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Research on the business of cancer testing in The Americas, Asia & Europe

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Who’s Who in the cancer testing business: The labs

Just 11 lab groups took in $4b of the $17b that was spent on cancer diagnostic services in the US in 2013.

The Big Two, Quest and LabCorp, are the only lab groups with a nationwide footprint and anatomic pathology capabilities in every major urban market. These two bring in half the revenues in the cancer testing business. LabCorp passed Quest in cancer testing revenues for the first time in 2012, to become the biggest cancer testing lab in the country. The Big Two are under siege these days and finding growth very hard to come by. LabCorp’s overall revenues were up 2.2% in the first half of 2013; Quest’s sales were down 4.9% during the half-year. Quest and LabCorp have been making several acquisitions each year, and will probably keep doing so.

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Four of the top ten labs could be described as completely focused on cancer testing, and also making money. Myriad is still the most decadently profitable lab on the planet, but that will be a hard distinction to maintain in 2014 and beyond, now that their BRCA patent has been nixed by the US Supreme Court. Genoptix has been modestly profitable for four or five years. Genomic Health and Clarient have just been emerging into profitability over the last year or two.

Sonic and Miraca are in some ways similar. These are the #3 and #4 medical testing companies in the world. Miraca bought the less exciting anatomic pathology business of Caris Diagnostics in 2011, while Caris kept the molecular business. Sonic has made eight acquisitions in the US so far, the biggest being CBLPath in 2010. Miraca and Sonic both think in many ways like Quest or LabCorp. We expect that more acquisitions will be in their futures.

BioReference is the #3 US lab chain, with a big footprint in the northeast, though scarce elsewhere. BioReference is somewhat similar to Sonic and Miraca in their mix of routine and esoteric business, their Quest/LabCorp envy, and their eye peeled for acquisitions. Their two esoteric cancer testing units, GenPath and GeneDx, operate quite independently.

Aurora and Bostwick have less desirable traits in common – both are in jeopardy of being history by the end of 2014. Aurora has been rolling up labs – 17 lab groups in some of the most obscure parts of the country – since 2006. But this year’s 88305 cuts hit them very hard, and they are finding it difficult to service their $300m+ in debt.  Dr. Bostwick got severely overextended in both UroVysion and real estate over the last few years. When reimbursement for the former was cut and interest on the latter came due, he lost control of his lab to a private equity group. Next year’s reductions in 88342 may prove to be the coup de grace for these two.

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Promising NGS specialty labs are springing up all over. The big story so far has been the extraordinary growth of Foundation Medicine. Then in the second half of 2013 PathGroup, Harvard/Partners, ARUP, Invitae, and Paradigm/U Michigan also rolled out interesting new NGS panels. Also in the second half of the year Myriad’s BRCA monopoly was challenged by Ambry, Gene by Gene, GeneDx, and Quest – and also hypothetically by Counsyl Diagnostics.  For the newcomers in the NGS and BRCA businesses, the future looks great.

Chad McEvoy