Labcorp Holdings Inc (LH) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2014 Laboratory Corporation of America Holdings earnings conference call. My name is Katina, and I will be your coordinator for today.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Stephen Anderson, Vice President of Investor Relations. Please proceed.

Good morning, and welcome to LabCorp's fourth-quarter and full-year 2014 conference call.

With me today are Dave King, Chairman and Chief Executive Officer; Glenn Eisenberg, Executive Vice President and Chief Financial Officer; Jay Boyle, Chief Executive Officer of LabCorp Diagnostics; Joe Herring, Chief Executive Officer of Covance Drug Development; and Paul Surdez, Vice President of Investor Relations.

This morning, we will recap our 2014 performance, discuss our 2015 priorities, provide an update on our Covance acquisition, introduce Project LaunchPad, our enterprise-wide business process improvement initiative, and issue our 2015 guidance. Before we get started, I would like to point out that there will be a replay of this conference call available via 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. These non-GAAP measures include adjusted EPS, free cash flow, and adjusted operating income. 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, the implementation of our business strategy, and the ongoing benefits from acquisitions. These statements are based upon current expectations, and are subject to change based upon various factors that could affect the Company's financial results. Some of these factors are set forth in detail in our 2013 10-K and in our subsequent filings with the SEC, and will be included in our 2014 10-K and subsequent filings with the SEC. The Company has no obligation to provide any updates to these forward-looking statements, even if our expectations change.

Now, I'll turn the call over to Dave King.

Thank you, Steve.

I'll start by recapping 2014. We delivered a strong operating performance, exceeding $6 billion in revenue and generating total volume growth, including acquisitions, of 5.3%. After a challenging first quarter due to extraordinary weather, our performance improved sequentially throughout the year. In the fourth quarter, revenue increased by 5.3% over the fourth quarter of 2013, and we posted year-over-year improvement in adjusted operating income, adjusted operating income margin, and adjusted EPS. We also achieved strong organic growth in the fourth quarter and for the year. We're very pleased with our 2014 performance.

Late last year, we made a very important strategic move with the Covance acquisition. This transaction is the culmination of years of thinking about how to best position our Company for the future, and I'm very proud of our team for its dedication and tenacity in completing the acquisition. We have made a transformational move for our Company, and over time, the combined Company will enhance drug development, laboratory diagnostics, and healthcare delivery. This merger creates unique combination of capabilities that positions the new LabCorp to bring innovative and higher value solutions to clients of both predecessor companies.

We closed the Covance acquisition yesterday, and we're off to a strong start on the integration of the businesses. Going forward, we will operate in two segments LabCorp Diagnostics and Covance Drug Development, which we expect to be closely aligned in furthering our core mission of improving patients' lives by providing world class diagnostics and knowledge services. Jay Boyle, who's been an exceptional Chief Operating Officer of LabCorp over the last five years, is now Chief Executive Officer of LabCorp Diagnostics. Joe Herring, who has successfully led Covance for over a decade and has been a great partner since we announced the transaction, is now Chief Executive Officer of Covance Drug Development. Joe and Jay will report to me.

Although the flawless integration of Covance is of utmost importance, I want to emphasize that it will not cause us to lose focus on the 2015 priorities for LabCorp Diagnostics, which include these three clear initiatives. First, we will continue to focus on opportunities to grow in both core and esoteric testing. We will build on our strong 2014 performance in organic growth, managed care contracting, new test introductions, and strategic acquisitions. We remain optimistic about the long-term prospects of the lab industry and our laboratory business.

Second, we will continue to make progress with our innovative products and services. The BeaconLBS team is pushing toward its goal of full implementation. Enlighten Health continues to expand, having launched ExomeReveal a genome wide interpretation service, and recently introduced an innovative patient friendly diabetes report that graphically displays results. Third, to complement our focus on top line growth, we have systematically reviewed our business and operating model to see where we can improve our performance. Project LaunchPad is the Company's enterprise-wide business process improvement initiative. It consists of projects designed to reengineer the Company's systems and processes, leverage technological advancements, and make sustainable reductions in our cost base.

LaunchPad is not a short-term cost-cutting measure. It is a long-term structural change in how we deliver our services. We are pursuing projects that will fundamentally improve the experience of everyone involved in the LabCorp Diagnostics value chain, from provider to customer to payer to our valued employees. We expect this initiative to drive net savings in excess of $150 million over the next three years. Glenn will provide additional details on LaunchPad in a few minutes.

Now, let me update you on the Covance acquisition, which will deliver new services to the pharmaceutical industry, drive share gains in both the diagnostics and drug development businesses, and benefit healthcare stakeholders and our shareholders. Our new combined company has a strong Management team, relationships with nearly every major player in the healthcare industry, a global footprint, and a unique wealth of data. With these assets, we expect to win a greater share of clinical trials, enhance and grow our market-leading central lab business, deliver an expanded range of diagnostic offerings, and accelerate profitable growth in the years ahead.

I will now discuss three immediate growth opportunities. First, we will use our unique combination of assets and data to deliver faster clinical trial enrollment. Patient recruitment is an inefficient process. Combining LabCorp's database of more than 70 million unique patient records with Covance's investigator database and analytic capabilities positions us to deliver faster, higher-quality clinical trials, significantly reduce clinical trial cycle time, eliminate nonviable sites which can significantly delay recruitment, reduce costs, and ultimately enable our biopharma clients to reach peak revenue for their new products faster.

Second, we will become the partner of choice to develop and commercialize companion diagnostics. There over 100 companion diagnostics on the market today, versus 13 in 2006. More than 20% of 2014 drug approvals were personalized medicines, and there are dozens of drugs in phase 3 development that will require companion diagnostics. Combining Covance's strength in central lab and early development with LabCorp's strength in assay development and test commercialization will create the only company in the world that can offer comprehensive end-to-end support for companion diagnostics development.

Third, we will enhance the phase 4 trial experience and post market surveillance. Approximately 30% of phase four patients dropout due to inconvenient trial procedures and a limited number of trial sites. LabCorp's 750 patient service centers, approximately 5,000 phlebotomist and physician offices, and convenient patient web portal for scheduling can improve the phase 4 patient experience.

LabCorp's infrastructure will serve another important function -- allowing the organization to collect post-approval safety data on new drugs. More than 25 approved drugs have been withdrawn from the market in recent years, the vast majority due to toxicity. Our combined analytics capabilities will give us the potential to identify early safety signals, avoid extensive recalls, and find genotypic characteristics of patients who experience adverse drug reactions so that the drug can be given to patients for whom it is safe.

How our organizations will also be able to use these capabilities to assist biopharma companies through post-market studies in understanding how drugs are being used by physicians and identify new locations -- new indications where those drugs show efficacy. We expect these three opportunities to generate over $300 million in incremental revenue by 2018. In addition, we see exciting opportunities to expand our food safety and nutritional chemistry services, and longer-term, to grow through international expansion and predictive analytics for providers and payers.

We're off to a strong start, as evidenced by a biotech client that recently awarded a sizable clinical study to Covance. This award was based in part on the potential of deploying LabCorp testing data to identify patients with rare genetic mutations, speeding enrollment in the clinical trial for its personalized oncology drug. There a number of new opportunities where LabCorp testing data is being used to support a Covance bid, and we expect our patient data and connectivity to continue to enhance and further differentiate Covance's drug development capabilities.

Before I turn the call over to Glenn, I want to express my appreciation to LabCorp's 36,000 employees for delivering an outstanding year in 2014 despite difficult circumstances. Our Senior Leadership team, including our operational leadership, our sales and service team, our phlebotomist, our couriers, and our technical staff are the best in our industry and it is a privilege to lead them. I thank each of you for your hard work, your dedication to patient care, and your performance in 2014 and every year.

I also want to welcome Covance's 12,500 talented employees to our Company, as I know they will join with the LabCorp team in making important contributions to our future successes. This is an exciting time to be at LabCorp, and I am confident that our team will enhance drug development, diagnostic services, and the delivery of healthcare to better address the need to improve patient outcomes at lower costs.

Now, I'll turn the call over to Glenn.

Thank you, Dave.

I'm going to start my comments with a review of our fourth-quarter results and 2015 guidance, followed by an update on our Covance acquisition and Project LaunchPad initiative. Sales for the quarter were approximately $1.5 billion, an increase of 5.3% over last year. The increase in sales was the result of volume measured by requisitions and acquisitions, partially offset by price mix and currency. The growth in sales was due to organic volume of 5.3%, partially offset by a decline in revenue for requisitions of 1.1% and negative impact of currency of 0.5%. In addition acquisitions added 1.6% to sales. Total volume, including acquisitions, increased 6.4%. The decline in revenue per requisition was primarily due to core testing growth outpacing esoteric testing growth, and less revenue generated from uninsured patients.

Gross profit for the quarter was $546 million, or 36.1% of sales. This compares to gross profit of $526 million, or 36.6% of sales, last year. The increase in gross profit dollars was due to volume, productivity, and acquisitions, partially offset by price mix, cost inflation, and depreciation. The decline in gross margin was primarily due to the changes in test and payer mix that I mentioned earlier.

SG&A for the quarter was $310 million, or 20.5% of sales, compared to $286 million, or 19.9%, last year. During the quarter, we incurred $13 million of special charges in SG&A relating to Project LaunchPad and the Company's acquisition of Covance. The remainder of the increase was primarily due to personnel costs, acquisitions, and an increase in bad debt expense. While bad debt increased due to sales growth, the rate improved 10 basis points over the fourth quarter of 2013. We expect this rate to be lower in 2015.

During the quarter, we had $2 million of restructuring and special items, compared to $4 million last year. The decrease was primarily due to reduced severance costs, partially offset by an increase in facility related costs. Operating income for the quarter was $219 million, or 14.5% of sales, compared to $215 million, or 15% of sales, last year. Excluding restructuring and special items of $16 million, adjusted operating income was $235 million, or 15.5% of sales, compared to $219 million, or 15.2% of sales, last year. Interest expense for the quarter was $32 million, compared to $24 million last year. The increase was primarily driven by Covance related financing costs of approximately $6 million.

The tax rate for the quarter was 36.1%, compared to 34.8% last year. The increase in the tax rate over last year was the result of benefits related to discrete items realized in the fourth quarter of 2013. As a result, net earnings for the quarter were $120 million, or $1.39 per diluted share, compared to $126 million, or $1.43 per diluted share, last year. Excluding amortization, restructuring, and other special items, adjusted EPS was $1.65 in the fourth quarter, up from $1.61 in the fourth quarter of 2013.

During the quarter, operating cash flow was $214 million, compared to $249 million last year, as we use working capital to support strong top line growth and incurred cash costs relating to Project LaunchPad and the Covance acquisition. Capital expenditures totaled $46 million, compared to $60 million last year. As a result, free cash flow, or operating cash flow after capital expenditures, was $167 million compared to $189 million last year. During the fourth quarter, we repurchased $39 million of our stock, bringing our 2014 total share repurchases to $269 million. With the November 3 announcement of the Covance acquisition, we suspended our share repurchase program until we reach our targeted leverage.

Now I'll cover our guidance for 2015. Total revenue is expected to grow 40% to 44%, inclusive of Covance as of February 19 and after adjusting for approximately 160 basis points of negative currency impact, as we've assumed that foreign exchange rates stay at January 31, 2015 levels. Our LabCorp Diagnostic business is expected to grow 3% to 5%. Covance's revenue is expected to increase approximately 4% to 6% versus full-year 2014 after adjusting for approximately 330 basis points of negative currency impact.

Given our expected topline growth, Project LaunchPad initiative, and the acquisition of Covance, our 2015 adjusted EPS guidance is $7.35 to $7.70, an increase of 8% to 13% versus the prior year. Included in this estimate is expected accretion from Covance of approximately $0.35 to $0.40. We expect to have approximately 102 million weighted average shares outstanding in 2015 after issuing 15.3 million shares for the Covance acquisition. In 2015, we expect the Company's interest and amortization expense to be approximately $220 million and $165 million, respectively. In addition, we expect the Company's tax rate to be approximately 35%.

2015 operating cash flow is expected to be between $1.075 billion and $1.1 billion, with capital expenditures between $325 million and $350 million. As a result, free cash flow is expected to be between $725 million and $775 million, up from $536 million in 2014. The increased free cash flow reflects higher earnings, the Covance acquisition, and improved working capital. In addition, free cash flow is burdened by approximately $90 million of net nonrecurring items relating to the Covance acquisition. These items include advisory fees, the make-whole payment on Covance's note and changing control payments, partially offset by paying only one of the semiannual interest payments on the acquisition debt in 2015.

Now, I'll talk about the Covance acquisition. The transaction allows us to bring decades of experience in lab operations and efficiency to Covance's global central laboratory network, while unlocking greater economic value from our patient database, customer relationships, and commercial infrastructure. The combination also creates new sources of revenue and earnings, and expands our customer base and international presence. This acquisition provides us with both near-term and long-term strategic and financial benefits. At closing, we paid approximately $5.7 billion for Covance net of cash acquired.

To finance the acquisition, we raised $3.9 billion in long-term debt and issued 15.3 million shares of LabCorp common stock to Covance shareholders. We recently issued the $3.9 billion of acquisition related debt at a blended interest rate of approximately 3.2%, with a weighted average maturity of approximately 12 years. These attractive terms reflect strong demand for LabCorp credit as well as a favorable interest rate environment.

We remain committed to maintaining an investment grade balance sheet. Both S&P and Moody's have rated our debt as investment grade at BBB and BAA2, respectively. We have temporarily suspended our share repurchase program until we reach our targeted leverage of 2.5 times debt to EBITDA, and expect to allocate our free cash flow towards the paydown of debt and tuck-in acquisitions.

The integration of Covance is also well underway. We created numerous functional and business unit teams to foster cross company communication, and to facilitate a smooth integration process. We expect to achieve net cost synergies in excess of $100 million within three years, primarily through central lab consolidation, elimination of redundant public company costs, and procurement savings. With associated one-time cost to achieve the synergies of approximately $50 million. Net cost synergies in 2015 are expected to be approximately $35 million, with associated one-time costs of approximately $20 million.

I'm going to end my comments on our Project LaunchPad initiative. As Dave discussed, LaunchPad is designed to reengineer our systems and processes, improve productivity, and deliver sustained margin improvement over time. Project LaunchPad savings will favorably impact both gross profit and SG&A through improved customer to cash processes, bad debt reduction, outsourcing, procurement savings, and labor efficiency. We expect this initiative to drive net savings in excess of $150 million over the next three years, with associated one-time costs of approximately $30 million. In 2015, we expect net savings of approximately $50 million, with associated one-time costs of approximately $15 million.

This ends our formal remarks, and now I'll turn the call back over to Dave.

Thank you, Glenn.

I want to announce that after five years of leading LabCorp investor relations, Steve Anderson will transition after this call to an operational role in our food safety business, one of the areas where we see great opportunity. Steve has been a terrific IR leader, and has worked tirelessly to meet the needs of our analysts and shareholders. I will miss him greatly in this role, but I know he is moving into an area for which he has great and enduring passion. Paul Surdez, who has led Covance's investor relations program since 2002 will serve as Vice President of Investor Relations for LabCorp. I greatly look forward to working with Paul, who is already recognized as one of the top IR leaders in healthcare services.

Now, we are ready to take questions.

(Operator Instructions)

Robert Willoughby, Merrill Lynch

Hi, Dave. I guess Steve Anderson and food safety doesn't really jive with his biscuit bill focus, but I defer to you on that decision. (laughter)

You mentioned substantial savings from the Project LaunchPad initiatives. Can you speak to any -- there seemed to be a reference to bad debt coming down, but what are the working capital opportunities? Can we see receivable balances shrink meaningfully there? And any kind of CapEx savings we might expect over the next few years to add to whatever you are doing, from an income statement perspective?

Yes, Rob. Good morning.

From a CapEx perspective, the focus of the LaunchPad initiatives will largely be around improving our systems and operations through technological investments. So, although I wouldn't expect to see extraordinary CapEx investments, I would expect to see transitioning some of our ongoing infrastructure CapEx into more streamlined and efficient processes and systems over time, and some of that will also be reflected, as I mentioned, in labor efficiency.

I will let Glenn take the working capital part of the question.

Sure. To your point, working capital has been a use of cash for us, but primarily due to the strong growth that we've experienced in the Company. When you reference our receivables on the absolute level, we actually feel we been managing it quite well. It's stayed at roughly 49 days overall.

Having said that, a big part of LaunchPad initiative is our working capital improvement, inclusive of bad debt. But, effectively we're looking at really a redesign. So, we're going to step back and look at what processes can we put in place that would be preferred? And then, as Dave said, to put systems to enable that to happen, as opposed to just a marginal improvement in that.

From our perspective, we expect to see improve working capital management, we expect to see also a reduction in our bad debt expense, and particularly our bad debt rate, which we saw some favorable movement already, but we expect to see much greater improvement as we go through the rest of 2015.

Glenn, you quantified the savings, though. From the income statement, can you quantify any potential free cash flow run rate that we might benefit from, or just too early to put a number around the CapEx and working capital opportunity?

Well, again, we wouldn't necessarily do it as part of those programs, as part of it is embedded in the overall guidance that we have given. So, when you look at our cash flow number for 2015, when you take the midpoint (inaudible -- technical difficulties), we're looking as a combined company of $750 million, and we talked about the fact that that's already being burdened by around $90 million of one-time costs.

So, you can see the strong improvement in our free cash flow is in part due to the synergies of the acquisition, in part due to the improvement in working capital because of LaunchPad, and because of the improved reduction in bad debt expense relating to that LaunchPad initiative, as well. So, that's all encompassed in that number

And Bob, this is Dave. I would just also say, over time, what we would like to see is the investments that we make in systems now allowing us to reduce CapEx in the out years. So, I do expect some positive benefit to the overall level of CapEx as a result of LaunchPad.

Right. Okay, thank you.

Bill Bonello, Craig-Hallum.

Two quick questions. One's just a simple numbers question. You talked about currency reducing revenue by about 160 basis points in 2015. How should we think about the hit to EPS?

Obviously, reflected in the guidance that we have, as well. The biggest currency headwinds, if you will, obviously with Covance having over half of their business overseas. That's where we see it. When we provided the guidance range of Covance year-over-year as if we would've had them for both years, you can see it was around 3.3 points. So that would call it in the mid-$70 millions, if you will, of headwind on sales.

Historically, Covance has leveraged at around a 20% degridential to their earnings. So again, as part of LabCorp, that translates to around, 1.5% headwind on the topline. And again, if you use that roughly 20% margin degradation, you could probably get a good proxy for the earnings impact, which again is reflected in the guidance that we provided.

Okay, perfect. Great. And then on the recent contract that you talked about being awarded, and Covance talked about this as well. Dave, I'm wondering if you could just give us a little bit more color about the process?

So, you mentioned that you're going to use lab data to identify patients but, maybe you could just elaborate a little bit on how does that actually play out and how beneficial that can be? Because I think it's an area where there's still some skepticism about how that really can drive improvement in patient recruitment?

Okay, so I'll start and I will ask Joe to comment, as well.

In this specific case, the Biopharma client was looking for a very specific set of patients with a very specific characteristic to test a personalized oncology drug in their trial. We went into our data of the testing that we had done, I believe, over the last couple of years, and looked at the number of patients that we had seen that met those very specific criteria, and we showed the client that this is a built in recruitment set, where we know who these patients are and we know where they are.

And I want to be clear, Bill, that was part of the client's decision. The Covance team had positioned us to be in great shape at the final stages. I think it was down to two CRO's that they were considering, so this was part of the calculation.

This was not a last-minute Hail Mary pass into the end zone that brought us back from the brink of not being involved. We were very well-positioned, this was incrementally something that was considered to be of value.

How we would then execute this is, for those patients who we have a direct relationship with, who have consented to be recontacted for whatever reason, we would be able to recontact them. For those patients who have not consented to be recontacted or who we don't have a direct relationship with, we would go to the physician, indicate to the physician that they have X number of patients who they are treating who would be eligible for this very important study, and leave it to the physician to recruit the patients or to seek the patients, whether the patients are interested in being recruited.

So, that's kind of how it works in practice. Joe, further comments?

I think Dave's done a pretty good job describing that. I was actually -- met with the CEO of this client during the JPMorgan conference, and as Dave said, this is a highly specialized, personalized medicine drug in non-small cell lung cancer, and the CEO was very concerned about finding patients for this study.

And we had talked about the historic sort of Covance approach to this, and he seemed pretty comfortable, but a competitor had an equally compelling sort of offer. But when we understood the genetic marker he was looking for, we said, let us see if we can look into the LabCorp database and give you an idea how to find the patients for this study.

They were looking for a little over 100 patients. And he said this trial has to be recruited. He said we're going to make a decision next week and I'd be happy to hear what you say about the LabCorp data.

I had our Chief Medical Officer with us. He worked with LabCorp, and 12 hours later reassured the client and said there are over 1000 patients in the LabCorp database that fit the inclusion/exclusion and genetic marker for this study. And they called the next day and awarded a $45 million study.

I would say there was roughly 50%-50% chance we were going to win it a week later. To get it that next morning was pretty awesome, and we have about five other clients right now that we are working with on a similar basis. So, I guess as of today, we are 1-for-1 utilizing the combination of LabCorp data and Covance clinical talents.

That was as good as an explanation as I could have possibly hoped for. Thank you.

Lisa Gill, JPMorgan.

Good morning. Steve, I really enjoyed working with you and I appreciate all your help over the last few years.

So, my question really is, first, Dave, when you talked about these unique opportunities and the $300 million revenue opportunity by 2018, and clearly Joe just talked about this most recent one at $45 million. Can you maybe give us an indication of how you expect that $300 million over the next several years? Are you expecting anything in 2015?

Well, Lisa, good morning, and thanks for the nice comments about Steve, and obviously I know many analysts and shareholders have enjoyed working with him. I've enjoyed working with him and the team has as well. He is not disappearing, he's just going over to food safety, and we are thrilled to have Paul to step in. And I think you will really enjoy working with Paul.

With that said, what we anticipate for 2015 is built into the guidance, and as you know, we don't break the guidance out into specific parts and pieces. I would expect this to be, as Joe said, we are one for one. We're going to have to prove the case that not only can we marshal the data, but that it actually increases the speed of patient recruitment.

So I would expect this to start relatively slowly, and then if we are right, we would expect it to build in 2016 and 2017, and come out of 2018. As we've identified $300 million as the target for all three of the initiative's combined, but I think that the opportunity there is real, and if we prove the case, it's significant.

And then my second question just is really around your core lab business, and the guidance that you gave for next year. Talking about this year, the offsets with price mix, currency, et cetera. But as we think about 2015, Dave, can you maybe just talk about what you are seeing right now from a reimbursement environment? Especially in the commercial market do you have anything that was of size that was up for renewal? And generally speaking, what are you seeing from a reimbursement perspective?

I would say, Lisa, in terms of year-over-year reimbursement, what we are assuming in the guidance is that MoPath remains about the same, that we have some incremental opportunity with BRCA particularly.

I think everybody knows that the uncertainty now is around reimbursement for the clinical toxicology. So the Palmetto Limited coverage decision, which has been delayed until April, but is still -- I think it's fair to say being vigorously debated between the lab industry and the payer community. And then how that will ripple through with managed care combined with the impact of new toxicology codes, many of which have still have not been loaded into payer systems.

So, generally the reimbursement environment looks better than it has the last couple of years, but as always we are in a rapidly changing regulatory and reimbursement environment, and we need to take that into account in how we think about the business.

And just so I understand that, should we assume that within the guidance range there is varying assumptions as to how these things will play out in 2015?

Yes, the guidance contemplates a wide range of outcomes, and we've attempted to incorporate these various potential outcomes into the range we have given.

Perfect. Thank you.

Gary Lieberman, Wells Fargo.

Good morning, thanks for taking the question. Steve, thank you for all the help over the years, it's been great working with you. I guess my first question is around LaunchPad and the $150 million in savings, that equals about 175 basis points of margin expansion. So, would you expect to see that margin expansion, or should we consider that there might continue to be some headwinds that would offset at least part of that?

This is Glenn. Let me take it first and Dave may want to chime in as well.

When we talk about the initiative, we talk about it on a net savings basis, and while we say that there are one-time costs, if you back that out, we've looked at the initiative, we've looked at what it would take to effectively take that kind of costs out of the Company net of the cost that we need to support it. So if you look at it in isolation, obviously that's a benefit that will accrue to the Company.

So as we go forward, though, our goal is to continue to drive our top line, to continue to manage the business, to drive operating improvement as we go forward, and launchpad is clearly one of the initiatives that we have that will help to drive that income and margin improvement.

Gary, it's Dave.

I think the only thing I would add to that is we're very focused on margin improvement, and LaunchPad is a significant opportunity for us to improve margins over time. The thing that obviously we cannot predict is, going back to Lisa's question, what is the reimbursement environment, two years out? Three years out? And all other things being equal, yes, I would expect LaunchPad to translate to margin improvement, but we can't guide to where we are going to be based on factors that we don't know about yet.

Okay, that's helpful. And then, maybe just update us on the reception of the deal and the closing of the deal by the Covance employees. You characterized it previously as sort of being almost transparent to them, and do you still view it that way?

Yes. I have spent a lot of time with both the Covance executive team and with the employees at town halls and in meetings and getting to know them, and my perception is the reception has been terrific.

People are very enthusiastic, they see the opportunity here. They see the long-term potential for both our combined company to excel, and I would say, my sense is that is exactly the same reception on the LabCorp side. People are very enthusiastic about this deal.

Joe, any further color?

Yes, I would characterize it as, overwhelmingly for Covance employees, it's business as usual. Certainly in the short-term. But with very exciting strategic prospects.

The LabCorp assets make Covance a stronger and more resourceful competitor, which makes us a better company. So if you think about our central lab, now all of a sudden we have more than $100 million in new revenue from LabCorp in largely esoteric tests that make our business stronger, and the combination makes us the most resourceful, most capable companion diagnostics company in the healthcare industry. And our employees, who want to improve patient care, see that as a nice opportunity.

For clinical, there's no overlap with LabCorp, so it's business as usual, except now you have access to a longitudinal database of $70 million patients, and we already talked about that. In Covance market access, where a number one issue is how to keep post -- patients and post-marketing studies on study to achieve the results. The 1700 centers in the US for LabCorp will make it much easier for those patients to complete their therapy and complete the study.

For food service, this is going to be a disruptive offering, just incredibly exciting, and you will hear more about that in the future. And then in early development, we pick up a very nice bioanalytical business in terms of Tandem, and makes us a much stronger biomarker development company.

So, there's not a lot of overlap, so this is not terribly disruptive, but where there is overlap, there is exciting strategic advantage. I guess what I would close with is just a comment about Dave. Dave and I have traveled around the world of Covance and been in front of thousands of employees in multiple sites, as well as small working groups, and I think I can represent the Covance employees saying that they love to see Dave's passion around improving patient care and healthcare.

They are excited to see how comfortable he is in a lab environment, and finally, I think his interpersonal approach has been very well received by Covance employees around the world. I personally held a town hall meeting yesterday in Princeton with about 1000 employees, and I can tell you the atmosphere was electric.

Great. Final quick question. In the example you gave where you said you could go to the physician and say that they had X-number of patients that met the criteria. Can you actually give the physician the name of the specific patients?

I am going to defer that to legal consideration. I believe that yes, we can, because I believe it fits within the HIPAA exception for healthcare treatment, but obviously before we would do that, and -- by the way, this has been done in situations in the past, before we would do that, we would make sure we had legal approval to actually provide the patient names.

Great. Thanks very much.

I was just going to say, the good news in this, as I walked away from this exciting win. I keep scratching my head, thinking what other organization on the planet can bring these resources? It's hard to come up with one. I like our chances.

Thank you.

Michael Cherny, Evercore ISI.

Good morning, everyone. Steve, first of all, good luck in the new role, and Paul looking forward to continuing to work together, so happy transition.

In terms of thinking about the combination, I know this is still early days, given the deal just closed yesterday. But maybe a question for Joe. You've talked about the employee reaction, you've talked about the new deal you won, which is great to see. How has been the rest of the customer reaction to this deal?

In terms of, have you spent time with them over the last few months as you've gone through some of the renewal or sale process? Obviously Covance delivered strong 4Q results, a good book-to-bill. Can you qualitatively about what the Pharma sponsors have been telling you relative to the power of this deal, outside of the one customer you did win?

I guess two words come to mind. The first is intrigued. This is a combination that very few people had thought of, and initially it's -- where did this come from? But, when they think about the combination, they start asking us questions. Can you help us with adherence programs? Can you help us with companion diagnostics? It seems like you have very unique assets.

I think intrigued, and I think the second point is comforted. Because, what we can say is -- there is not a lot of overlap here, so you are going to have the same project manager, you are going to have the same study director, it's going to be the same bill, it's still going to say Covance. So, there's no disruption here.

If a competitor tries to show up and say -- boy, this is going to be really disruptive. We pre-trained our clients to say what you mean, disruptive? I've got the same study director, the same salesperson, the same everything. And frankly, they have got some pretty exciting new things to talk about. I like our chances.

Thanks Joe. And then one quick question, I guess for Glenn and maybe Dave as well. When you first announced the deal I think you talked about the capital deployment. Obviously, you are focused on debt paydown, but that wouldn't stop you or preclude you in any way from doing any small tuck-ins that may come across that are a nice fit to either side of the business. Is that correct? I just want to make sure I understand the capital deployment priorities.

Michael, it's Dave. I agree. As I think we indicated in a couple places in our prepared remarks, we intend to pay down of debt and tuck-in acquisitions. So you are exactly right.

Perfect. I missed the tuck-in thing, so thank you.

(Operator Instructions)

Gary Taylor, Citi.

We go to the one question right before I get to go. I see how it is.

You've got one follow up.

That's true, the follow-up. I do have a follow-up that's related.

I just want to walk through the guidance, and get your response to something, just to see if I am thinking about it correctly. So basically, the cash earnings guidance $735 million to $770 million, Covance accretion is $0.35 to $0.40. That gets you to $7 or $7.30. LaunchPad is supposed to be $50 million, that's about $0.30. So we put the core lab business at $6.70 to $7 versus $6.80 this year.

Obviously, there's no share repurchase included in that, so it feels relatively flattish for the core lab business, but obviously volumes, organic volume and revenue has picked up, and as you said you're lapping some of the largest Medicare reimbursement cuts. So am I thinking about that correctly? And if so, why such a conservative take on the core earnings power in the lab business?

This is Glenn. Let me at least start off. To your point, when you back out the midpoints of the accretion that we expect to get from Covance, you kind of get to that $7.15-ish number for what would've been our base business compared to $6.80. So, growing at around 5%, consistent with what we said the top line growth.

From our perspective, as we go into 2015 with our base business, we are looking at good topline growth organically. We're looking at an improvement in operating income. We're looking at an improvement in our operating margins, and again to your point, we're driving that 15% -- or 5% EPS growth, which, again, is faster growth than just the top line without any capital redeployment. So the significant amount of free cash flow that we have that would normally have gone into our share repurchases obviously have gone into the acquisition of Covance. That's adding that -- call it 35% to 40% of accretion.

So from our perspective, LaunchPad is an integral part just of the ongoing continuous improvement initiative of our Business, but it should be viewed as part of our base Business. And we think, actually, the improvement in our profitability as well as the improvement in our cash flow in 2015 on the base business is quite strong.

That's fair, I understand it's part of the base Business, but it is new and fairly material and highlighted in a very material portion of the growth in the lab business, year-over-year.

Gary, it's Dave. I think the other thing to mention and I just want to be clear, we are not going to break down every bit and piece of the guidance because there are many, many moving pieces. We talked about currency earlier, but also remember that within the $6.80 this year, we had an $0.11 one-time gain from the share -- the sale of some shares of a company that we owned.

There are many, many things that are incorporated into the number that we turn in and the guidance that we produce, and I just want to be cautious about trying to back out every piece of it and figure out what's up, what's down, and what's not changing.

That's fair. I'm just kind of big picture what you're thinking on Lab. My one follow up would be, when you announced the Covance deal, you suggested $100 million in cost synergies over three years. I know you didn't carve that out today, but would you be willing to say what's embedded for 2015 in terms of cost synergies?

Gary, this is Glenn. We actually did break it out. We had talked about in excess of $100 million of synergy savings over the three-year period, so consistent with what we had said when we announced the transaction.

What we have added further is that we expect that the 2015 piece of it would generate around $35 million of net savings, while incurring around one-time costs of around $20 million. And the main components, again consistent with what we would've shared at the time of the announcement, was a combination of synergies through the lab consolidation, through taking out the redundant public company costs, as well as leveraging the purchasing power of the combined Company.

Okay. I'm sorry I missed that. Thank you.

Amanda Murphy, William Blair.

Hey, thanks. Good morning.

Just actually a follow-up to Lisa's question on the revenue synergy numbers that you have put together. Just curious if you can give a little more detail around, I know it's early, but the methodology you went through to get to those numbers? Just trying to think through what the risks might be there other than, obviously, the ramp. And then also, not to get greedy, but where we might potentially see some upside to those numbers, given the greater-than sign that you had included there?

Amanda, it's Dave. The methodology was that we went through the three opportunities, we looked at what we thought based on historical trends and how we size the opportunities was an appropriate breakdown, and then we said -- we think number one is the largest, we think number two is in the middle, and we think number three is the smallest. And, the numbers approximately around that are $150 million, $100 million, and $50 million. You add those together and they are $300 million.

Obviously we would not put the greater-sign if we didn't feel there was upside to those $300 million, but we've given a number that we think is very realistic. We've given a breakdown of how we think those revenue opportunities would materialize, and where we think the greater opportunities are. We did it all with financial analysis of past results of our Company and Covance and market size and market share and opportunities for gain. I really don't know how to break it down in much more detail than that, but I hope that answers the question.

Yes, thank you. And just one more here. It's a little more specific. Obviously LabCorp has had an increased growth and opportunity in certain NextGen sequencing-based tests, et cetera.

Just curious, I know that there's some efforts to set some reimbursement there via Medicare. Have you thought through there what the risks might be, given some of the issues with MoPath codes a year ago or so? Is there risk to the reimbursement for NextGen? I know it's early, and we setting infrastructure now, but just curious your thoughts there?

I think it's very early to comment on that. There are a lot of discussions going on with Medicare, with Palmetto specifically, about NextGen sequencing and appropriate reimbursement for NextGen sequencing, and we're very much engaged in those discussions, as are, by the way, a lot of other companies that have a significant interest in how NextGen sequencing will be reimbursed.

NextGen sequencing provides revolutionary opportunities to deliver greater knowledge to physicians and patients, and to improve patient care, and it would be a shame if we shortsightedly set reimbursement is such a way that we discourage patients and physicians from using the best tools available to deliver optimal outcomes.

Okay, thanks very much.

(Operator Instructions)

Nicholas Jansen, Raymond James & Associates.

Hello. Nice quarter, and good guidance. Just wanted to get your thoughts on the regulatory outlook. We haven't heard anything much on the timing of the 2017 regs coming out, also with LDT regulation and with the DOCSIS upcoming, just wanted to get your broader thoughts on the macro from a Medicare perspective? Thanks.

Back in my legal days I would've objected to that as a three-part question, within one question, but I will answer it. (laughter) Good morning, Nicholas. How are you doing? It's Dave.

PAMA still very much engaged with CMS on how the surveys will be done. I think we've made some constructive progress with them on thinking about how the surveys would be done, the inclusion of hospitals in the survey data. Don't have any update on the timing of when we might expect that to come out. I think to their credit, CMS has recognized the complexity of the task and is working very hard to devise a fair process.

Lab developed tests, we continue to have the same view that we have previously articulated. That we do not believe FDA has the legal authority to regulate LDT's as medical devices. We don't believe they are medical devices. We think they are extremely important to the practice of medicine and to meeting patient needs, and we think what the FDA has proposed would be contrary not only to the public interest in the language of the statute, but also to sound public policy.

FDA has had a listening meeting. I think there were a wide variety of views expressed about the LDT guidance, and it continues to be an area of high interest and high focus for the clinical lab industry. And it continues to be something that we at LabCorp feel very, very strongly about.

So those are the two major regulatory issues that I think we have on the table in front of us, and I hope that responds sufficiently to your question.

Thanks, Dave.

Whit Mayo, Robert Baird.

Hey, thanks. Good morning, I just wanted to go back to the synergy topic for a second, and looking at Covance's filings, it looks like they've historically had north of $40 million alone in just stock comp expense before thinking about other public company costs. And you are guiding to only $35 million, and I know that not all of the stock comp goes away as you lock down some of the key Covance employees.

So that's not a bucket where everything goes to zero, but nonetheless $35 million sounds a little bit on the conservative side when we look at some of the opportunities out there. So could you maybe give us a sense of where the majority of the $35 million comes from this year?

Sure Whit. This is Glenn. And I think the key point that you said this year. We're looking at synergy savings on the cost side of around in excess of $100 million as we go through the process. And that doesn't include any of the revenue synergies that Dave and Joe had already spoke to.

When you look at the -- we gave the first year piece of it, so -- and frankly, it will probably trend to be, call it, roughly around a third a year as we get over that $100 million number. But in the current year, as you would imagine, the biggest piece of those cost savings will come from the redundant public company costs that we have because we can take that out right away.

We will get some benefit from leveraging of the purchasing power of our combined Company, as well as what the lab consolidation will get some. But the latter two, the purchasing and the lab consolidation, are benefits that will accrue and take longer to achieve over the next couple of years. We view that, overall, the synergies of the combination are good on the cost side, the revenue side, let alone the expected growth in both of our businesses.

And Whit, it's Dave. Just to follow-up on that, I think you are right that the stock comp expense is an area we continue to look at. Obviously all the stock comp is not going to go away, but there are likely to be some changes in stock comp issuance for this year.

I just want to remind everybody that is a non-cash saving. So it doesn't translate into cash flow and it doesn't translate into cash flow guidance, but it's still a savings in terms of overall expense, nonetheless

Is there a number to think about for what the new stock comp expense should be for the entire company?

We don't guide to stock comp expense, and so no there is no number to think about there.

Okay, that's great. Thanks.

Glen Santangelo, Credit Suisse.

Glenn, I just wanted to follow-up on some of the comments you just made earlier about FX, because if we look at the top line guidance for Covance, you obviously called out specifically how big that was. But, given the many moving parts and geographic locations for Covance, could you help us think about the operating profit growth, particularly as it relates to any FX headwinds or tailwinds within that number?

And obviously, there's a piece of the Sanofi deal that's going away late in the fourth quarter. So, just trying to directionally think about that operating profit growth relative to the relative number you provided? Thanks.

Sure, Glen. And again, I think we may have already addressed that in an earlier question. We did give you the top line impact from the currency headwinds, and Covance has three principal areas of currency exposure. Obviously they're in 60 countries, but between the Eurozone, the Swiss, and the UK, if you will, is primarily where that exposure comes in.

So we talked about it, roughly call it 330 basis points of negative impact, give or take. That's in the mid-$70 millions if you will at the revenue line, negatively impacting what we believe Covance will see in sales is if the currency levels stay at basically the current levels, today. And, we've talked about the impact on operating income at least historically for them would be plus or minus around GP. A little bit lower than that, so we'd say 20% is probably a good proxy, were you to want to model that.

Okay.

Ricky Goldwasser, Morgan Stanley.

Hi, good morning. And Steve, congratulations on the new role; it's really well deserved, and Paul congratulations for you, as well. I have a question, and I have a follow-up as well. Dave, can you just talk to us a little bit about when you think about the top line guidance for LabCorp standalone? How do you think about the utilization environment in 2015, and that price to volume mix that is embedded in the guidance?

I think the utilization environment, just based on the numbers that we saw sequentially in 2014, Ricky, has improved. Obviously, very pleased with 5% plus top line volume growth in the fourth quarter. How do we think about price volume next year? I think we think about relatively similar volume numbers.

Maybe to be realistic, we obviously had very strong year-over-year performance. So, while we don't guide specifically to price and volume, I would think a reasonable assumption is volume growth stays about where it is, and pricing is relatively flat, maybe down a little bit, just depending on the factors that we've identified, which are core testing in the fourth quarter outpacing esoteric, and movement from the uninsured patient bucket into insured or exchange buckets.

I don't think next year would look a lot different from this year, in summary, although there may be a little bit of up-and-down between volume and price.

Okay, and I will use my follow-up question with a question to Joe. Joe, when you think about the patient recruitment time line in the new contract that you signed, how long will it take before you can come back to your clients and back to us with some proof of concept datapoints that will show how much time you saved your clients in the enrollment process?

Ricky, keep in mind we just closed yesterday, and we have to be careful. Have been very careful of things like gun jumping and getting ahead of ourselves. But as you know, clinical trials from the time you win it until it starts to ramp up to revenue is 6 to 9 to 12 to as much as 18 months. We will be talking about this in the future and giving you an idea of how we're doing.

Right now, it's largely manual. Again, so we don't want to get too far ahead of ourselves, but ultimately we want to make this industrial-strength and bring this as sort of an unparalleled offering and a differentiator for our Business. We are one for one right now.

We have about six more questions in the queue and we have about 10 more minutes, so we will try to manage to finish at about 10:15, please.

A.J. Rice, UBS

Hello everybody. Maybe I will just focus in on this year's layout of numbers. I know you don't guide to the quarters, but as we think the normal seasonal pattern, can you give us anything we should keep in mind as we lay it out? Whether it's weather in the first quarter or the progression of synergies over the course of the year. Anything along those lines?

A.J., it's Dave. Yes, weather in the first quarter. Obviously the first quarter, from the LabCorp Diagnostics perspective, tends to be a lower quarter. The second and third quarters being stronger, but we don't guide quarter by quarter.

So, your best -- the best way you can gain insight into that is to look at prior years and see how the quarters have shaped up.

Okay, I just was thinking in terms of -- because this is a corporate synergy, for example, do you think that $35 million lays out pretty evenly across the year? You've got that pretty much up front? Is there any help on the nontraditional seasonal things that you would give us?

This is Glenn, A.J., and I almost echo Dave's comment. If you look at both companies or the combined Company we are today, you would expect to see a ramp-up in the savings over time. So it's not necessarily going to be pro-rata.

When you look at the totality of our revenue, when you look at the totality of our earnings, you are going to see the same pattern, if you will, which is the strength more or less in the second and third being stronger than the first and the fourth. But even so, it's not material, but if you want to model that closely, you would go lighter in the first and the fourth, and a little heavier in the second and the third to follow historical patterns, partially offset maybe by a ramp-up in the cost coming in.

But again, that's not going to drive the numbers that much from a magnitude standpoint

Clearly the synergies will accelerate as we go through the year. We are not going to have a ton on day one, but they will accelerate as we get into later quarters.

This is Paul. Just real quick on the Covance side, the first quarter does have some seasonality in our early development business. So just make a note of that.

Okay thanks a lot.

David Clair, Piper Jaffray.

Hi. Good morning, everybody, thanks for letting me in the queue here. Just curious Dave you mentioned that core testing actually grew faster than esoteric. Just curious why that happened in the quarter?

Well it's a little bit of a tough question, why it happened.

What slowed down in esoteric, I guess?

Nothing has slowed down in esoteric. Core testing outpaced esoteric is what we said. So, esoteric grew consistent with the overall growth of the business, core testing grew faster than the growth of the business. And there are probably many theses about why that happened, but we have people coming in through the exchanges, we have people coming in through Medicaid.

We have patients who have previously been uninsured having coverage. The likelihood is that their initial encounters with physicians and with being covered lives, they are going to run a hepatic panel or lipid profile, things that we characterize as being in the core as opposed to being in esoteric.

So that would be my best assessment of why the core grew faster, but again I don't want to leave the implication that the esoteric didn't grow. The esoteric grew nicely, the core just outgrew it.

Okay thanks and just a real quick follow-up. In terms of Covance, it sounds like the feedback from the existing customers is pretty solid there, but is there anything baked in the guidance in terms of customer attrition?

The guidance incorporates a wide range of outcomes, and so you can assume that we have thought about that and incorporated that into our thinking.

Okay, thank you.

Isaac Ro, Goldman Sachs

Good morning. Thanks.

On the guidance for Covance, I think you called for 4% to 6% growth this year, and if I wind back the clock to when the deal was announced, I think we talked about longer-term growth in that 7% to 8% range. I just want to get a sense what you think it will take for that acceleration to happen?

Is there a time frame here that you think over several years, or could it be something that sort of hockey-sticks into that year two, year three post the deal. Just trying to get a sense of how you look at accelerating the growth? Thank you.

Isaac it's Dave. 4% to 6%, burdened by 330 basis points of negative currency, which if I add 3.3% to 4%, I get 7.3% to 9.3%, so it's exactly what we said at the time that we did the deal in terms of the growth perspective, and we think that opportunity is there for the long-term.

Okay and in terms of pricing for this year across the Company, can you maybe give us a sense, given your context on the core business for lab, the total?

No. As we said before, we guide to revenue. We don't guide to volume or price.

Thanks

Darren Lehrich, Deutsche Bank.

Thanks. Good morning, everybody, and congratulations to Steve. I may actually go back to eating chicken now.

My question now is for Dave, and it just relates to ACA and just wanted to get a quick thought from you, Dave, about how you think reform impacted 2014? And then as you think about the 2015 outlook, is reform a tailwind? Is it a neutral? Can you just give us an updated thought or two there?

I think the impact, Darren, for 2014 was it helped volume. And if I think back to what we said when we initially gave guidance, it helped volume probably more than we thought it was going to.

It was a drag on price, both because of the things that we have mentioned, the core testing growing faster than the esoteric. The patients moving from uninsured into covered categories and exchanges, and the growth which you saw on the first half of managed Medicaid. So net/net positive for volume, slightly negative for price.

2015, I saw the statistics that there's been some growth in enrollment and reenrollment for health plans. I don't think there's anything that's going to be material in there. There are some states that are talking about Medicaid expansion that hadn't expanded Medicaid previously. That would likely be net positive to volume and negative to price for the reasons that we have spoken about.

There's obviously some overhang with the Supreme Court taking up the King versus Burwell case, that, if that were decided adversely to the government's position, there would be significant impact on patients receiving subsidies, and we would hope there would be a constructive political response to that as opposed to sort of chaos for people who had insurance one day and don't have it the next.

That, at a high level, is probably how we think about the ACA for 2014 and 2015

Okay, but just to be clear, I can hear what you're saying volume and price. Was it more or less a push on EBIT? Is that what you are trying to say?

I think it was probably slightly positive.

Okay great. Thanks very much.

Bryan Brokmeier, Maxim Group.

Hi. Good morning. Thanks for taking the question. To follow-up on Gary's question from quite a while ago, on the core business. You generally drive efficiency improvements and take costs out of the LabCorp business, and that's normally included in your guidance.

Are there other margin expansion opportunities included within the guidance, or should we think of those is being lumped in with the LaunchPad, though a much smaller piece in that $0.30?

This is, Bryan, Glenn. To make sure I understand your question, first of all, we would agree that the normal course of operations is we have continuous improvements. That we're always looking at leveraging and managing our cost structure.

When we talk about LaunchPad, you have to think about it a little more than that. It's not the annual improvement to drive costs out and the leverage, but how can we reengineer processes and deploy systems to enable that to happen where you can't do that on the margin?

So, as we think about taking out around $150 million plus of costs over the next three years, yes, we have the impact of $50 million arguably would be greater than what would have been the normal reductions in our cost focus in a particular one year period. So we are getting the additional benefit of it, but part of what we're doing would also considered the normal course.

The more structural changes in what we do, obviously, will accrue as we go to the out years. But we're looking at taking costs out, we are looking at improving our bad debt experience. Collections, getting paid for tests that we're performing that we might not have been in the past, and then the more traditional things such as outsourcing, labor efficiency.

So it's all packed into there, but that's why you see probably a greater impact in 2015 than in the normal ordinary course of just our continuous improvement.

And Bryan, it's Dave.

If I understood the question, it was -- are there other margin opportunities that are outside margin improvement opportunities that are outside the guidance? The guidance contemplates the operation of the business similar to the way the business operated last year.

We had significant growth in esoteric over and above the growth in core. Obviously that's a margin improvement opportunity. So, that's why we give a range of guidance. Is that there are many things embedded in it that can move one way or another.

Right. My question was just -- when the question was about the core business being flat, I was looking at it as more it's not flat. Those margin expansion opportunities that normally we see every year are included in that $0.30.

Actually, again as we think through the $50 million of savings the first year, that's correct.

We're looking at the total program, some initiatives would've been done without calling it LaunchPad, but that is part of what we're calling LaunchPad is our improvement initiative. But the bigger part of it is that, as you think through the three-year total, you start to see more of the structural changes, but it's all inclusive.

And we don't agree that the core business is flat. I don't think that's an accurate characterization.

Great thanks

Brian Tanquilut, Jefferies.

Good morning. I promise I will just do one question. So Dave, good volume performance, 5% organic.

So if you don't mind just giving us your views right now on the market share dynamics, and how the hospital market share shift is playing out, and what your strategy is and what you are doing for that, as you look out to the next 3 to 5 years?

I don't spend a lot of time talking about market share. I think it's a hard thing to characterize. Our operational team has performed exceptionally well in terms of generating organic volume growth. Whether that's through contract wins, whether that's through sales, whether that's through service improvements. Everyday I get emails from customers, letters from customers about how LabCorp people go above and beyond to do the things that need to be done to serve the customers and for patient care.

That's what we're going to continue to focus on. That's part of what LaunchPad is about is we do a great job today, but there are things we can do better for the patients, for the physicians, for the payers. So look, I think we're doing a great job, operationally. I'm very proud of what we've done, operationally, and we're going to continue to execute on the operational opportunities that are ahead of us.

All right. Thanks.

Thank you.

With no further questions at this time, I would now like to turn the call back to Dave King for any closing remarks.

Thank you.

In closing, I'd like to say we appreciate your time and your questions this morning, and your interest. And just would sum up by saying, as we have said many times, the healthcare system is demanding better outcomes at lower costs and we're now the world's leading healthcare diagnostics company, and we have unmatched capabilities to serve every stakeholder in the healthcare system. We have a unique and complete set of tools to deliver what the system needs.

It's an exciting time for LabCorp, and we look forward to updating you on our progress as we carry out our key 2015 priorities. Thank you, and good day.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the presentation. You may now disconnect. Good day.