Labcorp Holdings Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the LabCorp third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Closer, will it? Vice President of Investor Relations, please go ahead.

Thank you, operator. Good morning and welcome to LabCorp's third quarter 2020 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 Adam Schechter, Chairman and Chief Executive Officer, and Glenn Eisenberg, Executive Vice President and Chief Financial Officer. This morning in the Investor Relations section of our website, We posted both our press release and an 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 expectations for 2020 and the related assumptions including the projected impact of the COVID-19 pandemic on the company's businesses, operating results, cash flows, and or financial conditions, our responses to and the expected future impacts of the COVID-19 pandemic, on our business more generally, as well as on general economic, business, and market conditions. Each of the forward-looking statements is based upon current expectations and is subject to change based upon various factors. many of which are beyond our control that could affect our financial results. Some of these factors are set forth in detail in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 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 Adam Schechter.

Thank you, Clarissa. Good morning everyone and thank you for joining us today. We delivered strong results in the third quarter as our base business continued to recover and significant progress was achieved to fight the global pandemic. Clinical trial activity is improving and we've had important wins in both COVID and non-COVID related clinical trials. The diagnostics business has recovered well as people resume their routine preventive visits, actively care for their chronic conditions, and move ahead with elective surgeries and other procedures. Non-COVID related volume was down approximately 9% for the quarter. As a result, we reported growth in the third quarter versus the prior year, with revenue of $3.9 billion, adjusted EPS of $8.41, and free cash flow of $709 million. Throughout the year, Our COVID-19 testing has helped to offset the pressure experienced in our base business. This is the first quarter where both the diagnostics and drug development total businesses grew versus prior year. Based on the current and expected strength of our business, we have decided to return to CARES Act provider relief funds. We greatly appreciate the support the CARES Act funding afforded us in the early days of the pandemic. when our base business was significantly impacted and the future was uncertain. We are pleased we can take this action now. Then we'll expand on this in a few moments. Importantly, our strategy extends beyond COVID-19. What LabCorp did prior to the pandemic and what we will do after the pandemic remains important to the country and to the world. Our strategy is based on the following long-term priorities. First, leveraging the power of our combined capabilities across diagnostics and drug development. Second, advancing our leadership position in oncology. Third, integrating AI data digitalization and analytics across our business. Fourth, putting customers at the center of all that we do. And finally, we will continue to evaluate and execute on high growth opportunities. I'll now move to the third quarter. We made significant progress in the fight against COVID, which highlights our diagnostic and drug development capabilities. To date, we've performed approximately 22 million COVID-19 tests, which represents about 19 million PCR tests and over 3 million antibody tests. We are performing COVID testing in more than 20 laboratories across the United States. and our capacity is greater than 210,000 PCR tests and over 300,000 antibody tests per day. We also continue to increase our capacity. Thus far this month, we're performing approximately 120,000 COVID PCR tests per day, with an average time to result of about one day. During the quarter, we also launched a series of innovations, We were the first laboratory to offer physicians the ability to order a combined test for respiratory infections, including COVID-19, RSV, and flu. The combined test will help quickly and accurately determine appropriate treatment during flu season. We also filed an emergency use authorization to make the combined test available to individuals through our at-home collection kits, Pixel by LabCorp, and LabCorp at home. In July, we received an EUA to utilize a matrix pools testing method which tests multiple patient samples at once and requires fewer supplies. We also recently received an EUA for a new heat extraction technology that improves the speed and the efficiency of our PCR testing and reduces the reliance on certain reagents. We will continue to work on innovations to help respond to the pandemic and to grow our core business. Moving now to drug development. We continue to see strong momentum in our drug development business. The backlog grew to nearly $12.5 billion and our trailing 12 months book to bill was 1.31. For the second consecutive quarter, we won a disproportionate share of COVID vaccine and therapeutic studies. To date, we have won approximately 350 opportunities from small programs in the non-clinical business through late stage clinical trials. These opportunities represented roughly 13% of our net orders in each of the past two quarters. The capabilities, the insights, and the data from our diagnostic business have been a differentiating factor in winning many of these studies, which once again demonstrates the power of our combined businesses. Now let's turn to several important highlights outside of COVID-19 for the quarter. In oncology, we accelerated our leadership position with several advancements, including a significant award to be the partner of choice for late-stage oncology studies from a major pharmaceutical company. The launch of Resolution CTDX Lung, a new non-invasive liquid biopsy test for patients with non-small cell lung cancer. And a collaboration with Tempus to accelerate clinical trial patient participation. Our leadership and companion diagnostics, combined with our successful track record in executing clinical trials, are helping to develop future breakthroughs in cancer therapies, including precision medicine treatments. During the quarter, we also made several other announcements to advance our strategy, including the extension of an agreement with BML to further the development of companion diagnostics in Japan, and an agreement with GenFit to commercialize a non-invasive blood-based diagnostic test for NASH. We acquired Teramont Health's outreach laboratory business and have several new laboratory service collaborations broaden our hospital system footprint, such as Infirmary Health, Rush University System for Health, and the University of Miami Health System. We also renewed our long-standing relationship with Swedish. Strategic acquisitions were made during the quarter to increase decentralized clinical trial capabilities, including the acquisition of global care clinical trials and, in early October, SNAP IoT. In closing, we delivered strong results amid continuing uncertain times. We are encouraged that people are returning to their routine care and that drug development trials continue to ramp up in the fourth quarter. It is anticipated that there will be continued outbreaks as we move into the fall and flu season, and we are preparing accordingly. Finally, before I turn the call over to Glenn, I want to thank all of our employees around the world. Our 70,000 colleagues across every part of our business have worked tirelessly to serve our customers and our patients at a time when the world has needed us most. I cannot thank them enough for their sustained commitment and passion, and I'm inspired by the countless stories of their great work. I'm confident that we have the right team in place and are executing against the right strategy to continue LabCorp's strong performance on its course of a global healthcare leader. Now I'll turn the call over to Glenn.