Q2 Revenues Slide but By Less than Wall Street Expected
As expected, the COVID-19 pandemic took a tremendous bite out of lab company earnings in the second quarter. However, the losses were largely below expectations, significantly below in many cases. And for the companies that were able to pivot and offer desperately needed coronavirus testing products and services, COVID-19 was actually a business windfall. Losers Outnumber Gainers In the past three years, year-over-year gainers have outnumbered decliners for quarterly revenue growth at a roughly 3-to-1 clip. And that’s also the way 2020 began where, in spite of the pandemic’s onset, 29 companies of 39 surveyed companies reported higher 2020 Q1 revenues, as compared to the same period in 2019. Expectedly, that pattern reversed itself in Q2 2020, with decliners leading gainers 29 to 12, including 6 of the 8 billion-dollar companies surveyed, towit, Abbott, Agilent, Becton Dickinson, LabCorp, Quest, Roche and Siemens Healthineers. The notable exceptions included Thermo Fisher Scientific, which posted an astounding 10% increase at $6.92 billion, which not only exceeded the average $6.13 billion Wall Street estimate but blew it to smithereens. Danaher was the other testing giant to post big revenue gains. Losses Not as Big as Expected But Thermo Fisher was hardly alone in beating […]
As expected, the COVID-19 pandemic took a tremendous bite out of lab company earnings in the second quarter. However, the losses were largely below expectations, significantly below in many cases. And for the companies that were able to pivot and offer desperately needed coronavirus testing products and services, COVID-19 was actually a business windfall.
Losers Outnumber Gainers
In the past three years, year-over-year gainers have outnumbered decliners for quarterly revenue growth at a roughly 3-to-1 clip. And that’s also the way 2020 began where, in spite of the pandemic’s onset, 29 companies of 39 surveyed companies reported higher 2020 Q1 revenues, as compared to the same period in 2019.
Expectedly, that pattern reversed itself in Q2 2020, with decliners leading gainers 29 to 12, including 6 of the 8 billion-dollar companies surveyed, towit, Abbott, Agilent, Becton Dickinson, LabCorp, Quest, Roche and Siemens Healthineers. The notable exceptions included Thermo Fisher Scientific, which posted an astounding 10% increase at $6.92 billion, which not only exceeded the average $6.13 billion Wall Street estimate but blew it to smithereens. Danaher was the other testing giant to post big revenue gains.
Losses Not as Big as Expected
But Thermo Fisher was hardly alone in beating Wall Street targets. Not counting European firms Roche and Siemens Healthineers, 34 companies reported better than expected earnings, and only 5 missed their top line revenue estimates. And these weren’t close calls. The predominant pattern was a sizeable gap between expected and actual revenues, including among companies with notable year-over-year declines. Notable examples:
- Abbott: Revenues of $7.33 billion (-8%) vs. $6.75 billion estimated;
- Hologic: $822.9 million (-4%) vs. $616.7 million; and
- Waters: $520.0 million (-13%) vs. $496.9 million.
How Labs Were Able to Avert Expected Disaster
There were several reasons why so many companies were able to limit their losses. First and foremost was effectiveness in ramping up or, even in some cases, developing the capacity to produce COVID-19 testing products. Thus, firms like Roche, Thermo Fisher, LabCorp, Hologic, Quidel, Abbott, Quest, GenMark and PerkinElmer wasted little time after the public health emergency began to secure Emergency Use Authorization (EUA)for their SARS-CoV-2 laboratory developed tests. Others like Meridien, PerkinElmer and Thermo Fisher were quick to recognize and develop the capacity to respond to the need for reagents, test platforms and other supplies, including PPE.
The other major factor mitigating the extent of the losses was the gradual drop in new cases and resumption of routine doctor visits, elective surgeries and wellness services as the quarter progressed. By the end of June, companies were able to recoup at least some of the ground lost in April when the quarter began. Thus, for example, Abbott reported that non-COVID testing had rebounded to 90% of pre-pandemic levels by the end of the quarter. It was precisely the opposite of what happened in the first quarter when the outbreak of the pandemic in March wiped out the strong gains of January and February.
Takeaway
The combination of a little luck and more resilience than the analysts on Wall Street expected has enabled lab companies to emerge from the second quarter of 2020 with just scratches and bumps. Companies that have made the strategic pivot to COVID-19 response will reap the rewards of their agility for as long as the pandemic lasts, as will the life science, molecular testing and other firms like Qiagen, Quidel, Meridien, who were perfectly positioned before the pandemic began. However, what is not likely to prove sustainable is the luck factor. Flu season and the expected surge in new cases could make the end of Q3 and all of Q4 a highly trying period for the vast majority of labs that rely on the testing products and services the pandemic disrupts.
Diagnostics Earning Reports for Q2 (period ended June 30, 2020)
(At least $10 million in sales)
| COMPANY | FY 2020 Q2 | DX Segment Performance | ||
| Total Revenue (vs. Wall Street) |
YOY Revenues | EPS (vs. Wall Street) |
||
| Abbott Laboratories* | $7.33 billion ($6.75 billion) |
-8% (-5% organic) |
Adjusted +$0.57 (+$0.41) |
DX up 5% to $1.99 billion, driven by 234% increase in molecular to $359 and 10% increase in rapid diagnostics to $530 million, which offset 16% decline in core diagnostics to $967 million; but non-COVID testing rebounds to 90% of pre-pandemic levels by end of quarter |
| Adaptive Biotech | $21.0 million ($18.8 million) | -5% | Net -$.26 (-$.28) |
Sequencing down 33% to $8.0 million even though test volume increased 31% with 3,136 tests delivered; developmental revenues up 27% to $13.0 million |
| Agilent Technologies (FY 3Q) | $1.26 billion ($1.21 billion) |
-1% | Adjusted +$0.78 (+$0.66) |
Diagnostics and Genomic Group down 8% to $241 million, Life Sciences and Applied Markets up 2% to $544 million; CrossLab group down 1% to $463 million |
| Becton Dickinson (FY Q3) | $3.86 billion ($3.94 billion) |
-11% | Adjusted +$2.20 (+$2.04) |
Shipped more Veritor readers in first month after launch of SARS-CoV-2 antigen tests than it usually does for whole year; Life sciences down 10% to $951 on weakness in preanalytical systems and bioscience units; interventional down 20% to $782 million due to continuing deferral of elective procedures due to COVID |
| Bio-Rad Laboratories | $536.9 million ($517.1 million) |
-6% | Adjusted +$1.61 (+$1.22) |
Clinical DX down 21% to $283.2 million; but higher PCR, Drop Digital instruments sales drive 19% increase in life sciences to $252.1 million, $71 million of which attributable to COVID |
| Bio-Techne (FY Q4) | $175.8 million ($163.9 million) |
-8% | Adjusted +$1.00 (+$0.75) |
DX & Genomics flat at $48.7 million and Protein Sciences down 11% to $127.3 million due to COVID shutdowns of biopharma and academic sites; firm was on track for double-digit FY 2020 growth before pandemic |
| Bruker | $424.6 million ($390.9 million) | -13% | Adjusted +$0.21 (+$0.06) |
Cost cutting + strength in life sciences mass spectrometry as microbiology and infectious disease consumables help offset 6% decline in CALID group ($132.7 million) |
| CareDx | $41.8 million ($35.6 million) |
+33% | +$0.04 (-$0.04) |
Testing services up 41% to $36.3 million driven by 44% increase in AlloSure and AlloMap sales; but COVID drives 28% decrease in products sales to $3.3 million |
| Castle Biosciences | $12.7 million $8.8 million |
+18% | -$0.08 (-$0.40) |
$2.2 million positive revenue adjustment helps offset 43% decline in Decision Dx-Melanoma test reports due to COVID |
| Centogene (FY Q1) | $13.6 million ($14.7 million) |
+13% | -$0.51 (-$0.44) |
Whole-exome sequencing drives modest DX growth, offsetting significant declines in NIPT test orders |
| Danaher | $5.30 billion ($4.95 billion) | +19% | Adjusted +$1.44 (+$1.09) |
DX up 2.5% to $1.66 billion, including 5% growth in core revenue; Life Sciences up 54% to $2.64 billion, including newly acquired Cytiva; Cepheid core revenues increase over 100% due to COVID testing with firm shipping over 6 million SARS-CoV-2 testing cartridges; but big dips in elective surgeries and wellness procedures hurt Beckman Coulter DX and Leica Biosystems revenues |
| Exact Sciences | $268.9 million ($228.4 million) |
+35% | -$0.58 (-$0.63) |
Precision oncology revenues from newly acquired Paradigm Diagnostics offset 34% decrease in screening products to $134 million with Cologuard hitting all-time low in April followed by rebound thru June; |
| Fluidigm | $26.1 million ($19.1 million) |
-8% | Adjusted -$0.07 (-$0.23) |
Pandemic hurts sales of both mass cytometry (down 28% to $12.5 million) and microfluidics products (down 8% to $10 million) |
| Fulgent Genetics | $17.3 million ($10 million) |
+100% | Adjusted +$0.17 |
COVID testing drives tenfold increase in billable tests at 180,513 tests |
| GenMark Diagnostics* | $40.1 million ($32.7 million) |
+118% | Net -$0.07 (-$0.09) |
Pandemic drives 195% increase in ePlex systems to $35.2 million (71 new systems placed during quarter) |
| Guardant Health | $66.3 million ($59.2 million) |
+23% | Net -$0.57 (-$0.38) |
Precision oncology up 21% to $51 million; development services up 29% to $15.3 million driven by new companion Dx products for biopharma |
| Hologic (FY Q3) |
$822.9 million ($616.7 million) |
-4% (+8% organic) |
Adjusted +$0.75 (+$0.38) |
Total DX up 75% to $305.4 million driven by 169% growth in molecular diagnostics to $460.3 million due to demand for COVID tests on Panther and Panther Fusion instruments; but decline in non-COVID tests, including 45% in blood screening (also reflecting sale of Grifols), 31% decline in breast health to $224 million, 54% decline GYN surgical to $51.5 million and 38% decline in skeletal to $24.4 million |
| Illumina | $633 million ($697.6 million) |
-25% | +$0.62 (+$0.67) |
COVID disruption to firm’s research customers drives decline in sequencing services revenues from $129 million to $88 million; product revenue down 25% to $527 million |
| Invitae | $46.2 million ($39.6 million) |
-14% | Non GAAP -$1.29 (-$0.70) |
At-home saliva sample COVID tests at end of quarter help arrest sharp declines in April; average costs per sample increase 42% to $358 |
| LabCorp | $2.77 billion ($2.50 billion) |
-4% (-5% organic) |
Adjusted +$2.57 (+$0.99) |
Acquisitions contribute 1% but PAMA price cuts account for -1%; at start of Q, COVID testing doesn’t offset decline in base testing, but that reverses in June with pattern of COVID more than offsetting base losses expected to continue |
| Luminex | $109.5 million ($107.3 million) |
+32% | Net +$0.11 (+$0.08) |
COVID more than doubles molecular to $64.9 million, including 162 Aries and other sample-to-answer systems sold; Assays revenue up 95% to $31.4 million |
| Meridian Bioscience (FY Q3)* | $84.8 million ($66 million) |
+75% | Adjusted +$0.64 (+$0.23) |
Ramped up production of reagents for COVID tests drives 313% increase in life sciences to $63.2 million, including 605% growth in reagents for molecular tests to $38.8 million, and 149% growth in immunoassay reagents to $24.4 million; but DX declines 35%, including 46% for molecular assays, and 32% for blood chemistry assays and immunoassays |
| Myriad Genetics (FY Q4) | $93.2 million ($93.9 million) |
-57% | Adjusted -$0.31 (-$0.41) |
Overall testing volumes down 58% across all segments due to COVID-19, with molecular DX down 58% to $83.3 million, including 66% drop in hereditary cancer ($39.9 million), 34% decline in GeneSight ($16.6 million), 41% decline in Vectra ($7.2 million), 29% drop in Prolaris ($4.5 million); 27% drop in EndoPredict actually up 25% to $2.2 million |
| NanoString Technologies | $22.6 million ($16.2 million) |
-25% | Net -$0.72 (-$0.52) |
Product + service pro forma revenues up 2% due to acquisition of Prosigna breast cancer test; consumables down 42% to $8.4 million; instruments revenues double to $9.8 million, including $6.3 million from newly launched GeoMx system |
| Natera | $86.5 million ($73.1 million) |
+16% | Net -$0.75 (-$0.58) |
Follows huge Q1 with big Q2, despite COVID, with 24% increase in products to $80.4 million; 21% more tests processed than Q2 2019, at 234,100; lab has operated without disruption thanks to improvements to remote ordering capabilities |
| NeoGenomics | $87.0 million ($86.6 million)) |
-14% | Adjusted -$0.04 (-$0.01) |
Clinical services down 14% to $73.9 million but pharma services up 3% to $13.1 million; test volume declines 18% and requisitions fall 21% due to COVID, but slight improvements made in May and June |
| Opko Health | $301.2 million ($245.6 million) |
+33% | Pro forma +$0.05 (-$0.07) |
40% increase in services revenues, $251 million, due to COVID testing which more than offset drops in genomic and clinical testing; product revenues up 2% to $29.3 million |
| OraSure Technologies | $29.3 million ($32.8 million) | -25% | Net -$0.16 (-$0.09) |
Declines in genomic and infectious disease testing products, including 35% drop in OraQuick HIV and HCV assays, wipe out increases in specimen collection devices |
| Pacific Biosciences | $17.1 million ($13.7 million) |
-14% | Net -$0.15 (-$0.18) |
Pandemic causes lower utilization of Sequel instruments, although improvements made late in quarter |
| PerkinElmer | $811.7 million ($726.4 million) |
+12% | +$1.57 (+$0.88) |
After Q1 decline, DX rebounds with 46% growth to $420.7 million, driven by COVID PCR tests, RNA extraction solutions and serology kits; non-COVID X products down 20%; applied genomics up 150% |
| Qiagen | $443.3 million ($425.8 million) |
+16% | Adjusted +$0.55 (+$0.46) |
12% growth in consumables to $375 million driven by unprecedent demand for COVID testing cartridges, reagents + RNA extraction kits; instruments up 45% to %68 million; QuantiFerron-TB tests fall 46% to $33.4 million |
| Quanterix | $13.1 million ($11.8 million) |
-3% | Not reported | Products down 23% to $6.8 million but company expects 2H resurgence |
| Quest Diagnostics | $1.83 billion ($1.83 billion) |
-6% | Adjusted +$1.42 (+$1.41) |
Test volume down 18% but expanded COVID testing capacity + resumption of doctors’ offices and elective surgeries rescue quarter + drive better than expected results |
| Quidel | $201.8 million ($189.8 million) |
+86% | Adjusted +$1.86 (+$1.09) |
Rapid immunoassays nearly triple to $109 million driven by $56.3 million in Sofia SARS antigen test; Cardiometabolic immunoassays down 20% to $54.2 million; Molecular DX up from $4 million to $55.2 million, mostly from Lyra SARS-CoV-2 test |
| Roche Diagnostics | $3.82 billion (Diagnostics sales) | -2% | Not reported | DX sales flat despite 51% growth in molecular flu and SARS-CoV-2 diagnostics; Roche has 7 different COVID products with 3 more expected before end of year |
| Siemens Healthineers (FY Q3) | $3.88 billion | -7% | Adjusted +$0.36 |
DX revenues decline 17% to $1.03 billion as COVID reduces utilization + reagent sales for routine tests |
| 10x Genomics | $42.9 million ($29.6 million) |
-23% | Net -$0.41 (-$0.55) |
Consumables down 27% to $34.2 million; instruments down 12% to $7.3 million; service up 48% to $1.5 million |
| Thermo Fisher | $6.92 billion ($6.13 billion) |
+10% | Adjusted +$3.89 (+$2.84) |
19% of total revenues ($1.3 billion) come from COVID fueling massive quarter; Specialty DX up 5% to $988 million; Lab products + services up 6% (5% organic) to $2.79 billion driven by pharma services and research + safety, including PPE sales |
| Twist Biosciences (FY Q3) |
$21.2 million ($14.2 million) |
+56% | Net -$0.67 (-$0.73) |
Despite COVID-19, synthetic biology, including gene pools, libraries and oligo pools increased 11% at $11.8 million |
| Veracyte | $20.7 million ($20.6 million) |
-31% | Net -$0.22 (-$0.24) |
Genomic testing revenues down 43% to $15.2 million due to COVID but finished quarter strong; biopharma up 153% to $3.8 million |
| Waters | $520.0 million ($496.9 million) |
-13% | Non-GAAP +$2.10 (+1.54) |
Strength in global pharma sales help weather COVID losses and lead to better than expected quarter |
Bold face: Companies that met or exceeded average or consensus Q2 Wall Street revenue estimates
Italics: Companies that missed average or consensus Q2 Wall Street revenue estimates
* Companies that raised their revenue or EPS guidance during Q2
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