Apollo To Buy Sun Clinical Labs For $4 Million

by Jondavid Klipp | Jun 15, 2021 | Apollo Medical Holdings, Lab Acquisition, Sun Clinical Labs

Apollo To Buy Sun Clinical Labs For $4 Million

Apollo Medical Holdings (ApolloMed-Alhambra, CA) has agreed to purchase a majority stake in Sun Clinical Laboratories (Sun Labs-El Monte, CA) for $4 million in cash. The deal is expected to close within three months.

Sun Labs is a small independent routine clinical lab with 19 patient service centers located across the San Gabriel Valley in southern California. Sun Labs was founded by its CEO Francis Sun in 1980.

ApolloMed is a publicly-traded company that manages 14 independent physician associations (IPAs) with 7,000 contracted physicians located primarily in California. Apollo’s IPAs have capitated contracts with insurers (Aetna, Anthem, Cigna, Humana, UnitedHealthcare, etc.) covering a total of 1.13 million members. ApolloMed, which is expanding into New York and Florida, anticipates growing to a total of 10,000 contracted physicians, two million covered lives, and $700 million of revenue by the end of this year.

Apollo had already been using Sun Labs for testing services. “As ApolloMed expands its geographic footprint, we see Sun Labs as a core partner in this expansion, growing the business and bringing high-quality lab services to more patients across the nation,” according to Kenneth Sim, MD,
Chairman and Co-Chief Executive of ApolloMed.

Quest Completes Acquisition of Mercy’s Outreach Lab Business

by Jondavid Klipp | Jun 15, 2021 | Lab Acquisition, Quest Diagnostics

Quest Completes Acquisition of Mercy’s Outreach Lab Business

Quest Diagnostics has completed its previously announced acquisition of the clinical lab outreach business of Mercy (St. Louis, MO) in an all-cash asset transaction (see LE, March 2021). The purchase price has not yet been disclosed. Cain Brothers served as Mercy’s transaction advisor.

Under the deal, Mercy’s clinical lab outreach tests will transition to Quest’s full-service laboratory in Lenexa, Kansas. Mercy’s clinical lab outreach business currently operates from 29 hospital laboratories and two independent clinical laboratories serving providers and patients in Arkansas, Kansas, Missouri and Oklahoma.

Mercy will continue to wholly own and operate its hospital laboratories for tests connected to inpatient and hospital-based outpatient services.

America’s Fastest-Growing Labs

by Jondavid Klipp | Dec 22, 2020 | Laboratory Economics, Laboratory Market Research

America’s Fastest-Growing Labs

Phlebxpress (Temecula, CA) grew its Medicare Part B test service volume by 202% per year between 2015 and 2018, making it the fastest-growing independent lab company in America over the three-year period. Phlebxpress is a mobile phlebotomy company headquartered in Southern California that serves California, Nevada, and Texas. Its highest volume Part B test services included travel allowance (P9603 & P9604) and routine venipuncture (CPT 36415).

Two other mobile phlebotomy companies, Mobile Health Labs (Orlando, FL), up 63% per year, and Unique Lab Services (Fountain Hills, AZ), up 59% per year, rounded out the top three.

Two hospital-owned outreach labs, UCLA Outreach Clinical Lab (Panorama City, CA) and Pathology Laboratory (Ankeny, IA), owned by UnityPoint Health, were also among the fastest-growing lab companies.

Overall, some 2,900 independent clinical labs saw their Medicare Part B volume decline from 352.6 million test services in 2015 to 314.2 million test services in 2018. The decline was mostly driven by the introduction of new bundled codes for drug testing (G0480-G0483), which eliminated a large volume of individually billed drug tests.

Top 25 Fastest-Growing Labs by Medicare Part B Volume of Services

Battle Continues Between Enzo And Harbert Discovery Fund

by Jondavid Klipp | Dec 11, 2020 | Enzo Biochem, Harbert Discovery Fund

Battle Continues Between Enzo And Harbert Discovery Fund

Alabama-based investment management firm Harbert Discovery Fund continues to feud with Elazar Rabbani, PhD, Chairman and CEO of Enzo Biochem (New York City) over the future of the clinical lab and diagnostic products company.

Harbert is an activist investor fund that targets small-cap companies that it believes are undervalued. Harbert accumulated shares in Enzo from May to August 2019 at prices ranging from $3.07 to $3.65 per share. It currently owns 5.6 million shares, or an 11.7% stake, making it Enzo’s largest shareholder.

In February 2020, Harbert nominated and won Enzo board seats for two directors, Fabian Blank and Peter Clemens (see LE, March 2020). However, Clemens and Blank both resigned from Enzo’s board in November. “It appears that Chairman and CEO Rabbani has created such an extremely hostile environment that Pete and Fabian found their position untenable as minority members in opposition to Mr. Rabbani’s continued mismanagement,” according to a letter Harbert sent to Enzo’s board of directors on November 18. Harbert called for the resignation of Rabbani, followed by an immediate pursuit of the sale of the company. Harbert believes Enzo could be sold at a minimum of 2x its current annualized revenue, or $5.51 per share.

Dr. Rabbani, age 77, is a founder of Enzo and has served as the company’s Chairman and CEO since its inception in 1976. He holds a 4.1% stake in the company. His board seat is up for reelection to another three-year term this January.

In response to Harbert’s letter, Enzo filed a lawsuit against Harbert on November 27 in the Southern District of New York. Enzo alleges that Harbert has made material misrepresentations to Enzo’s shareholders and that its board nominees, Clemens and Blank, were unprepared and never proposed a single strategic plan to help Enzo. Enzo says that Harbert is seeking to “force a fire sale” to the detriment of shareholders. Enzo alleges that Harbert has made false or misleading statements in violation of Securities Exchange Act rules. Enzo is seeking a permanent injunction to stop Harbert from making future misrepresentations, correct past alleged false statements, and pay monetary damages to cover Enzo’s related proxy contest expenses and attorneys’ fees.

Enzo’s Revenue Jumps Driven by Covid-19 Testing
Separately, Enzo reported net income of $299,000 for the three months ended October 31, 2020 versus a net loss of $7.6 million for the same period a year ago; total revenue increased by 42% to $28.7 million.

Enzo’s Clinical Lab Division recorded a 66% revenue increase to $21.2 million. The improvement was driven by Covid-19 testing. Total volume grew to 300,000 accessions in the latest three month period versus approximately 200,000 a year earlier. Average revenue per accession increased to more than $69 per accession versus $62 in the previous year’s period.

Enzo Got $7 Million PPP Loan
The CARES Act expanded the U.S. Small Business Administration’s (SBA) business loan program to create the Paycheck Protection Program (PPP), which provides employers with loans for the purpose of retaining employees and maintaining salaries. PPP loans are wholly or partially forgivable if spent on payroll and certain other operating expenses. Enzo, which has 408 full-time and 40 part-time employees, was one of four publicly-traded lab companies that received a PPP loan. Enzo received a PPP loan of $7 million in April, while Interpace Biosciences received $3.5 million, Psychemedics got $2.2 million and Aspira Women’s Health (formerly named Vermillion) got $1 million.

Volume Surge Expected For High-Priced Covid-19 Test Panels

by Jondavid Klipp | Nov 15, 2020 | Covid Testing, COVID-19, XIFIN

Volume Surge Expected For High-Priced Covid-19 Test Panels

With the flu season underway, more test panels are becoming available that test for Covid-19 plus other respiratory viruses, including influenza A/B and respiratory syncytial virus (RSV). Labs have begun to submit the combo PCR tests codes for Covid-19, although volume is nominal at this stage, notes Lale White, Chief Executive at XIFIN Inc. (San Diego, CA).

The AMA has issued new CPT codes for Covid-19 PCR-based test panels (87636 & 87637) and Medicare contractors have set rates for both of these codes at $142.63 by crosswalking to the existing code 87631 (respiratory virus detection, 3-5 targets).

In addition, several Proprietary Laboratory Analyses (PLA) codes (e.g., 0223U, 0202U and 0225U) have been issued for larger Covid-19 test panels that include up to 22 pathogen targets. Medicare contractors have set rates for these codes at $416.78 by crosswalking to the existing code
87507 (infectious agent detection, 12-25 targets).

There are currently an average of 1.5 million Covid-19 PCR tests being performed each day in the United States at cost of roughly $150 million per day, or $50+ billion annualized. A transition toward combo test panels reimbursed at $142-$417 per panel could potentially push the annualized market to more than $100 billion. That would exceed the total U.S. market for all non-Covid clinical lab and pathology testing.

In June 2020, the Office of Inspector General (OIG) communicated its fear that many labs are performing medically unnecessary add-on tests when responding to orders for Covid-19. The OIG has added an analysis for potential fraud and abuse with Covid-19 add-on testing to its work plan,
notes Charles Root, PhD, President of CodeMap LLC.