Labcorp Holdings Inc. (LH) Q2 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the LabCorp of America Q2 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Clarissa Willett, Vice President of Investor Relations. Thank you. Please go ahead, ma’am.

Thank you, operator. Good morning and welcome to LabCorp’s second 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 at labcorp.com, we posted both, our press release and an investor relations presentation with additional information on our business and operations, which includes 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 impact 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 update 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. Thanks for joining us today. For more than 50 years, LabCorp has led through science, innovation and technology. During the current pandemic, that leadership has been front and center, when the world has needed us most. I continue to be impressed with how quickly our teams have rallied to confront each and every challenge put before them. And I want to thank our 65,000 employees as their efforts have been heroic during this difficult time. During the second quarter, we delivered solid performance across the Company, despite the impact of the pandemic. We delivered revenue of $2.8 billion, adjusted EPS of $2.57 and free cash flow of $272 million. We were encouraged to see steady recovery in our Base Business during the quarter for both diagnostic and drug development, as people are starting to return to their doctors for testing and clinical trials activity is resuming, including those that are for COVID-19 related research.

Thank you, Adam. I’m going to start my comments with the review of our second quarter results followed by a discussion of our performance in each segment and conclude with some commentary regarding our current expectations for the remainder of 2020. As a reminder, in the first quarter, we were able to estimate the impact of COVID-19 on our results, given that the impact was late in the quarter. However, we commented that we would not be able to do that going forward. For second quarter results, we have quantified the revenue associated with the COVID-19 molecular and serology tests, so that you can see the change in the Base Business.

Our first question comes from the line of Eric Coldwell from Baird. Your line is now open.

Thanks very much for all the details. A quick question on Covance. I’m just curious if you could give us some sense on the nature of the strong bookings, particularly how much might be related to COVID-specific work. And maybe as a follow-on to that, if you could give us any details on the performance of the three segments, clinical, central lab and early development, how those individually played out during the quarter? Thanks very much.

Hi, Eric. Good morning. So, Covance had a very good quarter. And I think it continues to show the power of having both, diagnostics and drug development together. If you look, we had put together a enterprise-only response team. And that team includes people from both, our diagnostics business and our scientists from diagnostics together with people and scientists from drug development. And we’ve been participating in discussions on almost every vaccine and almost every treatment for COVID-19. With that said, as I mentioned in my script, most of those trials are still pretty early stage. So for the quarter, they didn’t necessarily contribute a very significant amount of dollars. As we move forward, I believe that it will be increasingly important in terms of our revenue. If you look at the three parts of our business, our early development and central laboratories began to come back quicker than the clinical work. And that’s because if, for example, we have a central lab in China, as China opened up, we saw the capacity fill pretty fast. And as markets opened where we have the central laboratories, we’ve seen those countries continue to increase with the capacity that we have, quickly. Early development, we continue to do very well and that includes some of the early work that I just mentioned for COVID-19. Clinical, we have seen an increase in accessibility of sites, and that’s gone up fairly significantly, particularly driven by Asia. Although there’s not as many sites in Asia, as there are in the U.S. and Europe, most of the sites in Asia are now accessible. However, many companies are still waiting until there’s global accessibility before starting some of those particularly later stage Phase 3 trials, and I think that’s still going to take some time. So that business coming back has taken longer than the other two.

Yes. Adam, your peers that have reported to-date, have talked about COVID awards comprising somewhere between call it, high-teens and even mid-twenties of total bookings. Could you share with us, your experience?

Yes. So, I am not going to give you the exact percent, because it’s a book-to-bill, as you can imagine, it moves based upon what makes it through Phase 1 and to Phase 2 and so forth. But we’re not that dependent on COVID-19 trials at the moment. So, I can compare to their numbers, but our numbers are not as dependent upon COVID.

Got it. Thanks very much.

Sure.

Thank you. Our next question comes from the line of Jack Meehan from Nephron Research. Your line is now open.

Thank you. Good morning. Adam, I was hoping to get your perspective as to how you think testing for COVID-19 is going to evolve as we head into the fall. What portion of the testing do you think is going to move to pool method? Do you think molecular is going to remain a good to approach? And just any perspectives on antigen testing would be great.

Absolutely. Good morning, Jack. So, the first thing I would say, it’s been pretty remarkable how in early March we were doing 2,000 to 3,000 PCR tests per week. And here we are in the end of July and we’re able to do 180,000 PCR tests per day. I mean, that’s just astonishing. For people that understand the type of equipment that you need to run PCR tests, it’s completely different than what you would need for blood tests, and we’ve had to build significant capacity. I believe that we have to continue to build capacity. We don’t know for certain what the fall will bring. But, as schools open up, as businesses open up and as the fall flu season comes to fruition, I think we’re going to continue to do more testing. And I do believe that PCR testing will remain the gold standard for telling if somebody currently has the disease. And therefore, we will continue to build the past feet as fast as we can and overcome some of the issues that we face in terms of supplies and machinery. At the same time, I think that all testing is going to play a role. Pool testing is particularly helpful in areas with low prevalence, in things like back-to-school or back-to-work because with low prevalence, you can do the pool testing and then you don’t have to do any retesting. I don’t think it’s going to be the most significant amount of testing that we’re doing. In fact, I believe that the standard PCR testing in the fall will remain the most significant by far of the testing that we do for PCR. But, I do think that the pool testing will add to our capacity and give us additional capabilities. Things like antigen testing, I think have a role also. So for example, if you wanted to test a large group of people with antigen testing, point-of-care, get quick answers, you could then see if there’s any positive people in that large group. If there are, I would go back and test them with PCR testing. If there’s none, I would probably feel pretty comfortable that I don’t have to retest. The issue with the antigen testing has been today is that you can miss some positives. So, you want to make sure if you have somebody positive, you test the people that tested negative. But if it’s a pretty population, it would be a statistical anomaly for everybody to test falsely negative. So if you see one positive in that population, I would go back and retest them with PCR. So, I think we’re going to need all the capacity we can get to get through the fall, assuming that the flu season could be big, and we’re all doing the best we can to prepare for it.

Great. Thank you. And maybe just building off that, given some of the expectations around testing in the second half, how are the incremental margins on the COVID testing stacking up versus the Base Business? And what’s your philosophy on reinvesting portion of that back into the business?

Yes. So, I’ll give you a broad statement. I’ll ask Glenn to give you some specifics. But, we’re going to continue to build capacity irrespective of cost, and that’s been our philosophy from the beginning. Buy as many machines as we can, get as much testing equipment as we can. And frankly, that’s what got us to 180,000 per day, along with our scientific capabilities. The LabCorp’s scientists have just been extraordinary to get us where we are today. And I want to continue to build that. It will be a good day if we get to fall and we have more capacity than the number of samples that we get in. And that’s what we’re going to strive for, albeit it’s not going to be easy. We need help from our suppliers. We are working 24 hours a day, seven days a week to try to get more reagents, more machines and so forth. But, in terms of the margins, I’ll let Glenn give you some specifics.

Sure. Jack, we’ve commented in the past that when we -- obviously given the fixed cost nature of the diagnostics business, the incremental dropdown for new testing, call it was around 65%. So, we’ve used that example when there’s been weather and what’s happened. So, the COVID testing clearly falls within the ballpark, if you will, of what we would have experienced with our other testing. So, obviously, helping contribute to the improved leverage, if you will, with the additional testing that we’re doing.

Our next question comes from the line of Stephen Baxter from Wolf Research. Your line is now open.

I wanted to follow up on the pooling for molecular testing. So, my understanding was you will initially be doing this on your LTD. I guess, how much of your daily volume today runs through the LTD? And what do you think is the multiplier effect that you’ll get on that capacity? And then, just as a follow-up, what’s the process for expanding pooling onto your other testing platforms? And then, when do you expect to see that occur? Thank you.

Yes. Thank you, Stephen. The first thing I’d say is that we launched back in March with our LDT, and that’s a laboratory developed test by LabCorp’s scientists. And it’s been remarkable, the amount of volume that we’ve been able to do through that LDT. Of course, we still need our suppliers and the other companies to help us to get to 180,000. But I have to say that our scientists did an extraordinary job with the LDT to get up to 180,000 today. I’m not going to give you the exact number through the LDT because that changes. It changes based upon we have 16 labs running tests, different labs have the LDT, different labs have other equipment. So, at the end of the day, it depends on where the samples are, which tests we run them. And what we try to do is optimize our network, so we can get the best possible turnaround we can. To be at two to three days right now, turn around for patients and the hospital inpatient even faster says that we’ve found a real way to use our capacity and distribute it successfully. With regards to the pool tests, I don’t think that we want to give a certain percent that will go through that. Instead, what I would say is we’re going to make sure that as much of our LDT that is a significant amount of our volume, it’s a significant amount, and go through that if we need it. At the same time, we’ll have to file EUAs to use other platforms, to run the pooled analysis on, and we would expect to do that as we move forward. But for now, I think with our LDT, we can do as much pooling as what we would deem appropriate.

Thank you. Our next question comes from the line of Lisa Gill from JP Morgan. Your line is now open.

Thanks very much. Good morning. Adam, I want to go back to the core volume. Can you give us any color as to what you’ve seen thus far in July, especially in areas of the country where we have seen some level of resurgence, would be my first question. And then, secondly, I know you’re not giving guidance, but just curious around your continued expectation on the reimbursement guide for COVID testing.

Sure. Good morning, Lisa. And, it was interesting because in the first quarter, when we saw the volumes up by 55% in the month of March, we didn’t know how fast it would come back. And there was a concern that it could take an extended period of time. To be Frank with you, I’ve been surprised at how fast it has come back. As states have opened, we’ve seen the testing come back more significantly. For example, as Florida and Texas and Georgia opened up first, we saw the core testing come back faster. As states begin to modulate and slow down a little bit, you see the testing slow down. So, there’s definitely a correlation between how far and how fast the states have opened and how far and how fast our Base Businesses has come back. What I would say is, for June, it was the first time since COVID that we saw that the total testing including our COVID testing was above prior year. In July, it’s still early, we don’t have all the data for the month, but we’re seeing continued strength in the Base Business in base testing. The reason that we have not giving guidance for the rest of the year is because as we say, it’s impossible to know how fast states will move, will they slow down a little bit, if they see additional breakout? What will the fall look like? What could happen? Will it be another slowdown to the Base Business? So, we’re watching it, I mean, frankly, almost every day. But, we want to make sure that we continue to do the best we can to be able to forecast that. In terms of reimbursement, they did announce, HHS that they extended the emergency in the United States. Typically, that lasts for another 90 days. We assume that the reimbursement will continue to be strong as we go through the emergency situation, and then we’ll just have to see what happens as we go after that 9-day extension.

Thank you.

Thank you. Our next question comes from the line Dan Leonard from Wells Fargo. Your line is now open.

Thank you. So, hoping you could elaborate further on what you’re seeing from the return-to-work demand front. Adam, you mentioned, you’re connected with hundreds of employers. But, I’d love to be able to quantify that or better understand the magnitude in some fashion.

Yes. Sure, Dan. Good morning. The first thing I would say is that, I spend a lot of time talking to other CEOs, talking to presidents of universities, and we try to help them understand ways that they can think about going back to work or back-to-school, and different companies and universities are thinking about different approaches. And sometimes it depends on if they’re in a hotspot, if they’re in an area of very low prevalence, what type of workforce they have, their healthcare workers, do they have factory workers? So, a lot of things go into the discussion and it’s a multi-variant discussion. In general, the first thing that we talked about is the importance of wearing masks, social distancing, ensuring the work place is clean, good hygiene, cleaning elevators and elevator bottoms, ensuring the air flow in the buildings are appropriate. Prevention and keeping people out of work that are sick, having temperature checks before they come into school or work, questionnaires, that’s all critical. The second thing is that, once somebody does make it into school or workplace and has any symptoms, you want to test them with PCR as quickly as possible, and you want to have tracking and tracing capabilities and be able to track and trace anybody that’s been around them. And then, you want to have a place to isolate them, particularly if you’re in a university while you wait for the results to come back. And that’s why having the type of turnaround that we do two to three days is so important for tracking and tracing. And then, ultimately, over time, we want to work with them to get flu vaccinations for their workforce, so that when they get to the fall flu season, they’ll have a sense as to what is flu versus what might be COVID-19. So, we’re trying to work with these companies across the entire upfront of what they can be thinking about as they go into the August, September timeframe. What I can say is a lot of my time is spent on talking them how them doing testing because the types of testing people have said is, why don’t I test everybody once a week? I don’t think that makes a lot of sense to do that. I think, if they want to do surveillance, that’s fine. But to try to test everybody once a week that’ll give you one point in time. And the next day, if somebody is sick and starts to spread it, you won’t necessarily have done a lot. You’ve spent a lot of money on testing that probably was not the best use of your time and money. So, to be honest with you, I spend a lot of time trying to help them think about it logically, and a lot of my time is trying to make them understand how to best use testing and where it’s appropriate. And I can tell you, I’m spending a lot of my time and my team is spending a lot of time talking to these folks.

I appreciate all that color. And then, for my follow-up, Adam, you commented earlier about the differential trends at Covance by line of business. Can you also comment by customer segment between large pharma, maybe midsize pharma and what you’re seeing out of the emerging biotech crowd that has been pretty successful raising money to-date?

Yes. I would say we’re seeing increases and we’re seeing business across all biopharma, pharma, large, small, U.S., ex-U.S. But, it’s in the lines of business, like I mentioned to you earlier that we’re seeing the business come back faster in early development, central laboratories, and over time as we will see more in the clinical area. But, I don’t think there’s a differentiation and segmentation across the customers within those segments. We’re seeing strength frankly, and RFPs across them all.

Thank you. Our next question comes from the line of Donald Hooker from KeyBanc. Your line is now open.

Great. Good morning. I was curious, you guys took a receivable reserve, I think last quarter, given the potential for cash collection issues, obviously with more unemployment. How has that played out? And how -- I know you guys have invested a lot in technologies in that area as well to mitigate that. Can you maybe elaborate on your experience there?

Hi, Don. It’s Glenn. Yes. As you mentioned, the first quarter, given the pandemic coming and looking back at other times where we’re seeing significant financial disruption and how it impacted our client base, we established a reserve of $17 million. We have seen an increase in our bad debt experience, but we feel that the reserves that we have established are very adequate going forward and nothing that was unexpected, at least at this time.

Okay. Super. And then, maybe just last question for me in the Covance business, given all the disruptions, are you seeing any change in pricing across the various lines of business you have there, particularly early development?

No, in general, we’re not seeing any significant changes.

Okay. That is helpful. Thank you so much.

Thank you. Our next question comes from the line of Pito Chickering from DB. Your line is now open.

Hi. Good morning. This is Justin Bowers on for Pito. And thanks for the questions. Just with respect to pooling are you -- is the plan to roll that out to all of the 19 test sites? And then, secondarily, when we do some quick math on the multiplier effect, we arrive, let’s say 300,000 to 350,000 like a theoretical capacity. But, just based on your earlier comments, it sounds like, molecular is going to be the primary modality. So, can you help us to think about kind of the ramp there or what the capacity is with pooling? And then, I’ll stop there.

Yes. Thanks for the question, Justin. And pooling is an important piece, but it’s not, in my opinion going to be the primary piece. PCR testing will continue to be the primary piece of what we do. And if you look at our labs, we will not be rolling out pooling all of our labs. It takes a lot of technical capabilities to do the analysis, the analytics to hold the samples where you test the samples. It is a lot of work and you need some specialized equipment from it. So, we’ll have it in multiple laboratories, but certainly not across all laboratories. And then, we have to make sure we use it in the right patient population. So, we’re not going to just broadly start trying to pool patients. We’re going to look for the right places and the right parts of the country or the right organizations where we believe the prevalence will be such that pooling makes sense. What I would avoid is, trying to go to theoretical capacity. And for example, right now, we can do 180,000 tests per day. We have done in a day, 180,000 tests and we know we can. But, I would not take 180,000 and times it by 7 and try to figure out capacity. Because if you can do 180,000, but you want to maintain a one to two-day or two to three-day turnaround, you don’t want to run at full capacity. You want to be below that. So, we’re going to continue to ensure that we do as many tests as we can, but we want to manage the turnaround time as best we can as well. So, to me, theoretical capacity is just that. But that’s not how I build our financial model. I build it based upon practical utilization of the test, of which pooling will be a part of, but the overall PCR testing will drive it.

I appreciate it. And just a quick follow-up. In terms of the Base Business, when you look at some of the areas where some of the hotspots around the country now, how is the Base Business trending versus like earlier in the pandemic? And just trying to get a sense of like the magnitudes and the swings, because I would think it’s not as severe as it was let’s say in April.

Yes. So, it’s bounced back pretty significantly. And what we’ve seen is, as states have begun to open up, the base testing has increased. And for the first time, if you look at our base testing plus our COVID-19 testing in June, we actually had volume that was above the year. So, that just gives you a sense that the Base Business came back pretty well.

Okay. Thank you.

Thank you. Our next question comes from the line of Ralph Giacobbe from Citi. Your line is now open.

Thanks. Good morning. Adam, you talked and mentioned the flu a times during the call. Just hoping to get a little bit of sense of what you’re expecting for the flu season, how it plays out, just given the current backdrop and what are your testing capabilities to sort of do both in one shot. And then practically speaking, could you just give us a sense of how big flu testing is for you and again whether you think there is an uptick there?

Yes. Thank you, Ralph. Good morning. And what I would say is, if you look at this pandemic, the only thing that has been predictable is the fact that it’s been unpredictable. And what we want to do is build as much capacity as fast as we can for any circumstance that comes at us come the fall flu season. When you look at the flu season, we think that this will probably be one of the highest years for people to get flu vaccinations. And we hope as many people that are able and that it’s appropriate for it to get those vaccinations can do it. Our LabCorp Employer Services are actually helping businesses get vaccinations for flu for their employees. It’s going to depend on the flu season, the strain, how effective those vaccines are. As you know, every year there’s a different efficacy of the flu vaccine. So, we’ll see how that plays out, based upon the strains. But under all circumstances, I think that COVID-19 together with the flu season is going to be more problematic than where we are today. We are developing combined tests of multiple respiratory ailments, including things like flu and COVID-19. Flu has not been a very significant driver of revenue for us in the past. But, I think with COVID-19, it’s going to continue to be important to know is it flu or is it COVID-19? If somebody does a rapid flu test in a physician’s office and it comes back negative and they saw symptoms, they’re going to probably want to get the PCR test. If somebody comes back positive for flu in the office, I feel good about that, but I would still want to validate it in case it was a point-of-care false positive and get the PCR test. So that’s why I believe under almost every circumstance, we’ve got to be prepared and do everything we can to build as much capacity for the flu season.

And then, just quick follow-up. I want to go to the pricing number ex-COVID, so just the base, I think was up almost 7% ex-PAMA and Beacon. Is that just all acuity driven, or what are the factors? And maybe what’s a more sustainable number as we think we’re going to have?

That’s right. The mix impact on the Base Business was up 5.2%, but negatively impacted the 2% between PAMA and BeaconLBS. So, call it around 7%. Again, you’ll notice that this time, we’ve used the price mix to help define the revenues, so volume and price mix to get to our change in revenues. We have changed the methodology, as you would have seen in the past, using revenue per requisition, given that in the past that was always a good proxy, if you will for our pricing or our mix within the business. And what was interesting this quarter is we’re trying to explain our, call it, 3.9% reduction in revenue, if you took our volume, change and our revenue per requisition change, you would get to minus 0.1. So this is really the first quarter that there’s been a change, and that’s just due to the dramatic decline in volumes that we’ve experienced. So the rec number, if you will within the base would have been around 19.4%. So, the pricing overall within the Base Business, we always talk about it being that from a unit price is relatively stable. So normally where we see the change is normally in favorable mix. It could be test per session, it could be acquisition-related, but most of it’s just driven off of test mix or potentially some payer mix as well.

Thank you. Our next question comes from the line of Ricky Goldwasser from Morgan Stanley. Your line is now open.

Hi. Good morning. Just a couple of questions here, the first one on serology. So, Adam, maybe you can share your thoughts. What do you think serology testing guidelines could look like when the vaccine is available?

Hey. Good morning, Ricky. The first thing I would say is that we’ve built capacity in serology to a very significant degree. We can do 300,000 tests a day. We can do the total antibodies. We can look at the IgG, IgM, IgA. And I think that we’ve done a really good job to get that up and running. There’s really still information and science that we need to understand what those antibodies mean. So, we need to understand if you have the antibodies, are you immune? If you’re immune, for how long does that last? If you have any antibodies, and they start to wane over time, will your T cells kick in if you’re exposed to virus again, and you have an immune response? So, I would say that there’s still more science that needs to be out there before we can give a definitive answer as to what they mean. But at a minimum, I would want to know if I had COVID-19 in the past, because I want to know that I beat it. So, if I have the antibodies, I would know that, I had COVID-19 in the past and I beat it. Number two, as you start to think about plasma an convalescence blood plasma and collecting that, you’re going to want to know that people have antibodies in the plasma, so that if that works as a treatment, we can get plasma from as many people as possible. I think antibody testing is going to be important for that. Ultimately, I think you’re going to need quantitative anybody testing that would say what level of anybodies you have. And I think that’s going to be important. And we have a quantitative antibody test as well as a qualitative anybody test. So, at the end of the day, we’re at the forefront of science on antibodies, on understanding T cells and other immune responses, but we still need more science and more research to give us the definitive answers.

Okay. And then, on the PCR side. I mean, to your point, you said, we have 180,000 capacity but practical utilization is below that. So, when you think about current demand levels, to achieve that one to two days ideal turnaround, where does capacity need to be?

Yes. So, Ricky, that’s a big question. And as you go into the fall, I can’t tell you the answer to that, because we don’t know what the demand is going to be. And that’s why we are building as much capacity as fast as we can. I have no constraints on buying machines and buying reagents. We’re working with our suppliers who have been just terrific to work with to build whatever we need. And it would be a good day if we get through the fall and said, we have more capacity than what we needed. With regard to where we are today at 180,000, we’re already -- for hospitalized patients, we’re at about a day, day and a half turnaround. And then for everybody else, we’re already, right now, as we speak at a two to three-day turnaround. So, we’re doing really well in terms of turnaround. But we’ve got to keep building because we don’t know what the volume is going to be in the fall. And we won’t rest until we build and build and build as much as we can.

And just one follow-up. When you think about the volumes, what percent of the volumes are hospitals versus the rest on the COVID side?

Yes. The hospital is small volume and over time it will get smaller. As there is more point-of-care tests available as it’s more cartridges for point-of-care tests available, I think the hospitals will try to use those as much as possible, so as we do some point-of-care tests in our TSAs, which are the hospital labs that we manage. So for me, hospital inpatients point-of-care is critical. Right now, we have great turnaround. We’re doing that as fast as we can for them, but if I was running a hospital and I can get an answer even faster, I want it even faster. So, it’ll be a smaller percent as we go towards the future.

Thank you.

Thank you. Our next question comes from the line of Derik de Bruin from Bank of America. Your line is now open.

Hi. Good morning. So, I’ve got a couple of questions on the lab. So, your competitor put out a low end of their fourth quarter guidance that basically implied a slowdown in molecular testing. I’m just wondering your sort of thoughts on that scenario happening. Is that even something that’s remotely possible? And then, some commentary on what you’re hearing from the commercial payers in terms of how they’re reimbursing? And then finally, have you looked at next generation sequencing as a way of increasing capacity? Is that something that you could potentially consider? Thank you.

So, what I would say is the reason that we have not provided guidance is because there are still so many unknowns as we go into the second half of the year. And the unknowns aren’t just with PCR testing. It’s also with the Base Business. Right now, the Base Business has come back very well. Will it remain that way, particularly if we have another significant COVID-19 impact in the fall? It’s hard to know. I believe that COVID-19 testing until there’s a vaccine they’re going to need us to do as many as we can possibly do. And that’s why we’re going to build that capacity as quickly as we can. So, I don’t see a scenario, except if there’s a vaccine or some type of technology that I don’t know of today that would impact us that would say we don’t need a lot of PCR testing going throughout this year. In terms of next generation sequencing, absolutely, we’re going to look at everything. The question is at what cost and what price point and how accurate will it be versus the PCR testing. And that kind of leads to your second question, which I put third, because I think commercial payers are going to look if they can get a very quick turnaround for an accurate test at a reasonable cost, it would do that versus other tests, unless there’s a real scientific reason to do otherwise. So, what I can tell you, our scientists are looking at every technology available. Every time I read about one, or I see one, I send it to our scientists and they said, yes, we’ve already talked to them, we’ve already looked at it. So we’ll be at the forefront of science and technology here. If it’s something that makes sense, we’re going to look at it and we’re going to do everything we can to be a part of it, just like we’ve done already with things like PacBio and Adaptive and so forth. But, as I sit here today, I think PCR testing as we go into the fall is going to be critical. And that’s why we are so focused on trying to build capacity.

Thank you. Our next question comes from the line of Dan Lawler from William Blair. Your line is now open.

Hi. Good morning. This is Dan Lawler for Matt Larew. Thanks for taking my question. I wanted to ask about the demand for COVID tests on the Pixel platform. Can you give us a sense for what share of your COVID tests have been through the platform and then how meaningful Pixel self-collection might be from a back-to-school or return-to-work perspective? Thanks.

Yes. So, Pixel continues to be an important part and one of the many offerings that we have for people to get PCR testing. It is not a significant, meaning not more than 25% of our volume, it’s less than that. But, we do see the Pixel volume increasing. And I do believe that as people go back to school or back to work, at-home collection kits will become more important. And that’s why we have Pixel, but we also have other at-home collection kits outside of Pixel that we will use for both, mailings and for things like employers. So, I do believe it will become a more important piece of our mix. Even though we’re moving a lot of them today, there’ll be more as we go into the future.

Great. Thanks.

You’re welcome. Okay.

Thank you.

Yes. So, in close, our mission to improve health and improve lives demands that we stay at the forefront of the fight against COVID-19. The importance and the urgency of what we do has never been more clear. And our ability and our ability to support important scientific advances are unwavering. And we will only continue to strengthen it as we move into the future. So, I want to thank everyone for their support as we navigate the crisis, including our customers, our suppliers, and especially employees, we’re all in this together. Have a good day. Stay safe. Wear your mask and donate plasma.

Ladies and gentlemen, this concludes today’s conference call. Thanks for participating. You may now disconnect.