NEW YORK (GenomeWeb) – Quest Diagnostics on Thursday said that its fourth quarter revenues rose a fraction of 1 percent year over year to $1.86 billion, matching the consensus analyst estimate.
For the three months ended Dec. 31, 2016 the firm's revenues just beat out Q4 2015 revenues of $1.85 billion.
On a conference call following the release of Quest's financial results, Quest Chairman, President, and CEO Steve Rusckowski said that the firm's gene-based and esoteric testing business grew in the mid-single digits year over year in Q4, and about 4 percent for full-year 2016.
Major growth drivers included noninvasive prenatal testing, hepatitis C testing, prescription drug monitoring, and SureSwab testing for bacterial vaginiosis and vaginitis.
Within Quest's anatomic pathology business, FISH testing is stable, Ruscowski said, but the pathological anatomy and cytology business continues to decline, though the decline decelerated in 2016 and is anticipated to continue doing so this year.
The firm has recently moved further into the direct-to-consumer testing space, and at the end of 2016 it opened patient service centers in 56 Safeway supermarkets. By the end of this year, that number is expected to balloon to 200, Rusckowski said.
Quest is also on track to begin performing ancestry genetic testing for AncestryDNA in Marlborough, Massachusetts later this month, he added, and Quest continues to explore opportunities in DTC testing with other retailers.
"They see health as a major platform for their growth and an opportunity for them to get more traffic into their stores," Ruscowski said.
Quest CFO Mark Guinan said on the call that the company's diagnostic information services grew 2 percent year over year in Q4 2016.
Quest said that its SG&A expenses shrank 7 percent to $400 million in Q4 2016 from $429 million a year ago.
Net income attributable to Quest for the recently completed quarter came in at $155 million, or $1.09 per share, compared to $188 million, or $1.29 per share, in the year-ago period.
The year-ago EPS figure included a one-time tax benefit associated with the winding down of a subsidiary, Guinan said.
On an adjusted basis, EPS of $1.31 topped the Wall Street's average estimate of $1.27.
On the call, Rusckowski also touched on developments in Washington that could impact Quest, as well as other players in the diagnostic space.
They include what Congress and the new White House administration will do with the Affordable Care Act. "As we've said in the past, we never realized the full benefit from ACA that we expected, so we wouldn't expect any significant near-term impact if it were to be repealed," Ruscowski said. "We hope that any potential alternative recognizes the value of diagnostic information services in healthcare."
Additionally, the Centers for Medicare and Medicaid Services has started the process of refreshing its clinical laboratory fee schedule under the Protecting Access to Medicare Act of 2014, or PAMA. Quest is preparing to submit pricing data to the agency later in Q1 2017, and it is working with its trade organization to better understand the impact on PAMA of recent announcements by the White House pertaining to regulatory reviews, Ruscowski said.
He added that PAMA could lead the clinical laboratory market to consolidate, and as a result, Quest believes it can maintain the 1 percent to 2 percent growth from acquisitions it has experienced during the past four years.
"We feel good about the prospects in our M&A funnel," he said.
For full-year 2016, Quest revenues inched up a fraction of 1 percent to $7.52 billion from $7.50 billion in full year 2015.
SG&A costs stayed level year over year at $1.68 billion.
Net income attributable to Quest was $645 million, or $4.51 per share, down from $709 million, or $4.87 per share, in 2015. On an adjusted basis, EPS for 2016 was $5.15, beating the consensus analyst estimate of $5.10.
The company said it had $359 million in cash and cash equivalents as of Dec. 31, 2016.
For full year 2017, Quest is guiding to a revenue range of $7.64 billion to $7.72 billion and an EPS range of between $4.65 and $4.80. Adjusted EPS is expected to be between $5.37 and $5.52.
Separately, Quest announced today a diagnostic laboratory service partnership with Montefiore Health System. Quest will provide a portion of low complexity diagnostic testing at its Teterboro, New Jersey facility. Remaining services will continue to be done at Montefiore Hospitals under the direction of the Montefiore and Einstein department of pathology.
"As part of our strategy to accelerate growth and drive operational excellence, Quest is collaborating with an increasing number of hospital partners, including leading academic institutions like Montefiore, which are looking to focus on their core business by taking advantage of our expertise, innovation and scale," Rusckowski said in a statement.
In early morning trading on Thursday, shares of Quest on the New York Stock Exchange were up about 3 percent at $94.25