LH Laboratory Corp. Of America

Scott Frommer VP, IR
Dave King Chairman and CEO
Glenn Eisenberg EVP and CFO
John Ratliff CEO, Covance Drug Development
Lisa Gill JP Morgan
Jack Meehan Barclays
Dan Leonard Deutsche Bank
Nicholas Jansen Raymond James
Amanda Murphy William Blair
Kevin Ellich Craig-Hallum
Erin Wright Credit Suisse
Bill Quirk Piper Jaffray
Ricky Goldwasser Morgan Stanley
Tim Evans Wells Fargo Securities
Mark Massaro Canaccord Genuity
Ralph Giacobbe Citi
Dave Windley Jefferies
Isaac Ro Goldman Sachs
Rohan Abrol KeyBanc Capital
Call transcript
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Good day, ladies and gentlemen, and welcome to LabCorp’s Third Quarter 2017 Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Scott Frommer, Vice President, Investor Relations.

You may begin.

Scott Frommer

Good morning, and welcome to LabCorp’s Third Quarter 2017 Conference Call.

press call will Internet. available today’s of a in conference this via detailed release, be there replay As telephone and me Covance President King, Glenn Dave LabCorp Diagnostics; Gary today Chief Ratliff, of With Officer; CEO John Executive of Huff, Chairman CEO Eisenberg, Development. Chief and and Vice and Financial Drug Officer; Executive are

of information. discussed addition our non-GAAP Investor morning that this to Form a X-K the and our In at call financial in additional website press GAAP. Both financial include filed Relations of available release, section during we also reconciliation to are includes a today’s measures

strategy Finally, we from acquisitions. the statements statements our factors forward-looking statements change ongoing are are These These about affect expectations various current upon based to forward-looking that business making financial expected subject financial today’s could implementation and our and call. among based the are others, during benefits include, results, upon statements our results. of

in XXXX factors are Some in Form detail set of XX-K. these forth our

have these our forward-looking any statements updates no to if change. expectations provide even obligation We to

call to Now the over turn Dave King. I’ll

Dave King

Thank EPS quarter, year-over-year basis growth you, record XX%, LabCorp morning. of of expansion operating growth adjusted with of adjusted margin X%. points revenue the in and Scott, XX and results good third delivered

of We us nearly record free outlook $X also to solid a reported enabling to billion. another cash raise new flow, quarter of year our full

hurricanes. women’s acquisition medical our results, our to volume the collaboration Chiltern, from with basis shareholders. of quarter, growth by outstanding broad-based, drug organic we monitoring deployment, on the led strategic the XXandMe. Diagnostics, by drag XXX health, the given impressive have robust was driven more with impact and of the of During growth continued even we active points of and strategic In remained Organic growth, and highlighted approximately by return total capital capital

PAML business as our to integration In performance. outreach addition, Sinai’s Mount are strong the and proceeding of contributing planned,

impacted in substantial regions in performed employees swiftly our for any face specimens. of operations collected adversity, operations remarkably multiple the restoring disruption of the processing and without Speaking in the team hurricanes, patients our

our affected communities of quarter, their development, areas. book-to-bill relief versus to orders need. generously behalf and a we and our patients In for continuation net of for appreciate the and had XX-month outstanding drug highlighted by X.XX All contributed each efforts of colleagues in other at X.XX improving trailing on also We to year-end efforts strong a XXXX. solid

team XXXX. positioning We continue line grow organically to performance in business historical capabilities, the our in and invest to its strategically in expand with

hospital independent laboratories, intent that designed of higher-price it demonstrated, is as the Medicare report its XXXX in much also when reports continue from service as consumes CMS place. X of apparently to commercial typically CMS Medicare strategic their significantly comment to commercial to to the of labs. paid labs update have physician on of its to beneficiary find data? instructed in a and desirable priorities, has published office We that be X% goal to key that the overlooked disappointing is warning of intent. pricing. the appropriate, briefly last Thus, work Congress to in that critical with X,XXX actions Before to rates. and charge preliminary their anywhere lab the disappointing X.X possible hospital independent times We entire no reported to hospitals that I CMS OIG were badly industry, reduced specifically in the customers fewer not include labs office X% that missed expected labs, for on by proposed even Congress deeply over-weighted to board How which I spending CMS ignoring congressional surprising country implement will Market the and not pricing which entire as for CMS, the our laboratory of market-based remedies, explore the testing. PAMA stakeholders laboratory market-based expressed we attempt Unfortunately, determined closely for critical in the access continue laboratories and determine the commercial and services. aligning you repeatedly market. PAMA. will action hospital to actions with In a price may as market expressly PAMA, reflect In we the only pricing legal submitted overlooked dialogue CMS’ do physician survey Medicare, highlight only clearly labs focused the by all in was Medicare as unmerited and survey month vastly they, CMS and we rates have mark services. cuts including industry stated statutory pricing first on and rates again It could comments than first the Congress’ XX fact, so reported is implementation represent

our progress key priorities, with our of you the focused development. drug update on will on I Now initiatives and strategic combination on beginning Diagnostics

patient real-world data innovative and global physician Covance’s recruitment the and that combination investigator performance patient We utilize into of provider solutions and studies to data. continue advance LabCorp Diagnostics’

we During the based quarter, capability. unique on awards multiple this won

to ulcerative quarter ulcerative global indication-specific selected be about engaged provided Covance the individuals study. a to outreach in patients contacted has We bid Using previously study used number competitive in total For that placed LabCorp bilirubin, has to an antibody trial this patients disease Covance. such and involved award. clinical to of parameters we the II have being been a lab sponsor LabCorp colitis by their had mitochondrial example, to the were for previously population, sponsor resulting followed another Covance. in we Phase for who interested consent in a conduct process liver conducting global In that biopharmaceutical we large previously not the example, a and not secured patient matched level the opportunities, sponsor’s protocol of against potential potential up colitis protocol-eligible study identified identification a as run criteria active

direct for Covance’s for engagement that continue with becoming clinical and physicians, patients trials. expressed we closely and have preferred in with LabCorp to interest health work Beyond systems partners

agreements form such signed recruitment, populations health patient efficiency diverse We and which partnerships, with have and to health will enhance our deepen increase system several systems relationships. access patient major broad-based to

customers. our broad $XX go-to the have to capabilities companion complementary and year-on-year lead unique continue industry and established pharma from awards delivered a in mix double-digit LabCorp We and growth in as around revenue than new capabilities precision medicine. partner of diagnostics. quarter won We more in of the biotechnology These another million

Excellence Diagnostics into cell Oncomine Thermo the with entered and agreement patients. we Scientific its Center to have launched Fisher program, target we panel cancer lung quarter, of the for Fisher join Dx Thermo an NGS During Companion non-small

and We to U.S.-based tumor tests, also oncology entered offering OmniSeq’s to immune profiling distribute agreement and into profile strengthening our global biopharmaceutical physicians an exclusive customers.

drug important addition in In strong successes Diagnostics, In this business and and enterprise-wide consumer progress delivered to Diagnostics quarter. we patient-facing progress our development initiatives, both on made initiatives.

start. Our LabCorp-Walgreens collaboration off to terrific is a

volumes, We Scores pleased on feedback these with are patient at sites. the Promoter and patient experience Net

to expect to XXXX. We LabCorp-Walgreens expand additional in sites

to continue of progress our strategy. consumer We elements make other in

card PSCs that allows solution automatically Express, in scans customer’s and are insurance patients driver’s select at We check LabCorp a tablet license. through to that custom-built a the introducing

PSC. application, insurance convenience streamlining reduce information patients debt demographic by opportunities of and to experience quality also improving trial PSC complete that These wait a about enhance which clinical web learn collect helping bad for to we mobile-optimized times, by workflow, create the reducing patients more patient to deployed and prior patients’ and steps We solutions PreCheck, verification at to allows LabCorp our the arrival opportunities.

and The Chiltern has revenue customer to of Chiltern expertise add to and Covance. Chiltern start, download enhanced also will our development. year, closed solutions on drug driving in a and integration enhanced Asia available new In welcome off operational in capabilities for launch into The We segment, version of trials our accelerating next FSP complementary mobile clinical and device reach September growth capabilities LabCorp of mid-tier stores. through the Patient profit and capabilities. and app various future acquisition emerging growth including business, drug are scale excellent development warmly at oncology biopharma position is in highly strategic early app strengthening Pacific, will Xst, profitable offering, fast-growing our broader colleagues. and we significantly Chiltern on our be which we an expanded focused development medical within

profitable Our focus investments growth on encompasses organic strategic as as acquisitions. well

laboratory and the serve FDA network completed important our investment of to supplies and provide and chemistry For XX a facility development cost-effective new The disease nine as more ability diseases our C, outside enhance X,XXX as our the used scheduled operations biologics arthritis, central therapies large-molecule business lab faster, of the open XX this Belgium. past of trial rheumatoid and Mechelen, by approved more life-changing manufacturing customers biologics center later the than new packages, expanded in year. Crohn’s analytical by has XXXX. central comprehensive site clinical This years growing market. production This in drug consolidation and opening control allows and of in treatment kits supported a to biopharmaceutical alone, cancer. and submission the U.S. Covance four to hepatitis more planned such than other including integrated We will In of Covance’s is for ability example, to enhances European delivery our our of this capabilities investment

progressing Covance Finally, our LaunchPad well. initiative is

customer solutions, enterprise-wide recognized tier policy experience ongoing and integrate clinician our Last month, new for joined sustainably and leadership us increase a strategic top plans Underpinning Caveney our finalizing is who North progress Brian Officer. of and our reengineer the LabCorp Medical investment strong Shield Dr. welcomed Cross we Blue from tools are and our We longer-term in Caveney as Dr. in development our health enhance Carolina. is priorities projects key and Blue nationally to margins. technology, expert to drug talent. Chief

Dr. exemplary to the of In succeeds Mark United his Brecher, Adcock, announced coagulation promote the Medical Dorothy who intention States, of in foremost addition, after Diagnostics’ Chief to of are Dr. pathologists LabCorp we pleased the to eight retire Adcock service. Officer. one years Dr. role

Dr. our morning his New and event as in LabCorp. you investors initiatives, with our see to success key years experience to with you To opportunity of the innovation our to The In expertise, pleased to projects, analysts hear we City. to our leaders, for for grateful strategic experience February provide team important are and an we well XXXX, of our to performance learn directly and strategy on the with of hope XX, York many for closing, We more contributions Brecher demonstration the an and will quarter there. in about differentiators LabCorp. are from long-term deeply as optimistic a hold key are about We vision ahead.

XX,XXX than innovative employees, to customers. world continues advancing more growth to customers, to to Thanks health available substantial motivated only to employees LabCorp range We and our the deliver who shareholders. the wide and mission initiatives, solutions from around significant of continue by lives, partners make are key LabCorp dedication value patients, progress improve to strategic on a of improve

Now the call to I’ll turn Glenn. over

Glenn Eisenberg

of due translation you, income revenue Drug million million Diagnostics quarter. and the last impact points. organic quarter basis hurricanes increase review quarter LabCorp results, benefited a we was conclude multiple the Thank from compared start year. Operating my and with an $X.X guidance. for last as of XX.X% comments I’m constrained points XX a X.X% Dave. of $XXX the segments on This by for going discussion followed from our XX.X% was was our revenue around or by or the of X.X%, an to Revenue update growth XX XXX year, added currency quarter our foreign X.X% acquisitions third of during over with to revenue basis Covance increased to Development and XXXX billion,

charges by to higher and by XX% and operating and mix Adjusted patients acquisition $XX million compared restructuring restructuring had volume, savings, of heavily were special we million income, acquisitions, or costs. LaunchPad excludes due to last price adjusted facility revenue operating The impacted XXX $XXX personnel related areas the the approximately was primarily forgiveness to partially amounts quarter, items, margin in Chiltern, in owed amortization, which income the and closures charges During organic and year. of XX.X% items, million primarily of offset special of or from increase hurricanes.

to last due of quarter addition, In special tax increase was and rate, amortization, $XX due hurricanes. for XX.X% XX.X%. rate income the operating the charges mix was XX.X% adjusted impacted The to This geographic compared excluding tax was million adjusted negatively to year. primarily by around was The earnings. multiple

Adjusted multiple the cash a cash expect earnings to management. year The debt hurricanes, the to caused operating for of Operating brings increase flow cash working our in We approximately continue X.X% reserve last year which per earnings the share. X.X% by reduced higher million the due quarter be last in compared or revenue improved to due our the earnings diluted $XXX totaled upon year. share to year. expenditures us Net excludes ago. XX%. were capital other based tax increase XX%, the which Capital $XXX EPS, to flow full or the rate reduced in approximately in items, were and was to compared $XX our or was diluted $XX XX% amortization, to million $XXX experience. to million over and up in million which quarter historical were fourth X.X% $X.XX rate and the special of revenue bad million in tax quarter Adjusted quarter per restructuring charges range quarter, $X.XX $X.XX

free to was cash up flow quarter our at second cash year. $XXX last result, million million the At million $XXX quarter. quarter was from in million, the $XXX end the of balance compared As end, $XXX a

During in billion and invested $XX repurchased we of the quarter, acquisitions $X.X stock. million

end As $X.X September under remaining billion. share million had at Total quarter XX, was of we repurchase our of authorization program. debt $XXX

to the the of company’s The agencies debt XX. rating ratings. acquisition company’s grade last Following leverage pro forma was as investment Chiltern, EBITDA both X.Xx September XX reaffirmed months’ of gross

flow yearend. to lower free leverage in our We cash use by fourth to of expect quarter the portion a the company’s

by price per by in annualized of performance, which from mix; including translation mix last and Revenue basis organic review measured the was from benefit points. requisition for price increase driven acquisitions, LabCorp was increased of currency over I’ll Revenue X.X%, an billion, $X.X the volume, Diagnostics. requisitions; benefiting XX Now quarter acquisitions; segment and in revenue The our with beginning year. Sequenom, increase X.X% September.

achieved primarily increased adjusted a organic than from transactions. result volume operating negative X.X%, Acquisition was PAML grew despite Diagnostics’ $XXX In addition, was X.X%, this Total the volume core for $XX million approximately rate of X% was impact growth, the hurricanes million XX due or points. impact XX.X% income revenue $XXX compared the decline XX.X% Sinai esoteric on to from multiple Mount quarter which The year. strong last savings. was due by negatively led impacted increase faster adjusted and hurricanes. income operating acquisitions testing. basis XX or We million testing in revenue of of the and multiple the at X.X%. volume LabCorp quarter, volume during to to in basis The point by LaunchPad was organic margin which margins

deliver $XXX In year company to the savings LaunchPad addition, achieved three of million. goal its net

the we Although that drive business of we identify are improvements to targeted number complete reached a new segment continue have opportunities. throughout projects the as and process our will savings, LaunchPad process underway

compared Adjusted currency growth I’ll income an operating quarter of to X.X% Now basis was Drug the and Chiltern, Development. performance were offset the in from year, Chiltern, or growth, the review million Revenue million, last due margin of $XXX XX.X% acquisition increase million partially translation. organic due LaunchPad costs. revenue points operating of $XX of or for and savings, synergies foreign income XX acquisition last $XXX increased increase to by to XX.X% benefit year. was The and primarily cost from Covance of of personnel the organic revenue the

deliver to consolidation synergies. three-year During facilities U.S., the the central quarter, completed lab of $XXX in target and Europe achieving cost in the our our we million

from LaunchPad year, million addition, annualize In on track XXXX. in savings $XX $XX to million Covance’s we’re generate will to which this beginning of initiative

continue pay net we details strong strategic another force for enhance The made progressing that planning to the next we and as initiative early capabilities book-to-bill. will to business’s well, expansion is and additional we’ve posted off, leadership, investments improvement three-year orders provide sales the in of and Our this year.

Chiltern XX months, XX of improved trailing of the billion. X.XX. added which at were billion, million over Backlog trailing For months, of last increase net an $X.X the producing $XXX of quarter $X the orders $X.X net was an billion, book-to-bill quarter’s end

$X.X the revenue approximately months. into billion over convert backlog next XX expect this to We of

XXXX our anticipated XX includes guidance, allocation. Now remainder September which for and of rates capital foreign exchange XXXX the of I’ll assumes update as

revenue over XX currency impact to growth of We after for basis points translation. X.X%. the is negative an X.X% prior guidance our foreign X% expect approximately of X% of increase from to This adjusting

growth to of LabCorp over guidance to We acquisition prior our related revenue This X%. X% is venture expect Diagnostics a X%, of increase X.X% of due primarily of consolidation PAML. the an to the joint to

negative the X% an to growth revenue of adjusting We translation. This our over to from after X.X% Covance due prior impact for X% approximately Chiltern. basis of XX Drug acquisition X% is expect guidance the points foreign Development increase of to of currency

adjusted $X.XX X% our and of increase an $X.XX, XXXX X% XXXX over to prior an Our to guidance $X.XX of guidance to EPS is over $X.XX. improvement

guidance, the is and during midpoint the of offset We from hurricanes have expected multiple acquisition. negative from by impact be Chiltern the narrowed increased the modestly range quarter accretion the as the to

free we Operator? and XX% flow million. management. X% million higher our to improved concludes questions. $XXX and outlook $XXX increase $X.XX formal last and driven billion, the Finally, of of remarks, than working between year, earnings company’s This strong now million we’ll take expect continued over The guidance $XXX an is be to cash capital to our and by prior


comes the Instructions] of of Morgan. question Gill line Lisa Our first JP from [Operator

Your line is now open.

Lisa Gill

we’ve cuts calls forward. the like it, three that into maybe to It I haven’t so as be wanted to are Dave, so just going heard but go a go my anything, heard looks specific expectation this we competitor any impact on there think ‘XX? about point, is your way financial would there, comments we on may to I I but apologize, about at understanding, your have this going are there talk have morning, PAMA, missed better the

earnings And I around in are where one. you help be you around can impact potential United any renegotiating just frame update to comments on that anything to better then the you understand relationship? if would just wanted So to had secondly, timing and your

Dave King

be what respect lab reductions of we with preliminary rates have that expected PAMA, with So revenue, been Based range is in starting of expected proposed excess that for our of the been clinical on lipid a be to the of of general X%. limit which were and is X% almost errors in cut assuming XX% the we saying of fee year statutory the the have to beginning example, so far panel, to in to we corrections the -- year, couple panel, the the since reductions, XX%. proposed, health obvious the first schedule the actually

those -- corrected, given end schedule will are we’ve that Assuming X% end toward -- fees point, clinical we at of impact or that higher fee laboratory revenue. be X% think this to estimate the clinical highest the that the of to

patient-facing to impacts with terms course, terms bad one. finally, then we PAMA items also of and So I so the earnings capabilities frame that financial all that EPS, that’s helps not we’ve be. we the of Covance hopefully largely estimator, what the say, earnings. Mount Covance, going phlebotomists, think we offset Sinai in have there check-in, also benefit are mentioned, offsetting opportunity the that we Chiltern, And of falls PAMA it expand allocation LaunchPad And continuation and benefit projected helps to to to also reductions. things although is as in-office price, offsets necessarily some the number continue the with us a think in in when impact you the Obviously, our through. will LaunchPad, as growth simplifying out of patient offset year some and PAML process like at of those believe Obviously, about all of rolling debt. our from from the be to the to will capital

to impact PAMA United, the So other I of through progress update levels United it’s in On that’s say as helps with and senior to a we think have the that would I believes frame some with about clarity the we it’s interest, how the conversation we and end I you soon And get continue at I our pleased recognizing XXXX. any we’re organization. including a conversations. think of as that have can, in and give hope to of that again, don’t the than the positive it of United, most interest their continues bit. contract little think the regular

conversations. XXXX so from obvious isn’t And any of there impact ongoing any the


Our Barclays. of from the question of comes line Meehan Jack next

open. now is line Your

Jack Meehan

on I just us underway, as you network give view you’re the there, of on wanted on the how commercial price your do terms negotiation if in to versus discussion, thoughts proposition continue negotiating could in is offset? Obviously, these you a update of commercial value pricing the access on national the pricing on context contract in versus as an possible PAMA your philosophy environment. payer just

Dave King

years they to commercial that last been the reporting Jack, ongoing Obviously, these pricing every several known think into to price we the to so stable. good conversations, that price with it would we environment in expect reduction, And morning. commercial seek are pricing is I to be remember, the through over pretty we reductions the years, continue government as has it future. process stable. certainly an go payers required roll three PAMA any any once making

and is not Obviously, we price all about of are the the the excellence. to leadership, about bring with services. terms centers proposition, Covance laboratory about a our commercial renegotiation. esoteric and constraint are pure value the contract number think the are discussions I they to diagnostics what about about in that beyond significant of our areas and proposition, are price, value reductions industry else our at of capabilities least willingness table in testing off, on They companion they about think of

there’s a around price we absolutely realistically, to are So of best to conversations. continue maintain and unit price I will so. always and do our conversation unit we think are stable, that there do these part But factors multiple

Jack Meehan

LaunchPad integrated data update pivot of Covance, that’s points opted net up, strategy to helpful. us it’s just offering, the in an business see glad number whether is? term have great finally, give to long this on the to just And it to coming on that then organic tangible patients growth. or the book-to-bill, related with recruitment? you Great, some And what the margin for of appropriate tied then for awards Can

Dave King

I’ll a comments, I’ll of John to couple the in make ask Yes, details. fill then and

the more tools we believe, introduce is the in to facing and our patient now, patients So customer consented the service up as around I database, again, XXX,XXX through mobile and center we’re increase devices, to is even substantially. continue optimistic grow that, a The in number remarks. of to points, I that and them couple the hopefully prepared going data cited more again,

but to We strong continue number we’re And data to we’re like net you that, a had, win I study, to further therapeutic that you’d why be a there’s have variety John, study orders Frankly, there’s data, with book-to-bill valuable of the asset. with that’s seen the there’s at not and table, the in presence, prior don’t think is of provide? the any table. conversations, these because than expertise, companies experience We a global a the whole Covance strong as to the color every more business. there’s there’s see the getting And in things.

John Ratliff

X.XX the the to strength months to it’s higher labs. all that customers strength from component we’ve of so the But in an to showing up saw now X.XX, just especially to highly No, Obviously, X.XX. in biopharma the across and valuable offering. that studies, central push XX continuously understand data, average. than the the that, billion getting the segments, order on of been the capability $X.X to X.XX in we’re the the segments the based awarded across that important the that terms X.X is We we


Dan Our next the question comes line Deutsche Leonard of of from Bank.

line is now Your open.

Dan Leonard

you seems The Just big color play? bit guidance Is the in on, it months there or are? what are wide, two more variables on more factors of Can trials offer in or one one guidance. left question on revenue a the with the range Covance year. rather just two

John Ratliff

the for segments is. a have I and coming anytime range the of stronger cancellations is why the the impacted little from from incorporating revenue of that up where now range into now in, the organic side, range growth the across integrating reason bit in growth the standpoint think you’re has last of the volatility, the up and allows Chiltern

Glenn Eisenberg

Yes, less the range is different do to frankly, end give toward the one, being the anyway. But of bigger and the volatile little as did narrow segments. range, ranges a only narrower use thing year. we we over we add, get Obviously, the too, historical we trends a Diagnostics closer I’d


from question next comes Jansen Nicholas of line James. of the Our Raymond

now line open. is Your

Nicholas Jansen

for understand one kind Chiltern. implied quarter to both for for and just the better from growth First XQ, me organic is contribution trying of Covance the the in just

I out ‘XX. revenue kind in called $XXX total think million of you of

back so wanted it for that little on have You prior bit versus envelope of the just four out? expectations suggests that to months, might of math there be growth, delta a flesh organic just

John Ratliff

had future, improvements revenue the single-digit and I’d we the X.XX growth focus. our Yes, high improvements quarter getting mid- to quarter. we growth months, the stronger the in book-to-bill organic organic growth that of over strong that to let’s see single and so keep of We our growth XX year-on-year, to the now had the strong last back say in revenue the in sequentially, so was slightly below with prior expectations. But

Nicholas Jansen

that guy cut And or the that your the that better secondly, worse understand XXXX ‘XX? towards in out PAMA, given mechanics is comments kind you ‘XX differences in kind trying very would if max? then for between range, on a just to highlighting end Dave, appreciate of than interpretation That’s helpful. of the be the wanted worse level, better that guys. the to Is that X% X% guy the flesh a NLAs higher and to of you’re Just XXXX

Dave King

does one our it’s And if a that gives very uncertain. about In things to does they The fix working a XXXX after the All and three-year become it. process. have not PAMA course. is, change obviously statute not meetings they first of the so them me but talking right, that thing some opportunity is for the and they -- is Congress that let statute statute a concerns a have provide cycle. ability with we’re This legislative year, to with the I right process, of to do this perpetual three-year expressed say CMS things adjust normally, seem think with with one-year provides on one CMS, a that them not

So having said Again, that, may changes but administratively, a make visibility have terms same I in what time. assumption I CMS would we would think lot assume don’t XXXX. that the over into that’s be reasonable of XXXX as of a assumptions, about


Our line William of the next Blair. Amanda comes from of Murphy question

Amanda Murphy

I of and with program about hoping There’s think us November, one auth bit and discussion on BeaconLBS. been United know of here prior was think I I automating it expanding, you they’re auth. you talked I up coming a an in United. that update has on just can prior late some give that programs, where as had has

to growth So together just those how broadly, you’re at more then see work BeaconLBS going how looking as and term? driver, a are just wanted to longer

Dave King

Yes, Florida, so in the by implementing been a X concerns of BeaconLBS, of about factors. version and of some ease call which by other United and we’re in customers the use it have to responds of process that expressed

United’s United this has any BeaconLBS be further I’m year. that the been pleased fact so don’t this for will we’ve with management, to in to the it And molecular We process rolling between of be markets us at test that plans later tool point, into and but selected we’re developed the roll have starting and which out.

time want what’s become physician it tool that utilization BeaconLBS continue So and to be, to doctors positive way we patients. the right right test, evaluate best decision which what the here, a right trajectory leads to that support for is we and see can we’ll

Amanda Murphy

switching Got gears then CRO side. the it. And to just

the you’ve database building I acquisition, really. past, consented So guess, the that the too, building you of patients since in talked been, about

we important that for -- And this driver being about stand is with this point? decision-making asset of an do you differentiated talked where biopharma, So data you’ve obviously, database? view Do that? as but you important for how a is at that

Dave King

Well, again, then it’s Dave. has further John I’ll and start comments. if

I patients. think is As up the around I XXX,XXX mentioned, consented database

consent was prepared that that were about database can through spoke physicians the thing just data, our patients, consented than the the the only colitis one gives high about contact who more opportunity the I remarks, clear, was to of identify them, interested The patients, very approach to look we in we Because consented liver contact the us them reached who ulcerative when people had us to and can Now have the broader in is we study out the enroll data at that we who given that’s so much of treat to rate really them database. patients. then be to as study. and the their directly, in encouraging did we learning that response ways in use access in the study, people a consented to

very think John do with a as tool. data, a it’s is I in and is I’m sure to because I differentiator. it’s only how But for So on, to specific will the results, identifiable do valuable sponsor elucidate patients specific reward I the decision a earlier, a particularly think it determining mentioned not as study. point

comments? John, any So further

John Ratliff

to preferred the specimen have need day, also bring probably when talk Dave it sites the global that’s of And XXX,XXX becoming trial the basis, recruitment I anytime to we that tests there. your out accelerated depends out that your solutions team identifying database, diagnostics, you on you on and we as think stated, go put in defenses, that It we companion advantageous. clinical PM, are health that table medic, the cetera. factor in Dave now out data diagnostics on pervasive We to with have The regard, now upon helping it’s whether as patient your is in within a that’s that with you have data general data and actual sites, we and/or an the us that’s win becoming network. bid systems general. differentiated a and from then a No, in in the that that’s And the solution said, we contributing just labs, the to of broaden et book-to-bill. feel part X.XX getting just that like central the now standpoint getting depends the

Dave King

quickly that, for through who investigator example, on we it. shouldn’t the And Covance trials, Amanda, only also database, just runs, overlook that We Covance the is the Covance not I all that central involved of on have investigators, power the information did not conduct in, but because lab. because mention investigators

because trial a important, be eliminate able look in to investigator retention So not to a had we enrolled at rate can enroll only those never very who’s sites at half than and more sites, can is sponsor. completed patients, a a trials, trials. of but the patients, And extremely patient, single higher who’s we early look consideration from asset valuable who’s that’s successfully for


of the comes of Our Craig-Hallum. next Ellich line Kevin question from

now line open. Your is

Kevin Ellich

your revenue Dave, go can Medicare? to have back how PAMA, just to just the but questions wondering, tied remind mechanics, us of you much commercial don’t is about to wanted

Dave King

revenue and whatever and So portion of is Medicare significantly managed but managed to Kevin, of fall that our a with the commercial not PAMA. change the in and is it Medicaid itself to of in small going tied mostly is would area, impact implemented Medicare

Kevin Ellich

for just then one Glenn. And quick one

to AP and that XX million. the really in the QX working sources services and at Looking nice and looking XX Should about capital, strong what increased tune the some this services, flow, like Can cash, guidance, unbilled of of cash at? talk in accounts look quarter were we changes the AP you is the of million reverse should parts? payable which at moving or looks it unbilled

Glenn Eisenberg

they imagine, the did overall, capital DSOs. payables going the we’ve substantial year-over-year Yes, categories, a would can LaunchPad from also We whether the our lot full we be payables. that nice between be earnings, will improve tools which initiative flow always guidance, and free this cash into a the that some fourth there’s therefore, is through guidance some as or includes Each factored quarter, in was benefit way. the using progress and and that on receivables a still flow well of be that focused capital benefit be also other guidance broader Obviously, the in different quarter improvement of order-to-cash should pretty generate in done again, cash was and implied have seen in to our year bad obviously, the been quarter, contributor, timing the to management. management. that’s We’ve to but get the timing debt go as that you working working to difference in of as tied case free

Kevin Kim Ellich

that? can describe Right. And you unbilled then What the is services?

Glenn Eisenberg

again, we’re where just billed milestones with that’s we’ve the And which included, our we so or but it’s the ultimately recognize proceeds receivable. to that extent, the yet not it going we effectively a treated yet, we’ve to some along time bill customer. but bill It’s it’s know will like or therefore, revenue, we’ve additional in, in recognized so to just revenues come comes billing is It’s, we lines working them. when various cash customers, of


Credit next comes the line of Wright from of Suisse. Erin Our question

line Your is open. now

Erin Wright

here. Covance A couple on

can a And this, sorry you and the the or business are flow the out gave of of helpful. but new if any book-to-bill for to trend nature underlying And Chiltern? Covance you speak RFP be excluding break would book-to-bill, wins did on you sort seeing comparable business commentary that you

John Ratliff

third, in we first to so second, saw new terms the trend to to a Chiltern second book-to-bill, immaterial proposals. was progression The RFP, the nice on rate business of and

of the central after terms Chiltern September on the was comparable I XQ. in approach order on of rates. of in the the to then terms nice up business bit and integrating from a momentum little the early completion And strong. business, performance Obviously, think a of the the clinical was segment labs XQ X in then development

bit of individual description in So that’s the little silos. terms a of

Erin Wright

segment, now? asset? preclinical to you the your over on is that business the business Covance I how guess, that ROA longer guess, segment, commitment, what’s term And within for development I And your big

John Ratliff

out preclinical, we’re on position, can chemistry the And leadership now it’s like out and broaden the position, in of the non-chemistry areas science area allocation in that’s with bring the the we’re we we Dave the strong. one, It’s the number a in the of the base And results, areas which of business. great to some both business. infrastructure capital feel that even commitment et Obviously, number menu don’t even is the side really of the We putting segment and two break our depending segmentation or we large that BioA or of that terms of stated, molecule, service and business BioCMC unit. as the the by the to business, the within in evidenced of whether cetera, table. investing the


question next Quirk the from Piper of line Bill Jaffray. Our comes of

is open. line Your now

Bill Quirk

here. Couple of questions

light in presumably were, ago? acquisitions may some months they lab changed first little couple I a general. PAMA? would Help question. allocation think guess, capital us of that, Dave, I has So And I suppose, a I of guess, a about than little now in say, specifically, all cheaper suggest be bit this at

Dave King

Well, look strategic. has I with our it always we to think, start at activity, history Bill, if you be of acquisition

Sinai, Pacific at are acquire optimistic PAMA joint transactions business There Again, from potential we’ve just once be some robust that we of And I much. changed there see you acquisitions, don’t fit. great are is we’ll valuations that for strategic, that therapeutic of health-system and around know New some smaller implemented, I the It it as do, the positioning some so in these is that greater been But fit, to transactions model, us underneath fit, a pipeline at we integrated, and ventures PAMA they they very long this the from quite activity feel strategic from continue then fit lab term may we strategic assets going of on see and time. all what has good if look assets. reasonable. opportunities. do selective for look to geographic of year terms we’re two growth. has the our terms of side, market, And structure, significant that multiple done York Mount PAML PAML Northwest market, highly City the in

Bill Quirk

And effect PAMA the private pay and it. there. got then appreciate the business potential your comments Okay, and around on comments

just that how then business. exposure. we of Just is much potential us a the tied fee-for-service How word on pricing? traditional remind Medicare about And maybe, to thinking Medicaid should Dave, be

Dave King

not than NLA. book. a book. the Medicaid is to about Limitation Well, Medicare Medicare tied allowed It the small fee-for-service Amount, National the traditional of fee-for-service our of part Medicaid It’s X% to very but is is per not se, pay probably more

it’s above is the current Medicaid pay reality above Medicare reduced state NLA it, -- rate NLA rate by payment that required then is now that is NLA. below is already will be I’m Medicare the The the the Medicaid the Medicaid law. if and sorry, well Medicaids reduced, So it, many

there PAMA going of terms the significant fee-for-service Medicaid pricing. I not So impact do is think be to in a from


comes question Ricky Stanley. of next our from the And Morgan Goldwasser of line

Ricky Goldwasser

of questions. have follow-up couple a I

First flat rates proposed of margins all, PAMA cuts next on obviously, parts a you if moving around a keep next do of for hold, segment think lot can do year? But lot the of year. that you and lab discussion the

Dave King

Dave. it’s Ricky,

that I too make -- PAMA headwind. will a will be what through them I’m all again. And tailwinds be the as Obviously, it’s going a with well. that think potential capital about have a and do to have not could that deploy earlier, -- to run we We the could also margins. incremental mentioned early is prediction I toward to to happen acquisitions margins

at really this say instinctively, that we So what’s without margins won’t flat, to keep be happen. to going not prepared it’s to to difficult going knowing able be I’m to but point

Ricky Goldwasser

Okay, but point. that’s And from acquisitions, both Volumes in strong. were the fair. the quarter, organically, M&A then on

you drove that anything that and for it were volume, should just or you announced announce didn’t benefited the account X% On everything not any last we there and new? that additional to quarter that contribution M&A, acquisitions assume

Dave King

will. Yes, Ricky, nothing, if you

three But obviously, development drug the acquisitions, being last XX small the is for not that the over we have did we quarter, but will would two quarter, For and the for number essentially, any largest the tuck-ins we for just acquisition last did Chiltern the months. be the -- done acquisitions there.

and that that contribution annualize hasn’t So would is. those acquisitions into anything quarter, coming shows a And then off factor then will the from change. new M&A annualized be up in that what each

so of part organic a growth. of period September, obviously, commented will the case it now in quarter. next a be quarter, of for Diagnostics, our annualized Sequenom we the in time This wasn’t So that Sequenom

Ricky Goldwasser

a were were basis, second business, But couple point, the the were that your sequential there not though in on quarter? Diagnostics acquisitions there a to there in of

Glenn Eisenberg

at but continue again, to were small, not acquisitive move we very numbers, they very, meaningful wouldn’t and Right, all. the be


Wells Evans Tim And our line the from next of question of Fargo comes Securities.

Tim Evans

Chiltern about doing Covance if guidance, And be that a $XX full you be? $XXX I already, have assume wanted it year currency Covance the where growth delta guidance. like million the I’m that if correctly? for to to full come year revenue and If constant looks on back correctly, is the to lower on we math million to using at I do my that might would track guided Am basis. revenue not, looking organic the the

Glenn Eisenberg

that number for comment good a I’d the say take will provided, the annualized proxy we the legacy four that we’ve that Covance right, will you give as so Chiltern. well All take currency, the, the come obviously from impact the prior Chiltern, call do you contribution months, for and from the within organic acquisition. it, year-over-year We’ve expect the given growth you to

gives of We’ve business existing trends, year-over-year. the off enjoyed as So well as the our bookings the organically, those the as backlog confidence, And of John all given growth growth good see sequential on earlier, base again, similar within and and comment forward, Covance will quarter. strength based a third that good the continue of what we’ll lot attributes. us to within revenue commented convert, going

Tim Evans

that? growth little help quarter. organic you can this than less preclinical, a say central that anything in did be? John Was it clinical, particular might you that bit were characterize why expecting think was lab, you I maybe that And Can about talk us there

John Ratliff

just segments, of growth in Covance segments. but early terms the in and from think, development organic year-on-year terms the clinical, those of having growth the I in and then standpoint sequential aggregate slightly all of of less still the


Our question Canaccord of Mark Massaro Genuity. of line the from comes next

now open. is line Your

Mark Massaro

tests, think joining given in CMS? the a single-digit potentially hearing have that year, of maybe of ACLA, to facing tests from per through if been the can and you’ve And I number receptivity just walking rates support the just you be been you’re that are now, XX% is certain to for time about communicated I can speak there’s high part and access Dave, providing some that you you been comments or momentum two-parter, through? away the -- now maybe goes cuts the assuming to thinking then some guess, of to broad A lower-margin can. that speak even second PAMA out you some can draft some of might how

Dave King

said particular imply away to service intention to all, it have our I providing any particular walk of First to from never any meant or or our test certainly was that patients.

the else access we be We’re looking patients, of and first obviously, something in at here infrastructure, that size business. industry not our at will said, looking looking the foremost, That our at and would the so in for thinking. and points, be everybody

service patient We have about centers. X,XXX

We changes PAMA offices; at to we’re gets doctors’ have have whether right-sized, implemented. the phlebotomists look in if we given

of beneficiary will rural more most of areas points yet, in were hospitals. is or think the a impact rural be I homes, rural concern of where the and PAMA very from from which fewer These provided Nursing largely local model them unique are felt, service they’re X% terms data obviously, is than of access many typically, laboratories providers, are, who facility, they’re which ambulatory our of a -- by completely different in it’s on largely model, a a is patients. bed. focused in are patients demonstrably nursing

and go go Someone I business but there has them the into and a model. draw detail, won’t it’s very all different to out

OIG laboratory if access the where which the over reports, most and an X% the flat critically industry of and that’s need the been spend has services, is look Medicare who will at total concern trend years. last Our three be those again, lost as people you are the spending actually

completely is of to Congress out intended. the what of So impact these proportion cuts ever

had Now in on other compliment amount and letter health collectively, tremendous ACLA, the from that colleagues I Hill the around industry, the CEO joined in care them of want groups activity to receptivity, the should the and the here. terms my Association, should these XX there’s and Hospital a consensus, and the executive Association, otherwise, the ACLA industry that and American wait thing a right that very from of we’ve Capitol CMS American right delay appropriate of are not College a rates, PAMA to strong rates including the Pathology, the urging Medical do American get the

for into accomplish. start Medicare, and a to foray based said, it’s to a bad what we pricing is is Congress this As trying market first

to and the both receptivity there supposed near-term months. to long-term the is done, you is in how effect going to that into about and get to solution, in obviously, are rates October of the just end given proposes these that filed a thinking CMS challenge It’s So two rates. do finalize but we’ve of details be comments, the go


And of of from our Giacobbe Ralph comes line Citi. next question the

line Your now open. is

Ralph Giacobbe

million that I’m right XX revenue of about the like XX the -- of million of it Just of assuming impact about proxy that’s assuming well? looks thinking margin I’m good volume from the a understanding is as EBITDA, and hurricane, about incremental that leverage of lack I’m just sort volume.

Glenn Eisenberg

quarter couple bad the reserve that experience. did One, up the upon build come affected the again, for volumes. collections play. challenges Ralph, what things Yes, reduced from historical we But impact into in potential the those our of of based debt also during our areas,

very volume expense, for us is result. incremental volume. as comes kind that So increase you will, a so profitable, on Obviously, have drop-down you of impact the in down, the the of if debt the bad plus

XX So the our $XX a around two millionish your of impact revenue on the around line. to and operating those point, income caused impact negative on million

Ralph Giacobbe

much the Medicare to that’s commercial could is and give And just that then, to current maybe that’s helpful. that rate Advantage, or us of Medicare? Okay, And if is to MA want commercial you closer confirm that, bucket, how right? revenue just is sense a closer in

Dave King

revenue. Medicare it’s to is part the bucket, commercial Advantage, typically, break commercially and out is tend Dave. would be as in of to It think by Medicare out those much it’s I Ralph, We broken care don’t the as managed negotiated specifically schedule. fee opposed set rates how

the and to that get past more queue. already hour, So we’re question to three just I we been try five you everyone. sure people has make to ask not have the we’ll everybody, answered. the Please, in asking you’re


Our comes of Dave next the from line Jefferies. Windley of question

line Your now open. is

Dave Windley

for environment the areas. traditional growth, Focused pricing apart target on comment if segments, Covance, the environment, opportunities pricing wondering clinical from could on and then particularly the you preclinical I’m across and first,

that real-world, late-phase examples. talked So about, for you’ve example, type areas Pac IV, Phase Asia as

John Ratliff

of the efficiencies more all efficiencies to effective Dave, for of in in-house. own then Obviously, looking terms and stable. it’s we to pharma and is continue pretty develop trials our approaches to need pricing,

be opportunities broader acquisition we than more And So there’s are the one, spectrum, a but I more faster of the look a of because infrastructure, environment. now always going the opportunities, then pretty to dynamic, across environment from emerging, it’s that in number when medium, consider, growing opens Chiltern broader pharma. areas. the stable the the small, do up now in attack standpoint much the the high to large base singles the dollars see real-world growth R&D terms their We of much more

Asia have, businesses, safety is Pacific, can attack positive just Dave, the we and upon building strength, it’s in XXX-plus in go that base, the you whether the of the optimization, building your growing. Asia we base some added clinical our a on early even employee opportunity environment. terms technical another they metabolic base central resources upon that now but Pac We very of lead labs, assessment, terms the of the base, see see significant

take see question, those we’re to all that. appropriate of and for primed adjacent advantage looking we opportunities Covance So


next Isaac Sachs. the question our comes of line Goldman And from Ro of

open. is Your line now

Isaac Ro

strategic precipitate a could If stay As few think for it not out, Question your broader to take to the than or months this whether at for labs you to to set whether M&A. that’ll I’m of smaller of smaller take curious, do here if relates as PAMA start potentially that? to relates competitors, a the independent. mostly look to as considering a it opportunity here some ones, longer decisions that how we you they M&A? want sort or you lot accelerating make to it plays just as situation look these expect

Dave King

Dave, Yes, that Quirk and has to when I the asked pretty response this the as pipeline I it’s in said question environment M&A been think it, Bill robust.

be to with deals that try to choose M&A, the continue to be throw to what be in be whether lot very unclear. that going on selective the the we continue not will we will the whether labs, smaller robust. their will But will sure they’ll do. it’s in it think pipeline the we I’m like it’s impact I acquisition just to hospitals, be it and

Isaac Ro

it ask what you’re Is a labs that reaction the say early. point, this to it’s properly. I other change trying Maybe I’m fair from more those because specifically, not to sense then, of been? has behavior get in seeing sorry, didn’t it a at just

Dave King

statement. accurate an that’s Yes,


of line from comes Capital. Rohan our the Abrol of question KeyBanc And next

Rohan Abrol

wanted you you’d trends me. CRO to just Yes, full-service I just business? and a elements any respect know quick if are the point out one the FSP from of seeing to to like particular with

John Ratliff

an seen seen with that now Well, more Covance FSP programmatic just they I a in more shift Chiltern, FSPs. management other. a bring business see balanced the respect But from then, business of stack, the oncology monitoring. We’ve the offering data the with couple to where that to all FSPs. we seen in that example, in continuing. an CoSource to programmatic mind, strategy I the with continuing FSP actually FSP I’ve penetration haven’t go versus was the to just programming, focused base, a, now are with from FSP add greater forward more enterprise a of companies as on on having talent of an

So service an broader-based now the to now offering. take encompasses and of being enterprise that offering all different segments, that trying advantage


showing King remarks. for further to this over to no Mr. the hand closing time. I’m any And back Dave questions at call like I’d

Dave King

extremely of patients of very just the thank on again, for in closing, I response these and you want the the ahead behalf optimistic XX,XXX day. good recognize quarter with you, -- pleased our Again, and the the strong in Thank our to very we’re the in reiterate and are we the storms quarter. performance years business a very, Thank colleagues really performance to, and of. much. In efforts impactful in very community future the all terrific of about very


gentlemen, all in conclude you great That does and today’s conference. for today’s Ladies day. disconnect. you may thank participating program, Everyone, have and a