Quest Diagnostics Q4 up despite product setback
information and services announced better than expected fourth
quarter results after increased clinical testing activity helped to
offset a weakness in its test kit manufacturing unit.
Fourth quarter revenues grew 11.8 per cent over the prior year to reach $1.4 bn (€1.2 bn) and Quest ended the year with a total net income of $130 m, a 12 per cent rise on 2004.
Clinical testing performed well in the fourth quarter, with revenues growing 8.7 per cent after a 6 per cent jump in clinical testing volume and a 2.8 per cent increase in revenue earned per requisition.
3 per cent of this revenue growth was attributed to new business from the acquisition of LabOne Insurance Services Group, completed in November, 2005.
"Our clinical testing business delivered another quarter of strong performance," said Surya Mohapatra, >Quest's chairman and CEO.
However the results were hampered slightly by a problem at Quest's test kit manufacturing subsidiary, Nichols Institute Diagnostics (NID).
In October Quest and NID each received a subpoena seeking the production of various business records, including documents related to NID's tests for parathyroid hormone (PTH) levels.
As a result the product was put on hold, costing the company $16 m before taxes and a consolidation in revenue growth of approximately 1 per cent.
"We are disappointed with the performance at NID, and are actively working to address the issues," said Mohapatra.
Merrill Lynch analyst Thomas Gallucci told investors that Quest is now evaluating its options for NID, including a possible sale of the troubled unit.
Moving on into 2006, Quest expects revenues to continue to grow at a rate of 12.5 to 13.5 per cent, with clinical testing again faring well and LabOne expected to fuel 8 per cent of this growth.
However, analysts are slightly more cautious, predicting a revenue increase of about 9 per cent from this year's results, to reach $5.97 bn.
