; immunoassays up 14% to $129.4 million |
| Bio-Rad Laboratories | $560.6 million ($565.0 million) | +3% | Non-GAAP +$1.61 (+$1.40) | DX up 2% to $341.8 million driven by quality controls, immunology and blood typing product lines; net loss of $258.8 million as a result of investment losses |
| Bio-Techne (FY 2020 Q1) | $183.2 million ($179.4 million) | +12% | Adjusted +$1.06 (+$1.05) | DX & Genomics up 16% to $42.6 million despite negative impact on operating margin from Exosome Diagnostics acquisition |
| Bruker | $521.1 million ($496.7 million) | +12% | Non-GAAP +$0.43 (+$0.38) | CALID, including mass spectrometry and microbio, up in low teens |
| CareDx* | $33.8 million ($33.1 million) | +60% | -$0.19 (-$0.19) | Testing services up 68% to $28.2 million driven by 11% increase in AlloSure and AlloMap sales |
| Castle Biosciences | $14.8 million ($9.5 million) | +300% | Net +$0.05 (-$0.30) | DecisionDx-Melanoma skin cancer tests delivered up 30% to 4,482; DecisionDx-UM test reports up from 324 to 356 |
| Danaher | $5.04 billion ($5.02 billion) | +4% | Adjusted +$1.16 (+$1.15) | DX up nearly 7% to $1.60 billion; Sciex and mass spectrometry down slightly as compared to unusually strong Q3 2018 sales and gap between new product launches; life sciences up from $1.60 to $1.70 billion; Beckman Coulter DX revenues up in mid-single digits for fourth quarter in a row driven by DxH 900 hematology analyzer and Dx 5000 laboratory automation system |
| Exact Sciences | $218.8 million ($216.1 million) | +85% | -$0.31 (-$0.41) | Cologuard test volume up 89% (456,000 people screened, 12,000 MDs ordered) with revenue per test down $13 to $479 per test (projected to be $480 in Q4) and average cost per test down $10 to $114; Company acquired by Genomic Health during quarter |
| Fluidigm** | $26.4 million ($28.7 million) | -9% | Adjusted -$0.09 (-$0.20) | Loss driven by 13% dip in mass cytometry to $15.6 million and 2% dip in microfluidics to $10.9 million |
| GenMark Diagnostics | $20.9 million ($20.4 million) | +32% | Net -$0.20 (-$0.19) | Growth driven by 98% increase in ePlex systems to $13.4 million (51 new systems placed during quarter), representing 64% of total revenues |
| Genomic Health | $114.4 million ($112.2 million) | +11% | Net +$0.48 (+$0.37) | US cancer test sales up 11% to $95.3 million, (39,340 OncotypeDx tests v. 34,810 in Q3 2018), including $82.4 million in breast cancer and $9.4 million in prostate cancer |
| Guardant Health* | $60.8 million ($45.4 million) | +181% | Net -$0.14 (-$0.37) | Testing volume + revenues per test both increase. Precision oncology up 185% to $52.1 million; development services up 156% to $8.7 million driven by new companion Dx products for biopharma |
| Hologic (FY Q4) | $865.8 million ($845.7 million) | +6% | Adjusted +$0.65 (+$0.65) | Global DX up 6% to $288.9 million driven by 9% growth in molecular diagnostics to $172.1 million and blood screening up 30% to $158 million but cytology + perinatal stay flat 1% at $118 million |
| Invitae | $56.5 million ($55.0 million) | +51% | Non GAAP -$0.69 (-$0.56) | All testing segments up, including cancer, noninvasive prenatal screening and Detect pharma-sponsored testing; wider coverage helps offset PAMA gains with 73% of revenues from third party payors |
| LabCorp | $2.93 billion ($2.91 billion) | +4% | Adjusted +$2.90 (+$2.85) | Growth driven by acquisitions including Covance drug development; DX flat with less than 1% growth ($1.76 billion) as PAMA produces -1.5% impact; organic volume up less than 1% with managed care contracting changes producing -1% impact |
| Luminex** | $78.7 million ($81.8 million) | +9% | Net -$0.04 (-$0.03) | Still transitioning from loss of LabCorp accounts and integration of newly acquired MilliporeSigma flow cytometry business. Consumables up 15% to $13.4 million + molecular sample-to-answer revenues increase to $17.4 million |
| MDxHealth (cumulative revenues for first 9 months) | $15.6 million | -35% | Net -$0.35, as opposed to -$0.40 thru Q3 2018 | ConfirmMDx prostate cancer test volume down 13% to 13,037 tests due to non-recurring volume spike from utility study done in Q3 2018—overall billable test volume for quarter up 5% to 4,305 |
| Meridian Bioscience (FY Q4) | $50.8 million ($50.6 million) | -4% | Adjusted +$0.13 (+$0.09) | DX down 9% to $33.4 million, including 21% dip in molecular tests to $7.7 million and 6% dip in immunoassay and blood chemistry to $27.3 million; losses driven competitive pressures + price declines for gastrointestinal products |
| Myriad Genetics (FY 2020 Q1)** | $186.3 million ($202.1 million) | -8% | Adjusted +$0.08 (+$0.32) | Unfavorable CPT code changes for hereditary cancer tests drive molecular DX down 9% to $172.0 million, including 10% drop in hereditary cancer ($104.5 million), 15% decline in Vectra ($11.0 million), 4% drop in EndoPredict ($2.3 million); but prenatal testing up 30% to $23.5 million and Prolaris up 5% to $6.2 million |
| NanoString Technologies* | $30.6 million ($28.1 million) | +7% | Net -$0.64 (-$0.54) | Total IVD consumables up 14% to $12.7 million but Prosigna flat at $2.5 million; instruments up from $5.4 to $8 million |
| NantHealth | $22.4 million | +1% | Adjusted -$0.15, v. -$0.89 in Q3 2018 | Insurance reimbursement losses lead to significant reduction in GPS molecular tests with overall 63% decline in molecular revenues to $276,000 |
| Natera | $77.9 million ($74.0 million) | +19% | Net -$0.33 (-$0.54) | Driven by growth in Panorama noninvasive prenatal and Horizon carrier screening tests; tests processed up 20% to 200,200, most of which processed via Constellation software platform |
| NeoGenomics* | $104.7 million ($99.1 million)) | +50% | Adjusted +$0.07 (+$0.06) | Fifth consecutive quarter of positive revenue growth, which occurs across all testing modalities, including over 50% growth in next-gen sequencing and molecular testing est volume up 35% to 250,518 + average revenue per test up 15% to $369 thanks to Genoptix acquisition and favorable test mix |
| OpkoHealth | $228.8 million ($225.4 million) | -8% | Net -$0.11 (-$0.11) | PAMA reimbursement cuts hurt; 4Kscore prostate cancer tests slightly down from 18,700 to 18,000) but GeneDX strong with 6% growth in test volume fueled by 21% increase in hospital- + health-system-based test orders |
| Oxford Immunotec | $21.2 million ($20.3 million) | +32% | Pro forma +$0.04 (-$0.03) | US revenues nearly double to $5.8 million driven by higher tuberculosis testing volume, price increases + accounting adjustments% to $18.7 million due not just to strong demand but shift of higher seasonal testing volumes previously recognized in Q3; services down 44% to $922,000 due to exit from blood donor screening business |
| Pacific Biosciences | $21.9 million ($27.0 million) | +21% | Net -$0.19 (-$0.15) | $18.5 million in product + $3.4 million in service and other revenues, as firm awaits regulatory clearance for Illumina merger |
| PerkinElmer | $706.9 million ($715.9 million) | +5% | +$1.06 (+$1.01) | DX up 4% to $280.0 million driven by immunodiagnostics + reproductive health |
| Personalis | $17.2 million ($15.8 million) | +47% | Net -$0.22 (-$0.25) | US Dept of Veterans Affair contract continues to account for 75% of revenues |
| Qiagen** | $382.7 million ($383.2 million) | +1% | Adjusted +$0.36 (+$0.36) | Molecular DX down 3% to $183 million due in part to discontinuation of China NGS joint venture |
| Quanterix | $14.9 million ($12.6 million) | +41% | Not reported | Products up from $6 million to $10.7 million + services and other revenues up 39% to $4.2 million, including 40% growth in lab services |
| Quest Diagnostics* | $1.96 billion ($1.94 billion) | +4% | Adjusted +$1.76 (+$1.71) | 5.1% increase in test volume offsets 2.5% decline in unit price, 120 basis points of which was caused by PAMA; Drivers of volume increase include drug monitoring, TB, STD and cardioIQ testing |
| Quidel | $126.5 million ($125.6 million) | +8% | Adjusted +$0.70 (+$0.64) | Rapid immunoassays up 20% to $42.5 million driven by 36% increase in influenza products to i$29.3 million; Cardiac immunoassays up 2% to $66.8 million; Molecular DX up 1% to $12.5 million, including 26% increase in Solana sales; Specialized DX up 13% to $14.3 million |
| Roche Diagnostics* (cumulative diagnostics revenues for first 9 months) | $9.53 billion | +4% | Not reported | Centralized + point-of-care (POC) up 5% to $5.78 billion, including 7% growth in molecular to $1.55 billion) driven by 9% increase in blood screening + strong demand for sequencing sample prep + microbiology; POC solutions up 26% + virology up 1% |
| Siemens Healthineers (FY Q4) | $4.64 billion | +8% | Net +$0.55 | DX up 2% to $1.22 billion (€1.11 billion) driven by strong growth in Australia, China + rest of Asia which offset soft sales in Americas |
| 10x Genomics | $61.2 million ($54.9 million) | +67% | Net -$0.33 | Firm goes public in June. Consumables up 86% to $49.7 million, instruments up 13% to $10.4 million + services up 80% to $1.1 million |
| Thermo Fisher* | $6.27 billion ($6.18 billion) | +6% | Adjusted +$2.94 (+$2.87) | Specialty DX down 2% to $879 million due to divestment of Anatomical Pathology business in June; Lab products + services up 6% (6% organic) to $2.62 billion driven by growth across segment led by pharma services |
| Trinity Biotech | $24.6 million | +4% | Net +$0.043 | Clinical lab up 1% to $20.7 million + POC up 33% to $3.9 million driven by higher HIV sales in Africa which offset decline in US HIV sales |
| Veracyte | $31.0 million ($30.1 million) | +32% | Net -$0.02 (-$0.07) | Genomic test volume up 24% to 9,941 tests, including 25% growth in Envista Genomic Classifier (223 tests) + 17% growth in Affirma (8,925 tests) |
| Waters** | $577.3 million ($588.9 million) | - under 1% | Non-GAAP +$2.13 (+$2.13) | Hurt by currency translation + 4% drop in US sales |
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