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Edited Transcript of LH earnings conference call or presentation 25-Jul-19 1:00pm GMT

Q2 2019 Laboratory Corporation of America Holdings Earnings Call

BURLINGTON Jul 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Laboratory Corporation of America Holdings earnings conference call or presentation Thursday, July 25, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Clarissa Willett

Laboratory Corporation of America Holdings - VP of IR

* David P. King

Laboratory Corporation of America Holdings - Chairman, CEO & President

* Glenn A. Eisenberg

Laboratory Corporation of America Holdings - CFO & Executive VP

* John D. Ratliff

Laboratory Corporation of America Holdings - CEO of Covance Drug Development

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Conference Call Participants

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* Bryan William Ross

Jefferies LLC, Research Division - Equity Associate

* Daniel Louis Leonard

Deutsche Bank AG, Research Division - Research Analyst

* Eric White Coldwell

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Erin Elizabeth Wilson Wright

Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst

* Jack Meehan

Barclays Bank PLC, Research Division - VP & Senior Research Analyst

* Kevin Caliendo

UBS Investment Bank, Research Division - Equity Research Analyst of Healthcare IT and Distribution

* Kevin Kim Ellich

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Kim Suzie Yoon

Evercore ISI Institutional Equities, Research Division - Associate

* Lisa Christine Gill

JP Morgan Chase & Co, Research Division - Senior Publishing Analyst

* Mark Anthony Massaro

Canaccord Genuity Corp., Research Division - Senior Analyst

* Matthew Richard Larew

William Blair & Company L.L.C., Research Division - Analyst

* Patrick B. Donnelly

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Ralph Giacobbe

Citigroup Inc, Research Division - Director

* Rivka Regina Goldwasser

Morgan Stanley, Research Division - MD

* Ivy Ma

Bank of America Merrill Lynch - Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Q2 2019 LabCorp Earnings Conference Call. (Operator Instructions). As a reminder, this conference call is being recorded for replay purposes. It is now my pleasure to hand the conference over to, Ms. Clarissa Willett, VP of Investor Relations. Ma'am, you may begin.

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Clarissa Willett, Laboratory Corporation of America Holdings - VP of IR [2]

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Good morning and welcome to LabCorp's Second Quarter 2019 Conference Call. As detailed in today's press release, there will be a replay of this conference call available via telephone and Internet.

With me today are Dave King, Chairman and Chief Executive Officer; Glenn Eisenberg, Executive Vice President and Chief Financial Officer; and John Ratliff, CEO of Covance Drug Development.

This morning, in the Investor Relations section of our website at www.labcorp.com, we posted both our press release and Investor Relations presentation with additional information on our business and operations, which include a reconciliation of the non-GAAP financial measures to the GAAP financial measures discussed during today's call.

Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to estimated 2019 guidance and the related assumptions, the impact of various factors on operating and financial results, expected savings and synergies, and the opportunities for future growth.

Each of the forward-looking statements is based upon current expectations and is subject to change based upon various factors that could affect our financial results. Some of these factors are set forth in detail in our 2018 Form 10-K, and subsequent Forms 10-Q, and in the Company's other filings with the SEC. We have no obligation to provide any updates to these forward-looking statements even if our expectations change.

Now, I'll turn the call over to Dave King.

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [3]

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Thank you, Clarissa, and good morning. I'll begin by discussing financial highlights of the second quarter. Our results in the quarter were again driven by strong demand across both businesses and consistent execution of our strategy to deliver world-class diagnostics, bring new medicines to patients faster, and use technology to change the way care is delivered.

We delivered another strong quarter across the enterprise. Revenue of $2.9 billion was nominally an increase of 0.5% over last year, but this significantly understates the strength of our operational performance. Top-line revenues from continuing operations grew 4%, decreased by three major non-operational items: 1.9% of divestitures, 0.9% of PAMA impact, and 0.7% of negative currency. We delivered excellent margin performance given the impact from PAMA, and adjusted EPS of $2.93. We also deployed $656 million to strategic acquisitions and $200 million to share repurchase.

Our Diagnostics business again performed well as our team continued its outstanding work retaining volume put at risk by managed care contract changes.

Revenue per requisition in the quarter, excluding divestitures, was very strong, growing at 2.5% excluding the impact of PAMA.

Despite PAMA and other headwinds, our organic volume, revenue per requisition and Diagnostics LaunchPad II initiatives combined to deliver an impressive 19.6% adjusted operating margin.

Our priorities in Covance continue to be driving net orders, converting backlog into profitable revenue growth, capitalizing on strategic investments such as Envigo, and focusing on our key initiatives: Precision Medicine, Patient Solutions, Data as a Differentiator, and new Global Delivery Models.

Investments in our Covance team, end-to-end capabilities, therapeutic expertise, and global infrastructure translated into over 6.8% revenue growth, margin expansion of 90 basis points, over $10 billion of backlog, and a trailing twelve-month book-to-bill of 1.26.

The backlog growth, exceeding $10 billion for the first time, is further evidence that our differentiated, data-driven offerings are resonating with existing clients and attracting new business.

Now, I'll review the quarter's performance highlights. Our integrated Diagnostics and Drug Development capabilities and data continue to create value in innovative ways that our competitors cannot match. I'll review several examples that showcase these capabilities.

First, our unique virtual and hybrid trial capabilities bring together our Diagnostics PSC infrastructure including LabCorp@Walgreens locations and logistics capabilities, as well as our Covance central labs, Market Access, project management, study design and data capabilities. These combined assets ease the patient burden of study participation and deliver faster and more cost-effective trials for sponsors.

In the quarter, we won several new awards, including an eight-year phase IIIb Cell and Gene Therapy study specifically designed to keep patients engaged over the lengthy timeline. The sponsor cited our unique ability to conduct blood draws at the LabCorp PSCs, deliver and track kits and samples, perform a full range of testing at Covance's central labs, provide patient support through the Covance Market Access business, and deliver FDA compliant data in selecting LabCorp for this important opportunity.

Second, we introduced our innovative new Patient Direct offering, streamlining patient recruitment by using LabCorp data and our direct connection to patients to quickly and effectively contact appropriate candidates for trials. Taking the sponsor's criteria, we sent e-mails to a targeted set of patients likely to qualify for the study based on diagnosis code, test results, and geographic location.

The emails referred the patients to the sponsor's website to enroll, and they were then routed to a LabCorp Patient Service Center for testing. We were compensated for each e-mail, for the testing, and for each enrolled patient. Based on the results of the initial campaign for a cardiovascular study, the sponsor has already significantly expanded the scope of work.

Third, Covance won a screening and recruitment study for a very rare pediatric disease where data from LabCorp Diagnostics, our recent MNG acquisition and other LabCorp partners combined to offer a unique solution. Our capabilities are unparalleled because they enable us to identify patients who are potentially eligible for the study but may have been misdiagnosed, and screen them for definitive diagnosis of the condition and for study eligibility.

Finally, we continue to advance our strong leadership position in companion diagnostics, and in oncology, with the introduction of two new companion diagnostics tests: PIK3CA for breast cancer and FGFR for bladder cancer. Revenue from all aspects of companion diagnostics grew nearly 30% and orders more than doubled in the second quarter versus last year.

These are among a growing number of proof points that our combined capabilities create unique and highly desired solutions for our customer needs that only LabCorp can deliver.

I'll now discuss this quarter's Diagnostics highlights.

Our managed care portfolio continued to perform well. The business grew in the second quarter, with United and Horizon volume holding stable, and we won several important contracts in key markets.

As a reminder, all of our LabCorp brands are included in UnitedHealthcare's Preferred Lab Network which went into effect on July 1.

Although we expect limited impact from the PLN in 2019, we are optimistic about the opportunity to grow volume with UnitedHealthcare through the PLN in 2020 and beyond.

We continued to grow our Hospital and Health System revenue and deepen our relationships. In the quarter, we announced the Mount Sinai digital pathology and artificial intelligence collaboration, and finalized several other new relationships with health systems.

We continue to work to overcome the inequitable Medicare price reductions imposed by the flawed implementation of PAMA. We are encouraged by the introduction of the Laboratory Access for Beneficiaries Act, a significant step in reforming PAMA to produce a truly market-based Medicare fee schedule. The LAB Act would delay the second round of PAMA data reporting to the first quarter of 2021 and would commission a study by the National Academy of Medicine focused on how to implement PAMA properly and deliver truly market-based reimbursement.

In the quarter, we continued our work on providing a seamless consumer experience. Our LabCorp@Walgreens partnership is on track to have at least 125 stores by end of this year, including sites in new states and major metropolitan markets. We are on track to achieve our target of at least 600 locations by 2022.

We are moving toward integration of our locations and capabilities into each other's digital experiences and Walgreens Find Care platform, and continuing to discuss a broader collaboration on health and wellness offerings and the "next generation CRO."

We also added consumer-initiated, phlebotomy-based testing to Pixel by LabCorp. This new offering expands the number of testing options available to consumers, and enhances access and convenience by giving them the option to have self-directed testing collected at LabCorp Patient Service Centers or LabCorp@Walgreens locations in states where Pixel by LabCorp is available.

LaunchPad II continues to progress well in transforming our business. A significant number of projects are underway, including digitizing operations, expanding digital and mobile options available to our patients, increasing transparency for consumers and healthcare providers and streamlining all of our workflows. We remain on track to deliver a transformed business and a total of $200 million of net savings by the end of 2021.

Now, I'll discuss Covance highlights in the quarter:

On June 3, Covance completed the Envigo transaction, divesting our CRP business and enhancing the reach and scope of our non-clinical early development business. This transaction infuses scientific talent and global technical expertise into our non-clinical business, and substantially increases global capacity with an expanded footprint in Europe and the U.S. We are excited to welcome our new colleagues to Covance as we focus on integrating our expanded capabilities seamlessly.

Recognizing our strength in drug development across the Covance business, a sponsor recently awarded us a full molecule development program, which included a pre-clinical toxicology study, a Phase I pharmacokinetic/ pharmacodynamic study to be conducted in our Clinical Pharmacology Unit and a large Phase II program, including three studies across two cardiovascular indications. This award was driven by our regulatory expertise and our biomarker capabilities, and demonstrates Covance's ability- unique among CROs - to take drugs to Early Discovery through to FDA approval.

Covance continues to improve its award-winning Xcellerate platform, which facilitates complete study quality management and risk-based monitoring according to the ICH guidelines.

Recent additions include implementation of a company-wide Risk Library and deployment of Xcellerate Action Alerts. These enhancements increase our capabilities in managing study risks and overall study quality, leading to improved safety for study subjects, more efficient trial operations and more effective use of study budgets.

We continue to execute our Covance LaunchPad initiative and are on track to deliver $150 million of net savings through Covance LaunchPad initiatives by the end of 2020.

We completed the $30 million in cost synergies from the integration of Chiltern that we committed to deliver in 2020, and expect to achieve $10 million in net cost synergies from the integration of Envigo by the end of 2021.

In closing, we are pleased with our second quarter performance. When we acquired Covance [five years ago] (added by company after the call), we knew that the power of the combined would result in a differentiated offering that would position us to become a unique global life sciences company. That decision reflected our strategic vision for the company's future, our established commitment to playing the long game, and our confidence in our exceptional team of colleagues around the world dedicated to caring for patients. We are seeing our vision for the combined enterprise come increasingly to life as we pursue our mission of improving health and improving lives.

Now, I'll turn the call over to Glenn.

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Glenn A. Eisenberg, Laboratory Corporation of America Holdings - CFO & Executive VP [4]

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Thank you, Dave. I'm going to start my comments with a review of our second quarter results, followed by a discussion of our performance in each segment, and conclude with an update on our 2019 guidance.

Revenue for the quarter was $2.9 billion, an increase of 0.5% over last year. The increase was primarily due to organic revenue growth of 1.7% and acquisitions of 1.4%, partially offset by divestitures of 1.9% and foreign currency translation of 70 basis points.

Excluding the negative impact from PAMA of 90 basis points, organic revenue grew 2.6%.

Operating income for the quarter was $336 million, or 11.6%, of revenue, compared to $369 million, or 12.9%, last year.

During the quarter, we had $51 million of restructuring charges and special items, primarily related to LaunchPad initiatives and acquisition integration. Adjusted operating income, which excludes amortization of $60 million as well as restructuring charges and special items, was $447 million or 15.5% of revenue compared to $464 million or 16.2% last year. The decline in adjusted operating income and margin was due to the impact from PAMA of $27 million, higher personnel costs and cybersecurity expenses partially offset by organic demand and LaunchPad savings.

The tax rate for the quarter was 29.4%, compared to 25.1% last year. The adjusted tax rate, excluding special charges and amortization, was 25.2%, compared to 24.5% last year. The higher adjusted tax rate was primarily due to the mix of earnings. We continue to expect the Company's adjusted tax rate for the full year to be between 25% and 26%.

Net earnings for the quarter were $190 million, or $1.93 per diluted share. Adjusted EPS, which exclude amortization, restructuring charges and other special items, were $2.93 in the quarter, down 2% compared to last year.

Operating cash flow was $254 million in the quarter, compared to $387 million a year ago. The decrease in operating cash flow was primarily due to higher working capital requirements to support growth. Capital expenditures totaled $85 million, or 3.0% of revenue, compared to $87 million, or 3.0% last year. As a result, free cash flow was $168 million in the quarter, compared to $300 million last year. We remain on track to achieve our free cash flow guidance of $950 million to $1.05 billion in 2019.

We remained active throughout the quarter in terms of capital allocation. During the quarter, we invested $656 million in acquisitions and repurchased $200 million of stock. As of June 30th, we had $1.05 billion of authorization remaining under our share repurchase program.

At quarter end, our cash balance was $265 million, down from $349 million at the end of the first quarter. Total debt at quarter end was $6.6 billion, and our leverage was 3.4x gross debt to last twelve-months EBITDA.

Now, I'll review our segment performance, beginning with LabCorp Diagnostics. Revenue for the quarter was $1.8 billion, a decrease of 2.9% compared to last year, due to divestitures of 2.8%, foreign currency translation, and organic revenue, partially offset by acquisitions. Organic revenue was down 0.3% in the quarter, which includes the negative impact from PAMA of 1.5% and fewer revenue days of 0.6%.

Total volume, excluding divestitures, decreased by 0.9% from last year, due to the decline in organic volume of 1.2% partially offset by acquisitions of 0.2%.

Organic volume was reduced by approximately 2.5% due to the combination of lower consumer genetics demand, managed care contract changes, and fewer revenue days. Excluding these items, organic volume was up 1.3%.

As a reminder, we do not include hospital lab management agreements in our volume, which would have added approximately 1.8% to our volume growth.

Revenue per requisition, excluding the impact from divestitures, increased by 1.0% due to mix. Revenue per requisition was negatively impacted by 150 basis points from PAMA.

LabCorp Diagnostics' adjusted operating income for the quarter was $345 million, or 19.6% of revenue, compared to $376 million, or 20.7% last year. The $31 million decline in adjusted operating income was primarily due to PAMA of $27 million. The negative impact from divestitures, managed care contract changes, cybersecurity expenses, fewer revenue days and personnel costs was essentially offset by LaunchPad savings, other organic revenue growth and acquisitions.

We remain on track to deliver $200 million of net savings by the end of 2021 from our Diagnostics LaunchPad initiative.

Now, I'll review the performance of Covance Drug Development. Revenue for the quarter was $1.1 billion, an increase of 6.8% compared to last year due to organic growth of 5.5% and acquisitions of 3.3% partially offset by foreign currency translation of 1.6% and divestiture of 0.3%.

Adjusted operating income for the segment was $142 million or 12.6% of revenue compared to $123 million, or 11.7% last year. The $18 million increase in adjusted operating income and 90 basis point improvement in margins were primarily due to organic demand, LaunchPad savings, acquisitions, and currency translation, partially offset by higher personnel costs, cybersecurity investments, and facilities expenses to support the Company's global expansion.

We remain on track to deliver $150 million of net savings by the end of 2020 from Covance's LaunchPad initiative.

For the trailing twelve months, net orders and net book-to-bill remained strong at $5.5 billion and 1.26, respectively. Backlog at the end of the quarter was $10.3 billion, an increase of approximately $350 million from last quarter. We expect approximately $4.1 billion of this backlog to convert into revenue over the next 12 months.

Now, I'll discuss our 2019 guidance, which assumes foreign exchange rates as of June 30th, for the remainder of the year and includes the impact from currently anticipated deployment of free cash flow toward acquisitions, share repurchases and debt repayment.

We expect revenue growth of 1.0% to 2.0% over 2018 revenue of $11.3 billion, a narrowing of the range as compared to our prior guidance of 0.5% to 2.5%. This guidance includes the negative impact from divestitures of 1.5% and foreign currency translation of 50 basis points.

We expect LabCorp Diagnostics revenue to be down 3.0% to down 2.0% as compared to 2018 revenue of $7.0 billion. This is an improvement over our prior guidance of down 4.0% to down 2.0%, primarily due to organic performance. This guidance includes the negative impact from divestitures of approximately 2% and foreign currency translation of 20 basis points.

We expect Covance Drug Development revenue growth of 5.5% to 8.5% over 2018 revenue of $4.3 billion, a narrowing of the range as compared to our prior guidance of 5.0% to 9.0%. This guidance includes the negative impact from foreign currency translation of 90 basis points.

Our adjusted EPS guidance is $11.10 to $11.40, which is an increase of 1% to 3% over 2018 adjusted EPS of $11.02, and a narrowing of our range as compared to our prior guidance of $11.05 to $11.45.

Free cash flow is expected to be $950 million to $1.05 billion, which is an increase of 3% to 13% over 2018, and unchanged from our prior guidance.

This concludes our formal remarks, and we will now take questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Jack Meehan with Barclays.

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Jack Meehan, Barclays Bank PLC, Research Division - VP & Senior Research Analyst [2]

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I wanted to maybe talk a little bit about the lab business in the quarter. And was hoping if you could break out for us within the 2.5%, what the impact in the quarter was from some of the managed care access changes versus the consumer genetics? And just given some of the noise on the consumer genetic side, just, what's built into the second half in terms of in and back and the comps in the fourth quarter?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [3]

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Yes, it's Dave. So in terms of the consumer genetics business, the volume for the second quarter was down about 1.1% versus last year. It's the first time we've actually seen a volume decline, but as we have for chatter free over the last couple of quarters, we had said, we expected consumer genetics volume to be flat to down for the balance of '19, that is built into the guidance. In terms of the changes in managed care access, we've not broken that number specifically, but what I'd say was basically flat from first quarter to second quarter, and the typical thing that you'd be interested in United and Horizon volumes basically remain stable and at the volumes increase a little bit for us. So broadly the managed care book did increase overall in terms of revenue and volume, but those three key components basically remained stable for the quarter.

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Jack Meehan, Barclays Bank PLC, Research Division - VP & Senior Research Analyst [4]

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Great. Also had two quick follow-ups on Covance.

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [5]

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You only get one. I am setting the precedence right here right now this morning.

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Jack Meehan, Barclays Bank PLC, Research Division - VP & Senior Research Analyst [6]

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Okay. So, appreciate Dave, also want to say congrats and see you in a few weeks.

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Glenn A. Eisenberg, Laboratory Corporation of America Holdings - CFO & Executive VP [7]

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Thank you, Jack.

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Operator [8]

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And our next question will come from the line of Ross Muken with Evercore.

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Kim Suzie Yoon, Evercore ISI Institutional Equities, Research Division - Associate [9]

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It's Suzie on for Ross. I guess just honing in on consumer genomics, what are your expectations for when those volumes could bounce back post 2019? And was the low demand a function of just one or two partners or the overall DTC genomics market?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [10]

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First of all, Jack, you're still entitled to one follow-up, sorry, I didn't mean to cut you off completely, just to say one follow-up.

In answer to the question on consumer genomics, we're not guiding into 2020, what we've set for the balance of 2019 is we expect consumer genetics volume to be flat to down. As you know, we have one primary partner in the consumer genetics business, which is 23andMe. So I think it's a fair inference that, that's where the volume decline is coming from. And in terms of what the future of the consumer genetics business looks like, our assumption is that it's going to be flat to down for the foreseeable future.

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Kim Suzie Yoon, Evercore ISI Institutional Equities, Research Division - Associate [11]

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Got it. And as a follow-up, around 23andMe, is there any color you can provide around 23andMe post some promotional periods we just passed?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [12]

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No. I -- the only guidance I can give you on 23andMe is what I responded in the prior question, which is, last year, we were slightly up in the first quarter, this year, we're down in the second quarter, we expect volumes to be flat to down for the balance of the year.

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Operator [13]

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And our next question will come from the line of Jack Meehan with Barclays.

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Jack Meehan, Barclays Bank PLC, Research Division - VP & Senior Research Analyst [14]

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I accept the follow-up question. Wanted to focus on Covance, just any color you can provide on how pass-throughs might have impacted revenue in the quarter? And a follow-up to the follow-up is, with patient direct, how broad of a patient pool do you think you can now address with that?

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John D. Ratliff, Laboratory Corporation of America Holdings - CEO of Covance Drug Development [15]

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On pass-throughs, Jack, this is John, it was -- pass-throughs were up this quarter and at the same time comparable to the organic growth that we stated at constant currency at 5.5% level. So we didn't have the anomaly that we had in first quarter.

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [16]

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And patient direct, Jack, it's Dave, the issue is where the sponsor comes to us with criteria that fit well within the items that we highlighted, which is geographic location, diagnosis codes, and lab results. But the potential opportunity there is very significant because, part of what is a differentiator in terms of winning studies is that we have been -- Covance capabilities of protocol optimization combined with the ability to look at LabCorp data and see as you're optimizing the protocols, where your patients are most likely to be and where you're going to, so to speak, what ponds you're going to catch the most fishes in. So we're excited about the patient direct and expect that it's going to continue to be a growing area. And as mentioned, we get compensated for each email that we send for the lab testing that we do and then for each patient that enrolls in the study.

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Operator [17]

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And our next question will come from the line of Lisa Gill with JPMorgan.

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Lisa Christine Gill, JP Morgan Chase & Co, Research Division - Senior Publishing Analyst [18]

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Dave, I just want to talk about the competitive landscape and some recent news around shifts in some competitive capitated contracts, said, I would presume shifted to LabCorp from Quest. When I look at your revenue per req being up 2.5% versus last year, it doesn't seem to really jive with what we heard around pricing. So really just two questions there. One, how do we think about the competitive landscape today? And two, how do we think about the actual profitability of this piece of business that shifted?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [19]

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Well, the competitive landscape is the same as it's always been, which is, Quest is an excellent competitor, we like to think of ourselves as an excellent competitors. There are other excellent competitors in the market as well. And of course, we have the built in competition of health systems, which have the ability to actually own providers in direct business internally, which is something that is not an option available to us. So the competitive landscape remains challenging, but it's no more challenging than it's been in my career. It's -- we're out there competing every single day. On the specific question about the contracts, I would just say, I think when you win a contract, it's always on quality and service, and when you lose a contract, it's always on price. So I would discount somewhat the observations around pricing and profitability and those things. And what I would point to is our revenue per requisition was up 1%, ex PAMA and 2.5%, including PAMA, our adjusted operating income was 19.6%, $27 million of the $31 million in decline in operating income versus last year was due to PAMA. That to me does not indicate aggressive price cutting, here at LabCorp, and we have been very disciplined around pricing. We continue to be disciplined around pricing, and I'm not going to comment on specific contracts, but I am going to say that, we don't go out and solicit and win business that is bad business or that is below our profitability or our price per accession from a per revenue per requisition expectations. We haven't done it and we're not going to start doing it now.

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Lisa Christine Gill, JP Morgan Chase & Co, Research Division - Senior Publishing Analyst [20]

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That's very helpful. And then just my follow up would be, Glenn, you talked about cash flow, acquisitions, share repurchase, paying down debt. Do you have specific things in the pipeline around acquisitions that we should be thinking about for the back half of the year? Or is that just kind of the general language of these are the kind of three things that we look at?

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Glenn A. Eisenberg, Laboratory Corporation of America Holdings - CFO & Executive VP [21]

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I think it's, yes, on both if you will, I mean, we have generated the bulk of our free cash flow in the second half of the year. We did lever up a little bit, obviously, with the Envigo acquisition, so part of our free cash flow will be used to pay down debt in the second half. But we don't have obviously a lot of financial flexibility to continue to pursue tuck-in acquisitions as well as be in the market repurchasing share. So the acquisition pipeline continues to be good across both businesses as we evaluate opportunities. And I think it's fair to assume that without, obviously, saying that, we will do transactions but that part of that capital in the second half could go to tuck-in acquisitions as well.

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Operator [22]

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And our next question will come from the line of Eric Coldwell with Baird.

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Eric White Coldwell, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [23]

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I just had a technical question on the calendar. I think this is the third quarter in the row where you've talked about calendar headwinds, revenue day headwinds. Can you tell us what exactly is going on there? And how does the calendar shake out for the rest of this year? And maybe I could lob the future request that we get revenue days or calendar day so analysts can be more thoughtful about modeling this going forward?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [24]

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Yes, Eric, it's Dave. So when we calculate the calendar, obviously, there's the same number of days every year, but what's important to us is the strength of days. So Mondays are not strong days, Saturdays are not strong days, Tuesdays and Wednesdays are stronger days, and obviously then there's the impact of holidays and pre-holiday days. So it's not quite as simple as saying there's so many days in this month and so many days in that month. It's how many Tuesdays and Wednesdays fall in a particular month versus Sundays and Mondays.

That said, every year, we look at the calendar and we calculate the strength of the total revenue days across the year. In the first quarter of this year, we were about a half a day below the first quarter of 2018. In this quarter, we're about a half a day below the second quarter of 2018. In the third quarter, the number of days will be identical year-over-year and the fourth quarter, we'll have the benefit of one more revenue day.

So that is the calendar for the balance of the year, and we will consider your request to give you more insight earlier in the year on the strength of the calendar and come back to you on that.

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Operator [25]

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And our next question will come from the line of Kevin Caliendo with UBS.

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Kevin Caliendo, UBS Investment Bank, Research Division - Equity Research Analyst of Healthcare IT and Distribution [26]

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Wanted to talk about the Diagnostic margin, it was a lot better than what we had modeled. You called out LaunchPad, can you talk specifically about the incremental savings that you got from LaunchPad in the quarter? And how we should be thinking about the Diagnostics margin going forward?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [27]

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Yes, I'll let Glenn start on that, then I'll add any comments that I might have.

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Glenn A. Eisenberg, Laboratory Corporation of America Holdings - CFO & Executive VP [28]

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Sure. Yes. Kevin, what we obviously talk about is the total LaunchPad initiative over the three years and the $200 million that we expect to realize, and we basically said, use a pro rata for each of the three years of the program. But the reality is as we do ramp up as we go throughout the program. So we don't quantify how much impact it has in any particular quarter, but clearly, when we talk about the headwinds that we had and how well Diagnostics performed, one of the key drivers to the performance was all the LaunchPad initiatives that will continue to benefit. As we think about the Diagnostics margins for the year, what we said was that, if you will, the second -- the decline in margins year-on-year is there, given the significant impact of PAMA. But that we expect to see less of a year-over-year decline as the year progresses because LaunchPad is ramping up. So even though margins will be down in the second half year-over-year, they will be down less than they were in the first half year-on-year, and obviously, yes, improvements expected as we get into 2020.

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [29]

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And I would just say, agree with everything Glenn said. I think it's also important to recognize that a lot of what LaunchPad is about is more than just near-term savings. So the business transformation from the digitization of the business and the streamlining of workflows is an ongoing savings for our business out in 2021 and beyond because we're able to do more without adding new heads, because we're able to redeploy the people that we have for customer facing position. So there's a pretty profound element of business transformation here that I don't want to lose sight of and that has greater long-term benefits than just the near-term cost savings.

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Kevin Caliendo, UBS Investment Bank, Research Division - Equity Research Analyst of Healthcare IT and Distribution [30]

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Got it. And just a quick follow-up on Envigo. I know it was only in for a short period of time. But was there any impact on bookings, book-to-bill? Any of that kind of stuff as you brought it on?

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John D. Ratliff, Laboratory Corporation of America Holdings - CEO of Covance Drug Development [31]

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Kevin, this is John. So it was only in there for one month, so a nominal effect. So as you know, in the early development area that has a quicker burn on the revenue side, a little bit lower book-to-bill but have nominal effect on the quarter.

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Operator [32]

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

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Rivka Regina Goldwasser, Morgan Stanley, Research Division - MD [33]

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So Dave, you seemed more positive today on the opportunity from United Preferred Lab Network. So when you think about the restrictions that United put in place that requires providers to do certain things to go out of network. Does this come out better than what you expected? And how should we think about that opportunity for next year?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [34]

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As I said in my prepared remarks, I think that impact this -- we're not expecting or factoring into guidance any significant impact from the PLN in 2019, just because of the start-up and the times it's going to take providers to become adjusted to the restrictions. I think the requirements that United has at least talk about for what they would ask providers to do before they go out of network are positive. For those of us who are in the network, I think, as we said for long-term, the real long-term opportunity is in benefit design and it's also in creating appropriate incentives for patients and for positions to use the more efficient lower cost providers versus referring either out of network or to higher cost providers who are in the network.

So I'm pleased with the initiative that United is taking. I'm pleased with the collaborative way, which they are talking to us and to the industry about how we can use the PLN as a device to improve quality and reduce cost of lab services. And I'm hopeful that in 2020, we're going to see some nice benefit from it.

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Rivka Regina Goldwasser, Morgan Stanley, Research Division - MD [35]

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Okay. And then my follow-up is in an earlier comment, you said that the volumes from United and Horizon stabilized 1Q to 2Q. I think that in the first quarter, you mentioned that the impact -- the negative impact was about 70 basis points on volume growth. So should we assume 70 basis points this quarter as well?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [36]

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I would say, approximately, I mean, we're not going to give the basis point by basis point. But it was in that ballpark of the 70 basis points and not materially different from what we saw in the first quarter. As we said, Ricky, we expected the major impact to be in the first quarter and that's how it's played out for us.

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Glenn A. Eisenberg, Laboratory Corporation of America Holdings - CFO & Executive VP [37]

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Ricky, another way to kind of get to the number a little bit, if you will is we talked about the three big headwinds on the volume accounted for roughly 2.5% headwind. We quantify the daily impact of 60 basis points in our opening remarks. Dave, commented about consumer genetics being around 1%. So you can get to the managed care impact of the comp around 1% as well as a little bit below.

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Operator [38]

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And our next question will come from the line of Dan Leonard with Deutsche Bank.

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Daniel Louis Leonard, Deutsche Bank AG, Research Division - Research Analyst [39]

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May be a quick clarification on that last point, Glenn. What was consumer genetics volume down 1%? Or was the headwind from the consumer genetics volume decline 1%, meaning that the business was down a lot more than that?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [40]

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No, the consumer genetics volume was down 1.1% versus last year.

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Daniel Louis Leonard, Deutsche Bank AG, Research Division - Research Analyst [41]

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Okay. And I want to spend my follow-up on that. So I have a quick follow-up here. Dave, you mentioned in your prepared remarks that you had important contract wins in key markets, can you elaborate? Or are these contracts with managed care companies, contracts with physician networks or hospitals, fee-for-service were capitated, any elaboration would be helpful?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [42]

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Yes, they were a couple of managed care contracts, and I'm not going to go into the minutia of every contract, but the reason we felt they were in key markets was that they were in markets where we probably felt that our exposure from the contract changes with United and Horizon were greater. So they helped to reinforce the strength of the business there. There were also a couple of health system transactions and as well the expansion of the Mount Sinai, a partnership to sort of another line of growth with the artificial intelligence of the digital pathology collaboration.

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Operator [43]

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And our next question will come from the line of Erin Wright with Crédit Suisse.

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [44]

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Before we do this, I just -- I want to correct a misstatement that I made just moments ago which is the 1.1% negative for consumer genetics was negative to volume for the business. It was not the consumer genetics year-over-year. I want to make sure I'm saying this right. So when we look at the organic volume being down, right, it was 60 basis points for the year-over-year comparison of days, 1.1% for consumer genetics and the balance being the managed care, so about 0.8% on the managed care, right? So that's how we got to the down number. So it wasn't the delta just within consumer genetics, that was the drag on the overall volume for the business, I'm sorry, I misstated that.

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Erin Elizabeth Wilson Wright, Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst [45]

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Okay, thanks, that's helpful, this is Erin. At Covance -- switching gears to the Covance, I guess, what inning would you say that we're in, in terms of better leveraging the data asset, the cost of CRO platform and then cost of Diagnostics platform. I guess, it's still relatively early. But you did highlight several examples in the prepared remarks. And I'm just curious if you could quantify or characterize with those, how the win rate is improving? How you're leveraging kind of some of the diagnostic you feel these data assets in? And also kind of, are you winning customers that you haven't worked with before on the CRO side?

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John D. Ratliff, Laboratory Corporation of America Holdings - CEO of Covance Drug Development [46]

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Yes, Erin, this is John. From the standpoint of any what inning, we'll call it in the -- right in the game, it is fourth inning, let's say, and from the advantage point of -- data is mandated in every deal that we do. And so when we win, that is based on, yes, data. But it's also based on the quality of the team, so quality of the medics, project management, et cetera. So there's multiple factors of why you win. From the standpoint of -- we potentially are going to be continuing to be in the middle of the game, only because we're looking at more data, more world data, more international data, looking at very specifically additional data. When you get into the oncology areas, you need additional data and that being the majority of our portfolio.

So the strength of our data is a myth. You have the worldwide nature of the central lab data and then the very specific capabilities of the Diagnostics data, and having that $2.5 million assessments of week, that we can analog. The data is tremendous. We feel capabilities have increased and continue to increase and we'll be looking at additional data to enable the business wins that we have had, but we'll have in the future.

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Erin Elizabeth Wilson Wright, Crédit Suisse AG, Research Division - Director & Senior Equity Research Analyst [47]

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Okay, thanks. And a quick follow-up. I guess, just digging to underlying test mix dynamics. What meaningfully influence kind of that revenue per req in the quarter?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [48]

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Erin, it's Dave. So we have strength in the non-consumer genetics. So genetics broadly not noninvasive prenatal testing. We have strength in allergy and we have strength in oncology, which was a nice trend over what previously has been sort of a flat business, the oncology business is trending up, a lot of that having to do with the companion Diagnostics capabilities. We had strength in women's health and we had some strength in medical growth monitoring. So broadly, the Esoteric testing base performed very well and that benefited us in terms of our mix.

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Operator [49]

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And our next question will come from the line of Patrick Donnelly with Goldman Sachs.

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Patrick B. Donnelly, Goldman Sachs Group Inc., Research Division - Equity Analyst [50]

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Maybe just one for John, on the Covance side, just looking at the back half ramp, can you just talk to the moving pieces there? I mean, obviously, Envigo rolls in, but in order to get to maybe the midpoint or even top ends, obviously, digging in some pretty nice growth in the back half. Can you just talk through confidence level there in the moving pieces?

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John D. Ratliff, Laboratory Corporation of America Holdings - CEO of Covance Drug Development [51]

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Yes. Confidence is there, Patrick. It's the combination of organic demand. Yes, to your point acquisitions, but it's also that you have less currency headwinds in the second half of the year.

So it's really enabled by those three things, the backlog of $10 billion, as Glenn stated, the 40% of the backlog in terms of line of sight tactically. And then clearly, the acquisitions kick in as well as then the currency based on today's currencies, you wouldn't see as much headwinds as you've seen in the first half.

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Patrick B. Donnelly, Goldman Sachs Group Inc., Research Division - Equity Analyst [52]

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Okay. And then maybe just one for Glenn, just on the margin cadence, staying on the Covance business, again Envigo coming in there. Can you just talk through the back half, how we should expect the margins to trend, obviously, the cost savings initiatives are really taking hold. But maybe just talk through again the moving pieces there with the M&A coming in and how we should expect it to trend?

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Glenn A. Eisenberg, Laboratory Corporation of America Holdings - CFO & Executive VP [53]

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Yes. You kind of hit on the points, we expect to see a nice improvement in margins in the second half of the year driven off of the organic growth in the business and the Launchpad initiatives that are kicking in. The acquisition of Envigo will mix up our margin as well as we have a full second half of the year with it.

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Operator [54]

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And our next question will come from the line of Ralph Giacobbe with Citi.

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Ralph Giacobbe, Citigroup Inc, Research Division - Director [55]

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Dave, those contract win that you mentioned, can you just give us a sense of when they were won, and was there an impact to volume in the second quarter? And/or is that more of a back half story?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [56]

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I believe one of them, Ralph, took effect February 1, and one on the March 1, there was a little bit of impact at the end of the first, but I would say most of the impact started in the second quarter. So it's going to continue to ramp throughout the year, but it's in the numbers.

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Ralph Giacobbe, Citigroup Inc, Research Division - Director [57]

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Okay. And any, I mean, I guess is there any sense of the size of those, I mean, is there capitative contracts? I guess, the argument is there's a lot more, sort of, volume not as sort of revenue per req? Or any more insights there?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [58]

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Well, I think you guys are referring that the contracts that our competitors have talked about the contracts that we won, and I honestly, don't know the answer to that question because they didn't specify the contracts. But what I will say is, if you look at the revenue per requisitions number for the quarter and you look at the volume number for the quarter, it doesn't suggest to me that there is anything that's going to have a significant impact one way or the other for the balance of the year either on the volume or on the price.

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Ralph Giacobbe, Citigroup Inc, Research Division - Director [59]

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Fair enough. And then obviously there's been the opening of the Aetna and United contracts and sort of this argument of a [see change] but then we hear about sort of the competitiveness of the market. So are the United and Aetna contracts more of, sort of the one-off nationals doing this but more sort of a status quo within regional contracts where there's just more exclusivity and that's just the way it's going to be?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [60]

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I think it's hard to generalize because, for example, Horizon, which is a regional contract, opened up on the other hand before the Florida Blue contract is still exclusive and we're not participating in it. So I think, the regional plans because of the concentration of where the patients are located and because of not having a need for a broad national network probably have more openness to exclusive contracts. I would also say, I think the trend is increasingly is how do we optimize the network to get the highest quality for our patients at a favorable price point.

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Operator [61]

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And our next question will come from the line of Derik De Bruin with Bank of America Merrill Lynch.

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Ivy Ma, Bank of America Merrill Lynch - Research Analyst [62]

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This is Ivy Ma on for Derik today. Just wanted to ask, what's the updated outlook for early-stage versus late-stage growth on the CRO side overall as an industry trend?

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John D. Ratliff, Laboratory Corporation of America Holdings - CEO of Covance Drug Development [63]

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I think from the standpoint of -- Hi Ivy, this is John, the late-stage versus early-stage, most analysts have the early-stage in and around the 4.5% to 5% growth, with the later-stage the industry growth is a little bit higher than that in 5% to 7% range. We see just based on the RFP flows, proposal flows, actually nice growth in both areas as well as even on our central labs. So we see pipeline strong.

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Ivy Ma, Bank of America Merrill Lynch - Research Analyst [64]

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That's very helpful, John. Just as follow-up also on the Covance side. Wanted to see what's the net book-to-bill for the quarter? And if there's any pass-through impact on revenues and bookings?

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John D. Ratliff, Laboratory Corporation of America Holdings - CEO of Covance Drug Development [65]

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The bookings regularly shift between the quarters so we're focused on trailing 12-month period versus the quarterly. We expect to continue to deliver, and we did that in terms of 1.26x. What I will say is that we've been remarkably consistent raising from around 1.24x to 1.26x over the last four quarters. Our service may seem to a little bit more heavily to the faster burning business than some of our competitors. So clearly, a slow burning work can provide a boost to bill and it won't take out the revenue generation. But we've been, as I said before, consistent with that 1.24x to 1.26x over the last four quarters.

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Operator [66]

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And our next question will come from the line of Kevin Ellich with Craig-Hallum.

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Kevin Kim Ellich, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [67]

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Dave. Two quick question. So first, you guys announced the Mount Sinai digital pathology in AI deal and then you also recently announced the path AI strategic investment. Just, could you give us a little bit more color on how big that opportunity is? And how much you think that could add to the growth over time? And then the second question is about Pixel and how big that is for you guys now and also where do see that going? Thanks.

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [68]

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Sure, Kevin. I'll start with the artificial intelligence. So this is -- the digital pathology is a long-term, I think significant opportunity in terms of both the improvement of the quality of care and the optimization of our pathology resources. I don't think we're going to see any material near-term impact, the idea with Mount Sinai is to introduce digital pathology, do side-by-side comparisons with actual pathologist, see how we optimize the use of digital pathology in routine pathology and are able to direct the pathologist towards the more complex and difficult cases. So I would say, long-term, I do see digital pathology expanding broadly across the laboratory business and there is a significant opportunity to better allocate and deploy resources, I don't see any major impact in the near term. In terms of path AI, we continue to be very interested in all forms of artificial intelligence and machine learning that will help with diagnosis, if I remember was more than ten years ago when we introduced image-guided path, which, in those days, was thought to be and was, I mean, a very dynamic change in the market from the traditional way of looking at path sphere. So it takes time for these innovations to take hold and to transform the business, but they are transformational over time.

On Pixel, it's not material right now. The self-collection devices, we continue to refine our abilities around the self-collection device. We view this self-collection device over time as a very important tool for our health system partners, for care of patients in the home. The big initiative this quarter was to get the Pixel offering into the Patient Service Centers where consumers can go, they can self-direct testing, they can get the results in a separate secure website, they can do as they choose with those results. So there is a health and wellness component. There are multiple reasons why people may want to get their testing done that doesn't come back through their primary care physician or through their insurance company. And what we're trying to do is, as we've said, we're a number of years now -- we're trying to meet the consumer where they want to be met and serve them in the way that they want to be served. I think the long-term opportunity with the consumer direct testing is quite significant for us.

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Operator [69]

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And our next question will come from the line of Brian Tanquilut with Jefferies.

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Bryan William Ross, Jefferies LLC, Research Division - Equity Associate [70]

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This is Bryan Ross on for Brian. Maybe sticking with the consumer side, I want your thoughts on the Walgreens retail strategy and maybe (inaudible)out on the Center's side. What's the thought process on the pace of center development and where those ultimately end up being located, is that more just for consumers who may not have easy access to LabCorp currently? Or are there other reasons such as may be aligned to certain payer population and as a follow-up, you discussed on the other areas where you can collaborative with Walgreens. So just want to hear your thoughts there and if anything's progressed on that front over the last couple months?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [71]

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Sure. As I said we are on track for 200 stores by the end of 2020 and 600 over time. The goal is, again, meet the consumer where the consumer wants to be met. And so part of the rationale for Walgreens Centers is places where we feel that we don't have the density of Patient Service Centers, the density of access points or the convenience that we would like to have. Part of it is our ability to draw patients who are -- who have other needs. We do market research on the patients in the stores. We find that, I think the number is about a quarter of them buy something else at Walgreens or fill up prescription at Walgreens so that's an important reason why they may choose Walgreens versus a standalone Patient Service Center.

And we have a great partnership with Walgreens. We are -- we meet and talk with them regularly. We have Senior Executive meeting just this week and talked about the opportunities ahead. As I highlighted in the prepared remarks, the integration of our digital and mobile experiences, and the integration of LabCorp capabilities into Walgreens Find Care now, we think is great step forward and gives us yet more opportunity for exposure and for patients being aware of the collaboration opportunity there. And then on the next-generation CRO, we have some very specific things that we're working on that I'm quite enthusiastic about it, and will have more to talk about with those in the next couple of quarters ahead.

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Operator [72]

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And our next question will come from the line of Matt Larew with William Blair.

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Matthew Richard Larew, William Blair & Company L.L.C., Research Division - Analyst [73]

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Wanted to ask about capital deployment, last quarter, John mentioned that following the Envigo transaction, you felt good about the capabilities on the Covance side and then obviously, alluded to some nice new contract wins this quarter, the leverages capabilities so in light of those comments, just wondering how you're viewing your pipeline both on the Covance side as well as on the Diagnostic side, and where you think you can use that capabilities across the enterprise?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [74]

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Yes, as Glenn mentioned, the pipeline is robust. When we think about adding capabilities, we've said many times, we always look at the strategic bit, that's the number one thing and then we look at the financial criteria.

To me there's no area in which we are significantly deficient in terms of the market. We always look on the Diagnostics side as where we can increase our critical mass, are there tests out there or capabilities out there, the MNG acquisition, for example. Small deal but very significant for us because it significantly increased our capabilities around nextgen sequencing and our ability to bring nextgen sequencing and genetic testing to market rapidly.

So and on the Covance side, John, would say, always looking at building strength in Asia Pac and gaining more critical mass there but there's no area -- we are going to look at every opportunity as, does it fit strategically, is it financially attractive, does it give us the appropriate returns and we'll choose among a very robust pipeline in that way.

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Operator [75]

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(Operator Instructions) Our next question will come from the line of Mark Massaro with Canaccord Genuity.

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Mark Anthony Massaro, Canaccord Genuity Corp., Research Division - Senior Analyst [76]

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Dave, you talked about the oncology offerings showing growth. Can you provide some examples of where you're seeing the strongest growth? I asked given that there seems to be a renaissance in the precision medicine, liquid biopsy space, on the cancer monitoring and the MRD detection side, and I'm curious to see to what extent LabCorp's looking to drive innovation in this space relative to some other really strong lab companies moving the needle?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [77]

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Yes, we've been very involved, Mark, in liquid biopsy actually for a number of years going back to the Covance, you've seen us using them in the Covance business as innovative ways of looking at cancer trials.

I think a lot of the strength that we're showing is in commercialization of companion diagnostics, again that are developed for Covance trials, or developed across the Covance business and then commercialized. And then what I would describe is, sort of more traditional oncology flow cytometry. I think, it's really important to recognize that the genetics of cancer are becoming much better understood and so we're seeing genetic testing around tumors, we're seeing testing around sequencing of tumors, all is well. So it's a nice broad base of growth area that highlights the combined capabilities of LabCorp and Covance as well as the one stop shop it can be obtained by doing business with LabCorp because of our capabilities do to the oncology, do to genetics, do to routine blood counts and other tests that are required as part of the oncology treatment, and also look at recurrence and look at tumor burden and other aspects of the continuing course of patient care.

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Mark Anthony Massaro, Canaccord Genuity Corp., Research Division - Senior Analyst [78]

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And then my related question, going back to direct to consumer genetic testing, some people that we've talked to have a view that DTC was great for ancestry testing, but has limitations for health given perhaps the lack of utility around array genotyping. Do you have a view about how this space, how this market could evolve and perhaps, whether it's a technology transfer more to sequencing?

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [79]

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My view is that the consumer genetics market is a market that consumers are very interested in. As you say, there was a lot of interest in sort of the ancestry side of it or the genealogy side of it. It is more complex with health. I think some of the consumer genetics companies have done a very impressive job in getting the FDA to approve health based claims and to be able to educate consumers on those health based claims. I think the real question is to what extent our consumer's going to adopt direct consumer genetic testing for health based as opposed to genealogy based purposes and I think that's a question that remains to be answered. I do agree obviously, that there would be benefits from moving more from array analysis to sequencing, but the other side of that is, when you do a sequence, there are so many things that are not known and so much opportunity for that confusion or uncertainty that I think it's just going to really be years before we know what the long-term future of the consumer genetics movement is.

Operator, I think we're out of question.

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Operator [80]

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Yes sir, we are. You may proceed with your closing remarks.

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David P. King, Laboratory Corporation of America Holdings - Chairman, CEO & President [81]

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Very well. Well, thank you for joining us this morning again. Very pleased with the strong performance this quarter and particularly, I want to highlight that we have more and more proof of points about the power of the combined enterprise in the way in which LabCorp and Covance are delivering unique solutions. And we're attracting new partners and new opportunities every day as a result of the capabilities that we bring to the market together.

So I thank our 60,000 colleagues around the world for the outstanding effort this quarter, and wish you all a great day. Thank you.

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Operator [82]

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Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program. And we may all disconnect. Everybody, have a wonderful day.