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Boosted by Covance Acquisition, LabCorp Posts 48 Percent Revenue Growth in Q4

NEW YORK (GenomeWeb) – Laboratory Corporation of America today reported fourth quarter revenue growth of 48 percent driven by its acquisition of Covance.

The Burlington, North Carolina-based clinical testing services firm had revenues of $2.24 billion in Q4, up from $1.51 billion in the fourth quarter of 2014 and above the average Wall Street estimate of $2.22 billion.

The acquisition of Covance contributed $669.5 million in revenues to the quarter, comprising 44 percent of the year-over-year growth. Organic volume increases, price, mix and tuck-in-acquisitions contributed $62.6 million, or 4 percent, to the revenue increase.  

LabCorp's diagnostics business contributed $1.55 billion in the quarter, an increase of 4 percent from $1.49 billion in Q4 2014. Covance Drug Development brought in $691.4 million in Q4 2015, a nearly 5 percent increase from $660.1 million from the year-ago period. 

LabCorp CEO David King highlighted in a call with investors and analysts that the company achieved double-digit growth last year in the revenues garnered from its companion diagnostics business. In recent months, the US Food and Drug Administration approved three new immunotherapy drug indications, and King noted that LabCorp was "the exclusive laboratory to partner on the clinical trials and support the regulatory submissions." LabCorp was also among the first labs to distribute these tests throughout the country.

"Our ability to collaborate with sponsors at all stages of companion diagnostic development through Covance and commercialization through LabCorp, gives us a preferred offering … [that's] translating to robust financial growth," King said. The company expects to deliver $100 million in incremental revenues in companion diagnostics over the next three years.

In LabCorp's esoteric testing business, company officials said there was growth in revenues from women's health, infectious disease, and non-invasive prenatal testing segments, and there was "good momentum" with tests that gauged BRCA1/2 gene mutations.

LabCorp recorded net income of $114.2 million, or $1.11 per share, compared to $119.6 million in Q4 2015, or $1.39 per share. On an adjusted basis, EPS was $1.98, falling just short of analysts' consensus estimate of $1.99.

The firm's SG&A costs ticked up 31 percent to $404.9 million from $309.7 million. LabCorp also reported $38.3 million in charges related to amortization of intangibles and other assets, as well as $54.0 million in restructuring and other charges.

For full-year 2015, LabCorp reported revenues of $8.51 billion, a jump of 42 percent from revenues of $6.01 billion in FY 2014, beating the Wall Street consensus estimate of $8.49 billion.

The acquisition of Covance contributed $2.20 billion from the February 19 closing of the purchase and drove 37 percent year-over-year revenue growth. The rest of the increase of $289.5 million, or around 5 percent, was attributable to organic volume growth, tuck-in acquisitions, price, and mix, partially offset by currency.

LabCorp posted net earnings of $436.9 million, or $4.34 per share, for the year, versus a profit of $511.2 million, or $5.91 per share, for FY 2014. On an adjusted basis, its EPS was $7.91, above analysts' consensus estimate of $7.89.

Its SG&A expenses for the year jumped to $1.62 billion from $1.20 billion, while amortization and restructuring charges were $164.5 million and $113.9 million, respectively.

The firm finished the year with $716.4 million in cash and cash equivalents.

LabCorp expects FY 2016 revenues to grow between 7.5 percent and 9.5 percent over FY 2015. The company expects diagnostics business to grow revenue between 3.5 percent and 5.5 percent increase over the previous year, while the firm projected that its Covance Drug Development business would realize revenue growth of between 2 percent and 5 percent.

In Thursday morning trade on the New York Stock Exchange, shares of LabCorp were up more than 2 percent at $108.33.

This article has been updated with additional information from LabCorp's earnings call this morning.