© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to the Labcorp Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator instructions]
I'd now like to hand the conference over to your host today, Chas Cook, Vice President, Investor Relations. Please go ahead.
Thank you, operator. Good morning, and welcome to Labcorp's second quarter 2021 conference call. As detailed in today's press release, there will be a replay of this conference call available via telephone and Internet. With me today are Adam Schechter, Chairman and Chief Executive Officer; and Glenn Eisenberg, Executive Vice President and Chief Financial Officer.
This morning in the Investor Relations section of our website at www.labcorp.com, we posted both our press release and in Investor Relations presentation with additional information on our business and operations, which include a reconciliation of the non-GAAP financial measures to the GAAP financial measures discussed during today's call.
Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to our estimated 2021 guidance and the related assumptions, including the projected impact of the COVID-19 pandemic on the company's businesses, operating results, cash flows and/or financial condition, our responses to and the expected future impacts of the COVID-19 pandemic on our business more generally as well as on general economic, business and market conditions.
Each of the forward-looking statements is based upon our current expectations and is subject to change based upon various factors, many of which are beyond our control that could affect our financial results. Some of these factors are set forth in detail in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and in the company's other filings with the SEC. We have no obligation to provide any updates to these forward-looking statements even if our expectations change.
Now I'll turn the call over to Adam Schechter.
Thank you, Chas and good morning, everyone. It's a pleasure to be with you this morning. We remain committed to using extensive diagnostics and drug development capabilities to advance our mission of improving health and improve lives around the world. Innovation, technology and science remains at the forefront and will always do to patients, providers and shareholders.
To that end, the second quarter of 2021 was very strong across both diagnostics and drug development. Revenue totalled $3.8 billion a 39% increase from the same period in 2020. Most of this growth was driven by the continued strength in our base businesses. Adjusted EPS reached $6.13 versus $2.50 from the prior year. Free cash flow was $390 million in the quarter versus $272 million in 2020. The strong performance in the quarter and the improved outlook for the year result in us meeting full year guidance for revenue, EPS and cash flow. Glenn will review the new guidance with you in a moment.
Our base business continues to recover and were 51% and 32% for diagnostics and drug development respectively. The drug development trailing 12 month book-to-bill remained strong at 1.41. This performance was patients and provider returning to routine healthcare checkups and pharmaceutical clients resuming their important research activities at an even faster pace than expected.
On that note, the company's continued response to the pandemic, our organization's collective strength and scale have allowed to play a substantial role in the fight against COVID. Although much progress has been made, it is clear that there is still a lot of work to do in the US and around the world. Labcorp remains vigilant and stands ready to help wherever and however we can as we have since earlier stage of the pandemic.
To date Labcorp has performed over 50 million COVID test. In the quarter, a steady decline in positive cases drove an overall decrease in COVID testing with an of 54,000 PCR test per day. The month of June was lower than the quarter average. However, testing started to increase again in recent weeks. We continue to monitor developments in the United States and around the world and are watching the Delta variant closely.
To support the CDC in tracking and monitoring the Delta and other variants, this quarter we announced an extension to our contract to provide net exceeds from positive PCR test samples. It is difficult to predict exactly what COVID testing demand will look like for the remainder of the year as areas continue to swell [ph] and we enter the flu season. Therefore, we will maintain our ability to scale testing capacity quickly and expand access for communities and individuals in need.
At the same time, our drug development teams continue to be involved in many studies on potential vaccines and treatments for COVID around the world. Our new automated clinical trial kit production facility in Belgium is up and running which will double our automated kit production capacity over time. This will allow us to better serve our pharmaceutical clients and study investigators in Europe, the Middle East and Africa.
Other COVID-related actions this quarter included the collaboration with the US Department of Health and Human Services to raise awareness of monoclonal antibody therapies and at state local levels, we expanded notable partnerships in places like Massachusetts and North Carolina to facilitate mass vaccination programs and expand access to at-home test selections for underserved populations. In addition, we continue the collaboration with Walgreens. Pixel bilateral test kits are now available in 6,000 Walgreen stores and through on-demand delivery services like [indiscernible].
Importantly, our scientists use data available through our robust testing infrastructure to contribute to essential research. In the quarter, we released the result of one of the largest COVID-related studies of its time, which analysed the test of more than 39,000 patients. This offers useful detail on the body's reaction to natural infection as we work to learn more about the nature of the immune response.
We are also building upon our portfolio serology testing including semi clinical [ph] analysis and T cell memory. We remain proud of our significant contributions to extending this set of progress and in the development of treatment and vaccines, all of which are intended to assist people to safely go back to work and normalize activities.
Now I'll provide updates to our strategy. We're focused on leveraging our industry-leading positions to drive growth, enhance customer retention experiences and advance science and healthcare. We see customer focus and integrate data and digitalization across our business. As part of that objective, we now plan to add a state-of-the-art bio-analytical laboratory in Singapore expanding our global drug development offering and elevating our client's experience through faster turnaround times in Asia.
In the United States we continue to improve our patient's experience in our service centers, focusing our efforts to create a seamless digital journey through scheduling to result delivery. With an average of three million patients served in a given week, we're excited to enhance their experience using our digital channels.
In the first half of the year, uses of our website totalled 22 million a 20% increase over last year and adoption of our patient application is rolling approximately 300,000 users per month. On that front of oncology, we made significant strides in the quarter oncology led by highly trained multidisciplinary feeds. We launched several new oncology tests including omni insight, enhanced cancer sequencing test for patients with advanced solid tumor cancers.
The test specific from individual's molecular and immune profile provides critical decision support that health medical professionals identify the most appropriate treatment options for patients as well as to identify potential eligibility for clinical trials. We also launched a companion diagnostic test to identify patients with non-small cell lung cancer who are eligible for new treatment option developed for Amgen.
This important task helps physicians identify patients who may benefit from the treatment promoting personalized precision medicine. Our work in oncology has created meaningful business relationships across the healthcare ecosystem that we will continue to enhance and grow. An important opportunity presented itself at [indiscernible] a long time oncology partner and a pioneer in solid tumor profiling. As announced today, we recently exercised our option to acquire the remaining stake in the company.
Omni [ph] enhances our integrated oncology platform, expanding Labcorp' s extensive oncology diagnostic testing portfolio and open the door to more patient participation in clinical trials. We continue to concentrate on identifying and engaging the high growth opportunities. We announced we provide autoimmune business unit for Marriott Genetics including Vectra rheumatoid assay. This will strengthen our position in RA with the CDC predicts will impact roughly 25% of adults in the United States by 2040.
Additionally, we agreed this week to acquired to outreach laboratory business of Minnesota-based North Memorial Health and will provide management services to increase its lab. Our pipeline of acquisition and investment target is robust and we believe there meaningful business development opportunities this year to enhance growth in our strategy moving forward.
Finally, I want to touch briefly on the board and the management team's ongoing review of Labcorp's structure and capital allocation strategy that we announced in March of this year. Working closely with our advisors, we're making progress to identify the best path forward to position Labcorp to unlock shareholder value while continuing to support our patients and customers around the world. Though we won't have further updates today, we look forward to sharing our conclusions once our review is complete. We expect to do so in the fourth quarter.
In conclusion, the quarter was strong across both diagnostics and drug development businesses. Significant progress was achieved on our strategy and our mission to improve health and improve lives of people around the world and we will continue to support efforts to stem COVID however we can. I am very optimistic about the future growth opportunities before us and our continued success. I want to thank all of our colleagues around the world for their tireless efforts to help stem COVID while also maintaining focus on our strategy and our underlying business.
Now I'll turn the call over to Glenn to review more details of our second quarter performance.
Thank you, Adam. I am going to start my comments with a review of our second quarter results followed by a discussion of our performance in each segment and conclude with an update on our full-year guidance. Revenue for the quarter was $3.8 billion an increase of 38.7% over last year due to organic growth of 35.5%, acquisitions of 1.2% and favourable foreign currency translation of 200 basis points. Our organic base business increased 42.4% when compared to our base business last year, while COVID testing revenues of $444 million were flat with last year.
Operating income for the quarter was $704 million or 18.3% of revenue. During the quarter, we had $92 million of amortization and $43 million of restructuring charges and special items. Excluding these items, adjusted operating income in the quarter was $840 million or 21.9% of revenue compared to $381 million or 13.8% last year. The increase in adjusted operating income and margin was primarily due to organic base business growth, acquisitions and launch pad savings, partially offset by higher personnel cost.
During the second quarter, interest expense was $78 million up from $53 million last year. The increase was due to one-time costs associated with the company's refinancing of $1 million in senior notes that were due to mature in 2022, taking advantage of the historically low interest rate environment. Excluding these one-time cost, interest expense would have been down $7 million versus last year due to lower debt levels and interest rate.
The tax rate for the quarter was 28.1%, the adjusted tax rate excluding restructuring charges, special items and amortization was 25.1% compared to 23.9% last year. The higher adjusted tax rate was primarily due to the geographic mix of earnings. We continue to expect our full year adjusted tax rate to be approximately 25%.
Net earnings for the quarter were $467 million or $4.76 per diluted share. Adjusted EPS, which exclude amortization restructuring charges and special items were $6.13 in the quarter up from $2.57 last year. Operating cash flow was $487 million in the quarter compared to €371 million a year ago. The increase in operating cash flow was due to favourable working capital, partially offset by lower cash earnings. Capital expenditures totaled $97 million or 2.5% of revenue compared to $99 million or 3.6% of revenue last year. As a result free cash flow was $390 million in the quarter compared to $272 million last year. During the quarter we used $300 million of our cash flow for our share repurchase program.
Now I'll review our segment performance beginning with diagnostics. Revenue for the quarter was $2.4 billion, an increase of 39.7% compared to last year due to organic growth of 37.8%, acquisitions of 1.1% and favourable foreign exchange translation of 90 basis points. Organic base business growth was 51.2% compared to our base business last year while COVID testing revenues were flat versus last year. Relative to the second quarter of 2019, the compound annual growth rate for the base business revenue was 4.5% primarily due to organic growth.
Total volume increased 39.6% over last year, primarily due to organic volume growth of 38.7%. The increase in organic volume was due to a 39.4% increase in the base business, partially offset by a reduction in COVID testing of 0.7%. As a reminder we do not include hospital lab management agreements in our volume, which would have added approximately 3.3% to organic base business volume growth.
Price mix increased 0.1% over last year, due to currency of 0.9%, COVID testing of 0.7% and acquisitions of 0.2%, partially offset by organic base business of minus 1.7% due to mix associated with the volume recovery. Our diagnostics organic base business revenue growth of 51.2% compared to its base business last year 48.2% was driven by volume while 3.1% was from price mix which was due to an increase in test.
Diagnostic's adjusted operating income for the quarter was $663 million or 28% of revenue compared to $309 million or 18.2% last year. The increase in adjusted operating income and margin was primarily due to organic base business demand and launch pad setting, partially offset by higher personnel costs. Relative to the second quarter of 2019, base business margins were down slightly due to the negative impact from [indiscernible]. Diagnostics margins were down in the second quarter of this year compared to the first quarter due to lower COVID testing while base business margins increased. Diagnostics three year launchpad initiative remains on track to deliver approximately $200 million of net savings by the end of this year.
Now I'll review the performance of drug development. Revenue for the quarter was $1.5 billion an increase of 36.7% compared to last year due to organic growth of 31.8%, acquisitions of 1.3% and favorable foreign currency translation of 370 basis points. Drug development delivered broad-based revenue growth across all businesses including COVID vaccine and therapeutic studies. Relative to the second quarter of 2019, the compound annual growth rate for the base business revenue was approximately 15%, primarily driven by organic growth.
Adjusted operating income for the segment was $221 million or 14.8% of revenue compared to $113 million or 10.3% last year. The increase in adjusted operating income and margins were primarily due to organic base business demand and launchpad savings, partially offset by higher personnel costs. Relative to the second quarter of 2019, base business margins were up approximately 200 basis points. While second quarter margins this year were lower than first quarter, we expect our second half base business margins to be up versus the first half. We also expect our full year margins this year to be up over 2020 which was up over 2019.
For the trailing 12 months, net orders and net book to bill remained strong at $7.9 billion and 1.41 respectively. Backlog at the end of the quarter was $14.3 million an increase of approximately $300 million from last quarter. We expect approximately $4.9 billion of this backlog to convert into revenue over the next 12 months.
Now I'll discuss our 2021 full-year guidance, which assumes foreign exchange rates effective as of June 30, 2021 for the full-year. We are raising our full year guidance to reflect the company's strong second-quarter performance and improved outlook for the remainder of the year for both our diagnostics and drug development base businesses. We expect enterprise level revenue to grow 6.5% to 9% from prior guidance of 2% to 6.5%. This includes the benefit from foreign currency translation of 100 basis points. This guidance range also includes the expectation that the base business will now grow 17% to 19% while COVID testing is expected to begin 30% to down 33%.
We are raising our expectations for revenue in diagnostics to minus 1% to plus 2% from prior guidance of minus 5% to flat. This guidance range includes the expectation that the base business will now grow 15% to 17% while COVID testing revenue is now expected to be down 38% to down 33%. We're also raising our growth expectations for revenue in drug development to 17% to 19% from prior guidance of 12% to 14%. Our current guidance includes the benefit from foreign currency translation of 200 basis points. This guidance range also includes the expectation that the base business will now grow 19% to 21%.
Given the improved topline growth expectations of our base businesses, we are raising our adjusted EPS guidance to $21.5 to $25 up from prior guidance of $20 to $24. Free cash flow is now expected to be between $1.95 billion to $2.15 billion up from prior guidance of $1.8 billion to $2 billion. Our earnings guidance assumes we will use our free cash flow for acquisitions and share repurchases which we expect to accelerate in the second half of the year.
We expect our capital expenditures will be approximately 3.5% to 4% of revenue driven by investments to support base business growth and productivity. For additional comparison purposes we have also included in the supplemental deck on our Investor Relations website a view of 2021 second quarter results and full year guidance compared to 2019 results.
In summary the company had another quarter of strong performance. We remain focused on performing a critical role in response to the global pandemic while also growing our base business. As we progress through 2021 we expect to drive continued profitable growth in our base business while COVID testing volumes are expected to decline in the second. We expect to continue to use our free cash flow generation for acquisitions that supplement our organic growth while also returning capital to shareholders through our share repurchase program.
Operator well now take questions.
[Operator instructions] Our first Brian Tanquilut with Jefferies. Your line is now open.
Good morning, guys. Congrats on a strong quarter. I guess my question will be a Covance. Obviously you're seeing some good strength there and strong. Just wanted to hear your thoughts and how do you think about sustainability of margins and growth outlook on your ability to maintain that high pace of growth going forward just for the Covance business?
Hi Brian. Thanks very much for the question. So Covance had a very strong quarter and if you look at our Labcorp drug development business in total, we had progress in all parts of the drug development business all three grew strong into double-digits and as I look at the margins going forward, I've always said be careful to look at any one quarter of the margin especially as were going through COVID. There are certain areas where we continue to maintain people and when we maintain those people, were doing it because we're going through COVID and we know we're going to need them for after COVID. So some of our margins look a little bit odd from quarter to quarter.
We're also seeing a slight increase in the material cost and labor cost which people are seeing in almost every industry, but we're going to continues to offset that with things like our launchpad initiatives. So I'd look at the margin on a yearly basis and we believe that this year will be better than last year which was better than the year before and I would expect as we go into next year in our drug development business, the margins will look better than this year. So we're going to continue to find ways to expand our margins moving forward.
Thank you. Our next question comes from the line of Jack Meehan with Nephron. Your line is now open.
Wanted to focus on capital allocation, was curious if you think is the strategic review having any influence over the timing of how you redeploy capital? You have $2 billion in cash on the balance sheet, net leverage of return is below the three turns you've been at historically. Within the second half acceleration just any additional color on the pacing of or magnitude of what you're looking to redeploy?
Hi Jack and I'll ask Glenn to jump in. So first of all two separate thoughts. One is we continue to execute on our strategy and we continue to do our capital allocation and we've always said, our allocation is focused on strategic acquisitions. You saw one of those where we purchased the remaining interest in Omni this quarter. So oncology is a strategic area. We're looking for ways to enhance our strategic capabilities.
And then we said we're going to look to do more hospital resolve, local laboratory acquisitions and you saw one of those this quarter, with what we announced we were doing with one of the hospitals in Minneapolis area, Minnesota. So those are the types of f acquisitions we're going to continue to do. What I would say is the pipeline is as robust as I've ever seen it and frankly I thought we would have couple more close this quarter, but I feel confident we'll close more of those as we go through this year.
Separately distinct from that, we continue to make progress on the strategic review and we're going to do this strategic review once we reach the conclusions, we'll look forward to sharing those with you and we expect to do that in the fourth quarter of this year. Glenn?
Jack, the only thing I'd add is you're right, our targeted leverage, has been the 2.5 to 3 times and a couple of things are going, obviously we have the benefit of the COVID testing, which has generated and helped our free cash flow this year, which has helped improved it. But also when you look at the improvement in our EBITDA, because of COVID testing, it's higher than normal.
So as you do look at our leverage relative to call it pre pandemic, you using a profile on the 2019, you'd get that are leveraged. Currently gross debt to EBITDA is towards the upper end of our range. Having said that as Adam commented on, we expect to use our free cash flow this year for M&A and share repurchases. The midpoint of our range a little bit over $2 billion. We spent around $400 million so far in the first half of the year.
So the Alyssa say it implies that the second half you'll see more capital allocation given to both share repurchases and M&A and spoke to the strength of our M&A pipeline, which again, gives us a lot of confidence we'll be able to deploy more towards M&A than we've done in the first half, but we'll continue to use our share repurchase program as well.
Great. Looking forward to the updates. Thanks.
Thank you. Our next question comes from the line of Kevin Caliendo with UBS. Your line is now open.
Thanks. I want to talk a little bit about Covance, revenues were up sequentially yet the margins fell by about 150 basis points sequentially, is there any seasonality there? Is there anything related to COVID potentially that would cause that I guess really ultimately what I'm trying to figure out is what is the right way to think about margins for that business going forward?
Yeah, Kevin, yeah, Adam actually commented a little bit in the remarks also that looking quarter to quarter, obviously, you do have issues on seasonality and just timing related things in that the comparison year over year, it gives you a pretty strong view of how our margins are doing, which again, in both businesses from a base business standpoint are up nicely.
When you look at Covance though to your point, sequentially, you move from kind of the first quarter to the second margins were down principally, related to COVID testing was down within that segment. The level of COVID vaccine and therapeutic studies was down compared to the first quarter. We had higher pass-throughs in the second quarter versus the first and obviously the tight labor market also impacting it. So a lot of things that will impact a quarter to quarter kind of change.
What we commented on is that the second half margins within drug development, we expect to be higher than the first half and that for the full year, we expect it to be up over the prior year. So we feel good about how the business is leveraging the top line growth from the base business standpoint.
And just quick follow up to that. How much is wage pressure impacting both segments of the business. And do you expect that, how are you contemplating that within the guidance or how impactful has that been to your guidance so far?
So of course we look at that closely. We've included what we think are the range of potential things that could occur within the guidance that we provided today. I think everybody's facing a tough labor market in most industries as we speak. And we're just going to have to continue to find ways through launchpad and other ways to reduce costs to cover that in the future. So we'll continue to find ways to take out costs in other areas, through things like virtual clinical trials and those types of things.
Thank you. Our next question comes from the line of Ricky Goldwasser with Morgan Stanley. Your line is not open.
Yeah. Hi, good morning. So a couple of questions here. First of all, when we think about the comparison for the base business for core testing versus 2019, I think you said it's up in the second quarter was up 4.5% versus 2Q baseline, can you maybe give us a little bit more details on how it progressed on a monthly basis and what are you seeing in the July run rate and what's embedded into second half guidance?
And then secondly and you talked about the increase in labor costs and often with launchpad, any updates on what's going to affect launchpad. I think launchpad ends in 2021. What are kind of like your plans for the next round of cost savings?
Yeah. So let me start Ricky with the base business. So, the diagnostics we saw the base business rebound nicely. And one thing is to look at revenue, which is what you stated, but the other thing is to look at volume. And for the first time, since the pandemic, we saw the volume increase in June of this year compared to June of 2019. So that's a good sign and it shows, continued recovery.
As we look at July, it's still too early to give any sense of that. But our expectation throughout this year is that we will see continued volume and revenue growth versus 2019 and that will continue throughout this year.
And Ricky maybe just a couple of follow-on comments because as Adam said, we crossed over where our revenue and diagnostic base business really in the fourth quarter of last year was favorable to 2019 levels, but that was driven off of the price mix know we were seeing more tests per session that was making up for the volume shortfall. So June was a signal a month for us, if you will, as we now have crossed over with volume now comparing favorably as well as price mix continues to be higher than normal, but as we continue to progress through the rest of this year and obviously going forward, we expect those to fall more in line with kind of the historical patterns.
As your comment on launchpad and really with the tight labor market in particular, but both businesses have launchpad initiatives. We completed drug development one at least publicly last year and this year we'll wrap up our diagnostics business, but that's part of an ongoing business process improvement initiative of the company every single year. We know we have just high inflationary costs as we go into every year and launchpad is really set to offset mitigate those rising costs. So continue to see a lot of opportunities to continue to drive productivity through technology, through the labor efficiency that will continue to help mitigate those costs going forward.
Thank you. Our next question comes from the line of Ralph Giacobbe with Citi. Your line is now open.
Thanks. Good morning. Certainly understand the fluidity of the backdrop, that the guidance is pretty wide for having seen the first half. I guess why keep it so wide and maybe help on assumptions particularly on the lower end that that seemed pretty hard to get to.
And then just quickly also wanted to ask about it. I think you mentioned the number of average COVID tests per day in the second quarter was 54,000 is hoping you can give us, where the midpoint of guidance assumes for the back half around that. And if any color you can give on what you've seen over the last couple of weeks in terms of average tests per day on COVID thanks.
Yeah, I'll start with the test question and we can give you some context on the ranges. As we said, the average number of tests per day in the second quarter is 54,000. And if you look at the month of June, it actually was lower than the average of the 54,000. If you would've just trended based upon the June data, you would have been in the 35% to 50% reduction that we had been quoting for the beginning of the year in terms of tasks.
But we saw a slight change with the Delta variant and we also saw the extension of the government saying that we're going to continue to be in an emergency situation. And those two things gave us confidence that the reduction in COVID test would be less than what we have originally had in the plan. And that's why we lowered and narrowed the guidance for COVID testing to 33% down to 38% down. So, we really did narrow that and provide some additional guidance there.
If you look at those numbers, I know it's still a fairly wide range. It's gone from 33% to 38%, but there's a lot of different ways that you can actually get there. One is by number of tests. And if you start to think about the variant and what we're saying, will that continue. If you start to think about what could happen, if there's a strong flu season or mass or mandated again, in certain states, maybe the flu season will be very light like it was last year, and then the other is obviously price. And the question is, will there continue to be an emergency declaration as we go into the fourth quarter of this year?
So what we've tried to do is kind of triangulate in all those different variables, and that's why we give you the range of 33% to 38%, which I think is a good reasonable range for us to be in with the uncertainties that still exist.
Yeah, Ralph, the only thing, I guess I would add to that is that what ranges are, we don't disagree this year or kind of wider than they would be in a normal year and just reflects the lack of visibility and the uncertainty that's ahead of us. Having said that with the new guidance that we provided, we've not only narrowed the ranges. So we've trumped the range given that we have six months remaining, we give annual guidance and more importantly, we've increased the call it the midpoints of all the key financial metrics that we guide to. So reflecting the company's performance.
So when you look at the midpoint of a range, as you would expect, that's kind of where we see things if we were to have to kind of put in a point, but we then give the ranges around it because there was a lot of things that on the positive or the negative side that could occur overall. And as Adam said, with regards specifically to the COVID testing again, narrowing the range and improving it. But what we did see, which was the first time, which we didn't have when we gave our guidance last quarter, was that we've seen a sequential decline in COVID testing each month as we've gone through the year, as Adam said with June being the lower than the average for the quarter.
For July was the first month, frankly, that we've seen the level of COVID testing higher than the prior month. And so obviously with the advent of the Delta virus the advent of the extension of the public health emergency gives us reason to feel now better about where we are with COVID testing for this year, then we did just have a quarter ago, but still with a lot of uncertainty that's ahead of us.
Okay. That's helpful. Thank you.
Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Your line is now open.
Hey, good morning, everyone. This is Justin Bowers on from Pito. Just shifting back to the diagnostics, the diagnostics business how should we think about 3Q versus 4Q and the base business? It sounds like you're back to at or above pre COVID volumes, but the question really is, should we -- does the guide kind of assume like normal kind of historic seasonality patterns or something different? And I'm asking because we're just hearing diversion messaging from hospitals and med tech companies. So trying to figure out where you guys stand on that.
Yeah. No, I think from our standpoint and why we kind of focus on the 2019 comparison, just to kind of get the back to the more normalcy, if you will. We're still obviously seeing a strong recovery as we compare to 2020, but similarly, when we look at a comp relative to 2020 last year, we saw the trough really being early in the year with the pandemic, and then it got better throughout the year, but we continue to expect to see good growth and favorable margins year on year compared to '20.
So really taking a look back to '19 and to your point, diagnostics does definitely has seasonality to the business. So when you look at sequentially, you really have to look at holidays and where the days lay. So we do expect normal seasonal patterns to occur within diagnostics. Again, especially when you look at it relative to '19 more normal times.
So from a call it a margin standpoint while we expect margins to be up year on year, we expect them to be flat to slightly down compared to 2019 because of the negative impact of Pama. As far as just the revenue growth we feel good that the volume, again, revenues have been up even compared to '19, but we're seeing the volumes pick up.
So volumes will be positive which will be a continued trend, racing mixed should start to come down from where it's been again, as volumes pick up to get back to that more normal patterns, but again, good growth expectations for the second half of this year from volume and from favorable next. And obviously as we go into '22, expect that to continue.
Thank you. Our next question comes from the line of Tycho Peterson with JPMorgan. Your line is not open.
Hey, thanks. A couple followups on the COVID outlook specifically, are you able to quantify where you ended that July on tests per day? I'm just curious what that step up, looks like, and then does the outlook bacon any back to school testing, I'm curious if you're starting to have discussions around bigger programs? And then lastly, I'm just curious on serology, latest thinking there, obviously a lot more discussion lately on anybody's potentially wearing off. And how are you thinking about it enough to consider in the back half of the year? Yeah,
Yeah. Thank you for the question. I think they're all important questions as we go through the rest of this year to next year. I'll start with the serology first. At the moment we have the ability to do as many serology tests as we would need to do. The CDC has not come out to recommend utilization of serology to try to understand titers.
So therefore not many people are going for serology test so that we can do several thousands every day, but we're prepared to do as many as we may need, but we're also developing and have the ability to do T cell memory testing as well as semi quantitative testing, which ultimately might be helpful if you start to think about a tighter, that you might need to understand the weighting of effectiveness of vaccines over time.
So what I would say is we are prepared for whatever might be necessary and we're building capacity to be ready for whatever that could be. My personal point of view is that I believe that serology testing over time will be more important, particularly if vaccination is not going to be every single year, if it could be less or more than a year and if it could be different by individuals, then I think you're going to need significant serology testing and that's why we continue to develop it.
With regard to back to school, we're having a lot of discussions about back to school. We're prepared to do as PCR testing, as we may need for back to school, whether it be through individual tests or through pooling. But to be honest, they've really been discussions. We haven't seen a lot of schools willing to pull the trigger and say, we're going to put in a significant back to school testing program.
So we're going to have to wait and see and even though we're having a lot of discussions within the range that we've provided up to down 33% to down 38%, there's multiple different ways you can get there. One would be a lot of back to school testing, but a lower price. Other ways it'd be not much back the school testing, but you could continue to have growth in other areas.
And then the last thing I would say is, it's truly to give the end of July, but as we look at the first couple of weeks of July, we're certainly starting to see numbers that are not yet there, but closer to the average that we had the last quarter versus where we ended for the month of June.
Okay. that's helpful. And then maybe one follow up just on a broader kind of decentralization theme. Obviously just spent a lot of capital place over the past year and in hospitals and smaller labs and physician offices, can you maybe just talk on the competitive dynamics whether you see that as a potential longer-term risk as they have to fall back on that COVID testing and think about broader flow through?
Yeah, again, if you look at COVID testing or molecular tests, and if you look at the number of molecular tests that we do as a percent of the total 530 million or so tests that we perform every year, it's still a very, very small amount. So even though there might be additional capacity in hospitals or laboratories for molecular types tests, it wouldn't have a significant impact on our overall business, frankly.
Thank you. Our next question comes from the line of Derik De Bruin with Bank of America. Your line is not open. Hi, good morning
So I know that and I know it's, tough enough to predict the second half of '20 let alone, sorry. of '21 let alone the looking at '22, but I just was wondering if the sort of your initial thoughts on sort of where the consensus estimates are. If I look at earnings estimates and you just words who have grown EPS by 10% off of your 2019 base, that gives you something around a $15 number for '22 and earnings the streets around $16, assuming some COVID and some other things like that.
Is that, are you comfortable with sort of like where the consensus estimates are right now and just some, any sort of initial color on what you sort of think about the '22 at this point? Yeah.
Yeah. So the first thing I'd say there is that we're still working through 2021. We're obviously not providing guidance today for 2022, but the reason we're trying to break out our base business versus our covert testing is to really give you a better sense of how to start to think about 2021. And if you take up a base business, we expect to get back to normal growth rates that you would have seen prior to the pandemic. The part that we're still trying to figure out is what could COVID testing look like as we go to 2021? And that's the entire reason that we're giving you the different pieces to try to help think about it as we get there next year.
Great. And if I can ask one follow up can you talk a little bit more about your oncology testing going on with that? Is that back as well? I know you talked about routine, testing me back as oncology back response. So we're hearing some mixed things in the market about demand is, and these are some of the, some of the other companies.
Yeah, what I would say is if you look at esoteric testing, which includes ecology that actually went down less than the other testing that we do more routine testing at the beginning of the pandemic. But as we stand here today, they both come back and, it looks about what you would expect. It's about a 60% to 40% breakout of our business, 60% on a more standard testing in revenue and about 40% on the esoteric, including oncology. So we see them both coming back.
Thank you. Our next question comes from the line of Matt Larew with William Blair. Your line is now open.
Hi, good morning. You mentioned the test book session again, were a driver, but curious how that trended sequentially, because you mentioned that as a driver in Q1 as well, I guess I'm just trying to get a sense for whether things are normalizing or whether, if there's still some catch-up going on as patients, visit physicians, touch it for the first time.
I'll let Glenn give some specific, but in general, we expect a test for a session to come back to pre COVID levels over time, and we're already starting to see that a bit. But Glenn maybe you can give some additional context.
Yeah, no, it's exactly right. Sequentially the test per session impact was less than it was in the first quarter, but obviously the volume levels were much higher in the second quarter then than the first quarter as well. So you will ultimately get back to that more sense of normalcy over time.
Okay. Now just on pixel, you've given some good data points here over the last couple of quarters on access and how that's improved. But can you share any data around what the patient uptake either volume or ever to contribution has looked like? And then maybe what the margin profile of pixel would look like relative to your traditional business?
Yeah. So if you look at pixel it ranges anywhere from 4% to maybe 8% at the peak of the percent of total PCR tests that we do. So it's a part of the armor where they have people that use it really appreciate it. It's now available in 6,000 Walgreens stores and things like Jordache and Instacart but it's been relatively consistent at about 4% or so of the total tests that we do and the margin isn't that different than other margins.
Thank you. Our next question comes from the line of Aaron Wright with Credit Swiss. Your line is now open.
Great. Thanks. What are you seeing in terms of the industry fundamentals across the Covance clinical business in terms of site accessibility, RFP flow, and in the nature of new business wins in the quarter, what was still COVID related work and you did mention the labor cost at Covance, and I'm curious if, if you anticipate seeing any partial offset from some of the disruption associated with some of the consolidation across your peers in this space and curious if that's something that's coming up with customers as well. Thanks.
Sure. I'll give you some additional context the business. The first thing I would say is about 80% of sites are currently open. So we still have sites around the world that have not yet fully open to allow us to go into help them enroll patients. But, we would expect continued improvement there as we go through the year.
I would say though, I would've thought it would be a little bit further than where it is at the 80% right now. But the good news is the RFP flow is very strong and we continue to see a significant number of RFPs. I think we have a good chance to win many of those, and it's a very healthy flow of the RFPs that we're getting.
And just to give you a sense, I mean, we were really pleased with our 1.41 trailing 12 month book to bill. And if you look at that, I mean, you kind of bring it to our backlog. Our backlog was $14.3 billion, and that was an increase of $300 million from the first quarter. It was also a 21% increase year over year. If you look at our trailing 12 month net orders, they were almost $8 billion and they were up almost 30% year over year. So, with that performance and the continued RFPs that we're seeing, we believe that there's continued significant growth opportunities before us.
And then Glenn I don't know if you want to talk any more about the labor costs that we're seeing, but we're seeing that. And we're hearing that not just in drug development, but across different industries, diagnostics, drug development, it's something that we're dealing with. I think we're doing a good job dealing with it, but we're going to have to continue to find ways to reduce costs in other areas as we go through. And then the last thing I would say is if you -- you asked COVID and the percent of our net orders it's, still relatively small, it's less than 3% of our backlog and it's about 7.5% of our net orders over the past four quarters. So overall it's small.
Okay, great. And just one quick follow-up on the PLN in preferred lab networks, can you give us an update on that front and how that's helping to potentially kind of steer lab volume? Thanks.
So we were added to the PLN for the third year in a row. Unfortunately, with COVID, I don't think there's been a ton of progress made in appeal and it makes a lot of sense and I believe over time it will be the right thing to do and our customers move in that direction. But I've been saying for a couple of years now that I believe we'll have a better answer at the end of the year and then with COVID and everything else has been very difficult to measure or to actually execute on.
So we'll continue to provide updates when it becomes meaningful. At this point we're glad that we're on there. We have a great relationship with our colleagues at United and we'll continue to work with them and where we can to help reduce costs and give high quality diagnostic testing.
Thank you. Our last question comes from the line of Ann Hynes with Mizuho. Your line is now open.
Great. Thank you. I just want to know if you can give any detail on revenue per test for PCR testing and also serology. Also there was increased speculation that the public health emergency might be extended into 2022. If so, do you think labs could maintain the elevated COVID pricing in that scenario? Yep.
Hi, and thanks for the question. If you look at our domestic testing that we do, the price is still in the high eighties, just below 90 frankly. So we continue to maintain a very good price in the United States. If the emergency does move into the next year, I think it will help us with price. Price is going to continue to be under pressure. It's under pressure now. We continue to have a lot of discussions with our colleagues and payers but having emergency declared is certainly a help and enables us to continue to provide the testing that we need.
The one thing that's interesting I mentioned before that we continue to keep the capacity that we have despite the fact that it impacts our margins to some degree. And part of the way we're able to do that is because of the emergency and the pricing that we're able to get for this test. If we were in a normal time period, we might've reduced certain things as we saw the total number of tests through the second quarter decline every month.
I'm so glad we didn't do that because when all of a sudden there was a significant increase because the Delta variant, we were able to respond. We kept our one day on average turnaround time. And we're going to continue to do that, but the emergency declaration and the price certainly is helpful for us to be able to do that.
And just one follow up. I know that the school opportunity is still an unknown, but if it becomes to fruition, I'm assuming that that revenue per test would be a little lower. Do you have a range what that would be just for modeling purposes, if we wanted to put anything on our models?
Yeah, I would say, it depends. If it's a pool pass, you could put 10 people in one test that would be different than if it's an individual test. So really it would depend on the type of testing they would want to do. But I would agree with you that if you're doing surveillance, then it's harder to have the same pricing then when you're actually testing people that are exposed or that have symptoms.
Okay. So I want to thank everybody for joining us this morning and spending time with us. It's clear that the second quarter was a very strong one across the enterprise, and that enabled us to increase our full year guidance. I want to thank all of our dedicated employees around the world. Their tireless efforts in their pursuit of answers really have demonstrated our mission to improve health and improve lives around the world. And I'm very grateful for the colleagues that we have that are doing that.
As the Delta variant continues to progress and other variants emerge, I encourage everybody to get vaccinated. I really encourage people to get vaccinated as quickly as possible if you're eligible and to stay diligent and vigilant about the disease and the pandemic. We're all in this together. So I look forward to talking to you soon and everybody have a great day. Thank you,
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.