Dx Earnings Report: Strong Q3 Adds to Robust 2017 as PAMA Looms for 2018

Big labs continue to post impressive earnings. But the positive Q3 numbers may prove to be the calm before the PAMA storm—at least for major reference labs that generate significant revenues from Medicare. Here’s an overview of earnings reports of firms with at least $10 million in sales for the quarter.

After enjoying a 26-to-10 margin in the previous quarter, the disparity between gainers and decliners reached an even more impressive 31-to-5 disparity in Q3. Among the gainers, only four failed to make their Wall Street targets, including (by size of miss):

  • GenMark Diagnostics which despite 7% year over year growth, missed its $14.6 million target by $3 million;
  • NeoGenomics which came up $800,000 short of its $63.9 target as a result of lab closures forced by Hurricanes Harvey and Irma;
  • NantHealth whose $21.8 million in revenues exceeded Q3 totals from 2016 by 5% but fell $400,000 short of Wall Street estimates; and
  • Luminex which missed its target by a heartbreaking $300,000—$74.1 million v. $74.4 million.

For the third straight quarter, almost all of the billion-dollar labs at least met, and in a few cases, smashed their expected gains. The latter included:

  • Thermo Fisher which had a monster Q3 featuring not only 14% growth at $5.12 billion, (vs. the Wall Street target of $5.03 billion) but completion of the $7.2 billion Patheon acquisition;
  • LabCorp which exceeded its $2.55 billion target by $11 million—while strategic acquisition revenues lifted the figures, the firm also posted a 10% gain in diagnostic sales;
  • Danaher which posted 10% overall growth including an eye-popping 20% increase in diagnostic revenues, allowing it to beat its $4.47 target by $6 million.

Abbott and Quest were also able to meet their Q3 Wall Street revenue targets but just barely. Moreover, four labs that posted declines in Q2 reported increases in Q3, including (in order of percentage gain) Fluidigm, GenMark Diagnostics, NantHealth and Quidel.

Only five labs posted revenue declines in Q3. Among them was Becton Dickinson, the only 9-figure lab on the bad list. But even that red number came in below what Wall Street was projecting ($3.15 billion actual v. $3.17 billion projected). In addition, CareDx which was down 2% overall, still came in with higher than expected earnings for the quarter ($12.2 million actual v. $12.1 million expected).

Other companies that struggled in terms of revenues:

  • OpkoHealth fell nearly 12% to $298 million, well short of its $319.4 million target;
  • Pacific Biosciences continues to leak oil with losses of 6% due in large part to falling instrument sales; and
  • Veracyte which took a 6% hit, a loss aggravated by accounting considerations and the conversion of its Affirma test sales from a cash to accrual basis.

Perhaps surprising by its absence from the decliners list is NantHealth, a firm in the process of restructuring that managed to post positive growth of 2%—albeit nearly $1 million shy of its $29.2 million Wall Street target.

Diagnostics Earning Reports 3Q 2017 (At least $10 million in sales)

Total YOY Wall Street Estimate
Abbott Laboratories $6.83 billion +6% $6.72 billion Dx up to $1.28 billion driven by 6% growth in core lab tests to $1.03 billion, 6% growth in POC tests to $131 million and 3% growth in molecular tests to $115 million
Becton Dickinson $3.17 billion -2% $3.15 billion Loss, which is less than Wall Street projected, driven by divestiture of respiratory solutions business; Dx revenues grow 5% to $359 million
BioMérieux €540 million +6% NA 23% in molecular bio driven by BioFire FilmArray line
Bio-Rad $535 million +5% $508 million Newly acquired RainDance Technologies generates $75 million in sales
Bruker $435.6 million +11% $414.6 million Organic growth of 3% net of 5% in acquisition boosts and 2% in positive currency effects
CareDx $12.2 million -2% $12.1 million AlloMap sales down $400K but projected to jump $3.24 million in 2018 due to PAMA Medicare rate hikes
Danaher $4.53 billion +10% $4.47 billion Dx revenues up 20% to $1.45 billion driven by strong immunoassay sales
Enzo Biochem $28.2 +6% NA Molecular Dx drives 13% growth in clinical labs segment
Exact Sciences $72.6 million +158% $65.0 million 136% increase in Cologuard colon cancer tests completed to 161,000 (vs expected 150,000). EPS decline narrows from -.30 to .23 cents per share
Fluidigm $24.7 million +12% NA Genomics revenues down 20% to $10.3 million; EPS loss narrows from -.68 to .46 cents per share
Foundation Medicine $42.7 million +45% $38.0 million Clinical testing up 37% to just under $13 million and biopharma revenues up 17% to $22.1 million
GenMark Diagnostics $11.6 million +7% $14.6 million Strong sales of newly FDA approved ePlex and eSensor XT-8 molecular Dx systems but not enough to meet Wall Street target
Hologic $802 million +11% $792.5 million Total Dx revenues fall 7% to $291.7 million despite strength of Aptima women’s health line in molecular segment
Illumina $714 million +18% $692.8 million NovaSeq instruments continue to drive growth with non-GAAP income of $1.11 per share v. .99 cents expected
Invitae $18.1 million nearly +300% $13.3 million Driven by revenues from newly acquired Good Start Genetics; 10% PAMA cut in Invitae’s hereditary cancer panel (CPT 81432) expected to hurt 2018 revenues
Laboratory Corp. of America $2.66 billion +10% $2.55 billion Acquisitions revenues spike totals though DX revenues up 10% to $1.84 billion; PAMA cuts expected to reduce 2018 revenues
Luminex $74.1 million +4% $74.4 million Misses Wall Street target despite 17% increase in assay revenues and driven by strong automated sample-to-answer molecular product sales
MDxHealth $30.5 million +38% NA Numbers inflated by $12.1 million in patent sales to Exact Sciences; total sales up 3% to $18.4 million
Meridian Bioscience $49.7 million +2% $48.1 million Dx revenues up 4% to $36 million
Myriad Genetics $190.2 million +7% $183.4 million 8% increase in molecular tests offsets 9% decline in hereditary cancer sales
NanoString Technologies $27 million +13% $27 million Prosigna IVD kit sales up nearly 50% to $17 million; big news for Q3 was setback in Merck companion diagnostic collaboration
NeoGenomics $63.1 million +4% $63.9 million Hurricanes Irma and Harvey kept clinical testing revenues growth to just 1%; meanwhile Medicare continues to refuse coverage of firm’s molecular tests
NantHealth $21.8 million +5% $29.2 million Firm in process of restructuring gets $1 million boost from GPS sales in Asian market
Natera $56.7 million +5% $56.0 million Testing volume up 15% at 130,400 tests processed led by Panorama prenatal at 87,400 (+4%)
NeoGenomics $66.1 million +5% $63.0 million Driven by 7% growth in genetic testing; EPS also beat Wall Street estimates
Opko Health $263.5 million -12% $319.4 million Product revenues up 10% to $22.8 million but DX products not broken out; CEO notes that BioReference Labs business fell short but projects improvement in 2018
OraSure Technologies $42.3 million +31% $40.8 million Driven by 186% growth in hepatitis C testing revenues to $8 million
Oxford Immunotec $30.4 million (YTD) +17% $30.1 million Growth driven by tuberculosis and tick-borne disease testing
Pacific Biosciences $23.5 million -6% $28.6 million Consumables up 62% to $10.6 million; YOY net loss grows from $17.5 million to $22.0 million
PerkinElmer $554.3 million +8% $552.4 million Dx revenues up 13% to $168.9 million
Qiagen $364 million +7% $363.3 million Molecular DX up 9% to $180 million, over 50% firm’s total sales, led by QuantiFeron latent TB test which is on track for 25% growth for year; Qiagen ups total year revenue guidance from 6% to 7%
Quest Diagnostics $1.93 billion +2% $1.92 billion DX revenue up 3% to $1.865billion; anticipated 2018 losses from PAMA cuts expected to be offset by revenues from acquisitions; firm now projecting total 2017 revenues of 7.71 billion, in range of forecasts from earlier in year
Quidel $50.9 million +3% $50.3 million Immunoassays drive 12% growth in DX sales; FDA approval of Solana RSV + hMPV expected to increase molecular revenues in 2018
Roche $40.61 billion (YTD) +5% NA DX up to $8.37 billion—centralized and point of care revenues up 7%, molecular up 3%, tissue up 13% but diabetes care down 1%; look to Asia Pacific and global market to offset PAMA losses in 2018
Thermo Fisher Scientific $5.12 billion +14% $5.03 billion Labs up 16% to $1.93 billion and specialty DX up 6% to $843.7 million— Asia Pacific sales continue growing at low double digits rate
Veracyte $18.6 million -6% $19.6 million Higher collection costs absorb gains in test revenues accrued due in part to conversion of Afirma Gene Expression Classifier test from cash to accrual basis; YOY net loss grows to $7.0 million or 21 cents per share, which at least falls below Wall Street estimates of 23 cents
Waters $565.6 million +7% $553.2 million Balanced growth with especially strong sales in mass spec business

* Bold face: Companies that met or exceeded Q3 Wall Street revenues target


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