COVID-19 Continues Driving Growth but in a New Way as Core Revenues Rebound
The earnings narrative for Q1 is essentially the combination of growing COVID-19 revenues, albeit at a slightly slower pace than the previous quarter, and the continued recovery of non-coronavirus core segments. Essentially, the DX industry is getting the best of both worlds. And while the long-term sustainability of COVID revenues remain in doubt, the boost from resumption and catch up in medical care and surgery engendered by the pandemic should be more than enough to take up the slack. Revenues Continue to Surge but Growth Patterns Change Of the 39 diagnostics firms that had reported their 2021 Q1 earnings as of press time, Abbott and Quidel were the only two to fall short of their Wall Street top line revenue targets. But Abbott just narrowly missed and both firms generated robust growth levels. In fact, every single company experienced positive year-over-year growth, the vast majority growth in the double digits. No fewer than seven companies increased their revenue guidance for the full year, with only two trimming down their projections, Fluidigm and Meridian Biosciences. Continuing pandemic patterns, the demand for COVID-19 tests, collection kits and instruments fuelled unprecedented growth in diagnostic revenues at a time when routine testing volumes have […]
The earnings narrative for Q1 is essentially the combination of growing COVID-19 revenues, albeit at a slightly slower pace than the previous quarter, and the continued recovery of non-coronavirus core segments. Essentially, the DX industry is getting the best of both worlds. And while the long-term sustainability of COVID revenues remain in doubt, the boost from resumption and catch up in medical care and surgery engendered by the pandemic should be more than enough to take up the slack.
Revenues Continue to Surge but Growth Patterns Change
Of the 39 diagnostics firms that had reported their 2021 Q1 earnings as of press time, Abbott and Quidel were the only two to fall short of their Wall Street top line revenue targets. But Abbott just narrowly missed and both firms generated robust growth levels. In fact, every single company experienced positive year-over-year growth, the vast majority growth in the double digits. No fewer than seven companies increased their revenue guidance for the full year, with only two trimming down their projections, Fluidigm and Meridian Biosciences.
Continuing pandemic patterns, the demand for COVID-19 tests, collection kits and instruments fuelled unprecedented growth in diagnostic revenues at a time when routine testing volumes have fallen off a cliff. However, the pattern is changing. The previous engine of growth, SARS-CoV-2 molecular testing, is now in sharp decline thanks to the COVID-19 and falling case rates. Exhibit A: LabCorp reported that it delivered an average 112,000 molecular COVID-19 tests per day during Q1 but that the daily average had dropped to 80,000 by the end of the quarter. During the company’s Q1 earnings call, LabCorp CEO Adam Schechter projected that molecular testing revenues would decline between 35 percent and 50 percent for the full year.
The pattern was much the same with Quest Diagnostics, which reported that it expected to average around 50,000 SARS-CoV-2 molecular tests per day throughout Q2, as opposed to the 73,000 daily tests it was averaging at the end of Q1. Similarly, Opko Health subsidiary BioReference Laboratories reported that daily averages fell from between 50,000 and 60,000 molecular tests in Q4 2020 to between 40,000 and 50,000 tests in Q1. Neither company projected an overall rate of decline for all of 2021.
From PCR to POC Testing
The flipside to the decline in molecular testing is the surge for rapid point-of-care (POC) and antigen COVID-19 testing. As society reopens, the center of gravity in the coronavirus testing market is shifting to relatively lower cost, fast and scalable tests that can be provided at the point of care for screening the asymptomatic, including at schools, workplaces and major sports leagues like Major League Baseball and the NBA.
“If you look at PCR testing throughout the United States and you look at the estimates that are coming from the antigen and point-of-care providers, you see that the actual level of testing is almost at the same level as we were [last] summer, but in different forms,” noted Quest CEO and chairman Steve Rusckowski. “There is a transition from PCR exclusively … to more capabilities around point-of-care and antigen testing.”
Many of the leading companies have done a good job of anticipating the shift and pivoting by delivering the products to meet it, including POC and antigen tests as well as tests and self-collection kits for home use. The Q1 earnings reports demonstrate that this strategy is paying off, with many companies, including Abbott, Danaher, Opko Health, Quest and Siemens Healthineers reporting significant spikes in rapid COVID-19 POC and antigen tests.
The At-Home and DTC Opportunity
Direct to consumer (DTC) and at-home testing represent a parallel path for COVID-related growth. Abbott has staked out an early claim by focusing on its BinaxNOW COVID-19 Antigen Self Test, which customers can now buy over the counter from CVS, Walmart and Walgreens. The strategy looks to develop a template that can be used to deliver DTC, at-home test products for other ailments if and when the COVID-19 crisis ever ends.
Quest estimates consumer testing to represent a $2 billion opportunity by 2025, growing at a 10 percent compound annual growth rate and is expanding its DTC operation with hopes of capturing a $250 million share of the market.
The Recovery of Core Testing Markets
The other positive development to emerge from the 2021 Q1 earnings reports is the continued rebound of other segments devastated by the pandemic, with many firms reporting positive growth in cancer screening, blood testing, non-COVID genetic molecular testing and other divisions that experienced steady declines in 2020. Although the pandemic losses haven’t yet been made up, things are clearly trending in that direction as surgeries, clinical trials and doctor visits resume, often at a stepped-up pace to make up for lost time.
Still another indicator of financial strength lies in the bottom lines, with only eight companies missing their Wall Street earnings per share targets during the quarter: Fluidigm, Guardant Health, Hologic, Invitae, NeoGenomics, Quidel, Twist Bioscience and Veracyte.
Diagnostics Earning Reports for 2021 Q1 (period ended March 31, 2021)
(Companies with at least $10 million in sales)
| COMPANY | FY 2021 Q1 | DX Segment Performance | ||
|---|---|---|---|---|
| Total Revenue (vs. Wall Street) | YOY Revenues | EPS (vs. Wall Street) | ||
| Abbott Laboratories | $10.46 billion ($10.69 billion) | +35% ( +33% organic) | Adjusted +$1.32 ( +$1.27) | DX up 120% to $4.01 billion. Core DX up 20% at $1.18 billion as base business continues to recover; DX growth driven by massive demand for COVID tests, including 221% increase in molecular to $447 million; rapid diagnostics up 303% to $2.26 billion; point of care drops 7% to $129 million; significant increase in instrument sales |
| Adaptive Biotech | $38.4 million ($27.8 million) | 84% | Net -$.29 (-$.41) | After declines of Q4, sequencing revenues grew 60% to $15.2 million due to COVID, test volume for ClonoSeq also turned last quarter’s decline around with increase of 35% (4,757 tests); Development revenues up 111% to $23.3 million driven by higher demand for biopharma services |
| Becton Dickinson (FY 2021 Q2) | $4.91billion ($4.89 billion) | 15% | Adjusted +$3.19 ( +$3.04) | Growth driven by COVID-19 testing, which brings in $480 million, including $239 million from newly launched Veritor Plus; all core non-COVID segments also came in ahead of expectations but still remain below pre-pandemic levels |
| Biodesix | $28.9 million ($26.3 million) | 550% | Net -$0.26 (-$0.17) | COVID testing revenue goes from $0 to $23.2 million; Core businesses also up, including lung cancer DX by 11% to $4.0 million and biopharma by 13% to $1.7 million |
| BioMérieux | $1.02 billion | +10% | Clinical applications up 10% to $803.86 million; BioFire Film Array products up 19%; Immunoassays reverse decline by increasing 22% at $133.87 million; Molecular biology also goes from down to up 11% to $361.39 million; Microbiology down again by 2% to $275.53 million | |
| Bio-Rad Laboratories | $726.8 million ($661.0 million) | 27% | Adjusted +$5.21 ( +$3.00) | Life Sciences up 61% to $366.5 million driven by PCR and Droplet Digital PCR products in response to COVID-19, which also drove Clinical DX down 2% to $358.5 million |
| Bio-Techne (2021 FY Q3) | $243.6 million ($228.2 million) | 25% | Adjusted +$1.79 ( +$1.55) | DX & Genomics up 18% to $58.1 million; Protein Sciences up 28% to $185.6 million; Growth driven by Exosome DX business (up over 100%), including rebound in ExoDx Prostate orders |
| Bruker | $554.7 million ($513.1 million) | 31% | Adjusted +$0.44 ( +$0.32) | Significant recovery in businesses hurt by pandemic, especially mass spectometry; COVID also continued to drive growth in molecular DX testing ($7 million contributed) and microbiology |
| *CareDx | $67.4 million ($61.1 million) | 76% | +$0.14 (break-even) | Testing services up 89% to $59.3 million driven by increase in AlloSure Kidney and AlloMap Heart sales; Products sales up 23% to $5.8 million; Digital and other revenues up 5% to $2.3 million |
| Castle Biosciences | $22.8 million $16.7 million | 31% | Net -$0.17 -$0.23 | Gene expression tests up 4% with 5,142 delivered; DecisionDx-Melanoma test volume down 11% with 4,060 reports delivered |
| Centogene | $84.1 million ($50.8 million) | 500% | Net -$1,25 (-$1.56) | $73.05 million in COVID revenues more than offsets 19% decline in core testing revenues at $7.09 million and 41% decline in pharmaceutical revenues $5.74 million |
| Danaher | $6.86 billion ($6.26 billion) | 58% | Adjusted +$2.52 ( +$1.75) | Core revenues up 30%, including newly acquired Cytiva; DX up 34% to $2.18 billion, including 90% growth of Cepheid driven by continuing unprecedented demand for COVID testing; Life sciences up 115% to $3.55 billion; Biopharma up in low 20% range, excluding COVID revenues |
| Exact Sciences | $402.1 million ($388.6 million) | 16% | Net -$0.18 (-$1.03) | Screening revenues up 10% to $240.3 million, including Cologuard which over 8,000 providers ordered; Precision oncology, including Oncotype products, up just 1% to $129.4 million; COVID testing $32.3 million, vs. $99.1 million in Q4 |
| Fluidigm** | $32.8 million ($32.0 million) | 19% | Adjusted -$0.15 (-$0.14) | Product revenues up 30% to $24.7 million; Service revenues up 21% decline to $6.3 million; Instruments down 19% to $7.7 million; COVID revenues of $6.5 million |
| Fulgent Genetics* | $359.4 million ($321.5 million) | From $7.8 million to $359.4 million | Net +$6.52 ( +$5.86) | Massive growth driven by COVID with 3.8 million billable tests delivered; Next generation sequencing also up 115% to $16.7 million |
| Guardant Health | $78.7 million ($73.8 million) | 17% | Net -$1.09 (-$0.89) | Precision oncology up 6% to $63.7 million; Development services more than double at $14.9 million driven by new companion Dx products for biopharma |
| Hologic (FY 2021 Q2) | $1.54 billion ($1.54 billion) | 104% | Adjusted +$2.59 ( +$2.62) | COVID surge continues with total DX up 233% to $1.05 billion, including 391% growth in molecular diagnostics to $935.3 million driven by demand for COVID tests on Panther Fusion systems; Cytology and perinatal revenues up 3% to $117.2 million; Non-COVID segments recover, including Breast Health (up 9% to $336.3 million) and Gyn surgical (up 8% to $114.2 million) |
| Illumina | $1.09 billion ($1.00 billion) | 27% | Net +$1.89 +$1.38 | First ever billion dollar quarter driven by 36% growth in products to $953 million, which more than offset 11% decline in services and other revenues; Sequencing up 29% to $979 million; Instruments more than double to $176 million |
| Invitae | $103.6 million ($101.5 million) | 61% | Non GAAP -$0.63 (-$0.59) | $99.3 million in testing revenues (up 57%) (259,000 tests billed) with test volumes bouncing back due to easing of COVID conditions; Other revenues triple to $4.3 million |
| *LabCorp | $4.16 billion ($3.91 billion) | +47% | Adjusted +$8.79 ( +$7.43) | Slightly slower growth from Q4 with total DX up 62% to $2.76 billion driven by COVID; Test volume up 27% but COVID testing declines and base volume down 1%; But non-COVID, core segments recovering faster than expected, which will have to drive future growth with COVID testing expected to continue tailing off |
| **Meridien Biosciences (FY 2021, Q2) | $85.3 million ($84.5 million) | 49% | Adjusted +$0.56 ( +$0.48) | Life sciences more than doubles to $53.3 million, including $31 million from COVID products; But DX continues to decline 9% (vs 13% in Q1) to $31.9, with molecular assays down 39% to $4.4 million and non-molecular assays flat at $27.6 million |
| Myriad Genetics (FY 2021, Q3) | $173.1 million ($156.2 million) | +6% (vs. -21% in Q2) | Adjusted -$0.06 (-$0.14) | Testing volumes continue to recover under new corporate leadership; Molecular DX goes from 21% decline to 6% growth (to $150.5 million); Hereditary cancer down again but by less, 11% vs. 33%, to $76.1 million; By product, Vectra rheumatoid arthritis up 2% to $10.7 million and Prolaris prostate more than doubles to $18.5 million |
| *Natera | $152.3 million ($114.4 million) | 62% | Net -$0.74 (-$1.02) | Growth driven by 48% increase in test volume and one-time payment from Qiagen related to terminated NGS test distribution partnership; Product revenues up 36% to $118.4 million |
| NeoGenomics | $115.5 million ($112.4 million) | 9% | Adjusted -$0.04 (-$0.01) | Core divisions continue recovery, including clinical services up 4% to $96.5 million, driven by COVID testing revenues; Pharma services up 46% to $19.0 million |
| Opko Health | $545.2 million ($495.1 million) | 200% | Pro forma +$0.05 ( +$0.05) | Services revenues nearly triple to $507 million, due to COVID testing by BioReference Lab; Product revenues reverse Q4 decline with 9% growth to $33.9 million; Intellectual property revenues down 55% to $4.3 million due to decrease in amortization of payments from Pfizer for somatrogon growth hormone |
| OraSure Technologies | $58.6 million ($57.0 million) | 85% | Net +$0.05 ( +$0.04) | Molecular DX revenues more than triple to $43.2 million, driven by COVID collection device sales, including DNA Genotek kits and ORAcollect RNA saliva collection device; HIV up 26% to $5.3 million in US but down 50% to $3.5 million abroad |
| Pacific Biosciences | $29.0 million ($25.6 million) | +86% (reversing 3% decline of Q4) | Net -$0.01 (-$0.46) | Instrument revenues more than triple to $14.9 million driven by multi-instrument sales; Consumables up 20% to $10.4 million; Service and other revenues slightly up from $3.3 to $3.7 million |
| PerkinElmer | $1.31 billion ($1.21 billion) | 100% | Adjusted +$3.72 ( +$3.07) | COVID PCR tests and RNA extraction solutions drive third massive quarter in a row, including 236% growth in DX to $853.1 million; Applied genomics up 330% and immunodiagnostics up 420%; Reproductive health up in high single digits |
| Personalis | $20.9 million ($20.4 million) | 9% | Net -$0.29 (-$0.36) | VA Millions Veterans Program revenues down 11% to $13.2 million but other customer revenues up 74% to $7.7 million, with firm projecting high growth in oncology |
| Qiagen | $567.2 million ($557.5 million) | 52% | Adjusted +$0.66 ( +$0.63) | 186% growth in COVID products to $203 million coupled with return of non-COVID products to near pre-pandemic levels; Molecular DX up 59% to $279 million; Life sciences up 47% to $288 million; NGS returns to growth with 17% increase to $50 million driven by oncology applications for bioinformatic products |
| *Quest Diagnostics | $2.72 billion ($2.64 billion) | 49% | Adjusted +$3.76 ( +$3.71) | Continued demand for COVID testing drives 26% increase in overall test volume and 21% growth in revenue per requisition; Base testing recovers to near pre-pandemic levels, despite 10% to 15% hit of PAMA Medicare price cuts |
| Quidel | $375.3 million ($400.8 million) | 115% | Adjusted +$4.09 ( +$4.71) | Massive COVID growth continues but at slower rate; Molecular DX up more than 7-fold to $60.3 million driven Lyra PCR and Solana assays for COVID; Rapid immunoassays up 148% to $237.7 million, including $212.1 million from Sofia SARS Antigen; Cardio immunoassays up 24% to $66.6 million; Specialized DX continue slide at faster rate, 34% (vs. 20% in Q4), to $16.5 million as demand for respiratory products remains weak |
| Roche Diagnostics | $16.26 billion | 50% | Not provided | Total DX up 55% to $4.82 billion, including $1.2 billion COVID sales; Molecular DX up 86% to $1.24 billion driven by high-throughput PCR COVID testing; Core lab up 28% to $1.97 billion driven by immunoDX; Point of Care nearly quadruples to $797 million |
| *Siemens Healthineers (FY 2021, Q2) | $4.78 billion | 8% | Adjusted +$0.54 | DX up 23% to $1.51 billion, including $231.9 million in rapid SARS-CoV-2 antigen and molecular tests; Recovery in core non-COVID businesses, including nearly $400 million in rapid antigen tests for the first half of FY |
| 10x Genomics | $105.8 million ($102.5 million) | 47% | Net -$0.22 (-$0.27) | Continues rebound with 52% increase in consumables to $93.1 million and 23% increase in Instruments to $11.1 million and 21% jump in Service revenues to $1.6 million |
| *Thermo Fisher Scientific | $9.91 billion ($9.72 billion) | 59% | Adjusted +$7.21 ( +$6.65) | Life sciences up 137% to $4.20 billion; Specialty DX up 69% (about half of Q1 rate) to $1.62 billion; Analytical instruments up 26% to $1.39 billion; Laboratory products and services revenues up 32% to $3.60 billion |
| *Twist Bioscience (FY 2021, Q2) | $31.2 million ($28.3 million) | 62% | Net -$0.78 (-$0.77) | Next-generation sequencing revenues, including SNP microarray conversions and liquid biopsy panels more than double to $17.7 million, topping Synthetic biology revenues ($12.9 million) for second quarter in a row |
| Veracyte | $36.7 million ($32.7 million) | 18% | Net -$0.66 (-$0.12) | Overall testing up 23% to $32.7 million; Product revenues slightly down at $3.1 million, including 14% decline in Prosigna (2,144 tests); Genomic test volume up 11% to 14,437 tests, including 1,560 Decipher tests |
| Waters | $608.5 million ($525.3 million) | +31% | Non-GAAP +$2.37 ( +$1.57) | All sectors achieve higher growth, with Pharma up 28%, Industrial up 24%, Academic and government sales up 29% after declining 15% in previous quarter |
| Bold face: Companies that met or exceeded average or consensus Q1 Wall Street revenue estimates * Companies that raised their revenue or EPS guidance during Q1 ** Companies that lowered their revenue or EPS guidance during Q1 | ||||
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