FOR THE BIGGER IN VITRO (IVD) COMPANIES, the third quarter (Q3) ending Sept. 30 was a time when diagnostic sales rose—molecular testing is skyrocketing, actually—while other corporate divisions continued to lag amid the COVID-19 pandemic.
Here are recaps of Q3 earnings reports and investor calls from leading companies serving clinical laboratories with instrument platforms, diagnostic tests, reagents, supplies, and more. During the conference calls, executives often provided insights about how long they believe the demand for COVID-19 tests will continue into 2021. This information will be helpful to clinical lab administrators and pathologists as they do strategic planning for their own laboratories and group practices.
ROCHE: Diagnostics Division Grew 18% during Third Quarter
Continuing demand for diagnostic instruments and test kits used for SARS-CoV-2 testing fueled sales growth at Roche Holdings’ diagnostics division. For the first nine months of 2020, global sales at its diagnostics division were US$10.6 billion, an increase of 18% compared to the same period in 2019.
Overall, Roche Holdings, based in Basel, Switzerland, reported revenue of US$48.2 billion in the first nine months of 2020, which was 1% growth at constant exchange rates over the first nine months of 2019.
During the company’s earnings call on Oct. 15, Roche CEO Severin Schwan made an interesting observation about the ability of the IVD industry to manufacture unlimited quantities of COVID-19 molecular tests. Roche is about to “bring an antigen test to the market for the clinical lab … and we will do this by the end of the year. And that is very meaningful, because … as you know, [there are] constraints on the PCR tests … I mean, we as an industry will never be able to provide a PCR test for the masses, it’s just not possible. But antigen tests can be scaled up.”
Thomas Schinecker, CEO of Roche Diagnostics, predicted that demand for COVID-19 tests will continue. “Now with regards to demand, I would say it’s pretty clear that—at least until the middle of next year—the demand is still going to be significantly higher than supply,” he said. “This is not a Roche-specific phenomenon but this is an industrywide phenomenon.”
In answer to an analyst’s question, Schinecker said, “Now, if I look into 2021 … it’s very difficult to exactly predict. But it’s pretty safe to say that we will not see any downturn in testing until—for certain—in the middle of next year. Potentially, we’ll see testing over the next years to come (maybe at low amounts) because this virus is now endemic. This virus is not going to go away anymore.
“That’s also why we believe that antigen tests are extremely important,” continued Shinecker, “because they can complement the PCR testing. First, if a person is positive and the specificity is really high, then it’s clear that this person is positive. Second, you will definitely identify the people who are having a higher viral load and are really infectious. So, you need to use the combination. And this is what a lot of governments are going for at the moment.”
In its earnings release, Roche disclosed that, for the first nine months of 2020, “sales in molecular diagnostics increased 77%, with 88% growth in the underlying molecular business. Growth was driven by virology (predominantly SARS-CoV-2), Quantitative PCR (to detect molecular/genetic targets) and Nucleic Acid Purification (to isolate and purify genetic material), Molecular Diagnostics systems, and Molecular Point-of-Care (influenza viruses).”
ABBOTT LABORATORIES: 38.8% Organic Growth in Diagnosticsin Response to COVID-19 Pandemic
Abbott Laboratories, which in August
received a $760 million federal contract for 150 million rapid antigen tests to detect COVID-19, had a strong third quarter. The diagnostics business segment grew nearly 40%, said Robert Ford, Abbott President and CEO, during the company’s earnings call.
Total worldwide sales were $8.9 billion for Abbott, an increase of 9.6% compared to Q3-2020. “We’ve sold more than 100 million COVID tests across our diagnostic platforms,” said Ford. Abbott CFO Robert Funck added that “global COVID testing-related sales were approximately $880 million in the quarter.”
When asked a question about how long the pandemic would last, Ford said, “… COVID-19 sustainability … is a key topic here … I’ve talked about the testing demand over four different phases:
• the pandemic phase,
• the recovery phase,
• the vaccine phase, and,
• a post-vaccine phase.
“… my view is that a lot of the volume was still going to be in the pandemic recovery phase,” he continued. “Even with a vaccine, you’d still get more of a steady state, but a lot of the [COVID-19 test] volume was going to be coming during this pandemic and recovery phase. I still think we’re in this phase right now—depending on the country and whether it is in a pandemic or in a recovery, and I expect that to last definitely all next year.”
Abbott Laboratories is making a big bet on SARS-CoV-2 antibody testing. When asked a question on this topic, Ford replied “Do I think there’s an opportunity for antibody testing as the vaccine gets rolled out? Yes, I do. I see the opportunity for [both] core lab-based and rapid lateral flow [COVID-19] testing.
“We’ve seen some governments already mandate [that] on every blood draw, other tests [are performed] to check for antibodies,” he explained. “I think that’s going to get more intense when the vaccines get rolled out.”
Early in the SARS-CoV-2 outbreak, Abbott’s ID NOW platform made national headlines as a way to generate fast results. Ford discussed Abbott’s success with the ID NOW and why he believes that this instrument system will be a foundation for further growth.
“When we started the year, we had over 20,000, ID NOWs placed in the US alone,” commented Ford. In just “four months, we’ve already doubled that placement rate by adding more physician offices, retail channels, universities, and a variety of other channels.
“So, what we’re building here with the COVID test [run on an ID NOW] is an installed base that will then be able to run different kinds of assays and different tests,” added Ford. “And if they’re digital, if they’re affordable, then, [given] the consumer behavior today in COVID testing, we believe [it will also] be there for all the other assays that we will build on [by using the ID NOW platform].”
DANAHER–BECKMAN COULTER, CEPHEID: COVID-19 Test Planned
Danaher—with a Diagnostics Division that includes Beckman Coulter, Cepheid, Leica Biosystems, and Radiometer—announced Q3 net earnings of $883.5 million, a 38% year-over-year increase.
“We generated $5.9 billion of sales with 14% core (business) revenue growth. COVID-related revenue tailwinds contributed approximately 1,000 basis points (or about 10%) to third quarter core revenue growth, while our underlying base business was up approximately 4%,” said Rainer Blair, President and CEO, during an earnings call.
Blair also reported these Q3 data during the call:
Diagnostics revenue was up 18%.
Cepheid had core growth of 100% due to COVID-19 testing volumes and GeneXpert installs.
Radiometer and Leica Biosystems had mid-single digit core revenue growth.
Beckman Coulter Diagnostics saw declines moderating as elective procedures resumed in Q3.
“Moving over to diagnostics,” continued Blair, “reported revenue was up 18% and core revenue was up 17.5% led by more than 100% core growth at Cepheid as a result of COVID-19 testing volumes and record GeneXpert System placements. Radiometer and Leica Biosystems, our acute care and pathology businesses, delivered mid single-digit core revenue growth. Declines at Beckman Coulter Diagnostics moderated as elective procedures and wellness checks continue to resume throughout the quarter.”
Cepheid is one of Danaher’s diagnostic products that is enjoying high demand because of the pandemic. Cepheid introduced its 4-in-1 respiratory virus test. Blair said, “it will be priced right around $55 to $60 per test, and that compares to the COVID-only of about $20 to $40. Once again, [this] depends on the type of customer and volumes and so forth.”
During the conference call, the Danaher executives discussed the supply chain issues of meeting the “extraordinary demand” for COVID-19 tests. In the case of Cepheid, they said that in Q2, Cephied had shipped six million tests; in Q3, seven million tests shipped; and expectations are that eight million tests will be shipped in Q4. These production numbers will help labs using the Cepheid system understand how demand overwhelmed supply, even as production was increasing.
BIO-RAD LABORATORIES: Imaging Sales Make Up for Sales Decline in Diagnostics Division
Bio-Rad Laboratories of Hercules, Calif., experienced a Q3 boost in revenue of 15.5% as compared to Q3-2019. Revenue for the period ending Sept. 30 was $647.3 million as compared to $560.6 million in Q3-2019. Other data reported by Bio-Rad for the period are:
Life Science Segment net sales of $324 million, an increase of 50.2% from Q3 2019.
Clinical Diagnostics net sales of $322.2 million, a decrease of 5.7% from $341.8 million in Q3 2019.
“Although clinical labs have seen a significant negative impact by the pandemic, we are now experiencing a gradual recovery from the trough of Q2 and expect incremental recovery until the end of the year,” said Norman Schwartz, President and CEO, in an earnings call.
During the call, executives said the majority of the year-over-year growth in the third quarter was driven by Bio-Rad’s core PCR products: Droplet Digital PCR and Process Media. Both core PCR and Droplet Digital PCR product revenue increases were largely COVID-19-related.