Quest predicts 80% drop in 2023 COVID-19 test revenues

In 2022, revenues from Quest Diagnostics’ COVID-19 tests weighed in at nearly half the size of the previous year’s haul—and the testmaker is now expecting 2023’s COVID-related earnings to shrink to an even smaller fraction.

The 2022 total clocked in at $1.45 billion, nearly 48% lower than the $2.77 billion that Quest’s COVID tests brought in the year before. The decline picked up some major speed in the final months of the year, with a fourth-quarter COVID-related earnings tally of $184 million—only about one-quarter of the $722 million earned a year prior.

That fast-accelerating drop-off has set the tone for Quest’s 2023 outlook. This year, the company is expecting to bring in somewhere between $175 million and $275 million from its coronavirus diagnostics, which would represent a year-over-year decline of up to 88%.

The forecast is about $150 million below the guidelines Quest originally set for 2023 last fall, Chief Financial Officer Sam Samad told investors on an earnings call last week, as the fourth quarter’s steep decline proved just how small the COVID tests’ share of Quest’s business will be in the months to come.

During the call, CEO Jim Davis described how Quest’s COVID testing volumes have “steadily declined since late December,” prompting the testmaker to lower previous estimates concerning its daily output—"from 10,000 to 15,000 molecular tests per day to 5,000 to 10,000 tests per day,” Davis said, according to a transcript of the call.

“After rising modestly throughout the fourth quarter, our COVID-19 molecular volumes declined to an average of roughly 17,000 tests per day in January and currently make up less than 3% of our daily volumes,” Samad added.

The new estimates would result in an average of around 675,000 tests per quarter. In comparison, Quest performed 1.9 million tests in the fourth quarter of 2022, which in turn represented a drop of 1.2 million tests from the preceding quarter and 5.4 million fewer than the same period in 2021, per Samad.

The CFO noted that Quest is expecting to see its COVID testing volumes dip consistently throughout the spring and summer, “but could see a modest uptick during respiratory season in Q4.”

Thanks to the steady downward spiral of COVID-related revenues, the diagnostics giant saw its full-year revenues drop about 8.4% from 2021, for a total of $9.88 billion. In a bit of a bright spot on the earnings report, the $8.43 billion that came from Quest’s base business—that is, everything other than COVID tests—represented a 5.1% year-over-year increase.

Still, as demand for coronavirus tests continues to dwindle, the company is expecting to see its revenues plummet even further. It’s forecasting full-year earnings between $8.83 billion and $9.03 billion, which adds up to a decline of at least 8.6%.

And even the base business is bracing for a slowdown: Quest has predicted that those earnings will land between $8.65 billion and $8.75 billion, which would represent growth of only 3.8% at the high end.