Specialty Laboratories, Cytyc, Quest Diagnostics, DakoCytomation, Abbot

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SPECIALTY LABORATORIES SHOWS VOLUME GROWTH DURING CALENDAR 2003

If the financial performance of Specialty Laboratories, Inc. in fourth quarter 2003 is an accurate measure, it appears the company has moved past its troubling problems of 2002.

For fourth quarter 2003, Specialty Labs reported modest growth in both net revenue and specimen volume. This indicates that the company is generating additional test referrals from existing and new reference testing clients.

Fourth quarter 2003 revenues were $30.5 million, compared to $29.9 million in Q4-2002. This was an increase of 2%. Accessions for fourth quarter 2003 were 628,000 versus 614,000 accession in Q4-2003. This also represented an increase of 2%.

For the full year 2003, net revenue at Specialty Labs totaled $119.6 million, a decline of 14.7% from 2002’s $140.2 million. The company showed an operating loss in 2003 of $10 million, compared to a loss of $22.8 million in 2002.

What these numbers mask is another significant accomplishment by Specialty Labs during 2003. Unilab Corporation was Specialty Lab’s single largest client, representing as much as $17 million in annual revenues. In February 2003, Quest Diagnostics Incorporated became the owner of Unilab. It began redirecting Unilab’s send-out testing to other laboratories within Quest Diagnostics.

Thus, Specialty’s 2% increase in specimen volume between fourth quarter 2002 and 2003 represents a substantial increase in specimens referred by existing and new clients. That additional increase was enough to offset the ongoing reduction of send-out volume coming from Unilab.

Specialty Laboratories also has a new Chief Financial Officer. Last month it announced that Kevin R. Sayer had joined the company. Sayer was at MiniMed, Inc., a company with services in diabetes management.

MAJOR LEAGUE BASEBALL, BARRY BONDS, AND QUEST DIAGNOSTICS

MAJOR LEAGUE BASEBALL’S PROBLEMS with steroid use has generated big headlines. In San Francisco, a federal grand jury probe of steroid use in baseball and the Bay Area Laboratory Co-Operative (BALCO) triggered a federal raid at the Quest Diagnostics Incorporated laboratory in Las Vegas.

On Thursday, April 10, IRS agents entered the Quest Diagnostics laboratory and seized specimens and drug test results on specific major league baseball players. Federal agents were acting on a subpoena issued as part of the grand jury probe in San Francisco.

Informed sources told the press that IRS agents sought the specimens and test results of not more than 12 players. Among the names mentioned were San Francisco Giants’ home run slugger Barry Bonds and New York Yankees players Gary Sheffield and Jason Giambi.

Quest Diagnostics’ link to the major league baseball and its steroid use scandal is innocent. During 2003, Major League Baseball wanted to evaluate the extent of steroid use within the American and National Leagues. It conducted a drug testing program that randomly selected some players for evaluation. Comprehensive Drug Testing of Long Beach, California handled certain aspects of this program and actual testing for drugs was done at the Las Vegas laboratory of Quest Diagnostics.

Major League Baseball determined that, of the players tested, more than 5% tested positive for steroid use. It then implemented new prohibitions on steroid use, along with a testing program and penalties for players who test positive.

Because the testing done in 2003 was part of an evaluation program, the test results were to be anonymous. That’s where the federal grand jury in San Francisco comes in. As part of its probe of steroid use in baseball, the grand jury issued indictments against four individuals who allegedly distributed steroids to professional athletes. One of these indictments was against Greg Anderson, who was a personal trainer for Bonds.

The IRS raid on a commercial laboratory is an example of how law enforcement interests can create management challenges for laboratories. In emergency rooms, there are instances of law officers requesting phlebotomists to draw blood from alleged drunk drivers, even though the subject opposes the specimen collection.

CYTYC CORPORATION DOES SEVERAL DEALS TO HELP IT DIVERSIFY

WITH AN EMPHASIS ON WOMEN’S HEALTH, Cytyc Corporation has done three deals since the beginning of 2004.

On March 30, Cytyc and Dako-Cytomation Denmark A/S announced a collaboration to investigate a biomarker associated with cervical cancer. The p16INK4a protein “is expressed as a consequence of abnormal E7 gene activity following human papillomavirus (HPV) infection. As such, it may serve as a marker of high-risk HPV effects on the cervical epithelium.” The joint agreement calls for the two companies to study the effectiveness of DakoCytomation’s CINtec™ p16INK4a Cytology Kit on Cytyc’s testing instruments.

Just six days earlier, on March 24, Cytyc closed its acquisition of Novacept, paying a net price of $311 million to purchase the California-based manufacturer of the NovaSure® System. NovaSure is an “endometrial ablation device to treat menorrhagia, or excessive menstrual bleeding.”

In a third deal, Cytyc and Abbott Laboratories signed an agreement last January to collaborate and co-promote a combination product. Called the ThinPrep® UroCyte™ Slide Preparation System, it modifies Cytyc’s thin layer sample preparation technology with Abbott’s UroVision™ test, the DNA-based test for detecting recurring bladder cancer.

MOVE OVER ASCP! CONCIERGE PHYSICIANS FORM THEIR OWN ASCP

“CONCIERGE MEDICINE” IS COMING into its own. The newly-formed American Society of Concierge Physicians (ASCP) announced its first national conference, scheduled for May 27-28, 2004 in Denver, Colorado.

Concierge medicine refers to an evolving medical business model where patients pay a flat fee, either monthly or annually. In return, the concierge physician will see the patient whenever requested and will allow office visits to last as long as the patient wants. In most concierge medicine arrangements, insurance will not be billed by the concierge physician. Because it is a cash-and-carry business, concierge physicians make good client accounts for labs.

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