NEW YORK (GenomeWeb) – Quest Diagnostics reported Thursday that its first quarter revenues grew around 1 percent from the previous year and beat analysts' consensus estimate.
For the three months ended March 31, Quest reported $1.86 billion in revenues compared to $1.84 billion for the first quarter in 2015 and exceeding Wall Street's expectation of $1.82 billion.
On an equivalent basis, excluding Q1 2015 revenues from the firm's clinical trials testing business that is now part of the Q2 Solutions joint venture, revenue growth was nearly 4 percent.
Revenues from diagnostic information services grew less than 4 percent, while test volume (measured by the number of requisitions) increased less than 3 percent from the year ago period. The company's revenue per requisition increased 1 percent.
Quest's Q1 net income was $102 million, or $.70 per share, compared to $61 million, or $.42 per share, in Q1 2015. Adjusted EPS was $1.12, matching the consensus analysts' estimate.
Quest's selling, general, and administrative expenses in the first quarter were $442 million compared to $419 million in Q1 2015.
Quest ended the quarter with $128 million in cash and cash equivalents.
The firm maintained its 2016 guidance expectation of revenues of between $7.52 billion and $7.59 billion, marking an increase of 1.5 percent to 2.5 percent from 2015 revenues. The company is targeting adjusted EPS excluding amortization of between $5.02 and $5.17.
During an earnings call, Quest CEO Stephen Rusckowki highlighted that Quest had recently expanded its offerings for hepatitis C by launching a new test that meets the US Food and Drug Administration recommendation to help physicians determine the type, dose, or duration for newly approved HCV drugs from Merck and Bristol-Myers Squibb.
"These new Quest services underscore the central role of diagnostics in delivering precision medicine," he said, adding that the company also has two tests for the Zika virus awaiting clearance from the FDA.
In addition to the Q2 joint venture, Rusckowski said that Quest wants to further collaborate with Quintiles on companion and complementary diagnostics in the context of drug discovery. "What we're doing is trying to understand where they engage with pharma and where we can engage and where we have specific opportunities to work together," he said.
Quest's is also increasing focus on improving consumer access to tests. The company has 2,200 patient service centers and 3,500 phlebotomists in physicians' offices, amounting to nearly 6,000 access points for testing.
"We're trying to understand how we can augment that with pilots we're running and we've done some work with Walmart," Ruscowski said. "We have pilots running in some of their stores looking at … how they can provide better access to healthcare in their stores." He added that Quest is exploring opportunities to increase consumer access to tests with "retail in general."
During the call, Quest executives also discussed reimbursement and regulatory issues impacting the broader lab industry.
Several legislators wrote a letter to the Centers for Medicare & Medicaid Services in March, asking it to delay the implementation of the Protecting Access to Medicare Act of 2014, which seeks to establish a market-based payment system for clinical lab tests by Jan. 1, 2017. Rusckowki seemed supportive of such a delay, since Quest thinks that the hospital lab space should be included in pricing calculations.
On the regulatory front this week, the House Appropriations Committee approved the fiscal year 2017 agriculture appropriations bill, which has an accompanying report that explains the bill's content. In that report, the committee has included language raising concerns about the FDA's draft guidance on the regulation of laboratory-developed tests.
Specifically, committee members suggest that the FDA, by issuing its draft LDT guidance in October 2014, is circumventing the rulemaking process while attempting to make significant changes to the way that doctors and labs operate. "The committee directs the FDA to suspend further efforts to finalize the LDT guidance and continue working with Congress to pass legislation that addresses a new pathway for regulation of LDTs in a transparent manner," according to the report. This language is not yet included in the appropriations bill, however.
Quest's stance on the regulation of LDTs is in line with the position taken by the American Clinical Laboratory Association, which has maintained that FDA lacks the statutory authority to regulate LDTs. Rusckowki indicated during the call that he was encouraged by the language from the House Appropriations Committee. "We think that's a good piece of work," he said.