The coronavirus is pinching labs
Commercial labs are in a precarious financial position, as the overwhelming demand for coronavirus tests is not close to making up the revenue of other tests that aren't being ordered.
Why it matters: Commercial labs are anchoring coronavirus testing, and testing remains paramount to mitigating the spread of the coronavirus.
By the numbers: The U.S. is testing about 150,000 people a day, but that testing capacity has barely expanded in April.
- Hospitals have partially stymied the effort to increase capacity, Nature reported.
- Large commercial labs, like Quest Diagnostics, also have major backlogs that have slowed test results.
What they're saying: The surging coronavirus demand is pinching them at a time when other revenue is drying up.
- "During the last two weeks of March, volumes declined in excess of 40% inclusive of COVID-19 testing," Quest said in a financial filing.
- The second quarter, which runs from April through June, will be "the worst quarter in lab history," analysts at Robert W. Baird & Co. said in an investor note.
- Labs continue to call for their own bailout so they can ramp up testing. They didn't get one in the most recent stimulus package.
Yes, but: Labs won other sought-after policies, like deferred Medicare cuts, and billions of lab dollars have been squandered on stock buybacks.
- Quest has repurchased $3.1 billion of its own stock since 2013, and LabCorp's stock buybacks have totaled $1.5 billion since 2015. Both companies also have a combined $2 billion remaining for stock buybacks.