LabCorp Reports First-Quarter Results

LabCorp Reports First-Quarter Results

LabCorp Reports First-Quarter Results

LabCorp reported a net loss of $317.2 million for the three months ended March 31, 2020, down from net income of $185.6 million in the same period a year ago; revenue was up 1.2% to $2.824 billion. A summary of key topics discussed by CEO Adam Schechter and CFO Glenn Eisenberg on an April 29 conference call follows.

Diagnostics Division
LabCorp’s Diagnostics Division reported a 1.2% decline in revenue to $1.702 billion. Volume decreased by 4.4%, including an organic volume decrease of 6.1%, partially offset by acquisition volume of 1.6%. LabCorp’s requisition volume is currently down by roughly 50% to 55% versus the company’s normal preCovid-19 crisis volumes.

Increased demand for Covid-19 testing is marginally offsetting the loss in routine test volumes, according to Schechter. He said that LabCorp is currently able to perform more than 60,000 PCR-based Covid-19 tests per day, or 1.8 million per month, and is seeking to expand to over 100,000 tests per day.

LabCorp’s primary PCR-based Covid-19 testing locations are Burlington, NC; Indianapolis, IN; Phoenix, AZ; and Raritan, NJ. LabCorp is performing the majority of its testing on analyzers from Thermo Fisher and Roche, in addition to the Hologic Panther Fusion System. “The issue that you run into is you need additional machines and you can imagine there’s lots of back orders and you know doing these RNA tests and the PCR test takes a lot of equipment. But we’re going to try to build to get to over 100,000 as quickly as we can,” said Schechter.

Home Sample Collection Kits
LabCorp launched its Covid-19 at-home self-collection kits through its branded Pixel service in late April. The kits allow patients to swab their own nasal passages and mail the samples back to LabCorp for PCRbased Covid-19 testing. The service is currently available only for healthcare workers and first responders who have Covid-19 symptoms. To obtain a collection kit, an individual must first fill out an online questionnaire, which is then reviewed and authorized by a physician. LabCorp will bill private insurance or utilize federal funds to cover the upfront cost of the test, while self-paying customers pay $119. LabCorp intends to make the collection kits available to all consumers in the coming weeks. However, the service is not available in MD, NJ, NY, and RI, due to state restrictions.

Covid-19 Antibody Testing
LabCorp can currently perform more than 50,000 Covid-19 antibody tests per day and expects to increase its capacity to over 200,000 tests per day by mid-May. LabCorp is using Abbott’s antibody test. “When you think about those numbers, over 200,000 tests today in serology and maybe 100,000 tests over time for PCR, it’s still a very small number compared to the 530 million or so tests that we do across all of our testing [pre-Covid-19]. So unless we start to see that come back, it will be hard for these tests to make up for the difference in what we’ve seen since the last weeks of March,” according to Schechter.

Accounts Receivable
LabCorp said that, as a result of increase in unemployment and the potential financial difficulties of medical practices from the impact of the Covid-19 crisis, it took a first-quarter charge of $17 million to increase its accounts receivable reserves.

Cost Cutting

Some of the actions that LabCorp has taken to help offset the impact of Covid-19 include employee furloughs, delays in new hiring, reducing temporary and contract workers, and suspension of merit pay hikes
and 401(k) plan contributions.

LabCorp received $56 million in April through the CARES Act, which the company is using to ramp up
its Covid-19 testing capacity

LabCorp Reports First-Quarter Results

LabCorp Reports Full-Year 2019 Financial Results

LabCorp Reports Full-Year 2019 Financial Results

LabCorp (Burlington, NC) reported net income of $823.8 million for the full-year 2019, down from $883.7 million in 2018. LabCorp’s overall revenue increased by 2.0% to $11.6 billion in 2019.

Revenue from LabCorp’s lab testing business decreased by 0.4% to $7 billion in full-year 2019. This year LabCorp expects its lab testing business to increase its revenue by 0.5% to 2.5%. This guidance includes a -1.3% impact from PAMA and -0.9% from UnitedHealth’s nonrenewal of the BeaconLBS contract in Florida.

LabCorp expects revenue from its Covance Drug Development division to grow by 7% to 9.5% in 2020.

On February 13, LabCorp held a conference call with analysts and investors. Here are some comments on a few key topics from CEO Adam Schechter.

Impact from PAMA
Schechter said that the PAMA rate cuts reduced the company’s lab testing revenue by approximately $100 million in 2019. He expects a similar $100 million revenue loss from PAMA this year and again in 2021.

UnitedHealth’s Preferred Laboratory Network (PLN)
“I don’t assume there’ll be a significant shift [to PLN labs] in 2020 because they’re rolling it out as we speak….If it works for United, I think that other organizations may see this as an opportunity to help them reduce their laboratory costs by moving over business to a lab like ours.”

Hospital Lab Acquisitions
“As I look at the hospital tuck-in acquisitions, I can tell you that our list is long. There are many discussions that we’re having around the country with both local and regional labs and hospitals… I believe over time it [hospital lab deals] will begin to accelerate, particularly as they feel the continued impact from PAMA.”

Direct to Consumer Genetic Testing
“We saw a significant decline in 2019 versus 2018. It’s now a very small amount of our total volume and of our total revenue and operating income.” Laboratory Economics notes that LabCorp has had a contract to provide genotyping services to 23andMe Inc. (Sunnyvale, CA) since 2008. After years of strong demand for
its ancestry and health testing services, 23andMe recently laid off 100 employees, or 14% of its workforce, citing a slowdown in consumer demand.

Swedish Flag
LabCorp Reports First-Quarter Results

More Executive Changes At Labcorp’s Diagnostic Division

More Executive Changes At Labcorp’s Diagnostic Division

After only a few days in the position, LabCorp Diagnostics’ CEO John Ratliff has resigned to take a top executive position at an unnamed company. Ratliff, age 59, had become head of LabCorp’s diagnostic testing business effective November 1. He had formerly been CEO of Covance, LabCorp’s drug development business.

Former LabCorp President and CEO Dave King, 62, had been serving as interim head of LabCorp’s diagnostic testing business since January 1, 2019. King retired from his day-to-day executive positions at LabCorp on November 1, but is staying on as Chairman through at least the end
of next year.

LabCorp says that its diagnostics division will now be led by two individuals. Brian Caveney, MD, 46, has been named Executive Vice President and President of Diagnostics. Caveney was formerly Chief Medical Officer at LabCorp. In addition, Mark Schroeder, 58, has become Executive Vice President and President of Laboratory Operations and Global Supply Chain. Schroeder was formerly LabCorp’s Chief Supply Chain Officer.

Debt Collection Company Hack May Affect 20+ Million Patients

Debt Collection Company Hack May Affect 20+ Million Patients

Debt Collection Company Hack May Affect 20+ Million Patients

Aweb payment page operated by American Medical Collection Agency
(AMCA-Elmsford, NY) has been hacked and may have exposed personal data on 20+ million patients from at least three commercial lab companies: Quest Diagnostics, LabCorp and BioReference Labs. AMCA, which also does business under the name Retrieval-Masters Credit Bureau, is a third-party debt collector with a reputation for aggressively pursuing patients for past due bills.

The hack was initially discovered in late February by the web payment
security monitoring firm Gemini Advisory (New York City), when they
found credit card information from patients linked to AMCA being sold
on a darknet marketplace. Gemini believes the AMCA hack may turn out
to be the largest medical breach of 2019.

Quest Diagnostics says that it was notified by AMCA of the data breach on May 14. AMCA said that an “unauthorized user” had gained access to social security numbers, credit card numbers, bank account information and other sensitive data from up to 11.9 million Quest patients between August 1, 2018 and March 30, 2019. Quest says that patient lab test results are not provided to AMCA and were therefore not affected by the hack. Quest has suspended sending collection requests to AMCA.

LabCorp says the data breach may have affected 7.7 million of its patients referred to AMCA. LabCorp has ceased sending new collection requests to AMCA and stopped the agency from working on any of its pending collection requests.

OPKO Health Inc. says that 422,600 of its patients may have been impacted by the hack through its subsidiary, BioReference Laboratories (Elmwood Park, NJ). BioReference has not sent any new collection requests to AMCA since October 2018, and has requested that it stop working on any pending collections.

In a statement, AMCA said it was notified of a potential data breach by a security compliance firm (i.e., Gemini) that works with credit card companies, which resulted in the collections agency conducting an internal review and then taking down its web payment page. As of early June, Gemini said that it can verify more than 200,000 compromised payment records related to the breach, and that more records are continually being added to dark web marketplaces.

Meanwhile, at least six state attorneys general—in Michigan, New York, Minnesota, North Carolina, Illinois and Connecticut—are now investigating the breach.

Public Lab CEOs Paid Average $4 Million

Public Lab CEOs Paid Average $4 Million

Public Lab CEOs Paid Average $4 Million

The chief executives at 17 publicly-traded lab companies were paid an average of $4 million each last year, according to an analysis of shareholder proxy statements by Laboratory Economics. Altogether, the 17 CEOs earned a total of $6 7.6 million, including $10.7 million from salary, $9.1 million from bonuses, $47.1 million from stock and option awards, and $751,270 from other compensation. In comparison, the average pathologist earned $308,000 in salary and bonus last year, according to the latest survey by Medscape.

LabCorp’s David King, age 62, was the highest paid lab CEO in 2018. He received total compensation of $12.3 million. In comparison, the median of the annual total compensation of all LabCorp’s employees was $43,230 in 2018. King’s compensation included: 1) salary of $1.2 million; 2) stock awards of $7.5 million; 3) stock options of $1.8 million; 4) incentive plan cash bonus of $1.6 million; and 5) other compensation of $189,068, which included financial planning services, 401K matching contributions, long-term disability insurance, use of a company car and aircraft, and home security services.

Quest Diagnostics’ Stephen Rusckowski, 61, was paid total compensation of $10 million last year versus median compensation of $46,749 for all other Quest employees. Rusckowski received: 1) a salary of $1.1 million; 2) stock awards valued at $4.7 million; 3) stock option awards of $3.1 million; and 4) cash incentives of $788,700. He also received $314,585 in perks, which included $87,414 for personal use of a company car and driver plus $100,000 for personal use of company aircraft.

Myriad Genetics’ Mark Capone, 56, got total compensation of $7.1 million versus median compensation of $77,814 for all other Myriad employees. Capone’s pay included: 1) salary of $852,000; 2) bonus and cash incentives totaling $817,920; 3) stock awards of $5.4 million; and 4) other compensation totaling $10,980, which included company-paid life insurance premiums and matching 401K contributions.

Exact Sciences’ Kevin Conroy, 53, was paid total compensation of $7 million last year versus median compensation of $98,783 for all other Exact employees. Conroy’s pay included: 1) salary of $695,800; 2) bonus and cash incentives totaling $794,952; 3) stock and option awards of $5.5 million; and 4) other compensation totaling $16,500.

Meanwhile, IRS 990 tax forms for 2017 (the latest year available) show that CEOs at the nation’s largest not-for-profit health systems receive compensation that often exceeds the pay earned by their counterparts at for-profit publicly-traded companies. For example, Ascension Health CEO
Tony Tersigni earned $17.5 million in 2017 in total compensation when base salary, bonuses and other compensation are added.

Kenneth Davis, MD, President and CEO of  Mount Sinai Health System (New York City) took home nearly $12.4 million in
cash compensation, including a supplemental executive retirement plan benefit of $8.3 million, in 2017. Jim Skogsbergh, President and CEO of Advocate Aurora Health, the largest health system in Illinois, received $11.7 million in 2017.

LabCorp Reports First-Quarter Results

LabCorp CEO Dave King To Retire

LabCorp CEO Dave King To Retire

LabCorp has announced that its CEO Dave King, age 62, will be retiring, effective October 31, 2019. Starting on November 1, King will become Executive Chairman of the Board through at least the end of 2020. He will also act as senior advisor to LabCorp’s new CEO, Adam Schechter, age 54, over this same period.

King served as CEO for 13 years, starting in January 1, 2007. He originally
joined the Company in September 2001 as Senior Vice President, General Counsel, and Chief Compliance Officer.

During the course of his 18 years with LabCorp, King has accumulated 442,660 shares of LabCorp with a current value of approximately $74 million. Since King has been CEO, the company’s earnings per share have increased at an average annual rate of 8.5%, while its share price has increased by 6.9% per year.

More recently, King has also been serving as CEO of LabCorp’s Diagnostics Division since January 1, 2019. A LabCorp spokesperson says the company “continues to seek a top-notch executive to lead our Diagnostics business and expects to have an announcement in the coming months.” In the meantime, King will continue to run LabCorp’s Diagnostics business until a new leader is named.

Schechter has served on LabCorp’s Board since April 2013, and was an Executive Vice President at Merck & Co. from 2010 to 2018.