Quest dims revenue outlook as it sells stake in J&J cancer drug
|Quest Diagnostics CEO Steve Rusckowski|
Quest Diagnostics ($DGX) is dampening its already staid expectations for 2013, posting another quarter of declines in income and revenue while it works to raise cash by selling off non-core operations.
In the second quarter, Quest clocked $1.8 billion in revenue, a 3.3% decline over the same period in 2012, and net income slipped 12.6% to $153 million. Quest blames about 3.2% of its revenue drop on reduced reimbursement for diagnostic tests, and, with that environment unlikely to change any time soon, the company now expects full-year sales to come in between 1% and 2% below 2012, down from its previous guidance of flat revenue.
But Quest is still in the midst of its turnaround plan, and, in its latest effort to raise capital and get more efficient, the company has sold off its stake in Johnson & Johnson's ($JNJ) ibrutinib to Royalty Pharma for $485 million in cash. The cancer drug won the FDA's "breakthrough" designation this month, likely setting it up for a speedy trip through the approval process, but Quest CEO Steve Rusckowski said the company did its due diligence and decided now was the time to cash out of what could become a blockbuster.
The ibrutinib deal follows a bevy of exits for the cash-hungry diagnostics giant. In February, Quest sold its HemoCue diagnostic products business to Danaher's ($DHR) Radiometer Medical unit for $300 million, and, in December, the company shipped out salivary testing subsidiary OralDNA to Access Genetics for an undisclosed sum.
"As we've previously shared, 2013 is a building year," Rusckowski said in a statement. "We are making good progress executing our 5-point strategy, and we expect stronger performance in the second half."
Part of that 5-point plans means doing some M&A of its own, and Quest has purchased the lab outreach segment of Dignity Health and Concentra's toxicology business this year, two deals it expects to add 1% to 2% revenue growth per year as it focuses on its core diagnostics offerings.
Separately, Quest will welcome aboard a new CFO later this month, recruiting Mark Guinan, who served the same role at Hill-Rom ($HRC) since 2010 and was previously an exec at J&J and Procter & Gamble. Ex-CFO Robert Hagemann left the company in May after more than 20 years Quest.