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.

Gainers
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.

Decliners
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)

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