DX Earnings Report: Q2 Lab Earnings Stay Strong but Not Quite at Q1 Levels
Q2 is shaping up to be another strong quarter—albeit not as stellar as Q1. Salient trends: Big labs continue posting impressive organic growth even as they enjoy the surge of new revenues from recent acquisitions designed, in part, to cushion the impact of PAMA cuts in Medicare rates; Currency translation and the strong US dollar had a significant effect on foreign firms and those that rely heavily on global markets; Seasonally, the prolonged winter and delayed spring in the Eastern US was a boost for flu and respiratory tests but a bust for Lyme and other warm weather illness tests. Here’s a full rundown. (Note: Foundation Medicine and MDxHealth had not yet reported their Q2 earnings on the date we went to press.) Gainers Continuing recent trends, gainers outnumbered decliners by nearly 7:1 with 34 of 40 companies reporting higher Q2 revenues vs. the same period in 2017. Gains were not only widespread but frequently higher than expected. Thus, among the gainers, only five failed to make their Wall Street targets (as compared to three in Q1): Exact Sciences which despite 78% growth fueled by Cologuard sales missed its $104.7 million target by $1.8 million; Meridian Bioscience which grew 3% […]
Q2 is shaping up to be another strong quarter—albeit not as stellar as Q1. Salient trends:
- Big labs continue posting impressive organic growth even as they enjoy the surge of new revenues from recent acquisitions designed, in part, to cushion the impact of PAMA cuts in Medicare rates;
- Currency translation and the strong US dollar had a significant effect on foreign firms and those that rely heavily on global markets;
- Seasonally, the prolonged winter and delayed spring in the Eastern US was a boost for flu and respiratory tests but a bust for Lyme and other warm weather illness tests.
Here’s a full rundown. (Note: Foundation Medicine and MDxHealth had not yet reported their Q2 earnings on the date we went to press.)
Gainers
Continuing recent trends, gainers outnumbered decliners by nearly 7:1 with 34 of 40 companies reporting higher Q2 revenues vs. the same period in 2017. Gains were not only widespread but frequently higher than expected. Thus, among the gainers, only five failed to make their Wall Street targets (as compared to three in Q1):
- Exact Sciences which despite 78% growth fueled by Cologuard sales missed its $104.7 million target by $1.8 million;
- Meridian Bioscience which grew 3% but came up $400K shy of its $52.1 million target;
- Quest Diagnostics which for the second quarter in a row narrowly missed its target despite posting respectable 3% growth;
- Pacific Biosciences which posted its first positive growth quarter in over a year but still fell $2.2 million below its $23.8 million target; and
- Struggling Waters whose $596.2 million in Q2 revenues were up 7% year over year but $1.8 million shy of where Wall Street expected them to be.
Four firms upwardly adjusted their full-year EPS and/or revenue guidance during the quarter, half as many as in Q1. One firm reduced its EPS guidance—Waters, which backed off from last quarter’s adjustment increase.
Decliners
The number of firms reporting revenue declines in Q2 increased from five to six. For the first time in a while, both Pacific Biosciences and Waters got off the decliners list. But they were replaced by new entrants, including:
- EnzoBioChem which followed Q2’s 3% growth with a 5% decline this quarter;
- NanoString Technologies which lost 28% due to the loss of pharma collaboration revenues—a loss that was anticipated and allowed the firm to meet its $25 million Wall Street target; and
- NantHealth, which is in the process of restructuring its operations, lost 6% but still managed to double sequencing sales and narrow its net loss to $.21 per share.
Meanwhile, two of the other decliners were repeats from Q1:
- Opko Health which lost 10% due in part to PAMA cuts but still boosted exosome sequencing tests and surpassed its $261.7 million target by $2 million; and
- Siemens Healthineers, the fledgling Siemens spinout which lost 5% in just its third quarter of operation.
On the flip side, a pair of Q1 decliners were able to turn things around this quarter, including:
- Fluidigm which bounced back from 1% in losses to post 11% in gains; and
- Myriad Genetics which followed up the previous quarter 2% decline with 6% to the plus side.
The Billion-Dollar Labs
Of the billion-dollar labs, only Quest Diagnostics missed its Wall Street target. But the miss was narrow and belied by the positive growth of 3% despite PAMA cuts that were estimated to impact 12% of its business. The predominant theme among the other giants was massive growth swollen by revenues from recent acquisitions but backed up by rock solid performance in core sectors, including:
- Abbott—17% in reported revenues from Alere and St. Jude acquisitions + 8% organic growth;
- Thermo Fisher Scientific—22% increase in reported revenues from Pantheon acquisition + 8% organic growth;
- PerkinElmer—29% reported growth from Euroimmun acquisition + 10% organic growth;
- Becton Dickinson—41% reported growth from CR Bard acquisition + 5% organic growth; and
- LabCorp—13% reported growth from acquisitions + 8% organic growth.
Diagnostics Earning Reports 1Q 2018
(At least $10 million in sales)
| COMPANY | QUARTERLY REVENUES | DIAGNOSTICS SEGMENT PERFORMANCE | ||
| Total Q2* 2018 | YOY | Wall Street Estimate | ||
| Abbott Laboratories | $7.77 billion | +17% | $7.71 billion | Organic growth not counting Alere and St. Jude purchases of 8%; DX sales of $1.87 billion v. $1.27 billion in Q2 2017 lifted by 8% growth in molecular tests spearheaded by infectious disease |
| Agilent Technologies | $1.20 billion *(Q3) |
+8% | $1.20 billion | CrossLabGroup up 10% to $426 million, Diagnostics & Genomics up 9% to $237 million; mass spec + cell analysis strong; raises guidance from $4.86 billion to $4.88 billion in revenues and EPS to $2.71 (up 2¢) |
| Becton Dickinson | $4.28 billion *(Q3) |
+41% | $4.24 billion | Up 5% on comparable, currency-neutral basis excluding CR Bard acquisition; DX systems revenues up 7% to $362 million driven by BD Max platform + core microbio; raises guidance to over 31.5% revenue growth |
| BioMérieux | $677.1 million | +3% | NA | 8% organic growth; 6% decline in immunoassays due to price pressures in US partly offset by growth of Vidas line in other markets |
| Bio-Rad | $575.9 million | +14% | $548.4 million | Clinical diagnostics up 10% (6.5% currency-neutral) to $354 million driven by blood typing, immunology + quality control products |
| Bio-Techne | $180.3 million *(Q4) |
+15% | $174.8 million | 9% organic growth; diagnostics up 2% to $33.1 million; protein platforms up 21% offsetting drop in glucose controls |
| Bruker | $443.7 million | +7% | $436.9 million | 3% organic growth; scientific instruments up 7% and mass spec up in single digits |
| CareDx | $17.8 million | +48% | $15.5 million | Stellar growth in Allosure kidney transplant tests driving 67% spike in testing revenues; product revenues up 6%; licensing revenues up 10% |
| Danaher | $4.98 billion | +10% | $4.92 billion | 6% organic growth (net of Cepheid); diagnostics up 8% to $1.55 billion with Cepheid properties growing in high single-digits, slightly down from previous quarters; EPS guidance adjusted upward to $3.64 to $3.71 range |
| EnzoBioChem | $25.6 million *(Q3) |
-5% | NA | Bad weather coupled with losses of major insurance payor + major genetic test medical practice client contribute to loss |
| Exact Sciences | $102.9 million | +78% | $104.7 million | Cologuard stays hot with 59% spike in tests—215,000 ordered at average of $479 per test |
| Fluidigm | $26.4 million | +11% | $26.3 million | 19% increase in mass cytometry + high-throughput genomics to $11.4 million partially offset by decline in single-cell genomics products |
| GenMark Diagnostics | $14.9 million | +20% | $14.5 million | Growth driven by 39 new ePlex analyzer placements; net earnings of -37¢ per share miss -32¢ target |
| Genomic Health | $95.6 million | +14% | $92.1 million | Oncotype DX breast cancer tests up 4% + prostate tests up 32% in US |
| Hologic | $824 million *(Q3) |
+2% | $800.4 million | Diagnostics up 4% to $294.3 million with 7% growth in molecular offsetting 2% decline in blood testing; cytology + perinatal basically flat at $121.1 million |
| Illumina | $830 million | +25% | $786.6 million | NovaSeq + new iSeq drive growth in sequencing segment; increases 2018 guidance to 20% revenue growth + $5.10-$5.20 EPS |
| Invitae | $37.3 million | +160% | $31.7 million | Test volume up 139% to 73,000 samples, 59,000 of which were billable; Medicare CPT code 81433 ovarian + breast cancer revenues up to $2.3 million |
| Laboratory Corp. of America | $2.87 billion | +13% | $2.85 billion | Diagnostics up 5% to $1.72 billion with acquisitions revenues + currency translation offsetting PAMA price cuts, which cut revenue per requisition 0.7% |
| Luminex | $79.6 million | +4% | $79.6 million | Strong growth in diagnostics led by sample-to-answer molecular products; loss of LabCorp NuSwab account expected to harm profitability |
| Meridian Bioscience | $51.7 million *(Q3) |
+3% | $52.1 million | Diagnostics revenues up 1% to $36.4 million driven with declines in Clostridium difficile + foodborne products wiping out single-digit growth in Helicobacter pylori + double-digit growth in respiratory and Magellan LeadCare testing products |
| Myriad Genetics | $200.9 million *(Q4) |
+1% | $195.8 million | Molecular test revenues flat at $187.6 million due to12% fall in hereditary cancer test sales to $126.8 million but GeneSight revenues up 33% to $33.9 million, Prolaris prostate cancer test revenues up 133% to $7 million, EndoPredict tests up 40% to $2.8 million |
| NanoString Technologies | $25 million | -28% | $25 million | Pharma collaboration revenues down over 300% YOY; consumables up 16% to $12.8 million with Prosigna IVD kit sales contributing $2.5 million; IO 360 remains fastest growing panel launch in firm history; full year revenue guidance increased to $79 million-$81 million |
| NantHealth | $22 million | -6% | $23 million | Net loss narrows to $.21 per share; sequencing molecular sales nearly double to $924,000; software falls 10% to $19.5 million |
| Natera | $63.1 million | +21% | $61.2 million | Tests up 29%, including 27% increase prenatal Panorama test ($33.3 million, 113,000 tests) + 36% increase in Horizon carrier screening test (41,800 tests) |
| NeoGenomics | $67.7 million | +9% | $66.2 million | 14% growth in test volume offsets 4% PAMA related decline in test revenue to $318 per test yielding overall 7% increase in total test revenues to $59.5 million; pharma services revenues increase 22% to $6.7 million |
| Opko Health | $263.7 million | -10% | $261.7 million | Despite 13% growth in test volume, PAMA cuts drive 1% decline in BioReference Laboratories revenues YOY (but $5 million above 1Q) as firm reorganizes to boost efficiency; exosome sequencing test volume up 38% |
| OraSure Technologies | $43.6 million | +8% | $42.2 million | Global sales drive 42% increase in OraQuick HIV testing products to $12.6 million; OraQuick HCV products down 58% to $3.2 million due to loss of foreign govt. contract; molecular collection systems up 7% to $17.2 million |
| Oxford Immunotec | $29.3 million | +12% | $28.6 million | Growth driven by 17% increase in global tuberculosis sales to $25 million; tick-borne testing down 9% to $4.4 million due to scale down of blood donor screening operation |
| Oxford Nanopore | £13.8 million ($18.4 million) | +204% | NA | Growth driven by increase in nanopore sequencing tools customers + sales of consumables |
| Pacific Biosciences | $21.6 million | +7% | $23.8 million | First quarter of positive growth in over a year; 90%+ growth in Sequel usage offset by 50%+ decline in RS II system consumables; instrument revenue up 20% to $8.5 million |
| PerkinElmer | $703.4 million | +29% | $693 million | 10% organic growth not counting Euroimmun revenues; diagnostics revenues up 66% (10% organic) to $272.7 million; new genomics business keeps growing at 100%+ clip due, in part, to low base it started with |
| Qiagen | $377.2 million | +8% | $375.6 million | Molecular diagnostics up 10% to $187 million, just below 50% of total sales, led by double-digit growth in QuantiFeron latent TB test (expected to generate $300 million in 2018 sales); companion diagnostics co-development deals boost personalized health sales |
| Quest Diagnostics | $1.92 billion | +3% | $1.95 billion | Narrowly misses target for second Q in a row; diagnostics services growth driven by acquisitions which offset PAMA price cuts; acceptance of AbbVie’s new Mavyret treatment for hepatitis C drives sharp declines in genotyping + resistance testing; Vitamin D testing down due to increase in coverage denials; prescription drug monitoring revenues strong but slightly below expectations |
| Quidel | $103.3 million | +269% | $103.2 million | Driven by $69.9 million in cardiac immunoassay revenues including sales from newly acquired Triage and BNP; rapid immunoassay products down from $22 to $16 million due to early end of flu season; specialized diagnostics down from $13.1 to $12.7 million; 103% growth in Solana products drives $700K growth in molecular to $3.9 million |
| Roche | $28.34 billion *(H1 2018) |
+7% | NA | Roche Diagnostics up 8% + total DX sales up 9% to $3.43 billion driven by centralized point of care solutions and success of new Cobas t 511 and t 711, molecular diagnostics (up 6%) and blood and HPV screening (up 30%); virology up 4% including 7% growth in HIV monitoring + 229% growth in Cobas Liat point of care testing sales |
| Siemens Healthineers | $3.87 billion | -5% | NA | Decline driven by negative currency translation; DX revenues down 4% to $1.01 billion despite strong growth in China, Europe and other global markets |
| Thermo Fisher Scientific | $6.08 billion | +22% | $5.89 billion | 8% organic growth + 12% growth from new acquisitions + 2% growth from currency translation; Lab revenues up 42% to $2.55 billion including 9% organic + net of Patheon revenues; increases 2018 guidance to revenues of $23.68-$23.86 billion and EPS of $10.80-$11.01 EPS |
| Trinity Biotech | $25 million | -2% | NA | Lab revenues decline $100K to $21 million with gains in diabetes + autoimmunity offset declines in Lyme disease due to late spring in Northeast; 4% decline in point-of-care ($3.8 million) due to lower HIV sales in US |
| Veracyte | $22.8 million | +24% | $20.6 million | Genomic test volume up 18% (7,686 tests), including triple revenues from Percepta bronchial genomic classifier; increases 2018 revenues guidance to $87-$89 million ($83-$86 million) |
| Waters | $596.2 million | +7% | $598 million | Growth driven by strong sales in China + TA sales + positive currency translation; mass spec rebounds from weak start in first part of year; reduces full year guidance to non-GAAP EPS of $8.05 to $8.20 |
* Bold face: Companies that met or exceeded Q1 Wall Street revenues targets
* Italics: Companies that missed Wall Street revenues targets
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