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Quest Diagnostics' Q1 Revenues Up 5 Percent

NEW YORK (GenomeWeb) – Quest Diagnostics today reported that its first quarter revenues were up 5 percent year over year, meeting analysts' estimates.

Quest's revenues for the three months ended March 31 were $1.84 billion compared to $1.75 billion for the first quarter in 2014. The top-line figure matched Wall Street's expectation.

Revenues from diagnostic information services climbed 5 percent, while test volume (measured by the number of requisitions) increased 6 percent compared to the year-ago period. The company's revenue per requisition was .7 percent below what it was in the first quarter of 2014.

Revenues from the firm's diagnostics solutions business, including risk assessment testing, clinical trials testing, healthcare IT, and other products businesses, grew by 11 percent compared to the prior year.

"Gene-based esoteric testing revenues grew in the quarter at a faster rate in more than a year," Quest CEO Steve Rusckowski said during a call discussing quarterly earnings with investors. He highlighted that BRCA testing sales continued to increase due to celebrity advocacy. The company last year launched BRACAvantage Plus, which tests for an expanded panel of breast cancer risk markers compared to the original BRCAvantage test launched in 2013.

"This year volumes were negatively impacted in the quarter by a harsh winter," Mark Guinan, Quest CFO, noted during the call. He said the weather impact on the business was "worse than expected," at $.08 per earnings per share. "As a result, we're pleased with the quarter, but we were planning on better performance," Guinan said.

Quest's net earnings for the first quarter were $61 million, or $.42 a share, compared to $104 million, or $.71 a share, in the first quarter of 2014. Earnings per share on an adjusted basis were $1.05, slightly above the consensus analysts' estimate of $1.04 a share.

The company said that its net income was negatively impacted by charges of $80 million after tax "principally associated with the early retirement of debt in connection with the company's recent debt refinancing."

Rusckowski said in a statement that the firm completed its debt refinancing this month and made progress in its commitment to return the majority of free cash to shareholders.

Selling, general, and administrative expenses in the first quarter this year amounted to $1.16 billion compared to $1.10 billion in 2014.

Quest ended the quarter with $974 million in cash and cash equivalents.

During the quarter, Quest announced a joint venture with Quintiles to advance its clinical trials business. Quintiles will own 60 percent of the joint lab services business, and Quest will own 40 percent.

Rusckowski said during the call that the joint venture would enable the company to accelerate near-term growth in Quest's clinical trials business and explore longer-term opportunities in precision medicine and companion diagnostics. The transaction between Quintiles and Quest is slated to close by the third quarter of 2015.

The company maintained its previously stated guidance to grow 2015 revenues by 2 to 3 percent over 2014, with adjusted earnings per share between $4.70 and $4.85. Guinan noted that the revenue guidance may be adjusted due to impact from the joint venture upon closing.

In Thursday morning trade on the New York Stock Exchange, shares of Quest were down 1 percent at $75.62.