Quest Diagnostics Inc. (NYSE:DGX) Q4 2014 Earnings Conference Call - Final Transcript

Jan 29, 2015 • 08:30 am ET

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Quest Diagnostics Inc. (NYSE:DGX) Q4 2014 Earnings Conference Call - Final Transcript

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Executive
Steve Rusckowski

hopeful the rulemaking process will be defined in 2015 and will establish an approach to building a representative view of the market. The market view that will be used to update the fee schedule should include participants from the entire market including large and small independent commercial labs, boutique labs as well as hospitals.The current timetable calls for data to be collected from the market.

Executive
Steve Rusckowski

participants in 2016 and any revisions to the fee schedule would therefore go in place no sooner than 2017. We will continue to update you on the progress as we know more in the coming year. Another important issue facing the industry is the FDA's proposal to extend regulatory oversight to laboratory developed tests. The American Clinical Lab Association is actively opposing the FDA's proposal and has engaged 2 highly respected experts in constitutional law in the administrative procedure, Laurence Tribe From Harvard Law School and Paul Clement, the former Solicitor General of the United States.

The FDA's proposal is regulatory overreach at its worst and is bad for patients and the healthcare industry. For that reason, the American Medical Association, the American Hospital Association and other leading healthcare providers have urged the FDA to withdraw its proposal. Now for an update on our performance. We continue to improve on our ability to execute the Company's 5-point strategy.

As a reminder, our strategy is to restore growth, drive operational excellence, simplify the organization, refocus on the core diagnostic information services business and deliver disciplined capital deployment. Let's start with our highest priority, growth, and reviewing our progress. In 2014, we executed our strategy and restored growth. First, we improved our sales effectiveness on how we call on the market.

As you have heard me say before, our go-to-market team is better led, better managed, better staffed, better trained, better equipped, better motivated compared to two years ago. We have seen continued improvement on our underlying revenue trends this year. In the fourth quarter, organic revenues grew 60 basis points versus last year. This is the first quarter of organic revenue growth since I joined the Company in May of 2012. Second, our professional lab services business has announced and implemented six new relationships in 2014 which are on track to deliver $40 million in annualized revenues.

The most recent contract was finalized in the fourth quarter. Third, part of our improving performance is a result of our strategy to focus on esoteric testing through our clinical franchises. We saw sequential improvement in gene based and esoteric testing for the third consecutive quarter.

Executive
Steve Rusckowski

some specific tests that are growing faster are our BRCAdvantage breast cancer testing, noninvasive prenatal testing, and hepatitis C. I am also proud of a growing list of strategic partnerships with healthcare leaders that include Memorial Sloan-Kettering and the University of California San Francisco. In addition, we have continued to see notable growth in the quarter in prescription drug monitoring, wellness and infectious disease franchises.

We are also making progress on some of