AmeriPath, SmithKline, Unilab, IMPATH, LabOne, Prudential/SBCL

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AMERIPATH REPORTS EARNINGS, NEW PURCHASE

AmeriPath, Inc. of Riviera Beach, Florida announced its 1997 financial performance. For the year, company revenues totaled $108.4 million.

On February 17, the company also disclosed the acquisition of Anatomic Pathology Associates (APA), located in Indianapolis, Indiana. AmeriPath intends to combine APA’s 14 pathologists with the 13 pathologists of CoLab, its original pathology acquisition in Indianapolis. APA serves seven hospitals and generates about $6 million in annual revenues.

The addition of APA gives AmeriPath 18 physician practices in eight states. The company employs 144 pathologists. As a pathology-based physician practice management (PPM) company, AmeriPath’s business plan calls for continued acquisition of pathology practices. (See related stories, here and here.)

SMITHKLINE/GLAXO DEAL OFF, BUT MAY NOT BE OVER

Both SmithKline Beecham PLC and Glaxo Wellcome made announcements that merger talks between the two companies had ceased. A variety of issues caused the two companies to disagree on how to proceed.

Since that announcement, securities analysts have stated that they feel SmithKline Beecham is still interested in pursuing a strategic merger or acquisition. Additional speculation by financial experts in New York and London indicate that Glaxo might possibly launch a hostile take-over bid for SmithKline. Both scenarios probably mean that SmithKline remains “in play.”

In the meantime, SmithKline Beecham released an abbreviated earnings statement. For 1997, sales of pharmaceuticals were up 7%, consumer product sales increased by 11%, and sales at the clinical laboratory division were up 6%. Given the poor reimbursement situation for laboratory tests, that is a respectable showing for the laboratory division.

UNILAB CORPORATION MAKES MONEY IN 1997

California-based Unilab Corporation made a profit in 1997. The company reported revenues of $214.0 million, an increase of 4.3% over 1993. Net income was $0.5 million for the year.

Given that Unilab posted a $92.9 million loss for 1996, the turnaround in 1997 represents a major accomplishment for the beleaguered laboratory. In fact, Unilab’s EBIDTA (earnings before interest, depreciation, taxes and acquisition) for the fourth quarter was a company-record $6.6 million (12.5% of sales). EBIDTA is an important measure of cash flow. At Unilab, EBITDA increased in each of the four previous quarters.

Were Unilab to continue demonstrating strong cash flow numbers during the first half of 1998, such performance might be evidence that the company has successfully restructured itself to meet the needs of California’s managed care marketplace. If so, that may be an early sign that there is a profitable combination of operations and laboratory services which a clinical laboratory can sustain within California.

IMPATH, INC. PLANS TO SELL MORE STOCK

Disease management is proving to be good business for IMPATH, Inc. of New York City. During February, the company reported a strong financial performance in 1997. IMPATH followed the earnings release with an announcement that it would sell an additional two million shares of stock.

IMPATH is one of a select number of diagnostic companies which is focusing on disease management services. IMPATH offers cancer information and diagnostics to clinicians and pathologists throughout the United States. It has developed a data base of 300,000 analyzed cases.

For 1997, IMPATH generated revenues of $37 million. This is a 69% increase from 1996 revenues of $22 million. Net income almost doubled, increasing from $2.0 million in 1996 to $3.79 million in 1997.

IMPATH has facilities in New York, Los Angeles and Arizona. It provides “patient-specific cancer diagnostic, prognostic and treatment information to more than 4,000 physicians specializing in the treatment of cancer patients, in over 1,650 hospitals and 140 oncologist practices.”

IMPATH and UroCor, Inc. of Oklahoma City are two of the earliest companies organized exclusive- ly to adapt diagnostic testing technology to create disease management products.

PRUDENTIAL HEALTHCARE GRANTS SOLE-SOURCE CONTRACT TO SMITHKLINE

Capping a multi-year process of RFPs and negotiations with the three blood brothers, Prudential Healthcare finally announced that SmithKline Beecham Clinical Laboratories would be its sole-source laboratory provider.

Three categories of Prudential health plans will be served by SBCL under this agreement: Prudential Health Maintenance Organization, Point of Service, and Administrative Services Only plans. A majority of Prudential’s 4.8 million managed care members are enrolled in these categories of plans.

Those knowledgeable with Prudential’s RFP process say that Prudential considered a variety of laboratory provider arrangements, including multiple laboratory provider panels. They indicate that SBCL’s goal was to negotiate a sole-source agreement similar to the one they signed with Cigna in 1995. For that reason, SBCL offered Prudential a comprehensive menu of laboratory services and pricing which, in the end encouraged Prudential to opt for a sole-source lab- oratory arrangement.

LABONE POSTS LOSS FOR 1997 DESPITE RAPID REVENUE GROWTH

LabOne, Inc. announced its 1997 financial performance. Due to a $6.6 million write-off from the anticipated sale of its existing laboratory facility the company reported a net loss of $2.4 million.

However, that write down masks a strong year for the Lenexa, Kansas-based laboratory. Revenue in 1997 increased 33%, from $59.4 million in 1996 to $78.9 in 1997.

Growth was balanced in all three divisions within LabOne. Revenue from clinical laboratory testing increased 91%. Substance abuse testing revenues climbed 101%, while life insurance testing revenues grew 22%.

The company’s LabCard laboratory benefits program continues to grow. Currently it serves 1.8 million members, with another 300,000 lives awaiting implementation. The balanced growth at LabOne demonstrates that a professional sales program directed at niche markets can build a sizeable revenue base of profitable business.

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