IT’S BEEN A CHALLENGING YEAR for companies that sell laboratory information systems (LIS) to the nation’s clinical laboratories. Because of the SARS-CoV-2 outbreak, labs have delayed decisions to acquire or upgrade their existing LIS systems, as well as previously-scheduled installs of new or upgraded systems.
Two major sellers of LIS products in the United States are Cerner Corporation and Roper Technologies’ Sunquest Information Systems. Both are public companies and report their quarterly earnings. However, at each company, revenue from LIS sales makes up a relatively small part of total revenue. For that reason, the quarterly earnings reports for each company may not always provide significant information about LIS sales activity in the quarter.
What follows are some basic insights about each company’s LIS sales activity in their respective second quarter earnings reports. This information can help clinical lab administrators and pathologists who may be ready to upgrade their LIS or purchase a new LIS.
Roper: Data Innovations, CliniSys, Sunquest Information Systems: ‘PERFORM NICELY,’ FLAT EXPECTATIONS FOR REST OF YEAR
Roper Technologies’ financial results for Q2 2020 included information about the financial performance of its three laboratory IT companies:
• Sunquest Information Systems, Tucson, Ariz., which offers the Sunquest Laboratory laboratory information system (LIS) and other diagnostic and laboratory informatics solutions;
• Data Innovations, Burlington, Vt., the provider of Instrument Manager and EP Evaluator for lab connectivity and autoverification; and,
• United Kingdom-based CliniSys Group, supplier of laboratory management systems to labs worldwide.
During its earnings call with Wall Street investors, Roper President and CEO Neil Hunn said Q2 revenue fell 2% to $1.3 billion while the company’s Application Software segment revenues were $398 million, up 1%.
“Our laboratory software businesses—Sunquest, Data Innovations, and CliniSys—all grew and performed nicely aided by the global demand to deploy diagnostic testing software interfaces and laboratory software associated with combatting COVID-19. Specific to Sunquest, we received the termination fee payment for the Queensland project (Queensland Health) that opted to terminate implementation due to COVID challenges,” said Hunn said during the call.
During the call, Hunn confirmed that a growing number of clinical laboratories are interested in having their LIS hosted remotely. This confirms a trend where labs see the benefits of using an LIS that is hosted remotely.
“Broadly across this segment [of clinical lab software solutions], we see an increased desire from our customers to migrate [their LIS functions] to our cloud or SaaS (software-as-a-service) offerings,” explained Hunn. “[This is] one of several trends that COVID appears to be accelerating.”
The shift to cloud-based LIS “should be a long-term growth driver for our business, as we have a large installed base of [lab] customers who will—over time—migrate [their LIS services] to the cloud,” he continued. “And turning to the outlook for this segment, we expect to be roughly flat for the second half of the year.”
Hunn disclosed that the Q2 financial results were “aided by sales pipelines” launched prior to COVID-19, while the second half of the year is affected by the pandemic shutdown. “As a result, we expect our prospects’ decision timeframes may extend longer than our historical experience,” Hunn said.
Cerner Corporation: SOFTWARE REVENUE DOWN, BOOKINGS NICE SURPRISE, DEALS DELAYED
For Cerner Corporation, Q2 revenue of $1.33 billon was down 7% from $1.43 billion in Q2 2019. This was attributed to the pandemic and the end of a large contract in Q4 2019, according to a news release.
“Revenue was $10 million below our guidance range, with the impact of COVID contributing to lower levels of technology resale and reimbursed travel,” said Marc Naughton, Cerner’s Chief Financial Officer, during an earnings call.
Also, Cerner’s licensed software revenue in Q2 was $152 million, down 23% from a record high of $197 million in Q2 of 2019, according to Naughton. “While we expected licensed software would be down this quarter, it did come in a bit lower than expected,” he noted. “Technology resale of $42 million in Q2 was down 31% year-over-year, primarily driven by a few anticipated new business deals pushing out of the quarter amid the pandemic. Subscription revenue grew 3% in Q2 to $92 million.”
In addition to subscription revenue, managed services was the other Cerner revenue line that grow during Q2, increasing 3% to $307 million, Healthcare Dive reported.
For the full year 2020, revenue may now be in the range of $5.4 billion to $5.5 billion, down from $5.5 to $5.7 billion, Cerner said.
Epic Systems Sells Beaker LIS to Labs
One competitor in the LIS (laboratory information systems) market is Epic Systems Corporation, of Verona, Wis. Privately held, it is not required to disclose financial information. It offers the Epic Beaker Clinical Pathology LIS in addition to the Epic EHR and other solutions.
Epic’s annual revenue for 2018 was reportedly $2.9 billion. Because Epic frequently offers a free license for the Beaker LIS to hospitals purchasing its electronic health recordsystem, it has grabbed marketshare from the established LIS vendors.
Enlyft is a business-to-business marketing development company that provides marketing data bases to its clients. In its data base, it shows this information about five LIS vendors:
• Sunquest: 1,204 customers–57.14%
• Epic Beaker: 498 customers–23.47%
• Care360: 270 customers–12.24%
• Cerner CoPathPlus: 138 customers–6.12%
• Aspyra: 29 customers–1.02%
It is important to note that this is an incomplete list of LIS vendors in the United States, which would include long-established companies such as CCA, LigoLab, McKesson, Meditech, NetLims, Orchard Software, and SCC Soft Computer.