Inside the Lab Industry

COVID-19 Drives Unprecedented but Ultimately Unsustainable Growth

As strange as it may sound, the COVID-19 pandemic has driven unprecedented revenue growth in the diagnostics industry. The fourth quarter of 2020 not only continued but accelerated the climb in earnings. But even as the earnings and revenues numbers approach epic dimensions, it’s becoming increasingly clear that they aren’t sustainable in the long term.

Revenues Up Across the Board

Of the 31 diagnostics firms that had reported their 2020 Q4 earnings as of the time we went to press, all but two achieved some level of positive revenue growth: Myriad Genetics and Pacific Biosciences were the lone exceptions. And even the two firms that experienced lower year-over-year revenue growth exceeded their Wall Street targets. Only one firm fell short of its top line number, Fluidigm, which posted 38 percent growth with $44.6 million in revenues but still missed its $50.7 million target.

Most eye-popping of all was the sheer extent of revenues growth among companies offering COVID-19-related products and services which not only matched but exceeded the gaudy growth numbers of Q3. And that includes most of the industry’s largest and most mature firms:

Revenues Growth Upward Trajectory in Second Half of 2020

Company Q3 Revenue Growth Q4 Revenue Growth
Abbott 10% 29%
Becton Dickinson 4% 26%
Danaher 35% 39%
Hologic 56% 89%
LabCorp 33% 52%
Perkin Elmer 36% 68%
Quest 43% 56%
Roche Diagnostics 18% 20%
Thermo Fisher Scientific 36% 54%

However, performance on the bottom line was far less impressive with seven of 31 firms falling short of their earnings per share targets, including Fluidigm, Adaptive Biotech, Exact Sciences (whose net loss was stunningly higher than expected), Invitae, Luminex, 10X Genomics and Veracyte.

Don’t Get Too Used to It

While it’s not a bubble, the current surge in diagnostics earnings is unsustainable. The insatiable demand for COVID-19 tests and products will eventually fall off. Several companies, including LabCorp, Quest and PerkinElmer have warned investors to expect significant falloff as widespread vaccination drives down COVID-19 case numbers. Among these companies, LabCorp has offered the most detailed projections suggesting that COVID-19 testing revenues may fall by as much as 50% by the end of the year.

The good news for those highly invested in COVID-19 is that the wind down may take a long time. In addition, firms should be able to leverage their research and development from coronavirus for other infectious diseases. Meanwhile, labs and lab companies will continue to benefit from the rebound in elective, wellness and other non-COVID-19 testing as patients and providers scramble to make up for pandemic-related interruptions in care.

Diagnostics Earning Reports for Q4 (period ended Dec. 31, 2020)
(Companies with at least $10 million in sales that have reported as of Feb. 25, 2021)

COMPANY FY 2020 Q4 DX Segment Performance
Total Revenue
(vs. Wall Street)
YOY Revenues EPS
(vs.
Wall Street)
Abbott Laboratories $10.7 billion ($9.94 billion) +29% (+28% organic) Adjusted +$1.45 (+$1.35) DX up 111% to $4.35 billion. Core DX up 6% at $1.32 billion as base business slowly recovers; DX growth driven by massive demand for COVID tests, including 315% increase in molecular to $482 million; rapid diagnostics up 334% to $2.41 billion; point of care drops 6% to $129 million
Adaptive Biotech $30.2 million ($26.9 million) 25% Net -$.33 (-$.29) Growth driven by 69% in pharma studies to $17.5 million, which offset 8% declines in sequencing revenues to $12.7 million due to COVID, even though test volume for ClonoSeq increased 41% with 4,539 tests
*Agilent Technologies (FY 2021 Q1) $1.55 billion ($1.44 billion) 14% Adjusted +$1.06 (+$0.89) Diagnostics and Genomic Group up 18% to $294 million, Life Sciences and Applied Markets up 13% to $722 million; CrossLab group up 13% to $532 million
*Becton Dickinson (FY 2021 Q1) $5.32 billion ($4.88 billion) 26% Adjusted +$4.55 (+$3.11) Growth driven by COVID-19 testing, including newly launched Veritor assay and Veritor and BD Max platforms; COVID testing generates $867 million; Integrated DX solutions up 163% to $1.01 billion; Routine testing continues rebound but remains below pre-pandemic levels
BioMérieux $908.2 million 21% Clinical applications up 17% to $884.13 million; BioFire Film Array products up 76%; Immunoassays down 5% at $148.39 million; Microbiology down 11% to $309.32; decline in microbiology
Bio-Rad Laboratories $789.8 million ($686.8 million) 27% Adjusted +$4.01 (+$3.29) Life Sciences up 77% to $428.5 million driven by PCR and Droplet Digital PCR products in response to COVID-19, which also drove Clinical DX down 5% to $359.6 million
Bio-Techne (2021 FY Q2) $224.3 million ($206.5 million) 21% Adjusted +$1.62 (+$1.37) DX & Genomics up 20% to $52.5 million; Protein Sciences up 22% to $172.2 million; Growth driven by Exosome DX business (up over 100%), higher collections from Medicare and private payors, and growth in test volumes
Bruker $627.5 million ($602.0 million) 5% Adjusted +$0.58 (+$0.56) Slow COVID rebound continues with Bruker Scientific Instruments up 5% to $574.7 million; Molecular DX and spectrometry both up double digits for full year
CareDx $58.6 million ($55.5 million) 64% +$0.08 (+$0.02) Testing services up 73% to $50.3 million driven by increase in AlloSure Kidney and AlloMap Heart sales; Products sales up 16% to $5. million; Digital and other revenues up 50% to $2.4 million
Danaher $6.80 billion ($6.53 billion) 39% Adjusted +$2.08 (+$1.87) DX up 24% to $2.23 billion, driven by over 100% growth of Cepheid which posted $2 billion in annual revenues for first time after hitting $1 billion for first time in 2019; more than 60% of respiratory tests were for COVID but pandemic also drove moderate declines for Beckman Coulter elective and wellness products; Life Sciences up 76% to $3.6 billion
Exact Sciences $466.3 million ($446.2 million) 58% Net -$2.79 (-$0.22) Screening revenues contribute $249.7 million, including Cologuard which over 8,000 providers ordered; Precision oncology $117.6 million; COVID testing $99.1 million
Fluidigm $44.6 million ($50.7 million) 38% Adjusted -$0.13 (-$0.07) 6% decline in Instruments to $14.9 million and 9% decline in Cytometry to $19.5 million offset by COVID-driven gains, including 98% growth in Microfluidics to $21.0 million; Service revenues up 13% to $6.1 million
Guardant Health $78.3 million ($76.7 million) 25% Net -$0.27 (-$0.57) Precision oncology up 13% to $64.7 million; Development services up 148% to $13.6 million driven by new companion Dx products for biopharma
Hologic (FY 2021 Q1) $1.61 billion ($1.40 billion) 89% Adjusted +$2.86 (+$2.17) COVID surge continues with total DX up 262% to $1.13 billion driven, including over 500% growth in molecular diagnostics to $995.3 million, which more than offset decline in non-COVID tests, including 33% in blood screening ($8.1 million); 3% increase in cytology and perinatal revenues to $124.8 million
Invitae $100.4 million ($98.4 million) 51% Non GAAP -$0.63 (-$0.55) $96.8 million in testing revenues (238,000 tests billed) with test volumes bouncing back due to easing of COVID conditions; $3.6 million in non-testing revenues
LabCorp $4.49 billion ($3.95 billion) 52% Adjusted +$10.56 (+$8.11) Best year-over-year quarter since pandemic began, with diagnostics up 79% to $3.15 billion driven by COVID, which offset 6% drag from PAMA Medicare reimbursement cuts; Covance drug development up 17% to $1.40 billion
Luminex $111.4 million ($104.6 million) 35% Net -$0.01 (+$0.13) After Q3 89% COVID spike, assays were up only 41% to $51.3 million driven by 49% growth in molecular testing, which offset declines in clinical tools and life sciences; cytometry flat at $12 million
*Meridien Biosciences (FY 2021, Q1) $92.9 million ($83.9 million) 96% Adjusted +$0.65 (+$0.42) Fivefold increase in life sciences and COVID products including Revogene drive massive growth; DX $30.3 million, which was actually down 13% year over year but up 2% as compared to Q4; molecular assays down 33% at $4.6 million; Immunoassays and blood chemistry down 8% at $25.7 million
$154.6 million ($150.4 million) $154.6 million ($150.4 million) -21% Adjusted -$0.12 (-$0.12) Testing volumes still down across most segments (5% in total) due to COVID-19 but are recovering to near pre-pandemic levels with molecular DX down 21% to $143.9 million; Hereditary cancer down 33% to $78.7 million; Pre-natal up 29% to $18 million
NeoGenomics $126.0 million ($123.5 million) 18% Adjusted +$0.14 (+$0.05) All core divisions achieve positive growth for first time since pandemic began, including clinical services up 14% to $106.8 million, thanks to $9 million in COVID testing revenues; Pharma services up 43% to $19.3 million
Opko Health $494.6 million ($443.1 million) 121% Pro forma -$0.05 (+$0.04) 157% increase in services revenues to $457.9 million, due to COVID testing with BioReference Lab COVID test volume up 170%, including 19 million PCR (up 24%) and 220,000 tests performed; but product revenues down 4% to $30.8 million
Pacific Biosciences $27.1 million ($25.4 million) -3% Net +$0.37 (+$0.32) Product revenues down 4% at $23.6 million; Instruments down 11% to $13.6 million; Service and other revenues flat at $3.5 million
PerkinElmer $1.35 billion ($1.22 billion) 68% Adjusted +$3.96 (+$3.00) Follows massive Q3 with even strong Q4, driven by 176% growth in DX to $851.8 million, with COVID PCR tests and RNA extraction solutions each contributing over $300 million; Applied genomics up 420% and immunodiagnostics up 250%, including over 20% growth of Euroimmun subsidiary
Qiagen $571.2 million ($548.9 million) 38% Adjusted +$0.68 (+$0.65) 36% growth in consumables to $494 million driven by continued demand for COVID testing cartridges, including 45% increase in molecular diagnostics to $287 million, as well as spikes in sales of reagents + RNA extraction kits; Life sciences also up 32% to $284 million; but non-COVID revenues flat at $371 million
Quest Diagnostics $3.00 billion ($2.93 billion) 56% Adjusted +$4.48 (+$4.24) Continued demand for COVID testing drives 27% increase in overall test volume (7% for all of 2020) and 25% growth in revenue per test (16% for all of 2020)
Quidel $809.2 million ($809.1 million) +>500% Adjusted +$11.07 (+$10.14) Incredible but ultimately unsustainable growth with COVID products bringing in $678.7 million; Molecular DX up over 1,200% to $89.4 million; Rapid immunoassays up nearly 10-fold to $678.7 million, including $587.6 million from Sofia SARS Antigen and Sofia 2 Flu + SARS Antigen test sales; Cardio immunoassays reverse 3% decline in Q3 to post 6% growth in Q4 at $70 million; Specialized DX down 20% to $11.5 million
Roche Diagnostics $15.21 billion 20% Net +$21.14 Molecular DX for full year up 78% to $4.15 billion driven by COVID testing, which offset declines in routine testing; Centralized and Point of Care Solutions down 7% to $8.02 billion
*Siemens Healthineers (FY 2021, Q1) $4.67 billion 8% Adjusted +$0.59 DX up 17% to $1.43 billion driven by rapid SARS-CoV-2 antigen and molecular tests; Recovery in core non-COVID businesses, which posted mid single-digit growth, including stabilized reagent volumes and Atellica sales
10x Genomics $112.2 million ($100.4 million) 49% Net -$3.87 (-$0.23) Continues the rebound began in Q2 with 49% increase in consumables to $96.5 million and 49% increase in Instruments to $14 million and 48% jump in Service revenues to $1.7 million
Thermo Fisher Scientific $10.55 billion ($9.58 billion) 54% Adjusted +$7.09, (+$6.56) COVID drives specialty DX to more than double to $1.97 billion; Routine DX rebound from Q3 but remain below pre-pandemic levels, especially immunodiagnostics and transplant; Laboratory products and services revenues up 28% to $3.62 billion
Twist Bioscience (FY 2021, Q1) $28.2 million ($25.4 million) 64% Net -$0.72 (-$0.74) Next-generation sequencing revenues, including SNP microarray conversions and liquid biopsy panels more than double to $15.6 million and contributed more than synthetic biology revenues ($11.5 million) for first time in company history
Veracyte $34.5 million ($31.9 million) 16% Net -$0.15 (-$0.11) Overall testing up 10% to $34.5 million, driven by 14% increase in volume (13,130 tests, including 11,221 genomic tests and 1,999 Prosigna tests)
Waters $786.7 million ($713.7 million) +10% (-2% for full year) Non-GAAP +$2.16 (+$1.93) Pharma up 15%, Industrial up 5%, Academic and government sales down 15%
Bold face: Companies that met or exceeded average or consensus Q3 Wall Street revenue estimates
* Companies that raised their revenue or EPS guidance during Q4
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