Labcorp Holdings Inc. (LH) Earnings Call Transcript & Summary

Good morning. My name is Lisa Gill, and I'm a health care services analyst here with JPMorgan. Welcome to day 2 of the 39th Annual JPMorgan Healthcare Conference. It is with great pleasure this morning that I have with me, LabCorp. I have with me CEO, Adam Schechter; as well as CFO, Glenn Eisenberg. We're going to have a fireside chat with Adam in just a minute, but I'm going to ask Adam to just make a few opening remarks. Adam?

Good morning, Lisa. It's such a pleasure to be here, and thank you, everybody, for joining us today. Last year, I said it was odd to have a fireside chat without a fire. This year, we're having a fireside chat without a fire, and we're all over the country and world in different places, so it's even more odd. We're in the middle of a surge of the virus. I ask everybody to please continue to be safe, be diligent, wear your masks, social distance. But I'm optimistic. I'm optimistic about the future. I'm optimistic about how well the vaccines work. And I'm hopeful that we'll all be able to be together again this time next year in San Francisco. 2020 was a big year for LabCorp. We were involved in almost every aspect of the pandemic since March. There were a lot of things that we were first to do. We were the first one to have a commercial PCR test, we're the first one to have an at-home collection test and we were the first ones to have neutralizing antibody tests. Those are just a few of the firsts that we had last year. There were many. But we also were able to use our science and innovation to make a significant difference. We were the ones who validated that you can use a simple nasal swab versus the nasopharyngeal swabs. We were the ones that we're able to figure out and invent a process that you could extract the DNA for the testing with heat as opposed to meeting reagent. It took the time from 4 hours down to 30 minutes. And we're also working with the CDC to sequence the virus so that we can understand how it mutates over time. All of this showing the great science and innovation that we've been able to show as we've gone through the pandemic. We also have been involved in almost all the vaccine trials in one way, shape or form or another, and we've been involved in many of the therapeutic trials with our drug development arm. We built our mindset with 4 principles. The first one was to build as much capacity as fast as we could. That's what's enabled us to now be able to do 275,000 tests per day, and we still have a 1- to 2-day turnaround time. That turnaround time has been consistent every single day since August. We also said that we were going to ensure that there was no upfront out-of-pocket cost, that people would not have to worry about paying for the test if they couldn't afford it. Even today, our Pixel test that you can order online has no upfront or out-of-pocket costs. And the other thing was, we weren't going to prioritize anybody over anybody else. That as the test came into our labs, we would run it. The good news is our turnaround time is so fast that it's not an issue. We only broke that when we were asked to by the CDC, for example, to prioritize patients that were in a hospital. What we've been able to do at the same time is continue our long-term strategy. We have been successful for the last 50 years, and I believe we're going to be even more successful as we move into the future. Our strategy is to demonstrate the power of the combined. I think we've done that with COVID, and now we're going to do it with other therapeutic areas like oncology. The second one was to include digital, data analytics and AI into everything that we do, and we've made significant progress there. The third one was to increase our ability to focus on our customers. And with Pixel at-home kit, I think we've really started to build a different type of relationship with many consumers across the United States. And then the last one was to continue to invest in high-growth opportunities. And you saw us do some acquisitions to support our strategy, such as those to increase our capabilities in hybrid and virtual trials. So I'm very optimistic about LabCorp's future, about where we're going and the direction. And I'm glad to answer any questions you might have, Lisa.

Great. Thank you so much, Adam. And thanks for all that LabCorp has done. And you talked about the focus on the patient, and I have to tell you that I personally have used LabCorp, and I did appreciate your thank you note that I got in my e-mail just a couple of weeks ago as being a customer of LabCorp. But as we think about this pandemic and you have played such an incredibly important role, how do we think about your role as we have the vaccine rolled out? And how do we think about testing going into 2021 and beyond?

Yes. No, I think those were all important questions, Lisa. First of all, as I said, we're doing sequencing for the CDC to understand the virus and how it mutates over time. I think that's going to be an important role that we'll be able to play. The second thing is that even with vaccines, there's still going to be a need for testing. So for example, if 80% of the population is vaccinated, 20% is still not. And if it works in 90% of people, it doesn't work in 10% of people. So right there would be 30% of the population that would still be at risk. That's why we need good therapeutics in addition to good vaccines. But if it was this time next year and you had a fever and you didn't feel well and you went to your physician, I think they'd probably still do a PCR test on you. Because they'd want to know are you one of the people that the vaccine didn't work in and understand if you have COVID or not. Of course, we won't need as many PCR tests, but I still think that we'll need them. The second thing which we don't know yet is what other types of tests might we need with vaccines. So for example, will we be measuring antibodies, neutralizing antibodies? Will we be measuring T cells potentially? So as the technology and the science changes over time and we understand it better, we're going to be prepared for whatever direction the science takes us to have the test available to help understand who is immune to the virus and for how long.

And as we think about just near term, obviously, there's been this surge, there's been a lot more testing that's been done. The government has come out and extended the Emergency Use Authorization and the $100 reimbursement. How do we think about reimbursement for this type of test longer term? I mean clearly, the $100 doesn't get to stay in place. We can't think that the government is always going to pay for this test. Should we think about this as going more towards commercial-type pricing over time?

Yes. Now I think that, first of all, as long as the emergency use is -- the emergency is still here, that the pricing is pretty stable. So now it's here, as you mentioned, for another 3 months after January 20. So I think the pricing will remain stable during that time period. The question is, will it be extended again? My base case assumption is probably not. Because as we get towards the summer, as more people are vaccinated, hopefully, we can get out of the emergency situation. That's what's best for the country. And I think we all hope that, that's where we are come April, May of this year. If that's the case, I do think there'll be significant pressure on pricing. I do think it will move back into the commercial area versus the government paying for it. And then there's going to certainly be additional competition to pricing. So my sense is if you go back to where the pricing was prior to emergency, it was just over $51. That's where I would start.

Okay. Great. And so just my last question around this area, and we can hopefully move on to talk about a lot of other exciting things that are going on at LabCorp. But that would just be around the efficacy of the vaccine. You talked about the fact that the anticipation is that it's going to be 90% efficate. If you think about -- Merck came out, right -- I'm sorry, Pfizer came out and said 95-ish. Moderna, the same thing. We're waiting for the J&J. Is there going to be a role for labs to play around that efficacy when we think about serology or other things playing into that?

So I believe there will be, Lisa, but it's too early to know. So there's some new data that came out that suggest that the vaccine will last for at least a year and be effective. If that's the case, that's great news. Hopefully, it will be 2 years or 3 years. But then you're going to want to know over time who needs to be vaccinated again and when do they need to be vaccinated. So there might be a role for serology or T-cell testing or some type of testing as such to understand how long the vaccine is working because it might depend on individuals and their response to the vaccines. At the same time, if the vaccine only works for 1 year and everybody has to be vaccinated every year, I think there'll be less of a role for other types of testing because I don't think you're going to measure people's response in the middle of a year if they're vaccinated that year. So it's really going to depend on how long the vaccine works were to some degree and how effective it is across all populations. To date, it looks extraordinarily effective. And if you would have asked me this time last year, if we would have a vaccine by the end of the year or multiple vaccines that we're showing efficacy of greater than 90% to 95%, I would have said that, that would be almost impossible. So I give a lot of credit to our colleagues in pharma and biotech that were able to do that. It's really a remarkable feat.

Yes. Adam, I appreciate you reiterating the kind of top 4 priorities of the company, which you have reiterated since the time that you became CEO. One of the questions that we consistently get, and just upfront, because I know this was before your time. Glenn knows this. I was a fan of doing the Covance transaction, changing into talking about it as being drug development rather than keeping the Covance name. I believe in all of that. But I don't think that investors give you the credit for having the combination of the 2 companies together. And one of the things, just because looking at some other companies that have recently broken up in the marketplace and get a higher valuation of the 2 parts, right, being greater than the sum of the totality, do you think about that? Can you maybe talk us through, one, how important it is to keep these companies together, the synergies that you see? And could you still have those synergies, whether it be contractually or something else without owning it?

Yes. Now Lisa, I think that's a fair question. And I agree with you that we have not gotten the valuation that we deserve based on having the 2 businesses together. I think COVID has demonstrated faster than anything we could have predicted the power of the combined capabilities. And if you look, we've got over 400 different trials that we're involved in for COVID, and a big part of that is because what we can do from a diagnostic perspective. And some of the central laboratory work that we're doing, for example, with vaccines, we're able to get those results fast for the blood that comes to us to understand if the vaccines are working or not because we have such a broad array of capabilities across our network of diagnostics. So I really believe that these 2 businesses together are significantly better than either of them apart. And I've tried to do things in the past where you just contract and you try to work on arrangements, and you've seen some of our competitors try to do it that way. I don't think it works. It's much harder. It's much more difficult. It's hard to get the priorities aligned. It's hard to get the people aligned and the businesses aligned. One of the things that we learned from COVID is that by having a cross-functional team that is incented the same, that goes from preclinical all the way through clinical, that includes diagnostics, making the pitches to the pharma and biotech company makes a big difference. And we're doing that now with oncology. And I think you're going to start to see how we're going to win in oncology. And I had mentioned briefly before that we've won a very large pharma customer's oncology business, so I think that's just the beginning. I think people now understand that if we go in and show our complete capabilities from developing companion diagnostics to doing diagnostic testing, the Phase I through Phase V clinical development that we can do, that when you present that altogether to the right people, you can actually get significant business. And I believe that you're going to see more and more of that as we move forward.

And do you think it just took you time to be able to develop that and to be able to have that cohesive offering in the marketplace, and that's why this has taken 6 years? Or is there something else that we can point investors to that -- as to why it's taken some time to get there?

Yes. So I think it's taken us longer than I would have expected. But what's happened is pharma has changed to some degree, and the speed of development is much different today than it was 5 years ago. So for example, an oncology drug today, you can get to market potentially in 3 years. You saw vaccines get to market in 1 year. So what happens is as the drugs and the vaccines come to market faster than they did before, you have much more discussion between preclinical people and the clinical people and the commercial teams. And when you have those discussions on an accelerated pathway, that's when I think you can see the difference that we can make. With COVID, when people want to move so fast, they saw the benefit that we could offer by having it altogether with one organization. You're going to see the same thing in oncology. If you went back 6 years ago, it took a lot longer to get a drug to market than it did today. What I think you're going to see is as we focus on specialty areas like oncology and other specialty areas, you can get to market much faster, and that's where having the combined capabilities makes the biggest difference.

And also, I think if we think about like the last couple of years, there's been a biotech boom, right, I mean if you think of it, in fact, the number of companies that are presenting here today versus 2 years ago. Who do we think about who you're working with? So you talked about that you have a new contract with a large pharmaceutical company, but can you maybe just talk about the different types of companies that you're working with today? And is there concern around funding for some of these smaller biotech companies?

Yes. So what I'd say is the funding seems higher than it's been before. The number of RFPs that we're getting is very significant. So I've not seen any sense that funding is going to go down. Historically, we've done very well in mid-sized biotech and in the smaller companies. We haven't done as well particularly in late-stage clinical in the large pharma companies, and that's where we have to improve. As we move forward, we continue to see us doing really well, not just in the U.S., but in smaller and biotech companies around the world. But what we really need to improve is in Phase III clinical trials in large pharma because that's where a lot of the dollars are. We've done well in terms of number of studies. But if you only get the smaller studies in the earlier stages and you don't get the bigger studies in the late stages, it's hard to show the benefit of the combined. So we do really well here. We've got to do a lot better over here.

And what do you need to do to get better over here? Is there an acquisition that you need to make? Is it just more experience so then people feel comfortable in giving you the study?

Yes. So the first thing is we had to build our presence in Asia. We weren't strong enough in Japan and China. We are strong enough now in Japan and China. When you go to large pharma, they want global studies. And they want them done really fast around the world, and they want the enrollment to be right by country so that they can file simultaneously in different parts of the world. We've done that. So we -- I feel confident that we are strong where we need to be strong on a global basis now. In addition to that, we needed to increase our capabilities in hybrid and virtual trials. That's why we bought GlobalCare and we bought snapIoT. It gives us feet on the ground on a global basis, GlobalCare gives us in order to do the virtual trials and hybrid trials. And snapIoT gives us additional IT infrastructure to do those. Those 2 things are really important for large pharma: global trials, fast ability to recruit; and then the ability to do hybrid and virtual trials, particularly as you've gone through COVID. And we can't necessarily get all the sites to be open at the same time.

Just circling back to the core lab business when we think about on the diagnostics side. One, when do we anticipate that we'll start to see traditional volumes start to come back? I mean I think that it's been difficult. We understand that when you think about things like elective surgeries are still not back to where they've been historically. We follow pharmaceutical trends, right? And new prescription trends are still down 20% to 25%, which tells me that people are not necessarily going to their primary care doctor. So when is your anticipation that we'll start to see some of that come back, would be my first question.

Yes. So if you go back to the beginning, in the first month, our base business was down 55%, 5-5. Then it came down to about 17% as we went through the summer. And in the third quarter, we were down on average about 9%, and it got better each month. If you look at December, there was a significant surge in COVID. We saw the base business impacted a little bit worse than it was in November, but not a lot. And with the surge that we saw, I would have expected a bigger impact, but we didn't see that. So I think we're kind of stable right now in that mid- to high single digit down versus prior year. I would expect that as more people are vaccinated, as we start to get into the better weather and we get through the surges, that our base business will come back. If there was no additional surge in November and December, I would have expected in January and February the business to be almost back to where it was. But because we saw the surge, because there are still shutdowns that are occurring, I think it's probably going to be the second quarter when you start to see things back to where it was prior to COVID.

And you're also seeing less number of people being able to -- the throughput in an office hour, right? So I mean I think I just look at myself, personally, I just had my wellness visit recently, and they told me at the front desk that normally, there might be 3 or 4 people waiting in the waiting room. There was no one in the waiting room the day that I went for my visit. So I do think that there's part of that as well. One of the things that we've talked about over the years when we think about the diagnostic business is the role in value-based health care. And there continues to be so much talk around value-based health care and where we're going with value-based health care. But yet, maybe we can talk about the preferred lab networks will fall into this a little bit. But where do you think we are on really truly shifting towards value-based care and the role that the labs will play? And I think that, that does even well to talk about the preferred lab networks.

Yes. So I'm going to kind of start at a higher level, and then I'll answer the question specifically. There's no doubt that health care costs in the United States are too expensive. And at 17% of the GDP and growing, it's not sustainable. So we have to find a way in this country to lower health care costs. It's affecting our ability to invest in infrastructure, education and so many other things. So value-based contracting to me has always made sense. But I've been talking about that for 10 years now, and we haven't made a lot of progress. And it's unfortunate because I think we need to. Now I think the work that we do for diagnostics can actually be part of the solution to reducing health care costs. By understanding who is progressing towards disease, if you can actually stop that progression, that's the greatest impact you can have. Prevention of disease is the greatest impact that you can have to reduce cost. If we can help people with companion diagnostics, understand if they have disease, what is the best treatment for them, that's another way that you can help reduce cost. We have so many data analytics in place that our customers can use to ensure that people are getting the tests that they need at the right time for the right reasons. And there are many instances where people are doing too much testing, and they shouldn't do as much testing. But then there are other areas that they should be doing more testing for prevention, and they're not doing enough. So we do talk a lot about value-based contracts. I think the data and analytics that we have can help our payers significantly. But I would have wished we made more progress than where we are today, but that doesn't mean we're going to stop trying. I think we all, as the United States in health care, have to find ways to have much more of a value-based system.

Yes. And I think -- do you think though that COVID played into this that perhaps as a payer, you're thinking, I have bigger things to think about than thinking about value-based care and how lab fits into that? And we didn't really talk about the Preferred Lab Network. So maybe if you can give us an update on how that's going with United. Do you have other payers? If I remember correctly, there's -- is there another -- one of the other payers came forward? Is it Anthem that's also doing some type of value-based Preferred Lab Network?

Yes. So the Preferred Lab Network always made sense to me. And we were on the formulary with United for the first one -- the first time that they had the RFPs were on again for this year. But I have no doubt that we've lost some traction with COVID. I think everybody has been a bit distracted rightfully so. And we haven't seen any significant impact. When we were here last year at this time, I said by the end of the year, by end of 2020, I'll have a good sense as to whether the network was working or not. Unfortunately, I don't because everything got put on hold and there was so much disarray. So my hope is that by this time next year, we'll have a much better sense as to does it work. There's no doubt it makes sense. There's no doubt it could be a significant cost savings and help with value-based care, but we have to make sure it can be executed on and implemented. And that's always the hard part. And that's where we're going to work very closely with United to have the right things in place to help reinforce the importance of adhering to the guidance. That's the part that we don't know is going to work or not.

If I look back to the Obama administration, and you look at some of the bundled programs that they did, whether it was around cardiology, around orthopedics, at that point, I wasn't really following the lab industry as closely as I do today. Was lab included back then when we started thinking about those bundles? And as we think about this next administration, the Biden administration, do you think that you're going to see something more from the administration around going back towards value-based care and bundling things that around Medicare, especially that somebody like LabCorp could participate in when we think about those things?

Yes. I think at some point, the administration will get there. Right now, they're going to have so much to do with vaccinations and getting through the pandemic and figuring out how to get the economy back up and running. I think it is going to take some time before we get new innovative ideas on health care. Once we get there, I don't see any reason that any administration wouldn't start to think about value-based medicine in health care. And I think people now realize the importance of diagnostics. I mean diagnostics are about 7% of the cost in health care. It's a very low percent of the cost, but it's involved in 97% of decisions. It's 3% -- I'm sorry, it's 3% of the cost. It's 3% of the cost, and it's involved in 97% of decisions that are made. So it's got to be part of any type of health care change or system. It's just too important to making the right decisions.

And I think that, that just kind of leads into the discussion around PAMA pricing, right? So I mean there's a reprieve, everybody knows in 2021, coming back in 2022. There's been multiple attempts in Congress to try to change this. I know that I've heard you and Glenn and as well as your other large competitors talked about the fact that you don't necessarily disagree with this but rather, the methodology around it. Is there any update around where we are on PAMA? Any thoughts around if you could see a reprieve beyond 2021? Or if we could actually see changes to PAMA in 2022?

It's just too early to tell, Lisa, with the new administration coming in, new Congress. We'll begin those discussions as we go through this year. As I said before, they're going to have so many other things on the top of their list to focus on. I think it will take us a while to get there. But I think the bigger issue is that any administration, and I believe the new administration has to think about what would we do if there was another pandemic? What would we do if there's an issue with antibiotic resistance? And there's a lot that we can learn from what happened in this pandemic. One of the things I think people realized was the diagnostic industry was cut for so long and prices reduced for so long that we didn't have any additional capacity, spare capacity. We didn't have [ gold ] supply chains. There's a lot of things that you would do differently if you weren't being squeezed so hard. So I think as people start to look about the future, they'll realize we've got to find a way to support a strong testing and diagnostic system in this country. And I think part of that will be how do we ensure that it is a good, strong business for the long term. So I'm optimistic that we'll find ways to work together and to figure out the right way to do that, and there's going to be a lot of lessons learned. I think that the country and the world has a much different sense of the importance of diagnostic testing today than it did a year ago.

Yes. I think we all do, right? We really appreciate being able to understand what's going on. Is that a flu symptom? Is it some other respiratory illness? Or do I have COVID and I should really truly be -- you should isolate yourself anyway, but really truly be isolating yourself if you have COVID. Can we talk a little bit about your relationship with Walgreens and how it's gone and your expectations going forward? They are making an effort to become more health care-centric, right, with their relationship. And I don't know if LabCorp will play any role in some of what they're doing, for example, with VillageMD or some of the other players in the marketplace. And so maybe just in general, talk about your relationship and talk about what you view as some future opportunities there.

Yes, sure. And I'll start by saying, the relationship is very strong and has been going very well. We now have 250 sites that are either fully open or very close to being opening. So despite the pandemic, we added well over 100 sites last year. And a lot of those happened in the fourth quarter. So I'm optimistic as we go through this year and next year, we'll be getting much, much closer to where we anticipated being somewhere around 600 sites or so. And then we're moving fast, and we're moving well together. The interesting thing is the NPS scores, which is kind of a patient satisfaction scores, in the Walgreen sites is higher than in our other sites. So there's a benefit to patients and the patient experience there. And at the same time, I think Walgreens benefits because we realize some of the people that go to get their blood there wouldn't necessarily have gone to Walgreens. So while they're there, they do other things and shop for other things. So I think it's a win-win scenario for both companies, and we're making really good, solid progress there. We do have discussions on many other things, including some of the things that you mentioned, including clinical trials as a way to work together for enrollment and looking at pharmacovigilance types of things. But I don't want things to slow down our progress in terms of opening up the PSCs in as many Walgreens as fast as we can. So that's the priority. But we are having many other discussions with them, and it's been a good long-term partnership.

What's generally an NPS score at a Walgreens store? I mean generally, anything above 60 is really high for health care?

Yes. Yes. I mean the most recent data I saw was we were in the low 70s.

Yes. Okay. That's a really good number. I know sometimes when people think about NPS, they think about things that are more consumer oriented, not necessarily health care. But from our experience, anything above 60 is really high for health care.

Yes.

So as we think about that consumer and the age of the consumer, and you talked about engaging the consumer as one of the key priorities that you have, can you give us an update on Pixel? Can you give us an update on other direct-to-consumer type of opportunities that you're seeing? And how do we think about the margin on some of those products versus your traditional lab products? And maybe that's where we bring Glenn in finally on this conversation.

Absolutely. I'll let Glenn talk a bit about the margins. When we launched the at-home collection kit for Pixel, to be honest with you, we didn't realize how well-received it would be. If you look at the press around that kit, if you look at the number of questions that we got from consumers, by the way, it was truly remarkable. It's about 7% of our total volume right now. But if you look like right before the Christmas holiday or right before New Year's, we saw a big spike in Pixel kits because I think a lot of people use them before they travel or once they come back from traveling. So as a percent, it actually went up in the days before the holidays. We're also seeing a lot of employers in our LabCorp Employer Services business that are using the Pixel kits to help with their employees and so forth. So it's been a pretty remarkable success for us. What we now have to do is figure out how do we take that success and expand it into all the other things that you can do with Pixel by LabCorp At-Home. And there are a whole bunch of tests that we have that are available through Pixel. And now we have a list of people that have appreciated Pixel, that have used it and have allowed us to engage with them in the future. We'll be thinking about how to use our marketing in order to make them understand that we have a lot of other offerings that could be appropriate for them moving forward. Glenn?

Yes. I would just add on the margin. Similar to our other PCR testing, our Pixel product is obviously contributing at a very high margin for the company, obviously benefiting from the pricing due to the public health emergency. So that will get adjusted, obviously, post that emergency going away as well. But as Adam commented, at Pixel, we've had, even prior to the pandemic, offering different testing services. And so the visibility that we've had and the use and the familiarity, we believe that we can continue to broaden Pixel and obviously at a very attractive incremental margin to the company.

Yes. And just staying lastly, as we think about diagnostics and we think about reimbursement and competition in the marketplace, any thoughts on or any update for us to think about reimbursement in the workplaces on the commercial side, traditional lab when we think about that? As we think about competition, I know there's been the expectation over the last few years that we would see more consolidation of the industry because of pricing constraints and reimbursement constraints. So I guess it's really 2 separate questions, right? The first would just be how do we think about where reimbursement is? And are there any changes that we need to think about going forward on the commercial side? And then secondly would just be, how do we think about the competitive market today? And do you still see opportunities for acquisitions within diagnostics?

Yes. So I'll start with the second question first. We see significant opportunity for consolidation and the ability for either hospital laboratories or small and more local laboratories to be acquired. And the discussions we're having today, there are a lot more than we were having at this time last year. The question is, how can we even move them faster and close the deals quicker? But I believe that there's going to be more deals this year than in previous years. And I think a big piece of that, Lisa, is if you're a hospital and you realize the first time when you had to start to do PCR testing that you needed new equipment, that you weren't investing capital over the years in your laboratory, that you need it to be state of the art, you need to increase your IT infrastructure so you can communicate with the CDC and with all -- with the state. I think that hospitals are now realizing that it is a capital-intensive business if you really want to stay state of the art. And now they're saying, do I really want to be in this business and invest versus do I want to invest in other surgical suite or something where they can drive much more revenue faster? So we are seeing more discussions now for that reason, I believe, than we've seen before. In terms of the overall pricing and reimbursement environment, every part of health care in this country is going to continue to be under significant cost pressure and pricing reimbursement pressure. I don't think it's going to be a step change. I think it's just a continuation every year that you're going to have some pressure. And that's what you have to continue to innovate, bring out new tests, find new ways to create value. I believe things like what we were doing with the liquid biopsy test where we license in liquid biopsy for non-small cell lung cancer, that's an area that we can provide value over time, get good reimbursement. I think you have to continue to augment your pipeline of tests with other high-value tests as you move forward to offset the reimbursement pressure that you continue to face. Glenn, anything you want to add there?

No. I think you covered it well.

Okay, great. So let's move on to drug development. We kind of just touched on it briefly, but how do we think about the long-term sustainable growth of this business? And what are the key drivers? I think that the diagnostics business is a lot easier for all of us to understand when we think about the growth rates and the drivers.

Yes. So I believe there's tremendous opportunity in the drug development business. And I break it into 3 pieces. You have the early stage, you have basically the central laboratory business and then you have the later-stage clinical business. I think the greatest opportunity for LabCorp is in the later-stage clinical business. And with everything that we're doing to reinforce our capabilities in preclinical and central laboratory, we are a market leader there in both of those areas. We should be a market leader in the later-stage clinical trial business, and we've not been. But we are starting to make real progress there. And as we go through this year, I think you're going to see more and more progress. To me, that's the greatest growth opportunity. I believe if you kind of adjust for COVID and move that aside, it's certainly a mid- to high single-digit growth business in a base case. My hope is, over time, we'll be able to grow faster than that.

One of the things that you talked about earlier is patient identification, right? So you talked about working with both Walgreens in identifying patients for trials, clearly, with all the lab information you have identifying patients for trials. And I think that, that was one of the key components of putting LabCorp and Covance originally together for recruitment. Can you talk about the success that you've had? And do you continue to win business because of that? How do we think about some of the other competitors that are out in the marketplace like -- what's that company of -- Beverly, Verily? Verily, I think, is the name of the company. It's a Google company, right? So how do we think about some of the competition around this as well?

Yes. What we have, what nobody else has, is individual patient-level data. So one of the reasons we've been so successful and disproportionately gained market share in COVID trials is we're doing the PCR testing. We know where the people are that are positive. We know as rates are changing in different states where those rates are changing. If you want to do a trial to try to treat patients that have COVID, we know where those patients are. We can direct the trial on the sites to those certain areas. So I think, again, COVID has demonstrated the power of the data and the analytics that we have to help enroll clinical trials faster. And we can do the same thing in other therapeutic areas like cancer and other specialty areas because we have so much data there. So I do think it makes a difference. It's a part of our pitch to pharma and our biotech customers, and I think it will make more and more difference over time.

Just in the last few minutes here, Glenn, do you want to just update us on uses of cash and priorities? And then I guess, Adam, will you ever pay a dividend?

Well, obviously, it's been a very strong year of cash generation given, obviously, what's been going on. And our priority for capital continues to be to invest internally. We see a lot of opportunities within our R&D, a lot of our capital investments where we're supporting growth as well as just business process improvement initiatives. But the good news is we have substantial resources. As Adam commented earlier that the acquisition pipeline continues to be very robust. We continue to believe that we'll be able to allocate capital like we have this past year, but also the pipeline is very good for '21 where we do expect to continue to be acquisitive across both of our businesses where we feel we can do very good strategic acquisitions that add a lot of value. And while we had suspended our share repurchase program earlier in '21 or in '20, we had brought it back in the fourth quarter. And we would expect that additional cash will be applied to share repurchases more in the normal course as we go through, call it, 2021, but with clearly the priority being on our internal needs in the acquisition program as we continue to go forward. But the balance sheet is very strong, we feel very good about our cash generation and we see a lot of opportunities to redeploy the capital.

And Lisa, I was on the Board for 6 years before I came -- became the CEO of LabCorp. And every year, at least once a year, sometimes twice, we would have a discussion on a dividend, and we continue to have that discussion with the Board. Right now, based upon the acquisition profile and some of the things that we just talked about, we think there are better uses of that money. But we're going to continue to have those discussions, and I never say never.

Okay. I like to end these with a year from now, what will people appreciate about LabCorp that they didn't appreciate? Adam, I just find it's so fascinating because when we sat together last year, your first JPMorgan Healthcare Conference never anticipated that we're going to have a worldwide pandemic. And so everything that we talked about last year really changed from -- and I really -- we appreciate every way that LabCorp stepped up for us, for the country, for any of us that have been tested and the ability to really have the turnaround time. So here in our last minute together, can you just maybe talk about what your expectations are over the next 12 months and what people will better appreciate?

Yes. Thank you, Lisa. I think people better appreciate us now for our science and innovation capabilities than they did a year ago. I would hope a year from now, not only do they realize that we're a scientific and innovation powerhouse, but that we've made significant progress on demonstrating the power of the combined, that we're doing really well in therapeutic area like oncology and that we're differentiating ourselves on the fact that we've got the capabilities of both diagnostics and drug development, and that enables us to see an accelerated growth path moving forward.

Great. Well, thank you both for your time today. I really appreciate you participating. Thank you, everyone, for tuning in. And if you have any questions, feel free to reach out to myself or Clarissa on the IR side at LabCorp. Thanks, Adam and Glenn. I appreciate it.

Thanks so much, Lisa. Great to see you. Stay safe.