Laboratory Corporation of America (LabCorp) Stock

Good afternoon, everyone, and welcome to the Morgan Stanley Global Healthcare Conference. I'm Erin Wright, the lead health care services analyst at Morgan Stanley. For more important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures.

And with that, we're happy to have Labcorp with us today, hot on the heels of their Investor Day last week, CEO, Adam Schechter; as well as CFO, Julia Wang, are with us today. Thank you so much for joining us.

Let's kick it off with just a bigger picture question on the back of the Investor Day. Some of your high-level takeaways that you wanted to drive home for investors. You reaffirmed the long-term kind of guide or largely reaffirmed the long-term guide with some tweaks. And can you kind of break down some of those building blocks and how you think about the long term for Labcorp?

Absolutely. Good afternoon, everybody. Erin, thanks for having us. It's a pleasure to be here. So last week, we had our Investor Day. And the first thing we did was we showed data on the last 3 years when we provided longer-term guidance and showed that we were able to achieve exactly what we committed to achieving.

The second thing we did was we reaffirmed our guidance for the rest of 2026, which we feel very strongly about, remains compelling, and we reaffirmed that guidance. The third thing we did was talk about our long-term strategy and provide longer-term guidance for the next 3 years.

If you look at that guidance, I believe it's a very compelling proposition. We have revenue growth of 5% to 8% at the midpoint, double-digit EPS growth. We have margin accretion of 75 to 150 basis points, and we have very strong free cash flow. Then what we did was provide the strategy that feels -- that shows us the path forward to achieving that growth compelling profile.

The strategy focuses on several areas. One is to lead in specialty testing. We're primarily focused in oncology, women's health, autoimmune disease and neurology. Each of those areas are growing significantly faster than the market. We gave some data on those areas that we can talk about if you'd like to in a bit.

To continue to win in the hospital, the local regional laboratory business, we have a very strong pipeline of potential acquisitions in those areas that will continue to give us growth. We said in the guidance that we expect 1.5% to 2.5% of the revenue growth to come from those types of acquisitions. If you look at the last 3 years, it's been about 2.4% of the growth has come from those types of acquisitions.

We talked about the importance of using technology and artificial intelligence in the majority of our business, and we're looking at it in 3 buckets: One, how do we improve the customer experience, thereby driving revenue; two, how do we reduce costs, thereby improving margins? And then how do we think about transforming aspects of our business in a fundamentally different way in the future?

And those 3 things are helping us reach the LaunchPad initiative, which we increased in this guidance versus prior guidance, where now we expect $125 million to $150 million of savings each year in the longer-term guidance that we provided. So I feel like it was a very successful meeting. We appreciate those that attended, and we've gotten very positive feedback on the longer-term outlook that we provided.

Okay. Great. So you also reaffirmed your guidance for 2026 as well at the conference. And can you talk a little bit about some of those key drivers in terms of your expectations for enterprise revenue growth of 5.4% to 6.3% in 2026, how is the year kind of playing out relative to your expectations and relative to the first half? And how do we think about it as we head into sort of the second half and that sort of cadence, some of the nuances we should be thinking about at the high and low end of the range?

Yes. So I'll give some background, I'll ask Julia to jump in with some specifics. But I'd say, overall, we feel like the momentum that we've entered the second half in is very strong. As I look at the guidance we provided, obviously, there's just over 3 months left. I feel very strongly that reaffirming the guidance tells you we see a clear path forward to achieving the objectives that we've set forth for the rest of this year. And the last thing I'll say is that we believe that the guidance and hitting the rest of the year guidance sets us up very well for next year and into the longer-term guidance here.

Erin, it's a pleasure to be here today. As you were saying that last week, we had an opportunity to reaffirm our guidance for 2026 on a full year basis. Essentially, at the midpoint, you are looking at a revenue growth of almost 6%, adjusted EPS growth of over 11% and along with continued margin expansion as well as strong growth in free cash flow that is expected to be in line with our earnings growth.

I think as Adam just mentioned, we are not only very much encouraged about where we are heading in wrapping up 2026. Equally importantly, this strong set of expectations is setting us up with a lot of momentum and as well as strength heading into the next 3 years as we just laid out last week.

Okay. And how would you characterize the current just underlying utilization environment? Like, what metrics do you look at internally that you think is the best gauge in terms of just underlying kind of health of utilization trends? And maybe it doesn't matter. Maybe it's just because your drivers are broad-based and you have everything from advanced diagnostics or esoteric testing to other areas that are obviously key drivers for you. But yes, how would you measure that or gauge that right now?

Yes. So the utilization environment remains strong. And we're talking specifically about the diagnostics right now. But if you look at our central laboratory business, I look at the book-to-bill, which remains very strong in that business as well. When I think about utilization, obviously, I look at volume. When I look at volume, I not only look at the way we describe volume, but I also look at test per accession. We continue to see an increase in test per accession.

And I think we're seeing that for 2 reasons: One is the specialty business. We reported last week for the first time that when we look at our specialty testing, patients in those areas tend to get 50% more test per accession than the average patient. We've seen a shift in our mix of business where esoteric business back in 2024 was about 38% of our kind of revenue total. It's now about 41%. So you're seeing the mix shift and that mix shift is helping with the test per accession.

The second reason I believe you're seeing an increase in test per accession is that there are a lot more new tests that physicians can use to help better diagnose patients. A good example of that is cholesterol testing. If you would have gone back 5 or 7 years ago, doctor would test your total cholesterol, your LDL, your triglycerides, your HDL. Today, they want to understand your ApoA, your ApoB, maybe even HDL subtypes. It gives them more information to better diagnose the patient, but also to better determine what treatment might be most appropriate for those patients. So the test per accession increase, I think, is durable and will continue over time, and that's another metric that we look at for under -- for looking at utilization.

Okay. Great. And so it sounds like you think a lot of this is durable, especially as we head into 2027. Can we talk a little bit about some of those factors that we need to keep in mind, PAMA, ACA, Medicaid utilization, which we just talked about in specialty testing as well, which seems durable, but in clinical -- sorry, central lab demand trends. And then, you'll also annualize some -- sorry, I'm bringing a lot in here, annualize some of your early development actions as well. So can you high level -- I know you're not giving '27 guidance, but high level thinking about this thing.

I'll give you some context, and I'll ask Julia to add additional context. But as we look at 2027 and the longer-term guidance, there are certain pushes and pulls. When I think about the headwinds that we could face, obviously, PAMA remains something that we're watching closely. We built PAMA into the guidance ranges that we provided last week. We put in the assumption that it will occur next year.

But I remain cautiously optimistic that working with our trade organization with Democrats and Republicans and the Senate and Congress, that we'll be able to get the RESULTS Act to move forward. But we'll continue to watch that as that's obviously a headwind.

The second thing we watch closely is a number of patients that lose insurance entirely. In general, if a patient is on Medicare, Medicaid, Medicare Advantage, private pay, as long as they have some type of insurance coverage, we find a way that we can be successful with those patients. When a patient loses all their insurance, that's when we watch very closely, and we tend to have a headwind. I don't think that's likely because you're in an election year this year and then 2 years from now, you'll be in another presidential election. I don't think anybody wants to be in a situation where they were 15 years ago, where there's a large number of people in the United States without access to health care.

For the tailwinds, there's a few things. One is the timing and amount of business development. So we've said that the range is 1.5% to 2.5%. Our pipeline is very strong. And the question is how fast can we bring some of that pipeline to fruition. If you look at the last 3 years, we actually were at the higher end of that of 2.4%. So that could certainly be a tailwind for us.

The second thing is our specialty testing. We talked a lot about things that we're doing in oncology and other areas. If we can get reimbursement in some of those oncology testing areas or other specialty areas quicker, that would be a tailwind with us as well. So we certainly have multiple paths of growth that I see that can get us to that longer-term guidance. And I think that the tailwinds actually are greater than the potential headwinds.

Yes. Maybe to add some additional color, I would start with the ACA impact. Our exposure there is limited. In total, that volume is less than 5% of our diagnostics business. We shared in the past that we expect the impact in 2026 full year is about 30 basis points to the volume for diagnostics. We remain to believe that's the appropriate estimate at this point in time. And then, post-2026, we are not anticipating a huge year-over-year increase beyond this estimate at this point in time.

The related topic to ACA is really a discussion about the bad debt. In our particular case, our payer mix has remained relatively stable over time. And our bad debt management for the diagnostics business has been effective. The historical benchmark has been about 5% of the diagnostic revenue, and we've been able to continue to track at that historical level.

The one additional comment as it relates to bad debt is over the past couple of years, we've made a significant investment in really strengthening our collection infrastructure as it relates to the revenue cycle management, inclusive of digital capabilities to really bill and collect. So we continue to manage our collection efforts effectively and efficiently.

The last comment is really around the whole Medicaid comment that Adam already shared some color on. Overall, as a percentage of our revenue for diagnostics, Medicaid is about 8%. But on the enterprise level, it's less than 6% of our overall revenue. So as you can imagine, as we develop our long-term planning process, we actually calibrated across a range of scenarios and the operating environment.

But because of our payer diversification, our scale, so that makes the impact more manageable than otherwise. As Adam shared already, based on what we know today, we believe the impact is manageable and contemplated in our 3-year outlook. And of course, as we continue to progress to get ready to set the guidance for 2027, we expect to provide update at that point in time based on what we know at that point in time.

And then to answer the second part of your question, which is the central labs, our central laboratory business remains very strong. And when you look at the central laboratory business, we are a leader. We work with almost every large pharmaceutical company and biotechnology company with our central laboratory and our other biopharma laboratory businesses.

One of the things that you look at, obviously, is where your business comes from. The vast majority of our business in Central Lab, over 70%, is from large pharma, large biotech and is focused on Phase III trials. Those are very durable businesses. Pharma would cut many other things before they'd ever try to cut a Phase III trial because that's the lifeblood of the organization over time.

And the book-to-bill remains very strong for the Central Laboratory business. So that gives us a good sense not only for this year, but as we go into the following years, many of those trials are multiple-year trials. Many of the Phase III trials could be 3-year trials, for example. So we feel like we've got good line of sight and that we're right in the sweet spot of where we want to be with the central laboratory business.

And Julia, you mentioned some on the bad debt and what you're doing on that front. But can you talk a little bit about what -- how the nature of your relationship with health systems and hospitals right now? What are they feeling in terms of -- and your exposure to kind of bad debt across that relationship, in particular? Are you seeing any shift there?

No, in terms of our exposure to the health system, it has remained in line with our historical level. We have not seen an uptick in the exposure in that particular regard.

Okay. Okay. And then when I think about all these drivers, whether it's the increase kind of around specialty and central lab business in the refined mix across kind of your biopharma business, just more holistically, we got the question like was there room for potential kind of upside to even your long-term targets that you laid out there to achieve. But I think you want to be prudent in how you think about that. There are some moving pieces, and you do have PAMA in there as well. Is that sort of the right way to think about it?

Yes. I mean, like I said, I think that we've got a lot of tailwinds. I feel very confident in the guidance that we provided. I want to provide guidance that was realistic, that was credible. I saw a clear path forward, and I saw multiple growth opportunities to help us get there. Building PAMA in, we're still assuming it's about $100 million impact. We basically -- historically, I said it was $80 million, then I said maybe $80 million to $100 million.

As our volume went up, I still use the old methodology, but just kind of increase based upon that. Could it be $90 million or not $100 million? Well, let's see how many customers submitted data to the agency. Could it be $110 million versus $100. We have to still run the analysis once we have the actual data, but $100 million is a good placeholder and that's what we used. So obviously, within our guidance, we're assuming we overcome that. If PAMA doesn't come, obviously, that would be very helpful to us achieving that guidance and probably more towards the upside than the downside.

Yes. Since you brought up PAMA, I'll just shift to that a little bit, but you're still going to push for the results, right, in any event, even if this does get pushed through. And remind us of when your latest thinking on when we get the next data point on PAMA?

Yes. So what I would say is that I've spent the last couple of weeks talking to Senators, Congressmen and women, Democrats, Republicans. And everybody I've talked to is very supportive of the RESULTS Act. People truly realize that the implementation of PAMA has been flawed, and therefore, we have a lot of support. We're still waiting for a CBO score, which will be important for us to understand the magnitude. But the people I talked to have said that they will support it irrespective of what the CBO score is, assuming that it's reasonable, which we expect it would be.

We're working very closely with our trade organization, ACLA, A-C-L-A and they have been really getting a lot of support for the RESULTS Act, not just in Congress and the Senate, but also with other trade organizations with other groups of organizations that will be supportive of results as well. So I'm cautiously optimistic that there's a path forward. We have to wait to see what the CBO score is. We have to wait to see what package of bills will be passed by the end of the year that could be attached to. But we certainly have a lot of support for it, and I feel very good about that.

If we don't get the RESULTS Act, of course, we'll continue to argue and try to find a path forward for a delay, which we've gotten for the last 7 years. But that would be secondary. The first and foremost thing that we think we should do is find a path forward. I talked to a Senator, the other day, I said, every year for 7 years, I've called you now to ask for your support on the same thing.

And let's finally get this to happen, so I don't have to make the same call next year. I think everybody wants to do that. That's the logical path forward. It just doesn't always end up logical in Washington at times.

Okay. I'll shift a little bit. How is Invitae tracking relative to plan as it relates to revenue growth, profitability accretion now that it's fully annualized? And what is the normalized growth rate from here? And any other surprises or cross-selling opportunities to call out?

Yes. So Invitae has been a real success for us. It's been a success from revenue growth, from operating income growth from launching new products, including new MRD products. We achieved our objectives to make it accretive after the first year. We actually beat our internal expectations in terms of timing. So it is fully 100% integrated into the organization right now.

In fact, we can't even break it out fully anymore because we've moved some tests that we performed at Labcorp into the Invitae Labs. We've moved some of the people that were supporting Invitae products to also support Labcorp products. So the company is fully integrated right now so you can't really break out the operating income any longer. What I would say is that everything that we had committed to do, we had done at least on time, if not faster than what the commitment was.

Okay. And I think oncology was a huge focus at the Investor Day. I feel like it's an area that's underappreciated for Labcorp. I wish you'd break it out just a little bit more for us, as I always want more. But you continue to expand in the oncology portfolio, ColoSense, Plasma Direct (sic) [ Detect ], Genome MRD, a lot of companion diagnostic opportunities as well. What parts of that -- are going to be the most material for you? Like what are you most excited about? What will kind of move the needle? And what do you need to get in terms of evidence generation reimbursement or physician adoption milestones to get there?

So there's no doubt that oncology remains a very important area for us -- for both our CLS business, but also for our diagnostic business. If you look at our CLS business, over 50% of the trials that we're running are in either oncology or in neurology. So it just tells you that there's a lot of new products coming in those areas.

And therefore, when those new products come, they're going to need a diagnostic testing along with those products, either to help decide who needs a product or to help decide whether the product worked, if there's side effects in the product or if the disease comes back. We are working on all aspects of those trials. So we have a good insight to where the future market is going.

When we think about oncology, we think about it in 2 ways. One is what can we do to help drive our oncology business. So we have solid tumor analysis that we do. We also have liquid analysis that we do. When it comes to liquid biopsies, there's 3 parts: there's screening, there's therapy selection, and then there's molecular residual disease does the disease come back. We are focused on developing primarily within therapy selection and molecular residual disease.

I think those 2 areas will be the fastest to reimbursement, will show the greatest ability to reduce cost to a health care system. And therefore, those are areas that we're working on developing certain products. We actually showed our pipeline of MRD products across tumor types. And I think we have one of the broadest, if not the broadest kind of pipeline of MRD across tumor types and across stages of cancers.

The second way I think about oncology is important as well because I don't think about it as just the oncology test. I think about it as the oncology patient. So nobody could develop all of the MR test -- the MRD tests that will be needed for oncology because there's so many tumor types, there's so many stages. We want to have them all available on our test menu, whether I develop them myself, whether we develop -- or we license them, whether we acquire them.

To us, we want to make sure that we have the test that the patient needs, not just for oncology, but when we actually work with the oncologist for that oncology patient for the oncology test, we get all the other tests that, that patient may need. So when you think about an oncology patient that's on an immunotherapy, they're getting a lot of tests for that first year of immunotherapy.

And it's not just the test for MRD is the disease coming back. It's ALTs, the liver, it's their kidneys. It's what's happening with their RBCs, or WBCs. For us, the most profitable test is the next test that we run on the same blood sample that we've already collected because all of our infrastructure in our service centers to take the blood, to deliver the blood, to analyze it is all fixed cost. So therefore, the incremental tests are actually valuable to us.

We only want to do incremental tests that make sense that the physician orders and prescribes, but physicians tend to prescribe many more tests for an oncology patient than for a patient that's not ill. So for us, it's all about the patient, and we'd like to have all the tests available for that patient, whether we develop them ourselves or make them available. Does that make sense?

Yes. I think that's an important point in terms of how much economic value we add and the quality of kind of the customer base, especially when you compare to sort of consumer and some other areas. But just quickly on -- also on the specialty testing side, you call out neurology, you call out women's health, other areas, which outside of oncology would you also be highlighting in terms of biggest opportunity for Labcorp?

So they're all opportunities. It's interesting. Neurology is actually the smallest. But if you look at like Alzheimer's disease, it's growing -- Alzheimer's disease, it's growing the fastest. So we have a very broad portfolio of products for Alzheimer's disease. I think that, that's going to be a very important area for us as we move into the future.

Adam commented earlier that tests per accession has been a favorable contributor to our overall revenue growth for diagnostics. Last week, during our Investor Day, we talked about the fact that when you look at the number of tests per session for the specialty testing requisitions, it's actually coming in at least 50% more than the average reqs, right?

So from that standpoint, to your point, it's absolutely been very conducive to the growth, both from a revenue perspective as well as the drop-through to the bottom line in terms of the economics for the profitability improvement.

Is there any metrics you can give us on that front in terms of that relative profitability and like -- because higher test for req that obviously drops through nicely for you. But anything you can give us in terms of how that drops through?

Yes. So the way we think about it is we have a fixed infrastructure in place. So to the extent that with any single collection of the sample, if we could just drive one more test out of that collection, then that drop through to the profitability is just really at the contribution margin that is much, much more compelling than the segment margin for diagnostics.

I think the other fact I would share is if you look at last year, as an enterprise, we expanded our margin by 50 basis points. In the first half of this year, we delivered another 50 basis points of margin expansion. And we also shared during the second quarter release call that for full year 2026, we expect it to be another year of meaningful margin expansion. So the contribution from the test accession in addition to operating efficiencies are definitely contributing to that outcome and the value creation for the company.

Okay. So we get a lot of questions on consumer. And how do you think about the consumer health business kind of going forward and direct-to-consumer testing and more proactive initiatives around preventative care? How do you play into that? How do you take a balanced approach when it comes to internal offerings and investments relative to external partnerships?

Yes. So there's no doubt that consumers are playing a much more active role in their health care today than they have in the past. And if you look -- to us, it's not just the testing, but it's also the consumer experience. So if you look at my Labcorp, which is our new portal for patients to get their results, they can actually get answers to their questions or they can get questions to ask their physician.

We've actually made it much more user-friendly so that the consumer can get answers to the things that are most on their minds. As I think about the consumers, we have Labcorp OnDemand, which continues to grow very strong double-digit growth. And there, we offer well over 100 different types of tests, including bundles of tests that physicians or that patients can acquire directly from Labcorp, things like women's health panel or men's health panel. There's many different types of panels that they can order, and that continues to grow well.

We're involved in things like Amazon, if you look at their One Medical, we're there. If you look at Midi, we're there. If you look at Ancestry, if you look at 23andMe, these are all areas that we're interfacing with consumers and running test for consumers. So we're going to continue to evaluate areas where we can be with the consumers. We've not yet moved into areas like the wearables and so forth. And the main reason why is we've seen the price decrease that's occurring over time in those areas.

And we have other growth drivers and platforms such as our central laboratory and our specialty business that we think is a better return for us. And I don't see a floor to the price decreases as I sit here today. I reserve the right to move into those markets if we start to see stability, if we start to see where it would make sense to us in the future. But at this moment in time, we've not participated in that area of the market.

And it's -- and presumably, that could be an area that it's not like a lot of these are necessarily exclusive, and it could be competitive.

It can be very competitive. And those companies have a lot of the wearable and other companies have come to us to ask if we participate. It's just at the current price and seeing the price decreases that I've seen over time, I think we have other better growth opportunities before us.

Switching to biopharma quickly here. So you recently announced an acquisition of MLM Medical Labs. Can you speak to the rationale, how that fits into the long-term biopharma strategy? And just bigger picture, the long-term biopharma strategy has obviously evolved a lot over the past several years. So where do we stand now? What's the right mix? What does Labcorp look like 5, 10 years down the road in terms of the business mix?

Yes. So there's no doubt that the biopharma laboratory service business is a good, durable growth business for us. It's primarily driven by our central laboratory. That's the vast majority of that business. And the central laboratory is a good business. We are the leader in that business. We do have a global footprint.

The acquisition that we announced with MLM actually gave us an additional laboratory in Europe, but also in South Africa. And many of our large pharma customers enrolled quite a few patients in South Africa for multiple reasons, but that's a place that we heard from our customers would be good for us to increase our presence. So that was the reason we did that relatively small strategic acquisition.

As I think about that business, it's going to continue to have good growth. I can see into the future with that business better than most because of the number of trials that are multiple-year trials. It's also right in the sweet spot of pharma with Phase II and we're seeing more and more products move into Phase III. So I feel very good about the growth of that business into the future.

At the same time, we have an early development business. The early development business is a small piece of our overall business. It's about 6% of our revenue, even less than that in OI. And we've moved that into a mindset of how do we increase the profitability of the business. So we did a couple of strategic actions last year where we were able to downsize or divest smaller parts of our business that were not strategic.

And we reduced that business on an annual run rate by about $50 million of revenue, but it also is accretive to earnings slightly. So you can see we made some really smart moves in that business, and it made it more profitable. I expect that business will continue to be a smaller part of our business over time, where the central laboratory will continue to be a bigger, more important business for us over time.

Okay. Margins, you gave some long-term margin targets in terms of margin expansion over the next 3 years. I guess what gets you there to those targets in terms of biopharma versus diagnostics? And how do we think about that trajectory in terms of breaking it out?

Yes. You're right. So we laid out for the next 3 years from 2027 to 2029, we expect the margin expansion to be between 75 to 150 basis points by the end of 2029. In terms of the pathway to get there, first of all, I would say we expect both segments to be contributors like they have been in the last few years.

Second of all, in terms of the key levers behind that margin growth, it starts with the top line growth as well as our ability to leverage the operating base that we have from an infrastructure perspective. As we shared, if you look at our global scale, look at our focus on specialty, look at our ability to really drive the increasing test possession. All of those are going to be very conducive from a drop-through perspective.

In addition to that, early on, Adam touched upon our operating efficiency drive through the LaunchPad programs. So we expect to deliver annual savings of $125 million to $150 million every year over the next 3 years. That, of course, is going to be meaningfully driven by technological advancements and our investments across our network, including areas like lab automation, customer-facing solutions, revenue cycle management, digital pathology, microbiology, just to name a few areas of investments.

So we are looking for areas where they are clearly aligned with our strategic priorities from a business perspective, but also we can clearly measure the return for the consumers, the customers, the patients and the shareholders.

So all in all, we believe that we have multiple proven levers that we can pull, both from a top line operational efficiency perspective to deliver against the margin expansion expectation for the next 3 years.

And on capital deployment, how is the deal pipeline shaping up? I think it's always missed a little bit that whether it's PAMA or pressures across health systems or otherwise, that you're a solution provider as well in terms of offering kind of lower cost, high-quality kind of laboratory services. How is that -- in that context, how is the deal pipeline relative to this time last year? How do we think about it going forward and the opportunities you see?

Yes. So there's no doubt that the deal pipeline is very strong. When I look at both the hospital deal pipeline, but also local regional laboratory deal pipeline, it's as strong as I've seen it, frankly. As I look forward, it's interesting if PAMA does occur, there's certainly a short-term impact.

But Labcorp will be just fine. We'll be able to grow through that over time. These smaller local regional laboratories, some of the hospital laboratories will really struggle. So I think it would actually increase our pipeline and be a tailwind for us over time if PAMA were to occur.

But all in all, we're rooting for the RESULTS Act. We're supporting the RESULTS Act, and we think that's the right path forward. But in a strange kind of way, PAMA actually, over time, could be a tailwind for us from a business development pipeline perspective. But overall, our guidance assumes 1.5% to 2.5% will come from inorganic growth. For the last 3 years, we've been at the higher end of that. The pipeline remains strong and stay tuned.

Okay. And I need to leave this for the last 30 seconds or so, but you spent a good portion of kind of the Investor Day talking about technology, investment in AI. And what were some of the highlights that you would like people to take away from that discussion?

So I would say we are fully invested in AI and technology. It's incorporated into our guidance. It's incorporated into everything that we think about with LaunchPad. And we think about it in 3 ways. One, what can we do to improve the customer experience? What can we do to reduce short-term costs? And then what can we do over time to transform our business? And we have multiple levers in each of those areas.

I remain excited about the technology. I think that it will help reduce health care costs overall. I think that it will improve speed and turnaround time. And at the same time, I think it's going to allow us to get insights, personalized insights into people's health that we've not been able to do before. So I think technology will always be a big part of our strategy, and I'm excited about where we're going.

Okay. Great. Thank you so much for the time. Really appreciate it.

Thank you, Erin. Nice to see everybody. Thank you.

Thank you.

Good morning, everyone. We're going to get started. Please welcome Dewey Steadman, Senior Vice President, Investor Relations.

So welcome, everyone. I'm not lighted up. Welcome, everyone, to LabCorp's 2026 Investor Day. Before we get started, please note that our presentations will include forward-looking statements. These statements are subject to change based on various factors, many of which are beyond our control. More information is included in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and other filings with the SEC. Our presentation today will include adjusted financial measures, and please see the use of adjusted measures section within our presentation for more information about the use of adjusted non-GAAP financial measures.

We'll kick off today's Investor Day with our Chairman and CEO, Adam Schechter; outlining our strategy, market differentiation and avenues for enterprise growth. Then we'll have business overviews from Bryan Vaughn, our President of our Diagnostics unit; Brian Caveney, President of Biopharma Laboratory Services segment, and then we'll have a break. Refreshments will be provided in the floor during the break, and then we'll kick off our science and technology updates with Shak Ramkissoon on our Specialty business and Bola Oyegunwa on our technology and AI. We'll close our presentations with a financial update and our 2026 to 2029 outlet from Julia Wang, our Chief Financial Officer. We'll then take your questions, and we hope to be done by noon today.

And with that, I will give a brief overview of who we are at LabCorp. And then after that, we'll turn it over to our Chairman and CEO, Adam Schechter.

[Presentation]

Please welcome Adam Schechter, Chairman and CEO of LabCorp.

Good morning for those of you joining us here in New York. Good morning, good afternoon, good evening for those of you joining us by webcast around the world. It is my great pleasure to welcome all of you to Labcorp's 2026 Investor Day. When I joined Labcorp as CEO in 2019, I knew what Labcorp did was important. I knew it because I go to the doctor myself. I get my blood drawn. I get the results. We talk to my doctor about what we were going to do. I knew it because I was on the board for 6 years, and I understood the importance of the work that LabCorp was doing. I knew it because I worked for Merck for over 30 years, and I saw the importance of central laboratories in our clinical trials.

When COVID came in 2020, the whole world understood the importance of what LabCorp does every day, the importance of diagnostics and drug devalue. And I stand here today, 6 years later, I don't think there's ever been a more important time in LabCorp's history. In fact, LabCorp has never been more important. If you think about the laboratory insights that we provide to help power better health, what we do to help bring breakthrough therapies to market the future of medicine in personalized care to improve outcomes.

All of this is intended to build a better, more sustainable health care system. When people ask me, what am I most concerned about in the next 10 years in health care? It's the fact that health care costs keep growing, they keep going up. And we have to find a way to curve health care costs while we also improve quality and length of life. I believe what we do every day can be part of the solution to unsustainable health care cost increases.

In fact, health care is entering an entirely new era. We have a growing and aging population, whether you look at the United States, Japan, France, we see the aging population. As populations age, they require and utilize more health care, driving up cost. We're seeing more and more use of personalized medicine. You've seen cell and gene therapies. You saw a couple of weeks ago in a publication of a vaccine for an individual patient. There's no doubt in my mind that personalized care is the wave of the future and that we'll be able to bend the health care curve by utilizing personalized care. There's no doubt that consumers are playing a much more active role in our health care today in every country in the world than it played before, in wellness and in our overall health. And science and innovation in drug development is continuing to increase the number of targets, the new computational capabilities with Quantum.

The things that the industry will be able to do in the future will drive new breakthrough therapies that we will be a part of. All of this, all of this has been driven by advanced technologies, which will completely transform health care over time. In fact, when you look at those market forces, they reinforce the importance of LabCorp today. Health care will become more data-driven, more personalized, technology enabled and more consumer-friendly. And as all that happens, what we do, laboratory services, will become even more essential, more essential for wellness and prevention of disease for finding disease earlier and earlier, for finding what treatment should be used for which patient and ultimately to monitor that treatment for that patient over time.

All of this becoming more personalized all of this, hopefully bending the curve on health care costs, improving health, improving lives, while reducing health care costs, and LabCorp will be right in the middle of that. LabCorp has been built, has been put together, has been working for years and years to be ready for this moment to be ready to help make the largest difference that we can make and helping health care on a global basis.

In fact, we are a global leader in laboratory services. We have our early development, central laboratories diagnostics, and we're involved from prevention all through monitoring of therapies. In every part of that system, we are part of an interconnected ecosystem that has insights and partnerships and science and innovation that are all reinforcing on each other. They're coming together. And our integrated interconnected ecosystem gives us a truly competitive advantage. In fact, if you look at we have an experienced, focused, mission-driven team with a huge amount of experience. We're all aligned behind the mission to improve health and to improve lives.

Our 71,000 employees around the world are all trying to make sure that we do this with our core values of adhering to our mission, putting the customers at the center of everything we do, innovate, innovate, be agile, move fast. In this environment, you have to be quick. And in everything that we do, our operations have to be excellent. Each part of what we do, operations have to be excellent.

All of these things together differentiate us in the marketplace. If you look at LabCorp science and innovation is at the core of everything that we do, and we have a global scale. In fact, we have over 1,200 PhDs, MDs, scientists and physicians. They published more than 1,000 publications and presentations a year. We have a broad test menu of over 6,500 tests available on our menu, and we develop and launch more than 100 new tests each and every year.

In fact, last year, we launched 165 new tests and the vast majority of those tests were in our core therapeutic areas that we'll talk about in a moment. We have more than 50 major laboratories around the world. We're involved in more than 85% of drugs that have been approved by the FDA.

We have scale -- or do we have scale. We do more than 750 million tests each and every year. And we're involved in more than 400,000 patients in clinical trials across over 100 countries. I think our scale is truly a differentiator. We are a trusted partner to customers across the health system. It's interesting. If I were to call you on my mobile phone, it would come up as Labcorp. Every time I call a senator, a congressman or woman, a scientist, a family member, they answer the phone. They answer the phone because I think it's LabCorp calling to give them a test result. It's amazing to me how many people ask for for a while, I didn't even know it said LabCorp when they called people like, wow, they just answered the phone. And then one time a senator said, "Oh, I thought you were delivering lab results." I said, "why did you think that?" He said, "it comes up as LabCorp when you call." They answer the phone because we are a trusted partner and the information that we have is important to them.

If you look at our biopharma colleagues, we are working with 20 of 20 of the largest global pharmaceutical companies. We're involved in more than 2,400 active clinical trials. Hospital and health systems, you'll hear us talk more and more about this, but we did 12 acquisitions since 2023, and we are working with more than 4,000 hospitals across the United States. When it comes to providers, they trust us, and we work with over 550,000 physicians in the United States and Canada. When it comes to our payers, they trust us.

We had a 100% renewal rate on the large managed care plans and more than 90% of all managed care lives are covered for LabCorp. And when it comes to consumers, we interact with more than 76 -- think about that number, 76 million consumers that we serve in a given year. And our Net Promoter Score with them is very high.

We are truly trusted to the customers that we serve. But at the same time, we are using advanced technologies to power innovations and drive performance in new ways. New ways that will enable our customers to trust and want to work with us more. When I think about these technologies, whether it be robotics or artificial intelligence, and you're going to hear a lot more about that.

It's about improving the customer experiences. You can see LabCorp's test finder. If you look at my LabCorp, you'll get great examples of that, ways to enhance productivity and you'll see we're finding every opportunity we can to be more efficient, while being more effective. And then we're trying to look at ways to fundamentally change parts of our business. and use technology to transform the way in which we work. And you're going to get plenty of examples of each of these things in the next couple of hours.

Based upon all of that information, our strategic priorities, our focus is clear, and we're focusing on impactful, scientifically driven innovatively driven high growth areas of opportunities. The 4 pillars of our growth strategy are: one, lead in specialty testing. That includes oncology, neurology, autoimmune disease and women's health. You'll hear a lot about that from Dr. Ramkissoon and also from Bryan. To be the partner of choice for health systems and leading pharma, we want them to come to us first. And you're going to hear a lot more about that from Dr. Caveney, and also from Bryan.

I believe that a core part of our strategy is to drive personalized health solutions to help reduce cost. It's always been amazing to me that diagnostics represent less than 5% of health care costs. Yet diagnostics are involved in almost every single decision that a health care provider makes. We have to find ways to use that information to help reduce cost and drive more personalized health solutions. And all of this, you're going to hear from Bola, and you'll actually see it across the presentations will be driven by innovation, technology AI and robotics across many, if not all, the parts of our business moving forward.

It's truly an exciting time to be part of LabCorp. When you look at this strategy and you look at the market tailwinds we have, it leads to a very compelling long-term outlook with revenue growth of 5% to 8%, double-digit EPS growth at the midpoint, driven by margin expansion. We think this is a very achievable plan. We achieved our plan that we presented 3 years ago, and we have confidence that we'll be able to achieve the plan that we're laying out today.

So if I leave you with 4 key takeaways, at the end of the day today, it's: one, we have a consistent track record of delivering strong performance, and that should make us feel confident of our future ability to deliver. Number two, we have multiple multiple, tremendous growth opportunities before us, and you'll be hearing about those in each of the presentations. We have a differentiated platform that's global and it's powered by science, technology and innovation. And all of this together leads to a very compelling longer-term outlook. We appreciate you being here today. Thank you. And at this point, I'd like to ask Bryan to come up and to talk about our diagnostic business. Bryan Vaughn is the Head of Diagnostics. Thank you.

Thank you, Adam. It is great to be with you here today. My name is Bryan Vaughn, the President of Diagnostics. I took over this role earlier this year, but I've been with LabCorp since 2009. And in that time, I've been in business development. I've worked in marketing. I've worked in finance. I led our health system strategy for a number of years. I've run a P&L for one of our regions. And across all those experiences, I've always been very optimistic about LabCorp's future, but I've probably never been as excited about LabCorp's future as I am right now.

Technology is going to change everything around us. Technology is going to change health care, I believe, for the better. Technology -- or sorry, health care is going to run more and more on data and insights, especially from diagnostic testing. And LabCorp is so uniquely positioned to deliver those insights at unprecedented scale. So I'm going to cover 4 things today. I'm going to talk about the market in which the Diagnostics business operates. I'm going to talk about our scale and our network and how advanced technology will amplify the impact of that network.

I'm going to talk about our growth strategy, how we're going to lead in specialty testing, our mergers and acquisitions and health system partnerships and how we drive consumer-centric solutions and how all of this positions us to lead in this time of change.

So first, as a market backdrop, we operate primarily in the U.S. It's a $90 billion market growing in the low single digits. It's still a highly fragmented market with hospitals, independent labs, specialty labs and even physician-owned labs providing the services in this market. Adam mentioned some of the market tailwinds, but specifically for the Diagnostics business, scientific advancement is only going to speed up with technology. That means specialty test, new biomarkers are going to come to market and need adoption at an ever faster pace. Consumers, all of us are walking around with essentially super intelligence in our pockets. We're going to be able to ask our LLM, our AI companions, more about our health. Many, many people are interested in understanding their health in new ways. So consumer engagement is going to drive utilization of tests.

And then demographics. We have an aging population. We still have far too high a prevalence of chronic disease older, more complex patients are naturally going to need more laboratory testing over time. The diagnostics business has a track record of executing at above-market growth. So over the last several years, it's averaged out to about 7%. And we grow our business in several different ways. First of all, we grow volume through both a sessions or patient encounters as well as tests. We can grow organically as well as organically. We mix our business up with specialty tests that are higher value. And then we have an underlying base of very stable unit pricing across many different clients and across our health plan partners that Adam mentioned a moment ago, hundreds of different health plan partners where we have great strategic relationships, and they see the value of working with LabCorp. We operate a very large and connected network. It is connected to a very diverse and very complex health care ecosystem. But that network powers our impact.

So when we talk about doing 750 million tests a year, there are 175 million patient encounters. It's fueled by our scale and infrastructure. And when you go around and talk to our people, our couriers who are part of these 22 million stops, our lab technician working in the 50 large labs. They know that our impact in that patient and that test tube is a patient waiting for a result potentially a life-changing result. When you talk to the scientists across LabCorp, about bringing a new test to market, they are genuinely excited that once it's on the menu and ready in the laboratory at LabCorp, 4,000 EMR connections can make it available very quickly to health care providers. They know that 2,200 patient service centers will be able to draw that test. Over 7,000 in-office phlebotomy locations will be able to draw that test and send it into the LabCorp network.

Our patients deal with enough complexity when it comes to health care billing, it's peace of mind for them to know. I can send all my laboratory testing to 1 in-network lab almost no matter where I am across the country. So simply put, our impact on patient care and our mission rides on this interconnected network, but also our growth strategy is powered by it. That network, as we apply technology and artificial intelligence is only going to grow in its impact. So Bola is going to talk more about this in a few moments, but I just want to give you 2 examples of why this is going to be really important.

First of all, we're connected to hundreds of thousands of physicians and providers. When we deploy a tool like a LabCorp Test Finder, that helps them navigate this immense number of specialty tests that are available to them, we save potentially hundreds of thousands, if not more, hours of time searching for these things. These are ways in which our providers are more satisfied. We save downstream time and cost, but getting the right test for the right patient at the right time. So this is one way in which we can improve satisfaction and make health care a little bit better with technology.

Similarly, on the operational side, every one of those 750 million tests leaves a little digital trail of when was the test ordered. When was the test drawn? When did it hit our laboratories? When was it resulted? And we have long had the ability to optimize many different things and use software to optimize lab workflows or logistics routes. But as we think about AI and abundance across this infrastructure, we will have immense ability to build a smarter operation, a smarter operation that can not only be more efficient but can also produce better service, better turnaround time, ultimately better satisfaction and growth for the providers and patients that rely on LabCorp.

So let me turn to our growth strategy. Now I'm going to go through 3 parts of our growth strategy. Each of these is distinct, but they're also interconnected. So I'm going to cover our specialty growth strategy, our acquisition and health system partnerships as well as consumer-centric solutions. So let's start with specialty. You're going to hear more from Shak in just a few minutes about the incredible science that underlies all of this. We've called out 4 specialty testing areas: oncology, neurology, autoimmune and women's health. Women's health, especially we're focused on the genetics portfolio within women's health. Collectively, these areas are growing about 3x faster than the market overall growth rate. They represent about a $2 billion franchise for LabCorp Diagnostics.

You can see over the last few years, each of these franchises has grown quite healthy. at healthy growth rates. And we're not only focused on growing the tests that are in these franchises. We're also focused on the whole patient within it, okay? So when a patient comes and gets one of these tests, they tend to have a lot more test ordered at the same time, which gives us the ability to do all of the laboratory testing that, that patient needs.

It gives us the ability to take care of all the testing needs of that client, not just the specialty test. We also compete in a very unique way in this market. So when we bring in Alzheimer's test to market, terrible disease, and I really hope that the diagnostic innovation, the therapeutic innovation gives us all hope of having some treatment for something as terrible as Alzheimer's, when we bring an Alzheimer's test to market, I just want to share with you how we compete. So we'll, of course, take it to new clients, but we take it to our existing clients. So imagine you're a health system, many, many sites serve many, many patients, a lot of different physicians. You already use LabCorp. We bring the Alzheimer's test to you.

All we need to do is update a simple interface. No new interface build, no new portal to learn, no new connectivity to put in place. When it comes to phlebotomy or logistics solutions, no new phlebotomy. You can -- we already cover dozens and dozens of sites across your network with either PSCs or your own clinics.

No need to do anything different with phlebotomy. No need to learn any new shipping, packaging, how to get it to the laboratory, we already do that. no need to educate the patients that they might have a different deductible for a different laboratory, okay? It's all part of what we do. Simply put, we're the easy button for the adoption of new tests because those new tests can work on the same platform of all your existing tests.

Let me give you just one other example, speaking of a health system, we monitor how all of these specialty franchises are growing with our largest customers. One of our top 5 largest health systems in the company has grown about 10% year-over-year. 2/3s of that growth is coming from these 4 specialty franchises. And that's a story that we see over and over and over of our existing customers adopting new specialty tests. I want to talk about mergers and acquisitions and health system partnerships as our second pillar. So we have a significant track record in this space. And given the complexities of health care, the cost pressures that Adam mentioned, the regulatory changes on the horizon, this is going to remain an attractive opportunity, and our pipeline shows that today.

So we have a track record of executing on acquisitions. We know how to get these done. We know how to integrate them. We know how to stay financially disciplined in doing them. When we think about our health systems, in particular, they make up a subset of these acquisitions, but we don't think of our health systems just as an acquisition or a deal, we think of them as very long-term partnerships. So yes, they might include an acquisition, but we think about that health system much more broadly. And I can talk with our teams about we don't want to be the laboratory partner that you do a deal with. We don't just want to be that. We want to be the partner you renew with years later. So we have announced several major renewals in the last few years with big partners. And we're continuing to invest in the capabilities that we know our health systems need. We're continuing to invest in reference testing capabilities in our lab management capabilities.

We manage a little over 200 hospital laboratories, and we're investing in the analytics and the benchmarking and the inventory controls all of which can be enhanced through advanced technology, analytics and AI. We're investing in the digital experiences and the connectivity experiences.

You saw us earlier this year announced a major partnership with Epic where we're going to put the whole LabCorp test compendium into Epic Aura so that any Epic customer can get the whole LabCorp test compendium straight out of their Aura connection. No need to build and maintain point-to-point interfaces, reducing friction, reducing time to market for new and specialty things. And then we collaborate with our health system partners.

Here are just 2 examples where we're collaborating with Fox Chase on MRD development. We're going to collaborate with Children's Hospital, Philadelphia on some pediatric development our health systems are great sources of innovation for us. They make LabCorp better. Turning to Consumer. We mentioned earlier, consumers are taking more charge of their health than ever. They have more intelligence in their pockets than ever before. We think about the consumer strategy for LabCorp in a few different buckets. First, we have our on-demand business, okay, LabCorp on demand. That's our channel. If you want to self-initiate laboratory testing. We want you to think about LabCorp. We want you to come to LabCorp on demand. We continue to invest in new tests in this space. We recently launched Marker by LabCorp which is not only a genetic test to understand your genetic risk profile, but it's an experience where you get to consult with a genetic counselor to more deeply understand what your results may mean.

We partner with many consumer forward companies that are thinking and curating experiences that are specific to the consumer. So we've long had relationships in the consumer accessory space. But we've also partnered with traditional providers and new providers alike to carefully craft and curate special experiences, frictionless experiences so those consumers have a great experience with those organizations. We will do more of that over time.

We also think about every one of those 70-plus million consumers that have some experience with LabCorp every single year. we want them to have a great experience, whether their experiences through billing, making that easier, simpler to understand, whether their experience is making a digital appointment with us or rescheduling their appointment, or whether their experience is asking questions of their results on the LabCorp app.

We want all of those things to be powered by technology and very simple and easy to use with LabCorp. And then lastly, we have a very powerful network and infrastructure with scale, but we want to keep extending that. That may mean things like opening up our PSCs for extended hours and weekends. We've opened up our patient service center network over 30% more weekend hours just since the beginning of the year. We're doing capillary blood collection in Canada for for hormone testing. Our venture fund is investing in alternative specimen collection and more home technologies. And when those things are ready, we will launch them more broadly. So that's how we're meeting the consumer where they need to be and expanding the reach and convenience of our infrastructure.

Let me bring this home with just a couple of customer lenses here. So RWJBarnabas was a relationship that began in 2022 with an acquisition. We have expanded that relationship in multiple ways since that time. We currently do a lot of their oncology and precision medicine testing today. And they're just a great example of our health system and our specialty strategy working together. Optum, we have long served a number of the Optum health practices and network affiliates over the years. We're part of the preferred lab network of Optum Health, but we've also partnered with Optum AI to develop solutions for patients to make their experience even better. It's a great example of an innovative partnership.

And we've long worked with One Medical, an organization I'm sure many of you are familiar with. They carefully, carefully think about the digital and physical experiences that patients of One Medical have. We continue to work with them to make our connectivity, our API, our embedded scheduling, just a little bit easier so that consumers that use One Medical have a great laboratory experience. It's a great example of our consumer strategy in action.

So in closing, we work in a great market with significant tailwinds, and we have a track record of outperforming the market. Technology will amplify the impact that our network and our scale has over time. We have multiple growth opportunities, each of which is distinct but they also work together and reinforce one another.

And in all of this, it positions us to lead as science and technology changes in this era. So on behalf of myself and the 50,000 or so LabCorp Diagnostics colleagues, we're excited for this moment, and we're ready for this moment. With that, I'd like to introduce my colleague, Dr. Brian Caveney.

Okay. Thank you, Bryan. I'm the other Brian, Dr. Brian Caveney. For my 9 years here at LabCorp, I've had the honor of being the Chief Medical Officer. For several years, I was President of Diagnostics and now I lead our biopharma laboratory services business. You've just heard why our diagnostics business is the clear leader in the diagnostics clinical market. In addition, our biopharma lab services business is the unparalleled global leader in laboratory services for bringing new therapies to market in drug development.

Today, I'll describe a little bit about the breadth of services we have in our BLS business and why it is differentiated in that fashion. Some of the market factors and tailwinds that have enabled us to hit our targets over the past 3 years and some things that give us reason to believe we're confident in our plan for the future. Quite a few different new capabilities, both scientifically and technologically that we're adding to the portfolio in accordance with what our clients need to achieve their objectives.

And in particular, why the synergy between our BLS business and our Diagnostics business, gives us not only a right to win, but a virtuous cycle of innovation where each part of the business helps each other and all of the clients and patients that it serves.

First, the breadth of the scientific organization of our business that underpins all that we can do today. As Adam mentioned, we have our early development business, central laboratory services and diagnostics. Obviously, as you know quite well, the early development, global market has been under quite a bit of challenge for the past several years. Both the inflationary and macroeconomic environment, the venture funding environment, softness in the biotech companies that are the core customers for that part of the business.

That's starting to change, as you all know, in the recent marketplace. We've also made quite a bit of change in both the geographic and operational footprint of that business. We've now substantially completed all of the strategic actions that we announced last year in the early development business. And we're starting to get a terrific amount of new proposals and new work that we believe will lead to long-term work throughout the rest of the pipeline of our BLS business.

In addition to the early development business, we have all of the safety toxicology safety assessment, bioanalytical services, molecular bio-a, chemistry and manufacturing controls and all of the clinical trial capabilities as part of our central laboratory business, that biotech companies and pharma companies need to move through all of the different regulatory gates to submit a therapy to the regulatory agencies for approval around the world.

That gives us the full breadth of the scientific capabilities that we need to perform all of those different services from discovery all the way to commercial diagnostics once therapies are approved. And underpinning that, as Dr. Ramkissoon will explain, we have 1 unified global scientific and medical community that works together across every aspect of laboratory medicine and science to understand everything that's happening in all of the different therapeutic and specialty areas, new techniques and mechanisms of action, new scientific capabilities that we need to perform in our laboratories around the world in order to move to the next gate.

With over 1,200 scientists, physicians, PhDs, veterinarians, statisticians and others to help bring these things to life. As Adam mentioned, we're constantly working with our biopharma partners and with clinicians around the world to identify new tests that will help doctors make better, faster, more precise diagnosis and can help them make better decisions for getting the patients on the right therapies. Our scientific contribution is often in parallel with academic collaborators with co-authors from our customers and clients.

so that we're advancing the field of science, developing the evidence it takes to get adequate insurance coverage in our diagnostics business and adoption across the clinical trial universe as credible information submittable to regulatory bodies.

And in all of that, last year, we received clinical trial specimens from 103 countries and constantly working to add more capabilities as you hear in a minute. In spite of all this, our combined ALS business, even with some of the softness in the early development business still grew at a combined 6% CAGR over the past 3 years since our last Investor Day. And we believe, as many of you know well, there are a significant number of macroeconomic and global factors in the biopharma marketplace that we believe fit perfectly with our strategy and capabilities going forward. One, as pharmaceutical companies address the patent cliff that they have, and they're both making more acquisitions of earlier-stage assets like biotech companies, which is the very client base of our early development business.

We hope that for it's that work that we've been doing early on as they make those acquisitions, we'll be able to continue the studies underway and do all of the other clinical studies necessary to get those assets that they just acquired across the finish line to the regulatory bodies. There is an increased globalization of trials, whether regulatory agencies in different countries and regions around the world wanting more patients from their own communities being reflected in the clinical trial cohorts as well as just the logistic network it takes and the fact that more and more work is moving to other countries, including the Greater Asia Pac region, where we are very well positioned with our current footprint to take advantage of that trend. Because the mechanisms of actions of new therapies, more large molecules versus small, more new mechanisms of action is requiring more complex clinical trial protocols that plays perfectly into our favor.

With our global scientific capabilities, the harder the trial, the more complex the science it takes to perform the studies necessary as part of those clinical trials that's where LabCorp really excels and performs at our best. And there are more and more specialty therapeutic areas or types of procedures required in clinical trials, whether it be antibody, drug conjugates, CAR-T therapies, radioligand therapies, other cell and gene therapy type protocols. That's the exact scientific capabilities that we have and are continuously adding to that separate us from our competition and make us the clear partner of choice for biopharma companies bringing these novel therapies to market.

One quick case study of a client for whom our entire BLS business has performed work along the way. Our early development business worked with this middle-sized biotech company that has a very novel oncology therapy with a totally new mechanism of action to perform all of the preclinical safety assessment and toxicology aspects. Molecular and Bio-A procedures to make sure that we can understand the mechanism of action of it. We developed a specialized custom flow cytometry assay specifically to work this particular mechanism of action in oncology. And right now, we're in Phase III trials with this partner around the world using all 5 of our central labs laboratories to identify whether or not this new therapy is going to work for this particular subtype of cancer.

If the clinical trial goes well, if it comes to market, we will have been able to perform all of the different steps along the pathway to help this company achieve its very aggressive timelines for submission to regulatory agencies and potentially bring an amazing new therapy to market for cancer patients around the world.

That's exactly the type of situation we're having all of the different aspects and components of our BLS business as part of one organization sets us apart from the competition and helps us achieve what our clients want us to do, which is deliver high-quality science with speed and seamless handoffs from study to study along the regulatory pathway to get their therapies approved. In addition to doing the early development work that I mentioned, I'll just explain for a minute the complexity of the journey of a clinical trial specimen and why it's a lot more than just having a lab and doing some lab testing for clinical trials, although that is a very important part of our business.

On the front end, once something has passed all of the early development safety assessment benchmarks, it's enabled to go first-in-human for clinical trials. We often consult with the scientists and experts at our biopharma partner to design the appropriate clinical trial protocol with the right biological and physiologic clinical endpoints along the way that are going to be able to measure whether or not that particular therapy can demonstrate safety and efficacy for the particular condition or disease that's intended to treat.

Then we can very quickly automate that around the world using our global footprint to help them identify patients to enroll in the clinical trials that will be necessary to demonstrate those end points. We have a fully automated robotic kit production around the world within continence so that we can design exactly the right kit with the right components for all of the biomarkers that need to be drawn for each individual clinical trial, clinic visit for that particular drug for that particular client and get it there in time for that clinic visit so that the nurses and doctors taking care of that patient as part of that clinical trial know exactly the right biomarkers to draw and get it to us very quickly. That often requires a pretty significant amount of specimen preservation techniques to make sure that whether we need to [ center view ] it, put it on dry ice, have a particular buffer, have a particular other analyte mixed with it, that it's exactly according to specifications for them traveling through our global logistics network to the appropriate laboratory, whether it's 1 of our 5 large central laboratories as part of our CLS business, or one of our amazing specialty esoteric business unit labs as part of our clinical diagnostics business, which is going to perform the analysis on that specimen for whatever biomarker we're looking for.

That all comes into one of our laboratories is appropriately accessioned, entered into the system matched with the patient consent, matched with the patient information, the investigator, the clinical trial, the biopharma sponsor the test article that's being given in that trial so that everything is matched perfectly and the data will be combinable at the end. Then of course, we perform the actual lab testing. We're known for the laboratory services that's critically important. We're the best in the world that with unbelievably high quality standards, automation and technology. that produces the specific result for whatever biomarkers are necessary for that clinical trial visit for that trial. That result gets put into all of the appropriate confidential databases so that our sponsors can log onto our brand-new portal and see exactly what the patient's test results are from that visit.

In addition, the site investigator, the doctor who's actually taken care of the patient in trial with a particular disease can both get the lab test results so they understand the right next clinical action for the patient sitting in front of them but also so that they understand the data coming back that is going to be part of the submission package for the clinical trial. So they understand both the clinical and the investigational aspects of what has happened.

We have an expert data integration and management team around the world that works with unbelievable amounts of data that we generate as part of this process along with the scientists from our sponsors because our laboratories are so highly standardized, perfectly calibrated and we use the same equipment, the same software version control numbers, often the same reagent lot number in all of our laboratories around the world. We have the most combinable, the most credible, the most scientifically accurate ability to combine lab testing that was performed in any of our labs around the world. at the grade necessary for submission to regulators as part of a clinical trial.

That's an incredibly important part of how we make sure that our laboratory testing is best in the world because of the use of submitting it in that way. After that, we have biobanks around the world so that we can preserve those precious specimens from the clinical trials whether it be a tissue from a biopsy of a cancer or whether it be some genomic markers so that we have it available if that biopharma company as it's doing its data analysis as it's seeing the results of one of its trials. Perhaps it wants to do a sub cohort analysis. Perhaps it wants to do some more retrospective genomic testing on the specimens that we preserved. Because we're so automated in the lab testing we do, we preserve the maximum number of specimen or tissue after each performance of the test so that we can go back and enable them to do other statistical analyses or follow-on testing where necessary to find out how to optimize the therapy that is in development, so that it's a virtuous cycle, and we're constantly delivering whatever is necessary for our clients to be able to do that.

And we have a global client delivery organization all around the world that works with our biopharma partner every single step along the way. Now there are other vendors, other companies, other institutions that do each of these individual activities as a solo exercise, but our biopharma partners want speed, quality and seamless handoffs. And we have an integrated platform to be able to do all of it together with alliance managers and global client delivery professionals that are helping babysit this molecule all along this process and make sure that it's a seamless handoff of the data and information between the different scientists and between the different people involved in the study to make sure that it's effective.

Now I'll discuss 3 of the competitive advantages that we believe we have versus other central laboratories competing in this space with biopharma sponsors. First, of course, is our scale. We've been doing this for 40 years. We have the entire globe of developed countries where most clinical trials are performed covered. We have 5 large fully integrated standardized central laboratories, geographically positioned not just where the work has been and is currently being performed, but where we know the future of biopharma work is going to be performed. And in particular, with the increase over the past 5 years or so of more and more new molecular entities and early phase clinical trials being performed in China and other Asia Pac countries, we are incredibly well positioned to have the high throughput, high-volume laboratories to perform that work now and into the future.

With our flagship laboratories in Indianapolis, Indiana and in Geneva, but also in Singapore, Japan and Shanghai, China, and we've recently added new capabilities, new technologies, new platforms such as spectral flow cytometry to these laboratories around the world, again, fully standardized across our footprint. One of the really important parts of the clinical trial work, as I mentioned on the last slide, is the development of highly specialized kits for each individual clinic trial. That is in our different facilities around the world, fully automated and robotic so that we can be sure exactly the right components and no more and no less goes into the clinical trial visit kit that we produce. And we continue to expand.

Just a couple of days ago, we announced a small but strategically important acquisition in our central laboratory services business of MLM Medical Labs. We are now the only central laboratory company in the world that has a fully cap accredited central laboratory and pathology services and kit production in Africa. As many of our large pharma company sponsors in particular, are wanting to get access to the large number of potential clinical trial participants in Africa. We now have a footprint for localized kit production and laboratory services in accordance with our standards there.

That also came along with some other highly specialized novel biomarker scientific expertise that will fit right into our portfolio of being able to develop new biomarkers for our biopharma customers. Our second competitive advantage is the science that we have that you've been hearing about. And after our break, you're going to hear even more about the science and technology that we're able to bring to bear to our biopharma customers. Adam mentioned that we have participated in 85% of all of the newly approved drug and therapeutic products recently. We have the global scale, the scientific expertise. We're constantly partnering with the R&D teams of our biopharma customers to understand not just what they need for the trials they're in planning now, but what's coming down the future. I mean recent conversations we've had around things like radioligand therapy and doing the planning necessary to hire the expertise, buy the equipment, build some of the other facilities required to handle very specific types of specimens like that that it takes the expertise and foresight of LabCorp's entire scientific community to make sure we get that right and on time for our customers.

As other different types of new modalities are coming online, we're constantly because of the partnership between our diagnostics and BLS scientists. We're constantly thinking about what is going to come, working with the global suppliers that we have to tell them the specifications of things we're going to need to put into all of our different laboratories over time. And you've heard us mention the 4 main areas of specialty testing where we're particularly focused. One of the many reasons for that is because that is a very significant portion of the pharmaceutical R&D pipeline in oncology and neurology.

In our book of business, that is more than half of all of the studies that we perform. Now we've also added an enormous amount of new GLP-1 studies over the past couple of years with pretty long-term cardiovascular outcomes studies as part of that. It's been a terrific piece of business. But oncology and neurology both have an enormous amount of unmet need.

They have an enormous amount of unknown science yet. There's a tremendous amount of more differentiation needed to understand how to precisely diagnose subtypes of cancer and certainly in the neurodegenerative diseases such as Alzheimer's Parkinson's, Myasthenia Gravis and others, and we're adding both the biomarkers for that, but also performing the clinical trials globally with those very large patient populations to bring those forward.

And in addition, the innovation and technology that we're applying to the business that we have is enabling us to, again, meet what our customers want us to do, deliver speed and quality at the trust that they know that we can deliver with the credibility of LabCorp science, whether it be thinking through every single individual step of study startup from a whiteboard in a scientist mind to how we get the first patient enrolled in the first clinic at the site investigator so they can start the process of generating the data it takes once they're on the patent clock, you know the pressure they're under to deliver on time. Bola is going to tell you more about the LabCorp Global Trial Connect program that we just announced a couple of weeks ago, adding a completely new fully digitized and automated sponsor portal and investigator portal, so that they can see the data in real time as it's being generated by any of our laboratories, either on our CLS business or in our diagnostic specialty laboratories so that they can make the next right action on a patient enrolled in a clinical trial.

All parts of our business from early development, central laboratory services and our Diagnostics business have made announcements and are investing very heavily in AI-enabled digital pathology for all of the different types of specimens we read. And another one in particular for this, if you have a rare subtype of cancer, if it's very difficult to get a piece of tissue, if one of our expert specialist pathologists is reading that case, with our digital pathology platform, they can have one of the scientists or pathologists at one of our sponsors be looking at it together, potentially get a secondary consult overread from another expert somewhere in the world and make a very quick decision about both the clinical need and the data collection need for that patient enrolled in the clinical trial.

They have to be able to make both of these decisions in real time when that patient is ready. And in addition, we're continuing to add to our data capabilities. We've announced our Alzheimer's real-world data platform, combining all of the biomarkers that we've been able to perform on patients in the U.S. by clinical physicians, making that available so that we can identify patients that might be appropriate for clinical trials, but also things like trying to measure and identify the natural progression of disease using the large diagnostics database that we have to identify what are the combinations and correlations between different biomarkers that different doctors may have ordered for different reasons, but are somehow potentially suggestive of the development of a disease that you can potentially identify years before an actual eventual diagnosis is made.

That's exactly the target-rich population to try to identify and get into a clinical trial earlier so we can deliver faster, better therapies over time. Those are the competitive differentiators of our CLS business versus other central labs. But the real special sauce and why LabCorp is so unbelievably uniquely positioned, by having our BLS and diagnostics business together is the synergy between them when they each can rely on the other part of the business to be even better and more effective for the customers that we serve.

Simple examples in the BLS business working with biopharma partners using the resources we have from our Diagnostics business that Bryan described so well. We serve so many patients in the U.S. and Canada. We see so much pathology. We can identify so many people with rare diseases, genetic mutations, very specific diseases that are very hard to find for clinical trials. We can work with our biopharma trial sponsors to identify patients that might be appropriate for clinical trials or treating physicians who have patients in their practice that might have specific markers or mutations that could be appropriate for that and speed up the patient identification process, which is so often tricky in rare diseases.

In addition, because it is so difficult to get patients to enroll in clinical trials. Modern life has become so busy. Not everybody wants to drive 200 miles to an academic medical center for a follow-up appointment for a clinical trial. Our biopharma sponsors want more and more for us to be able to offer other ways to collect appropriate information along the way in addition to the main visits as part of a trial whether it be adding more and more digital health tools, wearables, other sensors, continuous glucose monitors, whether it be coming to just get a safety testing blood draw at one of our patient service centers without having to go back to the cancer center for that. Whether it be one of the other ways that we can help them in the interim because our diagnostics business is so broad and has that capability. That can accelerate our ability to deliver for our biopharma clinical trial sponsors. More and more of clinical trials lately have wanted some of these decentralized and hybrid characteristics in order to reduce patient attrition from clinical trials, improve retention, get more data so that they can submit their regulatory packages ever more quickly. And just 1 simple example of how the businesses work together so well. Our early development business might be helping identify a novel biomarker for a new mechanism of action. Our central laboratory services scientists might be developing a very specific human clinical test as part of a biomarker for a clinical trial. That also can become a companion diagnostic that might be in the label of the therapy of -- that we're doing the clinical trials for. We have the ability to both make manufactured IVD CDx kits that are available on our clinical diagnostics menu as well as to be able to perform those assays in our specialized diagnostics clinical laboratories for doctors to get that information on their patients once that therapy has been approved.

A perfect example of how all of our scientific community can work together to help our biopharma sponsors launch these products faster, and we can participate every step along the way in our ED business, our CLS business and obviously, our Diagnostic business along the way.

So all in all, I think our biopharma laboratory service business is the unparalleled leader at what it does on its own and even better together. We have significant competitive differentiation because of our scale, our science and the technology that we're adding to our portfolio along the time. Our global scientific community for all of LabCorp enables us to work with all of the best new inventions and technologies around the world to bring these to all of our customers and clients and patients wherever they may be.

We have very long-term partnerships with every single one of the largest pharmaceutical companies that are fully invested in continuing to bring new therapies to the world for the patients who need them. This gives us tremendous visibility, particularly in our CLS business with a backlog that gives us tremendous visibility to the revenue that can be delivered over the coming years. with those long-term clinical trials underway. All of this and the scale that we have gives us the ability to deliver on our promises to our customers and improve the drug development process all along the way. BLS is built for this moment, and we are ready to help bring new novel biomarkers to doctors around the world and new therapies to the patients who need them. Thank you.

We'll now be taking a short break, and we will start back up at 10:15, please. There are refreshments in the foyer. If you could come back a few minutes prior, that would be great. Thank you.

[Break]

We're going to get started in a second. All right. Thank you, everybody. Welcome back. Please welcome Dr. Shakti Ramkissoon, Senior Vice President, Enterprise Oncology and Diagnostics Medical Affairs.

All right. Thank you, everyone. Welcome back from the break. My name is Shakti Ramkissoon, Senior Vice President for Enterprise Oncology and Diagnostic Medical Affairs. And what I'm not doing those roles, I'm actually a practicing pathologist at LabCorp. And if you ever come down to the basement of LabCorp, you will find me [indiscernible] in microscope sometimes looking at slides or interpreting data as it comes off of the sequences to help interpret that and put it into reports for patients. And one thing we are very cognizant at LabCorp is the fact that behind every 1 of these samples is a patient.

I think Adam mentioned this earlier, they're waiting for an answer. They're waiting to develop a treatment plan and they're oftentimes just waiting for hope and that patient perspective is really the right starting point for what I'm going to share with you today, which is about how we spend a lot of time thinking about turning innovation into access.

So there are 3 themes I'd like to cover with you today. The first is around this concept of LabCorp as an innovation engine. And how we leverage our scientific expertise, the work we do across all the different parts of the organization to turn science and innovation into test that patients in the real world can access. And that's how we have the greatest impact in patient care. We take that approach and then we apply it to certain areas, which we call our specialty areas. Neurology, autoimmune, women's health and oncology because there's 2 factors happening there. There's a great unmet need today, and there's growing demand in the coming years. And then finally, how do we address what I like to think about as the last mile challenge in health care. How do we operate within the health care ecosystem to ensure that the tests we bring on to our menu actually reaches the patients in the community setting, in the real world, in the rural settings. How do we do that? How do we close that gap. So that's the other part we'll talk about.

You heard a little bit about it from Bryan Vaughn. And I think you'll hear more about that from Bola as well. Okay. So let me introduce you to this concept of the innovation engine of LabCorp because I think it's actually very exciting. We're one of the few organizations maybe the only that exists across the entire continuum of precision medicine. That includes drug development, diagnostics, day-to-day care delivery and real-world data generation. And so let me make this real for you. So it all starts with a biomarker where a partner may be developing a therapy and they want to create a diagnostic that runs alongside that therapy. And so there's a biomarker will create the test for it. And we'll work that up in our drug development business. And then we'll move it into clinical trials, generate the evidence of that combination of biomarker and therapy is really the right path forward for that patient. Now after this therapy gets approved, we need to actually move it into the real world. So we have to shift it from our drug development business into diagnostics. And that's where we can scale and commercialize these tests across the U.S. so that all patients can access that test.

Once that gets adopted, the other part about it is we see the overall action, we see the therapies being utilized. But we also get insights because all that data is running through our labs and we're able to see mechanisms of things like resistance mutations developing, and we can create the next wave of diagnostics that feeds into the machine. So it creates a virtuous cycle I think Brian Caveney mentioned earlier, where we see this continuous loop, we iterate on the process, and we feed the insights from we generate on our diagnostics side of the business back into the development side.

Now we take that approach, that energy, that insight and we apply it specifically to these 4 areas: neurology, autoimmune women's health and oncology. These are the areas where there's a convergence of forces, emerging technologies, more biomarkers are being discovered. The diagnostic complexity around these categories is increasing, and the unmet need is high and growing.

So what I'm going to do is walk you briefly through 3 of these areas, and then we're going to go very deep into oncology. Okay. I started you off with a neurology because this is the perfect example of unmet need and growing demand. By 2050, we're estimating about 150 million patients worldwide will be living with a neurodegenerative condition. It's actually really hard to diagnose some of these neurological conditions because a lot of the features between them actually overlap. And so what you need is to go see a specialist. The challenge though is that we don't have enough specialists. In some parts of the world, there's less than 1 neurologist or 100,000 individuals. So how is this going to work out? We have growing demand and we do not have enough folks to do the workups.

And these workups are oftentimes long. They're complicated, lots of imaging, lots of sort of unsatisfactory results, and so our solution to this is to build out diagnostic assays that help shrink the time and support neurologists and even primary care physicians as they think about categorizing some of these patients with neurological conditions.

In the last 5 years alone, we have brought online 10 simple blood-based tests that are for Alzheimer's related biomarkers. We have supported in our drug development business, almost 500 clinical trials in neurology. And across our business, tested over 350,000 patients. That's an incredible amount of work in neurology, and that's just the beginning. That's already what we're doing today.

So we're already leading in this space. But because of that innovation engine and when you see what's coming down the pipeline, we know that's still not enough. We have to spend the next several years building out the next wave of neurology diagnostics because there's a whole group of other disease categories in neurology that we need to build out the testing for. That's coming. There's going to be therapies coming down the line. We need to be prepared for it.

Autoimmune disease. This is a very difficult chronic condition. Today, in the U.S. are about 15 million patients who are impacted by at least one autoimmune condition. And over time, about 1/3 of those patients will go on to develop a coexisting autoimmune condition. Yet the path to diagnosis can be very long and very frustrating. And when I say it's a path, I mean, that sort of implies something linear. It's more of a diagnostic odyssey because it takes about 3 to 5 years for a patient with an autoimmune condition to achieve a definitive diagnosis.

So think about what that means for a patient, 3 to 5 years, not weeks, not months, 3 to 5 years. That's endless doctor visits, a whole series of very unrevealing testing and a patient and family dealing with a condition that they don't have a name for, they don't know what it's going to evolve into, and they're trying to figure out what to do to manage their symptoms. So to address this, we have spent a lot of time working through the process of building out diagnostic tests that allow providers to both to actually screen, diagnose and monitor for disease activity in autoimmune conditions. And when those patients go on to receive a therapy, we're able to perform therapeutic drug level monitoring and watch them as they move into surveillance.

So we're not just thinking about building a portfolio of assays that just diagnose this disease. We want to actually change the way we think about managing patients with autoimmune conditions from across the entire spectrum or continue with their care.

Women's health, this is, I think it typifies unmet need and growing demand. Today in the U.S., there are about 17 million women who are overdue for at least 1 guideline recommended cancer screen. There are another $8 million or so who are eligible for a hereditary risk [indiscernible] assessment would have never been tested. And millions more are living with menopause-related symptoms, but have never been appropriately worked up.

Those are pretty big numbers, and they're going to get bigger. But behind every one of those numbers is a woman who is missing the opportunity for earlier intervention, preventative care and better symptom management to improve her quality of life. To address these gaps, what we've done is build out a comprehensive portfolio of over 650 tests focused on women's health. We've put that together with a market-leading genetics portfolio, and one of the largest teams of in-house genetic counselors. That last piece is very important because it allows you to take a lot of very complicated genetic and laboratory information distill it down into conversations and clinically actionable insights, the genetic counselor could have with the patient provider and their family. So we've talked about these 3 areas, and you get the sense that there's unmet need and hopefully growing demand. But if there's one area of our specialty business where this exists, but at another scale, it has to be oncology. So we're going to jump into this right now. There are about 18 million patients in the U.S. living presently with a history of cancer. 20 million patients will be diagnosed this year globally with a new diagnosis of cancer. Now the way we treat cancer in the last 15, 20 years has changed dramatically. We've moved away from thinking about cancer and treating cancer just based on where it started, colon, lung, breast, and we moved towards managing these diseases based on the molecular biology and biomarker profile of these tumors.

Now at the same time, more than 60% of patients in the U.S. with advanced cancers do not receive comprehensive biomarker profiling. So think about that. That's a huge gap in terms of what patients should be getting and they're missing. So that's not a science problem. That's not a test problem. We have more targeted therapies available now than ever before, and that list will continue to grow. This is the last mile challenge. We have the right tests, we have the therapies, but patients are not receiving the right work up. And this is where LabCorp could intervene.

And we mentioned that -- I mentioned that innovation engine before and Brian Caveney alluded to it as well. This is exactly how we do it in oncology. Last year, in 2025, 80% of the U.S. FDA approved Oncology Therapeutics came through our -- we supported in our drug development business. When those combinations of biomarker and therapy move into the real world, we can scale and commercialize it. Added to our diagnostic test menu would be other 450 oncology tests, a provider needs to take care of their patient. And it's resonating because right now, 65% of oncologists in the U.S. rely on Labcorp for diagnostic testing.

When they go to our menu and when they sort of come into the Labcorp ecosystem, they don't need 1 test. They don't need 2 tests. They need an entire series of tests to take care of a single oncology patient. They may need precision oncology testing, a tissue-based profiling, liquid biopsy. MRD, [indiscernible] line testing and even an immunohistochemistry to look at protein levels on the surface of the tumor. And below that, they still need all of the baseline CBCs and chemistries and liver function test because it's not enough to understand the biology or the status of the tumor, you need to know about the overall health of the patient, and that's where we can offer everything that oncologist needs.

So how do we -- so we have the [indiscernible] built, but how do we actually address this last mile challenge, this gap between available testing to where patients are. And that's where we -- you'll hear more about this from Bola, and I think Bryan Vaughn mentioned this as well, but we're investing a lot in simplifying the process. So EMR and EHR connectivity. So ideally, what we want is an oncologist, when she's writing up her note for her patient and filling out all -- like the catching up and all the details from the clinic visit and she realizes she needs a series of tests. She doesn't have to think about where to order this test or who to order it from or what is the right test. She can just log right into her account, into her patient chart and click on all the appropriate tests from LabCorp and have them all ordered right there.

And if she's not sure about which test, no problem. We -- Bola and team have built out our AI-enabled Test Finder that has a lot of details about each of the tests so she can know which one to order. And for patients, when they get back home, and they need a liquid biopsy or a longitudinal MRD test, no problem. You don't have to drive 2 hours each way back to your provider just to get a blood draw. You can actually get that done at one of our 9,000 patient access points. That's a huge benefit to patients and providers. We want them spending more time thinking about how to best take care of their patient and not worried about how to order testing. That's not what -- we can solve that, and we'll take that off.

Now we -- the innovation engine is always running in the background. And because of that, I also want to give you a view of what we know is coming down the pipeline because we have line of sight to it. And so I want to preview for you what the future of LabCorp Oncology looks like. This is what we're building in the next several years. And I'm going to walk you through each of these, so you get a pretty good sense of all of it. In tissue-based molecular profiling, we are moving away from just looking at several hundred genes to more of a genome-wide approach for DNA and RNA sequencing. We're going to layer on top of that, AI-enabled algorithms that allow us to take a lot of this data and simplify it down the key actionable insights a busy provider can use. In liquid biopsy, we're going to add on matched buffy coat sequencing. That does a couple of things for us. It allows us to have the true tumor signal better distinguished from underlying background biological noise.

So when you get back your LabCorp liquid biopsy result, you have a lot of confidence that you should be acting appropriately based on that result. In heme malignancies, we are moving towards a whole genome approach for diseases like AML, or acute myeloid leukemia, and building on an MRD program for heme malignancies, so we can monitor these patients over time. And whether it's a solid tumor or a blood-based cancer, we've talked about the importance of understanding the drivers of that patient's tumor, but it's equally important to understand if that patient was predisposed to developing that cancer in the first place.

So I think BRCA mutations in breast cancer or ovarian cancer. We're going to be combining somatic and germline testing as part of our oncology strategy. This does a couple of things. The first being, obviously, we need to think about therapy selections, and we'll be able to take care of that. But we're also going to be able to do things like inform family risk. And maybe for patients who are not affected by cancer yet, but our family members of the affected individual, we can start thinking about earlier detection and maybe even prevention. So that's the value add about combining somatic and germline testing.

Digital pathology. This one is very near and dear to me because of a pathologist, I don't actually have to sit at the microscope and look at my glass slides anymore. But it's more than just convenience, although it is going to be very convenient. It's going to be about seeing the same digitized glass slides in front of me on a screen, but are also going to be able to augment the way I operate, right? Because now I can algorithms on top of that digitized image. That allows me to pull out features of the tumor that I can't reliably and reproducibly do it as a human and quantify it and put it on to reports that a biopharma partner can use to understand whether or not the drug is having an appropriate response.

This is really exciting. It's going to change everything about pathology, how I operate, how I share cases, efficiency, workload, everything is going to change for the better. Our CDX strategy -- our [indiscernible] strategy is really focused on addressing that access challenge. How do we move testing closer to where the patient is. And that's why we're building out these kits. The kits are -- we have a strong regulatory strategy around it. And our goal here is to just keep adding companion diagnostic claims on top of these kitted products or CDXs. And as Brian mentioned -- Caveney mentioned, we have global labs. And so the idea is to deploy these tests into our laboratories, our central laboratories around the world. And so if you're a pharma partner, for us. And you're trying to think about how do I do a global clinical trial with an FDA-approved kitted NGA product. No problem. We have it all over the world. And so we can not just do the testing for you, we can manage the entire trial. That's a pretty unique feature.

Okay. All very exciting areas. But if there's one area I'm sure you're very interested to hear more about it's our MRG strategy. This has the potential to fundamentally change the way we practice oncology. So let me introduce you to LabCorp, plasma detect genome MRD. And I'll do it in the context of maybe a clinical situation we face, which is oftentimes a very challenging 1 for us as doctors. Imagine a patient who just underwent surgery for colon cancer. We went in, we took out a segment of the colon and the tumors out, got sent to pathology. And now they're in the recovery room surrounded by family and whenever they, sort of, wake up or kind of become more aware, there's one question they typically ask us. And that is, did you get it all? Did you remove all the tumor? Am I essentially cured at this point? It's a very simple question. It's a very practical question, but it's actually, kind of, hard to answer because we don't really know. We have not historically known. So what we do is we put together all the information we have, which is things like what we saw during the surgery, maybe the pathology findings, the imaging findings and published statistics. And we say, here's what we think is likely to happen based on your current profile. But that uncertainty actually has a cost because we don't really know who's going to recur and who's not going to occur. We end up treating a lot of patients with chemotherapy because we can't be sure who's going to be the patients likely to recur.

But only 10% to 20% of patients actually benefit from that chemotherapy. So this is a large population of patients who are overtreating. And on the flip side, there's a population of patients we think are cured, and we actually just observe them with serial imaging over time. And about 1 year, 1.5 years later, they may come back when the tumor is so big, we can finally see it on imaging, and so we've, sort of, missed in the other direction. And this is exactly why we built plasma detect genome MRD. This is why MRD testing is going to change the way we manage patients because now we have the ability to create a signal for tumor that's a residual in the body.

And so let me explain to you how our test works. What we do is we sequence it's a tumor-informed whole genome sequencing assay. So what does that mean? What we do is we take the tumor that came out of the patient's body, we sequence it, and we essentially develop like a fingerprint of that patient's tumor. And then we go looking around in the patient's blood to see whether or not we find evidence of that fragmented DNA for that tumor in the patient's blood.

If we find the signal, that means they're somewhere in the patient, there's residual tumor. We don't necessarily know where it is. And in fact, it's so small, we can't actually know where it is. But we know it's in there. And so maybe those are the patients who are likely to intervene earlier with chemotherapy or other interventions. If we do not find a signal, we'll say it's undetected, and that means that patients are at a lower likelihood of recurrence. And that right there is, I think, the promise of precision medicine. We want to be able to give that specific patient the right information at the right time. And that 14-day turnaround time is really important. I want to call out now because all of this decision-making has to happen postoperatively within a window where you need to know whether or not to treat or not shrink.

And if I gave you back this result, 6 months later, it's no help to you. You've already have to make a decision. So getting all of this information back to you within 14 days is really important. So a highly sensitive test with a rapid turnaround time. That's the win for patients and providers in these complex decisioning situations.

Okay. I said a lot there. So let me back this up with some actual data as you may want to see. This is a study we published last year. It's called a PROVENC3 study. It focused on patients with stage III colon cancer. There's a lot of great information on the slide, but I want you to focus on 1 number, 7.6. So what is the 7.6 mean?

Well, it's the amount of time on average, 7.6 months that we were able to detect tumor recurrence before it was clinically detected. So we're finding tumor 7.6 months before that it shows up on imaging or the patients clinically symptomatic. That's not just a number. That's found time. That's the time a patient can intervene when the tumor so small, we can't actually find it in the body on imaging, right? That's the best time to intervene. Now if that's not exciting enough, we've already moved forward with our version 2 of this assay. It's called plasma detect genome MRD user because it's more of an ultrasensitive version. And what we've done is we've improved the sensitivity of finding that tumor fingerprint in the blood by tenfold.

So all we're going to be able to do now is move that window up when we're looking for residual tumor in that patient's body. So even when the tumor is smaller and you can potentially intervene sooner. That is the value of our MRD program. And as much as I wish I could just show everybody this data and everybody would adopt the testing, reimburse for the testing, that's not how it works. But we are not just launching a single test, we're building an entire platform around our MRD program.

And to do that, we are working across multiple tumor types show here, and there's another longer list. I can't even fit on the slide. But I've highlighted these because some of these are the most prevalent tumor types, lung, breast, colon. But also, these are the tumor types where a patient oftentimes will undergo surgical resection with curative intent. That's the patient population for MRD testing. We are in the process of clinical utility studies across all of these tumor types and more. Our mission is to generate the evidence publish the papers and work with clinicians to guide adoption, reimbursement and maybe inclusion in the guidelines. We are going to build a body of evidence around our MRD program whether it's colon cancer, lung cancer, breast cancer, all the solid tumors. Our goal is to not just have 1 study in each of these tumor types, but multiple across multiple stages within each of these tumor types.

This is going to be a very comprehensive strategy around MRD evidence generation. And we work with our academic partners, our technology partners, our health systems to do this all together because this can happen in isolation. We have to work together with everyone. So as I wrap here, I want to give you 3 takeaway messages. The first being, LabCorp sits in a very unique spot in the precision oncology ecosystem. We are at the intersection of drug development, diagnostics real-world care delivery and data -- real-world data generation. And we iterate on this loop over and over and over across all disciplines, but certainly in our specialty areas. And then finally, we've worked and continue to work to address this last mile challenge by combining a leading oncology portfolio with our physical and digital infrastructure to close that gap between testing and patients because there's the true value of any of these breakthroughs or innovation is when it's discovered. It's actually when it reaches the patient who needs it the most.

So thank you for your time. Let me introduce our next speaker, our Chief Information Technology Officer, Bola Oyegunwa.

Good morning, everyone. I know at this point, I'm standing between everybody hearing from Julia. So I'm not going to keep you waiting too long. But before Julia comes up here, I am going to be speaking to how technology is going to be a key enabler of the things that Julia is going to be talking about. My name is Bola Oyegunwa, and I am the Chief Information and Technology of Labcorp. I've been at LabCorp for about 7 years. And during that period, I've been the Chief Information Officer for our biopharma Lab Services business. I've also been the Chief Information Officer for our Diagnostics business. And I'm going to be speaking to you today about how we're deploying technology across all areas of the business to provide a frictionless experience for our customers, for our patients, how we're using technology to unlock efficiencies across all areas of operations at LabCorp and how we're using technology to digitize the business to shape and build the future of health care.

It is an exciting time to be a technology leader in health kit. Because health care, it's adding technology moment. historically, technology adoption in health care been slower than technology adoption in other industries. However, that is beginning to change, and it's changing quite rapidly. Currently, technology adoption in health care is outpacing technology adoption in other industries or at least keeping pace with technology adoption in other industries. And that is positioned in health care for an unprecedented era of innovation and transformation. And that is why I am excited to be leading technology at LabCorp at this moment because our science, our operational scale, our data and our innovation and the technology that you're going to hear me discussed today are exactly the assets that are required to lead in the error of technology-enabled health care transformation.

Undoubtedly, you voted from Adam. Technology is going to fundamentally change health care and advanced technologies such as multiparameter optimization and quantum machine learning, neural networks, agentic frameworks, digital twins are going to accelerate drug development and increase discovery of new therapies biomarkers and druggable targets. They're also going to help unlock intelligent instants and data from health care data that is going to result in accelerated clinical, medical and scientific breakthroughs. And you've already heard my colleagues discussed our biopharma lab services business our diagnostics business and our science.

And this is going to create significant growth opportunities within our core businesses. to capitalize on those opportunities, we are concentrating and focusing our technology strategy around 3 core pillars that drive financial outcomes. We use technology to provide a frictionless experience for our patients and our customers so we can accelerate revenue growth. We're using technology to enhance productivity within operations.

So we can unlock efficiencies that allows us to scale and grow profitably. We're also using technology to digitize and to transform our business to accelerate the innovation that is going to allow us to build a durable competitive advantage. So now I'm going to be discussing our way using technology to improve the experience within our core customer stakeholder groups. For our providers, we're using technology to reduce the administrative body and to help them make faster and more informed decisions. Bryan Vaughn mentioned the announcement of our partnership with EPIC. Through EPIC Aura, we're going to be able to accelerate health system access to our broad menu of 6,500 tests, which is going to allow providers to rapidly gain access to start ordering both routine and specialty test. It also allows us to innovate and evolve away from point-to-point interface building. So when we're bringing 1 of those new 100 tests to market every year, we can accelerate out quickly, we can provide access to health systems. It also allows us to share more discrete data with the health systems as well across specialty areas such as genomics.

One of the key competitive advantages that LabCorp has is we offer routine testing but also special to test it. neurology, oncology, so providers have a one-stop shop to order the test. We have a broad test menu of 6,500 tests and no clinician or provider is going to know exactly what type of test to are there and have that memorized and went to alert test during the diagnostic workup. And that is exactly while we built LabCorp Test fiber, which is our generative AI-powered solution. LabCorp test finders simplifies our providers find and other diagnostic testing. They can simply use labor test finder to describe the name of the test, describe the condition, describe the symptoms, they don't even need to know exactly what that test is. And LabCorp test funding uses AI to return a curated list of clinically relevant test for that condition. We have trained a set of clinical agents that are grounded in clinical guidelines with the appropriate clinical context and content that helps the providers find and select the right tests.

The agents are also training on clinical decision support as well, guiding that provider along every step of the diagnostics workup. And coming very soon. We're also going to be providing a frictionless experience. So now when that provider when they identify that test, they can order that test directly from that interface without having to navigate to a different page. Visibility during the treatment, our care continuum is also very important.

And that's why we're providing visibility across that care continuum through LabCorp Link and LabCorp Diagnostics. So when they order a test, they know that we've received a test. They know that the test is in our lab and they know that we're actually performing the test, and they can receive notifications and statuses on the tests that have been resulted and the test partial results as well. And this always provide the transparency that has led to the provider so they always know went to expect the patient results to make that very important diagnosis for the patient. More on visibility. We're using diagnostic assistant to provide integrated and aggregated result fee across diagnostics lab, clinical data and prescription in one single EHR interface. So providers have longitudinal insights across these categories over time. So they can spot health trends and use that to make better clinical decisions. for their patients. We've also -- we've actually had instances where providers were able to spot and diagnose diseases that were missed by previous providers because LabCorp provides visibility across all the tests that LabCorp firms whether it was performed by the health system or by that provider. And this was serious diseases such as oncology, and they've been able to rapidly initiate treatment for these diseases.

So when we use technology to simplify the lives of our providers, it translates directly to improving overall patient use and patient kit. It also allows us to differentiate LabCorp to our health system customers as well, which allows us to capture more others. And now we're applying the exact same principles to our patients and to our consumers. We're using technology to deliver exceptional experiences for the stakeholders. MyLab, our AI-powered application allows patients and consumers to seamlessly schedule appointments, blood draws and lab services at any of our patient service center locations nationally.

It also delivers statuses on open orders. So they can go to the TSCs, get their blood run, receive the lab services that's going to make the out better. It also allows us to convert open others into revenue-generating visits. And when they get their results, they can use the AI assistant that is built in into my lab call to evaluate their results, to analyze their results trends so they can increase the understanding of their results.

We have built clinical agents that have been trained on clinical data interpretation. And we've also embedded the trustworthy analytics within these agents. So we're able to validate the queries in real time to ensure accuracy for the information that we're providing to patients. They can have a dialogue with the AIS system and say, explain to me what my HBAC means? Explain to me my cholesterol, my HDL, my LDL, my triglycerides, what should I do next? What questions should I ask my physician. My Labcorp AI assistant can actually help them prepare for upcoming physician visits.

In addition to providing health insights, personalized health insights and education about the lab results as well. And when they have the sell insights, it actually translates in patients taking more action about the let. My Labcorp also simplifies our patients navigate their kit. They can use it to seamlessly pay for their bills and also initiate follow-on consumer director testing through OnDemand. When we use technology to simplify the lives of the patients and provide a frictionless experience, it allows us to build a direct and lasting relationship with the patients that we can build upon during -- within our consumer business.

It also allows us to convert open orders into revenue-generating visits. Dr. Caveney already mentioned our using technology within our biopharma lab services segment to deliver value to investigators and customers. And I'm very excited about the capability that we are delivering to the market in this area.

We recently announced global Trial Connect that digitizes key investigator and clinical trial workflows such as kit ordering, kit management, sample tracking and sample management to reduce the number of disparate applications and systems that are being used during clinical trials. One of the bottlenecks and pain points in clinical trials is investigator sites are often using up to 11 or 12 different systems, point solutions that are all disconnected. And they have login credentials and sometimes at the site, they have paper where they are right in the past ones. And global TrialConnect is able to now provide 1 system, 1 application that is able to do all of those things to digitize that experience. And because we're digitizing that experience, we're also now able to provide end-to-end visibility to investigators and to our biopharma lab services customers.

A matter of fact, Global Trial Connect provides near real-time operational insights into key protocol milestones, such as patient recruitment trends, biopharma customers and investigators, they want to know how quickly they are recruiting for the patients, their patients and how they're meeting their recruitment targets start-up metrics. How quickly are they initiate in size activating sites and getting kids to those sites and monitoring the kid expiry as well. And then the test status and Global Trial Connect provides visibility across all of these key metrics. So operators and customers can support operational trends earlier intervene and make data-driven decisions that increases the probability of success for their drugs, but also helps to accelerate drug development.

We're also using technology to accelerate patient recruitment and scientific discovery. We announced several months ago, all-time insights patient engine, which we call developed with AWS. And Insights engine uses AR to evaluate and analyze the biomarkers that both Dr. Caveney and Dr. Ramkissoon, described, such as APOE4, a generic risk market for Alzheimer's disease. [indiscernible] 217 to identify the clinically relevant patient cohorts that can be targeted and recruited for clinical trials.

This type of analysis used to take several months and now using Insights engine, we've been able to compress it to just a few minutes, which delivers actionable insights to our biopharma customers. When we use technology to simplify the experience while our biopharma customers and investigators were able to differentiate our offerings within biopharma lab services segment, which increases our win rate. We are deploying technology across all areas of the business to enhance productivity, robotic process automation, automation, robotics, neural networks, convolution neural networks, agentic AI, AI agents. We are using all of this technology to unlock key efficiencies that allows us to continue to grow profitably and to enable our operational scale. You may already be aware of our large robots [indiscernible] in our regional labs, which is delivering significant operational efficiencies.

And now we're introducing automation and robotics within our smaller labs to increase throughput and quality. We're also deploying [indiscernible] agentic across pre-analytical and analytical operations. For more intelligent document processing, faster issue resolution, reagent utilization optimization, and also automation of key lab workflows, which is, again, delivering key efficiencies within those domains. You've already heard Dr. Ramkissoon and Dr. Caveney about we're introducing AI workflows within digital pathology, digital cytology and microbiology. And this allows us to provide the near real-time predictive analytics that helps our pathologists make faster decisions and better clinical decision.

In addition to accelerating the detection of pathogens within microbiology. It also does one important data as well. which is it allows us to build digital signatures, particularly within cytology cytology and digital pathology that turns into digital biomarkers that we can combine with other data assets such as the patient's clinical records that we can extract intelligence from and I'm going to be speaking more about this in a few.

Within revenue cycle management, when using AI, multi-agentic frameworks to automate our generating appeals. When using AI to reduce bad debt and deviates. We're also using AI to optimize our outreach to patients with outstanding invoices. So we can maximize revenue recovery.

Within Patient Services, we're also deploying technology within this area to accelerate out quickly, we can respond to patient queries when patients contact Labcorp and they have questions about their invoices, their bills and their lab results. In fact, by using technology within this vertical, we've been able to accelerate how quickly we can respond to this patient queries by over 60%, which allows us to free up very important time for our associates to focus on high-value activities that moves the business forward, such as providing exceptional experiences and care to our patients and providers. When we use technology, across all areas of the business within operations. It allows us to unlock efficiencies to support our operational scale.

I mentioned at the beginning of my talk. That technology is going to fundamentally transform health care. And that is how we're going to achieve a lot of the objectives that my colleagues have mentioned, improving health care quality, reducing cost of real care, accelerating drug development and providing the ability to be able to find better drug targets to treat a lot of these complex diseases, particularly within oncology. And you heard Dr. Ramkissoon speak a lot about that. And I believe that organizations that are going to lead in this era of technology-enabled health care transformation are going to need a platform that is going to accelerate innovation in a mechanism to bring new and innovative solutions to market much faster. And this is why we've invested in a Labcorp built, which is Labcorp's AI platform that seamlessly integrates humans, AI agents, enterprise data, agentic workflows and the secure and governed frameworks that is required to scale AI in multi-genetic systems across the enterprise. It will also allow us to rapidly build, deploy and scale innovative software solutions for our operators, for our customers, our patients and our scientists.

This is not just a platform. This is how we're going to identify aspects of our business, such as within our session where we can now build multigenic systems to streamline that process and accelerate turnaround time. This is how we're going to continue to provide a frictionless experience by using technology to accelerate start-up processes within our biopharma lab services business.

This is how we're going to use technology to accelerate onboarding of new acquisitions and customers so we can pull in revenue faster. This is how we're going to deploy and scale rather agents within our contact center. So we can continue to free up time for our associates to focus on what matters the most.

This is how we're going to go from idea to product rapidly, products that are going to improve out and improve lives. Within revenue cycle management, this is how we're going to continue to identify that value chain, that workflow to ensure that we continue to minimize or continue to reduce our denial rates. This is not just a platform. This is how we're going to redefine how we deliver services to our customers and to our patients. LabCorp is deeply embedded within the health care ecosystem. We are both contributors and consumers of data within that ecosystem. You've already had my colleagues speaking about some of our last scale. 750 million tests performed annually, 6,500 tests in our test menu, and we're introducing over 100 new tests to market annually. We performed clinical trials in over 100 countries globally, enabling 200,000 investigators with 400,000 patients that are participating in clinical trials, 4,500 active clinical trials, and we supported 85% of FDA-approved drugs and therapies in 2025.

We're partnered with 4,000 hospitals, and we enable 550,000 providers annually. Contactable list of 76 million patients that can receive and access Labcorp services at thousands of locations globally, both Diagnostics and Central Labs services. And this has really led to one of the industry's leading multimodal data assets that we can build upon. We believe that the next frontier, a very important area of growth will be the ability to extract intelligent insights from all of this health care data and move beyond episodic diagnostics monitoring to actionable and intelligent insights that can transform it and LabCorp is building for this future. Because when we build for this future, it allows us to answer very questions for our customer stakeholders, for our providers, it allows us to answer very important questions such as who should be tested. When should they be tested, and what is the next best test to order? So we can accelerate how quickly they are able to detect disease and diagnose disease.

For our clinical trial customers, we will be able to help them answer important questions such as, what is the most optimal protocol for them to design for a particular tariff indication within a therapeutic area. And also, what is the ideal patient court to target and recruit for that clinical trials, which helps them accelerate bringing new drugs to market, but also increase their probability of success during clinical trials as well. And for our scientists, and you saw some of this during Dr. Ramkissoon's presentation. It allows us to be able now to provide deeper insights on biomarker expression and progression of disease and provide deeper insights on the gene variants and the pathogenicity of this gene variants on this is progression and for the patients.

It allows us to be able to provide deeper and more meaningful insects about the out encompassing their entire medical records. Looking at close claims, looking at their clinical data, looking at the imaging and building upon this digital signatures and digital biomarkers that I mentioned earlier. And this is going to be an important growth area within health care.

Before I close and invite Julia up to the stage, I would like to share with you a few key takeaways. Labcorp is deploying and scaling technology across all areas of the business to drive important business outcomes. We're using technology to improve overall healthcare outcomes. We're focusing on improving and enhancing the customer experience so we can provide a frictionless experience to our patients and our customers.

We're using technology to unlock efficiencies during operations, which is going to achieve -- help achieve a lot of the things that Julia is going to be sharing with you in a few moments. And we're using technology to transform and digitize the business to redefine how we are delivering services to our customers. And we are building on the future where data plays a very important role where data becomes intelligence, it comes action that could be a life-saving. And that is why I continue to be excited about technology and innovation at LabCorp because of our science, our operation and scale our data and the technology that I just shared with you are exactly the assets that are required to lead in the era of technology-enabled health care transformation and LabCorp has never been better prepared for this moment. LabCorp is ready this moment. I would like to invite Julia Wang to the stage.

Hello, everyone. It is great to be with you today, and thank you for spending time with us. You have heard from Adam and our leadership team this morning. Lab [indiscernible] science are more important today than ever in advancing health care outcomes while reducing health care costs. LabCorp is uniquely positioned to drive this transformation through our industry-leading diagnostic business and BLS business. Having spent the past 2 decades across diagnosis and biopharma, including 2 largest national labs in our country and 3 global biopharmaceutical companies that are the important clients of our BRS business.

I have rarely seen an organization as the intersection like LabCorp. With our combination of market leadership, growth opportunities and equally importantly, the ability to deliver cash.

From a financial perspective, our message today is straightforward. Number one, we have delivered on the commitments made at our 2023 Investor Day. Number two, we are entering the next phase with multiple levers to drive durable growth. And number three, we are deploying our capital in a disciplined manner to create long-term shareholder value. This strength supports the outlook we are introducing today for the next 3 years throughout 2029, which remains in line with our prior outlook at the enterprise level. Specifically, we expect to deliver revenue CAGR of 5% to 8%. Margin expansion of 75 to 150 basis points by the end of 2029. Adjusted EPS growth of 8.5% to 11.5%, of course, strong free cash flow growth in line with adjusted earnings growth.

Underpinning this outlook is the fact that LabCorp collects scientific discovery, clinical development and diagnostics in a way that very few organizations can. This enables us to leverage our global scale, scientific innovation and data insights to create differentiated value for our biopharma clients, our health provider partners and most importantly, the millions of patients that we are privileged to serve. So simply put, LabCorp has demonstrated our ability to deliver. And today, we believe we are even better positioned to create long-term shareholder value. Before discussing long term outlook.

Let me start by reiterating our guidance for 2026 full year. This guidance reflects another year of strong growth and execution across revenue, profitability and cash flow simultaneously, specifically at the midpoint of our guidance on a year-over-year basis. We expect to deliver revenue growth of almost 6%. And adjusted EPS growth of over 11%, along with continued margin expansion and of course, a strong free cash flow generation. As we wrap up 2026, these expectations provide a very strong foundation for us to head into the next phase of growth.

More importantly, our confidence in our outlook for the next 3 years is not based on aspiration. Instead, it is grounded in a consistent track record of delivering our commitments to our investors. Talking about track record, let me provide you with a little bit more context. At our 2023 Investor Day, we established a 3-year financial outlook between 2024 to 2026. Today, based on actions for 2024, 2025 and the midpoint of our 2026 guidance, We are delivering at or above that outlook, including revenue CAGR tracking at 7%, adjusted EPS CAGR at 11%, and free cash flow CAGR at 14%. So this consistent track record of delivery is what gives us confidence in our outlook for the next 3 years. Of course, strong financial performance matters the most.

When that also translates into shareholder returns. Our consistent track record of delivery has translated into meaningful shareholder returns. These results speak for themselves. Whether you measure it over the longer term or over the 2023 Investor Day outlook period, LabCorp has delivered total shareholder returns that significantly exceeded S&P 500 Health Care Index. But more importantly, at the fundamental level, we believe this tiers are outperformance is driven by our proven value creation framework whereby we consistently convert grow into earnings, earnings into cash flow and cash flow into shareholder returns.

A key enabler of our value creation framework is our DC plan capital deployment approach. Let me give you a little bit more context in that track record. Between 2023 to 2025, we delivered $6.1 billion cash from operations including the cash distribution to LabCorp from our strategic action of the [indiscernible].

During the same period of time, we fully deployed that $6.1 billion. Specifically, we invested $3.7 billion behind growth, including $2.3 billion into acquisitions. Acquisitions continue to be an important driver as part of our growth algorithm. Over the past 3 years, acquisitions have contributed $900 million of revenue, equating to approximately 2.4% revenue CAGR. -- towards the very high end of our target range of acquisition contribution between 1.5% to 2.5%. During the same period of time, we also returned $2.4 billion to the shareholders through a combination of dividend and share repurchases.

The takeaway here straightforward. We consistently balanced investment into the business with returning capital to the shareholders. creating a capital deployment framework that proves to be effective and repeatable.

Turning to the next 3 years. Our objective remains unchanged. We expect to deploy our strong operating cash flow generation in a way that will enable us to invest into the business, pursue disciplined M&A to accelerate growth and then return excess cash to the shareholders. Between 2027 to 2029, we expect to generate operating cash flow between $6.3 billion to $7.2 billion, creating significant flexibility across multiple [indiscernible] to create value.

And then if you think about our capital deployment priorities, they are clear and straightforward. Let me start with reinvesting into the business. We expect capital expenditures to be about 4% of revenue, reflecting our multiyear investment into a state of the art CLS map to support future growth. So the 4% is slightly above our historical levels.

In addition to that, we continue to expect acquisitions to be a meaningful contributor to our growth. Specifically, we are expecting 1.5% to 2.5% of CAGR from acquisitions for revenue growth. This is in line once again with the last 3 years. And once again, we also delivered almost 2.4% revenue CAGR in the last 3 years.

In terms of returning capital to the shareholders, we remain committed to our dividend policy and continue to target the payout ratio of 15% to 20% of our adjusted earnings. Of course, finally, share repurchase remains an important pillar within our overall capital deployment framework. It is a flexible and strategic number that we can deploy to offset dilution at a minimum but also potentially deploy more capital at the times that acquisition opportunities are less attractive.

When you put all this together, there's just one key takeaway. That is we have approached the capital deployment with discipline and balance that enables us to deliver durable growth while creating long-term value.

Then the next question is, where do you expect the growth to be coming from? So let me break down the key rivers for our revenue outlook for the next 3 years. Once again, we are expecting enterprise revenue to grow 5% to 8% on a CAGR basis between 2027 to 2029.

In terms of the growth, let me start with organic, organically speaking, we expect revenue CAGR to be 3.5% to 5.5%. When you think about the key levers behind that growth, it's very consistent with what you've just heard from business leaders, including Bryan and Dr. Caveney. They both detailed for you, our global scale, our advantaged business portfolio and our focus on driving faster growth in specialty in both diagnostics and BLS. Of course, all of these drivers against the anticipated backdrop of strong health care demand and healthy utilization environment. And then from an inorganic perspective, we expect that to drive a revenue CAGR of 1.5% to 2.5%.

Once again from an acquisition perspective, we continue to be looking for assets that would help us strengthen our competitive leadership position while also accelerating growth above and beyond the organic contribution. So when you think about the drivers between the organic side and the inorganic side, that gives us the 5% to 8% of enterprise revenue expectation for the next 3 years on a CAGR basis. And we believe that we have multiple proven growth levers that gives us confidence of our ability to deliver. Of course, revenue growth increase value when we can translate that into a higher level of growth for earnings and cash flow.

Here is where market expansion comes into play. For the next 3 years, we are expecting margin expansion of 75 to 150 basis points by the end of 2029. There are really 2 broader groups of complex mature drivers for that margin expansion outlook to start with is always taking advantage of the revenue growth and drive operating leverage.

So our infrastructure is already in place. To the extent that we drive revenue growth through volume, it carries very attractive economics in addition to the fact that our heightened focus on specialty, on esoteric testing as well as the increasing pace of number of tests per session from a mix durability perspective is giving us confident about 1 lever of margin expansion as an enterprise.

The second lever is really the continued efforts in our operating efficiency through the large pad program enabled by advanced technologies. You've heard from Bola earlier that we're not just viewing technology as a tool to improve workflow or optimize network. Most importantly, we actually expect technologies to serve as a productivity engine that helps us scale global growth, lower cost to serve and to increase capacity for future growth.

You've heard from Bola as well that we are utilizing digital capabilities to achieve the following 3 objectives: number one, simplify the way that the health care providers interact with us, including accessing our broad and extensive testing menu; number two, to create collected and personalized experiences for our patients and our consumers; and number three, to help our biopharma clients execute our Phase II and Phase III studies efficiently and expeditiously. So we put all these levers together, we are confident about the margin outlook of expanding 75 to 150 basis points by the end of 2029.

Now by this point, I've walked you through in details the key numbers, including revenue outlook, margin outlook, disciplined capital deployment. So let me try to bring this together in 1 place at a very high level for you for the next 3 years in terms of what you can expect from Labcorp.

Revenue CAGR at the enterprise level, 5% to 8%, supported by both organic growth and the contribution from acquisitions. Margin expansion, 75 to 150 basis points by the end of 2029, supported by both revenue growth and operating efficiencies, enabled by advanced technologies.

All of this are expected to translate into adjusted EPS CAGR of 8.5% to 11.5% and then free cash flow growth in line of adjusted earnings growth. I do want to highlight a few key planning assumptions that is underneath this outlook for the next 3 years with the outlook has incorporated the potential return of [indiscernible]. In addition to that, we built [indiscernible] an annual savings target from our launch plan initiative of $125 million to $150 million.

From a balance sheet perspective, we continue to target a financial leverage of 2.5x to 3x. Currently, we are operating towards the low end of that range, which gives us flexibility as we continue to invest and return. So if I would leave you with one key takeaway about this outlook, that is we have delivered against this framework in the past 3 years, and we believe we have a clear plan to deliver it again over the next 3 years.

Okay. Let me wrap up this formal presentation for this morning. Clearly, Labcorp is entering the next phase from a position of strength and momentum. I wanted to leave you with a 3 strengths in particular. Number one, we have 2 powerful growth engines that complement each other; number two, we have a consistent track record of delivering on our commitments; and number three, we have a disciplined operating model that can work growth into earnings, cash flow, and shareholder returns.

So looking ahead, we believe that we are uniquely positioned to capitalize on the growth opportunities and drive broad impact across scientific discovery, diagnostics clinical development as well as diagnostic testing in a way that very few other organizations can. Taken together, these competitive advantages position us very well to drive durable growth, compound earnings and cash flow and create long-term value for our shareholders. With that, thank you very much.

We will be taking a couple of minutes of break while we set up for Q&A. So just a few minutes, please. So we will be right back.

[Break]

That's a good looking group up there. So I am Dewey Steadman again, Head of Investor Relations at LabCorp. We are going to now take questions, probably into about 12:05-ish or so.

[Operator Instructions]

When you ask a question, please identify yourself name and affiliation just for the sake of the transcript and future listeners of this webcast. [Operator Instructions] David?

David MacDonald from Truist. Just had a technology question. I mean, look, the company historically has done a great job driving cost savings and efficiencies. You talked a lot about technology adoption and what looks like a pretty meaningfully expanding number of areas where you could drive margin expansion. So can you talk about just the opportunity there that, that affords. And also, I don't know if this is too early, but is there any perspective that you guys can provide in terms of what kind of lift you're seeing in satisfaction from your customers, your patients and your providers as you roll these tools out.

Yes. That's great question, David. Thank you. I'll ask Bryan and Brian to talk about the satisfaction number. We built in a launch pad savings that's slightly higher these 3 years than the last 3 years. And a big part of that is from the technology and what we're expecting to gain from technology productivity. And historically, we've done a lot of the easier things like procurement and moving jobs overseas and so forth. So now a lot of the savings that we expect into the future will be based upon technology. Why don't Bryan and Brian talk about satisfaction, and then maybe either Bola or Julia can ask us a little bit about the savings on the technology.

Sure. In the diagnostics business, we can see especially, we have very broad patient surveys. Those patient satisfaction metrics are very strong and continue to tick up a little bit. All the little things that we do, whether it's just a little bit easier to reschedule your appointment or move it around. We're doing patient reminders. Now all of these little things that we're doing, we can see the impact in the scores and the patients come back expecting that experience.

We also see it in the provider scores. We don't have as many of those data points, but we hear it from providers and see it in the scores as well, sort of making their lives a little bit easier for a physician or a clinician out there, that's really what you want. You want to be able to access and take care of our patients.

And David, in the BLS business, we've just launched several of these tools this year in the last couple of months. So it's early for us to have reported NPS changes. But just anecdotally, testimonials from sponsors, so the pharma companies love the ability to see real-time results coming back and specimen tracking around the world, so they can know the speed with which their trials are being filled and when they can expect data be coming. That's terrific.

But really, for me, as a physician, what I love is the good feedback we're getting from site investigators, so physicians around the world taking care of patients in clinical trials. As Bola mentioned, they're currently having to log into a bunch of different systems to get this data. We're bringing it all together so that the doctors, the nurses and the clinical research coordinators in these clinics around the world can see this information, understand what the clinical trial protocol is, give the right information back to the patient and be reporting correct data in the right format back to the sponsors. So it's win-win, and we just know that this is going to really build over time and give us good results.

What I would add is that earlier, I shared with you all that from a capital expenditure perspective for the next 3 years, we are expecting that to be about 4% of our revenue. That investment actually includes investments dedicated to technologies and AI and everything in between. Now from a capital allocation perspective, I would say that investing into technologies is not its own spending category. It actually has to compete against other investment opportunities, whether it's acquisitions facility investments or other growth opportunities.

And the areas that we are particularly interested in investing are really strictly aligned with our strategic priorities from a business perspective but also investments that we can clearly measure the return for the consumers, the patients and the shareholders.

That's why you are saying that we are very much prioritizing investments into digital pathology, the revenue cycle management, level automation, customer-facing solutions because all of those initiatives are expected to help us improve top line while also improving margin expansion.

Okay. Next question.

Thanks for the comments. Lisa Gill with JPMorgan. I just want to talk about PAMA for a minute. So it's embedded within your guidance, but can you give a little more color around a couple of things: one, what the anticipation is around participation by the hospital? Would the dollar value be roughly what we've seen over the last few years, about $100 million and what's the potential for an offset? And then secondly, obviously, we have midterm elections coming out do you think the chances are for some type of bipartisan's support for results or something else when we think about legislation.

Yes, I'll talk a little bit about PAMA. I'll ask Julia to just talk about the impact that we've built in to the guidance that we provided, and we did include and [ assume ] PAMA would happen. I'm still very hopeful that it will not happen. I spent so much time talking to congressmen and women and senators, Republicans, Democrats, I have not found one person yet that doesn't believe the results of legislation is the right path forward and that we should move away from PAMA and move into something that's more durable, that makes sense and we'll achieve the objectives they set forth in the beginning.

If you look at the data that's been submitted, we have no insight to the number of hospitals that may have submitted this time versus last time. But if you ask my personal opinion, I do not think we'll see a significant difference. The way in which you collect the data, the difficulty to pull the data together, it's just not simple. Us as Labcorp, it takes a lot of effort for us to get that data together in a cohesive manner. We do a lot of deals with hospitals. We see how disparate their systems can be, how they've been accumulating over years from integrations and acquisitions.

So it would be very hard for me to believe they would have put the level of resources needed in order to submit data. So in our assumption, we assume that the impact in terms of the pricing and so forth would be similar to what we saw last time if PAMA happens. I have no idea what's going to happen in the midterm elections. I'm hopeful that either way, we can get results passed by the end of the year. But hope is not a strategy. So therefore, we've built it into our base case that it occurs, and we will work to offset as much of it as we can.

Yes. So as Adam said, right, we essentially building an assumption that was similar in the past. In the past, we have sized the PAMA impact to be about $100 million in both the bottom line and top line in year 1 and with that impact to be significantly reducing in year 2. That's the same assumption that is included in the current outlook range. Of course, as we continue to make progress, particularly as we get ready to set the guidance for 2027, we would be in a position to provide an update based on what we know at that point in time.

The only other thing I would add, which is, kind of, an interesting thought is that if PAMA does occur, I think there's certainly a short-term impact, but our pipeline for deals, I think, will actually get even stronger from an already strong pipeline because where we can withstand that, where we can offset some of the PAMA impact. These smaller local regional laboratories, hospital laboratories will feel increased pressure. So I think although we'll feel some pain in the short term, I actually think over time, it's actually a benefit to us in terms of our acquisition strategy. Take next question.

Erin Wright, Morgan Stanley. There was a big -- sorry, there was a big focus today on oncology. And can you give us a little bit more around how you think about the contribution to that over time? Something that maybe you could break more out going forward, what the contribution is to organic growth over the longer term. We do think it's, kind of, underappreciated here. And just anything you can give us to better model that out and understand the opportunity would be great.

Yes. I'll ask Bryan Vaughn to talk a little bit how he's thinking about it within his portfolio, and then we'll see if there's anybody else who wants to add to that.

Yes. So thanks, Erin. First of all, we broke out $2 billion of specialty across 4 specialty franchises. Oncology is the largest of those franchises and they vary in size. When you think about our oncology portfolio, there's a lot of things in it. There's more legacy technologies that have been around for a while that are growing more slowly. There's also next-gen sequencing. There's tumor profiling. There's liquid biopsy. Those sorts of things are growing much, much faster, although on a smaller base.

Over the long haul, we expect oncology to continue to be a really material growth driver for LabCorp, especially as the MRD portfolio and other things unfold. But if you go back to the way we think about it, we also want to serve the entire oncologist. We also want to serve the entire oncology patient. So part of our strategy is not only to grow the individual specialty test, but also to take care of that patient while they're on a journey that may need a lot of other lab testing over time or take care of the oncologists that may need a lot of routine and other oncology tests over time.

Next question?

Elizabeth Anderson from Evercore. Looking forward in the BLS guidance, obviously, that market has had a turbulent time as they have the COVID and then funding came down and you were still able to hit that revenue guide. As we think about the recovery of that, it seems like that guide may still be on the lower side. Is there anything on, sort of, the changing business mix? Or is that just, sort of, a level of conservatism given the volatility of that market over the last few years.

So I'll give you a couple of thoughts and I'll ask Brian Caveney to give some thoughts as well. As I look at the Biopharma Laboratory Services business, obviously, it's driven by central laboratories. The good news about Central Laboratories is that driven by large pharma and typically Phase III trials, so those are very safe. They're long term. We have great insight to them. The book-to-bill looks good.

The early development business, which is the smaller business is where we see more volatility and that's where we continue to watch for signs of funding from private equity and smaller biotech companies. Anything you would add, Brian?

Yes, that's right. About 2/3s of our early development business is in that venture fund biotech space. And so that's what we need to look on the front end of that. But by and large, the overall business is relatively in line with the growth in pharmaceutical R&D spending over time. So as that is having early green shoots of improvement over time, we -- that is the market by which we think we'll be able to continue growing and hit the guidance that we've placed.

And I agree there the fact that our oncology portfolio is under, kind of, value that we have a lot of value there. I also think our central laboratory business is undervalued. When you look at the durability of that business, when you look at the long-term growth prospects of the business. When you look at where it's focused on Phase III trials, I believe that, that's a really good growth driver for us moving forward.

Next question?

Michael Cherny from Leerink Partners. Maybe to follow up on Erin's question but goes up further. So oncology was a deep focus, but there's some other -- 3 other priority areas in autoimmune, neurology and [indiscernible]. Is there any way to rank order where you think the growth opportunities come from those? And what needs to happen in terms of test development to continue to achieve the growth that you had above market?

Yes. So maybe, Brian, you could talk about the relative size of the markets and a sense of what the growth is in the past.

Sure. Thanks, Michael. So oncology is the largest of the portfolio that we broke out today. Neurology is actually the smallest and then women's health and autoimmune are in the middle. And like I mentioned with oncology, some of the tests in those portfolios are growing very quickly. So if you look at the neurology portfolio, the Alzheimer's testing is growing incredibly fast, much faster than some of the other markers. And for all the reasons Shak mentioned, neurology and with the development and scientific discovery that's happening, it's going to be a very meaningful growth driver for us going forward.

But same thing in autoimmune where there's a lot more to uncover. Same thing in women's health where there's still unmet needs. I mean, these are all areas where we see meaningful growth opportunities. And then I just come back to the -- we not only want to grow in those specialty areas, but also in everything around it as well.

[indiscernible], Bank of America. Two other questions on the specialty testing part. I think you mentioned you guys are launching more than 100 tests like per year. And I guess most of that probably coming out from specialty testing. I'm wondering how do you prioritize internal development partnership or acquisition. So that's number one. And second, I think last time at the Analyst Day, you mentioned about like growth in that area. I'm wondering if you kind of like reiterate that range or maybe you see potential to go faster.

Yes. So I'll ask Brian Caveney to talk about how we prioritize. Shak, I'd like you to jump in a little bit about how we think about licensing versus building ourselves. And then Bryan, you can answer the last part.

Terrific. That's a great question. We look at all of the different possibilities of bringing on new technology and figure out what is going to be the most efficient. What's going to be the most scalable given that we need to have it standardized in all of our different laboratories for both our CLS business as well as our Diagnostics business. We have our own venture fund. We have about 50 different scientific business advisory teams that scour the world and look for what we think the most promising technologies are.

We work with all of the instrument manufacturers of the world to understand their instruments are becoming more precise, more sensitive over time and what's going to fit our portfolio. We talked to the scientific expertise that we have around the world, academic collaborators and all sorts of other ways and we figure out what is at the brink of fulfilling an unmet clinical that clinicians who are often telling us what they need to take better care of their patients to replace a less sensitive or less specific prior technology that they were using on their menu.

We also think deeply about what evidence is going to be required to get adequate reimbursement in the different markets that we serve to make sure that we're going to be able to add that to the portfolio, improve a clinician's ability to deliver good care and have some foreseeability to how we're going to be able to make it profitable in our Diagnostics business.

I can add on to that, Brian. When we think about servicing providers and our patients. Again, we're really thinking about this from a very comprehensive perspective. We don't want them to come to our services, our menu and find that they can get 99% of things, and we're still missing 1%. So our goal is to achieve that full comprehensive menu, and that's either a buy, build or partner strategy and it, sort of, depends on what the assay that we're missing or the biomarkers that we need to test for. And is that something we already have lots of data and evidence to build out our own assay? Or is it just faster and easier to just license in the technology and deploy internally? Or sometimes it really is just an acquisition, and that's really the best [indiscernible] for. But the goal is to make sure that the provider and the patient have simplicity when it comes to accessing all of the testing they need to take care of the patients.

And then lastly, on market growth. just what we framed up is that overall market in Diagnostics is growing in low single digits. We've called out in the way we've defined the specialty franchises. That market is growing about 3x faster. Let me just call out certain pieces within that, within the oncology portfolio within the neurology portfolio are growing much faster. So there are submarkets within it. And we think about it been very targeted. We want the Alzheimer's portfolio or the MRD portfolio or something growing even at a much higher rate than 3x the market.

Okay. Next question. We've got to get a mic on this side of the room, too.

All right. David Westenberg from Piper Sandler. So I wanted to talk about maybe some of the specialty diagnostics, spent some time on minimal residual disease, I believe that was Shak's area, if I'm not mistaken. It's clearly a large and growing opportunity. I do think investors view the market as structurally concentrated or potential to [indiscernible] well, right now, it is structurally concentrated, but the potential to kind of stay structurally concentrated. However, saying that you were maybe not necessarily [indiscernible] our share was very early to the game. So I don't know if you can talk about maybe some of the opportunities there. How the market will shape up in your belief over time and if it is even constant, if it does tend to be structurally concentrated, do you still see yourself as maybe 1 of those top 5 players in MRD given the fact that invite was fairly early on that, and you did acquire that?

Yes. So I'll give some context and maybe Shak, you can jump in a bit. When I think about MRD, you think about the number of tumors and the types of tumors out there, I don't think there'll be any one company that's small that will necessarily be able to be successful across all these tumor types. When you'll see the tumor types that we were focused on, most of them very large complicated tumor types I think we stand a chance to be successful in each of those, but there's still a lot more tumor types that we're going to have to partner with and license in order to have a full menu.

So I do believe that there will be multiple successful players in this market. I believe that it will be very difficult to be specific to one tumor over time and physicians are going to want to go to one company that offers multiple different tumor types. And I think that's where our competitive advantage will be. But Shak, do you want to add some context?

Yes. It's a great question. I think we -- again, the way we think about taking care of our patients, it's a very holistic approach, right? We mentioned 65% of oncologists today in the U.S. rely on LabCorp for diagnostic testing. And so that means they can get all the precision oncology testing, biomarker directed testing and core just a routine labs all from Labcorp. And when we layer on our MRD testing into that ecosystem, it just simplifies the process where they can order everything from Labcorp. And if their patients move from New York to Florida over the winter, it's not a problem because we have PSCs in Florida, where you can get your blood draw for longitudinal MRD testing. So it's easier for them to just stay within the Labcorp ecosystem for testing.

Okay. Next question.

Pito Chickering from Deutsche Bank. I'm going to actually ask [indiscernible] question a little bit differently, like we've talked about this sort of in the past here. Can you talk about the cancer tests today in a market that utilize exome versus whole genomes and how we're using AI to crank through the data from the whole genomes? How many tests have you validated, sort of, using the, sort of, new, sort of, digital versus more analog experience? And where do you see exome versus whole genome testing for cancer in the next few years?

Shak, that was your ...

I could give them to Julia but I'll ... No, it's a great question. So we think -- so what do we know, right? So we see the therapies under development because we're working with them on the biopharma side of the business. So we know what's coming down the line. And what the trend is away, just like in the early days, we moved from single-gene testing to large panels today, the trend is also to move to larger and more comprehensive testing. And so once you get beyond a panel, you're either talking about an exome, a genome and a transcriptome. There's not that many options, right? And so actually, our strategy is combination of both. It's going to be a genome backbone with a modular exome dosing to ecology.

So you can have the depth in certain areas across the genome where certainly genes are like EGFR and [indiscernible]. But you also have the broad coverage across the entire human genome. That's important, not just for [indiscernible] patients today, but also we're going to be at that data in the background so for our biopharma partners when we do that kind of services and testing. If you need to go back and retrospectively analyze that data, [indiscernible] genome is available, the entire transcriptome that was available. So if they need to reanalyze that data set to identify maybe different strategies for the next trial it's already available. There's no additional testing that's needed.

So we think solid tumor is going to move this way. He malignancies are going to move this way, liquid biopsy over time, it's possible. But for right now, I think that that's sequencing that's necessary for a therapeutic selection liquid biopsy assay like labor plasma complete is not really set up for what I would think of as an excellent today. But maybe over time, we're adding tools like a buffet sequence in which will even improve that tumor signal as well.

I think the MRD approach using a whole genome sequencing a person makes the most sense because it's fast, you can get very good signals. We're not limited by just a few, sort of, variants for tracking over time. It's more -- that's more of that AI algorithm approach, machine learning approach to identify that tumor fingerprint.

We have time for 2 more questions.

Eric Coldwell with Baird. I wanted to stick on the MRD topic for a second. I realize you would be giving us more information if it was a material driver at this point. You've got a lot going on. But that being said, it'd be amazing to get some updates on where you stand with reimbursement, what you expect both commercially as well as government Medicare, where you are with investment, breakeven targets, regulatory pathways, FDA breakthrough or New York Club. I mean there's 3 dozen companies out there we could identify in this category. There's a lot of information flowing. And I just -- I feel like we need some more milestones or things to date as we track your progress versus the market?

Okay. So there's a lot in there. I'm going to ask Shak to talk a little bit about the registration reimbursement pathway. And then Brian, maybe you can talk about how you're thinking about the market size and how things are progressing there.

Yes. So we launched tests every year. And so we understand the reimbursement pathway very well. It's actually relatively clear we're in a [indiscernible] jurisdiction. And so that means we oftentimes actually meet with them, discuss study designs, what kind of data can we require at the end of the study in order back with a publication that drives reimbursement. So this is a process we've done. We know how to do it. We're doing it right now. And the key is to developing the study, the clinical utility studies, like we put out in the press releases for a couple of them. There's some we have not yet, but we are in the process of enrolling patients, generating the data, we will publish those papers, and we will use that as the evidence needed to drive the reimbursement discussion as well as adoption with KOLs and oncologists who will be looking at some of these different tools for MRD.

So if they're already ordering your liquid biopsy from us, they're already ordering their germline testing for us. They are going to want to say, hey, why don't -- my patient is coming in from a blood drop for those other tests. Can you just do the blood drop of the MRD testing at the same time? I don't want to have to send them somewhere else, take it a lot for different MRD test. It just doesn't make sense. It's not how we practice medicine, and it's more burden on the patient, and we already know it's going to be a challenge for them to come in, get that a point in schedule and show up for it to get all of that testing done. So I think simplifying the process, putting everything together into one easy-to-access package, I think, is the right step forward for us and our patients.

And I mean that was well said, MRD is going to be a nice market opportunity for us longer term. We're still in the early innings of it. But just like Shack set, I mean the way we think about it is and Shak laid out the platform we're going to build, it's going to require evidence generation. You see us announcing partnerships with health systems to do trials and studies and generate that evidence.

So we'll be able to show you those sorts of things along the way, but also we're very interested, just like Shak laid it out, how do we get in now with oncologists with health systems with hereditary cancer with routine testing with other sorts of things so that when the MRD things are ready, when they're reimbursable, when they're more accessible, we're right there. And we're competing in this way that we're the ease of use solution for everything that the client and the patient needs.

And the only thing I'd add, Eric, is Brian Caveney, has shown that more than 50% of the clinical trials today are in oncology and neurology. And the vast majority are in oncology. In order to be state-of-the-art and to win those trials, we have to be state-of-the-art in MRD, in cancer diagnostics and testing. So it helps us in winning clinical trials. It will help us ultimately in winning oncology business in the marketplace. And then I think Bryan Vaughn showed some data that showed that you get 50% more test per patient in the specialty areas than you would for just the routine testing. So not only do you get that one test, but you get all those other tests that give us a good return as well.

Okay. Great. We have time for one more question from Kevin

It's Kevin Caliendo from UBS. I want to talk a little bit about the organic growth assumption that you have. How much of that is volume growth? How much of that is sort of rev-rec or pricing. And we've seen this uptick in number of tests per session. And I'm wondering how much further that can go? Are we peaking there? Or is there still room for that? Is that part of the assumption of the growth going forward?

Yes. Kevin, thanks for the question. I mean I think of -- I know it shows up in the financials as volume and price. A lot of price is actually test, which is also a volume. I don't think we've peaked there at all. I think with the scientific innovation that's coming with the value of these new specialty biomarkers and what they're able to do for patient care. I think consumers being more interested as a whole another driver, right? The appetite for understanding more about what's going on in your body through biomarkers, I think test procession has a long runway as well as our session or patient volumes along the way. Anything you want to add to that?

Yes. I would definitely echo that. And the only thing I would add is, as you have seen over the last few years, every single quarter, we've seen a consistent yet a slight increasing test per session. So I think to build out what Brian just shared, we continue to expect that to be a favorable driver going forward in light of the demographic, kind of, assessment and assumptions as well as our focus on specialty in general, right? But I also would say that we continue to expect that to be at a pace that is consistent yet a slight improvement because we conducted 750 million tests every single year to be able to move that portfolio at that pace is going to be continue [indiscernible] for the organic revenue growth that we laid out this morning.

All right. Thanks, everyone. Okay. So thank you all for joining us today here in New York City. For those of you who joined us by webcast, we appreciate you joining us as well. I hope you walk away with a few takeaway messages. I hope you're as excited about the future as I am. As I hear, each of our speakers talk today, I get more enthusiastic. I feel even more confident about the future each and every day.

I'll leave you with a few thoughts. One, we have a consistent track record of delivering strong performance that should enable you to feel confident that we will continue to deliver on our commitments. We have tremendous growth opportunities before us. We have multiple different ways to find growth and we're focused on those. We're putting money and investment behind those, and we feel like there's multiple ways for us to achieve the objectives that we set forth today. We have a differentiated platform. We're differentiated in our global nature, in our mix of business, in our science, our technology and our global scale. And all of that combined together leads to what we believe is a very compelling long-term outlook that we are confident in. Thanks for joining us today. We look forward to seeing you all soon and travel safely.

Good day, and thank you for standing by. Welcome to the Q2 2026 Labcorp Holdings Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Dewey Steadman, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to Labcorp's Second Quarter 2026 Financial Results Webcast.

With me today are Adam Schechter, our Chairman and Chief Executive Officer; and Julia Wang, our Executive Vice President and Chief Financial Officer.

This morning, in the Events section of the Labcorp Investor Relations website at ir.labcorp.com, we posted both our press release and a supplemental financial presentation with additional information on our business and operations. We will also host a replay of this webcast on the IR website for 1 year.

On today's webcast, we will focus on our adjusted or non-GAAP results for the second quarter of 2026, our capital allocation strategy our updated financial guidance for the full year 2026. Our GAAP results and a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures are available in today's earnings release and the supplemental financial presentation. Please see the use of adjusted measures section in the supplemental presentation for more information regarding our use of non-GAAP financial measures.

In today's remarks, the term organic growth excludes the impact from acquisitions, divestitures and currency as well as other strategic actions taken in early development business. Our remarks will also include forward-looking statements, including, but not limited to, statements about our updated 2026 financial guidance and the assumptions underlying that guidance, the expected impact of various factors on our business operating and financial results, cash flows and financial condition, global economic and market conditions, our future business strategies, the expected savings, benefits and synergies from acquisitions strategic actions and partnerships and our potential opportunities for future growth.

Each of these forward-looking statements is subject to change based on various factors, many of which are beyond our control. More information is included in our more 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 Labcorp's Chairman and CEO, Adam Schechter. Adam?

Thank you, Dewey, and good morning, everyone. We appreciate you joining us today to review our second quarter 2026 results. Labcorp delivered another very strong quarter, driven by solid revenue growth, margin expansion and progress across our strategic priorities.

Our diagnostics and biopharma laboratory services businesses both performed well. Advancing strategic initiatives and expanding technological capabilities that continue to drive growth. Key accomplishments include broadening our specialty test portfolio, expanding partnerships with leading health systems, biopharmaceutical clients and regional local laboratories, continuing to grow our consumer business and increasing the use of advanced technologies across the company.

Turning to our enterprise financials for the second quarter. Revenue grew 6% to $3.7 billion. Margins improved 70 basis points to 15.8%. Adjusted earnings per share grew 15% to $4.99. And free cash flow was $314 million.

Moving to our segments. Diagnostics revenue increased 5.5% to $2.9 billion, Biopharma Laboratory Services revenue increased 6.5% to $836 million, driven by strength in central laboratories and our BLS book-to-bill was 1.14 in the quarter and 1.03 in the trailing 12 months. Julia will review our updated increased guidance in just a moment.

Our results reflect the progress we've made across each of our strategic priorities, beginning with strengthening our leadership in specialty testing across oncology, neurology, autoimmune disease and women's health. Collectively, in the first half of the year, these specialty areas delivered double-digit revenue growth and helped us to win new health systems and provider customers.

Laboratory testing plays a critical role in both drug development and patient care, supporting earlier detection, diagnosis, therapy selection and ongoing disease monitoring, all of which support better health outcomes while enabling more informed clinical decision-making.

In our Labcorp oncology business, we expanded our portfolio across lung, colorectal and prostate cancer, adding innovative screening, diagnostic and companion diagnostic testing solutions. We launched ColoSense nationwide, the first FDA-approved RNA-based colorectal cancer screening test with an at-home collection. With Medicare expanding commercial payer coverage, this test increases patient access to screening and enables earlier detection.

And we entered into a clinical trial collaboration with Fox Chase Cancer Center to evaluate Labcorp's Plasma Detect Genome MRD in patients at risk of early-stage non-small cell lung cancer recurrence. We expanded nationwide access to Roche's FDA-approved companion diagnostic for people living with prostate cancer who will now be eligible for combination treatment with AstraZeneca's targeted therapy. And we added an advanced DPYD genotyping test to our portfolio that helps identify patients at risk for severe treatment-related toxicity from certain chemotherapies.

Beyond our priority specialty areas, we continue to advance testing solutions across a broad range of important health conditions. We signed an agreement to broaden nationwide access to myOLARIS-KTdx a first-of-its-kind noninvasive test that supports surveillance of graft injury, including rejection following a kidney transplant.

For patients at risk of liver disease, Labcorp's blood-based test, NASHnxt secured Medicare coverage beginning in mid-August, expanding access for more patients and enabling earlier detection of MASH.

Additionally, new peer-reviewed research demonstrated the potential of Labcorp's advanced noninvasive blood-based diagnostic tools, including MVX and NIS2+ to improve risk assessment and to provide early identification of patients at risk for liver disease progression.

Moving now to the strategic priority of being a partner of choice for health systems and regional and local laboratories. These partnerships play an important role in providing health systems and providers, greater access to our high-quality, cost-effective laboratory services to our scientific expertise and to our broad testing portfolio, including specialty diagnostics.

In the quarter, we completed the acquisition of select Outreach Laboratory Services from Parkview Health in Indiana and Ohio and the acquisition of Tribal Diagnostics, a clinical laboratory serving communities in Oklahoma and Texas. And once again, we were recently awarded a Department of Defense contract to provide laboratory testing for service members and their families across military hospitals worldwide. We continue to have a very robust pipeline of deals and to support our long-term growth strategy, and we look forward to sharing more of those moving forward.

Turning to the consumer health space. Our consumer business continued to deliver strong double-digit growth, driven by increasing demand for consumer-initiated testing, innovative offerings and compelling digital experiences. And with the recent announcement of our Marker by Labcorp Genetic Health Panel through Labcorp OnDemand, consumers will be able to get biomarker and genetic testing and insights from a single trusted source. We also launched Canada's first at-home self-collection test to measure women's fertility-related hormones, immense cystosterone levels.

Additionally, our recently launched AI-powered app, MyLabcorp has already begun to be downloaded by millions of consumers. The app allows patients to schedule appointments, to view their test results and to get deeper insights into their health using AI. These differentiated innovations, combined with our leading science are creating personalized experiences that consumers can trust. We continue to make strong progress on the strategic priority of shaping our future through technology and innovation to improve the customer experience, to enhance productivity and to transform our business.

In the quarter, we broadened our cooperation with Epic, which will make Labcorp's 6,500-plus diagnostic tests available on Epic's Aura platform. This collaboration will make it easier for health care providers using Epic Aura to access Labcorp's tasks, including genetics, oncology and other advanced diagnostics.

We also enhanced the experience at Labcorp's patient service centers through expanded appointment availability, streamlined scheduling and proactive rescheduling reminders and assistance. These are just a few examples of how we're advancing our strategic priorities in serving our customers. Our results this quarter and our progress against our strategy were made possible by our teams who carry out our mission each and every day. Their impact was recognized by TIME, where we were honored to be named again as one of the world's most impactful companies.

We were also included on the Wall Street Journal's Best Companies for the Future list, recognizing our commitment to innovation with long-term value creation and positive impact.

With that, I'll turn the call over to Julia to discuss our financial results in more detail.

Thank you, Adam. Our second quarter results reflect strong momentum and continued execution of our strategy. Enterprise revenue grew 5.8% versus the prior year. Enterprise adjusted operating margin expanded basis 70 basis points to 15.8%, primarily driven by organic revenue growth. Adjusted earnings per share grew 14.9% and we generated $314 million in free cash flow. We also remain active on capital deployment. We invested $226 million in acquisitions, repurchased $354 million of shares and paid $59 million in dividends following the retirement of $500 million in senior notes in the second quarter with $142 million in cash and $5.9 billion in total debt at the end of the quarter.

In July, our Board of Directors approved an increase of $1 billion in the company's share repurchase authorization, bringing the total authorization outstanding to $1.4 billion.

Moving to more details on the quarter. Enterprise revenue was $3.7 billion, up 5.8% from the second quarter of 2025. Organic revenue growth was 4.2%. Net acquisitions contributed 1.2% growth. Foreign currency translation contributed 0.4%. Adjusted operating income was $589 million, or 15.8% revenue compared to $532 million or 15.1% of revenue last year.

The adjusted tax rate was 23%, in line with last year. We continue to expect our full year adjusted tax rate to be approximately 23%. Adjusted EPS was $4.99, up 14.9% from last year. Free cash flow was $314 million compared to $543 million last year. The difference was primarily due to working capital timing and planned increases in capital expenditures. We continue to expect free cash flow in the range of $1.24 billion to $1.36 billion for full year 2026.

Turning to our segment. Diagnostics segment delivered another strong quarter. Revenue was $2.9 billion, up 5.5% compared to the prior year. Volume growth contributed 3%, and the price/mix contributed 2.5%. We delivered organic revenue growth of 3.6%, consisting of 1.8% volume growth and 1.8% favorable price mix, which was largely driven by higher test per accession. Revenue from acquisitions contributed 1.9%, consisting of 1.3% volume growth and 0.6% favorable price mix.

Diagnostics segment adjusted operating income was $523 million or 18% of segment revenue compared to $483 million or 17.6% range last year. Adjusted operating margin expanded 50 basis points due to organic growth and operating efficiencies. BLS segment revenue was $836 million, up 6.5% compared to last year. Organic constant currency revenue growth was 6.2% as a 1.8% benefit from foreign currency translation was partially offset by a 1.4% impact from our early development strategic actions. Within the BLS segment on an organic constant currency basis. Central Labs Services delivered strong revenue growth of 7.6% and early development grew 2.7%.

BLS segment adjusted operating income was $142 million or 17% year-on-year. compared to $123 million or 15.7% of revenue last year. Adjusted operating margin expanded 130 basis points driven by organic growth and operating efficiencies from the strategic actions we have taken in early development. All strategic actions have been announced and are largely complete. Our BLS segment ended the quarter with a backlog of $8.7 million. We expect approximately $2.7 billion to convert into revenue over the next 12 months. Quarterly book-to-bill was strong at 1.14, bringing trailing 12-month book-to-bill to 1.03.

Turning to our full year 2026 guidance. We are raising the midpoint of our enterprise revenue and our adjusted EPS range by $42 million and $0.13, respectively. Enterprise revenue is expected to grow 5.4% to 6.3%, which represents a 30 basis point increase at the midpoint. The guidance continues to include a 40 basis point benefit from foreign currency translation. Diagnostics segment revenue is expected to grow 5.3% to 6%. This is a 20 basis point increase at the midpoint. We continue to expect the majority of growth to be driven by organic performance. segment revenue is expected to grow 5.5% to 6.5%. We have raised the midpoint of our BLS revenue guidance by 140 basis points, driven by continued strength in Central Labs and a more favorable outlook for early development. The guidance continues to include a 150 basis point tailwind from foreign currency translation.

For the full year, on an organic constant currency basis, we continue to expect Central Labs revenue to grow in the mid-single digits. We now expect early development revenue to grow in the low single digits. We continue to expect enterprise margin expansion with margins improving in both Diagnostics and BLS in 2026 versus 2025. Consistent with our prior expectations, BLS margin is expected to expand more than Diagnostics. This reflects continued strong topline growth in Central Labs and the benefits from the strategic actions in early development.

At the enterprise level, we continue to benefit from our launch pad initiative, which remains on track. Our adjusted EPS guidance range is $18.10 to $18.55, with an implied growth rate at the midpoint of more than 11%. Compared to prior guidance, we have narrowed the range and raised the midpoint by 3. Our free cash flow guidance range remains $1.24 billion to $1.36 billion. We continue to expect capital expenditures to be approximately 4% revenue. Our full year guidance assumes foreign exchange rates as of June 30, 2026. The guidance also reflects our current capital allocation assumptions, including the use of free cash flow for acquisitions, share repurchases and dividend. We remain focused on delivering profitable growth and strong free cash flow to generate long-term shareholder value.

Now I will turn the call back to Adam for closing remarks.

Thank you, Julia. Let me close with a few takeaways. First, we delivered another strong quarter of financial performance, including solid revenue growth, significant margin expansion and double-digit adjusted EPS growth. Second, we strengthened our leadership in specialty testing and announced several important partnerships with health systems. And third, we are leveraging technology and AI to create differentiated customer experiences to enhance productivity and to transform our business. All of this has led to us increasing our full year revenue and EPS guidance.

Looking ahead, we remain confident in our long-term growth trajectory. We are executing with discipline, investing in areas of significant opportunity and remain well positioned to deliver sustainable growth and long-term value to both customers and shareholders.

Operator, we'll now take questions.

[Operator Instructions] And our first question comes from Lisa Gill of JPMorgan.

Good morning, Adam and Julia. Adam, I just really wanted to understand a couple of things when we look at the strong organic growth. You talked about specialty testing being double-digit growth. You talked about advancing strategic partnerships in the marketplace. Can you just talk about underlying what you're seeing from a utilization perspective, one?

And then just on the back of that, I think previously, you had talked about a potential impact from changes of around ACA and Medicaid, do you still have something in your guidance or anticipation that we could see some type of headwind because of changes to the exchanges and Medicaid?

Yes. Lisa. I'll take the first part, I'll ask Julia to comment on ACA and what's built into the guidance. So diagnostics had a very strong quarter. That's for sure. We had $2.9 billion in revenue, which increased 5.5% versus last year. And as you mentioned, it was strong organic growth. The organic growth was 3.6% and then just under 2% was due to acquisitions.

If you take a further look, the volume growth was also good at 3%, with the majority of that volume growth coming from organic growth. We're certainly seeing our specialty business grow faster than the routine business, and we expect to continue to see that. Importantly, when we have the specialty business and you look at an area like oncology, it's not just the oncology test, but it's the oncology patients. And if you look at an oncology patient, they tend to get many, many, many more tests than a typical patient over time. So that's why we also believe we're seeing tests per accession continue to increase as well.

Lisa, in terms of the ACA impact, previously, we provided an estimate of 30 basis points to the Diagnostics segment volume for full year 2026. At this point in time, we continue to believe that this assumption is appropriate. And we have incorporated into the updated guidance that we just provided this morning. As you might recall, we shared on our last earnings call that the impact from ACA during Q1 was immaterial.

Subsequently, in the second quarter, it was a slight headwind of about 20 to 30 basis points of the diagnostic volume. Now it is important to note that this particular peer cohort accounts for a very small percentage of our total diagnostic volume which is less than 4% to 5%. Therefore, our expectation for the full year impact remains unchanged. But of course, we will continue to monitor closely and manage appropriately.

And our next question comes from Kevin Caliendo of UBS.

I want to dive a little bit into the organic volume number. And how to think about that relative to the markets, how are you faring in the retail segment, how are you faring hospital versus doc offices? And sort of what's embedded in that in terms of how you calculate volumes versus number of tests that you're doing? Is it -- is it sort of an apples-to-apples because we're hearing that there are more tests per session. And I'm just trying to understand how to think about is organic -- you're positioning in organic volumes versus the market versus your peers and how it's reported?

Yes. Thanks, Kevin. So let me start, and I'll ask Julia to provide additional context. So first of all, the volume growth was 3%. So it remains strong, and the majority of that 1.8% was organic volume growth. That does not include the test per accession increases. So if you would increase that, you would actually see tests actually going up even more. We're doing very well. The market typically grows at 1% to 2%. So we're growing substantially more than the overall market. And I think a big part of that is some of the hospital deals that we're doing, the local and regional laboratory deals that we're doing to continue over time to give us additional growth opportunities.

If I look in the overall market, we're doing very well in primary care. We're doing well in the hospital segment. And if you look at hospital reference testing, for example, we're actually even growing faster there than the overall segment. I think we have some real strength if you look at reference testing as well. So overall, I'd say a good organic growth, and that's why we were comfortable to raise the midpoint of the diagnostic revenue guidance by about 20 basis points. And we remain excited about the rest of the year.

Yes. Kevin, in terms of your question about the way that we account for volume for diagnostics, it is beneficial to bring some clarity to that. As you know, we typically report that out in the measurement of a session. And then we would account for the number of tests, including the session in the price/mix calculation. However, if you step back and think about volume in the unit of test, you could potentially argue that the combination of the volume growth in accession, combined with volume growth in number of tests is a more intrinsic representation of the volume growth.

So with that being said, maybe I can give you a little bit more color. For example, in the second quarter, we just shared that the price mix growth for the diagnostics business was about 2.5%. And out of that, the organic aspects of our business contributed 1.8%, once again in the terms of a session. But if you think about the test per accession growth, it's also another kind of majority of the contributor to the price/mix improvement.

So all in all, I would say if you take the session growth of 1.8% and 1.8% price/mix contribution is almost 3.6% in the terminology of number of test growth. Now immediately post-COVID, we have seen significant growth in test per accession versus prior to COVID. But over time, we continue to see consistent and slight growth in test per accession quarter in and quarter out.

Now longer term, we continue to believe that the mix growth will be supported by structural factors as well as our own strategic focus, as you've heard from Adam earlier, which, of course, include the considerations around the aging population, the health and the wellness trend the advancement in diagnostic testing as well as the breadth of our testing menu and our focus on specialty testing.

And our next question comes from Elizabeth Anderson of Evercore ISI.

Maybe one on BLS. Obviously, nice to see this morning. If we think about early development, can you talk about from maybe a revenue perspective like how much of the revenue improvement was sort of the end of the restructuring versus the end market improving there. Central Labs obviously continues to be strong. And then can you help us sort of decompose the bookings? Just looking for a little bit more color there.

Sure. So if you look at BLS revenue, it increased 6.5% versus last year. So it was very strong. And it was driven by Central Lab that's really performing well. It represents about 70% of the BLS segment.

And the Central Labs grew 10% or an organic constant currency, it was about 8%. If you look at early development, it was down 1% reported, but it was up 3% and on an organic constant currency basis. So we're certainly seeing that business do a bit better than it has in the prior year or -- if you look at ED, we continue to look at RFPs, which are strong. We look at our win rate, which remains consistent. We're also seeing study starts to be a bit more on time. So we were able to raise the guidance, frankly, to single-digit growth for that business for this year versus prior it was relatively flat. And that's based upon the strong book-to-bill.

For early development, you might recall that within a year, you can have a study start and finish. So you typically have a lower book-to-bill overall for early development. but those studies can start and end in the same point in the year. The strength in our book-to-bill was really driven by central laboratories. And if you look at the central laboratories, typically, the book-to-bills for future years. So the strength in our book-to-bill for the quarter of 1.14 or 1.03 trialing 12 months bodes well for the central laboratory business as we look into the future.

And our next question comes from Michael Cherny of Leerink Partners.

Maybe just one quick clarification and then a build on that. Just on the guidance update for Diagnostics segment, is the 20 basis points of volume organic or inorganic in terms of what's changed? And then along those lines, looking at the trend file you sent out, there was a shift higher in patient responsibility as a percent of total revenue versus clients and third party. Anything specific to call out there in terms of what you're seeing?

Yes. I would say -- I'll answer the second question first. If you look at some of the patient pay, typically, the second quarter has been a bit higher than other quarters and patient pay includes a lot of things, co-pays, deductibles as well as patients buying direct. We have seen double-digit growth in our Labcorp OnDemand test, which will be included in patient self-pay and the good news about that is patients pay upfront, so it doesn't increase bad debt. If you look at our bad debt, it remains consistent, and we haven't seen any significant increases there, even with that patient pay. So the more growth we get from Labcorp OnDemand, you will see that fall into the patient pay.

Yes. And the only thing I would add on that patient responsibility and bad debt topic is that if you look at our bad debt as a percentage of revenue for the Diagnostics business, it continues to be in line with prior year as well as historical benchmarks. So from that standpoint, we continue to work very hard on the collection efforts to ensure that we manage it very effectively.

I think, Michael, the other question you have is, as it relates to the relates to the midpoint of the revenue guide raise for diagnostics. Now as you might be familiar with our practice, at the beginning of the year, we generally would be planning for certain in-year revenue for deals that we might not necessarily have already linked, so to speak, but have line of sight. But once we got to a point where we feel much more confident about the ability to close and generate revenue in the year, we will move that to the respective segments. And in this particular case, we are moving that an expectation from corporate into the Diagnostics segment because at this moment, we feel more confident about our ability to deliver against that expectation.

And our next question comes from Jack Meehan of [ Operon Research.

I wanted to push a little bit more on the diagnostic lab organic growth. The 3.6%, that's nothing to scoff at here, but comes after a notably stronger print from your closest peer. So I was just curious, like as you kind of look at the landscape, how much of this delta do you think is either competitive or market or just like a conscious decision not to chase certain hospital arrangements that are lower margin or just something else like help us interpret it. .

Yes. No, thank you, Jack, for the question. And if you look at the Diagnostics business, as you said, 3.6% organic growth is a good number. But importantly, if you look at our margin, our margin for the quarter improved 50 basis points. And that is already after we've lapped Invitae. So that's -- and historically, people have said, well, you're lapping Invitae, of course, your margins improved. This is after that.

So what we're doing is we're focusing on high-growth areas like the specialty, oncology, women's health, autoimmune disease neurology. We're focusing on higher margin segments, and in some of the lower margin segments, such as some of the partnerships in the consumer area, we've not focused because we have so many other growth opportunities, including our central laboratory business, including some of the other hospital deals that we feel very confident with the guidance that we've given that it's a very high quality, strong set of guidance that's only good top line growth, but also with margin expansion.

Jeff, to build on what Adam just shared, I'd like to provide some additional color as it relates to our margin progression. I would start by saying that we continue to be very pleased with our operating margin expansion trajectory. For perspective, Q2 of this year represents the fifth consecutive quarter that we have been able to expand our operating margin for the enterprise as well as for both of our operating segments. As we just shared in the release this morning, in the second quarter, we delivered basis points of enterprise margin expansion versus prior year.

And as Adam also pointed out, if you look at the segment, we improved about 50 basis points in diagnostics and we expanded the BLS segment margin by 130 basis points versus prior year. Now as you look at the full year 2026, consistent with our communications, we continue to expect another year of meaningful margin improvement in both segments. And we also continue to expect even into margin expansion year-over-year by the BLS segment than the Diagnostics segment. So overall, I would say that as an enterprise, we have been highly focused on driving durable top line growth that is profitable, and our relentless focus has clearly been reflected in our financials, including the operating margin trajectory.

And our next question comes from Michael Ryskin of Bank of America.

Maybe let's shift to specialty testing and oncology specifically. You talked about, I think, double-digit growth in specialty in the first half. I don't know if that accelerated or not in the second quarter. I think you only gave a first half number, but would just love to hear more about how that's doing, also double digits sort of a broad range.

What I'm trying to get at is sort of how impactful is that to the 3.6% organic growth that you've been talking about in the DX business, how much that's moving the needle, whether it is some of the newer updates and portfolio expansions that you've talked about, whether it's ColoSense or some new organic investments. Just sort of how much upside do you think that could be providing to the second half and beyond?

Yes. Thank you for the question, Michael. As I think about oncology, we've made significant progress in that area over the years. whether it be in solid tumor capabilities or it be in liquid capabilities, whether it be through partnerships like screening with ColoSence or be an MRD where we've launched products for lung cancer, colorectal cancer, breast cancer, we continue to make extraordinary progress in bringing new tests to market in that area. Now when you do 750 million tests per year, it takes a lot to move the needle.

And when you look at 3.6%, you think about the 3.6% of the base, it still takes a lot to move that needle. There's no doubt that the oncology market will continue to grow well. We expect it to continue to grow 2 to 3x faster than the overall market. But what's really important is to think about the oncology patients versus just thinking about an individual oncology test. And let's say you do therapy selection for a patient and a patient ends up on an immunotherapy. The amount of tests that a patient on immunotherapy will have over the course of the year is very significant.

And what Labcorp offers is over 6,500 different tests so that the oncologist can use all the tests that they feel is appropriate for that patient from one place. So I think when you see the number of tests per accession increasing, you can start to see that, that can be driven by some of these patients. You also saw a neurology business, and that continues to have very strong double-digit growth there as well. We haven't disclosed the size of that business yet, but it's certainly becoming a significant portion of our specialty business within Diagnostics. So those areas are important in themselves. It's important scientifically that we'd be seen as good as we are scientifically, but it's also important for us to offer to the physician all the needs that a patient may require.

And our next question comes from David Westenberg of Piper Sandler.

So I want to go on some of the self-collection and kind of how that might change the future of lab medicine. So -- just a couple of different concepts I was hoping you can touch on. First, I wanted to know if there is a number of patients out there that might not be accessing health care due to maybe transportation problems or fear of needles?

And then over the longer term, I wanted to get your kind of thoughts on self-collection and cost of goods sold and margin. I would assume there's going to be some changes over time in kind of costs, but I also think about maybe some of the overhead savings or anything like that. So I do think this is a concept that's going to change the industry, maybe not next year, but maybe over the next 5 years. So I'd love to get your thoughts on that.

Yes. Thank you for the question, David. And we actually invest in companies that are working on various self-collection capabilities. And there will be certain times at self-collection will make sense. So even today, there are certain tests that people can do at home with a drop of blood that they can send into such a laboratory -- one of our laboratories, and we can run a test for them. I do think over time, you'll be able to get blood through capillaries and so forth. .

But when you think about like an oncology patient or neurology patients and you think about the amount of blood and the number of tools or the number of tubes that you have to take, it's hard to see a way that home collection can get to that level. And the question is going to be for what level patients will they want to do home collection versus if they have to take significant blood having to go to a phlebotomist at any rate. And we continue to watch that closing. We want to make sure we have both offerings for patients depending on what their needs are and then make it a patient decision.

And for the reasons you said, there's pros and cons from an economic profile to both ways, whether phlebotomy or at-home collection I don't think it's going to be one or the other. I think you're going to need a combination of both. And I think for a relatively healthy patient looking for a limited number of tests, you could probably do a home collection years from now. But if it's a chronically ill patient and need significant amount of test, it's hard to see a path at this moment, but we'll continue to monitor that over time.

And our next question comes from Pito Chickering of Deutsche Bank.

A follow-up on Lisa's question on BLS. Just can you talk about specifically for early-stage development, how the market looks how -- or how the new deals look -- how is your win ratio and how is pricing and how these strategic actions could impact margins in the back half of the year?

Yes. So let me start and then Julia can talk a bit about margins. So first of all, I'd say the BLS business, in general, had a very strong quarter, and it was driven by strength in our central laboratory, which is 70% of that total business. If you look at early development, we made some strategic decisions. We've announced all of the ones that we are going to put in place, and we've begun and we mostly completed implementing those announcements. So we really told everybody what we were going to do, and we went out there and we did it, and we're implementing it very well.

And you see that in some of the margin expansion, obviously, for BLS. You also can see that in the growth that we're seeing in early development now. I think the strategic decisions we made were really smart and good decisions. If you look at RFPs, they remain strong. I wouldn't say that they've increased significantly, but they have been strong -- our win rate is very consistent. Win rate to me is kind of a sense of market share. And our market share has remained consistent for quite some time.

But we are seeing study starts to be a bit more on time where historically, we're seeing the study starts delayed a bit. And I think that's helping us as we go through the first half of this year and gives us confidence as we go into the second half of the year. And if you look at the book-to-bill, for early development, there's always a certain amount that you count on getting the trials within the year to start. And we see those in our pipeline. We see those in our book-to-bill, and we feel good about that, and that's why we're able to raise the revenue guidance for early development.

Yes. In terms of the margin, while we do not break out the 2 business units within the BLS segment, but what I can share is the following. As you can see in the first quarter, we improved the BLS segment margin by 60 basis points versus prior year. And in the second quarter, we expanded 130 basis points of margin. When you think about the drivers that are really primarily 2 sources. First of all, it's the continued strength in the top line growth in Central Lab. And the second area of margin driver is really the strategic actions that we have taken in [ ED ]. And that started contributing in a relatively meaningful win the second quarter.

Now as you move through to the third and the fourth quarter, a couple of dynamics to be mindful of. First of all, we've always said that from the seasonality and cadence perspective, the operating margins for the BLS segment generally strengthened throughout the year. Second of all, we've also shared that the strategic actions for [ ED ] has already all been announced and largely complete. Therefore, in the second half of the year, you can expect both the strong top line growth in Central Labs and the strategic actions taken in [ED ] to help us drive further margin expansion.

Lastly, I would say, we also reiterated our expectation that for full year 2026, the margin expansion for BLS segment is expected to outpace that for diagnostics. And when you combine the margin expansion expectations for both operating segments that gives us confidence to really guide for a full year EPS growth at the midpoint of over 11% for 2026.

And our next question comes from Erin Wright of Morgan Stanley.

You launched a new consumer offering marker. Can you just detail a little bit on your overall consumer strategy at this point around DTC testing -- and do you expect this to move the needle for you? How do you think about the opportunities to partner across the consumer-driven health care ecosystem versus your own organic initiatives? And it sounds like you're mindful of the profitability and durability of some of these either partnerships or offerings on the DTC front. So how do you kind of balance that?

Yes. No, thank you for the question, Erin. So our Labcorp OnDemand business continues to perform well, and it's delivering strong double-digit growth versus last year. We've been strategically investing in our consumer space through our innovative testing solutions, and we're making sure that the customer experience is actually meeting the patients where they are, and we're giving a very good patient experience.

If you look at our OnDemand now, Erin, we have about 200 biomarkers, it's actually just over 200 biomarkers, which gives them the ability to take a more proactive approach to their health care wherever they would like to take that. And there is like cancer screening, men and women's health. We have things for allergies and wellness.

You mentioned that we also expanded our OnDemand where in August, we're going to launch a genetics offering called Marker by Labcorp and that's going to give them a single destination for consumers that want both biomarker and genetic testing through Labcorp, which is a trusted brand for them. So we are really focused on bringing to market through Labcorp OnDemand.

We do look at all of the other alternatives in the marketplace. I can tell you most of those companies would love to work with us. but we want to make sure that we have a good margin profile that we understand the floor of where the price can go because a lot of those consumer markets, the price continues to decline over time. And we just feel like we have so many other growth opportunities and higher margin, higher quality revenue that we're going to focus on our central laboratory business, our health system business, our specialty testing business and then our Labcorp OnDemand business, which also has a relatively good margin similar to our other businesses.

And our next question comes from Ann Hynes of Mizuho.

I just want to focus on the ACA and also bad debt. As the hospital peers have noted a deterioration in collectibility of even the insured population. And I know that you don't have much bad debt related to your hospital partnerships. But just from the physician and your service centers, can you remind us what your ACA guidance assumed for bad debt? And maybe what your [indiscernible] policy is and if you're seeing any signs in kind of this deterioration of co-pays, that would be great.

So let me start, Ann. First of all, if you look overall at our bad debt, we have not seen a significant increase in our bad debt. If you look at the ACA, we built a 30 basis point impact. The ACA total amount of our business is less than 5%. So it's very small, and we think for the full year, it's about a 30 basis point impact.

If you look at our hospital business, which is kind of a surrogate to part of what you're asking, we continue to see growth in the hospital laboratory businesses to where we would expect that growth to be. And we've actually seen a bit of accelerated growth in the hospital reference business, which is a good place to be.

So overall, we're not seeing the impact of some of our other customers may be saying, and it could be the mix of patients, whether they're relatively healthy versus chronic disease and so forth. But as we look at our business, -- we feel confident in the guidance that we increased and provided today. We feel confident in our diagnostic business and what we've provided today as well.

Yes. And just for perspective, right? If you look at our payer mix for the last few years, it has really stayed relatively consistent, and also, as we showed earlier on the call, our bad debt as a percentage of revenue for Diagnostics really continues to be in line with our prior experiences, and which is typically just less than or around like 5% of our revenue. So as you can expect, this is an area of heightened organizational focus for us and we continue to work extremely diligently to ensure that we manage it appropriately and effectively.

And our next question comes from Tycho Peterson of Jefferies.

Maybe 2 quick ones. First, on capital allocation, just thinking about the M&A funnel. Is there a stronger appetite to look at some of the hospital labs amid some of the ACA noise, that is out there? Does that change your kind of lens on M&A? And then a second unrelated one, just on PAMA, any visibility into the ongoing data submissions from the independent labs and I think there was another request for information as well? Just maybe touch on that as well.

Yes, so first of all, our pipeline for deals is very strong, and it continues to be very strong. And I do think that hospitals are feeling additional pressure not just from ACA, but as they think about it, PAMA is going to occur next year then feel even some additional pressure potentially. So I would say that we have a very high bar. It has to be accretive in the first year, return its cost of capital in 2 to 3 years. and be a partner that we can work very well with the health of the integration. If it meets that financial criteria, we are open to it, and that pipeline remains strong, and I'm excited about the things in the pipeline. So stay tuned. .

Separate and distinct from that, you mentioned PAMA, the submission date is tomorrow, the 31st. We've obviously submitted our data. We probably won't have significant insight into how many other laboratories submitted their data until October time frame. So stay tuned for that.

What I can say, the RESULTS Act continues to be focused on by our trade group as well as us. I think we're making real progress. We have real bipartisan support both in the Senate and Congress and even the physicians in Congress have cited that they believe the RESULTS Act is a good legislative package to improve. So we're going to continue to march forward with that. It's hard to predict what happens with legislation, particularly in November with elections and so forth. Our backup will be to see if there's a way to have another delay of PAMA. And then we're always going to plan that if it occurs, we'll have a really strong plan next year. And if it doesn't occur, the plan will be even stronger, and we look forward to discussing that in more detail in September at our Analyst Day.

And our next question comes from Luke Sergott of Barclays.

Adam, Julia, this is Anna Kruzenski on for Luke. Appreciate you guys squeezing us in here. Wanted to ask about how early adoption is going for the ColoSense test that you launched in June. And if you could talk about reimbursement dynamics and just overall how that's been going so far?

Yes. No, thank you for the question. So first of all, we're excited to bring another option to market for noninvasive colorectal screening. So ColoSense is FDA approved. It's at-home collection stool-based. It is for average risk adults above the age of 45. We think it's an opportunity to expand screening options that are out there. There's still a lot of people that should be screened that are not screened. And I look at it as another important alternative to be considered for patients.

The early signals, I would say, are encouraging. We launched it nationally in June, positive market reception by the American Cancer Society. It was included in their guidelines. We have CMS coverage. Early signals are encouraging, but it's still very early. And we have to really focus on getting broad payer access, and that just takes time. So stay tuned, and we're going to continue to work on access.

And our next question comes from Yujin Park of Baird.

I just wanted to follow up on early development margin. So outside of the strategic actions benefiting margin, can you talk more about the underlying margin improvement? And where do you see opportunities? And if there are any changes you see on the pricing side? .

Yes. So let me start and please chime in. I would say a couple of things to consider, right? So when you think about margins, first and foremost, start with the top line growth and -- in terms of the pricing for ED, it has been relatively flat. Therefore, to the extent that we could get into a trajectory of generating organic constant currency top line growth, that is going to be a key source of our margin expansion in addition to the strategic actions that we have taken.

Now given that at this point in time, we have announced all the actions, and they are largely complete. As I look out for the second half of this year, I believe we are very well positioned in continuing to expand the margin for the BLS segment, inclusive of EE to be able to contribute to our overall enterprise adjusted EPS expectation of over 11% of the midpoint of our guidance.

Well, thank you everybody, for joining us today, and we look forward to seeing you all soon. Have a great day.

This concludes the question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.

Okay. Great. We're going to kick it off. I'm Tycho Peterson from the Life Science team. It's my pleasure to have Labcorp with us. We've got Julia. So welcome.

Thank you.

Why don't we maybe just start just unpacking the 1Q results. You shared about a month ago, you've beat on revenue and EPS raised full year guidance. So things are looking good. What, I guess, pleased you most in the quarter? What gives you confidence in the momentum coming out and into Q2?

Thank you for hosting us, Tycho, and I'm excited to be here. Speaking of our business, we delivered strong results in the first quarter, whereby we grew revenue by 6% and adjusted EPS by 11%, while expanding operating margin by 30 basis points. As I look at the Diagnostic business, we continued the trajectory of organic growth and price mix favorability.

In terms of the BLS business, the Central Lab business unit, in particular, continued to perform well, which delivered 5% organic constant currency revenue growth in the quarter. As we continue in the second quarter, we are highly focused on building upon the strong momentum in the first quarter and working towards delivering against the full year outlook.

As you pointed out, Tycho, on the first quarter earnings call, we raised the guidance for the full year, both for revenue and adjusted EPS. At the midpoint, we guided to a revenue growth of 5.6% and adjusted EPS growth of 10%, once again supported by expected expansion in operating margin, along with an expected free cash flow generation of $1.3 billion. All in all, I would say, sitting where we are right now, we are optimistic about the balance of the year, and we continue to believe that the strong underlying demand, our marketing -- market leadership position, along with our consistent execution will continue to position us well to drive the growth forward.

And maybe jumping into some of that, I'll start with Diagnostics. The bulk of -- the quarter was organic, which is great to see. Just talk a little bit about the contribution from volume versus price and mix in the quarter.

Yes, you are right. So if you look at our full year guidance for the Diagnostic business segment, we guided to a revenue growth range of 5.1% to 5.9% with a midpoint of 5.5%. We said that we expect the majority of the revenue growth to be coming organically. In terms of the contribution from volume vis-a-vis price mix, we expect that to be roughly 50-50, which is broadly in line with how we delivered 2025. Of course, from quarter-to-quarter, you could potentially see some variation for volume vis-a-vis price mix, but I would really encourage us to look at that relationship with a sight in longer-term perspective.

And just the drivers on volume, have you seen expansion in overall test per accession, the metric with COVID a few years behind us? And if so, is that heightened utilization structural?

Yes. I would characterize the utilization environment as structural. As you might recall, Tycho, immediately following COVID, we saw a meaningful step-up in utilization driven by deferred care. But sitting where we are right now, we believe the drivers behind the utilization are more durable in nature. There are just a couple of factors that are expected to contribute to long-term growth, which include an aging population, which would require an extended health care need as well as diagnostic testing need. In addition to that, we are seeing continued progress in diagnostic innovation as well as an increase in consumer engagement among many other factors.

Now this dynamic has been manifested in test per accession trend, which has been moving higher consistently and durably post-COVID. Now this is actually an important development, not only from a volume growth perspective but also from a margin management perspective. Because if you step back, think about the way that we operate. Every year, we process 750 million tests to serve our patients. If you take a single accession to the extent that we could drive more number of tests on that accession, then it creates a compelling economic profile. Essentially, the fixed cost for that accession is already covered. Therefore, the additional test will flow through to the bottom line after variable cost in a highly accretive manner from a margin perspective. Actually, this is the key driver behind our optimism about the durability of the testing volume growth over time as well as the associated margin improvement opportunity.

And then on the other side, pricing, what does the typical year look like from a unit pricing perspective?

Yes. Unit price for the last few years has been essentially flattish give or take. Therefore, when you think about the impact of price mix and its contribution to revenue growth, I would say the benefit is essentially been coming from mix improvement over time.

And as we think about going from routine more toward esoteric testing, how do we think about that portfolio evolution impacting mix? And are there specific targets you could share?

We have seen the pace of growth for esoteric testing to be faster than that for the routine testing. At this point, the esoteric testing is accounting for about 40% of our overall diagnostic revenue. Now when you step back, think about the drivers behind that, it's actually very in line with our strategic priority as well as our ability to execute. One of our strategic priorities is really around increasing our leadership in the specialty testing area. And we do that for 2 major considerations.

On the one hand, the specialty testing area, including oncology, neurology, women's health and autoimmune have been growing at a faster pace than that for the broader diagnostic market. Essentially it is 2 to 3x faster. Now in addition to that, in the real world, we found out that as we compete and win in the specialty testing area, we also tend to win the broader testing need of a patient. This is really reflective of our company in terms of our value proposition. So essentially, where we are strong at is we are a comprehensive provider of lab testing needs for the patients by leveraging the breadth of our testing menu, the extensive testing infrastructure, our ability to continue to innovate for scientific breakthrough as well as the leveraging of technology to create a set of customer and the patient experience that is differentiated. So all in all, we are interested in driving test growth, broadly speaking, including the specialty testing areas.

And then you touched on consumer-initiated testing earlier. I think your strategy in DTC is a little more nuanced than maybe your closest peer. But can you talk about how you're approaching the consumer market through both your in-house offering and with Labcorp OnDemand and then partnerships such as Ovia Health.

Consumers have been and continue to be an important channel from a customer segmentation perspective for our company and our business and the patients that we serve. Essentially, the way we think about it is that as the consumers become more involved in their health care, we would like to take the breadth of our testing menu, our testing infrastructure, our differentiated patient experience to meet the consumers where they are. So in that regard, we have been strategic in investing in our own online platform called MyLabcorp -- like OnDemand, MyLabcorp (sic) [ Labcorp ] OnDemand. That's where you can really access -- I think it's over 120 tests right now. We've also expanded the biomarkers to be over 200. A consumer later can just get online and order test in areas like men's health, women's health, cancer screening, allergy, wellness and so much more. Now in the first quarter, we shared that our revenue growth from this direct channel was a very strong double digit, and we continue to be optimistic about the growth to come in the future.

Now in addition to accessing the consumer in that direct channel, we also have been -- partner to some other channel partners such as telehealth platform or virtual care providers. Now we are excited about the consumer initiated testing, and we'll continue to explore partnerships that will help us generate durable growth. The considerations that we have been intentional and disciplined about are really the type of services we provide, the value we bring, the partners that we collaborate with and equally importantly, the pricing architectures that actually fit into our strategic and financial criteria for the long term.

And how should we think about the contributions this could add to the overall diagnostic portfolio? I mean you mentioned the double-digit growth rate, but how do we think about how you're kind of sizing that opportunity and then also the operating margin profile?

Yes. So at this point in time, we have not yet to break that out. However, with this level of growth and the pace of the growth, it is imaginable that at the right time, we will be able to really disclose the size of that opportunity from a revenue perspective. I think in terms of margins, I would say on average, from a direct channel perspective, it is constructive. Although you would want to keep in mind that since we are still in the phase of developing and expanding that market, so it would require some upfront investment, if you will. But all in all, we are comfortable with the trajectory of the top line growth as well as the expected return out of this channel and the customer segmentation.

And are there particular priorities or focus areas for the consumer-initiated testing as you think about additional partnerships?

I think at the end of the day, when we evaluate a partner, we wanted to make sure that when we put our competitive advantages along with the partners, we can indeed create a set of experiences for the consumer that is compelling, that is hopefully differentiated versus some other channel that they could really get that service for. And last but not least, we wanted to make sure that the pricing architecture of those partnerships are making it a scenario that is win-win for both parties.

Maybe we could just spend a minute on MRD and just anything you could say on the timing expectations for MolDX approval for MRD. We've heard from some of your peers that there's more back and forth with submissions. It's taking longer. Is this something you're experiencing?

Yes. So maybe before we touch upon the MolDX approval for MRD, let me start by sharing that we believe Labcorp offers a comprehensive oncology portfolio that is designed to support the continuum of care for the cancer patients, which includes screening, therapy selection as well as recurrence monitoring through MRD. Now MRD is a platform technology that has long-term growth potential. So as a company, we are working very actively on expanding our offerings within that portfolio. From a market access perspective, we have been disciplined in both working with MolDX as well as other commercial payer coverage.

Now the other thing, I think, is worthwhile noting as it relates to MRD is that -- it also highlights the strength of our particular platform and makeup in the sense that there's tremendous synergy between our Central Lab business and our Diagnostics business. When you think about MRD, this is where that we can actually leverage the insights that are coming out of the clinical trial, helping our sponsors to better appreciate the therapeutic impact in the clinical trial, but also leveraging actionable insights that can guide patient care over time.

And I guess, how do you think about the longer-term path to kind of winning in this market? And what does a successful launch look like for Plasma Direct (sic) [ Detect ]?

The MRD market clearly is a compellingly important segment within specialty testing. I believe we've all seen research out there that is sizing the market to be extremely meaningful, including research from our own Jefferies team, right, I've seen research that suggests a market potential up to $20 billion, and growing at a strong double digit.

Now the other aspect of the market is from a penetration perspective, it's about 5% right now. So while we are excited about the innovation, and the breakthrough that the industry collectively has achieved, we also believe that when you look at those statistics together, it's suggesting that there's still tremendous market out there for multiple players to come in, being able to use the innovation to help more patients benefit from the scientific breakthrough.

In this particular area, we believe we are well positioned to be a meaningful player because we have the science, we have the scale, we have the access, we have the ability to really bring adoption, right, more broadly speaking. And if you look at the Plasma Detect launch that we did back in the first quarter, essentially, we are leveraging this highly sensitive tumor-informed assays that span across Stage III colon cancer; Stage I, II, III breast cancer; Stage I, II, IIIa non-small cell lung cancer. So we're excited about bringing that to the patients.

Now at the same time, it is also critically important to keep in mind that the place that we win best is really being the comprehensive provider of the lab testing and diagnostic insight provider. So for us, as we continue to innovate, then we quickly plug those testing into our overall testing menu, which right now has over 6,500 on the menu. And then we leverage our broad portfolio, our extensive infrastructure as well as the focus on really differentiating the customer and the patient experience through technology to really serve more patients over time and drive more business growth, both top line and bottom line over time.

Another growth driver is neurology, and just thinking a little bit about -- you've talked about, I think, Alzheimer's as a driver -- a key driver of the double-digit growth you're seeing in the neurology portfolio. Can you maybe just talk on the ramp your in-house menu relative to some of the partnership assays? You've got Elecsys from Roche and Lumipulse from Fujirebio. And are you starting to make inroads in the primary care setting as well?

Yes. So early on, we chatted about, there are 4 specialty areas that we've been highly focused on as one of our strategic priorities, and neurology is one of the four. Neurology is also an extremely exciting therapeutic area for sure. In the first quarter, we shared that we grew this particular franchise in revenue by a strong double digit, right? So we believe we are well positioned to be a leader in this space. If you think about the type of test, the number of tests as well as our ability to really bring the test at a large scale to a primary care setting.

Now the other interesting about neurology is if you look at the growth in the first quarter, the leading contributor is really from Alzheimer's, right? The Alzheimer's space is still going through very active development. There is a robust pipeline of clinical studies that right now are really assessing the possibilities to potentially expand treatment pathways as well as testing opportunities. Now Labcorp is definitely well positioned to lead in this ever-evolving landscape. Early on, we talked about the strategic synergy between our Central Lab business as well as our Diagnostics business. This is where that we can really leverage the insights we are learning in those clinical trials with a big pharmaceutical company, the biotech and biopharmaceutical company and leverage that and translating into diagnostic applications. And through doing that, we could really generate also the evidence needed for adoption down the road.

So if you think about the breadth of the portfolio, in addition to Alzheimer's, we're also working on expanding that to include some other neurological conditions, which include ALS, Parkinson's, autoimmune neuropathies even include concussion recovery, for example. So we are also working very hard in getting to a broad set of neurological conditions from a testing offering perspective.

So all in all, I would say that we continue to be excited about neurology as a growth area, and we think we are perfectly positioned to lead in driving innovation that can translate into meaningful patient impact.

And I guess just circling back on your own in-house menu versus partnering, like as we think about something like Alzheimer's, how do you think about that mix?

I would just say, broadly speaking, when you think about innovation, we are extremely open-minded, right? So on the one hand, we continue to really march forward with our in-house scientific discovery and development efforts. In the meantime, if there are tests out there in the marketplace that makes sense for us to either partner, license or acquire, we can then easily and quickly fold into our very broad testing menu. We are always open to explore those type of partnerships. So I would say that open mind flexibility, if you will, is also a mindset that we continue to drive in our company as a culture, right? Open mind is agility, speed to move, yes.

Maybe just shifting over to biopharma lab services. You've taken some strategic actions. You obviously divested the non-core pieces of early development. You're building a new central lab facility. Talk to maybe what prompted those strategic decisions.

Let me start by talking a bit about the Central Lab business, and then I will move to cover the early development side of the house, if you will. I'm always excited to talk about our Central Lab business because I believe it is a compelling and differentiated value creator within our enterprise. I know you know this well, right? If you step back, think about what our Central Lab business is about, it's essentially a global leader of lab services for clinical trials. So in other words, what we are doing there is we are doing -- we are taking a core strength of our company, which is delivering high-quality lab services at scale and apply that capability to serve a different customer segmentation. In this particular case in Central Lab, we are servicing the global pharmaceutical of the world, the biotech -- the biopharma of the world in supportive of their Phase II and Phase II trial -- Phase III trials worldwide.

Now if you look at the central labs, they actually mirror that for the diagnostic labs in the sense of infrastructure, technology, science and talent. But a key difference between the Central Lab and the Diagnostic lab is really in central lab, we are focusing on servicing clinical trial sponsors. And therefore, our operation there is really designed to meet the complex and global regulatory requirements in clinical research.

Now the other thing I would say about the Central Lab business is that we generate unique downstream insights that can be leveraged and create synergy between Central Lab and diagnostics, right? You leverage those insights coming out of your clinical trial and inform actually the diagnostic applications down the road, but we also help generate evidence that will enable downstream adoption.

And from a performance perspective, in the first quarter, we generated revenue organically speaking at a constant currency basis of 5%. Last year was 5.2% equivalent growth. And then we guided for the full year this year to continue to be mid-single digit. So in light of the strength in the pipeline, the growth prospects and the sustainability of that we actually are investing in the Central Lab facility, which is a testament of our confidence about the value of this business in our portfolio.

And then the early development divestitures of $50 million in annualized revenue, have those been completed? And how do we think about impact on operating profile of the business heading into the back half of the year?

Yes. The early development business is the smallest business unit. The revenue is about 6% of our total company revenue and the operating profit is even less. As you were saying, we have been taking some strategic actions by divesting non-core assets as well as consolidating certain performance sites. And we expect the strategic actions to be largely complete by end of this quarter. So you shared the annual revenue would be about $50 million. And this year, due to timing, it's more like $40 million. Now in doing this, we do expect the business will be more streamlined coming out of it and therefore, more profitable. As a matter of fact, we did guide on the first quarter earnings call that we expect the margin expansion for the BLS segment this year to be at a faster pace than that for the Diagnostics, partially benefiting from the strategic actions that we are taking in ED, along with the strong top line growth in Central Labs.

And then book-to-bill, I think there's been some investor confusion around this metric. It was 1.16 in the fourth quarter, 0.94 in the first quarter. Why is there such volatility in this KPI?

Yes. So if you look at the BLS business in general, what our focus is really being a partner of choice for our pharmaceutical biotech and biopharma companies around the world while building a strong pipeline on a continual basis. So in that regard, the quarterly book-to-bill is a metric, although it has its own pros and cons and sometimes it's impacted by timing of things, right? Therefore, we always say that the trailing 12-month book-to-bill is a better indicator of the long-term health of the segment when it is evaluated along with other business and financial metrics.

Now if you look at the trailing 12-month book-to-bill at the end of Q1, it was healthy at 1.04. Now if you look at the quarterly book-to-bill, we had a strong ratio in the fourth quarter of last year, which was 1.16. In the first quarter, we were slightly below 1. We did share that we expect the second quarter to sequentially improve. Now what I also would say is when you step back and look at the operational aspect of the orders and the bookings, we feel good about the number of RFPs we are getting. We feel good about our win rate in terms of just the market share and winning the RFPs. Therefore, we have confidence about the book-to-bill as we move through the year. And on the first quarter earnings call, we did raise the revenue guidance for this segment, and we look forward to providing more updates as the year progresses.

Obviously, there's been a lot of focus on AI and potential impact on wet lab spending. You could argue more targets, better targets coming through the funnel. How do you think about AI impacting the BLS segment longer term?

We view AI and its associated development as potentially a tailwind for the BLS segment. Let me explain why. So as AI evolves, it is expected to accelerate innovation, including precision medicine, biomarker development, data-driven endpoints, which all will require increase in -- increased demand in standardized and global lab infrastructure as well as global regulatory expertise, as we just chatted, those are the areas that we are truly differentiated from. Now the other thing, I would say, if you look at our customers, right, biopharmaceuticals, pharmaceutical biotech, one of their focus has been and continues to be speed because speed means growth, both in terms of patient impact as well as business impact.

Now as you think about how AI could potentially help from a speed perspective, if you look at Central Lab side, we think AI could potentially help us accelerate clinical trial and drive operating efficiency in the trials. We talked about AI could potentially enable virtual control groups. When we do that, it would help accelerate patient recruitment, but also overall reduce trial complexity.

On the early development side, we've been investing into nonanimal testing methodologies, which once again will help us continue to really be meeting with the emerging regulatory guideline and as well as strengthen our leadership in the space. And even as the pharmaceutical company gets more targeted in their clinical trials and all of that, we believe that all this development could enable them to do more trials with the same R&D budget. And this is where their reliance upon the lab expertise on the global scale as well as the global regulatory expertise and data analytics capability will be increasingly important. And that's where exactly reinforcing the value of BLS in our overall portfolio and our offering to our customers.

Should we think about AI as adding a new revenue stream, additional services to wrap around or more that you can get maybe better milestones for faster enrollment and deeper customer relationships like...

Yes. The way that we are approaching AI in our company and enterprise is we are really embedding that across the entire enterprise to achieve three goals, hopefully, which include enhanced customer experience, improve operating efficiency and accelerate innovation. And let me give you some examples in all three pillars, if you will.

At the front end, we are really leveraging AI to simplify and enhance the way that our patients and our providers interacting with Labcorp. One example is recently we just launched -- MyLabcorp app, right, which is a secure AI-enabled kind of experience where patients can go online and really get their testing results over time, but also personalized health insights and education.

The other example is our test to finder capability. This is where it's very simple. Now for the clinicians to go and search for tests that are more relevant for the patients that they are trying to prescribe for.

Now from an operational perspective, we are really embedding deploying AI across the entire network, whereby we're trying to streamline workflows. We are reducing complexity, removing friction and also improving turnaround time through automation, digital pathology, optimized drug development processes to just name a few. Now in terms of accelerating innovation, we also recently announced a partnership with Amazon Web Services as well as Datavant. This is where we are putting all of our brainpower together and leveraging AI to enable faster analysis of large data set to really support the research and drug development for Alzheimer's. So all in all, I would say, all these efforts taken together, combined with many, many other more, are representing a very coordinated approach that we have taken around leveraging, not only just AI, but also other formats of technologies such as robotics, right, to help us drive better outcomes, improve operating efficiency and deliver sustained long-term growth.

Great. Maybe just in the last minute here or so, we can just hit on capital allocation. How are you thinking about the M&A landscape? Any focus areas, whether it's hospital labs, regional independents?

M&A has always been continues to be a core part of our strategy. We are constantly evaluating opportunities that are leaning into our core competencies. And at this moment in time, we continue to have a robust and active pipeline that we can tap into and leverage that to help deliver inorganic growth. Now over the first few months of this year, we've closed a few transactions, which included regional independent lab that is the Empire City Labs, as well as two health systems, one is Crouse Health, the other is [indiscernible] Health. And our focus is really on the 250 largest health systems in the country with outreach labs, along with regional and local independent labs that fit our strategic considerations as well as our financial criteria.

Now from a strategic point of view, we are looking for acquisitions and opportunities that would enable us to expand patient access as well as enabling us to build relationships with partners that we can grow with, innovate with, collaborate with and create long-term value together. Now the opportunities we are also interested in are those that can help us accelerate growth broadly speaking, including the specialty testing area.

From a financial criteria standpoint, we are looking for transactions that are accretive to adjusted earnings in year 1 and return cost of capital by year 3. We take this financial discipline seriously as we continue to focus on driving accelerating and durable revenue growth in a capital efficient and profitable manner.

Great. I think we'll leave it there. Thank you.

Thank you.

Good day, and thank you for standing by. Welcome to the Q1 2026 Labcorp Holdings Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Dewey Steadman, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Didi. Good morning, and welcome to Labcorp's First Quarter 2026 Financial Results Webcast.

With me today are Adam Schechter, our Chairman and Chief Executive Officer; and Julia Wang, our Executive Vice President and Chief Financial Officer.

This morning, in the Events section of the Labcorp Investor Relations website at ir.labcorp.com, we posted both our press release and a supplemental financial presentation with additional information on our business and operations. We will also host a replay of this webcast on the IR website for 1 year.

On today's webcast, we will focus on our adjusted non-GAAP results for the first quarter of 2026, our capital allocation strategy and our updated financial guidance for the full year of 2026. Our GAAP results and reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures are available in today's earnings release and the supplemental financial presentation. Please see the use of adjusted measures section in the supplemental presentation for more information regarding our use of non-GAAP financial measures.

In today's remarks, the term organic growth excludes the impact from acquisitions, divestitures and currency as well as other strategic actions taken in our early development business. Our remarks will also include forward-looking statements, including, but not limited to, statements about our updated 2026 financial guidance and the assumptions underlying that guidance the expected impact of various factors on our business, operating and financial results, cash flows and financial condition, global economic and market conditions, our future business strategies the expected savings, benefits and synergies from acquisitions, strategic actions and partnerships and our potential opportunity for future growth.

Each of these forward-looking statements is subject to change based upon various factors, many of which are beyond our control. More information is included in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and 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 Labcorp's Chairman and CEO, Adam Schechter. Adam?

Thank you, Dewey. Good morning, everyone. We appreciate you joining us to review our first quarter 2026 financial results and progress on our growth strategy.

Before we begin, I'd like to officially welcome Dewey Steadman to Labcorp. Dewey joined us in March as Senior Vice President of Investor Relations and is a seasoned Investor Relations and Capital Markets leader across health care and finance. I'd also like to thank Christin O'Donnell, for our leadership of Investor Relations function, and I wish her well as she takes on an important senior role in finance as part of our precision oncology and health systems division, both of which are strategic to our growth.

Turning to our results. We are off to a strong start in 2026 with continued momentum in both our Diagnostics and Central Laboratory businesses and significant progress across our strategic growth priorities. Our businesses remain strong due to our critical role in improving health and improving lives for people around the world. Our financial results were strong in the first quarter. At an enterprise level, revenue reached $3.5 billion, increasing 6%. Margins improved more than 30 basis points and adjusted earnings per share grew 11%.

Looking at our segments. Diagnostics revenue increased 5%. Biopharma Laboratory Services revenue increased 8%, driven by strong growth in Central Labs of 11% or 5% excluding foreign exchange. And our BLS trailing 12-month book-to-bill remains healthy at 1.04.

In the quarter, we advanced our strategic priorities, starting with being a partner of choice for health systems and regional and local laboratories. These partnerships and acquisitions enable us to expand our patient and provider networks, increase access to our broad test portfolio, including leading specialty diagnostics and to drive volume growth. We recently announced a nationwide strategic collaboration with Children's Hospital of Philadelphia, to expand access to cutting-edge diagnostics for pediatric patients. By combining CHOP's renowned pediatric research and clinical expertise, with Labcorp's scientific capabilities, and extensive reach with physicians and patients, this partnership will help [ bring ] advanced diagnostic tests to more children who need them.

We also completed our acquisition of select assets of Crouse Health Laboratory Alliance of Central New York, a clinical anatomic pathology laboratory. And we executed an agreement with Crouse Health to manage their inpatient laboratories. We remain on track to close our acquisition of select outreach laboratory services across Indiana and Northwest Ohio from Parkview Health in the very near future. We continue to have an active pipeline of hospitals and regional local laboratory deals to support our long-term growth strategy.

Next, we continue to progress on our strategic priority to lead in specialty testing across our key focus areas of oncology, women's health, neurology and autoimmune disease. These specialty areas are important growth drivers in both Diagnostics and Central laboratories, with significant scientific overlap across the businesses. In fact, Labcorp supported the development of more than 85% of new drugs approved by the FDA last year, including in these important specialty areas. In the Diagnostic business, we expect these specialty areas to grow 2 to 3x faster than the broader diagnostics market. In neurology, we experienced double-digit growth, driven by a market-leading portfolio in Alzheimer's testing. Oncology also achieved double-digit growth, supported by the launch of several liquid biopsy tasks and expanded access to MRD solutions over the past year.

Additionally, when providers choose Labcorp for specialty testing, we see them consolidating a greater share of their patients testing needs with Labcorp. As part of our growth in specialty areas, we're collaborating with Illumina to broaden access to advanced genomic testing in oncology, particularly in community care settings. We expanded nationwide access to the first FDA-approved companion diagnostics that helps identify platinum-resistant ovarian cancer patients who may benefit from Merck's KEYTRUDA, which can reduce the risk of disease progression and improve overall survival.

In addition to these specialty areas, we continue to increase our portfolio with test and address pressing clinical needs. Recently, we launched the Labcorp Fentanyl Urine Visual Test, an FDA-cleared rapid screening test that delivers results in just 10 minutes and assesses possible fentanyl exposure for up to 48 hours.

Moving to Consumer Health, where we continue to deliver double-digit growth. Labcorp OnDemand launched new tests in the quarter for insulin resistance and pancreatic function. We also introduced unique customizable men's and women's health tests, enabling consumers to design panels tailored to their needs. We are also expanding how consumers engage with Labcorp through MyLabcorp, our secure mobile app launching in May, when it will be available to tens of millions of customers. MyLabcorp brings an individual test results and health data together with clinical guidance into a personalized experience to help consumers better understand their test results. MyLabcorp's AI assistant will also help simplify appointment scheduling and payments.

Additionally, we continue to make significant progress on our strategic priority to utilize advanced technologies, including AI and robotics to enhance customer experiences and to improve operational efficiency and productivity. Our recent progress includes an expansion of our collaboration with PathAI to deploy an FDA-cleared digital pathology platform across our national anatomic pathology labs and hospital laboratory collaboration. This platform embed AI into everyday clinical decision-making by enabling pathologists to review and manage cases digitally, improve turnaround times and increased consistency of results.

A new AI-powered real-world data platform being developed in partnership with Amazon Web Services and Datavant to accelerate Alzheimer's research, by combining agentic AI with Labcorp's diagnostics and real world data, the goal is to improve patient recruitment for clinical trials and ultimately shorten drug development time lines. A strategic collaboration with Optum.ai to apply AI capabilities to streamline laboratory operations, improve efficiency and enhance the patient and provider experience. providing clear insights to patients about their health, test progress and next steps in care. For physicians, it will help in ordering clinically appropriate tests upfront, reduce administration delays and speed patient access to results. This work builds on a more than 20-year strategic relationship between Optum and Labcorp.

This work showcases our culture of innovation and the commitment of our employees. Their impact was recently recognized by Fortune which named Labcorp to the list of most innovative companies for the fourth year in a row, highlighting our track record of scientific product and process innovations. We were also recognized as one of the 2026 World's Most Ethical Companies by Ethisphere, reinforcing our commitment to operate with the highest standards of ethics and integrity.

With that, I'll turn the call over to Julia to discuss our financial results in greater detail.

Thank you, Adam. We are off to a strong start in 2026. In the first quarter, enterprise revenue grew 5.8% and enterprise adjusted operating margin expanding more than 30 basis points to 14.4%. The majority of enterprise revenue growth was driven by organic growth in Diagnostics and Central Labs. The increase in adjusted operating margin was primarily driven by organic revenue growth. Adjusted earnings per share grew 10.6% and we generated $71 million in free cash flow.

Additionally, we remain active on capital deployment, investing $202 million in acquisitions as well as returning capital to shareholders through $98 million of share repurchases and $61 million of dividends. We ended the quarter with $981 million in cash, $6.3 billion of total debt and $700 million share repurchase authorization outstanding. Our cash balance and debt position included closing on a $750 million term loan, prefunding the retirement of $500 million senior notes in June of this year.

Moving to the specifics for the quarter. Enterprise revenue was $3.5 billion, up 5.8% from the first quarter of 2025, with 3.1% organic growth, 1.4% growth from net acquisitions and 1.3% from foreign currency translation. Adjusted operating income was $508 million or 14.4% of revenue versus $469 million or 14% of revenue last year. The adjusted tax rate was 21.7%, lower than the 22.5% tax rate last year, driven primarily by benefits associated with equity-based compensation during the quarter. Despite this benefit, we continue to expect our full year adjusted tax rate to be around 23%.

Adjusted EPS was $4.25, up 10.6% from last year. Free cash flow was $71 million compared to a use of cash of $108 million last year. The increase in free cash flow was primarily due to higher cash earnings. As a reminder, our first quarter is typically our lowest quarter for free cash flow. We continue to expect free cash flow in the range of $1.24 billion to $1.36 billion for full year 2026.

Looking to the segments. Diagnostic Laboratories delivered another strong quarter with 5% revenue growth to $2.8 billion. With that, we have 2.9% organic growth, 2% acquisition-driven growth and 0.2% contribution from foreign currency translation. Total volume growth was 2.5%, with 1.1% organic growth and 1.4% acquisition-driven growth. Volume was constrained by the impact from adverse weather, excluding which organic volume growth would have been closer to 2%. Price mix increased 2.6%, with organic price/mix contributing 1.8%, primarily due to an increase in tax [ provision ]. Acquisitions grew 0.6% and foreign currency translation contributed 0.2%. Diagnostics adjusted operating income was $459 million, or 16.6% of segment revenue compared to $428 million or 16.3% of revenue last year. Adjusted operating margin expanded 30 basis points, primarily driven by organic growth, despite the impact from adverse weather.

Biopharma Laboratory Services revenue grew to $781 million, up 8.2% compared to last year, which includes a 5.5% benefit from foreign currency translation. We delivered organic growth of 3.7%, partially offset by our Early Development strategic actions of 1%. In organic constant currency, Central Labs revenue grew 4.9% and Early Development revenue grew 0.7%. BLS segment adjusted operating income increased to $121 million or 15.5% of revenue compared to $107 million or 14.8% of revenue last year. Adjusted operating margin was up 60 basis points, driven by growth in Central Lab. We continue to make progress on strategic actions in Early Development, which will be largely complete by the end of the second quarter. Our BLS segment ended the quarter with a backlog of $8.6 billion, and we expect approximately $2.7 billion to convert into revenue over the next 12 months. Our segment quarterly book-to-bill was 0.94 and is expected to improve sequentially in the second quarter versus the first quarter. Our trailing 12-month book-to-bill remains healthy at 1.04.

Turning to our expectations for 2026. Our full year guidance assumes foreign exchange rates as of March 31, 2026. The guidance also reflects our current capital allocation assumptions, including the use of free cash flow for acquisitions, share repurchases and dividends. We are raising the midpoint of the enterprise revenue range by approximately $30 million and the midpoint of the EPS range by $0.13.

Looking at revenue, we expect enterprise revenue to grow 5% to 6.1%. This includes the tailwind from foreign currency translation of approximately 40 basis points. We expect Diagnostics segment revenue to grow 5.1% to 5.9%. This guidance assumes the majority of revenue growth comes from organic growth. We expect the BLS segment revenue to grow 3.8% to 5.4%, despite [ taking corporate state ] actions in Early Development and the tailwind from foreign currency translation of [ 150 ] basis points.

For the full year, on an organic constant currency basis, we continue to expect the Central Lab revenue to grow in the mid-single digits and for Early Development revenue to be relatively flat, with the second half being stronger than the first half. We continue to expect enterprise margin expansion with margins improving in both Diagnostics and BLS in 2026 versus 2025. BLS margin is expected to expand more than Diagnostics, reflecting continued strong top line growth in Central Labs and operating efficiencies in Early Development as we streamline the business.

As an enterprise, we continue to benefit from our [ large hedging ] initiative, which remains on track. Our adjusted EPS guidance range is $17.70 to $18.35 with an implied growth rate at the midpoint of approximately 10%. As compared to [ product finance ], we have narrowed the range and reached the midpoint by $0.13. Our free cash flow guidance range remains $1.24 billion to $1.36 billion, weighted towards the second half of the year. And we continue to expect capital expenditures to be approximately 4% revenue as well as investing in a new strategic facility to support long-term growth in our Central Labs services operations.

We expect to continue delivering profitable growth and strong free cash flow and drive disciplined capital deployment across acquisitions that support our strategy and complement organic growth, while also returning capital to shareholders through share repurchases and dividends, we remain confident in our ability to deliver durable growth and long-term value for our shareholders.

Now I'd like to turn the call back over to Adam for closing remarks.

Thank you, Julia. I'm pleased to announce that we'll be holding an Investor Day in New York City on September 10. We'll share more details as we get closer to the day.

In summary, we had a very strong quarter. Our performance is the result of disciplined execution of our strategy which positions us to deliver long-term sustainable growth, margin expansion and value for our customers and shareholders. Ultimately, our performance is a result of our employees' commitment, compassion and innovation which continue to accelerate our mission to improve health and improve lives around the world. We'll now take questions.

[Operator Instructions] And our first question comes from Lisa Gill of JPMorgan.

Adam and Julia. I just want to go back here to the first quarter. Can you discuss the impact of weather in the quarter? And then thoughts around the ACA exchange and potential changes that are coming about there. I believe that you put a number around that previously. And so should I just think that -- what did we see in the first quarter, if we didn't see anything? Are you still expecting that there could be some headwinds from those volumes as we move towards the rest of the calendar year?

Yes. Thanks for the question, Lisa. So if you look at weather in the first quarter, we estimate it was about a $15 million impact for the quarter. In general, if you look at that, it would impact the diagnostic business, obviously, more so than the central laboratory business. We would expect that the organic volume growth would have been approximately 2% if it wasn't for the impact of weather.

Yes. Lisa, in terms of your question, as it relates to the ACA impact, previously, we provided an estimate of 30 basis points to the Diagnostic volume this year. Now the impact that we saw in the first quarter was really immaterial, although it is perhaps too early to be able to draw any form of conclusion. As we know, the year-to-date enrollment is slightly better than expectations. What we do continue to monitor is if they enrolled participants are indeed paying the premium, and equally importantly, if that has been translating into the testing utilization by this insured group. Now at this point, we continue to believe that the 30 basis point volume impact is a good estimate to work with, which is reflected in our full year revenue guidance for Diagnostics for 2026.

And our next question comes from Jack Meehan of Nephron Research.

I wanted to ask you about one of the big policy questions we've been getting at the moment, which is the new one that's related to the CRUSH initiative. Adam, what do you think this means for Labcorp in the lab industry broadly speaking? And is it possible you can share any color around any exposure, some of the codes that have been highlighted.

Yes. Thanks, Jack. So if you look at CRUSH, what CMS is attempting to do is to reduce fraud, to reduce waste and to reduce abuse. The process has been going on, frankly, for several months now. And we're supportive of any initiative that can create a level playing field within the industry and support what's right for patients. I mean nobody wants there to be abuse in the system. Health care costs are high, and we've got to find ways collectively to reduce those. And a good way to do it is to reduce any type of waste, fraud and abuse.

Now we worked with our trade organization, ACLA, we submitted a comment letter in March, [ and the letter encourages CMS to ] kind of be thoughtful in their efforts so that they can avoid unintended consequences, such as impeding Medicare patient access to medically necessary laboratory testing to prevent them from potentially punishing legitimate providers. So when I think about it, it makes sense to try to reduce the fraud and abuse, but we have to find the appropriate way to do that and not getting away of what we're really trying to do, which is to improve patients' health and lives.

And our next question comes from Michael Cherny of Leerink Partners.

Maybe if I can go back to the volume side on DX. Obviously, you mentioned some of the mix dynamics on test per requisition. As you think about the trajectory and what's embedded in guidance, what are the moving pieces that you see around that number against the backdrop of how share is progressing relative to just broader volumes? Any thoughts would be great.

Sure. And let me give some context, and I'll answer the question directly. So if you look at Diagnostics revenue, we had a 5% increase over last year. It reached $2.8 billion. If you look at the organic growth, it was about 3%. Acquisitions were about 2%, and there's just about slight, slight impact in foreign currency.

So if you go to volume growth, it was 2.5%. And was organic growth. That would have been higher, about 2% if it wasn't for the weather. And about 1.4% was acquisition-driven. If you look at the price mix, there was a good increase of 2.6% with organic price/mix being about 1.8% of that. As I think about it, you are seeing substantial growth in the specialty areas like neurology, oncology, autoimmune disease and other areas that we're focused on. In those areas, you tend to see less successions but more test per accession and a higher price per test, particularly in areas like oncology.

So I feel good about where we are. I feel like we've got momentum as we move into the second quarter and the rest of the year. I feel good about the mix of the business that we're seeing. We're focused on the higher-margin business where we can continue to get good volume but also at a good price and good margin. And I think that's why you're seeing such good improvement in our margins as well. So net-net, I feel confident in the guidance that we've provided, and I feel good about the momentum to get there.

And Michael, maybe to just build on what Adam just shared. If you look at our updated guidance for the diagnostic revenue for full year 2026, the midpoint growth is 5.5% and we continue to expect the majority of that revenue growth to be coming from organically.

And our next question comes from Patrick Donnelly of Citi.

Can you talk a bit more about the bookings trends you're seeing in BLS? If you guys can break down what you see in ED versus Central Lab in the quarter, that would be helpful. And then you commented that quarterly book-to-bill you're expecting to be up sequentially 2Q versus 1Q. Can you just talk about what's driving that confidence? Is that improved conversations with customers recently? And any color there would be helpful.

Yes, absolutely. So I feel very good about the progress and the momentum that we have in our BLS business. We had an 8% growth over last year, and it was about 4% from organic revenue. If you kind of look at the 2 businesses, you see the BLS segments going well, but the Central Labs are actually driving the growth. Central Labs grew 11% or 5% if you look at it on an organic constant currency basis. And then the Early Development business is relatively flat. We still make a lot -- we made a lot of progress on our strategic actions in Early Development, and those will be completed by the end of the second quarter. So I feel good about the momentum. It enabled us to raise the midpoint of the guidance for our BLS segment.

As I look at the quarterly book to bill, we had a very strong quarter in fourth quarter last year. If you look at our trailing 12 months right now, it's at 1.04. The quarter was about 0.96, but we stated that 0.94, but we stated that we expect sequential growth in the second quarter. That's based upon the 0.94 being mostly driven by timing. Some that fell into fourth quarter versus first quarter, some [ of that fell ] from first quarter into second quarter. We are having a good RFPs. We have a good win rate. And as I look at the rest of the year, I expect to have a book-to-bill that will remain above 1.

I've always said you want to have a book-to-bill above one. But then it's also a tale of 2 cities. If you look at Early Development, you'd expect that book-to-bill to be below 1 because a lot of the business can be gotten and then actually occur within the same year. The BLS business is typically above a 1.0. If you look at the trailing 12 months, that's what you would see if you looked at the 2 separate businesses. And the BLS business is mostly longer-term, larger-scale trials. Those trials are continuing to come to RFP, and I feel very good about our ability to win those trials. I have confidence in the book-to-bill as we move through the rest of the year. That's what made me feel confident to raise the midpoint of the BLS guidance.

And our next question comes from Tycho Peterson of Jefferies.

Wondering if you could just touch a little bit more on esoteric testing. I think MRD, you obviously expanded the indication portfolio in [ breast, lung, stage 3 colon ]. So maybe just touch on the reimbursement pathway there for the different buckets? And then Alzheimer's, I know you did the Roche deal for the primary care market. How are you thinking about that versus specialists?

Yes. Thanks, Tycho. So as I look at the specialty areas. I feel very good about our momentum. I feel good about our scientific leadership, and I feel good about the trends moving into the future. We focus on 4 key areas: neurology, oncology, autoimmune disease and women's health. And each of those areas, we're continuing to lead with the types of tests that we're bringing into the marketplace. You specifically mentioned neurology. Neurology is growing, particularly in Alzheimer's disease, all neurologies going, but it's being driven by our success in Alzheimer's disease. We don't yet break out the individual segments, but it's getting to be at a point where at some point, we will break it out because it is growing so quickly.

If you look at the test, we are a leader in that field, in the number of test, the types of tests and our ability to have large scale to bring those tests to a primary care setting. As we mentioned, in oncology, we continue to bring new tests to market. We continue to feel good about our science. When we think about liquid biopsies and solid tumors in oncology and tissue test, we remain a leader. And in those areas, the reimbursement aren't necessarily quite where we'd like them to be at the moment. But I think over time, as we collect more data, we run more trials, the reimbursement will get there.

But what's important to note is when you win in these areas. Many of these patients require a lot of tests outside of just the specialty tests. So an oncology patient that is being treated for cancer. they get test for their white blood cells, red blood cells coves, their liver, their kidneys. So when we tend to win the specialty task, we also tend to get all the other tests that a physician might want for that patient and find appropriate for that patient. So our success in the specialty areas also leads to additional success in the overall marketplace.

And our next question comes from Elizabeth Anderson of Evercore ISI.

I was wondering if you could update us on your thoughts about the PAMA survey that starts tomorrow. Are you hearing in terms of hospital participation? And how do you sort of see that impacting potential updates to pay to later in the year for next year? And then also, any updates you have on the RESULTS Act progress?

Absolutely. And obviously, this is something we spend a lot of time thinking about. We spent a lot of time with our trade organization, and we spent a lot of time in Washington talking about the importance of the RESULTS Act. We continue to push the implementation to the results. We think that is the right appropriate best path forward. Our trade group, ACLA, has been doing a lot of advocacy. And I can tell you, there is an understanding across the Senate, across Congress, that a long-term permanent fix needs to be enacted.

In terms of what we're waiting for, for results, we're really waiting for a CBO score, which could give us a sense of the likelihood of approval. We're waiting for CMS to do the technical essence on the bill. So there are several steps that we're still waiting for. So in the meantime, we continue to make sure that we submit the data according to the law, which we will do. And the impact of PAMA, if the RESULT Act does not go through this year and PAMA actually comes to fruition next year, the impact to Labcorp will be highly dependent upon the number of other laboratories, including hospital laboratories that report their data. The more that report, the lower the impact will be for Labcorp because we are a very high quality but lower cost with broad reach laboratory. So there's a lot of work being done to encourage laboratories in hospitals and other settings to report their data. We just don't have any insight yet as you mentioned, the reporting is just about to begin as to how many people may or may not report the data. But of course, Labcorp will.

And our next question comes from David Westenberg of Piper Sandler.

So I wanted to talk on the consumer testing environment with Labcorp OnDemand. And of course, you're launching the MyLabcorp in May with the AI assistant. So just given the fact that this has been growing double digits in consumer health, and it is a strategic priority. Could we see some investments from you over the next couple of years and some DTC efforts? And how should we think about the magnitude of that growth and the expenses there? And how should we think about ROI?

No, absolutely. It's an important question, and we spend a lot of time looking at the consumer market. As you mentioned, Labcorp OnDemand continues to expand, continues to grow, and it's growing strong double digits. And we continue to bring new tests to marketplace through OnDemand. We now have over 200 biomarkers in categories like men's and women's health and cancer screening, sexual health, longevity, and those are all available as we speak today.

We already do some advertising to consumers, particularly through social media and other areas for OnDemand. And I would expect that business to continue to show good strong growth, and we will continue to invest in bringing new products to market and into the appropriate advertising to consumers where it makes sense. We also continue to look at the other parts of the consumer business. We've decided at this moment, there are some parts of it that although there is strong volume at the current pricing and not knowing the floor of the pricing that we're not necessarily going to compete at this time.

We'll continue to evaluate that. But we see so much growth opportunities in the specialty areas, in the areas where there's significant medical unmet need, where we can win scientifically with what we can bring to market with new tests. And in those areas where they have a great reimbursement but also have higher prices and margins that we continue to focus in those areas. We continue to focus on the business development pipeline that we have in the hospital deals that we're doing, and we have a very long, broad pipeline of those types of deals. So as I think about the future, I am optimistic about our growth prospects before us and the strategic priorities that we've put in place.

And our next question comes from Michael Ryskin of Bank of America.

I want to ask on LaunchPad initiative and just sort of margins throughout the year. Just give us an update on progress there. And you saw 40 bps of margin expansion in the first quarter to 2 expansion throughout the year, I think, across both segments. Would just love to hear your comments on pacing through the year, ability to take cost versus just top line volume benefits?

Sure. I'll start with giving you a sense of LaunchPad and then I'll ask Julia to talk about the margins. If you look at LaunchPad, we're on track. We continue to make strong progress. And a lot of what we're doing right now is thinking how do we use technology, including artificial intelligence, robotics and computation to help us reduce costs but also to improve the customer experience, things like MyLabcorp that we're launching to help patients understand their lab results better, their health better and so forth.

So as I start to think about AI, think about it in multiple ways. One, what can we do to improve customer experience, what can we do in order to try to drive revenue? The second thing is how do we drive operational efficiency from it? Or how do we change processes? And you've seen us talk about certain things that we're doing with digital pathology and microbiology and things that we're doing in psychology, all these things will help to reduce cost over time. We've talked about things that we're doing with billing using artificial intelligence in order to reduce bad debt. And I think all of those things will help us with things over time. That's a revenue generator.

So as I look at the future, a lot of the costs coming out will be driven by technology, and then I'll ask Julia to give you a little more information about the margins.

Yes. Michael, we are really pleased with our margin progression. Over the past few quarters, we have been disciplined and consistent in driving margin expansion across the entire enterprise, including both segments. As you can see in the release this morning, in the first quarter, our Diagnostics segment margin was improved by 30 basis points versus prior year, primarily driven by organic growth despite the impact from adverse weather.

As we look to the full year 2026, we continue to expect another year of margin improvement in Diagnostics supported by strong revenue growth as well as operating efficiencies, including LaunchPad initiatives that Adam just shared. Now as you move to the BLS segment, in the first quarter, the margin was improved by 60 basis points versus a year ago. And this improvement was primarily benefiting from the strong top line growth in Central Labs which, as you may know, is the more profitable business within the segment.

Now on a full year basis, we continue to expect the BLS margin to improve more than [ that for ] Diagnostics as we continue to benefit from organic growth in Central Labs and the strategic actions that we are taking in ED. All in all, I would say that the margin expansion across the enterprise inclusive of the 2 operating segments is expected to contribute to the double-digit EPS growth guidance at the midpoint for full year 2023 that we just updated this morning.

And our next question comes from Luke Sergott of Barclays.

This is actually Anna Kruszenski on for Luke. I wanted to go back to margins actually. If you could talk about maybe what you have baked in, in terms of potential inflation on fuel costs. And if you have anything baked in on additional weather headwinds for later in the year? And then lastly on that weather point. Curious if you could talk about how -- like what percentage of appointments that had to be canceled you were able to recapture like later in the quarter or in 2Q?

Okay. I'll start with the last one first, and then I'll ask Julia to talk a bit more about the margins. If you look at the weather impact, the way I think about that is approximately 20% to 25% of our business goes through our service centers. And we know who has appointments, we know who has requisitions and we get the vast majority of those patients back over time because we know who they are. But the other 75% goes through physicians' offices, there, we don't necessarily know who has appointments. We don't necessarily know the doctor's availability to take on those additional patients. So that's a bit harder to go after until those requisitions are available within the system.

Yes. Let me start with the fuel cost. So obviously, we've been closely monitoring the situation, and we currently actually expect a minimal impact to our business. Of course, the oil and gas prices have been dynamic. And our diagnostic logistics network does include a fleet of [indiscernible], but we have been shifting to hybrid vehicles over time, which helps us mitigate this risk to a certain degree. And if you just look at the fuel prices in early April, the estimated AOI impact is approximately $5 million to $10 million this year. We believe this impact is manageable, and we have reflected that in our updated guidance. I think the other question you had is really related to weather assumption for the balance of the year.

Now just as a practice, we generally do not bake in explanted assumptions for whether for our forecast simply because it's something a little bit difficult to really project. But with that being said, as you further shared earlier, if you look at our full year revenue guidance for our Diagnostic business segment, we are looking at revenue growth of anywhere between 5.1% to 5.9% with a midpoint of 5.5%. So I think when you think about certain factors that could potentially move us within that range, weather could be one of the factors.

With that being said, of course, we continue to have a very robust M&A pipeline. And to the extent that we continue to make progress in depending upon the timing that could actually be another factor that moves us a little bit towards the high end of the range. So all in all, I would say that at this point in time, we are comfortable with the range that we are providing and we are encouraged to head into the second quarter of this year.

And our next question comes from Erin Wright of Morgan Stanley.

How would you describe the deal pipeline right now? Like what are you seeing in terms of the pipeline, both in terms of acquisitions as well as partnerships, outreach deals otherwise, like given just the landscape that we're in, the uncertainties and see -- are you seeing an acceleration or building pipeline of these types of deals with health systems or otherwise? And how does it maybe compare to this time last year?

Yes. Thanks for the question. Our pipeline remains very strong. And I would say it's accelerated versus this time last year. It was strong this time last year. I've spent quite a bit of time talking with different folks in health systems across the country. And I think you're right, they are struggling right now, and they are looking for ways to partner and for ways for us to work with them. And I don't think that is going to stop anytime soon. In fact, if PAMA is implemented in January, although there will be a short-term impact during the year to us, I think over time, it actually will increase the pipeline of deals because these regional laboratories are under a lot of stress already. These hospital system laboratories are distressed already, and I think that would just make it more difficult. So stay tuned. I expect we'll have some more deals that we'll be talking about in the future, and I look forward to talking about those.

This concludes our question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Q4 2025 Labcorp Holdings Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Christin O'Donnell, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Labcorp's Fourth Quarter 2025 Conference Call. As detailed in today's press release, there will be a replay of this conference call available. With me today are Adam Schechter, Chairman and Chief Executive Officer, and Julia Wang, 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 an Investor Relations presentation with additional information on business and operations, which includes a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures. Please see the use of adjusted measures section in our press release and Investor Relations presentation for more information regarding our use of non-GAAP financial measures.

Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2026 guidance and the related assumptions, the projected impact of various factors on the company's businesses, operating and financial results, cash flows and/or financial condition, including global economic and market conditions, future business strategies and expected savings, benefits and synergies from acquisitions and other strategic actions and partnerships and opportunities for future growth. Each of the forward-looking statements is subject to change based upon various factors, many of which are beyond our control. More information is included 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, Christin, and good morning, everyone. We appreciate you joining us to review our fourth quarter and full year 2025 performance and our outlook for 2026. 2025 was a very strong year for Labcorp with over 7% top line growth, 13% adjusted EPS growth and with margins also improving by over 50 basis points. With the momentum that we have, we expect strong underlying business performance in 2026. As we look back at 2025, we made significant progress across our strategic priorities. We deepened our partnerships with health systems and regional and local laboratories by signing or closing 13 deals. The transactions we have closed in this area over the past three years have contributed to growth of more than $1 billion in revenue and have expanded access to our broad portfolio of routine and specialty testing. In the fourth quarter, we entered into an agreement to acquire select outreach laboratory services from Parkview Health.

We completed our acquisition of select outreach assets from Community Health Systems, and we acquired select anatomic pathology assets from Incyte Diagnostics. Subsequent to the quarter, we completed our acquisition of select assets of Empire City Laboratories. We continue to have a very robust pipeline of opportunities, and we look forward to updating you on our progress. We also advanced our leadership in specialty testing with providers, health systems and pharmaceutical clients. They're increasingly turning to us for more complex and innovative laboratory testing. In fact, esoteric testing grew double digits last year. And when physicians choose Labcorp for specialty testing, they tend to use Labcorp for all of that patient's testing needs. This will continue to be a key growth engine, including in our central laboratory business, where utilization of specialty testing in clinical trials continues to increase.

In 2025, we launched more than 130 new tests. The majority of those were in strategic and high-growth areas, including oncology, women's health, neurology and autoimmune disease. We also successfully integrated Invitae, expanding our leadership in genetic testing solutions. Recently, we added several new specialty tests. In January, we expanded access to MRD testing for Stage I through III breast cancer, stage I through IIIA non-small cell lung cancer and Stage III colon cancer to help detect recurrence earlier than traditional imaging. In oncology, we now offer comprehensive and advanced testing capabilities with over 450 tests for many types and stages of cancer. We also advanced our leadership in neurology and launched the first FDA-cleared blood test for Alzheimer's disease assessment in the primary care setting.

This will enable broader access and better and more timely patient care. And in Consumer Health, we saw strong growth as consumers look to take more control of their health and wellness. Last year, Labcorp OnDemand continued to expand and now offers tests for over 200 biomarkers in categories like men's and women's health, cancer screenings, sexual health and longevity. In the quarter, OnDemand launched new tests for food allergies, micronutrients and thyroid health. We also continue to make significant progress through technology and AI-powered solutions to accelerate innovation to improve quality, to enhance customer experience and to operate more efficiently. For example, we launched AI and automation in areas such as pathology, cytology and microbiology. Recently, we announced that Labcorp became the first U.S. commercial laboratory to enter in an agreement to implement Roche's fully automated mass spectrometry solution.

In addition, we improved the customer experience in several areas. AI-powered solutions simplified appointment scheduling and results reporting for consumers. Our AI test finder experience for physicians helps them find the right lab test in seconds, freeing up time for patient care. And Labcorp's Global Trial Connect will help to accelerate clinical trials for investigator sites and for sponsors. Finally, we announced a strategic investment to build a new central laboratory facility to support growth and demand, which will enable us to deliver more integrated connected experience for customers. Construction of the new state-of-the-art 500,000-plus square foot laboratory and kit production facility is expected to begin later this year. Our strategic focus and disciplined execution drove strong financial results in 2025.

In the fourth quarter, enterprise revenue increased 6%. Margins improved 120 basis points and adjusted EPS grew 18%. Diagnostics revenue increased 6% with organic growth of over 4%. Central Laboratory revenue increased 11% or 8% constant currency and as expected, early development revenue declined. The Biopharma Laboratory Services segment book-to-bill in the quarter reached 1.16 and the trailing 12 months was also strong at 1.09. Our central laboratory business saw strong demand, underscored by wins in oncology, neurology and also in cardiometabolic studies. Free cash flows from continuing operations were $490 million. Based upon the momentum of our business going into 2026, we expect full year enterprise revenue growth of 5.4% at the midpoint of our guidance, improved margins across both segments and adjusted EPS growth of approximately 9%. This outlook reflects the delay of PAMA through December 31, 2026. While we are pleased by the delay, permanent reform is necessary, and we will continue to advocate for the passage of the RESULTS Act this year.

Finally, Mark Schroeder, Executive Vice President and President of Diagnostics and Chief Operations Officer; and Sandy Van der Vaart, Executive Vice President, Chief Legal Officer and Corporate Secretary, will be retiring, April 1. It has been a privilege to work with Mark and Sandy. They have made extraordinary contributions, shaped our strategy, developed strong talent and strengthened our ability to deliver on our mission. Their successors have been appointed following a thoughtful succession plan, and we look forward to introducing them to you in the coming months and as we plan for an Investor Day later in the year.

With that, I'll turn the call over to Julia to discuss our financial results and 2026 outlook in greater detail.

Thank you, Adam. My remarks today will focus on our adjusted financial results. Please see our earnings press release and supplemental financial presentation for detail on our GAAP results. In 2025, we made meaningful progress on our strategic priorities and delivered strong financial results. In comparison to prior year, enterprise revenue grew over 7% and enterprise margins expanded over 50 basis points, driven by ongoing strong performance in Diagnostics and Central Labs. Our LaunchPad initiative also delivered savings for the full year, in line with our long-term target of $100 million to $125 million per year. Adjusted EPS grew 13% and free cash flow of $1.2 billion grew 10%. We ended the year with a strong trailing 12-month book-to-bill of 1.09, driven by Central Labs.

Now turning to fourth quarter results. Revenue was $3.5 billion, an increase of 5.6% compared to last year, driven by organic growth of 3.8%, the impact from acquisitions of 1.2% and foreign currency translation of 0.6%. Adjusted operating income was $488 million or 13.9% of revenue compared to $423 million or 12.7% of revenue last year. The increase in adjusted operating income and operating margin was primarily driven by organic growth in Diagnostics and Central Labs. The adjusted tax rate was 22.5% compared to 22.4% last year. Adjusted EPS was $4.07, up 18% from last year. Free cash flow was $490 million, compared to $665 million last year. The decrease in free cash flow was primarily driven by working capital timing. During the quarter, we invested $258 million in acquisitions, paid out $59 million in dividends and repurchased $225 million of stock. We continue to have a robust pipeline of potential acquisition opportunities that meet our financial criteria and will supplement our organic growth.

In addition, our share repurchase program and dividend continue to be important parts of our capital allocation strategy. The company currently has approximately $800 million of share repurchase authorization. At year-end, we had $532 million in cash, while total debt was $5.6 billion. Our debt leverage as of year-end is 2.3x gross debt to trailing 12-month adjusted EBITDA, reflecting a disciplined leverage position. Now I will review our fourth quarter segment performance, beginning with Diagnostics Laboratories. Revenue was $2.7 billion, an increase of 5.5% compared to last year, with strong organic growth of 4.1% and acquisitions contributing 1.5%. Total volume increased 2.2% with organic volume and acquisitions each contributing 1.1%. Price/mix increased 3.3%, with organic price/mix contributing 3%, primarily due to an increase in test per session. Acquisitions contributed 0.3%.

Diagnostics adjusted operating income was $419 million or 15.4% of revenue compared to $360 million or 13.9% of revenue last year. Adjusted operating margin was up 150 basis points, primarily driven by organic growth, which includes Invitae. Now I will review the fourth quarter segment performance for Biopharma Laboratory Services or BLS. Revenue was $793 million, an increase of 3.4% compared to last year due to an increase in organic revenue of 0.6% and foreign currency translation of 2.8%. In the quarter, Central Labs performed well and revenue grew 11.1% or 7.7% constant currency. Early Development revenue was down 13.5% or 15.1% constant currency, and we continue to focus on streamlining our business, which will reduce annual revenue by $50 million and increase operating income.

The actions began in the fourth quarter 2025, and we expect to be largely completed by the end of the second quarter. BLS adjusted operating income was $136 million or 17.2% of revenue, compared to $131 million or 17% of revenue last year. Adjusted operating income and operating margin were slightly up due to Central Labs revenue growth. We ended the quarter with a backlog of $8.7 billion, and we expect approximately $2.7 billion of this backlog to convert into revenue over the next 12 months. Our segment quarterly book-to-bill and trailing 12-month book-to-bill was strong at 1.16 and 1.09, respectively. Now I will discuss our 2026 full year guidance, which assumes foreign exchange rates effective as of December 31, 2025, for the full year.

The enterprise guidance also includes the impact from currently anticipated capital allocation, utilizing free cash flow for acquisitions, share repurchases and dividends. Beginning with the enterprise, we expect revenue to grow 4.7% to 6% compared to prior year. This includes the tailwind from foreign currency translation of approximately 40 basis points. We expect Diagnostics revenue to be up 5% to 6% compared to 2025. This guidance assumes the majority of revenue growth comes from organic growth. We expect BLS revenue to grow 3% to 5% versus prior year. This guidance incorporates the actions taken in Early Development and a tailwind from foreign currency translation of 170 basis points. For the full year, we expect Central Labs to grow mid-single digits organic constant currency, with Early Development relatively flat, improving throughout the year.

We expect enterprise margins to increase with margins improving in both Diagnostics and BLS in 2026 versus 2025. BLS margins are expected to expand more than Diagnostics, reflecting continued strong top line growth in Central Labs and operating efficiencies in Early Development as we streamline the business. As an enterprise, we anticipate our LaunchPad initiatives to deliver savings for the full year 2026, in line with our long-term target of $100 million to $125 million per year. We expect our adjusted tax rate for 2026 to be approximately 23%, and we expect net interest expense of approximately $230 million.

Our guidance range for adjusted EPS is $17.55 to $18.25 with an implied growth rate at the midpoint of approximately 9% and includes an impact from adverse weather year-to-date. Our free cash flow guidance range is $1.24 billion to $1.36 billion. And due to normal seasonality, we expect it to be weighted towards the second half of the year. We expect 2026 capital expenditures to be approximately 4% of revenue, higher relative to prior year as we began investing in a new strategic facility to support long-term growth in our Central Labs service operations.

In summary, we are encouraged by the underlying strength of our businesses. As we move into 2026, we expect to drive continued profitable growth and strong free cash flow generation that will be utilized for acquisitions that support our strategy and supplement our organic growth while also returning capital to shareholders through our share repurchase program and dividends. As we look ahead, we are confident in our ability to deliver sustainable growth and long-term value for our shareholders.

Now I will turn the call back over to Adam to provide closing remarks.

Thank you, Julia. I'd like to thank our Labcorp team members for their contribution to a very successful year. It's because of their commitment to our mission that Labcorp was recently named to Fortune World's Most Admired Companies list. In summary, we delivered strong financial performance in 2025. We made significant progress against our strategic priorities, and we expect strong performance in 2026. We remain focused on growth, disciplined execution and creating sustainable long-term value for our customers and our shareholders. We look forward to discussing our progress throughout the year.

Operator, we'll now take questions.

[Operator Instructions] And our first question comes from Michael Cherny of Leerink Partners.

This is actually Dan Clark on for Mike. Just wanted to ask on 2026 guidance. How are you kind of thinking about the contributions from price and margin -- price and volume, excuse me, kind of at the high and low ends of the range at this point?

Yes, sure. So first of all, if you look at our 2026 guidance, we expect another very strong year. And we expect that with the midpoint of our revenue growth being about 5.4%, and we expect both segments to perform well. I think you're probably referring to the volume in the Diagnostics segment. If you look at Diagnostics, we're expecting the revenue to grow 5% to 6%, and we expect the majority of the revenue growth to come organically. And if you look at the guidance, we assume about half of the organic growth will come from volume and about half will come from price/mix, pretty similar to what you saw this year.

Dan, to add to that, I'd like to provide some color on our margin trajectory under a broader context. I would say that as an enterprise, we have been highly focused on delivering strong top line growth while driving operating efficiencies, which translates into margin expansion. In this regard, we are really pleased with the progress that we made in 2025, which positions us with positive momentum as we head into this year. So for full year 2025, we expanded our enterprise margin by over 50 basis points, and the margin growth was supported by both segments, with Diagnostics margin being up about 50 basis points and BLS margin was up 40 basis points. If you step back, look at the key drivers of the margin expansion, it was really coming from the strong top line growth, coupled with disciplined expense management and continued execution of our LaunchPad initiative.

Looking forward to 2026, we actually expect another year of meaningful margin improvement by both segments. I would also add that if you look at the contribution in terms of margin progression versus last year, we expect BLS segment to improve more than the Diagnostics segment as we continue to drive strong top line growth in Central Labs while streamlining the ED business. So all in all, we are pleased with the margin progression, and we believe it positions us for continued success in 2026.

Just a quick follow-up. How should we think about contributions from Invitae this year, given that you did a pretty good job integrating it thus far?

Yes. So the Invitae integration went extraordinarily well. And in fact, it's so integrated, it's almost impossible to pull out any longer because if you look at the Invitae lab, for example, in San Francisco, we now are running tests that historically ran in some of our diagnostic labs. If you look at the sales forces, they're now completely combined. So we expect strong revenue growth as one of our specialty areas. We expect that to grow to 2 to 3x faster than the overall market. But we won't be breaking out Invitae any longer specifically.

And our next question comes from Kevin Caliendo of UBS.

The fourth quarter organic volume was lighter than normal, up 1%. Was there anything in particular to call out there? It was sort of one of your -- given the volume trajectory that you saw in the guidance what you imply in '26, it seems an outlier, but I just want to understand it a little bit better.

Yes. Let me give you some specifics on that, Kevin. So first of all, if you start with the Diagnostics revenue, it was $2.7 billion, around 6% growth versus last year. The organic growth was strong. It was 4.1% and the acquisitions were about 1.5%. If you then kind of break it back further, the volume increased 2.2% and organic volume was about half of that, acquisitions was the other half. If you look at the organic volume, there were two things to look at that impacted it.

First of all, there were lower referrals from a large consumer genetic client who experienced financial challenges during the fourth quarter. And there was just a little bit from weather. If you just adjusted for those two, Kevin, it would have been over 2% growth, which is consistent with the full year. As we think about 2026, we expect strong growth in the Diagnostics business of 5% to 6%, 5.5% at the midpoint. And that assumes about half of it will come -- or the majority of the revenue will come organically. And if you look at the organic growth, about half will come from volume, half from price/mix, about the same as this year.

So that one customer that was just -- a fourth quarter, it sounds like that's really the issue here, and that was a fourth quarter thing that's not going to continue or no longer...

That's correct.

And our next question comes from Ann Hynes of Mizuho.

So when you look at your 2026 guidance, where do you think maybe you're being the most conservative? And alternatively, where do you think the biggest risks are?

Thanks, Ann. So as I look at the enterprise guidance for 2026, I feel really good about it. And if you look at the -- it's really 4.7% to 6% revenue guidance and the EPS guidance implies about a 9% growth at the midpoint. If you look at the pushes and pulls, I'll focus on Diagnostics first. We expect the utilization environment to be healthy. We're seeing these industry trends that I talked about before, aging population, a number of tests that people are getting, lots of positive trends in that direction. But of course, slightly higher or lower organic volumes could move us within the range to the high end. If you think about the underlying business and business development pipeline, that's strong and the timing of M&A could impact us one way or the other. So we have a very strong pipeline of M&A, but we're going to continue to see how quickly we can turn that pipeline into revenue.

If you look at biopharma side, if you look at the Central Labs, we expect to see solid organic mid-single-digit growth, and you can see the strong trailing 12-month book-to-bill that will support that. And that's a very backlog-driven business. So I feel good about the guidance. If you think about Early Development, we expect to see organic growth relatively flat for the full year. It will be driven partly by how quickly we either consolidate or we've already sold the $50 million of impacted revenue. We expect that to impact us started in the fourth quarter, but the majority will be done by the end of the second quarter. And it's just the timing of that, that can impact us a bit one way or the other. Those would be the big pushes and pulls.

And just as a follow-up, do you think there's any change to the competitive landscape in the Diagnostic business? And when you look at like the break of test, I know there's like a lot of these consumer tests happening. How do you view your market share in those type of consumer tests versus peers?

Yes. So I continue to believe that the Diagnostic market is strong and that we will outperform, continue to perform slightly better than the overall market growth of the market. When I think strategically of where we're focused, first and foremost, we've talked about the hospital deals and the strong pipeline that we have. Those hospital deals in the past few years have contributed to more than $1 billion of growth. Those hospital deals are overall about our average margin, and there are things that we can implement well and integrate well. So we're going to continue to focus there. I talked about specialty testing, and we launched over 130 new tests last year. The majority of those were in the 4 areas of women's health, oncology, neurology and autoimmune disease.

We see those areas growing 2 to 3x faster than the overall diagnostic market. So that's going to continue to be a growth engine for us, good margins. But in addition to that, when you have a specialty patient that uses your specialty test, the physician tends to use all of our testing for the patients' needs there. So it has a really good return for us. Then when I think about consumer business, if you look at our Labcorp OnDemand, we've launched over 200 different biomarkers in areas like women's health, men's health, longevity. We will continue to focus and launch new tests there. We have our Ovia Health, which helps the women throughout the stages of her life, and that's doing very well. And then we have our consumer genetics testing, which is also continuing to do well. If you look at those three together, we have very strong growth.

We don't break out the dollar amount yet. It's not yet at that level where I believe it's critical to break out. But with the growth rates that I see, I expect that we will break that out at some point into the future. Where we haven't necessarily been focused is on the other areas of consumerism and some of the wearables and so forth. And those areas, we look at the pricing environment, we look at the margin environment, and we have so many things that we focus on in the other parts of our strategy. I feel that we have just tremendous opportunity before us with the focuses that we have in the areas.

And our next question comes from Jack Meehan of Nephron Research.

First question is on PAMA. Adam, I would love to know how you think this is going to play out this year. Are you prepared to submit in the survey that's going to take place in a few months? And what do you think happens once the data reads out some time in the fall?

Yes. Thanks for the question, Jack. The first thing I'd say is we were pleased that the PAMA was delayed this year. I think it shows that people really understand that the way in which it was intended to be in the marketplace is not the way in which it has been if we continue to use it in the original design. But it's not enough. I mean we're still going to continue to advocate for the RESULTS Act. And that, to me, is the right answer to the problem that we have.

And we're going to continue to work with our ACI trade organization to advocate for the passage of that bill this year. Of course, if we need to submit the data, we will submit the data and we'll be prepared to submit the data. It's hard to understand exactly what would happen because we don't know how many other people will be able to submit the data and what that may or may not show. But under all circumstances, I still believe that the RESULTS Act is the right way for us to enable the -- frankly, the government to achieve the objectives that they put place in the beginning of what they were trying to achieve with PAMA. So to me, that's the right answer.

Okay. And one unrelated follow-up. You mentioned investments in the Central Lab business within CapEx this year. I was wondering if you could just give us an update as to what's going on there and how that's changing your footprint or just where those investments are getting directed?

Jack, maybe I can start by sharing a bit of our thought around the CapEx investment in 2026 in general. And then I'd like to really invite Adam to comment a bit about the business considerations and the footprint planning for Central Lab in particular. So for 2026, we commented that we are expecting the CapEx investment around 4% of our revenue in the year, which is higher than prior years.

And as we shared in the past, as you look at the priority areas in terms of the CapEx investment, it's primarily around refreshing our lab infrastructure as well as our technology investment to ensure that we create a set of experiences for our customers, our patients and our employees that are compelling and differentiated. Now this year, in addition to those areas of investments, we are also starting to plan to invest in an expansion of a new strategic site for the Central Lab business in order to support the long-term growth. And that investment in addition to all the ongoing investment is contributing to the overall planning for CapEx.

With that, Adam, do you want to comment a bit about the business considerations?

So if you look at the business, we are a leader in this business. It is a strong business. I believe it will continue to be a strong business. The majority of our trials are with large pharma or large biotech companies. They're in Phase II, Phase III areas, and there are areas that will continue to get investment from pharma over time in order to launch new products into the marketplace. As we look at the book-to-bill, it remains strong across the segment as well as within the central laboratory. And if you look at the book that we have, it remains very strong and the growth is strong as well.

When I think about the business, we have a truly global footprint. We have the ability to get samples from over 100 different countries around the world. It is a competitive advantage, and our laboratories consistently are able to give results that are using the same types of machinery, the same type of reagents around the world, which I think is a competitive advantage for us. As I think about the growth, it's going to continue to grow. And therefore, we need to continue to invest both in capital for building the kit facility as well as the laboratory we've talked about.

We're also going to continue to invest in areas that improve the customer experience. So for example, our Global Trial Connect is a new digital way to help our pharmaceutical clients track their samples, track their studies, be able to submit data and other things faster than before. So because of the importance of the business, we'll continue to invest in it as appropriate.

And our next question comes from Pito Chickering of Deutsche Bank.

I guess just to start off with just looking at the ED market, can you sort of talk about overall market growth there? How does pricing volume look for '26? And then your thoughts around your market share for the upcoming year?

Yes. So if you look at our Early Development business, it remains a very small part of our business. In fact, it's now less than 6% of our revenue. And as we think about what we're going to do there is continue to be a market leader, which we are, but we're also going to streamline the business to areas where we can win in the marketplace that are strategically focused on where we want to win. And then at the same time, we will either divest areas like we mentioned before and/or consolidate sites.

Historically, I said that we were going to keep the excess capacity for the growth to come back. But it's been too long, frankly. The growth has not come back to the level that we would have anticipated. So we've moved down the path to appropriately consolidate so that our utilization is at a better level and therefore, the margins and the profitability will improve. So as I think about that business, it's a strong business. We are a market leader. I expect it to be relatively flat throughout the year in '26, but it will improve as we go through the year. And I think it will be based somewhat on the timing of the $50 million of revenue that we've decided to consolidate or divest.

And then a follow-up here. Can you talk about sort of the new test you're launching in oncology? You've had some interesting studies in peer-reviewed journals recently. How do you think about those tests launching and the revenues associated with those tests in the next sort of 12 to 24 months?

Yes. No, thanks for the question. If you think about precision oncology testing, I think about liquid biopsies, but I also think about solid tumors, and we're very well positioned in that market. We acquired OmniSeq in 2021. We acquired PGDx in 2022, and we acquired Invitae in 2024. Those are all intended to help accelerate our capabilities in this area. Earlier this year, we announced our MRD testing being expanded to Stage I through III breast cancer, I through IIIa non-small cell lung cancer and Stage III colon cancer. And that actually leverages both the Plasma Detect genome, but also the Plasma Detect ID that we put into the marketplace.

So I feel very good about our position there. I think the growth over time will be strong for the test individually. But as importantly, we offer now over 450 different tests for oncology patients across different stages and types of cancer. And when you have a cancer patient that's tested for either an MRD test or a solid tumor test, they tend to get a lot of other tests alongside of that. So it not only is encouraging that we have these specialty tests available, but it actually helps us provide one place for the oncologist to go for all the testing needs or the majority of the testing needs of their patients. I think that's another growth opportunity for us.

And our next question comes from Lisa Gill of JPMorgan.

I just want to follow up on a few things from a guidance perspective. First, when we last spoke, you had talked about a potential headwind around the exchanges and perhaps Medicaid. So I just want to understand, one, what's in your guidance? Two, we had pretty severe weather in the Northeast in January.

So just curious if you had any impact as it pertains to weather here in the first quarter. And that really leads to how do we think about the cadence of numbers? Should we think about that having some kind of impact in the first quarter? Or can you make it up within the quarter? And then just lastly, Julia, you mentioned that the enterprise margins had expanded by 50 basis points, and you expect it to be meaningful again in '26. Should I take that as it should be another roughly 50 basis point expansion?

Yes. Lisa, let me take the first cut of your question. Your first one relates to the impact from the expiration of the ACA tax credits. We have estimated that impact to be about a 30 basis point reduction to our Diagnostic volume in 2026. This estimate is incorporated into our revenue guidance for this year. It is also worth noting that the reported enrollment this year has been slightly better than anticipated. Of course, we continue to monitor the utilization of this insured group as the year progresses.

I think your second question, Lisa, is as it relates to the weather impact. Yes, we indeed experienced weather in January of this year, which was worse than this time of last year. But when you look at the guidance that we have provided here, we have already reflected that weather impact year-to-date.

Now from a cadence perspective, while we don't really guide to the quarters, but what I can share from a directional perspective, for this year, you can expect potentially be very much similar to last year. So essentially, you look at 2025, I believe we generated approximately half of our earnings in the first half and in the second half, respectively, as well. So that is probably a good proxy for you to consider as you model things out. So all in all, I would say that from a margin perspective, I think that's your last question -- yes, so I shared a bit earlier that as a company, we're just highly focused and it's been a priority, but we've been extremely diligent with respect to prioritizing investments where it's really driving top line growth in an accelerated fashion.

And then we are also diligently utilizing technology, among other things to help us become ever increasingly efficient in the way that we operate and in the way that we deliver value end-to-end to our customers and our patients. So while we do not guide margin specifically in the guidance, but what I would say is if you look at our guidance for 2026, in terms of the top line growth at the midpoint of 5.4% for the enterprise and then the midpoint of our adjusted EPS growth at 9%, you can perhaps triangulate into a margin expansion that is going to be supportive of that adjusted EPS guidance. So all in all, I would say that once again, we're really pleased with the strength of margin expansion in 2025, and we expect that strength to continue into 2026.

And our next question comes from Elizabeth Anderson of Evercore ISI.

Maybe one modeling question and one longer-term question. I think originally, when PAMA, we were still trying to decide whether PAMA was going to get delayed or not for 2026, you guys had previously said something about maybe $25 million to $30 million of additional savings if that came through. I know Julia just sort of put it -- talked about it in the traditional range. Is that -- like are those potential savings that you guys were talking about if PAMA came through, do you still view that as a potential source of upside like as you move through this year? Or is it just kind of -- we should think about it as, no, those are sort of investments needed at the higher revenue rate to think about?

And then secondarily, just on the Early Development business, I think there's been some concern that there might be increased behavior changes, particularly from pharma and biotech in terms of some of the new AI applications. Just curious, are you actually seeing any of that like in terms of client requests currently? Has that been part of discussions? Or should we think of something that's something maybe that's potentially further out, but not something you're currently seeing?

Yes. Let me start with the second question first. So as we start to think about new models, we have a significant number of people within our organization that are actually working on the new models. In fact, we're working with several governments in Europe to try to develop those models. So we've not seen a utilization of them instead of the regular testing at the moment. But over time, I think in certain areas, you would see people move more towards NAMs.

And I think those NAMs will be something that we want to be part of that there'll be ways to monetize the work that we do there in different ways than the work that we do today. And we're actually encouraged by the progress that we're making in those areas. But I would say, at the moment, it's not having a significant impact. In fact, if I look at our business, I look at like the dollar amount of our RFPs and I look at our win rate, they still remain relatively consistent to the historical levels.

Yes. Elizabeth, we are pleased that PAMA is delayed for another year as we continue to work on the more permanent solution through the RESULTS Act. Now as you were saying previously, we did comment that should PAMA be implemented in 2026, we have plans to drive additional $25 million of savings above and beyond our LaunchPad initiative to help mitigate a portion of the PAMA impact.

At this point, we continue to move forward with those efforts; however, given the PAMA delay, we plan to reinvest a portion of the additional savings into our businesses to position ourselves for continued long-term growth. So at the end of the day, I would say that in 2026, we expect enterprise margin once again to expand versus 2025 to support the adjusted EPS growth of 9% at the midpoint of our guidance.

And our next question comes from Michael Ryskin of Bank of America.

I'm wondering if you could add a little bit of color on esoteric testing, what you saw in the fourth quarter, just how that played out relative to expectations, just if there's been any changes in the market there? And a small follow-up to what you called out earlier in terms of the 4Q volume weakness that you called out sort of a consumer genomics business. Just clarify, is that a onetime hit? Or do you expect that to continue to be a little bit softer in 2026? And just sort of what was behind that? Was that just timing? Or just explain that a little bit more.

Yes. It was, in our opinion, a onetime hit, and we've actually seen good recovery, and we have additional business that we brought in into that area. So as I look at 2026 and we provide the guidance for 2026, you can see that we expect the volume to be strong.

Michael, as it relates to the question about the esoteric testing, we are pleased with the progress that we continue to make in this regard. Just for perspective, in the first quarter of 2023, esoteric testing accounted for 37.5% of our total testing in revenue. And then if you fast forward to Q4 of last year, that contribution went up to 41.5%. So clearly, if you just look at the growth of the esoteric testing, it's been outpacing the routine testing, as you would have expected, given our strategy around enhancing our investment execution in the specialty testing as well as our continued focus around enhancing our partnership with the hospitals and the health care systems. So we are encouraged by the progress, and we will continue to focus on that going forward.

And our next question comes from Erin Wright of Morgan Stanley.

You mentioned that the Diagnostics segment, it's largely organic in terms of the revenue guidance there. But can you talk a little bit about the deal pipeline on that front? I guess, how do you think about the nature of the deal pipeline now, how it compares to maybe this time last year? And when you think about hospitals and health systems, what are you thinking about in terms of the nature of some of those conversations and deals going forward?

Yes, sure. And as I look at our deal pipeline, it remains very robust. And I look at it not only from hospitals, but I also look at local, regional laboratories. And I think there's just a lot of pressure right now in the systems, particularly with the hospitals in terms of profitability. So they've been turning to us quite a bit to say, how can we partner with them, what can we do to work with them in order to help them with the issues that they're facing financially. So I've personally been involved in many of those discussions and the discussions continue to go well.

I would say there's two things that I monitor. One is the number and the size of the partnerships that we're involved in discussions with and the pipeline there is strong. I look at the timing. We've seen the timing be a little bit slower perhaps because now for certain states, we also have to get approval in addition to the federal approvals that we need. But those not have been -- those have not been obstacles to approval. It just takes sometimes a little bit longer. And then I look at the future pipeline in terms of where I think the business can come from. And I would expect that we'll be talking about these types of acquisitions for quite some time because we still have a long, long tail to what I believe this business can do in those areas.

Okay. Great. And then the lower referrals from that one consumer client, I guess, in light of that one-off dynamic, I guess, how do you think about the durability of growth across the consumer-driven market? Can you talk about the long-term growth profile, margin profile, durability thereon? And what's your philosophy on how to participate or not in that market?

Yes. So first, I'll respond to the consumer genetic company that we were referring to. We now have additional business in that area. So I don't think it's going to be a headwind as we move forward. As I think about the consumer market, I put it into perspective of strategically where we want to be. And first and foremost, your first question regarding hospitals and local regional laboratories, the pipeline there is strong. When you look at the average margin across those businesses, they're typically about the same as our average margin, and we continue to have that as a priority focus. I then look at our specialty testing areas. And we talked earlier about how the esoteric testing is shifting in terms of our mix, and I expect that's going to continue.

The esoteric testing or specialty testing continues to be an area of focus in oncology, neurology, women's health and autoimmune disease. And a big part of why is because that's going to grow 2 to 3x faster than the underlying diagnostic market. And in general, those margins tend to be about the same margins as our other business. But equally important, when you do the specialty test for a patient, you tend to do all the other tests that a physician may request for that same patient. So there's even spillover into the routine testing for us that I think makes a lot of sense. Then when it comes to the consumer market, and we have a good consumer business.

Our Labcorp OnDemand continues to show significant growth. We launched new tests in there almost every single quarter. We have over 200 different biomarkers that can be ordered from Labcorp OnDemand. Ovia Health continues to perform well and grow and help women through different stages of life and their testing needs. And then we also have the genetic testing that we do. And I think that, that will continue to be an area of growth. So if you look at those three areas together, the growth there is strong. We haven't broken out the revenue there to this point. But I think as it reaches critical mass with the growth rates I've seen at some point, we will, I expect, break it out.

So I think that's how we approach the market. And it's really based upon strategically where we see the best growth opportunities, maintaining the margins that we want to maintain at the price points that we think makes sense. We also, of course, look at our ROIC on each and every one of those areas, which remains strong.

And our next question comes from Eric Coldwell of Baird.

A little late in the Q&A here, so I'm going to have to get pretty myopic. I want to go back to Early Development. I heard you say a few times on the call, you expected the business to be relatively flat year-over-year. I do think that was before taking out the $50 million of divestiture and cost impacts as well as FX. So if I do make some preliminary assumptions there on the FX, I mean, it looks like you're talking about an $800 million revenue a year in Early Development. Is that really what you're saying?

No, I would say that including the $50 million impact that we've said, we expect it to be relatively flat with the second half performing better than the first half, Eric.

So you are expecting something in the [ $865 ] million, [ $866 ] million ZIP code?

Again, I don't want to give the exact number, but I would say, directionally, your second number is closer than the first, I think, but there's always a range that we look at within there.

So that would suggest to me that you're either being very aggressive with that formula or you had pretty good bookings or you have pretty good signs on your expectations for that business, given that you are eating into the $50 million -- you have to overwhelm that $50 million of divestiture and cost impacts, cost action impacts. So what are the signs in the market that give you that level of confidence?

Yes. I would say you saw the overall book-to-bill across the segment. It was strong. The trailing 12 months is strong, and we've seen improvement in both segments, frankly, of the book-to-bill.

Okay. And then on the margin front, prior to the divestiture and the cost actions, I believe this business was running at a low single-digit margin with the actions and your revenue outlook as well where there would be more leverage than I was expecting. Could you give us some sense on where you think margin could exit this year in Early Development? What kind of improvement is available near term? And then longer term, what kind of profile do you expect your business could have in that piece of BLS?

Yes. Eric, as you know, we don't really necessarily break out the business unit within the segment from a profitability perspective. But what I could share is the following to reiterate what I commented earlier. We head into 2026 with the momentum, including from a margin perspective. So we not only are expecting another year of margin expansion for the enterprise, we actually expect that improvement to be supported by expansion in both segments, inclusive of BLS. And then if you look at BLS margin expansion in '26 over '25, we actually expect that ratio improvement to be even greater than Diagnostics segment.

And the key drivers for that are really two. One of them is what you already alluded to is all these actions we are taking with ED, which will be complete by the second quarter of this year is going to make that business meaningfully more profitable. And the other contributor to the BLS margin expansion in '26 versus '25 is really driven by the solid growth from a top line perspective. So all in all, we are pleased with the direction we are heading towards, and we look forward to providing you with more updates as the year progresses.

This concludes our question-and-answer session. I'd like to turn it back to Adam Schechter for closing remarks.

Thank you. So it was great to spend time with you this morning. As you can see, we entered 2026 with momentum, and we look forward to continuing to provide you with updates as the year progresses. Have a great day.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good afternoon, and welcome. My name is Lisa Gill, and I head up healthcare services here at JPMorgan. It is with great pleasure this afternoon that I will host a fireside chat with LabCorp. With LabCorp this afternoon I have to my right, the CEO, Adam Schechter; and to Adam's right is CFO, Julia Wang. So with that, Adam, welcome. Nice to see you.

Happy New Year. It's nice to be back.

Happy New Year. As I look back on '25, and I know we still don't have the fourth quarter, but if I look at the fundamentals, solid core fundamentals, you had nice M&A integration support, improved organic growth. Is there something you want to highlight to investors that you're particularly proud of as you look back at 25?

Sure. So first of all, I hope everybody had a nice new year. It's a pleasure to be with you all today.

2025 was a tremendous year for LabCorp. If you look strategically, we said we were going to focus on 4 core therapeutic areas: oncology, women's health, autoimmune and neurology. We launched over 100 tests last year, and the majority of them were in those 4 areas. Those areas we expect to grow 2 to 3x faster than the rest of the diagnostic market. So it's a tremendous opportunity for growth.

We also said that hospital acquisitions, local regional labs were important for our strategy. We announced 13 new or closed deals in 2025, once again giving us tremendous opportunity for future growth.

The interesting thing is when you look at the specialty and the hospitals, a lot of the hospital acquisitions look at our specialty capabilities, and that's very important to them because they want to make sure they bring the latest, most important new test to their patients. In addition to that, our central laboratory business, which is an extremely important faster-growing business also benefits from the specialty testing that we do.

In addition to that, we made a lot of progress in terms of artificial intelligence and automating our laboratories and cytology, in microbiology, in areas like AI for pathology. We launched Global Trial Connect for our central laboratory business that enables pharmaceutical companies to understand what's happening with their clinical trials better than ever before.

But if you push me to come up with one thing that I'm most proud of in 2025 as an organization, I think the integration of what we did with Invitae was truly remarkable. We took a company that was struggling financially. And by third quarter of 2025, we made it accretive to our earnings, and we turned that business around. But as importantly, Lisa, we'll probably talk about this later, you might have seen this morning, we announced several new MRD products or test into the marketplace, minimal or molecular residual disease. And if you look at those tests, there's 3 of them.

One is for our breast cancer Stage I through III. The other is for non-small cell lung cancer, Stage I, II and IIIa; and the other is for colon cancer, Stage III. The first 2 of those tests came from Invitae. So not only are we making progress with the integration and the profitability of the company, but we found a way to take the tremendous science that they were doing at Invitae, and now we're bringing new MRD test, liquid biopsy test to the marketplace. So I think that the acquisition of Invitae will go down as a just great acquisition that turned out financially how we expected, but also contributed significantly to our scientific advances.

And I think as we were sitting here last year, there was a lot of question around how that was going to play out and if you are going to be able to recover the margin and make that business profitable. So I'm happy to hear that.

I never had any questions about it. I -- the team was committed to it. We had a clear path forward. I was glad to show that what we said we were going to deliver, we delivered in that time frame. But you're right, there was a lot of people questioning that.

Just coming back to the diagnostics business for a minute. The organic revenue growth target of 4.5% for the full year really exemplifies the strong diagnostic fundamentals you pointed to throughout the year. What's your view on the durability of these trends, whether we think about volume and price going into next year and the longer term?

No, I think it's a great question. And I have to say, after COVID, I thought that the increased utilization was due to the fact that people were not going to the doctor for quite some time, that it was kind of a catch-up. People started to go back to the doctor and increased utilization.

Well, I can't make that argument 6 years later. I actually believe that the increased utilization is based upon demographics and things that are occurring in the marketplace. One, we have an aging population; two, we have a more chronically ill population that requires more testing; three, we're seeing a lot more tests in the specialty area. There's more excitement about those tests to understand people's diseases.

A great example of that is historically, if you wanted to look at somebody's cholesterol, you look at their total cholesterol, their triglycerides, HDL, LDL. Now you're going to look at their ApoA, maybe their ApoB, you might want to do HDL subtyping. There's just so many more test that can help diagnose a patient better than what we've had before.

So if I now look at where we are today, historically, utilization was growth of 1% to 2% organically per year. It's significantly higher than that if you look at through third quarter of 2025. You see some ups and downs quarter-by-quarter. But if you look over a year's time, you can see that it's very strong. I don't necessarily think it's going to stay at that level over time, but I do believe it will be higher than it ever was prior to COVID. So I think the utilization will continue to be much stronger than it has been historically.

Separate and distinct from that, as I think about LabCorp and I think about specialty testing growth and I think about the hospital acquisitions, I expect that LabCorp will grow faster than the overall market. So irrespective of what the underlying organic growth is, I expect that we will grow significantly better than that with the market share gains.

When we think about the underlying growth, some of the potential headwinds going into next year are the subsidies expiring on the exchanges, very surprising to see where the numbers kind of shook out initially, although the first payment isn't due yet, right? So we'll see how many people actually pay their premium. And then secondly, the changes to Medicaid. Can you maybe talk about what you anticipate that will be the impact from a volume perspective on the business?

Yes. So we provided guidance. I'll ask Julia to give you some specifics on what it is, but it's definitely something we believe is manageable.

Yes. Lisa, it's great to be here, and thank you for having us. As it relates to ACA subsidy, the headwind, as you were saying that yesterday, we just learned the new development related to the enrollment so far, which appear to be encouraging and slightly better than expectation. Now with that being said, previously, when we analyzed the impact of the tax credit expiration for ACA, we have provided an estimate of approximately 30 basis points of volume impact to our diagnostic business in 2026.

In deriving at this impact, we started evaluating the testing utilization of this insured population in the past. And then on top of that, we have made assumptions based on the expectation that some of the insured participants might have decided to not participating in the exchange but might continue to have insurance through other channels, whether it's employment based or through a family member, for example, right? So all in all, at this point, we will continue to monitor the landscape, but we believe a 30 basis points of volume impact to 2026 might be a good proxy to work with as an estimate.

Yes, that's what we put in our model, just to be clear.

Yes.

On the price and mix side, higher test per requisite has been a primary driver of organic growth where unit pricing has been roughly flat. And I think you talked, Adam, a little bit about metabolic panels as you were talking about cholesterol levels, et cetera, and increasing the number of tests. Can you maybe just talk about how we've seen that over time and what your expectations are going forward?

It's interesting. So first of all, if you look at overall health care spend, diagnostics is only 3% of the spend. Even with more test per accession, it's not going to make a significant difference to overall health care spend, but I do think it can have a significant impact to overall health of the population.

There's a couple of things to think about. One is, as we're seeing more of the business move into these higher specialty areas, oncology, neurology, autoimmune disease, women's health, a lot of these patients, particularly in the first 3, are sicker and therefore, they tend to get more tests, not just on initial diagnosis, but even over time.

So you think about an oncology patient, we now test them to see what the best therapy selection would be for them. That's great. It saves money for the system. It helps the patient not have any unnecessary side effects. But let's say, they go on immunotherapy. If you're on immunotherapy, you're going to monitor the kidneys, you're going to monitor the liver, you're going to monitor their heart. You're going to look at their white blood cell counts, all their blood cell counts. So you tend to have more tests for those types of patients.

Therefore, I believe a specialty testing becomes more sophisticated. We have more options for people to help actually treat patients better that will continue to see the number of tests per accession increase over time. So it's been an asymptotic increase over time. I don't see that stopping.

Earlier, you spoke to hospital deals as one of the highlights in '25. And also, when we think about more favorable negotiations with managed care and keeping the unit price relatively flat, do you see additional traction on the unit price as we continue to make -- as you continue to make incremental strategic partnerships?

Yes. I mean I think when LabCorp does a deal with the hospital, there's 3 parts to the deal. There's one that's running the laboratory. It's a lower margin business, but it has a very high return on the cost of capital.

If you then look at the second piece which is acquiring the outreach business, that has a very good return for us. In that business, when we acquired the outreach business, it actually reduces the cost for the patient, for the provider and ultimately for the plan. The more hospital acquisitions that we do, the lower the cost is for the plan. So we're able to go into the payer and say, look how much money you're already saving by the work that we're doing. And I think that, that goes a long way with them to say, hey, let's be partners, let's find a way to reduce health care costs overall. And it's allowed us to argue to at least have prices stay flat, where historically, prices have gone down over time.

The pipeline for those hospital deals remains extraordinarily strong. I feel very good about the potential growth opportunities that we have there. I feel like the specialty testing that we're developing helps us in the hospital setting. I also feel that it's helping us with pharma and our pharma clients as well. If you look at the number and the percent of clinical trials that are being done in those 4 therapeutic areas, I mean, just oncology alone is over 40%. So the fact that we are bringing the test to market that our pharmaceutical clients are most looking forward to or that will help them diagnose and actually treat their patients that they're looking to enroll in clinical trials, I think it helps us there as well.

You touched on this also a little earlier when you talked about some of the new tests. And when we think about esoteric testing and the trends in esoteric testing, you highlighted a couple of the specific tests, but one of the other potential areas is Alzheimer's, right? And we've talked about this for a number of years?

Yes.

Can you maybe talk about when you expect to see that incremental opportunity, how big the opportunity can be?

Yes. So if you look at neurology, neurology is bigger than just Alzheimer's disease. We have a lot of new tests that we're doing for Parkinson's disease, for concussions, for many other neurologic areas. We believe that in the future, based upon the number of clinical trials that are being done in those areas, those tests will represent bigger and bigger opportunities over time.

If you look specifically at Alzheimer's disease, there are multiple new products in development that we think these tests will be applicable to. Now we have the broadest range and number of tests for Alzheimer's disease. We want to continue to stay ahead of the science. Right now, I can't tell you which one might be the most important for the future, but whichever one it ends up being based upon the biological data that we get over time, we want to have that test available for every patient that could benefit.

But the other thing is that's important about what we do at LabCorp based upon our size and our capabilities is we don't only do the Alzheimer's test. We can do all the other tests that, that patient might require so that a provider can come to us and say, yes, I'd like to know the patient's amyloid levels. But at the same time, they might want to know 5 other things, and we have the ability to run all of those tests. So I think it's not just the individual test, but it's the fact that we have over 7,000 tests on our menu that's helpful.

In addition to that, the vast majority of drugs that come to the U.S. market, we have worked on in one shape, way or form through our BLS business. So we have experience with a lot of these new drugs and new molecules that have come to market and the tests that are being done in those clinical trials. So again, I think it brings together the central laboratory and the diagnostic laboratory business. in a very substantial way.

Adam, there's always been a lot of talk about companion diagnostics and the future of personalized medicine. And obviously, you would play a big role in that. I mean, it sounds like when you're thinking about neurology right now you're saying, oh, there could be a number of drugs that come to market, people will need to be tested. How do we think about the future as we sit here today in companion diagnostics?

I've always said that companion diagnostics are one of the best way that we can reduce health care costs. Like knowing who needs what medicine at what time is the best way to eliminate unnecessary side effects, eliminate unnecessary patients on products that we know aren't going to work. So the more we can figure out the science behind who's going to respond to what product, I think the better health care overall.

I think as we have more AI in the development of new products, and you've heard a lot of my pharmaceutical colleagues talking about how they're using AI and development, I think we're going to find new biological methodologies to identify who's going to best benefit from each treatment that are going to make companion diagnostics increasingly important over time. And I hope it gets there because that would reduce cost for health care, it would reduce side effects for patients that aren't going to respond to a medication anyway, and it will allow us to focus on the patients that will get the most benefit. So I think it's good for everybody.

It was further down on my list, but let's talk about artificial intelligence because I think that it's obviously one of the key themes that people are talking about this year. You just talked about it from a development side. Can you talk about it specific to your business and some of the benefits that you potentially could see?

Yes. So we are looking at AI through every lens of our business. If I start with our operations, we're looking at how do we incorporate it into our laboratories, into microbiology, cytology, into pathology so that we can help identify issues much faster, allow the pathologist to know exactly where to look, when to look. Will we be able to take a tissue sample and not have to stain it alive, but stain it virtually so we can check different stains with the same tissue. We're doing all of that work as we speak.

Separate and distinct from that, when you look at the customer experience, we're using AI in significant ways. We've used it for our test finder. So we have 7,000 tests. Providers can now go and have a chat, just a normal discussion to figure out what test might be most appropriate for their individual patients. We're using AI for scheduling of appointment. So historically, if you want an appointment before 8 a.m., you'd have to go site by site, look at each of our agendas. Now you can just go on, I want an appointment before 8 a.m. within a 10-mile radius. I want to have it on a Tuesday or a Thursday, and we're able to do all of that. But when we do that, we're then able to use AI to figure out how many phlebotomists do we need at each site at which time. What's the biggest traffic points that we could make sure that we're actually maximizing our capacity. We're using AI over in Julia's world, looking at RCM and our collections and all of the bad debt and things that we face there and how can we be more effective and more efficient there.

So I'm just a firm believer that there's no aspect of your business, whether it be how you run your company, how you analyze information for your company, how you interact with your customers, every single one of those things is going to change with AI. And I can give you examples of things that used to take us 18 months that we can now do in 6 weeks. And we've got real examples of those things. So you'll hear us talk more and more about it. I heard somebody once say recently that if you're a CEO and you're asked if your company is a technology company, if you say no, it's because you haven't yet realized your company is a technology company. It's here. It's going to affect all of us in everything.

Adam, you also touched on this a little bit earlier when you talked about the hospital deals that you've done and the M&A pipeline. But can you give us a little more detail around what you're seeing currently in the marketplace around the M&A pipeline and where you see the biggest opportunities?

Yes. So I'll talk about the M&A pipeline, and then maybe, Julia, you can add how we're thinking about capital allocation and how we're putting capital towards the things that we see.

First and foremost, when it comes to business development, I'd like to do as many hospital deals that we can do. They are accretive in the first year, they return their cost of capital in 2 to 3 years, and we're very successful in knowing how to integrate them. It's actually a way that we can expand our presence and make testing more broadly available. The pipeline for those is very strong. And what I would say is the urgency after COVID was high. But as hospitals started to perform better, the urgency was a little bit less even though the pipeline remains strong. I'm starting to see more urgency again. I think hospitals are worried about what could happen with reimbursement and Medicaid.

Medicaid, ACA.

ACA. So I think we're seeing another sense of urgency. So that will be a continued growth opportunity for us for as far as I look out into the future with the pipeline that we have.

Separate and distinct from that, if there's a strategic acquisition that helps us in one of the core therapeutic areas or helps us in our central laboratory in a geography that we want to be present, I will be open to that as long as the financials were supported. I am not looking for a third leg of the stool. I'm not looking -- we have enough growth opportunities in our central laboratory business, in our diagnostic business, and I feel really good about our opportunities for the future. I'm not looking to add another part of the business that we're not in at this moment in time.

We're happy to hear you say that.

Yes. So one additional add on the M&A pipeline going into 2026 and beyond is that we continue to stay extremely disciplined as it relates to financial criteria. So the vast majority of the deals that we do actually meet our stringent financial criteria in the sense that they are expected to be accretive to earnings in year 1 and then help drive a return of cost of capital in 2 to 3 years. As Adam just shared, we executed well in 2025, and we expect to continue to progress in 2026.

And then if you were to step back and just look at our capital deployment strategy and execution, our philosophy and approach, I would say, have been essentially strategic, consistent and balanced over the last few years. As you know, we have been very effective as a company in generating strong cash flow. And our capital deployment philosophy is essentially to utilize the strong cash flow generation to, on the one hand, reinvest into our businesses to position ourselves for continued success over the long term and on the other hand, to return capital to the shareholders.

Now let me break that down a little bit further. So from an investment perspective, first and foremost, every year, we do a meaningful investment into capital expenditure. It's generally about 3.5% to 4% of our revenue as a range. And the investment is going into, on the one hand, refreshing our lab infrastructure, including the instrumentations and facilities and everything in between. The other aspect of investment that is meaningful as part of the CapEx is really investing into technology because now it's part of our value proposition in improving the customer experience, the patient experience and the employee experience. The other aspect of the reinvestment is, as Adam just shared, we've been extremely active on the BD and M&A front. Essentially, we continue to drive deals that support our strategy and augment our organic growth.

Now when you move to look at the returning of capital to the shareholders, we generally do it in 2 ways. One of them is a dividend practice. We have been indexing a dividend payout in the range of approximately 15% to 20% of our adjusted earnings. And in addition to that, the share buyback has been a critical pillar within our capital deployment framework. For example, year-to-date until September of last year, we have purchased about $225 million of common stock. And at that point in time, we still had approximately $1.1 billion of a share buyback authorization outstanding that we could tap into at any time, right?

Now when we think about capital deployment, it's also important to note that we have a very strong balance sheet that certainly provides dry powder capacity. For example, at the end of Q3 of last year, our financial leverage was 2.4x, which, by the way, was defined by the gross debt divided by the trailing 12-month adjusted EBITDA. And the 2.5x financial leverage was actually lower than the low end of our targeted financial leverage range, which is 2.5x to 3x. So in this environment, to be able to have that financial capacity is a good place to be. So all in all, I believe that we are well positioned to continue to deploy capital in a way that will position us for continued success in 2026 and beyond.

As I think about the M&A opportunities and I think about all the comments you made on the hospital side, one of the things that comes to mind is your managed care relationships and your ability to leverage those relationships by bringing more volume to them at a lower reimbursement. And so if I think about your number of requisites have increased, your pricing has remained relatively flat. And what I would say, health care services is pretty competitive. How much of that is driven by this conversation? Have you come in and you talked to what a large managed care company of, well, we've been able to save you x millions of dollars by shifting people out of the higher-cost hospital channel.

I mean it's very compelling. In fact, I think I should bring you in there to help make the argument with me. I mean, what a great position to be in where you're really needed for the work that you do. I mean it's 3% of health care spend diagnostics, but it's involved in almost every health care decision. So it's a necessary need for the health care system, and you can actually reduce cost by doing it. You can reduce cost by people using you to do the same thing they might do in other places. And you can reduce costs by finding disease earlier, preventing disease, finding the right patients for the right therapies. So we're really on the side of trying to decrease overall health care costs. The more we can convey that to our payers and the managed care organizations, the better off we are in our discussions on pricing.

As I sit here today, we have very strong relationships with the payers. I feel very confident in the continued success that we'll have working side-by-side with them. The more business that comes to us, the better the cost is for them, but it also increases access importantly for the patients that we serve. So I think we're in a very good position. And as I sit here, we're not giving guidance today for '26, we'll do that in February. But as I look into '26 with our managed care and payers, I feel very good about the position we're in. I don't see anything that I'm concerned about with negotiations this year.

You brought up a really good point when you think about really trying to create that opportunity to catch disease earlier, to have our population be healthier. I think maybe some of you saw Dr. Oz today who can really reinforces that whole idea, right, Make America Healthy Again. Do you see incremental opportunities where -- and we're going to get into talking about the consumer, but where the consumer is much more focused on their health and wanting the incremental test whether you think about functional health or whether you wear a wearable or something else along those lines. So what are your future thoughts there?

Yes. I think the more that people pay attention to health care, the more that they're involved in the health care, the better we'll be. The healthier we can keep people, that's the best way to reduce overall health care costs. Any country in the world, the healthier the population, the lower the overall health care as a percent of GDP. It's just a fact. So anything we can do to diagnose people early, to keep them healthy, to prevent them from having chronic or severe disease is the right thing to do for the health care system.

We're a big part of that. The test that we offer can help do all the things that I just mentioned. As I think about our LabCorp OnDemand, we launched 35 new tests last year alone. We have now over 100 tests available. And if you look at biomarkers, it's well over the 100 mark. We have the platform available that people can actually choose the test that they want, build the panels that they want in order to get the information that they need. At the same time, we're working very closely in the functional health space particularly with providers and physicians that are practicing functional health. Those physicians are trying to help people understand their bodies in a more holistic way. They tend to do more testing upfront to try to prevent chronic disease. And that's a very big, strong business for us working with those providers.

It wouldn't be a discussion if we didn't talk about PAMA. So for those of you that are not as close to the story, PAMA has been delayed until at least the end of January, where that's just a few weeks away. There has been other legislation that's been proposed, which is called RESULTS. So Adam, I think for those that don't -- are not as far in the weeds, can you maybe just talk about RESULTS versus PAMA, talk about where we are in the legislative process and what we think could potentially happen from here?

So I'm going to get some audience participation here first. So is there anybody in this room that thinks it's a good idea to go back and collect 2019 data, data from before COVID, to try to determine the price of diagnostics in 2026? It makes no sense. It doesn't make sense. It's just not the right way to think about how to make things current and to get the benefits that they were trying to achieve with PAMA. I haven't found a congressperson or a senator that doesn't agree.

The issue is that PAMA is still around. We were trying to get legislation passed or passed through in the immediate past. It was called SALSA. That didn't happen. It was hard to get legislation approved. But PAMA has been delayed for many years now. And up until now, we assumed that PAMA would happen in 2026. What happened was when there was a funding for the government that's delayed, PAMA got delayed at least through the month of January.

We also, through our trade group, ACLA, brought new legislation to bear that I think will achieve the results that people were trying to achieve, which is to make sure that you have the appropriate pricing for government programs for diagnostic testing. And that's called RESULTS. And ACL President -- ACLA President was in front of Congress last week where she had a review of the RESULTS legislation. And if you listen, it was very well received by both sides of the aisle, and I feel very confident that people understand that this could be the right answer to what they were trying to achieve in the first place.

Now can you get the RESULTS legislation approved before the end of January? I think that will be really hard. I don't think that's going to happen, frankly. So the question is, by the end of January, will there be another delay in PAMA? That is what I am cautiously optimistic will happen. The fact that it was already delayed for the month of January tells me people understand that trying to implement PAMA is not the right thing. Assuming it's delayed again, then when we provide our guidance in February, we'll provide guidance that assumes that PAMA is not going to occur this year. If PAMA is not delayed, then it will go into effect in February, of which we've said there's about $100 million yearly impact. It will be less than that because January is not impacted. And we're working to offset $25 million to $30 million of that.

Now the good news is, as I think about what we're looking at in 2026, we'll come with a compelling story assuming that PAMA does come. If PAMA doesn't come, it's just going to allow us to do better in order to make sure that we continue to invest in the future diagnostics, in the future science that's going to bring new tests available into the future.

If RESULTS does come about and it does pass, is there a financial impact from RESULTS?

There will be a financial impact from RESULTS. It would start in -- not in 2026, it will be after that. But it would be much more thoughtfully done. The issue in the past with PAMA is it only looked at a very small sample size, less than like 2% of the total diagnostics tests that happened out there. So it was a skewed result that caused the pricing to be very kind of out of context.

RESULTS will allow the pricing to be more in context because it will use a third party to get the data so we have more data. And therefore, the impact will be more reasonable based upon what's actually occurring in the marketplace. So we're all for doing what is trying to be achieved, but we want to do it in a way that is more effective and actually is the intent that people had when they put in place PAMA.

That makes sense. Let's move on and talk about Biopharma Lab Services. Smaller component of the business, but it's still important. Can you discuss your positioning in both central lab, which is very strong and early development in the context of longer term. I know that you recently made a divestiture so maybe we can talk about that as well.

Yes. Yes. So if you look at the Biopharma Laboratory Service business, the vast majority of that business is our central laboratory. If you look at the central laboratory business, the majority of the business there is for Phase II and Phase III trials, and it's with large pharma and large biotech. It is a very strong business. It has very good growth opportunities. You saw the third quarter book-to-bill. We said we expect fourth quarter to be better. It will be better. It's a very strong, sustainable long-term business. We're a leader there. We're a leader in all parts of the world. We brought in new technologies, new advances in specialty testing. So we really are meeting our customers' needs very strong there.

If you look at early development, early development is less than 5%. Well, it's about 5% of our total revenue, and it's even less than that if you look at operating income. That business is impacted much more by small biotech. The majority of the trials that we do there are small biotech trials. That gets impacted by funding. It gets impacted by interest rates. It gets impacted by timing. And we've seen that business not perform where we would have liked it to perform.

We were holding capacity at higher levels in case the business returned to growth like it had previously done. We did not see that over the past couple of years, so we've started to really go into a profitability mindset. In order to do that, we're kind of focusing on our core areas. So we divested a noncore area, which was device work that we were doing. And we're consolidating certain sites, which we've announced 1 or 2 of those already, where we're trying to make sure that the capacity at the sites that remain get to level set our -- that are really at the maximum level. So I think those 2 things will enable us to continue to have a good, strong, profitable business. It is a leader in what we do there every day. You are starting to see biotech funding come back. So we're prepared for that, and it will be a more profitable, more kind of focused business as we move forward.

We had the discussion around M&A opportunities, you really were focused on the diagnostic side. Are there opportunities on BLS? Or do you feel like this is a business that we, like our central lab, we have a few other businesses within that for early development, but that's primarily all we want to do these days.

So in central laboratory, I'd be open to additional capabilities that we need if there's additional specialty laboratory tests that we want to do or laboratory facilities that might make sense to acquire, I'd be open to that. We are a leader. We are in all parts of the world. So I feel like we've got a really good basis there. I don't see anything as I sit here today to say, boy, we have to have that. But because it's such a strong business, because the long-term growth potential is so strong, that's an area that we would invest capital in if it made sense.

When it comes to early development, I'm not as excited to spend additional capital in. Right now, I'm trying to figure out how do we maximize and make the business that we have more profitable. It is a leader in what we do. If there was something that was really important, I would consider it. But that's not where the majority of our mind is right now. It's really in our diagnostic growth capabilities and in our central laboratory growth.

You touched a little on central lab. But I mean even through the ups and downs, this business has been pretty consistent. When we think about your positioning in the marketplace and potential momentum from here, what do you think are the key drivers? Is it that biotech seems to be back?

You know what, I was in pharma for over 30 years before I came to LabCorp. And I can tell you that when you need to make cuts, the last place you look to cut is in your Phase III programs or your Phase IIb programs. I mean that is the lifeline of your company is that pipeline. You might cut early studies, you might cut some additional sales and marketing areas, but you'll go almost everywhere you can before you would impact what you think could be potentially a new product to bring to market in Phase III. I think that business is so strong, sustainable because we are a market leader. We are very global with that business. And we're doing mostly larger pharma and biotech companies and mostly Phase IIb through Phase III trials. I think that's like the sweet spot of that business. And it's a very good long-term business.

The other thing I would say about that business is if you went into one of our central laboratories, it looks very similar to a diagnostic laboratory. Very similar equipment, very similar people that you need, very similar reagents. There's certainly a benefit of scale in that business combined with our diagnostic business. There's certainly a benefit to the specialty testing that we learn in the pharma business that we could bring to diagnostics or vice versa. So there's a ton of synergies between those 2 businesses.

In our last couple of minutes, I want to just focus on 2 areas. One, talk a little bit about LaunchPad and the initiatives there and some of the big opportunities. And then secondly, Julia, if you want to -- I know we're not going to give guidance, but if there's any headwinds or tailwinds that we need to think about going into '26.

So I'll start with LaunchPad and you can go into that '26. So if I look at LaunchPad, I look at it as a continuous improvement opportunity. Basically saying that every year, we have to find $100 million to $125 million of improvement in order to offset, in particular, wage inflation. And to me, it's just the right way to run your business. Historically, we've been able to do that through easy things like increasing our procurement capabilities by looking to offshore certain jobs. There were things that everybody was doing that was a little bit of, like, I call lower hanging fruit. But as we've been doing it now for many years, now we're actually looking at impacting processes. How do we do things more efficiently? How do we take more automation in our laboratory so that we can be more efficient, more effective?

Now with AI and with machine learning and with computation, it's opening up all kinds of ideas that we have for savings. Things that took 18 months before we're doing in literally months. So I think that as we look at the future savings, it's going to come from more process improvements, more automization (sic) [ automation ], more robotics, but also more capabilities with AI to reduce costs in these higher cost areas. So I think there's a lot of opportunity moving forward.

Yes. And then as it relates to the tailwinds and the headwinds for 2026, I believe we are well positioned heading to the year driving continued growth. So a few highlights for considerations. First of all, on the diagnostics side, as you heard Adam sharing earlier, we expect to continue to have strong underlying utilization trend supported by the industry dynamic. On top of that, our focus on specialty, the tailwind as it relates to the test session increase as well as our continued position in as a partner of choice for the health systems, the hospitals as it relates to the M&A activity. So all of those things should drive tailwind for sure.

Now obviously, PAMA continues to be a variable at this moment in time, although we just now discussed, no matter how that aspect lands and the dust settles, we are well prepared to manage through those scenarios. And then on the BLS side, we talked about the continued strength in the central lab side. And then on ED, we're just doing everything we could to streamline the business while improving the profitability profile. So all in all, I would say that we are excited about the new year, and we look forward to updating you on our guidance in a few weeks when we get to the Q4 earnings release.

Great. We're looking forward to that as well. With that, we're out of time. Thank you so much, Julia and Adam. We really appreciate the time this afternoon. Thanks, everybody.

Thanks, everybody.

Thank you.

Good day, and thank you for standing by. Welcome to the Q3 2025 Labcorp Holdings Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Christin O'Donnell, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Labcorp's Third Quarter 2025 Conference Call. As detailed in today's press release, there will be a replay of this conference call available. With me today are Adam Schechter, Chairman and Chief Executive Officer; and Julia Wang, 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 an Investor Relations presentation with additional information on our business operations, which include a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures. Please see the Use of Adjusted Measures section in our press release and Investor Relations presentation for more information regarding our use of non-GAAP financial measures.

Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2025 guidance and the related assumptions, the projected impact of various factors on the company's businesses, operating and financial results, cash flows and/or financial condition, including global economic and market conditions, future business strategies, expected savings, benefits and synergies from the LaunchPad initiative and from acquisitions and other strategic transactions and partnerships, the completed holding company reorganization and opportunities for future growth.

Each of the forward-looking statements is subject to change based upon various factors, many of which are beyond our control. More information is included 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, Christin, and good morning, everyone. Thank you for joining us today to discuss our third quarter 2025 financial results and progress on our strategy. During the quarter, we delivered strong revenue growth and margin improvement, leading to double-digit EPS growth. Our financial results reflect continued momentum in our Diagnostics Laboratories and Central Laboratories businesses.

At an enterprise level, revenue increased to $3.6 billion, representing 9% growth compared to last year. Margin for the quarter improved 100 basis points, driven by Diagnostics. Adjusted EPS grew 19%, and we generated strong free cash flow of $281 million.

Moving to our business segments. Diagnostics revenue increased 8.5%, primarily due to strong organic growth of 6%. Margin improved 110 basis points, driven by strong organic demand in Invitae. Invitae was accretive in the quarter and will be slightly accretive for the full year. BLS revenue increased 8% or 5% constant currency. Central Laboratories growth was strong at 10% or 7% constant currency, more than offsetting softness in Early Development. BLS margin improved 20 basis points and the quarterly book-to-bill was 0.9 with the trailing 12 months remaining strong at 1.09.

In response to the lower-than-anticipated revenue in Early Development, we are beginning to divest or restructure through site consolidation approximately $50 million of annual revenue. We will focus these actions on non-core areas, which will result in a more streamlined business and slight improvement to operating income. Julia will provide more details on our results and full year 2025 outlook in just a moment.

We continue to make progress on our strategy to be the partner of choice for health systems and regional/local laboratories, to lead in high-growth therapeutic areas and to use science and technology to accelerate growth, to enhance the customer experience and to improve operational efficiency across our business.

Starting with health systems and regional/local laboratories, we've added a significant number of strong strategic relationships over the past several years. Through these partnerships and acquisitions, we've expanded our patient and provider network, and we've strengthened our presence in key markets. These partnerships have increased access to our broad test menu. They've improved patient care and have driven efficiencies for our customers.

This quarter, we signed an agreement to acquire select clinical laboratory assets of Empire City Laboratories, which serves the New York Tri-State area. We signed an agreement to acquire select assets of Laboratory Alliance of Central New York, a pathology reference laboratory. In parallel, we signed an agreement with Crouse Health to manage their inpatient labs. We expect these transactions to close in the first quarter of 2026.

We continue to make progress on the acquisition of select assets of the outreach business from Community Health Systems across 13 states, which we expect to close by year-end. We completed our acquisition of select oncology and clinical testing assets from BioReference Health. This acquisition further solidifies Labcorp's position as an industry leader in oncology. We continue to have a very robust pipeline of opportunities, and we look forward to updating you on our progress.

Additionally, we are expanding our business in high-growth specialty areas, including oncology, women's health, neurology and autoimmune diseases. These are areas where science, clinical need, the use of genetic testing and innovation are accelerating. We are experiencing strong growth across these segments, which also increases demand in our core test menu as physicians rely on Labcorp for comprehensive diagnostic solutions.

In the quarter, we introduced several innovative testing capabilities. We expanded our leading oncology and genetic testing portfolio. OmniSeq INSIGHT, our comprehensive genomic profiling test for solid tumors in support of therapy selection now evaluates ovarian tumors for HRD. PGDx elio tissue complete used for therapy selection for pan-solid tumors became the first and remains the only tissue-based tumor profiling test with CE Marking under the European Union's In Vitro Diagnostic Regulation. This enhances our global tissue profiling capabilities in support of clinical trials.

Geneoscopy received FDA approval for a simplified at-home collection method for ColoSense for colorectal cancer screening. As a commercial partner, we will be expanding access to this test to patients and providers. We also expanded access to our Invitae genetic tests through Epic Aura, enabling streamlined ordering and results delivery for Epic customers.

In neurology, where we have one of the most comprehensive test menus in the industry, we expanded our leadership position. We introduced the first blood-based test cleared by the FDA to aid in the diagnosis of Alzheimer's disease in specialty care settings. In early 2026, we're planning to offer the only FDA-cleared blood test to rule out Alzheimer's related amyloid pathology in the primary care setting.

Separately, we continued to experience strong momentum in our consumer business. In the quarter, we launched several consumer-initiated tests through Labcorp OnDemand, including tests for lead exposure, ApoB for heart health and a panel for healthy aging. Labcorp partnered with Praia Health, a consumer experience platform for health systems, to help close care gaps and to deliver better experiences for patients.

Moving now to review our use of science and technology to accelerate growth, to enhance the customer experience and to improve operational efficiency. This quarter, we launched Labcorp Test Finder, a generative AI tool developed with Amazon Web Services, to improve test selection for providers and health systems. It allows clinicians to easily search for lab tests using plain language, streamlining decision-making and improving care.

In our core laboratory operations, we're investing in digital and AI capabilities to improve in areas such as pathology, cytology and microbiology. Through a collaboration with Roche, we are digitalizing pathology workflows using slide scanners to enhance diagnostic speed and scalability. We've also deployed a new FDA-cleared AI platform for digital cytology that enables remote viewing and rapid analysis of cell-based samples, improving turnaround times.

Finally, we're using AI and automation to accelerate microbiology workflows to reduce turnaround times. These are just a few examples where we are using technology, robotics and AI. We look forward to discussing others in the future. In summary, we delivered a strong quarter and made meaningful progress on our strategy. We have momentum as we finish 2025 and move into 2026. Our focus remains on driving value for both our customers and shareholders.

With that, I'll turn the call over to Julia to discuss our financial results and 2025 outlook in greater detail.

Thank you, Adam. Now let me start with a review of our Q3 financials, and my remarks today will focus on our adjusted financial results. Please see our earnings press release and supplemental financial presentation for detail on our GAAP results. Revenue for the quarter was $3.6 billion, an increase of 8.6% compared to last year, driven by organic growth of 6.2%, the impact from acquisitions of 1.7% and the foreign currency translation of 0.7%.

Adjusted operating income in the quarter was $513 million, or 14.4% of revenue, compared to $441 million, or 13.4% of revenue, last year. The increase in adjusted operating income and operating margin was primarily driven by organic demand, including the strong performance of Invitae. Our LaunchPad initiative continued to be on track in the quarter, which offset typical increases in personnel costs.

The adjusted tax rate for the quarter was 23.3% compared to 22.8% last year. We continue to expect our adjusted tax rate for full year 2025 to be approximately 23%. Adjusted EPS was $4.18 in the quarter, up 19% from last year. Free cash flow for the quarter was $281 million compared to $162 million last year. The $119 million increase in free cash flow was primarily driven by higher cash earnings. For the full year, we expect capital expenditures to be approximately 3.5% of revenue.

During the quarter, the company invested $268 million in acquisitions and partnerships, paid out $60 million in dividends and repurchased $25 million of stock. At quarter end, we had $598 million in cash, while total debt was $5.6 billion. Our debt leverage as of quarter end was 2.4x gross debt to trailing 12-month adjusted EBITDA and slightly under the low end of our targeted leverage range of 2.5x to 3x.

Now I will review our segment performance, beginning with Diagnostics Laboratories. Revenue for the quarter was $2.8 billion, an increase of 8.5% compared to last year, with organic growth of 6.3% and acquisitions of 2.2%. Total volume increased 4.7% compared to last year, with organic volume contributing 3.5% as we continued to execute our strategy and drive strong demand. Acquisitions contributed 1.2%.

Price/mix increased 3.7% versus last year. Organic price/mix was 2.8% as we benefited from mix, primarily due to the annualization of Invitae as well as an increase in test per accession. Acquisitions contributed 1%.

Diagnostics adjusted operating income for the quarter was $450 million, or 16.3% of revenue, compared to $387 million, or 15.2% of revenue, last year. Adjusted operating margin was up 110 basis points. Adjusted operating income and operating margin increased, primarily driven by organic demand, including the strong performance of Invitae, coupled with slight favorability from weather year-over-year.

Now I will review the segment performance of Biopharma Laboratory Services or BLS. Revenue for the quarter was $799 million, an increase of 8.3% compared to last year due to an increase in organic revenue of 5.3% and foreign currency translation of 3%. We continued to perform well in Central Labs. In constant currency, Central Labs revenue was up 7% in the quarter. Early Development revenue was up 1.1%, lower than expected due to delayed study starts. In response to the lower-than-anticipated revenue in Early Development, we are beginning to divest or restructure through site consolidation, impacting approximately $50 million in annual revenue in non-core areas. We expect these actions to result in a more streamlined business with a slight improvement in operating income.

BLS adjusted operating income for the quarter was $132 million, or 16.5% of revenue, compared to $121 million, or 16.4% of revenue, last year. Adjusted operating income grew 9% year-over-year, driven by organic demand. We ended the quarter with a backlog of $8.6 billion, and we expect approximately $2.7 billion of this backlog to convert into revenue over the next 12 months. Our segment quarterly book-to-bill was 0.89. Our trailing 12-month book-to-bill remains strong at 1.09.

Now I will discuss our updated 2025 full year guidance, which assumes foreign exchange rates effective as of September 30, 2025, for the remainder of the year. The enterprise guidance also includes the impact from currently anticipated capital allocation, utilizing free cash flow for acquisitions, share repurchases and dividends.

Beginning with the segments. Diagnostics continues to execute well in the marketplace. We have maintained the midpoint versus prior guidance and narrowed the growth range to 7.2% to 7.8%, which assumes approximately 4.5% organic revenue growth. In BLS, we expect to grow 5.7% to 7.1% versus prior year. We have lowered the midpoint by 40 basis points versus prior guidance due to the unfavorable impact of currency. In constant currency, we have maintained the midpoint versus prior guidance as strength in Central Labs is offsetting softness in Early Development. We continue to expect Central Labs to grow in the mid-single digits for the full year. We now expect Early Development to grow low single digits for the full year, with Q4 presenting the most challenging year-over-year comparison.

We updated the 2025 enterprise revenue growth guidance range to 7.4% to 8%. We lowered the midpoint by 40 basis points due to timing of acquisition revenue, which are held at the enterprise and the unfavorable impact from currency. We continue to expect full year enterprise margins to increase with margins improving in both Diagnostics and BLS in 2025 versus 2024.

Our guidance range for adjusted EPS is $16.15 to $16.50 with an implied growth rate at the midpoint of 12%. As compared to prior guidance, we have narrowed the range and raised the midpoint by approximately $0.05.

Our free cash flow guidance range is $1.165 billion to $1.285 billion. We narrowed the range and raised the midpoint by $25 million versus prior guidance, given our strong cash flow generation year-to-date.

In closing, our quarterly performance reflects strong execution of our strategy and the continued efforts of our teams across the organization. As we look ahead, we are confident in our ability to deliver sustainable growth and long-term value for our shareholders. We look forward to updating you in the coming quarters.

Operator, we will now take questions.

[Operator Instructions] And our first question comes from Lisa Gill of JPMorgan.

I just want to better understand when we think about the revenue and the updated guidance around revenue. So Julia, I heard you talk about currency and acquisitions. I'm curious, one, are you seeing an increase in utilization from, for example, the exchange population as people anticipate that they potentially could lose their benefit or it could cost more going into 2026? And then is there a way for you to break down that 40 basis point between currency and acquisitions? And, again, is the acquisitions just a timing aspect and so we'll see that come through in '26?

Lisa, I'll start. First, I'd say that $13 million of it was from the foreign exchange, the rest was from the acquisitions, and it's fully timing related. Some of the acquisitions this year closed a little bit later than what we anticipated. So that impacted us just a little bit and then a few fell into next year. But overall, the pipeline remains strong. The acquisitions remain strong. So it's purely timing related.

With regard to your question on utilization, I'll first start off by saying we had a very strong quarter when you look at the Diagnostics business. And when you look at the organic volume, it was up 3.5%. And when I think about the volume, we're certainly seeing some uptick, I think, from demographics in the marketplace, from market share that we're gaining. I don't necessarily believe it's due to people concerned about losing to ACA because doctors can only take so many appointments and I don't -- and they're usually very booked. So it would be hard to get a large number of people into those offices that quickly. So I think we're seeing it more from organic volume increases.

And our next question comes from Michael Cherny of Leerink Partners.

Congrats on a nice quarter. Maybe if I can dig in a little bit on organic price per mix in particular. It's been strong. You had a tough comp this quarter, and yet it still grew nicely. As you think about the behavioral changes that you're making as an organization, how much of it do you feel is proactive versus reactive in terms of what you can push versus what the market is bringing to you as we think about how that builds beyond this year?

Yes. Sure, Michael. I'll give you some context, and I'll ask Julia to jump in and give you some specifics on the price/mix. So when I look at the Diagnostics revenue, it grew 8.5% versus last year. Organically, it was about 6%. When I look at the organic volume, that grew 3.5% and price/mix grew about 2.8%. Some of that was from mix, but also from Invitae. But I'll ask Julia to give you some more specifics about the price/mix.

Yes. Michael, if you were to break down the impact between unit price and mix, we continue to see unit price being relatively flat. Therefore, the price/mix impact has really been benefiting from mix. And as Adam just shared, in the third quarter, our organic price/mix was up 2.8%. That was driven primarily by increase in tests per accession as well as Invitae. Now the impact in Invitae was more pronounced in Q3 due to the timing of the annualization being in the middle of Q3.

And going into Q4, we expect Invitae to drive continued price/mix favorability and the impact will somewhat moderate when compared to Q3. And if we step back and look at price/mix in general, over time, we have seen a slight yet consistent growth in test per accession post-COVID era. Longer term, we continued to believe that the mix growth will be supported by the increase in our partnerships with the large hospitals and the health systems as well as the aging population, the health and wellness trend, the breadth of our test menu as well as our focus on specialty testing. And for the full year, you might have seen that in terms of our updated guidance, we maintained the midpoint of Diagnostics revenue guidance of 7.5% and updated the organic revenue growth expectation to 4.5%, whereby the price/mix is going to be a big contributor to that expectation.

And our next question comes from Jack Meehan of Nephron Research.

I was hoping to get a little bit more color on the announcement around the site consolidation in the Early Development business. Can you just talk about what the factors were you're seeing in the market that led you to make this decision? And it sounds like we got the revenue impact. Is it possible to think about -- it sounds like this might be a low margin, just what the earnings impact might be from the decision?

Yes, absolutely. And Jack, I'll start off with giving some additional color, then I'll answer the question specifically. But if you look at the Biopharma Laboratory Services businesses, it performed well. And you saw an 8% increase in revenue or 5% in constant currency, but it was really driven by strength in Central Laboratories, it was up 10%, 7% if you look at constant currency, and it more than offset the weakness that we saw in Early Development.

Based upon what we're seeing in Early Development, we've decided to look at some non-core areas. We're going to divest certain things there, but we're also going to have some site consolidation. And that will be leading to approximately $50 million of annualized revenue. But without that revenue, we expect to see a slight increase in operating income. So it actually was negatively impacting our accretion. So that will be a positive for us.

What drove us that decision was we look at 3 things with the Early Development business. We look at RFPs coming into us, then we look at what's our win rate and then we look at do the trials start on time. If you look at the RFPs and numbers, we're getting about the same number of RFPs that we've gotten in the past. If you look at our win rate, it's about the same. Our market share is stable, as it's been in the past. The issue that we're seeing is with timing of study starts. They're just not starting in a timely fashion that we would have expected based upon historical time lines. We expected that to start to come back to more normalcy. Unfortunately, it has not. Based upon that, we've decided to streamline the business and to take the actions we talked about today.

And our next question comes from Patrick Donnelly of Citi.

Maybe just given that PAMA is a little more topical here heading into year-end, can you just talk about the expectations there? I know you've talked about the $100 million top line impact. I think during conference season, you were talking about some levels of mitigation efforts, maybe something like $25 million. Can you talk about, I guess, the probability, what you're hearing on PAMA, results, et cetera? And then, again, what you're doing on the offset? Are you already kind of getting things in line? Would love just your thoughts on the expectations and then the potential mitigation efforts you guys could do into next year?

Yes, absolutely, Patrick. So we've consistently said that we believe the CMS's execution of PAMA was not accurate, and it shouldn't be implemented in its current form. We've worked really closely with our trade organization, ACLA, to advocate for the RESULTS Act, which would put a freeze on the cuts for a period of time. When you look at that, it has strong bipartisan support. I mean Democrats, Republicans sponsored the bill. We think that we have very strong support. The question is, with everything that's happening right now and the shutdown and everything else, will we see additional legislation approved by the end of this year? We're going to continue to advocate for it. We have strong support for it, but it's very hard to [indiscernible] whether or not that will happen by year-end.

We also are continuing to work to see if it should be and can be delayed again, as it has been for the last number of years. And that's really going to come down to, I believe, the [indiscernible] score, which we've not seen a final score. If the [indiscernible] score is positive or maybe kind of neutral to slightly negative, I think there's a good chance that it could be delayed again. If it's not, and it goes in a different direction, then I think it will be more difficult with everything else that's going to have to happen by the end of the year.

So it's really difficult to predict whether we'll be able to get the results, legislation implemented and/or get another delay. So therefore, we think the prudent strategy is for us to plan that there will be a $100 million impact on both the top line and bottom line for full year 2026. And with that, we are already planning and we have work underway to offset, like you said, approximately $25 million of that impact. And that's in addition to the commitment that we have for LaunchPad, which roughly offsets the cost of inflation. So we're going to do that in addition to. And a lot of that's going to come from the things that we've started to discuss for AI implementation and things that we're doing to increase our efficiency and use AI more effectively. So those things are underway, and we'll provide guidance for 2026 in February, and we'll give you more specifics.

And our next question comes from Erin Wright of Morgan Stanley.

Could you speak a little bit to your efforts around the consumer-driven testing, the contribution you're seeing now from that? I know one of your peers was talking about that, the margin profile growth rate of that business, and is it starting to what move the needle in terms of volume or overall revenue growth?

So if you look at our consumer business, we continue to have a strong focus on consumerism. We're trying to meet the patients where they are through a whole bunch of different channels. And importantly, we interact or engage with over 75 million patients through all the different avenues that people come to get Labcorp results or information from Labcorp. So as the consumers are taking a much greater control of their health care, we want to be a resource for them and offer solutions that put them in the driver seat, frankly.

Today, a lot of them engage with us through our on-demand e-commerce platform. We also have the Ovia app where many people interact with us as well. And what we're seeing is a very significant increase in terms of growth rate. There's no doubt about it. It hasn't reached critical mass at the moment for us to pull out the numbers and provide separate numbers, but we're continuing to add new tests. Just this quarter, we added tests for lead exposure, ApoB for heart health and even a panel for healthy aging. And we're going to continue to add new things there.

In addition to that, if you look at Ovia Health, it's a leading app that supports women's health and it guides through all different stages, including pregnancy, postpartum, menopause and a lot more. So these are really important capture points for us. I do believe we're going to continue to see growth in these areas. And as it reaches critical mass, we'll figure out when to start to report it separately.

And our next question comes from Andrew Brackmann of William Blair.

Maybe I guess, on the Diagnostics segment margin expansion, I think it was 110 basis points in the quarter. Can you maybe pick that apart a bit more for us? And, I guess, how should we be thinking about the go forward there and considerations around things like price, Invitae and just underlying improvements there?

Andrew, let me provide some color on margin. As you can see, we delivered meaningful margin expansion at the enterprise level in the third quarter, up 100 basis points versus prior year, supported by both segments. As we shared before, the year-over-year margin comparison in the second half of this year gets tougher for BLS and gets easier for Diagnostics, given the margin evolution throughout 2024.

As such, in the third quarter of this year, BLS margin was up 20 basis points, driven by organic demand. Diagnostics had a strong margin improvement of 110 basis points versus prior year, which was primarily driven by organic demand, including strong performance of Invitae. You might recall that Invitae annualized in August of this year and is now fully integrated into our broader business infrastructure.

As you look at the Diagnostics margin in Q3, in addition to Invitae, there were some other puts and takes. For example, the savings from our LaunchPad initiative, coupled with a slight favorability from weather helped us offset typical annual wage increases and mix impact from in-hospital lab management agreements. As we think about Q4 margin for Diagnostics, we expect Invitae to continue to be a tailwind.

Sequentially speaking, we expect margins to moderate in Q4 versus Q3, reflecting typical seasonality. Overall, I would say that we expect the full year margin expansion by both segments to support enterprise margin expansion in 2025, which contributes to our expectation of growing adjusted EPS by 12% for the full year at the midpoint of our guidance.

Our next question comes from Elizabeth Anderson of Evercore ISI.

This is [ Joanna ] for Elizabeth. So I have a question about '25 guidance. We only have 1 quarter left, yet the EPS guidance do have a very wide range of $0.35. Like what are the major moving pieces that could swing you towards the high end or the low end of that guidance range?

Thank you for the question. And as I look at the guidance, we've narrowed the ranges in our overall revenue guidance and our Diagnostics guidance. We've purposely kept the range in BLS a little bit larger, we didn't adjust it this quarter. And the primary reason is, as we're looking to do some of the divestitures and/or the site consolidation, the timing of what could impact us this quarter is a little bit uncertain. We're moving as fast as we can, but there are certain things that we can only move so fast on. And that's why we've kept that range a bit wider than we typically would.

And our next question comes from Kevin Caliendo of UBS.

I'm still a little confused about why the margins weren't maybe a little bit better in 3Q. I'm wondering if there is anything discretionary, but any discretionary spend on top of that, just given this. But my real question is more around '26. If we think about the impact if PAMA comes back, let's say, you said the net impact would be $70 million, $75 million. Given all the other puts and takes that you have with Invitae and some of the other deals that you have, can you still meet your LRP if PAMA comes back? And I know there is a chance that you could be updating your LRP at some point next year. But I'm just thinking out loud here, just given sort of where the headwinds and tailwinds are.

So Kevin, first of all, thank you for the question. And there's nothing unusual for the margins. The 110 basis point improvement in Diagnostics, we think, is strong, driven partially by Invitae, but there's also offsets when you think about some of the hospital deals that we do. They typically start off being dilutive to margins and, over time, get to the average margin. So there's always some puts and takes to the margins as we think about that.

We also are on track for our Labcorp -- our LaunchPad initiative, which is taking out a significant amount of cost covering almost all of the inflation that we have from employees. So if you then think about Biopharma Laboratory Services, we also saw an increase in the margin of about 20 basis points. When you put those 2 together, we thought we had a strong margin improvement of 100 basis points for the quarter.

As we think about next quarter, we expect to see continued strength, particularly in Diagnostics. It's important to note that this quarter, we overlapped 2 or 3 months from the Invitae acquisition. Next quarter, it will be 3 out of 3 months. And in addition to that, we'll continue to make progress in the other areas.

BLS will be more difficult because, as you may recall, it was an easier compare in the first half of the year, it's a much more difficult compare in fourth quarter for BLS. But net-net, margins for both businesses, we expect to improve this year versus last year. It's frankly too early to give specifics about 2026. We're going to provide that guidance in February. But I would say we're working really hard to do everything we can to not only get the LaunchPad, but also additional savings from some of the AI initiatives that we have underway, which would offset as much as we can from the impact of PAMA, which is such both on the top line importantly as well as the bottom line. So it's an impact to both top line and bottom line there.

And our next question comes from Luke Sergott of Barclays.

This is Anna Kruszenski on for Luke. It sounds like the hospital M&A pipeline has reaccelerated given all the macro and policy uncertainty. And just curious if you can talk about whether your deal criteria has changed at all given this larger opportunity set. And would you be willing to take on a lower-margin asset that offers meaningful potential share gains in a particular geography where you're less penetrated?

No, thank you for the question. And the hospital pipeline does remain strong, and I expect it to continue to be strong. When I think about the hospital business, I think about 3 different parts of it. One is running the laboratories in the hospital. Those are typically the lowest margin business, but it has a very high return on cost of capital. So we will do that business even though it's a bit lower in margin because it does have a great return on cost of capital.

The second thing we look at is the reference work. So if it's business that they can't do in a hospital lab, will they send it to us as reference? And that's good margin business, about the same as our average margin. And then the third part is acquiring the outreach business, which also is about the same as our average margin. Most hospitals, when we do all 3 of those things, it ends up being about the same as our average margin. If we were to only do the hospital running of the labs, it would be lower, but that's not typical. Typical, we would do running the labs along with either the reference and/or the outreach business. So net-net, it should be neutral to margins over time.

And our next question comes from Michael Ryskin of Bank of America.

This is Aaron on for Mike. It looks like esoteric testing is growing almost double routine. I guess how are you guys prioritizing R&D investments into those more esoteric tests? And then kind of following that line of questioning, for Geneoscopy's ColoSense, how are you thinking about your commercialization strategy? And any reimbursement updates that you guys can provide us?

So I'll start with the esoteric business. And we certainly are seeing growth in esoteric business, and it's -- continued asymptotic increases over time. But when you think about 700 million tests that we do in a year, it's hard to move the needle. And typically, esoteric tests are lower in volume overall, but they're very important because when you run the esoteric test, you typically do all the routine tests that come along with it. We have been launching many esoteric tests. But importantly, we're focused on oncology, women's health, neurology and the autoimmune areas.

And in those areas, we see growth rates that should be 2 to 3 times faster than the overall diagnostic market. So it's certainly an area that we want to be competing in. When we think about how to compete, some of those tests we develop ourselves, some of those tests we license or acquire. And we're really focused on what's the best way to get the best test to market as quickly as we can. And to us, it's more about having all the tests that a physician would need for a patient as opposed to developing any one test internally. So we're really agnostic to developing it ourselves or to acquiring or licensing it.

And our next question comes from Yujin Park of Baird.

On BLS, can you provide more color on bookings between Central Lab and Early Development? I recognize Central Lab bookings can be more chunky quarter-by-quarter. And Early Development demand environment, as you said, didn't change much, but I wanted to hear your thoughts between the two.

So I'll start off with overall on the book-to-bill, then I'll talk specifically. If you look at the book-to-bill, it was about 0.9 for the quarter, a little bit lower than we typically like. We like to be about 1.0 to 1.05. But if you look at the trailing 12 months, it was a 1.09. And I've always said that you have to be careful looking at any one quarter because there are ups and downs to any one quarter. But over time, the trailing 12 months, that's a better predictor. I would expect the book-to-bill in fourth quarter to be better than it was in the third quarter, if you look at it sequentially, albeit it will be a tough year-over-year compare because last year fourth quarter was very strong as well.

If I look at the book-to-bill, I feel confident that we're in a very good place. Book-to-bill is a good measurement for the Central Laboratory business, and it remains very strong. I've always said book-to-bill is a little bit more difficult for Early Development business with the primary reason being that many studies in Early Development start and end in the same year. And therefore, there's not a lot of 2- or 3-year trials that kind of build your book-to-bill over time.

So you would expect the Early Development book-to-bill to be lower than the Central Laboratory, which it is, but I would say the Central Laboratory is very strong. For the Early Development, I look at the RFPs, the win rate are strong. It's the study starts that are really the issue in Early Development.

And our next question comes from David Westenberg of Piper Sandler.

This is [ Skye ] on for Dave. Could you provide some more color on the expected revenue and EPS accretion from the completed and progressing acquisitions for 2025 and, if you can, 2026? Kind of what are the key integration milestones we should be looking out for and potential synergies expected from these transactions?

So I think it's -- if you look at what we've provided, we say typically, we expect the acquisitions to provide 1.5% to 2.5% growth in a given year. And that's what we are projecting in our longer-term guidance, which we continue to expect that type of growth. The pipeline remains strong. It remains good. We don't give specific operating income or margin for the individual deals. What I would say is, as I look at hospital deals, in general, when you do all 3 pieces of the business, meaning the reference laboratory work, the in-house laboratory work for the hospital itself as well as the acquisition of the reference -- of the outpatient labs, you tend to have a margin that's about the same as our average margin.

And our next question comes from Tycho Peterson of Jefferies.

I want to probe on the Central Lab strengths a bit more. I understand your book-to-bill comments earlier, but can you maybe just talk about the acceleration you saw here in 3Q, a nice step-up from 2Q? Maybe just talk about the durability of what you're seeing now on the Central Lab side.

So if you look at our Central Lab business, it remains strong. It had 10% growth on the top line, but it was 7% if you looked at the constant currency growth rate, which is very healthy growth. We expect it will be in the mid-single-digit growth for the full year. That's typically where you'd expect the Central Laboratory business to grow. We're seeing strong book-to-bill. Last quarter, we announced that we had several large studies that were going to go over multiple years. The more large studies over multiple years you have, the better you are. But overall, I would say that, that business, we expect to continue to grow and to do well as we look for that to offset some of the softness that we're seeing for the Early Development for the rest of the year.

I show no further questions at this time. I'd like to turn it back to Adam Schechter for closing remarks.

Well, thank you, everybody, for joining us today. And I want to just take a moment to recognize our 70,000-person team members around the world. Our employees really are the driving force behind our mission to improve health and improve lives. Hopefully, you see we have momentum based upon our third quarter results going into fourth quarter, and we look forward to sharing our 2026 guidance in February of next year. Thank you all.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good morning, everyone. I'm Erin Wright, health care services analyst at Morgan Stanley. For more important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your Morgan Stanley sales representative.

And with that, we're happy to have Labcorp with us today. We have CEO, Adam Schechter as well as Julia Wang, CFO. Thanks so much for coming.

Yes, it's great to see you. Pleasure to be here.

So I'll kick things off with some Q&A. I'll start off with the most recent quarter and the strength in the most recent quarter. You recently raised your revenue, EPS and free cash flow guide, what are some of those key drivers that's getting to your 7.5% to 8.6% revenue growth range, the impetus for the raise and how are things just generally playing out relative to your expectations this year?

Yes. So it's great to be here. And as Erin said, we had a really strong second quarter, but I'd say the whole first half of the year was strong for us. We have a lot of momentum. We see the momentum in both our Diagnostic business, but also our Biopharma Laboratory Services business.

If you look at Diagnostics, for the full year, if you look at the midpoint of our guidance, it's about 8% revenue growth. Of that 8% growth, about half of it is from inorganic growth and the other half of it is organic. The organic growth is stronger than what we've seen in the past, but we expect that to continue through this year. We have a lot of momentum with that growth. I think we can talk about that later, if you'd like to.

If you look at our Biopharma Laboratory businesses, our book-to-bill is strong. We won a couple of large Phase III trials that helps our central laboratory business, and we expect that business to continue to grow throughout the rest of this year. We had margin improvement in the second quarter, and that's despite the fact that we had a significant impact on our margin from Invitae acquisition. The good news is that we'll lap the Invitae acquisition in the second quarter, so it will no longer be a headwind as we go through the rest of this year. And that's why we expect our margins to improve in both businesses for the full year.

Okay. That's great. So you touched on some of the pieces kind of supporting the enterprise growth expectations, but I want to drill down into utilization. Can you give us some more color around core volume trends currently, how they're tracking relative to your expectations? The recent volume trends have been strong. Organic growth, 3.4% in the second quarter. How sustainable is the stronger utilization environment? What are some of those key underlying factors driving this and what's assumed for the year?

Yes. It's an important question, and I would have answered the question differently 2 or 3 years ago than I answered today. Two or 3 years ago, we started to see an increase in volume, and we thought it was due to COVID that people were not visiting their physician regularly during COVID. And when they started to go back to their physician that they were getting more services, more tests. But it's so far after COVID right now, I no longer believe that that's the reason for the increased volume, I believe that there are other things that are driving the increased volume. Number one, we certainly have an aging population. As people age, they tend to go to doctor more often, they tend to get more tests.

Number two, we are seeing new tests that are available that help understand patients' diseases better. So for example, historically, if somebody had cholesterol test, they would check for total cholesterol, LDL cholesterol, triglycerides, HDL, but now they have things like ApoA and ApoB and there's additional tests that help to diagnose the disease even further than what physicians have had in the past.

And then in addition to that, I do believe that we are winning market share in the marketplace. Some of that is from the hospital acquisitions that we do. They increase access to patients, but they also help us with market share. We've also seen that when we run a hospital laboratory, the geography surrounding that hospital laboratory tend to get more market share than the geographies around hospitals that were not necessarily running the laboratories. So I think for all those reasons, we've seen an increase in volume. Historically, we would have said volume will increase 1% to 2%. We're certainly seeing better volume in that, and we expect that to continue with the guidance that we gave for the full year, we expect it to be 4% growth from inorganic and 4% from organic.

And when I think about that organic piece, how much would you say is from, if you had to guess kind of true underlying halo effect of market share gains from some of these hospital deals?

Yes. So I would say, historically, the market was growing 1% to 2%. I think it's growing faster than that right now, maybe 2% to 3%. And then I would say the rest could be from market share gain.

And then price/mix has always -- I guess, it's also held up well here. Can you talk a little bit about the price/mix dynamic, what you're seeing, what you saw throughout the year and what your expectations are going forward? And mix has been that healthy contributor. Could you break down some of the pieces for us?

Yes. I'll ask Julia to jump in and help with that as well. But it is consistent with what we've seen historically overall.

Yes. It's so good to be with you all today. So happy to comment a bit about price/mix. As you are saying, it has been holding up. In the second quarter, it was approximately a growth of 1% contribution to our revenue growth. That's actually what we are also expecting for full year 2025.

If I were to further break down the difference between price and mix, I would say that on a unit price basis, it's been relatively flat. Therefore, the benefit is really coming from mix. And there are 2 drivers behind that. One of them is the increase in test per session, the other one is the growth in our lab management agreement. And over the longer term, we do expect to continue to benefit from price/mix favorability for a couple of considerations. First of all, our increase in our partnerships with the health systems and hospitals is whereby we tend to experience a higher price mix, relatively speaking. In addition to that, we continue to observe a slight yet consistent increase in test per session, mostly driven by the factors that Adam already commented about, whether it's the aging population, it's the heightened focus on wellness and health as well as our test menu, given the whole extensive and broad it is.

Last but not least, our focus on the specialty testing as well as the advancement in those categories have been a tailwind as well because what we have found is that focus not only is driving an accelerated growth in those particular categories, it's also improving our broader testing volume just because as a provider of essentially such a comprehensive offering, we are well positioned to capture essentially almost all the testing needs of the patients.

And as we think about the broader kind of pricing environment, some of the key contracts that you look at, or is there anything up for renewal this year that you would call out or upcoming? And how would you characterize some of the relationships? We're talking to a lot of payers both yesterday and today here at the conference and how would you characterize those relationships with payers right now?

Yes. I mean our relationships with payers are strong. Every year, maybe 20% of our contracts come up. They're typically 3- to 5-year contracts. We have very good relationships, and there's none of the contracts that I'm concerned about at the moment. We are a very small part of overall health care spend. Diagnostics is just 2% to 3% of health care spend, but we're involved in almost 90% to 95% of decisions that are made in health care.

In addition to that, the deals that we've done with hospitals actually are great for the health care system. They're good for the hospital. They're actually good for the payers because price typically comes down when we do the deal versus the hospital running the laboratories themselves. And we've been able to show payers how much they're able to save just through the hospital deals that we're doing with them. So I would say it's a very strong relationship, and they realize the importance of Diagnostics and that we're just a very small part of the overall spend.

Yes. Okay. And then let's switch gears to Invitae. Can you speak to the rationale behind the deal, how it's progressing in terms of integration and overlap with existing offerings or integration with existing offerings and contribution in the second half and going forward, how we should be thinking about Invitae?

So I would say the Invite deal has exceeded my expectations. We were interested in the work that they do in hereditary cancer many years ago. But the market cap was about $10 billion. We would do our financial analysis. And we kind of find a way to justify an acquisition based upon what the deal would cost. As the price came down, we would continue to run the analysis, and we ultimately were able to acquire the company for less than one turn of revenue. We were able to make the numbers work and see a path to its profitability within the first year.

Strategically, there's no doubt that it fits great with our strategy, with our portfolio, with the type of work that they do. If you look at the integration, it's gone extremely well. We're now up upon a year. The company will be slightly accretive for the full year this year. We're on track for that. The revenue growth about 10%, we're on track for that. And by the end of second quarter, we had fully overlapped the year since we acquired the company. So now it's going to be a tailwind versus a headwind. So I would say on all avenues, it's done exactly what we expected it to do.

And then bigger picture, just on esoteric testing, too. So growth rates, margin profile, if you could speak to that across the esoteric testing business and the focus on some of those high-growth areas, women's health, oncology, neurology, autoimmune disease, I think, is what you've called out. How are those progressing relative to your expectations? And are there any areas of innovation to call out?

Yes. So there's no doubt that we're making significant progress in each of those areas. For example, in women's health, our preeclampsia test and neurology, the things that we've done for Alzheimer's disease and oncology, some of the liquid tumor things that we're working on, solid tumor things that we're working on liquid biopsies. So we're certainly making progress in each of those areas. But I would say there's 3 things to consider. First is we want to have access to the range of tests that any provider would need, including specialist providers. It's not just about the individual tests, for example, a liquid biopsy. If you actually start to help oncology patients through a liquid biopsy then you'll get all the other tests that an oncology patient would need, their WBCs, RBCs, ALPs, ALTs, all the other tests, we can be one place for the provider to go to get the test and then get it over time in just one report. I think that will be a competitive advantage for us.

So it's important that we be in each of those therapeutic areas, have the leading-edge test, whether we develop them ourselves, whether we license them, whether we acquire them, we're a bit agnostic to. We just want to make sure they're available on our menu so that the specialists can order all those tests.

At the same time, we've certainly seen that esoteric business is growing faster than overall diagnostic routine testing. Historically, diagnostic routine testing will grow a couple of percent per year. The esoteric testing in the 4 areas we talked about will grow about 3x that rate, so somewhere around 9%. And we'll certainly see that play out, and I expect that's going to continue over time.

And then as we think about longevity, for instance, it's a big theme for us at Morgan Stanley, and when we think about some of the consumer or direct-to-consumer kind of testing sort of initiatives, what does the growth profile look like? What are the key offerings now? Is it moving the needle yet or is at the forefront and such?

So I would look at that through a separate different ways. If you look at consumer testing, during COVID, we observed that people were looking for an answer as fast as they can get it. They weren't necessarily as concerned about the accuracy of the answer, and they were willing to pay whatever it took to get the answer. That's not how consumers typically behave. Typically, they're okay to wait a day or 2 to get their diabetes test results. They want to make sure it's absolutely accurate and they would like it to be covered by their insurance versus paying out of pocket. So we've seen for many tests, consumers go back to the historical way in which they work.

At the same time, when it comes to screening, a lot of consumers would like to do that and they can do it whatever is convenient for them. When it comes to symptomatic disease, they still want to get an answer quickly, and they're more apt to do that at home. And then there are certain diseases that they prefer to test for privately, syphilis being an example that they might not want to go to the doctor. So we have our on-demand offering, which continues to grow. It's growing significantly, but it's not yet reached a point that I would pull it out because it's not a critical mass at this time.

Separate and distinct from that, we have now an offering of a significant number of biomarkers for people that want to do some type of functional health and understand many different aspects of their health. We also have an offering for physicians that practice functional health so that they can order tests from us. And I'd say that's a pretty significant amount of business, but it's through the standard methods that we have all of our other business go through.

If doctor is providing functional health, they can order through their electronic medical records, order directly with us, whatever test they feel are appropriate for those patients. So we are seeing an increase in functional medicine, but we've been seeing that for quite some time, frankly.

Okay. I want to switch gears to the regulatory landscape. What are your latest insights and expectations I have to ask on PAMA. We've been talking about it for, I don't know, 10 years?

Yes, it's 6 years.

It feels longer. We've heard from the new CBO scoring, they suggest that delaying PAMA may not save money in 2026. Maybe talk a bit about PAMA, PAMA reform, what your expectations are and what's the next data point we expect.

Yes. So if you look at PAMA, we've been discussing that for many years now. We still believe the way in which it's been administered and calculated is incorrect. We expect that there will be some legislation that will be announced soon that we'll try to fix the issues through a legislative process. That is the best answer. It has bipartisan support, it has for some time. Whether or not legislation gets approved, it's hard to say. But working with our trade organization, ACLA, we still believe that is the best path forward for a long-term fix.

Separate and distinct from that, if it does not get passed in legislation, then we would look to see if there's a way to have it delayed again, which has been delayed for many years now. As you mentioned, we've not seen the new CBO score. I don't know, frankly, the methodology changes or what that is. So it's very difficult to try to give odds on what the chances are of it being delayed again. If the score is neutral, maybe a slight cost add or actually a cost avoidance, well, then I think there's a high likelihood it could be delayed if the legislation is not passed.

If it would cost a significant amount, I think it would be harder, but not impossible. At the same time, we're going to continue to have discussions through the trade organization on other ways to make sure that the methodology is going to be better implemented than before. I think the big issue is they'd be looking for data from 2019. Trying to find a hospital that can provide data on tests by payer from 2019 is nearly impossible. I don't think I can get it for 2024 very easily. So I still think it's going to be very difficult for them to collect the data.

With all that said, I've said this for the last 6 years, I'll say it again this year, I build the impact from PAMA into our base case plan, and that would be about $100 million impact next year on both the top line going directly through to the bottom line. We will use launch pad to offset as much as we can of our wage inflation, and then we'll be going after additional cost savings in order to offset some of PAMA. Obviously, we couldn't offset $100 million impact, but we would shoot to offset as much of that as possible. People have pushed me to give a number. We don't have an exact number, but I would shoot for something like $25 million to $30 million of it.

Okay. $25 million to $30 million, you would be able to offset?

That's what our goal would be to offset.

Okay. I guess that was my next question. Okay. So on the one big beautiful bill and cut from a federal funding perspective, how do you think this plays out for Labcorp from a volume perspective as we could see increased uninsured population? How would you compare this to other iterations of reform? And then also, can you parse out Medicaid versus ACA in terms of if -- well, we'll see what happens from an ACA subsidy perspective, but what do you anticipate, I guess, the implications are for Labcorp?

I'll give some comments and I'll ask Julia to jump in with some of the specific analysis that we did. But I would say, in general, with the bill, there's tailwinds and there's headwinds. I think the tailwinds unfortunately, I think hospitals will be under increased pressure than they are today, which are already under a lot of pressure. That pressure tends to enable them to have quicker discussions with us about running their laboratories or acquiring their outreach business. So we've certainly seen our pipeline for hospital deals be strong. We've announced quite a few deals this year. There's more to come, and I expect that, that will continue. I think if things play out the way they may play out in the bill that will actually cause the pipeline for hospital deals to increase.

The headwinds would be if we have more patients without access to health care, that tends to be difficult for payment and so forth. So those are the 2 pushes and pulls. Overall, not a significant impact to us, but I'll let Julia talk a little bit about the magnitude that we see.

Yes, sure. So if you break down the impact to start with the potential expiration of the tax credits as it relates to the ACA enrollment, we have sized that to be about 30 basis points in volume for 2026. And the key assumptions that we are making in derive at that impact is the following: First of all, we understand that for 2025 open enrollment, as it relates to the ACA marketplace plans, we had about 24.3 million insured lives. And then I believe CBO released information suggesting that about 17% of that insured population might potentially be impacted by this expiration of the credit.

So obviously as Adam mentioned earlier, there are some other moving parts, too, because even if the credit gets expired, some insured lives might transition to some other alternatives, whether it's through the spouse or new employment, things like that. So all in all, when you do the puts and takes, it's getting us to a ballpark number of 30 basis points of volume impact in 2026, which obviously is relatively manageable.

And the other thing as it relates to the major changes associated with Medicaid reform, most of them are not going to kick in, in 2028. So we'll continue to see how that evolves over time. The last aspect I would mention is when you think about the one big beautiful bill from an effective tax rate perspective, we do not expect anything meaningful for our company. So for this year as well as going forward, we continue to expect our effective tax rate to be approximately 23%.

And the only thing I'd add, I mean, I don't think it will be tenable for a large number of Americans to lose insurance altogether. I think whether at the federal level, at the state level, I think something would happen. We all remember before when there were 40 million Americans without insurance, it became such a political issue, whether Democrats or Republicans are running that I don't think anybody wants to get to that point again. So I think that they would find ways to ensure that there's some type of insurance for those people that would lose insurance.

And I think bigger picture to that whether it's PAMA or changes from a funding perspective across insurance or otherwise, I mean, do you think that it's still the same picture in terms of -- and this is kind of what you're getting with the hospitals, but at the end of the day, economics should prevail, volume should go to the low-cost provider.

I would think so. I mean, at the end of the day, we provide high quality at a low cost, and we are now providing a lot of innovation with that as well. So if you look at different economic environments over time, if you look at different political situations over time, the diagnostic market has always continued to perform well. And I think it's because we are so important to making health care decisions, and we're such a small overall amount of the total spend.

Okay. Let's switch to biopharma a little bit. So can you give us an update on what you're seeing in terms of cancellations, RFP flow, the biotech funding environment and how is the environment has been under the new administration. We just had the head of the FDA here yesterday talking about animal testing and talking about different components of what he's focused on. I guess, yes, how would you kind of characterize the underlying environment now?

Yes. So I'll start broadly and then I'll narrow down and answer some of the questions that you raised. So broadly, if you look at our biopharma businesses, there's 2 segments. There's our Central Laboratory and there's our early development. The Central Laboratory business is the biggest business by far. Early development is frankly less than 6% of our revenue and even less than that in operating income. So it's a small piece.

If you look at Central Laboratory, about 70% of our business is in large pharma. And the vast majority of that business is Phase III trials because those are going to be the largest trials. The last thing that pharma wants to cut are ongoing or new Phase III trials for important products in the pipeline. That's typically the last thing that would be cut. We've seen the essential laboratory business continued to perform well. Our book-to-bill looks strong. Our offering is strong. We are the leader in that business. So I see that business continuing to perform well as we look out to the future.

Our early development business. It performed well in the second quarter. We expect that it will continue for the full year to grow this year versus last year. That business is a little bit different because about 70% of that business is in small biotech and only about 30% is in larger biotech and pharma. That's where you see more volatility when interest rates go up when funding goes down, and that's where we have to watch for cancellations very closely.

When I look at that business, I look at 3 things. I look at what are the number and dollar amount of the RFPs reflects proposals coming to us. Right now, those look good and steady. I then look at what percent of those proposals do we win. That's kind of my surrogate for market share. Our market share looks good, and we're winning at a very consistent rate.

I then look at do the trials start and start on time. That's the area that we're continuing to watch the closest. Right now, I would say there's a slight delay in when we see the trial starting. The cancellations are definitely less this year than they were last year. Last year, they were above the normal range. This year, they're within normal, but at the high end of normal. So that's a business that we're going to continue to watch closely. At this point, I don't see signs of an issue, but that one tends to be a little bit more volatile than the central laboratory business. And frankly, I'm glad that it's a very small part of our revenue and OI.

And maybe this is going back a little bit to the Covance days and the decision kind of the split of the business. But what was the rationale in retaining kind of the early development business? And how do you see all the different pieces playing together? I think I always ask you this question in terms of how you're taking development and then getting the companion diagnostics and ultimately taking it to market. Like how many of those opportunities are you seeing at this point?

Yes. When we decided to spin out the clinical development business, we actually looked at all possibilities. We looked at spinning out all of the biopharma laboratory services business. It made no sense to spin out the central laboratory business because it's core of what we do. In fact, we had a central laboratory business even before the acquisition of Covance, same machines, same equipment, same types of people, same reagents. If you walked into a central laboratory versus a diagnostic laboratory, you would be hard-pressed to see a difference. The biggest difference is the customer diversification, pharma versus providers, the global nature of the business and the fact that the regulators are different that come in from a global basis to central laboratories for global trials versus mostly the U.S. regulators for our U.S. laboratories.

So it really made sense to keep the central laboratory business. We decided it did not make sense to keep the clinical business. It was a feet on the street business, not a lot of bricks and mortars. It was global people all around the world. We were not the leader or a leader in that business. And also to acquire another company based on the multiples at the time just didn't make sense to actually make it a leading business. That's why we decided to spin that business out.

So then we had 3 alternatives for early development. One, we could spin it out with the clinical business. That made no sense because the 2 businesses are so different, especially without a central laboratory in the middle. We then said, do we spin it out on its own. Based upon the size, the scale and the margins of that business, the amount of infrastructure that you'd have to build to have your own IT departments and HR departments and CFO and CEO, it just didn't make sense to spin out as its own business.

And then the question is, do you keep it or try to merge it with something else? We decided to keep it because it's more closely related to central laboratories than not. And at that point, we were doing a lot of cell and gene therapy work in early development. I think that's yet to happen, but that's where I see a lot of the benefit of having early development where cell and gene therapy work that we're doing there ultimately would make its way into our central laboratories. And then ultimately, we can bring those products to market.

We also have seen an increased number of personalized medicine trials. By that, I mean, whether it's companion diagnostics or tests that are used to determine who should be treated. When we win those trials in early development, we tend to get those in the central laboratory work. But I think the big difference is the customer base is so different that it doesn't always transfer to the customers from early development to central laboratory business.

Okay. That's helpful. And then I want to switch to margins and profitability. Can you talk a little bit about the LaunchPad savings initiatives and also how we should anticipate margins to progress throughout this year? And what long-term margins ultimately look like?

Yes, I'll start, and I'll ask Julia if she wants to jump in. So if you look at our margins in LaunchPad, we continue to make a lot of progress in Launchpad. We committed to $100 million to $125 million of cost reduction per year. And we have hit that commitment and continue to make progress towards it this year. We will hit it, and then we've committed to it for next year as well. That helps to offset the increase that we see in wage inflation.

So then the question is, how do we use AI and robotics and other technologies to reduce cost even further, which is what we're going to try to do to offset part of PAMA going into next year. With that said, we did see a margin increase of 20 basis points in the second quarter across Diagnostics, despite the fact that we had still a negative impact from Invitae. For this year, we expect the margins to increase for both businesses. You can talk about the progression.

Yes. I think that's right. So we are pleased with the progress we've made with margin. In the second quarter as an enterprise, we grew our margin by 20 basis points. That is after absorbing a headwind of Invitae of 30 basis points. And heading into the second half, particularly now that we have annualized Invitae as well as our efforts to continue to drive operating efficiencies across the enterprise. So we expect a step-up in the margin expansion in the second half to a degree that will translate into a full year margin expansion for 2025. And actually, that margin expansion is also a key driver for our guidance for EPS growth this year. At the midpoint, we do expect our EPS to grow approximately at 12% versus a year ago, which, of course, is going to help with our free cash flow generation as well, given our relatively high cash conversion from adjusted earnings into cash.

And on capital deployment, can you talk a little bit about the deal pipeline? I think you still say it's still robust, but how would you characterize it relative to even last year or the year before, the past 3 years in terms of the deal pipeline?

Yes. So when we think about deals and more broadly about capital deployment, we first are looking at these hospital local regional laboratory deals. The reason why is they're accretive in the first year, they return their cost of capital very quickly, 2 to 3 years. And we know how to do them, and we develop good partnerships through them. That pipeline has been strong. After COVID, I think a lot of hospitals realized that they weren't investing the capital that they needed to keep their laboratories up to date. So they really were much more open to thinking about us running their laboratories.

In addition to that, they realized that we can do it very well. And they saw us, for example, with Ascension, move 100 hospitals over very quickly, very successfully without interrupting patient care. And I think that gave them comfort that they could do it with us. In addition to that, by acquiring their outreach business, it gives them an infusion of cash, which they can use to invest in surgical suite or something else that would be more beneficial to them. So we saw an acceleration after COVID. That has continued.

I would say the urgency has slowed down a little bit recently with the hospitals being a bit more successful than they were in terms of generating margin. But with that said, we've actually seen it accelerate again and the pipeline start to build in the last several months. So I think as hospitals are looking at next year and they're starting to prepare what could happen with tariffs and other things that they're facing, they are looking again to us to potentially be a good partner and/or acquire their outreach business. So that pipeline right now, I'd say, is as strong as I've seen it. And I'd say the urgency is probably a little bit higher than it was at the beginning of the year, but not where it was right after COVID.

Okay. And then any incremental color on your latest announced acquisition of the community health systems business and the nature of that deal?

It's a great deal for them and for us. It's across many different states. So it will be one that will go across several of our regions. We have a very good team that we've put together to work with them on it. So we're looking forward to that. It will be a good partnership. There's no doubt about it.

How do you find the right balance between some of these hospital deals and then bolt-on lab deals and then partnerships as well as acquiring innovation?

Yes. So the first thing is that we look to deploy our capital. We're committed to our dividend, and we remain committed to the dividend. We then look for as many of these hospital local regional laboratory deals that we can do as long as they meet our financial criteria, accretive first year, cost of capital return in 2 to 3 years and good partners. And we have the capacity to do as many of those as we've been doing and even more as we go into the future.

Then we look at are there other acquisitions such as key tests that we'd like to acquire. Typically, they're very small amounts of capital outlay. They return their outlay very quickly. And then we're not interested at this moment to look for a third leg of the stool or something outside of our core. We believe that the core of our central laboratory business and our diagnostics business, our biopharma business is strong enough to give us a great profile as we move forward. So at this point, we're looking at those types of deals. We're not looking at any large acquisitions outside of our cores that we're doing now.

Okay. Great. Thank you so much for the time. I really appreciate it.

Yes. Good to see you. Thanks, everybody.

Thank you.