Meanwhile, both Quest Diagnostics and LabCorp report second quarter declines in specimen volume
Fewer patients visiting physician offices during second quarter 2010 is considered to be one reason why specimen volume declined at clinical pathology laboratory testing giants Quest Diagnostics Incorporated (NYSE: DGX) and Laboratory Corporation of America (NYSE: LH) during that three-month period.
For second quarter, LabCorp reported a 2% decline in specimen volume, along with a 4.2% increase in revenue. At Quest Diagnostics, the specimen volume decline was 1.3% and revenues declined by 1.4% in the second quarter 2010, compared to second quarter 2009.
Yet, two other sizeable clinical pathology laboratory companies in the United States enjoyed significant increases in specimen volume during second quarter 2010. In recent weeks, Bio-Reference Laboratories, Inc. (NASDAQ: BRLI) reported a significant increase in specimen volume for the same period, as did Sonic Healthcare Ltd. (ASX: SHL).
This data shows that the nation’s four largest medical laboratory companies do not perform in lockstep.
In reporting its third quarter financial performance, Bio-Reference Labs reported that specimen volume had increased by 17% when compared to the same quarter in 2009. Bio-Reference also posted an impressive 25% increase in revenue, growing from $97.4 million in its third quarter ending July 31, 2009 to $121.7 million for the quarter ending June 31, 2010.
When asked to speculate on the performance of Bio-Reference Laboratories versus the two blood brothers, Marc D. Grodman, M.D., CEO of Bio-Reference Labs said, “We are fully aware of the headwinds reported by other publicly-traded laboratories. While we make no comment on the business of our competitors, our numbers most certainly speak for themselves. We are not an index fund for the laboratory industry.”
Similarly, Sydney, Australia-based Sonic Healthcare, reported that its laboratory operations in the United States generated annual revenue of U.S. $734 million for its fiscal year ending June 30, 2010. This represented an organic growth rate of 3.6%.
When Wall Street analysts reacted unfavorably to the news that specimen volumes had declined at Quest Diagnostics and LabCorp, Sonic’s CEO responded with a public statement to address its experience with specimen volume for its laboratories in the United States. Sonic CEO and Managing Director Colin Goldschmidt disclosed that, for the six-month period ending June 30, 2010, Sonic’s U.S. laboratories had enjoyed a specimen volume increase of 1.4%.
Certainly neither Bio-Reference, with annual revenues approaching $450 million, or Sonic Healthcare, with U.S. revenues of $734 million, approach the size and market clout of Quest Diagnostics and LabCorp, which have annual revenues for 2009 of $7.4 billion and $4.7 billion, respectively. Yet, Bio-Reference and Sonic Healthcare are the third and fourth largest independent clinical laboratory companies serving office-based physicians in the United States. Thus, the success of their business strategies at increasing specimen volume even as fewer patients visited physicians’ offices needs to be studied and understood.
Another factor that may help explain the reduced volume of specimens referred to the two blood brothers in recent months could be market share gains posted by the clinical laboratory outreach programs at hospitals and health systems across country. Most of the best-run hospital laboratory outreach programs are reporting solid gains in new clients and specimen volumes through all of 2010.
Thus, might it be true that the collective number of hospital laboratory outreach programs in the nation has now reached a critical mass? If true, then the cumulative effect of their laboratory outreach sales programs finally may be large enough to trigger fluctuations in the aggregate number of specimens referred to the two blood brothers.