Perfect. Good morning, everyone. Welcome to day three of the Leerink Partners Global Healthcare Conference. I'm Mike Cherney, the healthcare tech distribution analyst here at Leerink Partners. It's my pleasure to have Quest Diagnostics with us, CFO Sam Samad, Finance Exec, Temporary IR, Dan Haemmerle, longtime Quest exec, with us as well. Team didn't bring any slides, which I appreciate, we're just gonna jump right into questions. You know, maybe Sam, to kick things off, you know, encapsulating 2025, we saw a year of building volume strength. It really resonated in the 4 Q with a particularly impressive performance. Can you maybe just give us a little bit more of a breakdown of what you're seeing in terms of where you're pulling from the pockets of improving volumes?
Sure. Michael, first of all, thanks for having us here. Pleasure to be here. You're right. I mean, 2025 was a very strong year for us. If I think about utilization specifically, a few things that both we are driving but also from the macro utilization sort of environment are helping create a really positive tailwind. In terms of the things that we are driving, I would say, you know, access, increased access across the country. We're up to 92% now in terms of coverage across the entire country. We recently got access in four remaining states with Elevance, when I say recently, at the beginning of 2025, which helped us also increase our share and increase our capture in those states. We are, you know, gaining share overall.
In addition to access, I think some of the acquisitions that we've done, some of the, you know, offerings that we have enabled us to gain share as well. As I think about the utilization market overall and what's driving some of that higher utilization, I think about things like, for instance, increased access to early cancer screening to increase screening overall. Things like, for instance, brain health screening. You know, more screening options that physicians are relying on that are driving more utilization in certain cases. The focus on wellness, you know, the consumer offerings that I think a lot of, you know, whether it's baby boomers or patients that are more focused on having control of their own health outcomes are really going to. Those are driving utilization as well.
There are a number of factors, but in general, I would say, you know, things that we've driven, like increased access, things that are, you know, from an overall healthcare utilization standpoint are also helping us, like early access to screening options and also, you know, improved guidelines favoring those.
I'm gonna come back on the specialty side, but I'm glad you mentioned Elevance because, you know, called out a same payer, four states. What about that book of business has been added? Is it just simply that you have access to lives? Is there anything you've seen from a behavioral perspective that has driven excess growth in that book of business, especially as part of that share gain dynamic across it?
Yeah. I don't think it's anything unique to that book of business, Michael. I think it's more. You know, we had those four states where we really didn't have access, and so you really. It's hard to go to certain physician offices, get that business when you're not basically in-network with a certain payer. So as you get more coverage, and as I said, now we're up to 90%+, you're able to just drive market share in those states because you can go to physician offices, you can now compete for that business. You're in-network with all their payers, and so they're more likely to, you know, shift that business over to you. Then you can build on that with additional market share gains.
I don't think that's what we saw in 2025 is the end of that, you know, expansion of our capture in those states. I think that was the bulk of it, but we will likely see also a tail to that as well going forward.
Along that dynamic of share gain, share capture, it seems fairly straightforward that it is happening based on where we see market growth versus your growth. How is the share gain changing, especially against the hospital labs at this point in time? It's, you know, obviously a long time push by you to make sure you're establishing your position. Like, what are you seeing now that's changing some of the behavior that's allowing you to gain share?
Yeah. I think, you know, I'd like to break that down into sort of the physician market, the physician testing market and then the hospital market, because there are two different dynamics there. In the physician testing market, where we today have about 12% of that market, you know, it's about a $60 billion market. We've gained share. You know, obviously the things that I just mentioned around having more coverage across the country, having a very comprehensive test menu, having, frankly, you know, better prices as well than the health systems, which helps the payers. It helps the patient because they have sometimes a lower copay that's out-of-pocket for them. It helps employers because they know that their employees are not gonna incur the same cost.
For self-directed care or, you know, employers that are basically funding their own healthcare, it saves them money. I think we've been able to grow our share both organically but also through acquisitions of some of these physician outreach books of business from the hospitals. The reason for the acquisitions, you know, getting momentum is the reasons that I've just mentioned around it's more cost beneficial and we can perform the work more cost-effectively. Now, in the hospital space, I think a key driver of our share gains has been the Co-Lab initiative. You know, the, what we used to call PLS, now we call it Collaborative Lab Solutions. Basically, it's the ability to grow our scale through taking on the operations of labs across health systems.
Again, health systems realize we can do this more effectively, we can do this more cost-effectively, we can drive cost reduction. There's been this, I would say, real aptitude on the part of health systems to basically outsource some of that lab management to us.
Maybe using that as an example, I'm gonna jump back to some other questions, but on the Co-Lab side, you have a more sizable Co-Lab agreement going on with Corewell right now as part of an additional JV that's building. Can you walk us through a little bit about the tenor of that relationship, especially given that there is a double component to it beyond just doing the collaborative work?
Right. Sure. Yeah, it's a very important relationship and a really big Co-Lab partnership. This has basically two facets to it, to your point. Number one is we've taken on the Collaborative Lab Solutions for across their entire health system. You know, Corewell, very large health system in the state of Michigan, and I think it's in excess of 20 hospitals that they run. We're gonna be running basically all of their labs across these health systems. That started to happen across Q4 in 2025. We started to basically ramp that business. It's gonna happen across 2026, and it's gonna be an additional $250 million for us in terms of revenues this year in that Collaborative Lab Solutions business.
Now, in addition to that, we have formed a JV with Corewell . What JV means is that we basically bring our assets together, our employees together, and we're gonna be building a lab together in Michigan to basically stand up all of that work across their physicians, our physicians, their book of business, our book of business to come together. We're the majority owner. We have 51% of that JV. They have 49%. We're gonna be building the lab together this year across, you know, the majority of this year to stand it up, build it, staff it, put all the equipment in there. We expect to have that stood up early 2027. Okay, the Co-Lab business, really important. As I said, it's ramping up now. It's $250 million.
The margins on that business, especially in the first year, are lower than our average book of business. The margins on that business in 2026 are gonna be somewhere in the low single digits, okay? 3%-4%.
For Corewell specifically.
For Corewell specifically, right. Co-Lab overall is about a, you know, 12%-13% margin business. That's what Corewell, by the way, will grow to eventually in its second year, maybe towards the end of its second year. Now, the JV business, which ramps up in 2027, you know, ramps to become, over time, almost on par with our enterprise average. It's regular business. It's not necessarily Co-Lab business.
Got it. Maybe jumping back to some of the other recent trends. You know, the other dynamic that's driven organic growth has been test per session.
Yeah.
You know, there's some clear mixed dynamics you've called on the consumer side, but if you unpack what's going on with tests per session, which has been durably higher than historical trends, what are you seeing in terms of the why behind that?
Yeah, no, it's a good point. Just the facts first in terms of where we are on tests per req. We call it tests per requisition. You know, back before COVID, we were sitting at somewhere, I would say, 3.5 tests per requisition. When I say before COVID, I'm going back to maybe 2015, 2016. We were somewhere about 3.5, 3.6, and now we're sitting at around 4.5. Okay, we've basically grown the density of our requisition over the last 10 years by almost an additional test. That's really important when you think about it, because, you know, the cost to perform an accession and additional test is not, you know, proportional in terms of. You already have the fixed cost covered.
All you're incurring are some additional, you know, reagents and costs of testing. It's very profitable to have that increase in tests per requisition to your question. Now, what's driving it? A number of things. Consumer is one of them, and we can talk about it. You know, in terms of other things, the advanced diagnostics growth in our business, you know, that what we call esoteric testing, these highly specialized, advanced diagnostics tests are really a key driver. You know, the availability of new tests that are now being favored by physicians, because if you have a patient coming in for whether it's for their annual physical or for a general routine, you know, testing visit, if they have certain risk factors, you might add an AD-Detect test, which is for brain health, for early screening of early onset dementia.
If you have certain risk factors, you might add, you know, a colorectal cancer screening test. You might add, you know, a general cancer screening test versus a pan cancer screening test. You might add a cardiometabolic test that you didn't have before. There are many different things, I think, on the screening side that are starting to become much more prevalent and being favored by physicians, and guidelines are driving towards that as well. You know, we saw last year that blood-based testing was added to the guidelines as a screening option for brain health. All that is helping, I think, driving tests per requisition.
As you think about the next leg, I'm not asking for guidance beyond the 4.5, but should we assume that there's a continuation of these trends you've seen? Obviously, we all have better information, better data, applications of AI. Like, are all these factors? Should we think about test per req being something that's a more permanent added piece for organic growth?
Yeah, I mean, it's hard to project this out, right? 'Cause you have to think about just physician behaviors, guidelines, evolution, a lot of things that some of which we control, some of which we don't control. I think at the least, I would say we expect these trends to continue. Now, does it mean that in the next 10 years, we add yet another test per req? No, I'm not saying that. I do expect that these trends qualitatively would continue because I think that's where care is heading, is more prevention, more screening, more, you know, rather than shifting a little bit of that, you know, equation from treatment to prevention. I think U.S. healthcare is starting to catch up to the importance of that.
Given we're sitting here in the middle of March, I have a couple start of year questions for you. First of all, a lot of people here live in Northeast, multiple weekends getting snowed in. What are you seeing in terms of how your network responded to some of the snow days and-
Yeah.
Any impact that you think is relevant to think about this point in time?
Yeah, sure. Some of it we talked about on the Q4 call as well. Listen, January was a tough month in terms of weather, you know? I mean, not saying anything that maybe a lot of us didn't experience firsthand. You know, the Northeast had some really bad weather. The Southwest had some bad weather. You know, we had bad weather across the country. Leading up to that sort of, you know, third week, maybe fourth week of January, we were seeing very strong utilization. Obviously, as usually happens when you have bad weather, you get impacted by that because, you know, if you're snowed in, your first thought isn't gonna be to go rush to a patient service center to get blood-based testing, you know? You can defer that.
Now, we do think that a lot of these recs, Michael, 30%-40% of them do come back, so it's not like you lose that business and it's gone. 30%-40% of them, we estimate, do come back. You know, the general wellness type of testing usually does come back. If it's more episodic, if you're going in every three weeks to get a blood test done for a certain chronic condition, that might not come back 'cause you might miss a certain visit, and then you do the next one. The general wellness and the routine testing stuff does come back. We've seen that. We also have, you know, now the ability, and we've developed this over the last, I would say, number of months, to really target patients as well that have missed appointments.
We do campaigns to go and make sure we remind them to come back for testing. We control some of that. As I said, you know, leading up to that bad weather, and thankfully now it looks like we've turned the corner and weather is starting to become more manageable. Leading up to that, the utilization was really strong. I expect it to continue at the same trends that we were seeing before. There's no reason for it to not get back from that, you know, short-term disruption we saw.
You know, obviously early in the year, but you've been pretty transparent on your views on the health insurance exchange.
Yes. Yeah.
the volume headwinds. Is there anything you can parse out from your data yet to see how it's tracking relative to your targets or plans?
Yeah. Just to remind everybody, we put in an estimate of roughly 30 basis points impact on revenue growth this year as a result of people not renewing their coverage because of the subsidies expiring, and the removal of the subsidies. I would say I'm encouraged by the early signs. You know, in terms of enrollment, the enrollments have been stronger than we expected. The drop-off in enrollments has been lower than we thought as a result of the subsidies expiring. You know, there's still, I think, a bit of a wait and see to see the type of coverage that people opted to.
For instance, you know, if you signed up but you before had maybe a gold plan, now you're going to a bronze plan, you're going to a lower utilization plan because you just wanna make sure you have catastrophic coverage, but you're not gonna really utilize the plan, will that impact utilization? Yes, of course, even though you're still covered, but you're gonna be covered, but utilize your healthcare less. Now, we factored that into our 30 basis point estimate. It's not like we expected everybody to, you know, even the people that stay on, we expected there to be a bit of a drop-off in utilization. I would say overall, Michael, I think it's probably gone better than we thought.
And then, you know, we're a week and a half into some expanded geopolitical strife and obviously subsequent increases in oil and gas commodity prices. It's been a while since we've talked about sensitivities of your business relative to some of the commodity dynamics. Can you just remind us how you manage through potential changes both up and down when you do see spikes like we've seen? Obviously, no one knows how long it's gonna be.
Yeah. Yeah.
Just curious to think about how Quest attacks it.
Yeah, I mean, you know, obviously, anything that's whether it's price of oil or, you know, other disruptions or I would say shocks in the system, so to speak, are gonna have an impact. You know, we have a very large logistics network. You know, we have 16 planes that fly across the country and transport samples. So, you know, the price of oil is gonna impact us as do some you know other utility type sort of impacts that are out there. Now, you know, I'm not too worried about it.
First of all, we started to really make this push to move our whole logistics fleet, our ground-based fleet to hybrids, which helps really save on the cost of, you know, on the cost of gas, 'cause that was a big cost factor for us regardless of whether the price of oil was $100 or $60. You know, I think to your point, now, if this disruption is, you know, eight months in terms of higher prices, yeah, it'll have a cost that, I think we can manage, but it'll have a cost increase. I think we've started to take some steps to offset some of the negative impacts of that.
Got it. Turning back to some of the mix dynamics, especially around specialty. You know, we've talked about some of the growth in tests. Where do you see your portfolio lies today? You know, AD-Detect has been a good advancement. What have been some of the other success points you've had in terms of the proactive push?
Yeah.
to drive better specialty mix?
Yeah. We've got. First, let me talk about the portfolio overall. I mean, we've got these five high growth areas that we you know are really focused on, and those are in the areas of oncology, brain health, autoimmune, women's health, and then cardiometabolic. You know, those are the key areas that have high growth tests that are now about $1 billion in terms of size, and high growth tests within these five areas basically are growing in the double digits, you know, somewhere close to the high teens. We're seeing really solid growth there, and that impacts the mix overall. Back to your question about revenue per requisition and mixed benefits, you know, that really impacts favorably that revenue per requisition and also the number of tests per req.
In terms of key tests, Michael, let's focus on a few. Brain health I talked about AD-Detect, but this is a really important test, and it's a portfolio of tests with different analytes. You know, we have four analytes. You've got amyloid beta 42, amyloid beta 40, you've got p-tau217, p-tau181. Depending on, you know, the patient and what the specialist or the GP, 'cause this test is being prescribed by a lot of GPs, or ordered by a lot of GPs. I mean, you know, they can order four analytes for that test, and it could be a test that's priced that gets reimbursed at about $400. It's a good high-priced, high-value test for us as well.
that test is really important for the early-onset dementia patients, at least the ones that have risk factors. If you look at autoimmune, we have this test called ANAlyzeR, which is also fairly new. I mean, it's been around for maybe close to two years now, but it really can help physicians detect which of eight autoimmune disorders, you know, which one they might be suffering from. Because, you know, for these autoimmune disorders, it's really hard sometimes to figure out which autoimmune disorder does a patient have, how do they treat it, what's the next step. This is a test that really informs which of those eight large autoimmune disorders, which one does the patient have and what are the next steps in terms of treatment.
You have obviously on the oncology, you have Haystack MRD, you know, the MRD test that we have, which, you know, is having good momentum. We partner in oncology on some tests as well with companies like Guardant, with companies like GRAIL on their early cancer screening options as well. You know, in cardiometabolic, it's really a focus on a large number of tests, some of which really help in terms of, you know, understanding a patient's risk, based on their cholesterol, but also getting away from the traditional options like just looking at LDL and HDL. That's a little bit outdated. Now we look at things like Lp(a) and ApoB, which really helps you understand the full risk factors behind cardiometabolic disease.
on Haystack in particular, like, what is the status update right now? Where are you seeing the commercial expansion, and how is it tracking relative to your expectations for the ramp?
Yeah. We've made a lot of progress on Haystack, and I'll tell you in which areas we've made progress. First of all, back in late 2024, early 2025, we had this early experience initiative, which was with about 75 cancer oncology centers, you know, many more oncologists within those cancer centers that have tried Haystack. 90% of them, you know, based on the experience they had, said that this really helped them think differently about their, basically their MRD options going forward. Really big success. Now we launched the assay fully, you know, commercially in April 2025. We've been at this now almost a year, not quite. We've scaled commercially in terms of the number of reps.
We're now about 40 dedicated reps and in total between reps that are dedicated to Haystack and ones that co-promote it's about 60 or, you know, just over 50 reps that we have driving it. We've gotten reimbursement for the test for both baseline and recurrence monitoring. The baseline test now is priced at, close to $3,900. The monitoring is close to, close to $800, the repeated monitoring, the blood-based monitoring. We've launched this ordering, you know, EMR ordering platform to help oncologists with the ease of ordering, ease of resulting, which really helps oncologists not to have to deal with paper recs, et cetera. That was really important. You know, I think we're getting really good feedback on the low limits of detection that we have for the assay, Michael.
I mean, we're getting feedback in some cases where they say, "You know, I've used another option. I got a negative test. I used your option, and I got a positive test," which is really critical for patients. That means they had recurring tumor, you know, basically tumor fragments in their blood that were being shed by that tumor. The previous test didn't catch it, and that's really critical.
What comes next in terms of hitting your milestones to get Haystack to break even and venture profitable?
I mean, continue the ramp. Obviously, we're gonna continue to drive the commercial focus and execution. That's gonna be the key thing. I mean, at the end of the day, you know, reps talking to oncologists are what gets adoption going. You can talk about all the scientific merits, and those are really important, but unless you have reps really promoting the product, explaining to physicians and oncologists what this does, you're not gonna get traction, and that's why we've increased the commercial focus. We have also, you know, the reimbursement that we got was with Medicare. You know, 50% of cancer cases are over 65, so that covers a big portion of the population. We're now focused on Medicare Advantage as well. We submitted this technical assessment to MolDX for the purpose of getting Medicare Advantage coverage.
That's next. You know, continue commercial adoption. That's the key thing. Now, you know, I won't give you revenue targets in terms of what the success look like for revenue targets 'cause it's a test.
Right.
You know, at the end of the day, this is not a P&L. This is a test. We have many tests. We have hundreds of tests in our menu. But what's gonna, you know, what does success look like? I mean, this is a market today, Michael, that's $1 billion, the MRD market. In 5 years, many have estimated this could be 5 x that, $5 billion market. Every point of share really matters in this market. We're not expecting to have 50% share in this market in five years. No, that would be an unreasonable expectation. We are expecting to gain share in a market that's growing. You know, every point of share really matters. For a company like us, you know, this can help us really be more accretive in terms of growth.
Turning internally a bit, before we run out of time, 'cause going fast. Let's talk about AI.
Yeah.
I mean, you have obviously the Project Nova large-scale implementation going on.
Yeah.
You're also doing some interesting things on AI.
Yeah.
I was at one of your labs in November.
Yes.
I saw some of the microbiology, sample work that you're doing, sample sorting. How do you think about the strategic optionality on AI as both a, within the clinical side, so actually, like, testing advancements, analytical advancements versus the internal side, i.e. your world on finance operations?
Right. Yeah, I'm glad you went to Clifton and saw sort of the automation AI in action, 'cause that's a really impressive lab. I would say it's, if not the most advanced lab, you know, out there, it's definitely among the most advanced labs. Here's how we think about AI, Michael. It's an evolving thought process, I'm sure, for a lot of people, 'cause AI, you know, keeps changing in terms of how the use cases, the potential, how we size the value from AI, all these are still evolving, I think. I'm struggling with them as much as I think any other CFO is. We think about it as inside the lab and outside the lab, okay? That's how we categorize our AI efforts.
Inside the lab, you know, I'd say we're more advanced than probably a lot of companies out there in terms of how we think about AI, how we've deployed AI. I mean, we've deployed both automation and AI into a lot of our workflows. You know, we've got three labs now that have end-to-end automation. Clifton is one of them. We have, you know, automated sample sorting. We are piloting automated accessioning, things where no human touches the sample. This all gets done by machines.
On the AI side, you know, we've got algorithms for detecting regions of interest around, you know, cytology, so automated cytology and also microbiology and pathology as well, where we basically have, you know, AI and large language models or, you know, AI algorithms, I should say, detecting regions of interest, highlighting them for either the lab tech or the pathologist to help them really diagnose much quicker and improve their productivity. You're always gonna need a human to make the diagnosis, but you don't need a microscope anymore for looking at samples. You don't need people looking at cultures. You need digital images that are being essentially assessed by an AI algorithm that's pointing regions of interest, that's helping focus the detection on a much more concentrated area that now helps either the lab tech or the pathologist/physician make that diagnosis.
That's in the lab. Outside the lab, you know, there are many areas that we're looking at. More recently, we just launched this essentially this language model and chatbot for, you know, interacting with your results. If you have MyQuest, the app that we have for all of our patients that can choose to download it and you get your results there, you go in and you interact with your results in a way that's much more fluid than it ever was. Now, when you see outliers in terms of some of your results, you can ask questions, you can get answers. It's never gonna give you a treatment option 'cause you need a physician for that, but it's gonna direct you to probably how you should be thinking about this and what questions to ask your physicians potentially.
It's a very interactive language model for your results. We're looking at what we call dynamic route optimization and logistics, where AI figures out the best routes on a very dynamic basis, not just a static, "Hey, here's how we think you should go to point A to point B." Really helps both in terms of flight mapping and ground mapping, how we think about the, you know, the most cost-effective routes on a, as I said, dynamic basis. You know, in my area, there's tons of things. I mean, I have a group now that's dedicated to focusing on how do we improve back office functions. How do we make sure that we. My goal, Michael, is in three years, stake out every transactional function, not just a one or two. Really, I think that's what we should be aspiring to.
Last minute, in Project Nova, you introduced it around this time last year at the Investor Day. You've talked about the headwinds. I think it's $0.25.
Yeah.
for this year, embedded in the numbers.
Yeah.
As you've gone through the process, any surprises yet on what's been unveiled, opportunities for more spend, opportunities for more optimization? Anything you can call out?
No. No surprises. It's going as planned. You know, we signed with Epic in the second half of last year. We're starting to ramp all of the efforts around, you know, think about how we're gonna roll this out across our 24 labs. It's gonna be a staggered rollout. We're gonna have the esoteric labs, namely two esoteric labs, be in the first phase of rollout to be basically operational on the new lab information system by end of 2027. That's the goal. That's the first step. You start to stagger the rollout post that. That obviously helps you to manage the risk so you're not doing many labs at once. You wanna do them over time.
Our expectation is that we're gonna start to see benefits in late 2027 when we start to roll this out. Benefits in terms of, you know, easier integration with health systems, with physician offices that help you onboard businesses faster, lower denials through AI and automation there. We didn't talk about actually, you know, denial management as one of the AI initiatives, but that's also ongoing with companies that we partner with in the AI space. Nova will help us do that. We're gonna actually pool some of Epic's AI capabilities with our own as well that helps with Nova benefits realization. I think that's gonna be important.
We're out of time.
All right.
Sam, thanks so much for being here.
Thank you.
Thank you, everybody.
It's a pleasure.