In March, LabCorp became the first commercial lab to launch a COVID-19 PCR test. Five months later, the company was conducting at least 275,000 tests per day, and returning results in up to two days.
The testing company has kept up the past and expanded its coronavirus-related contributions, according to CEO Adam Schechter. LabCorp has been involved in more than 400 different trials related to COVID-19. In December, the Burlington, N.C.-based company received emergency use authorization for an at-home COVID-19 test, named Pixel, which now makes up 7% of its bottom-line, Schechter said. LabCorp is currently working with the Centers for Disease Control and Prevention to sequence the virus so officials can understand how it mutates over time.
“2020 was a big year for LabCorp,” Schechter said. “We were involved in almost every aspect of the pandemic.”
During its most recent third quarter ended Oct. 27, LabCorp reported $3.9 billion in revenue, up 33% from $2.93 billion during the same time in 2019. A large portion of organic revenue growth, or 32.6%, came from LabCorp’s COVID-19 testing. Despite the bump from PCR and antibody testing, LabCorp’s base diagnostic business was down 1.9% year over year due to patients avoiding labs because of the pandemic and lower Medicare and Medicaid pricing. Schechter said he expects the company’s base diagnostic business to pick up during the second half of 2021 once the weather warms and more vaccines have been administered.
He does not expect demand for coronavirus testing to end once a large number of the population has been vaccinated since there is still so little data on who is immune to the virus and for how long.
“This time next year, if you have a fever, didn’t feel well and went to a physician, I think they’d still do a PCR test on you,” Schechter said.
Schechter said he does not expect the federal emergency authorization period to extend beyond March, which would mean the government would no longer cover the upfront cost of PCR tests for consumers. He expects pricing for the company’s tests to return to where they were before the coronavirus and cost about $51 each. Reimbursement for these tests will then either come out of consumers’ or payers’ pocketbooks.
“I do think it will move back into the commercial area versus the government paying for it, and then certainly they’ll be additional competition for pricing,” Schechter said.
The pandemic has underscored the need for hospitals and healthcare systems to have state-of-the-art testing systems, Schechter said, with providers questioning if they want to make the equipment investment and driven interest in LabCorp’s services. Going forward, he said the company sees significant opportunities for the acquisition of hospital and local labs. He also expected the company’s partnership with Walgreens to continue. The company now has 250 sites “fully open or very close to being open” and, over the next two years, is on track to build out around 600 sites, Schechter said.
“I believe we’ll have more deals this year than in previous years,” Schechter said.
But, the greatest growth opportunity for LabCorp lies in drug development, with the company investing in its late-stage pre-clinical trial systems to attract larger pharmaceutical customers. Six years ago, the company paid $5.6 billion to acquire drug development giant Convance. Although Schechter said merging the two companies has taken “much longer than I expected,” the COVID-19 pandemic has underscored the value proposition for having one company that can offer clinical trials, testing and drug development. LabCorp recently signed a large oncology customer, Schechter said, although he did not disclose its name.
“As we focus on specialty areas like oncology, you can get to market much faster, and that’s where having a combined company makes a big difference,” Schechter said.