Labcorp Holdings Inc (LH) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the third quarter 2010 Laboratory Corporation of America earnings conference call. My name is Deanna. I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. David King, Chairman and CEO. Please proceed.

Thank you. Good morning and welcome to LabCorp's 2010 third quarter conference call. Joining me today from LabCorp are Brad Hayes, Executive Vice President and Chief Financial Officer; Ed Dodson, Senior Vice President and Chief Accounting Officer; and Steve Anderson, Vice President Investor Relations. This morning, we will discuss our third quarter 2010 results, highlight our progress on our key strategic initiatives and provide answers to several frequently asked questions. I would now like to turn the call over to Steve Anderson who has a few comments before we begin.

Before we get started, I would like to point out that there will be a replay of this conference call available via the telephone and Internet. Please refer to today's press release for replay information. This morning, the Company filed a Form 8-K that included additional information on our business and operations.

This information is also available on our website. Analysts and investors are directed to this 8-K and our website to review this supplemental information. Additionally, we refer you to today's press release which is available on our website for a reconciliation of non-GAAP financial measures discussed during today's call to GAAP.

I would also like to point out that we are making forward-looking statements during this conference call. These forward-looking statements include, among others, statements about our expected financial results, financing activities and our ability to close the acquisition of Genzyme Genetics. These statements are based upon current expectations and are subject to change including based upon various important factors that could affect the Company's financial results. Some of these factors are set forth in detail in our 2009 10-K and subsequent filings. The Company has no obligation to provide any updates to these forward-looking statements even if our expectations change. Now, Brad Hayes will review our financial results.

Thank you, Steve. By now, you should have had a chance to review our third quarter financial results. On today's call, I'll discuss four key measures of our financial performance. Cash flow, revenue growth, margin and liquidity. First, cash flow.

Our cash flow remains strong. Free cash flow for the trailing 12 months ended September 30, 2010 was $718.2 million compared to $739.6 million in 2009, both net of transition payments to United Healthcare. This decrease of 2.9% is attributable to higher capital expenditures which were anticipated in our cash flow guidance. Also, third quarter cash flow was impacted by timing-related issues in Accounts Receivable, primarily related to acquisitions and higher tax payments. Importantly, our full-year guidance related to operating cash flow remains $870 million.

We're extremely pleased with our cash collections. Despite the timing-related issues previously mentioned, DSO improved four days year-over-year to 44 days at the end of September. And declined sequentially by one day from the second quarter. As a result of our continued success in cash collections, we're maintaining our bad debt rate of 4.8%.

Second, revenue growth. Revenue increased 7.7% year-over-year in the third quarter. During the quarter, we achieved strong growth in revenue per requisition which increased 5.7% year-over-year. The growth in revenue per requisition is attributable to test mix shift and increases in test per requisition. The revenue per requisition growth was also impacted by lost contracts and the recognition of deferred revenue resulting from an amendment to a customer contract which together, improved revenue per requisition by 2.5%.

Total Company volume increased 1.9% year-over-year. The contract losses in 2009 that we've previously discussed reduced volume by 1.4%. Excluding the lost contracts, volume increased by approximately 3.3% in the quarter. Esoteric volume increased 6.9% in the quarter.

Third, margin. For the third quarter, our adjusted operating income margin was 19.6%. Recent acquisitions that we have not yet fully integrated caused a 50 basis point drag on margin.

Fourth, liquidity. We remain well capitalized. At the end of September, we had cash of $96.9 million and approximately $395 million available under our revolving line of credit. At the end of September, total debt was $1.3 billion, including $65 million drawn down on our revolving credit facility.

During the quarter, we repurchased $115.8 million of stock, representing 1.5 million shares. At the end of September, approximately $234.2 million of repurchase authorization remained under our previously approved share repurchase program. I would also like to point out that earnings per share benefited in the quarter as a result of a reduced tax rate, primarily due to the favorable resolution of uncertain tax positions.

This morning, we updated our 2010 financial guidance. We expect revenue growth of approximately 5%. Adjusted EPS in the range of $5.52 to $5.57, excluding the impact of any share repurchase activity after September 30, 2010, compared to prior guidance of $5.40 to $5.55. Operating cash flow of approximately $870 million, excluding any transition payments made to United Healthcare in capital expenditures of approximately $135 million. This updated guidance does not include any impact from the Genzyme Genetics acquisition. I will now turn the call over to Dave.

Thank you, Brad. We are very pleased with our third quarter results. We grew revenue 7.7% in the third quarter. We grew esoteric revenue by approximately 10.1%. Taking into account the impact of lost contracts, volume increased year-over-year by 3.3%.

We are encouraged that we have achieved volume growth in a difficult economic environment and believe this reflects the effectiveness of our growth strategies. Revenue per requisition growth remains strong at 3.2% after adjusting for the impact on revenue per requisition from the lost contracts and deferred revenue. Thus, the pricing environment remains stable.

I would now like to update you on our recent progress on four of our strategic initiatives. Acquisitions, expanding our managed care relationships, growing our clinical trials business and enhancing our IT capabilities.

First, we have consistently stated that the primary use of our free cash is to grow our business through strategic acquisitions. This quarter, we made a significant strategic acquisition when we announced a definitive agreement to acquire Genzyme Genetics, a business unit of Genzyme Corporation and one of the premier specialized medical testing laboratories in the United States in an all cash transaction valued at $925 million. Net of expected income tax benefits, less acquisition related expenses, the acquisition is expected to have a net cash cost to LabCorp of approximately $795 million.

We are very excited about the opportunity that the combination of Genzyme Genetics and LabCorp presents for future growth. The acquisition fits squarely into our key strategies, expanding esoteric testing capabilities and enhancing our leadership in personalized medicine. Combining Genzyme with our businesses will allow us to capitalize on two emerging trends; increasing importance of diagnostics to healthcare and the evolution of personalized medicine into the mainstream of patient care. The acquisition will expand our capabilities in reproductive, genetic, hematology, oncology and clinical trials set for laboratory testing and provides us with an attractive opportunity for future esoteric revenue growth.

As we have previously stated, we expect the transaction to be dilutive to LabCorp's adjusted EPS for the first year after closing by $0.25 to $0.35, primarily attributable to financing costs and amortization. However, we expect the transaction to be slightly accretive to operating cash flow in year one, excluding transaction costs such as bridge financing, legal and advisory fees and restructuring costs. We continue to expect the transaction to be accretive to LabCorp's adjusted EPS beginning in the second year after closing.

The transaction is subject to the satisfaction of customary closing conditions set forth in the agreement including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended. Our goal is to close the acquisition by the end of this year and we look forward to welcoming the employees of Genzyme Genetics to our LabCorp family upon completing the transaction.

On June 16th, LabCorp acquired certain assets of Westcliff Medical Laboratories, a clinical lab in California, pursuant to an asset purchase agreement and an order of the bankruptcy court administering the bankruptcy at Westcliff. The acquisition furthers our strategy to grow our footprint in the California market where we have historically been under represented. LabCorp was notified by the Federal Trade Commission that it intended to review the acquisition and on June 24, we entered into an agreement with the FTC to run the Westcliff business as an independent company, separate from LabCorp while the FTC conducts its review of the transaction.

The Westcliff business continues to lose money as a separate entity and accounted for the bulk of the margin contraction we experienced in the third quarter. We hoped that the FTC will expeditiously conclude its review and allow us to integrate the businesses. At this time, we're unable to provide further information on the transaction.

Second, expanding managed care relationships has long been a key growth strategy for LabCorp. As we have said since gaining access to the New York market through the United Healthcare contract, we are focused on growing our business in this important region. To that end, on August 1, 2010 we gained access to all of the Empire Blue Cross-Blue Shield markets and products as in-network provider.

Empire is New York's largest insurer by medical membership. This expansion of the network provides broader choice for Empire's members and physicians and reduces member costs associated with out-of-network laboratories. We are working diligently to build relationships with Empire and their physicians and look forward to providing Empire members with greater choice and exceptional lab service.

Third, we have consistently discussed our desire to expand the international footprint of our clinical trials central laboratory. After carefully reviewing many opportunities, we took a significant step in doing so by partnering with Clearstone Central Laboratories, a global central laboratory specializing in drug development and pharmaceutical services. The collaboration combines the complimentary strengths of two leading central laboratories to support drug development and enhances our clinical trials central lab offerings in key international geographies including China, France, Singapore and Canada. Our collaboration is proceeding as anticipated and we remain pleased with the growth opportunities this relationship will provide.

Fourth, we have recently discussed enhancements of our IT products and improvements in client connectivity. This summer, we began the roll-out of our new online gateway for client lab connectivity, LabCorp Beacon. Accessible anywhere and at any time, LabCorp Beacon is an end-to-end solution that allows physicians to view, share, manage and analyze lab results. Beacon also gives physicians a choice of tailored solutions including robust integration with EMRs, EHRs and personal health record applications.

These options allow our customers to choose the right solution based on their needs for decision support, interoperability and use objectives. We will complete our launch of Beacon on a national scale by the end of the year. Additional ordering functionality will also be added to Beacon by year end, providing our customers with enhanced analytic capabilities, an intuitive interface, and a superior customer experience. As with all of our customer facing IT systems, Beacon is built on an open platform strategy that allows seamless integration with hundreds of EHRs and physician practice management systems.

In summary, we are pleased with our third quarter and year-to-date performance and we are proud of our progress on our key strategic initiatives. Though the economic climate remains uncertain, we are confident about the long-term growth opportunities in the clinical laboratory space and about the strategies we are employing to capitalize on them. Now, Steve Anderson will review anticipated questions and our specific answers to those questions.

Thank you, Dave. Can you update us on the mix of your business coming from esoteric testing? In the third quarter, approximately 37% of our revenues were in the genomic, esoteric and anatomic pathology categories.

We have previously stated that our goal over the next three to five years was to increase our esoteric test mix to approximately 40% of revenue. Once we receive regulatory clearance, the acquisition of Genzyme Genetics will achieve this goal. We will provide you with updated growth goals for our esoteric business after we have closed the acquisition.

Does acquiring Genzyme Genetics limit your ability to repurchase shares or act upon other acquisition opportunities? While we do not comment specifically on share repurchase, we have historically been a consistent purchaser of our shares. Also, we believe that we can still be active with acquisitions, obviously adjusted for the need for Genzyme Genetics funding. Thus, we do not believe we are precluded from conducting our business as usual or from pursuing our strategic goals.

Can you remind us of how drugs of abuse trended during the year? In the quarter, our drugs of abuse volume increased 13.9% year-over-year. That compares to a year-over-year increase of 15.4% in Q2 of 2010, a year-over-year increase of 6.8% in Q1 of 2010, a year-over-year decrease of 6.5% in Q4 of 2009 and a year-over-year decrease of 15% in Q3 of 2009.

What is the status of your transition payments to United Healthcare? Our obligation to reimburse United Healthcare for transition payments ended on December 31, 2009. We have received and paid the final invoices for these payments. The final amount was approximately $120 million.

What impact would the proposed 2011 Medicare physician fee schedule rule have on your business? Assuming the Congress acts to prevent the reduction in the physician fee schedule, we would expect to receive a modest increase to our revenue tied to that schedule. As a reminder, approximately 2% of our revenue is tied to the physician fee schedule. Now, I would like to turn the call back over to Dave.

Thank you, Steve. In summary, we are pleased with our performance this quarter and look forward to the opportunities ahead. Thank you very much for listening. We are now ready to take your questions.

(Operator Instructions) Our first question will come from the line of Robert Willoughby, Bank of America Merrill Lynch. Your line is open.

Sorry about that. Brad, what was the amount of the deferred revenue that was recognized in the quarter?

Bob, we're not breaking that out specifically. But we've combined it with the impact to the lost contracts to quantify that it had a 2.5% impact on price. So, in Dave's comments, the real way we think about price excluding those items was 3.2%. I will say that it affected multiple periods. The deferred revenue that is. It had associated costs with it and it is not material to earnings.

Okay. And just -- can you speak to -- you mentioned the bulk of the margin degradation was Westcliff. Do you have an EPS estimate off the top of your head, what that was in the quarter?

No, not specifically, we have that off the top of our head. But, probably about $0.03, if we thought about that.

Okay. And would you give us an estimate for tax rate for the fourth quarter? Was that truly just one timer in the third quarter or is there some change to your annual view on the tax rate?

We don't guide on the tax rate for the year or the quarter. But I would take this opportunity to say that, since the adoption of "FIN 48", it's fairly normal for the third and fourth quarter to have reversals of our uncertain tax positions as the statutes of limitations expire on those uncertain tax positions. I would say this is somewhat a greater impact in Q3 this year as past years. But again, I think it's normal since the adoption of "FIN 48". We would expect to see that continue into the future. That phenomena of lower third and fourth quarter.

Okay. And just maybe Dave, any thoughts on the Genzyme quarter, how they did operationally? I guess they didn't give too much granularity on their data. Is there something you can comment how well they did or how poorly they may have done?

Bob, I have not seen anything in terms of financials and because of the antitrust review that's currently on-going, we're not allowed to share specific details about operational performance. So, my sense is that they came in pretty close to plan but I just -- I don't have any specifics.

Okay. That is it. Thank you.

By the way, Bob, I'm sorry. I'm just referring to the Genetics business. I have no visibility at all into the activities of Genzyme Corporation.

That is great. Thank you.

The next question will come from the line of Adam Feinstein, Barclays Capital.

All right. Thank you. Good morning, everyone.

Good morning.

I guess maybe, a few questions here. So, volumes did pick up here especially in the core business. Still lower than normalized but certainly we're seeing some improving trend. So, just wanted to better understand, as you guys look at that, if we back out the acquisitions, are we still seeing that same improving trend? I know you don't break a number out so I'm not looking for a point of number but I'm trying to better understand the trend there.

And then, secondly, if you can just comment in terms of anatomic pathology. A lot of noise in that space over the past year with the whole insourcing trend, just curious in terms of whether you've seen that stabilize and just the thoughts there and then a quick follow-up.

Sure. It's Dave, Adam. Your first question on volume, we did see volume growth, organic volume growth this quarter which really is the first time this year that we've seen the organic business grow. And again, that is a change in the trend from the first two quarters. So, positive in the sense that we had organic volume growth. Yes, we had some help from acquisitions but both on the core side and the esoteric side. We saw the business grow.

In terms of anatomic pathology, our histology volumes actually increased year-over-year in the third quarter. There was some help from acquisitions there but again, the organic trend in anatomic pathology improved. So, to be clear on that, we lost a little volume organically but the trend has improved substantially from what we were seeing through last year and the first two quarters of this year.

Okay. And do you think the insourcing trend is dying down as you think about that and hear about that, just curious. Yesterday Quest said they thought it was stabilizing. Are you guys seeing a similar thing?

I think the insourcing trend -- I think the issue that one sees with insourcing is that it makes the most sense for bigger practices. So, the bigger practices that were the leaders in this insourcing basically have, I think, completed the insourcing.

The question that's still out there is -- are, given the impact of healthcare reform and everything else, are smaller practices going to start consolidating and then trying to insource, too. We don't have a lot of -- a lot of ability to see that. Certainly, it is the case that the insourcing trend has stabilized where we are now from where it was a year ago and even at the beginning of this year.

Okay. And just, maybe a final question from me here, Dave. I know you guys don't comment on specific contracts but just with the Empire business, maybe if you can just comment in terms of what you see as in the opportunity. Once again, if you can't quantify revenues, just talk about the opportunity there and just if you have any updates in terms of how things are going thus far.

So, it is the largest plan by medical membership in the New York market. And while we don't quantify the revenue opportunity, my recollection is there's something on the order of one and a half million to two million members who have a laboratory benefit in that plan. So, the potential opportunity is pretty sizable in terms of continuing to improve our position in New York, capture market share and have further opportunities for pull through from the existing United Healthcare business.

In terms of progress to date, it is -- I would say we're off to a somewhat slower start than we expected, Adam. And the -- so we continue to be focused on improving our performance in the New York market and certainly the senior leadership responsible for operations recognizes that we need to pick up our performance with Empire. But we're there. We're making the physician office calls. We're starting to see traction. I think overall, we're pleased with how that relationship is progressing.

Maybe some of the radio ads that I've been hearing will start to kick in also.

Yes.

All right. Thank you very much. Appreciate it.

Thank you.

The next question will come from the line of Amanda Murphy, William Blair.

Hi, good morning. Just a question on the esoteric side. You're seeing strong growth there. And I recall -- I guess I don't know even how long ago now it was, a year and a half or so that you were focusing on the specialty docs primarily. I'm curious, is that still -- are you still seeing a benefit from that initiative? Or can you talk a little bit about why you're seeing such strong growth there?

We did talk about -- I'm sure it was a year ago by now, it seems shorter but we did talk about our focus on specialty markets. I would say we're seeing very solid growth in endocrinology. We're seeing very solid growth in infectious disease. And some of that obviously has been assisted by the success of our Monogram integration.

So, and other specialties, rheumatology, nephrology, with our chronic kidney disease program, we're seeing very strong year-over-year growth particularly in volumes there. As I think we've said before, and as you see in the IMS data, the biggest detractor is the OBGYN market continues to be soft for everybody. But I think the reason you're seeing good esoteric growth and as we've mentioned, a return to organic volume growth is -- we are focused on the specialty physicians.

We're focused on the specialty markets. We're focused on the comprehensive LabCorp offering which we enhanced last year with Monogram and obviously we feel we've strongly enhanced once we receive regulatory approval and we're able to close the Genzyme Genetics transaction. That Genzyme Genetics transaction really opens up a whole new area of opportunity for us which is the large hospitals and academic medical centers that are sending reference work to Genzyme Genetics that historically have been very difficult for LabCorp to reach.

In terms of going forward would you say you still have more opportunity on the specialty docs side, sort of ex-Genzyme?

Absolutely.

Okay. And then what's your decision topics? What's your latest thinking or do you have any perspective on the FDA and do we have any insight into what that regulatory structure might look like or even the timing of when they might roll something out?

The FDA, as you know, held a very comprehensive two-day public meeting back in June at which it solicited comments from a broad range of stakeholders about regulation of laboratory developed testing. It is my understanding that the FDA continues to review the input they received at that session and also continues to evaluate what the right regulatory approach would be for lab developed testing.

We have worked extensively through the American Clinical Laboratory Association, our trade association, to -- with, by the way, the collaboration of, I believe, 13 other or 14 other affiliated industry groups including the College of American Pathologists, the Hospital Lab Trade Associations, so a lot of good thinking has gone on in the industry about trying to help the FDA find the right course. At this point, I think it is premature to try to hypothesize what FDA might do. But I do think they are taking a measured approach, which we appreciate. We are trying to contribute in a constructive way to the dialogue to lead to an outcome that will be positive from their perspective as well as from the industry perspective.

Okay. Thank you very much.

The next question will come from the line of Kevin Ellich, RBC Capital Markets.

Thanks. Good morning, guys. Steve gave the information on drugs of abuse testing growth. I was wondering if you could provide the actual impact on total growth. Hello?

Yes, Kevin. This is Brad. I'm just looking through. Less than 50 basis points.

Less than 50 basis points. Okay.

Yes.

And that's on the total volume, Brad?

I was doing that on revenue.

Okay, on revenue. What about on the total volume growth?

It provided about 60 basis points.

Okay. Thank you. And then just going back to the 2.5% impact that came from the lost contracts and the deferred revenue, how much of an impact did the -- is that the lost government contract?

Yes.

That's right.

Has that annualized yet? Is there still one contract that you guys still haven't lapped yet?

Correct, Kevin. It is Dave. There is one contract that we spoke about last year that will fully annualize it. It went off in various tiers and so it will fully annualize in December.

And how much of an impact did that have on the price this quarter?

The two items combined were 2.5%.

Okay.

Favorable impact to price.

Understood. Understood. Dave, I was wondering if you could maybe just provide us an update on the IL28B test.

Sure. We do -- well, a couple of things. First of all, the clinical volume on IL28B has grown pretty significantly since we launched it in September. That's a positive. It's not huge and at this point, it is certainly not anything that would be material to revenue. But we've seen a very substantial growth in the number of clinicians who were ordering IL28B.

Second, in the clinical trials business, there are a large number of newly initiated or on-going trials relating to hepatitis C drugs and drug treatment in which IL28B will be a key component. So, we've seen a pickup in interest on clinical -- in the clinical trials business and at Monogram for the use of IL28B to evaluate the new direct acting HCV antivirals. So, pleased with the progress and we expect it to continue to grow.

Understood. And then just going back to the Genzyme Genetics deal, wondering, can you guys provide any detail or maybe any information on the assumptions toward financing cost and amortization?

Well, Kevin, this is Brad. I'll go back to what we said when we announced the deal on the financing costs. We said at that time we intended to permanently finance about two-thirds of the transaction price and fund through cash or our revolving line of credit the other one-third. I think it is too early to provide any details on what we assume around the amortization because we have to close the transaction and then also complete some work to finalize that number.

Understood. And then the two-thirds of the cost, would that be on that $795 million net?

Oh, no. It would be on the gross. We're going to have to come up with funds of $925 million. That would be on the gross.

Got you. Okay. Then lastly, just wondering if you could talk a little bit more about the Clearstone joint venture and -- I don't think you guys break out your clinical trials revenue yet. But wondering where it is and what's the goal or target? Where do you expect that to go over time?

Sure. We don't break out our clinical trials revenue but it is not something we're ashamed of. It is about $120 million in revenue. For reference, in about 2005, that business was a $40 million business. So, in the space of less than five years, it's tripled from a revenue perspective and I would point out that last year was a very tough year so we actually went backwards a little bit. This year, we're getting back to where we were really in the 2008 time.

So, it has been -- it has been an excellent source of growth for us. It has also been an excellent source of innovation and it's positioned us in terms of our ability to license and capitalize on assays like IL28B because the pharmaceutical sponsors recognize our superior esoteric capabilities and all of the other advantages we have including our infrastructure and service centers that can help them with patient collection. So, the business has been a very good business.

What it has lacked and what we've talked about probably for at least the last year if not more is we have lacked a central lab network that went beyond the United States, our central lab in Belgium and some loose affiliations that we had with labs in other countries. And the reality is that the naive patients and when I say that, patients who are not being treated and therefore, the patients that are most desirable for trial sponsors, the naive patients largely -- these days, are in the developing markets. So, that's India, it's China, Singapore, Malaysia.

And our lack of central lab capabilities in those areas has been a detriment. Particularly in China because under Chinese regulations, we're not allowed -- no one is allowed to move blood out of the country to do testing elsewhere. So, the Clearstone -- what Clearstone offers us is a collaboration that makes our services and also our esoteric testing capabilities available in places that we previously have not had those capabilities. And I think it will be as significant opportunity to grow the clinical trials business going forward.

Sounds good. Thanks.

The next question will come from the line of Gary Lieberman, Wells Fargo Securities.

Thanks, good morning. I was wondering if you could comment -- it looks like that your genomic price per session had some nice increase in the quarter. I was wondering what that was attributed to.

Gary, this is Brad. That's where some of the deferred revenue impact hit. So, there would be very little volume related to that and mostly price. So, we have that impact there.

Okay. So, is that where all of the deferred revenue was booked, or just a portion of it?

I think the majority of it was there.

Okay. Then you mentioned that there was some cost associated with the deferred revenue. Could you comment on that a little bit further?

Only just by its very nature. There's deferred revenue and the deferred costs associated with it. We're not going to quantify it. But it would represent the cost of performing those tests.

Okay. And then I guess the other comment you made around the deferred revenue was that it was immaterial. So, would that be safe to assume, less than $0.05 to earnings would be in that range?

Correct. Immaterial.

Okay. Okay. Thanks a lot.

The next question will come from the line of Bill Quirk, Piper Jaffray.

Thanks, good morning.

Good morning, Bill.

Just a quick question on the OBGYN comment. You mentioned obviously that business remained challenging. Can you quantitatively talk about LabCorp's performance here? How is this business tracking relative to the market trends?

I think our -- what I see, Bill, in the IMS data on physician office visits which again, we should remember is not intended to be a month-by-month but rather sort of a quarterly view is that physician office visits particularly in the OBGYN market continued to trend down year-over-year, although by less in September than they had in July and August. Our trends in the OBGYN market continue to be better than the IMS data. So if the IMS data is down by X, we're down by less than X. But we're still down.

I would say the biggest thing we notice on a year-over-year basis is a decline in Pap testing and my hypothesis and I will tell you it is only a hypothesis because it's very hard to prove out. But my hypothesis is you were seeing a lot of people, a lot of women who are deferring a Pap for a year whether it is because of financial considerations, whether it is because the Pap itself isn't very expensive but it also involves a physician office visit which can be expensive. I don't know the answer to that. But that's where we see the biggest impact in overall volume in the OBGYN market.

Understood. Then understanding that we're still pretty early into 4Q, Dave, the slight improvement in terms of trends which is to say less than negative year-over-year comparison, are we continuing to see that into the early stages of 4Q?

I don't think we're going to say anything about 4Q until we announce our -- the quarter, Bill.

Understood. Second question for me or second topic rather is just thinking about the Palmetto changes, the proposed changes rather, that are coming up here in December. I would image that this isn't going to be terribly disruptive for you guys but can you talk a little bit about some of the logistics changes that you're looking at. If there's any concern around reimbursement on some of the new pipeline, esoteric tests, et cetera?

Yes. So, what I think the folks at Palmetto and the medical director there are trying to accomplish and we've had many discussions with them through ACLA is they're trying to get greater transparency in what they're paying for. So, right now, they get a set of CPT codes and particularly with genetic testing, that set of CPT codes could be any number of a wide variety of tests. And the concern is that, whether it's by design or otherwise, the coding is not consistent among providers for the tests. And so that adds further opaqueness to what are they actually paying for?

We have always been supportive of greater transparency in CPT coding and in people knowing and payers knowing what they're paying for. That's absolutely appropriate. And I think the concern that we've expressed to Palmetto is, make sure that when you implement guidelines such as these, that you really -- that you don't run into the law of unintended consequences as CMS did a couple of years ago with their medically, whatever they were called, the medically unbelievable edits where there were some significant potential consequences to providers they had not foreseen.

So, I know that recently, the Monogram business people met with -- and the clinicians, met with the medical director of Palmetto. They provided a very detailed data package on why Palmetto should reimburse appropriately for the trophile testing. Palmetto was very pleased with the package that we provided. I think what it says is, if you provide the appropriate data and you provide transparency which is what we try to do, it's not a big issue.

And so I think, again, I think we'll be fine with this. I think the initiative for greater transparency in coding is something that we at LabCorp welcome. And I think the key is to make sure that in doing these things, there are not unintended consequences that are not foreseen at the time the rules are implemented.

Very good. Thanks for all of the color, Dave. I appreciate it.

The next question will come from the line of Ralph Giacobbe, Credit Suisse.

Thanks, good morning. Maybe can you remind us again, why you don't break out the acquisitions just considering that there is a number of deals that you've sort of done over the last year and some a little bit larger. And then, since you have sort of the organic growth number that you have there, Dave. Maybe remind us again why you don't like to break that out?

Yes. The reason we don't like to break it out is because part of our growth strategy is to acquire and fold in other businesses. And so that's -- we grow the business organically and we grow the business by acquisitions. And to us, there's no difference in terms of how we achieve that growth.

I think it becomes -- I mean, clearly, when you do a sizable acquisition along the line of a Genzyme Genetics, it is perfectly reasonable for people to want to know how that business is performing. But when do you a fold-in acquisition, my view is that's just part of our business and it doesn't merit separate consideration.

Okay. And then just -- Westcliff, Diamond, Monogram, are there other deals over the last year that we should be aware of that were done that are helping the numbers?

I don't think Diamond materially helps the number. Westcliff is impactful, Monogram is annualized. So, I don't think you're seeing much impact from that in the number. It annualized in August. The only other one that's been written about that is making some contribution is DCL up in Indiana.

Yes. Okay. All right, perfect. And then maybe give us a little bit more sense of the margin pressure and maybe how quickly you can get that sort of back up as you move through some of the recent acquisitions. I know you said it was a 50 bip impact on margin. Even if you add that back margin profile, it seemed like it was flat year-over-year, despite the fairly healthy top line. Just your sense on the margin pressure and how we should think about that, as we think about 4Q and your guidance.

Yes. The real drag is Westcliff. And as I mentioned in my opening comments, given that the FTC has asked us to hold the business separate. That business was losing money before we acquired it and given that we have to hold it separate and it's being run by a separate manager with a separate FTC monitor, we can't do anything to improve the profile. So, it is losing money which obviously is not helping on either the expense side or the margin side.

So, that's where the real drag is coming from. We're hopeful that the FTC will give us clearance to close the transaction. And at that point, the cost reductions are pretty good. They're not all day one obviously. But the reduction of some of the inefficiencies occur pretty quickly and we get that to the Company margin profile fairly rapidly.

Is there a time frame on Westcliff at all Dave, in terms of when the FTC will be done with it or is there no real time frame?

I wish I could give you a time frame. But it is really in the hands of the FTC and they are the ones who will tell us when they've completed their review.

Okay. Fair enough. Just my last one. Just maybe a little bit on the managed care environment. It got brought up last quarter. Things have died down a little bit. Maybe just remind us if any large contracts are coming up for renewal, how you feel about pricing in terms of the managed care environment.

We don't have any national contracts up for renewal; as we mentioned there are some regional contracts that -- there's a couple of regional contracts that are up for renewal. And we're working on those. The environment continues to be -- the managed care companies are very anxious to move work to the low cost provider and we are the lowest cost provider. And they would like -- they would always like pricing to go down but I think the pricing environment continues to be quite stable.

Okay. That's helpful. Thank you.

The next question will come from the line of Steven Valiquette, UBS.

Hi, thanks. Good morning. A couple of questions here. First, on the revised full year guidance. Just want to clarify and make sure that the number for the first nine months of the year we should be using $423 million within that, so, therefore the applied range for 4Q should be $1.29 to $1.34. Is that correct?

That's right.

Then on Westcliff, I was going to ask on that, too. You just kind of answered that but just to be clear there. When you do get FTC clearance, I'm assuming you'll press release that so we'll know, in our minds whether there will be some additional benefit in 4Q or not from your ability to integrate that.

We haven't made a decision about whether we would do a press release or not. So, I can't -- I can't project that right now.

Okay. But for 4Q though, for right now, you're assuming in the guidance right now though, not really much improvement in 4Q from 3Q. Is that what's currently baked in, or is that the biggest delta of the range, the $0.05 range for the fourth quarter?

No. We're assuming that Westcliff remains a stand alone business through the fourth quarter in the guidance that we've given.

Okay. Got it. Okay, all right. Thanks.

The next question will come from the line of Darren Lehrich, Deutsche Bank. Please proceed.

Thanks. Good morning, everybody. I just wanted to ask a question about the out of period revenue related to the contract amendments. I think you referenced in the press release. What was the nature of the amendment? Can you just help us understand what exactly you've done and how common that type of amendment is?

It is very unique for us. It was a contract that came with the Monogram acquisition. I would say in our history, it is the first time we've ever had anything like that. And so it is a very unique item for us as opposed to something that you would expect to see on a normal basis.

Okay. And is it fair to say that, that was the bulk of the 250 basis points you've spiked out in terms of the pricing difference?

Was it the bulk of the 250 basis points of the pricing difference? I would say no. It was not.

Okay. So, maybe it is more split evenly. And is that -- I guess I'm just trying to -- I know --

What we've said is that the two items account for 2.5 points of the price. That's what we're going to say.

Okay. Fair enough. And I guess my other question here is just on the tax rate, we know obviously that you've had some bigger adjustments in recent years in Q4. We haven't typically seen them in Q3 so I would be curious just to hear from you, was this sort of within a normal band of what you would expect your tax rate to be? Or did the Q3 tax rate turn out to be a bit better? Just so we can put that a little bit more into perspective.

Sure. And I looked back at some of the history that you mentioned. One was related to a tax treaty. An International tax treaty. That was large item in the fourth quarter in a past period. The other was a resolution of a state audit that had a large number related to it.

I would say this is normal part of our expectation. It's somewhat lower, that is the tax rate, than I would expect on a normal Q3 basis. But one thing I would like to point out about both items that you mention, the deferred revenue as well as the tax rate is that we raised the midpoint of the guidance for the full year by $0.07. So, basically, leaving the fourth quarter unchanged.

Sure. No, I certainly recognize that. I wanted to just, and that's helpful. I wanted to also just go back to the histology question because we can see pretty clearly in your disclosures that the growth in Q3 -- I mean the swing is very notable. It was significantly negative in the last several quarters and has turned positive. So, Dave, maybe can you just come back to that point and help us understand the swing in the growth rate and what exactly you guys experienced there?

Yes. A couple of things. The acquisitions, particularly DCL which is a women's health focused business, did bring us volume in histology year-over-year that helped that number. So, that's the first item. Second item, on a sequential basis, the trend in our base anatomic pathology business, particularly the Dianon business is better.

Now, that doesn't mean that volume is improving in that business compared to where it was because we're still seeing the falloff that was discussed relating to insourcing, but it's improving on a relative basis and it has improved since the first quarter -- it's about 300 basis points better in the third quarter than it was in the first quarter in terms of the relative decline. So, that -- those two factors are why histology is -- has turned positive. A better organic trend and help from the acquisitions particularly DCL.

That's real helpful. My last question here, we heard from Quest yesterday. Clearly a more cautious outlook just about how year end is going to wrap up for them in Q4. You've guided more or less in line to The Street EPS numbers. I know you don't comment on the quarters but can you just maybe put into context, your overall outlook about the environment. Is there anything that you've seen that's changed here in the second half?

Our outlook on the environment is that it is not getting better. But it's not getting worse. And so our guidance for the rest of the year is unchanged. Our guidance for the fourth quarter, I mean we don't give guidance by the quarter but look, we're at the end of the third quarter. There's full year guidance. There's one quarter left. We can kind of figure out what the fourth quarter expectation is. But our guidance for what we think we're going to do in the fourth quarter is unchanged because we think fundamentally, the environment is unchanged. That's why we are where we are.

Okay. Thanks a lot.

The next question will come from the line of Gary Taylor, Citigroup.

Hi, good morning.

Good morning.

A couple of questions. I wanted to go back to gross margin. Just for a moment. I know you talked about drag from the couple of acquisitions there. But even adding back some of that drag, it looks like gross margin's still down year-over-year versus the first half of the year, you were up about 30 basis points in terms of gross margin. Can you talk about kind of the impact on the quarter of gross margin when pricing-slash-mix was very, very good and what your outlook going forward is on gross margin?

Yes. If you take -- if you back out the impact of the acquisitions, particularly Westcliff, gross margin was flat year-over-year. And so that's a little bit disappointing. I would point out that one of the things that is having an impact there is that fringe, particularly including healthcare costs are -- continued to increase. And so that's a headwind in terms of gross margin. But offsetting that and why we're able to improve gross margin, the first half of the year and keep it net of the acquisitions flat this quarter is the continued progress on our 2010 initiatives and our efficiency initiatives. And we expect those to continue to have a positive impact on gross margin over time.

So, going forward as we look into next year, any material change in terms of where you think the trend is? Holding pretty steady, material opportunity improve?

Well, obviously we don't guide to gross margins. So, what I would say is the first -- you always have as you turn the year, you have the impact of salary increases which we factor in. And whatever fringe costs are, that's always -- that always is a negative to -- when you start the year, to being able to achieve gross margin improvement. So if we're going to see gross margin improvement which we continue to strive for and we think we've done a very good job of accomplishing, it's going to be because the efficiency initiatives offset the impact of those and other factors. Rental increases and things that are just part of our business. So, you're not going to see huge jumps in gross margin. You're going to see incremental gains, 10, 20 basis points. That's the way we should think about it. But we certainly should think about, over time, there is the opportunity to continue to improve our gross margin.

Thanks. And second question, just going back to that implied fourth quarter earnings guidance with -- just being a stub period basically but that $1.29 to $1.34 that remains to achieve your annual guidance, I understand it's possible you could have another quarter where tax rates benefit from some issues and could be lower than we've seen in the first part of the year. I guess the question is, does the remaining guidance contemplate a materially lower tax rate like we saw this quarter or would the tax rate simply be a variable in the $0.05 range that's remaining?

Gary, this is Brad. I think it would be a variable. Not certainly -- I don't expect a number that we saw this quarter but certainly, a variable in that range. Like every other assumption.

Okay, great. Last question, when we look at the Genzyme deal, it looks like the financing costs alone, could be -- you could get to the $0.25 to $0.35 GAAP dilution just with financing costs alone which really implies there's zero operating income contribution in year one. So, I guess there's two questions. We've seen the disclosure of Genzyme diagnostics on its own. Either as a money loser, fully loaded with R&D and overhead costs. I guess one, there was an expectation that because of your scale, we'd see better margins and where that's run historically and then second question is what will you be amortizing and will that be significantly higher than your own amortization which runs about 1.5% of revenue.

So, I think on the amortization question, until we finish the closing and the accounting, we're not in a position to talk about that. And I think on the overall running of the business, I would -- obviously, it is our goal and it's the goal of the management group at Genzyme Genetics, which is a terrific group, it's the goal to improve the operating profile of the business. But this is a complex transaction involving complex businesses that do very complex testing. There are three lines of business within Genzyme Genetics.

The genetics business, the hematology, oncology business and the clinical trials business and we're not going to rush through an integration process to improve the margin profile at the expense of losing the revenue and the value of the brand that we're paying for. So, this is a very important strategic acquisition. On both sides, we're committed to improving the operational performance from a financial perspective but we're going to do it in a deliberate way that's not going to jeopardize the rationale for why we're acquiring the business.

Okay, good. That makes sense. As you swing into 2012 with the expectation for GAAP accretion, what's the number one swing factor there? Is it just testing growth, revenue growth?

Well, it's partly revenue growth and it's partly expense reduction. That's where you get to -- first of all, we're going to focus on the non-employee related expense reductions which are specimen collections, logistics, transportation, use of our patient service centers, couriers, better use of the genetic counselor. All of the opportunities where we can reduce expense, supply costs and supply chain where we can reduce expense that does not have a direct impact on personnel. Then, we'll sit down with management and we'll look at -- I mean, there are many overlapping facilities. We may be able to quite comfortably accommodate the testing and the people who do the testing at Genzyme in facilities that we already have and save substantial rental expenses. So, the big improvements in 2012 are both top line revenue growth and improvement in the cost structure.

Okay. Great. Thank you very much.

The next question will come from the line of Ricky Goldwasser, Morgan Stanley.

Good morning.

Good morning.

A couple of follow-up questions. First of all, on the tax rate, what was the effective tax rate in the third quarter?

33.9%.

Okay. And what was the impact from the tax rate on the new guidance range?

As I said earlier, I'll relate this to two issues, the tax rate in the third quarter and the deferred revenue were part of the third quarter and we raised our full year guidance by $0.07 in the middle.

Okay. So, the benefit from the effective tax rate is included in that.

Yes. To the extent that's in the year-to-date number, absolutely.

Okay. And then the revenue guidance implies a sequential declining revenue of about 4.4% from 3Q to 4Q, which is actually a lot better than what we've seen historically between third quarter and fourth quarter. So, I mean obviously there's some positive trends implied in the fourth quarter. I guess my question here is what would be the delta between September and December quarter if you exclude the benefit of the deferred revenue from the third quarter numbers.

Gosh, Ricky, we haven't done that specific calculation. As you point out, the fourth quarter is typically much lower than the third, sequentially. Yet we haven't done the exact calculation that you're asking for. But I think, Dave alluded to earlier, we don't see any material deterioration or change in the business between the third and fourth quarter except for adjusting for the holiday volumes.

Okay. Because again, the implied number seems at least to us to show that yes, there is obviously the seasonality but it's actually to some degree less than what we've seen historically. Is that some degree the improvement that you're seeing in pathology that you're assuming is going to be sustainable in the fourth quarter?

I think it would be difficult to try to break out all of the puts and takes in the fourth quarter. We just have -- we have continued impact of the acquisitions. We have the full annualization of the lost contract. So, there's a lot of moving pieces and our guidance is intended to encompass the full potential range of moving parts and outcomes and I just think it is very tough to start breaking it down into the detail of what's up and what's down.

Okay. And the last contract are completely phased out in the fourth quarter from a comp perspective.

By the end of the fourth quarter, they will be. But there's still some impact in the first couple months of the fourth quarter.

Okay. Thank you.

The next question will come from the line of Kemp Dolliver, Avondale Partners.

Thank you. First question relates to your progress with Monogram. Since that was going to be a big swing factor this year in terms of driving earnings growth particularly in the second half. How are you doing with Monogram in terms of test uptake and then also in the expense structure?

Monogram, the integration is complete. We annualize the acquisition. The business achieved our growth expectations and continues to achieve our growth expectations and in fact, in the third quarter was accretive to EPS which we had said it would be. Probably the thing I'm most pleased about here, Kemp, is we've introduced the GenoSure powered by Monogram for HIV resistance testing which gives physicians a very favorable price point and a very large database to do their genotyping for HIV resistance. We've introduced Trofile DNA, which is a new tropism assay. We've seen increasing interest in assays used to evaluate the HCV antivirals including HCV genotype. HCV phenotype, also HCV genotypic and phenotypic resistance tests and as I mentioned earlier the IL28B.

We've got Monogram fully integrated into the LabCorp logistics network so that's providing with us significant cost savings and the Monogram scientists have had a very strong year in terms of thought leadership so they've had over 60 peer-reviewed publications in both the oncology and infectious disease market in the first nine months of this year. So, I'm very pleased with where Monogram is. I think it's been exactly what we said it would be. Which is -- it was dilutive in year one. It is slightly accretive going into year two. And it continues to be a leader for LabCorp in science and in innovation in the infectious disease market which we think has a tremendous amount of potential.

Great. Thank you. The second question is just to clarify and that is the subject of organic volume growth. Can you give us a little more quantification with regard to how much volumes were up organically. I'm assuming it is probably less than 1%. I just want to be clear, given the uptick in acquisitions. What's really driving the trends here?

I think for the reasons that we've said, we're not going to break out what we consider to be organic versus acquisition driven volume growth. Volume was up, adjusted for the lost contracts by 3.3%. That includes some acquisition impact and some organic growth impact. And we're very pleased with that.

Okay. Thank you.

The next question will come from the line of Anthony Vendetti, Maxim Group.

Okay. Thank you. I just have -- just one follow-up on kind of trying to put together the pieces a little bit of the revenue growth. So, some of it obviously is from the deferred revenue. Some of it is from price increasing. And then there is a little bit from volume increasing which is a combination of organic and inorganic. Is that about correct?

Yes.

Okay. And then in terms of the esoteric and genomics, sometimes you provide us the breakout. I know Vitamin D obviously isn't very big. Anything this quarter, specifically that was helping the esoteric and genomic growth?

The deferred revenue on the price side and as you mentioned, Vitamin D, the acquisitions again back to Dave's comments on histology, obviously helped. But also an improving trend organically. So, I would say those are the big items.

Right. So, you said this was the first quarter this year where you actually saw organic volume growth, correct?

In total or in genomic, or in histology?

In total.

In total, yes, that is correct. One thing I would like to clarify on that point too, because it came up earlier, when we're evaluating that, we also back out the drugs of abuse. So, we came -- we know that drugs of abuse is growing year-over-year. When we think about our organic volume, we also take that into account so we can see what the core business is doing.

Okay, great.

Yes, first time we've seen growth this year.

Okay, good. And then lastly, on the Genzyme Genetics, if that were to close, let's say tomorrow, which it's not likely obviously but if it were to close tomorrow versus closing by January 1, do you have a range of what you think the one time charges would be associated with that?

No. We don't. And if it were to close tomorrow, I think we would -- obviously we would announce that and we would provide an update to the balance of the year guidance based on the early closing. Right now, the balance of the year guidance assumes that Genzyme Genetics does not close this year.

Does not close this year. Okay. Lastly on physician utilization, it was commented on the Quest call yesterday that -- expect it to remain stable. Is that sort of in line with what you're seeing, physician utilization has been down but you don't expect it to get worse or better by the end of the year?

You mean office visits?

Office visits, yes.

I mean, I think the trend continues to be year-over-year declines but again, less decline in, for example, in the month of September than IMS reported in the months of July and August. I think we expect to see the trend remain about what it is. I don't expect it to improve. I don't expect it to get noticeably worse.

Okay, great. All right, thanks a lot.

The next question will come from the line of [Merrek Trazisky, Harris Private Bank].

Yes, Hi, good morning. Thanks for taking my call. Can you hear me okay?

Yes, fine.

Great, great. So, first, more of a comment I guess. I was frustrated by this every quarter. You guys report sort of the most frustrating part of really liking LabCorp as a Company and as an investment is really that you always report quarterly results after Quest. It always seems no matter how consistently better your operating results are, it's almost sometimes as if you operate in different businesses, your stock price doesn't recognize the superiority. So, sort of the damage inflicted by Quest results and investor sentiment is already done. So, I guess then my comment here is perhaps the best thing you could do for the benefit of all of us owners. Would be to consider maybe to move your release dates to always before Quest. That's kind of point one.

And then an actual question, secondly, but sort of related to what I just said is, in terms of your view about the industry and trends that you see. You've said in some very positive things in terms of what you just reiterated just now that you're seeing growth for the first time this year. And, in fact, you said that you're seeing some very strong growth in some certain specialties. Then you contrast that with what Quest said yesterday. They're seeing continued softness in physician office visits. I'm wondering if you could maybe provide some light on to what you think the major differences are, why they say what they say and what you say.

Sure. First of all, with regard to the timings of earnings. We will take that under advisement. The timings of our earnings are largely dictated by closing the quarter. The timings of our announcements are largely dictated by closing the quarter. And recognizing your comment at the same time, we think that our results stand up well on their merit and that's what we want our owners to evaluate us by. With regard to the commentary, as I don't make a habit of listening to our competitor's call, I don't know what commentary they gave. But the commentary I can give you is, we started to see the impact on the economic impact on volumes as early -- and we started to make reference to it as early, I believe as the second quarter of 2008. When we did that, when others were expressing the view that we were not -- that they were not seeing the impact. We did that. We undertook a strategic initiative to redirect our sales force and to redirect our sales efforts to areas where we felt there was the greatest opportunity to continue to grow the business in spite of the economic challenge. And so we put a lot of sales resources into infectious disease. We put a lot of sales resources into endocrinology. We put a lot of resources into the -- particularly the obstetrics market for prenatal and preconception genetic testing.

I think our results, since we undertook those initiatives, speak for themselves which is that they've been positive. Not only by comparison to the industry but generally in terms of just the profile of our business and the continued growth of the esoteric testing line. We also have said that acquisitions are part of our growth strategy and we continue to make strategic and in our view, very sensible acquisitions. And then deliver what we say we do. Which is, we said Monogram would be accretive post the annualization, and Monogram is accretive post the annualization. It's driving top line revenue growth because of the pricing and because of the uniqueness of the test offering. So, we're going to continue with the strategy that has been successful for us. We're, of course, always going to continue to refine that strategy to improve it. As we take account of what's going on in the market place. And the long-term opportunity in the business, when we receive regulatory clearance and close Genzyme Genetics and have a new window into large hospital systems, academic medical centers, more prenatal and preconception genetic testing, more hematology, oncology business in an area that is not subject to insourcing which is the very sophisticated treatment of blood and bone cancers. We feel great about the way the future looks for us.

Absolutely. I agree. I think it is all that and everything that you're doing, all of the acquisitions you're doing, the path that you're taking forward. This is all fantastic. This is exactly, as an owner, this is exactly what I want to see out of the management team leading this Company. And really building and enduring shareholder value. And that's exactly what you're doing and that's exactly why we own the stock. My first comment is that it was just basically relating to a frustration because it seems like this happens every quarter. Quest goes out there and provides these numbers that are just -- it is like the gang that can't shoot straight. And that just implants these ideas in investor's minds then it is almost no matter what you do or say, the damage is already done. But when you read everything on paper, I mean the superiority of your results and what you're doing is just head and shoulders above what they're doing. I just feel that that's really being missed by the market simply because of what -- the timing of the news that's being put forward. So --

Thank you very much.

Yes, so -- Good luck and thanks.

Thank you.

We have a question from the line of Bill Bonello, RBC.

Hey, guys, thanks a million for being willing to take my call. Just a follow-up on something you said earlier. I'm just curious if you can say, Dave, because you specifically pointed out weakness in Pap volume, if you can say whether you saw similar trends in HPV and chlamydia and gonorrhea then as well.

Different trends, I would say because those -- some of those come out of the bio, but some of them are ordered separately. I would say the overall trend is not anywhere near as noticeable there as it is in the straight Pap volumes.

Then, just when you talked about improvement in volumes during the quarter, I wasn't sure if that was specific to sort of Pap and women's health or if that was overall you were talking about volume improvement.

Overall.

Okay. Care to weigh in on whether it improved for Pap as well?

No.

Okay. And then I know you're going to say no but I'm going to ask anyway. Since you were as bold as giving inter-quarter volume trends which I've never heard you do before, any desire to weigh in on what October's look like?

I don't think we gave interquarter volume trends. I think we said we wouldn't and we're not going to weigh in on October.

Okay. I thought you said that September was better than July and August. I must have made that up.

I'm sorry. In terms of decline and physician office visits year-over-year based on the IMS data. Not based on our volumes.

Oh, not based on your own volume. Okay, that's great. Then, I'm disappointed you won't give guidance on how all of the minutiae impacts your P&L.

Bill, as you know, our guidance is intended to encompass a wide range of outcomes but we guide at a high level.

Thank you very much.

Thank you.

There are no more questions at this time. I would like to turn the call back to Mr. David King for closing remarks.

Thank you all for listening to our earnings call. We very much appreciate the time you spent with us this morning. And hope you have a great day.

Ladies and gentlemen, this does conclude today's presentation. Again, thank you for your participation. You may now disconnect.