Surprise, surprise: A company known for its diagnostic tests was hit particularly hard by the industrywide decrease in demand for COVID-19 test kits last year.
In a full-year earnings report published Thursday, Labcorp reported a 7.7% year-over-year drop in revenues in 2022, thanks almost entirely to a COVID diagnostics haul that weighed in at less than half the size of the previous year’s.
For all of 2022, Labcorp raked in $1.1 billion in revenues from sales of its PCR and antibody tests for the coronavirus—just over a 60% drop from 2021’s tally, which added up to $2.8 billion. Though an undeniably huge decrease, that was actually the best-case scenario for Labcorp, which predicted at the start of 2022 that COVID-related revenues for the year would fall at a rate between 60% and 75%.
In this week’s earnings report, the company pinpointed the cut-down COVID sales as the primary cause of not only the lower overall revenues but also its year-over-year dips in operating income and operating cash flow.
Revenues across the entire diagnostics giant clocked in at $14.88 billion for the year, down more than $1.2 billion from the prior year’s $16.12 billion total.
That downward trend wasn’t solely the fault of the COVID testing drop-off: Labcorp’s drug development business experienced a slight year-over-year dip, too, from $5.8 billion in 2021 to $5.7 billion last year. But that department will soon have much less influence over Labcorp’s annual results, as the company is poised to spin out its clinical development segment into a standalone public company—newly dubbed Fortrea—this summer.
Meanwhile, somewhat mitigating the negative effects of Labcorp’s COVID testing and drug development businesses on the full 2022 total was the rest of the diagnostics department. The sans-COVID base business brought in $8.1 billion for the year, representing a modest 6.5% increase over 2021’s haul.
And Labcorp is expecting that diagnostics base business to have an even stronger impact on its 2023 results.
For the year ahead, it’s forecasting revenue growth of at least 10.5% in that department—though the double-digit increase will be largely canceled out by still-plummeting demand for COVID tests. Labcorp is currently predicting that revenues from its coronavirus diagnostics will fall by at least 75%, and up to 90%, in 2023.
Taken all together, in a tentative full-year forecast—which still factors in a year’s worth of revenues from the soon-exiting clinical development department—Labcorp has sketched out 2023 revenues that could grow by 1% on the low end, and up to 4% if its base business speeds up and COVID testing’s race to the bottom slows down.
That’s the continuation of a trend now plaguing the testmaking industry, where Siemens Healthineers, Hologic and more have all reported steep declines in their earnings from coronavirus diagnostics.
Thermo Fisher Scientific saw its own COVID-related earnings drop by two-thirds in 2022 and has resorted to laying off hundreds of workers at a trio of California manufacturing sites. Quest Diagnostics’ COVID testing revenues were slashed in half last year, prompting the Labcorp competitor to lower its expectations for 2023: It’s now planning on seeing those revenues fall up to 88% this year.
In a recent earnings report of its own, BD reported an almost 83% drop in COVID-related revenues for the first quarter of its fiscal year 2023. It went on to shrink down its full-year forecasts, with COVID tests now predicted to bring in between just $50 million and $100 million for the year, compared to initial expectations of at least $125 million. Even so—and even with the rest of its business growing barely half a percent during the period—BD showed a similar optimism to Labcorp’s by ramping up its overall forecasts, adding $500 million to its total expected revenues for fiscal 2023.