Though countless diagnostic developers struck it rich at the height of the COVID-19 pandemic, many of those that were relatively new to the testmaking game are now struggling to make up for lost sales as the spread of the virus slows down.
Not so for established testing giants like Quest Diagnostics, which has seen its base business rebound in direct relation to dropping COVID-related earnings.
“There is a correlation between COVID volumes and our base business, and so as COVID improves, we believe that could help our base business,” Steve Rusckowski, the company’s outgoing CEO, said during a call with investors Thursday. “To some extent, as we’ve talked before, we have somewhat of a natural hedge, because if COVID goes up and base softens, we have seen that in the past. Therefore, the improving COVID situation should be a tailwind on base growth going forward.”
That seesaw effect was on display in Quest’s third-quarter earnings. According to a release, the company’s COVID testing revenues dropped more than 55% year over year—from $709 million in the third quarter of 2021 to $316 million this year. That number also marked a drop of about 11% from the preceding quarter of this year, CEO-elect Jim Davis said on the call, explaining that the decline came after a “plateau” in June and July.
Meanwhile, non-COVID-related earnings—which Quest refers to as its base business—rang in at nearly $2.2 billion, up more than 5% from the same period last year. That upswing occurred in direct correlation with the COVID-related downswing, with Davis singling out August and September as the base business’ strongest months after a “softer” start to the year.
In fact, he added, “before Hurricane Ian hit in September, we were seeing some of the highest base testing volumes we have ever experienced.”
That growth helped buoy Quest’s overall earnings: Despite the major drop in COVID test sales, the company’s total quarterly revenues sank only about 10% year over year, to around $2.5 billion.
With its base business picking up speed, Quest is now taking a more optimistic view toward the rest of the year. It’s now expecting full-year revenues as high as $9.86 billion, which would represent a year-over-year decrease of 8.6%, compared to previous forecasts that topped out at $9.75 billion and assumed a decline of at least 9.6%.
COVID testing-wise, the company is predicting that its 2022 revenues will be slashed approximately in half compared to 2021’s haul. But as it shifts focus back to the base testing business, Quest isn’t leaving its COVID-related developments behind.
“As COVID-19 volumes have declined, we’ve begun to repurpose some of our COVID-19 testing platforms to enhance our quality and reduce costs,” Davis said on Thursday’s call.
The improved appointment and scheduling system that Quest introduced throughout the pandemic, for example, has reduced wait times to “approximately five minutes, which is roughly half the level since 2019,” per Davis. It has also increased the number of patients who arrive at a Quest testing center with an appointment—now up to 75% from 2019’s below-25% rate—which “allows us to flex our workforce to meet demand within a particular geography, which enables us to serve our patients faster,” he said.