JUDGING BY THE THIRD QUARTER FINANCIAL PERFORMANCE of the major in vitro diagnostics (IVD) manufacturers, the demand for COVID-19 testing continues to generate a substantial stream of revenue.
During their respective conference calls with investors and financial analysts, IVD company leaders associated revenue growth with increased sales of tests and supplies while noting the gradual return to business as usual. But the global makers of lab analyzers and tests said supply chain disruptions are putting a pinch on their robust offerings and services. Some IVD leaders suggested rising inflation was pushing prices up and a factor in sustaining manufacturing at desired levels.
Three insights about the clinical lab marketplace emerged from these conference calls. Clinical laboratory administrators and pathologists may want to update their strategic plans with the following developments:
- COVID-19 is proving to be a lucrative business for the IVD companies, and should the virus become endemic, related SARS-CoV-2 testing could continue to boost long-term earnings.
- Supply chain woes have squeezed IVD manufacturers. Despite that fact, the growth in profits suggests the firms are successfully saving money in other areas or passing off the costs of material and transit to suppliers and customers.
- Rapid COVID-19 testing—particularly at home—is becoming routine as social events, travel, and other activities require the ability for people to quickly produce a negative result.
Here is a summary of information released by the top 11 IVD companies in their Q3-2021 earnings reports. (See TDR, 2020 Rankings of the World’s Largest IVD Corporations, Sept. 7, 2021.)
THERMO FISHER: Strong Growth in All But One Division
For Q3-2021, Thermo Fisher Scientific, Inc., in Waltham, Mass., reported a revenue increase of 9% to $9.3 billion, as compared to $8.5 billion in 2020. Thermo Fisher also shared data on Q3 revenue for its business segments:
- Laboratory products and services segment grew 12% to $3.4 billion, compared to $3.1 billion in Q3 2020.
- Analytical instruments segment was up 11% to $1.4 billion, compared to $1.3 billion in Q3 2020.
- Life sciences segment grew 9% to $3.7 billion, compared to $3.4 billion in Q3 2020.
- Specialty diagnostics segment was $1.3 billion in Q3, down from $1.4 billion in Q3 2020.
During an earnings call, Marc Casper, CEO, responded to an investor’s request for his thoughts about supply chain woes. “The world is clearly experiencing supply chain disruptions,” he said. “We all see that, and the duration of the impact of that still is to be determined. I think [that] we are well-positioned to navigate these environments better than the smaller, less capable companies.
“You have certain things you have to manage through, including freight, logistics, and slower delivery times,” continued Casper. “I have high confidence in our team’s ability to navigate it, and I think we’ll be talking about this in some fashion across the world and across the Pacific probably into 2022.”
ROCHE: Diagnostics Division Grew 39% in First Nine Months of 2021
The world’s largest IVD company, Roche, based in Basel, Switzerland, reported strong growth in the first nine months of 2021:
- Group sales increased 8% to 46.6 billion Swiss francs (CHF) (US$50.4 billion).
- Diagnostics division sales grew 18% in Q3 and 39% in the first nine months.
- Diagnostics generated 13.3 billion CHF (US$14.4 billion) of Roche’s total sales.
Roche attributed the quarterly growth to continued high demand for COVID-19 tests, a strong recovery in its base business, and new diagnostic platform offerings.
“Demand for coronavirus tests remained high in the third quarter due to the Delta variant,” said CEO Severin Schwan. “Together with recently launched medicines and diagnostics platforms, they contributed to the strong sales growth.”
During the conference call, Thomas Schinecker, PhD, CEO at Roche Diagnostics, released these details on diagnostics growth year-over-year for the nine months ending Sept. 30, 2021:
- Core lab increased 26% to 5.6 billion CHF (US$6.1 billion)—immunodiagnostics up 29%, and clinical chemistry up 21%.
- Molecular lab increased 36% to 3.5 billion CHF (US$3.7 billion)—virology up 34% and point-of-care/molecular up 565%.
- Point-of-care (POC) services up 279% to 2.1 billion CHF (US$2.2 billion)— POC immunodiagnostics up 1,469%.
- Pathology lab grew 14% to 889 million CHF (US$961 million)—advanced staining up 15% and companion diagnostics up 3%.
- Diabetes care increased 4% to 1.3 billion CHF (US$1.4 billion)—blood glucose monitoring up 6%.
ABBOTT LABORATORIES: Company Can Now Supply 100 Million COVID-19 Tests Per Month
Abbott Laboratories in Abbott Park, Ill., shared data on a stellar Q3-2021, while noting the major contribution its rapid COVID-19 test sales have had on company earnings:
- Total sales of $10.9 billion represented a 23.4% increase, compared to 2020.
- COVID-19 test-related sales were $1.9 billion.
- Excluding COVID-19 earnings, sales were up 11.7% over 2019.
Robert Ford, Abbott’s new CEO, shared details on growth in the company’s major business areas during an earnings call with investors. “Turning to diagnostics, sales increased more than 45% overall and 12.5% excluding COVID-19-testing-related sales,” Ford said.
“During the quarter, as the Delta variant spread and COVID-19 cases surged, particularly in the U.S., demand for testing increased significantly—most notably for rapid tests,” he explained. “In total, during the quarter, we sold more than 225 million COVID-19 tests globally and have now shipped over one billion tests since the start of the pandemic.
“COVID-19 testing—particularly rapid testing which is fast, affordable, and easy to use—is an important companion to vaccines and therapeutics,” Ford added.
In rapid testing, Abbott has a “supply capacity of more than 100 million [COVID-19] tests per month,” he stated.
During the call’s Q&A session, an investor inquired about implications of inflation and supply chain issues on Abbott. Robert Funck, CFO, responded, “I think inflation and supply chain are really linked together. The global supply chains have not been able to keep up with strong demand out there. Like others, we’re seeing some increased input cost across areas of our business. We’re experiencing some higher shipping costs and, in some cases, higher commodity costs.
“In some areas, we have flexibility to adjust pricing a bit, and we plan to do that,” he continued. “In other areas, that flexibility doesn’t exist. And so, we’re working to mitigate the impacts we’re seeing, such as looking at other manufacturing costs.”
BECTON, DICKINSON AND COMPANY: CEO Says Many Hospitals Are Treating More Non-COVID Patients
For Becton, Dickinson and Company (BD) in Franklin Lakes, N.J., the period ending Sept. 30, 2021, marked the end of the company’s Q4 and fiscal year. The multinational medical technology company released this data:
- Q4 revenue of $5.1 billion grew 7.3% compared to the same quarter in 2020.
- Q4 revenue in the life sciences division, which includes diagnostics services, grew 2.9% quarter over quarter.
- Full-year revenue of $20.2 billion grew 18.3%.
During the BD earnings call, CEO Tom Polen said BD revenues got a boost as hospitals started to experience increased non-COVID-19 patient volumes, as compared to how hospitals emphasized caring for COVID-19 cases during 2020.
“Revenues grew over 15% to more than $20 billion in fiscal 2021 with $2 billion in COVID-19 testing revenues and strong 8.1% growth in our base business,” Polen said. “As hospitals have returned to serving both COVID-19 and non-COVID-19 patients and the overall healthcare utilization levels increased, we saw strong demand for our broad portfolio of products.”
BD leaders anticipate more pressures from COVID-19 variants and inflation in the economy. “We expect the greater resiliency exhibited by healthcare systems during Delta will continue, along with continued recovery in patient demand post-Delta,” he predicted.
“While there are inflationary pressures occurring across most every industry, we have been very active in addressing those challenges. We have put specific, defined, actionable plans in place to help mitigate these pressures. And in this environment, it’s also required to initiate pricing actions, which we have begun,” Polen added.
BIO-RAD LABORATORIES: Robust Revenue Increases in 2021
Bio-Rad Laboratories in Hercules, Calif., shared these Q3-2021 and year-to-date results:
- Sales of $747 million, up 15.4% in Q3, compared to $647.3 million in Q3 2020.
- Clinical diagnostics segment sales of $372.2 million grew 15.5% in Q3, compared to Q3 2020.
- Life science segment sales of $373.5 million were up 15.3%, compared to Q3 2020.
- Sales for the first nine months increased 24.7% to $2.1 billion, compared to $1.7 billion in 2020.
“During the quarter, demand continued for products associated with COVID- 19 testing and research, though at a more moderate level,” said Norman Schwartz, Bio-Rad’s CEO.
SIEMENS HEALTHINEERS: Company on Track to Have Record Year of Revenue Growth
The period ending Sept. 30, 2021, also marked the end of the fiscal year for Siemens Healthineers, in Erlangen, Bavaria, Germany. It reported a record year for earnings:
- Annual revenue of €18 billion (US$20.3 billion) represented a growth of 19.3% year over year.
- Diagnostics division annual revenue grew 42.3%, excluding rapid COVID- 19 antigen tests.
- In Q4, diagnostics revenue grew 22.3% year over year to €1.2 billion (US$1.7 billion), excluding revenue from rapid COVID-19 antigen tests of €160 million (US$181 million).
“This momentum will continue in fiscal 2022,” said Roland Busch, CEO of Siemens. “We’re ideally positioned to support our customers and benefit from major growth drivers of digitalization and sustainability.”
BIOMÉRIEUX: Solid Growth Follows Increased Demand in U.S.
For bioMérieux in Marcy-l’Étoile, France, Q3-2021 and nine-month period data included these highlights:
- €2.4 billion (US$2.7 billion) in sales over the first nine months, which represented an 8.2% increase, as compared to first nine months of 2020.
- Q3 sales were up more than 11%, as compared to Q3-2020.
Here are reports on business segments sales for Q3 and the first nine months, respectively:
- Clinical applications sales, generating 85% of company sales, rose by 11.8% and 11.7%.
- Molecular biology sales increased 7.8% and 4.9%.
- Microbiology sales went up 14.1% and 13%.
- Immunoassays sales rose 7.3% and 20.7%.
The company’s BIOFIRE reagents sales grew 19% during Q3-2021, largely due to demand in the U.S. for respiratory panels related to testing for the Delta variant. “All other business lines—namely microbiology, immunoassays, and industrial applications—kept on maintaining solid growth,” said CEO Alexandre Mérieux.
SYSMEX CORPORATION: Sales Climbed 27.8% during 2021
Sysmex Corporation, in Hyōgo, Japan, reported financial results for the first six months of its fiscal year, which ends March 31, 2022. Highlights included:
- Sales of ¥168.75 billion (US$1.5 billion) were up 27.8%, as compared to 2020.
- Sales in North America grew 31.2% to ¥35.67 billion (US$314 million).
Sales in North America of instruments, reagents, and maintenance services increased due to “resurgence in testing demand in hematology and sales increase of instruments,” Sysmex said. In partnership with Siemens, Sysmex said its urinalysis instruments and reagents sales grew, too.
HOLOGIC: Diagnostics Performance Did Not Meet Expectations
Quarterly earnings at Hologic, Inc., in Marlborough, Mass., weren’t as rosy compared to other IVD manufacturers. Hologic shared financial results for the company’s Q4, which ended Sept. 25. Included was this quarterly data:
- Revenue of $1.3 billion, a decrease of 2.3% in the quarter, compared to the prior year period.
- Revenue for breast health and gynecologic surgical divisions grew 15.6% and 21.8%, respectively, compared to 2020 when the company said sales were affected by the COVID-19 pandemic.
- Diagnostics revenue was $836.8 million, a decrease of 10.9% due to slowdown in COVID-19 assay sales.
- Molecular diagnostics revenue was $704.5 million, a decline of 14% from Q4 2020.
The company’s annual revenue growth was 47% or $5.6 billion, driven by women’s health and COVID-19 testing needs, according to Steve MacMillan, CEO.
ORTHO CLINICAL DIAGNOSTICS: Company Sales Increased 13.2%
Ortho Clinical Diagnostics, Inc., in Raritan, N.J., released Q3-2021 financial indicators:
- Revenue increased to $508.9 million, up from $443.3 million in Q3 2020, a 13.2% increase.
- Net income for Q3-2021 was $50.9 million, compared with $21 million in Q3-2020.
“Both our clinical laboratories and transfusion medicine businesses grew double digits, supported by our strong recurring revenue base,” said CEO Chris Smith.
DANAHER CORPORATION: Lab Activity Back to Pre-Pandemic Level
At Danaher Corporation in Washington, D.C., financial performance data for Q3 and year-to-date included:
- Net earnings grew to $1.2 billion in Q3, which represented a 33% year-over-year increase from Q3 2020.
- Revenues were $7.2 billion, up 23% year-over-year.
During an earnings call with investors, Rainer Blair, CEO, said the company has recently regained its access to medical laboratories.
“Across life sciences, we’re seeing robust customer activity and demand across all major end markets,” Blair said. “Lab and other site access is largely back to pre-COVID levels, and we’re seeing this through more normalized productivity levels, installations, and project initiations, driven by a strong funding environment.”
Like other IVD leaders, Blair also informed investors of supply chain impact on the company. “While we see some global supply chain constraints … [we are] actively working with our customers and suppliers to help mitigate any impact,” he said.
Pandemic Test Volumes
Overall, Q3-2021 performance of the large in vitro diagnostics companies points to continued strength in the market as the COVID-19 pandemic enters its third calendar year and need for COVID-related testing continues.
Although the effect of the new Omicron variant on the IVD testing market remains to be seen, should that variant prove to be on par with the Delta variant, testing demand may grow in 2022.
Also, the current administration’s national plan to provide more at-home COVID-19 rapid clinical laboratory testing options for Americans is likely to spur further revenue growth for some IVD manufacturers.
As with many options in healthcare, a shift towards local-based preventive care in place of hospital and physician clinic visits seems to be occurring with COVID- 19 testing as well.
TDR sources: Company presentations to investors, news releases, and earnings call transcripts.