Q3 Lab Company Earnings Take a Hit
A decline in COVID-19 testing demand, along with a challenging economy, made for a difficult quarter for diagnostics companies.
It was only a matter of time. Sooner or later, the combination of falling demand for COVID-19 tests and adverse macroeconomic conditions were bound to take their toll on lab companies’ earnings. While the first two quarters of 2022 represented a come down from the soaring revenues of 2021, it took until Q3 for reality to set in. It was a tough quarter for most companies, even though core non-COVID-19 revenues continued their gradual recovery. Here’s an overview of Q3 2022 and the key trends in lab industry earnings.
“Probably Our Most Challenging” Quarter
That’s how Abbott Laboratories CEO Robert Ford described the three-month period from July 1 to September 30, 2022, on the company’s earnings call with investors. And it wasn’t just Abbott. Q3 was challenging for just about all the major US lab companies, with year-over-year (YOY) revenues also down or flat at 12 of the 31 companies that had reported earnings as of press time, including major firms like Becton Dickinson, Hologic, Illumina, Labcorp, PerkinElmer, Qiagen, and Quest Diagnostics.
One big reason for the YOY declines is the comparison with Q3 2021 when COVID-19 products, while past their peak, were still driving strong growth at most major testing companies.
Overall YOY Revenue Growth, Q3 2021 vs Q3 2022
| Company | Q3 2021 | Q3 2022 |
| Abbott | +24% | -6% |
| Becton Dickinson | +7% | -2% |
| Danaher | +23% | +6% |
| DiaSorin | +51% | -5% |
| Illumina | +40% | +1% |
| Labcorp | +4% | -11% |
| PerkinElmer | +21% | -17% |
| Qiagen | +11% | -7% |
| Quest | Flat | -10% |
There were other major headwinds during the quarter, including:
- The strong US dollar, which made it harder to sell products and services abroad and forced several companies to lower their revenue forecasts for the remainder of the year;
- Rising inflation, which reduced the pace of recovery of core testing and depressed bottom line earnings per share (EPS) totals;
- Supply chain bottlenecks, particularly microchips, that slowed instrument and platform sales at companies like Abbott, Bio-Techne, DiaSorin, and Hologic; and
- Ongoing COVID-19 lockdowns that affected companies like Bio-Techne, Danaher, DiaSorin, Illumina, and 10x Genomics.
These macroeconomic factors forced several companies to restructure their operations and lay off workers.
Top Line Earnings
One bit of good news is that the slowdown in earnings caught few by surprise. Thus, of the 30 surveyed companies, all but six met or exceeded their top line Wall Street targets. That includes six companies where revenues were down or flat—Abbott, Becton Dickinson, Ginkgo Bioworks, Hologic, Illumina, and PerkinElmer.
Eight of the companies that missed their targets in Q2 turned it around in Q3. Among the companies that came in short in Q3, all but three—Adaptive Biotech, Labcorp, and PacBio—came in above expectations on the bottom line.
2022 Q3 Companies that Missed Their Wall Street Revenues Targets
| Company | Actual Revenues | Target Revenues |
| Adaptive Biotech | $47.8 million | $48.0 million |
| Bio-Techne | $269.7 million | $281.7 million |
| CareDx | $79.4 million | $82.6 million |
| Labcorp | $3.61 billion | $3.79 billion |
| Myriad Genetics | $156.4 million | $170.1 million |
| PacBio | $32.3 million | $35.4 million |
Prospects for the Rest of the Year and 2023
What does this latest earnings report portend for future revenues? The universal consensus is that COVID-19 revenues will continue to drop. The big question is whether core revenues will rebound fast enough to offset the losses.
Of the 12 companies that revised their revenue or EPS forecasts for the remainder of calendar year 2022, only three projected lower revenues. However, those three are major players with a disproportionate impact on Wall Street, including Labcorp, Siemens Healthineers, and Illumina, which gave its future revenues forecast a haircut for the second quarter in a row.
But there were also some heavy hitters among the nine companies that raised their revenue projections, including lab giants Abbott, Quest Diagnostics, and Thermo Fisher Scientific, as well as genetic test makers Exact Sciences and Qiagen.
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Diagnostics Earning Reports for 2022 Q3 (period ended September 30, 2022)
(Companies with at least $30 million in sales)
| Company | FY 2022 Q3 | DX Segment Performance | ||
|---|---|---|---|---|
| Total Revenue (vs Wall Street) | YOY Revenues | EPS (vs Wall Street) | ||
| *Abbott Laboratories | $10.41 billion ($9.68 billion) | -6% (+1% organic) | Adjusted +$2.36 (+$2.17) | DX down 6.2% to $3.67 billion despite significantly higher than expected COVID tests, which generated $1.7 billion—$1.6 billion from rapid tests—both down YOY; Core DX down across the board |
| Adaptive Biotech | $47.8 million ($48.0 million) | +21% | Net -$.32 (-$.38) | Immune medicine, which accounts for 58% of total revenues, up 18% to $27.9 million; Minimal residual disease, which accounts for 42% of total revenues, up 26% to $20 million driven by 52% increase in clonoSEQ test volume |
| *Agilent Technologies (FY 2022 Q4) | $1.85 billion ($1.76 billion) | +11% | Non-GAAP +$1.53 (+$1.39) | Diagnostics and Genomics up 3% (8% on core basis) to $352 million; Life Sciences and Applied Markets up 16% (22% core) to $1.12 billion; CrossLab up 7% (14% core) to $381 million |
| Becton Dickinson (FY 2022 Q4) | $4.76 billion ($4.72 billion) | -2% | Adjusted +$2.75 (+$2.74) | Decline in COVID testing offsets 4% growth in base revenues; Medical segment up 6% to $2.38 billion offset by 16% decline in Life Sciences to $1.29 billion in revenues, including 21% decrease in integrated diagnostic solutions to $930 million; Strong demand for recently launched FACSymphony A1/A5 SE analyzers and FACSymphony S6 sorter drives growth in biosciences unit |
| BioMérieux | €902.0 million ($905.6 million) | +3% | Not provided | Higher than expected BioFire sales drive growth; Clinical applications (consisting of microbiology, molecular biology, and immunoassay) up only 1% to €763.0 million due to decline in COVID testing; Microbiology up 16% to €311.8 million driven by instrument and reagent sales, especially Vitek automated ID/AST and blood culture BACT/ALERT products; Molecular biology down 1% to €333.5 million due to lower BioFire respiratory panel sales, which offset near 30% growth in non-respiratory syndromic panels |
| Bio-Techne (2023 Q1) | $269.7 million ($281.7 million) | +5% | Adjusted +$1.78 (+$1.83) | DX & Genomics up 15% to $69.9 million; ExoDx Prostate test up 70%; Supply problems and slow demand in Europe hurt sales of new instruments |
| *Bruker | $638.9 million ($608.2 million) | +5% | Non-GAAP +$0.66 (+$0.55) | CALID Group (which includes life sciences and mass spectrometry) up 7% to $207.5 million; Bruker BioSpin down 6% to $175.7 million; Bruker Nano up 14% to $199.1 million; Bruker Energy & Supercon Technologies (BEST) up 4% to $59.3 million |
| **CareDx | $79.4 million ($82.6 million) | +5% | Adjusted Not given (-$0.14) | Testing services down 3% to $64.8 million; Product revenues up 11% to $7.2 million; Patient and digital solutions nearly triple to $7.4 million |
| Cue Health | $69.6 million ($58.2 million) | -69% (vs -36% in Q2) | Net -$0.45 (-$0.54) | Revenue down despite stronger than expected COVID sales; Product revenues down 70% to $66.7 million; Grant and other revenues soar from $1.1 million to $2.9 million |
| Danaher | $7.66 billion ($7.16 billion) | +6% (+10% core) | Non-GAAP +$2.56 (+$2.25) | Diagnostics up 10% (+14% core) to $2.68 billion; Cepheid up nearly 30%, including 10% increase in non-respiratory testing and double-digit growth in virology and infectious disease testing; Respiratory testing revenues of $875 million, significantly exceeding expectations of $325 million, due to higher-than-expected prevalence of respiratory viruses; Life Sciences up 4% (8% core) to $3.78 billion; Bioprocessing business, made up of Cytiva and Pall, up more than 20% in non-COVID revenues |
| DiaSorin | €326.8 million ($327.1 million) | -5% (vs +32% in Q2) | Adjusted net down 11% to €75.6 million | Revenue declines due to fall in COVID testing, delays in electronic components, and other supply chain issues; COVID testing plunges 47% to €51.6 million, but immunodiagnostics testing (excluding COVID) grows 15% to €171.5 million; Molecular diagnostics (excluding COVID) climbs 10% to €54.3 million; Licensed technologies up 5% to €49.4 million |
| *Exact Sciences | $523.1 million ($502.9 million) | +15% (vs +20% in Q2) | Net -$0.84 (-$1.08) | Growth in screening and precision oncology more than offset COVID testing declines; Screening, including Cologuard and Biomatrica products, up 29% to $360.8 million; Precision oncology, including Oncotype DX products, up 4% (9%, not counting foreign currency exchange and sale of Oncotype Dx Genomic Prostate Score test) to $151.4 million; COVID testing down 64% to $10.9 million |
| *Ginkgo Bioworks | $66.4 million ($60.4 million) | -14%) (vs +231% in Q2) | Net -$0.41 (-$0.30) | Biosecurity down 3% to $41.7 million; Biosecurity services (mostly COVID testing) up 6% to $36.5 million; Biosecurity products down 39% to $5.2 million; Foundry, or cell engineering down 29% to $24.7 million |
| Hologic (FY 2022, Q4) | $953.3 million ($864 million) | -28% (-14% in Q3) | Adjusted +$0.82 (+$0.62) | Declines result of lower COVID sales and shortages of semiconductor chips; Diagnostics revenues, excluding COVID tests, up 8%; Breast Health down 18% due to semiconductor chip supplies issues; Surgical up 9%, driven by rebound in volume of procedures |
| **Illumina | $1.12 billion ($1.11 billion) | +1% (vs 2.7% in Q2) | Adjusted +$0.34 (+$0.31) | Core sequencing consumables revenues flat at $725 million due to an increased installed base being offset by delayed lab openings and consumables inventory deleveraging; Instruments down 10% to $162 million; COVID surveillance contributes $23 million in sequencing consumables and $5 million in instrument revenues; Oncology testing consumables up 9% and sales of TSO 500 assay up 17%; Grail contributes roughly $10 million |
| Invitae | $133.5 million ($131.4 million) | +17% | Non-GAAP -$0.42 (-$0.63) | Recent extensions of cancer screening guidelines expected to drive broader clinical use of, and secure more consistent reimbursement for, firm’s oncology products |
| **Labcorp | $3.61 billion ($3.79 billion) | -11% (vs -3.7% in Q2) | Adjusted +$4.68 (+$4.67) | DX down for third quarter in a row, by 16% to $2.21 billion (compared to 4% decline in Q2) due to decline in COVID testing, which more than offsets 4% growth in base testing; Total requisition volume down 10%; Covance unit down 4% to $1.41 billion |
| Myriad Genetics | $156.4 million ($170.1 million) | -7% (vs +7% in Q2) | Adjusted +$0.19 (+$0.06) | Overall total test volumes up 12%, driven by 37% growth in pharmacogenomics, including GeneSight test, to $33 million; Hereditary Cancer down 11%; Prenatal down 6%; Tumor Profiling down 6% |
| OraSure Technologies | $116.5 million ($91.7 million) | +200% | Non-GAAP +$0.13 (-$0.04) | Core diagnostics grows from $15.8 million to $18.1 million; InteliSwab soars to $79.6 million from $7.7 million in Q3 2021; Core molecular solutions down from $24.2 million to $18.5 million; COVID-19 kit revenues fall from $6.3 million to $361,000 |
| PacBio | $32.3 million ($35.4 million) | -7% | Adjusted -$0.32 (-$0.33) | Product revenues down 10% to $27.5 million, including $11.4 million in instruments (-28%) and $16.1 million in consumables (+10%); 34 Sequel II or IIe systems placed, growing installed base to 494; Other revenues up 9% to $4.8 million |
| PerkinElmer | $1.03 billion ($1.01 billion) | -17% (vs 0% in Q2) | Adjusted +$1.51 (+$1.42) | DX revenues down 39% to $399.2 million due to decline in COVID tests, which generated just $54 million (organic DX revenues excluding COVID up 5%); Discovery and Analytical Solutions up 50% to $313 million |
| *Qiagen | $500 million ($482.8 million) | -7% (vs -9% in Q2) | Adjusted +$0.53 (+$0.45) | 48% decline in COVID sales ($83 million) more than offset 11% increase in non-COVID sales to $417 million; All non-COVID segments experience growth, including double-digit growth in sample technologies and QuantiFERON-TB |
| *Quest Diagnostics | $2.49 billion ($2.34 billion) | -10% (vs -4% in Q2) | Adjusted +$2.36 (+$2.17) | COVID testing down 55% to $316 million this year YOY and down 11% sequentially; Non-COVID revenues up 5% to $2.2 billion, up more than 5% |
| **Siemens Healthineers (FY 2022, Q4) | €6 billion (€5.8 billion) | +16% (vs -6% in Q3) | Adjusted +€0.65 | Unit sales up 17.3% (8.1% comparable basis) (vs 24% decrease in Q3), driven by strong demand for MRI and CT machines; Restructures DX business |
| *SomaLogic | $41.7 million ($20.1 million) | +200% | Net -$0.18 (-$0.21) | Total earnings include $21.2 million one-time licensing royalty payment from New England Biolabs; Core life sciences up 3% to $20.5 million; Service flat at $17.6 million; Product revenue up 13-fold to $1.1 million; Collaboration revenue flat at $763,000 |
| 10x Genomics | $131.1 million ($129.6 million) | +5% | Net -$0.37 (-$0.46) | Growth driven by instrument sales and new customers but partially offset by foreign exchange fluctuations; Consumables up 2% to $108.1 million; Instruments up 22% to $20.9 million; Services flat at $2.1 million |
| *Thermo Fisher Scientific | $10.68 billion ($9.91 billion) | +14% (vs +19% in Q2) | Adjusted +$5.08 (+$4.81) | COVID testing revenue of $440 million; Life sciences down 20% to $2.96 billion; Analytical instruments up 9% to $1.62 billion; Laboratory products and biopharma services up 60% to $5.59 billion; Specialty diagnostics down 21% to $1.07 billion |
| *Twist Bioscience (FY 2022, Q4) | $57.3 million ($57.0 million) | +51% (vs +54% in Q3) | Net -$0.37 (-$0.46) | Next-generation sequencing revenues, including SNP microarray conversions and liquid biopsy panels up 36% to $29.2 million; Biopharma revenues grow to $9.4 million |
| *Veracyte | $75.6 million ($66.4 million) | +25% (vs +32% in Q2) | Net -$0.20 (-$0.25) | Testing revenues up 27% to $64.6 million, driven by Decipher Prostate Genomic Classifier and Afirma Genomic Sequencing Classifier tests; Product revenues increase from $3.0 million to $3.3 million; biopharma and other revenues grew to $7.7 million from $6.5 million; Test volume up 26% to 26,374 |
| Waters | $708.6 million ($679.8 million) | +7% (vs +5% in Q2) | Non-GAAP +$2.64 (+$2.57) | Instrument sales up 14% (21% at constant currency) to $336.8 million; Service and precision chemistries up 2% (10% at constant currency) to $371.7 million |
Bold face: Companies that met or exceeded average or consensus Q3 Wall Street revenue estimates
* Companies that raised their revenue or EPS guidance during Q3
** Companies that lowered their revenue or EPS guidance during Q3
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