Bio-Reference Labs, Quest Diagnostics, TriPath Imaging, Specialty Labs, SARS

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BIO-REFERENCE LABS POSTS 20% INCREASE IN ANNUAL NET REVENUE

LAST YEAR’S FRENZY of laboratory acquisitions left Bio-Reference Laboratories, Inc. of Elmwood Park, New Jersey as the nation’s third-largest public laboratory company focused primarily on physicians’ office testing.

For that reason, Bio-Reference’s ability to grow and sustain profits even as it competes against the two blood brothers makes it a useful marker for trends in the lab services marketplace. Earlier this year, Bio-Reference reported its fiscal 2002 earnings.

For fiscal 2002, Bio-Reference posted net revenues of $96.6 million. This was a healthy growth rate of 20.0% compared to 2001’s net revenues of $80.6 million. Growth in net income was 108.4%, totaling $4.9 million in 2002 against $2.3 million in 2001.

Bio-Reference provides laboratory testing services to physicians located in New York and New Jersey. It has invested considerable resources in recent years to develop an e-health strategy. The goal is to provide added value beyond simply reporting laboratory test results to its referring physician-clients.

To further that objective, it has a joint venture with Roche Diagnostics, Inc. to collaborate in marketing Care- Evolve, a Web-based laboratory test ordering and resulting system. It also announced the launch of a new hemostasis and thrombophilia laboratory under the direction of Yale Arkel, M.D. Bio-Reference wants to develop specialty testing services as part of its added-value lab services menu.

To position these new products and services more successfully, Bio- Reference Laboratories hired John Littleton to be its Vice President of Sales and Marketing. Littleton formerly was a sales executive at both Specialty Laboratories, Inc. and Quest Diagnostics Incorporated.

Bio-Reference has substantial sales momentum already. It has posted seven consecutive quarters of record revenue. Its success at building specimen volume and net revenue shows there is still opportunity to laboratories willing to invest in expanding market share.

SPECIALTY LABORATORIES WORKS TO REGAIN ITS REVENUE BASE

FOR LOTS OF REASONS, 2002 was a challenging year for Specialty Laboratories, Inc. of Santa Monica, California.

Early in 2002, Specialty Labs was hit by two adverse events. In February, Quest Diagnostics Incorporated announced that it would purchase Specialty’s largest customer, Unilab Corporation. Then, in April, Specialty disclosed its licensure problems with state and federal laboratory regulators. These problems were resolved in July 2002. (See TDR, August 5, 2002.)

Both situations contributed to a decline in specimen volume and revenue at Specialty Labs. During fourth quarter 2002, the company posted net revenues of $29.9 million. This was down 31% from its net revenues of $43.3 million for fourth quarter 2001. During 2002, Specialty’s net loss was $13.4 million, compared to its net profit of $13.1 in 2001.

Specimen volume for fourth quarter was 614,000. This was down 23% from fourth quarter 2001, when specimen volume was 790,000. Significantly, fourth quarter test volume was down 10.5% from third quarter 2002, when it was 685,000 specimens. This indicates that there may still be some client defections as a result of its licensure problems.

However, since CEO Douglas Harrington, M.D. assumed his duties last spring, Specialty Laboratories has undergone a comprehensive makeover. Harrington has used Specialty’s moment of crisis as an opportunity to revamp operations, refocus the company’s extensive menu of esoteric testing, and put a new public face on the company. These changes should become visible throughout the remainder of the year.

QUEST DIAGNOSTICS ADDS TRIPATH’S SUREPATH TO ITS LIQUID PREP MENU

AS EXPECTED BY MANY, Quest Diagnostics Incorporated announced on March 5 that it had signed a collaborative agreement with TriPath Imaging, Inc. to add TriPath’s Pap smear testing products to its test menu.

The agreement covers Tripath’s SurePath™ liquid preparation kit, the PrepStain™ slide processor, and the FocalPoint™ slide profiler. Quest Diagnostics will place these products in selected locations for evaluation.

Under an earlier multi-year agreement with Cytyc Corporation, Quest Diagnostics offered Cytyc’s Thin-Prep™ test exclusively. Observers believe that Quest Diagnostics wanted leverage against Cytyc to improve pricing and other terms. Because its exclusive agreement with Cytyc had ended, the company was free to look at other products for Pap smear screening. Quest Diagnostics has not yet disclosed how it intends to market both products.

EMERGING DISEASE USES TECHNOLOGY FOR QUICK REPONSES

THERE’S A NEW DISEASE attracting head- lines worldwide. Severe acute respiratory syndrome, called SARS, was swiftly recognized as a potential threat when the first cases were identified in recent months.

The disease emerged from China and is believed to have infected at least 300 people outside that country. By mid-March, investigators in Hong Kong had identified the source. The Centers for Disease Control (CDC) said today that the leading suspect is a new virus in the coronavirus family, known to cause common colds in humans.

Now the race is on to develop a treatment for SARS. Within the United States, the CDC is investigating 13 people who may have the disease. All have traveled to Asia or had close ties with someone who did.

What is astonishing to watch is the speed with which the international public health community responded to this new threat. Last week, it was announced that investigators in Hong Kong had identified the carrier who brought the disease from China into that city as Dr. Liu Jianlun. He was a professor and kidney specialist who caught SARS in mid-February while in China working at a hospital that was treating patients with the disease.

He then traveled to Hong Kong. While in the hotel, Professor Liu infected at least seven people who either stayed on the same floor as he or who visited that floor. One of the hotel guests who caught SARS was an American citizen who traveled to Vietnam and infected people there.

The positive aspects of this story are the rapid successes by the public health labs of many countries to quickly identify the disease and track its spread from nation to nation.

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