Ladies and gentlemen, thank you for standing by, and welcome to LabCorp's Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Vice President of Investor Relations, Clarissa Willett.

Thank you, Operator. Good morning, and welcome to LabCorp's fourth quarter 2020 conference call. As detailed in today's press release, there will be a replay of this conference call available via telephone and the Internet. With me today are Adam Schechter, Chairman and Chief Executive Officer; and Glenn Eisenberg, Executive Vice President and Chief Financial Officer. This morning, in the Investor Relations section of our website we posted both our press release and an Investor Relations presentation with additional information on our business and operations, which include a reconciliation of the non-GAAP financial measures to the GAAP financial measures discussed during today's call. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to 2021 guidance and the related assumptions including the projected impact of the COVID-19 pandemic on the company’s businesses, operating results, cash flows and/or financial conditions, our responses to and the expected future impacts of the COVID-19 pandemic on our business more generally as well as on general, economic, business and market conditions. Each of the forward-looking statements is based upon current expectations and is subject to change based upon various factors, many of which are beyond our control that could affect our financial results. Some of these factors are set forth in detail in our most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q and in the company’s other filings with the SEC. We have no obligation to provide any updates to these forward-looking statements, even if our expectations change. And now I'll turn the call over to Adam Schechter.

Thank you, Clarissa. Good morning, everyone. Thanks for joining us today. Before I cover 2020 results, I want to first thank Clarissa for her leadership in Investor Relations for the last several years. Clarissa has been promoted to lead our revenue cycle management team, which is a very important role. I also want to take this opportunity to welcome Chas Cook, who has been appointed to Vice President of Investor Relations, and will continue to strengthen the foundation built upon by the IR team. Chad has been a strong leader in our finance organization since he joined LabCorp in 2018. Moving now to 2020 results. 2020 will be remembered for many things, including the fight against COVID and the tragic loss that it brought. It also emphasizes the critical importance of frontline healthcare workers and scientists, amongst others.

Thank you, Adam. I'm going to start my comments with a review of our fourth quarter results, followed by a discussion of our performance in each segment and conclude with our 2021 guidance. Revenue for the quarter was $4.5 billion, an increase of 52% over last year due to organic revenue growth of 50.1%, acquisitions of 0.9% and favorable foreign currency translation of 100 basis points. The increase in organic revenue was driven by COVID testing of 46.4% and organic base business growth of 3.7%, which includes the negative impact from PAMA of 0.6%. Operating income for the quarter was $1.3 billion or 28.8% of revenue compared to $336 million or 11.4% last year. During the quarter, we had $46 million of restructuring charges and special items, primarily due to COVID-related costs and acquisition integration charges. We also had $91 million of amortization, which was higher than recent quarters. As part of our new branding initiative, we are transitioning out of the Covance trading. As a result, we are accelerating the amortization of its trade name over the next year. Adjusted operating income for the quarter was $1.4 billion or 31.8% of revenue compared to $422 million or 14.3% last year. The increase in adjusted operating income and margin was primarily due to COVID testing, organic base business growth, acquisitions, and LaunchPad savings, partially offset by PAMA, higher personnel costs, and investments to support the company's new branding initiative. The tax rate for the quarter was 24.5% compared to 22.4% last year. The adjusted tax rate, excluding restructuring charges, special items, and amortization, was 24.8% compared to 22.9% last year. The higher adjusted rate was primarily due to the geographic mix of earnings. For modeling purposes, we expect the company's adjusted tax rate for 2021 to be comparable to 2020 at approximately 25%. This does not include any potential increase in the federal tax rate in 2021. Net earnings for the quarter were $938 million or $9.54 per diluted share. Adjusted EPS, which exclude amortization, restructuring charges, and special items were $10.56 in the quarter, up from $2.86 last year. Operating cash flow was $775 million in the quarter, compared to $570 million a year ago. The increase in operating cash flow was due to higher cash earnings, partially offset by higher working capital to support growth. The higher working capital was primarily due to the increase in accounts receivables and supplies related to COVID testing.

Our first question comes from Jack Meehan with Nephron Research.

I was wondering if you could start and just provide a little additional color on the assumption in the guidance for 2021 COVID testing. By my math, it seems that it assumes the COVID sales are going to be essentially zero in the second half of the year. I think that's a world we all want to live in, but I'm not sure if that's exactly how it's going to play out. So it would just be great to be a little bit more on your philosophy there.

Hi, Jack. Good morning and thanks for the question. The reason we had to give such a wide range, minus 35% to minus 50% for the testing is because, as you say, it's very difficult to have precision. And you could get to the minus 35% to minus 50% in several different ways. Right now, we've seen a decline in tests if you look at the last several weeks versus the end of 2020. If that decline continued, and then you saw it continue throughout the whole year, you could get there. If the amount of testing we're doing today, on average, was maintained for the six months of this year - in the first six months, well, then you could do zero for the second half of the year and still be there. So there are multiple different ways to get there. My assumption going in is that the price is going to remain at where it is right now. So right now, it's $100. We're still in the emergency situation. That's been extended through the year. You have to hit the CMS guidelines, which is basically for the previous month. You have to have more than 50% at a two-day turnaround. And then they look at each sample for the current month. We're well within that range. I mean right now, we did 275,000 tests a day. We're not doing anywhere near that in our turnaround times of about a day. So, I expect that the price you should assume is still about what we've averaged until now. I think for this quarter, it was about $90 on average. It then comes down to the volume. And I assume that the volume is going to continue to decline, albeit maybe at a lower rate than we saw from the end of last year into this year. And then for the second half of the year, they'll be significantly less than the first half of this year. That's our base case assumption.

And Jack, just to reinforce it, too, one of the reasons we did break out the level of COVID testing separate from our Base Business, just given that we put a wider range around something that we feel is more uncertain versus, frankly, having better visibility on just the performance of our Base Business.

Yes, I like the way you laid it out. I think it's helpful just for teasing out the parts. On that last point on the base business, Glenn, I was wondering if you could provide some more color. I think saw a little bit of the same dynamic from last quarter where it looks like maybe there's some mix benefit or additional test per rec. What's going on there between kind of core volume versus mix?

Yes, Jack. As you saw from a revenue standpoint, what was nice is that we saw the 0.5% growth in revenues in the quarter. So it's the first time we've seen the positive to your point, it's a combination that we still saw lower volumes down 7.7%, but still that's an improvement as we trended through the earlier parts of the year. And it was more than offset by favorable price/mix and we continue to see an unusually high level of favorable mix, primarily driven by higher test per recession. So the feeling is with the fewer visits that patients are going, they're conducting more tests per visit that they're going through. So again, as we think going forward and reflected in the guidance is we'll continue to see over time, the pickup in our base volumes. But with that, you'll see the core level core lever, if you will. You'll start to see that favorable mix start to come back down to more historical levels.

And our next question comes from the line of Dan Leonard with Wells Fargo.

So first question, can you talk about on the drug development business, the contribution of COVID trials to either sales or bookings and the outlook there?

Yes, absolutely. Thanks for the question. So first thing is, if you look at the drug development business which is 16%, but if you take out the PCR testing, we had growth of 8.4% which was strong growth, and we did well across all of our businesses. If you look at COVID right now, basically, the COVID trials accounted for about 12% of our net orders, if you look at the last 3 quarters. So you can see that it's meaningful, but a lot of our growth is coming from outside of COVID trials. And we mentioned in the last quarter that we won a large pharma's oncology book of business. I think that's helpful to us, but also we've won another pharma's non-oncology business. So we continue to show strength outside of COVID, which is very important as we move forward to the base business. That's what gives us confidence as we look at the range we provided for the drug development business for this year.

And then just a follow-up on the Diagnostics business. Adam, you mentioned the work with the CDC on sequencing for COVID surveillance. How do we think about the economics of that or frame that? Is that - could that be a meaningful part of your business? Or were you just trying to emphasize the high science there? Thank you.

Yes. So right now, we're doing a couple of thousand sequences a week for the CDC. We can increase that significantly. We're working with them to see what numbers they might like us to go to. That's more science and more for the benefit of understanding the mutations. We could use it for drug development and understand what we need to do in the future with drug development. But I wouldn't look at that as a separate, significant revenue stream.

And our next question comes from the line of Lisa Gill with JPMorgan.

Adam, when we spoke about a month ago, I think, I asked you a question around the tie between diagnostics and drug development, and did it make sense for the two entities to be together. You clearly put up a great number, obviously, on both sides, but especially on the drug development side for book-to-bill. Can you talk about outside of COVID, the tie you're seeing between drug development and diagnostics for winning business? Is this helping in some way? Any of the correlation that you see between those two businesses? And then lastly, how do we think about virtual trials playing into all of this?

Sure. So I'll start by saying that I continue to believe that having diagnostic and drug development together is a winning scenario. And that you can do significantly better with drug development business by having diagnostic capabilities. There's no doubt in my mind that we've seen that with COVID. I mean, being able to do the diagnostic test of what we're doing in drug development enabled us to win more than 400 opportunities across COVID. At the same time, I believe that people now have seen it in pharma and biotech. So it opens up the doors for other areas. We won large Pharma's oncology business. I think oncology is the next area that we'll be able to show the benefit of having diagnostic capabilities, particularly Companion Diagnostic capabilities along with drug development. And we are beginning to see in the biotech and pharma clients that this is mattering more and more. So I continue to be very bullish about the ability to have both these businesses together. I've always said that I think that the drug development business benefits more by having diagnostic capabilities than diagnostics does by having drug development. But with that said, we've seen some synergies going the other way, where the drug development group has been working on Companion Diagnostics, and we're able to potentially launch that in the diagnostic area. So I'm actually seeing benefit to diagnostics over time from drug development. So we continue to make progress there. If you look at virtual and hybrid trials, the reason we've invested there is because I believe it's going to be more important than it's been in the past. And it's been talked about for quite some time. I don't think a lot of pharma companies were willing to go there because they know how to do the other trials, and we still have to get regulators to approve how to look at virtual hybrid trials. But with COVID, all that has changed. And there are still about 20% to 30% of clinical sites that are not open. And if you start a trial now, you want to make sure if there's another event that, for example, if in November there's a new variant and you need another vaccine. There could be another impact from COVID later this year. You don't want your trials to be interrupted. You want to have the possibility to do virtual and hybrid trials. So I think it's going to serve, number one, as a backup to ensure that trials can continue. Number two, I believe that particularly in specialty areas, you're going to see more and more use of the hybrid trials. Because what we're seeing is they can work and they can work well, and they can actually allow you to potentially enroll more patients faster. And therefore, I think it's here to stay now that we've seen it work.

Your next question comes from the line of Erin Wright with Crédit Suisse.

Quickly on the Diagnostics segment. Has anything changed in terms of your thoughts around serology testing here? Do you think that will pick up vaccine utilization? Or is that minimal in terms of your assumptions and the guidance at this point?

That's an important question. It's a very important scientific question. We are very specific to say COVID testing and not break apart PCR and serology because it could go in multiple different directions. I think if you end up having to have a vaccine every year, serology might not be that important. If you need a vaccine every several years, then I believe serology will be very important. And the real question is going to be what level, what's the quantitative analysis that you need for a certain level of antibodies to feel like you're protected. If there is a quantitative number that people can feel comfortable they can fly, they can go to events, that they can do many other things, then it will be very important. And what we're doing is we're preparing for that just in case. So we already have the ability to do a semi-quantitative antibody test, which I think would help if you have to get to a certain level, know what that level is. And we're going to be prepared to scale that. We already have - we can run thousands, but I want to be prepared in case we need hundreds of thousands in the future. It's just too early to know from the science, and we're learning so much about the variance and so forth, that there'll be more to come as we go through this year.

Erin, the only other thing I'd add for that is that, as Adam said, COVID testing the guidance that we gave down under the $35 million to $50 million is our expectation for the full year. But while serology is a small piece of that, frankly, from our guidance in the range that we have, we would actually have a range where serology testing would go up at the upper end of the range, could go down again at the lower end of the range, versus the PCRs, to your point, is once the vaccines are readily available, more interest in seeing if the antibodies are there. But again, it's a smaller piece of the total COVID business that we have.

And then on capital deployment, can you speak to the consolidation opportunity across the core lab business? What does the deal pipeline look like now? And does the broader installed base of wind care instruments and other concepts change or delay or your thought process, I guess, around deal activity in the near term? Thanks.

Yes. So as I look at capital deployment, the first thing we look forward to see if there are hospital laboratories, local or regional laboratories that we can acquire. And those make a lot of sense. They are accretive in the first year, typically, you return your cost of capital in about two years, and we know how to integrate those. We are seeing more opportunities for those. We're spending a lot more time and discussions with various hospitals and local laboratories. And I can tell you, even as a senior management team, we're spending a lot more time in those discussions ourselves. So I feel good that there will be multiple opportunities as we go through this year. The second thing I look for is strategic acquisitions. So if there's something in one of the pillars of our strategy, for example, oncology, that we need to acquire in order to be successful, we would look to do something like that. And those would be kind of smaller tuck-in type of acquisitions versus large-scale mega deals. And then the third thing we look at is the share buybacks. If you ask me about large-scale acquisitions, so for example, another large CRO, I don't think we need to do that. I think we have what we need to be successful. So we're mostly interested in laboratory, hospital laboratories, local retail laboratories and strategic acquisitions helping us in the pillars.

Your next question comes from the line of Ralph Giacobbe with Citi.

Just wanted to go back on the commentary around visibility on the core trends and maybe the assumptions and comfort around those core trends. And more specifically, when I look at the numbers compared to 2019, and I look at the lab side, midpoint looks like, it's about 4% growth. And then on the CRO side, it looks like it's about 15% growth off that sort of 2019 baseline. So anything to call out there on either side around sort of the visibility you talked about that bridges the growth?

Yes, Ralph. Yeah. From our perspective, it's kind of an interesting viewpoint because as we go into 2021 and look at a comp to 2020, obviously, we see significant growth in both - in our base businesses because it's coming off of the pandemic here. As we look back to 2019 kind of pre-pandemic levels, to your point, your growth rates, we actually look at it even on a compound growth rate, let's say, is that kind of fitting in within our historical growth rates. And the guidance range that we have kind of implies, obviously, we're getting a range. But for both businesses, clearly at the upper end of the range that we're back to kind of the normal historical growth. And so as we think about the pieces, so first, within diagnostics, while we've already seen a favorable revenue trend in the fourth quarter compared to 2019, so revenue is already there, but our volume wasn't. We were down, call it, around 8% in the fourth quarter. So the range that we have as we look to 2019 is that, for the most part, call it, the mid part of the guidance that the volume now will get back to 2019 levels, call it, in the midyear to second half of the year. And again, the price will come down to more historical levels as well. But similarly, within the drug development side of the business, we've already had good growth compared to a year ago, and we expect that to continue relative to 2019 levels, where, again, the range, if you looked at it as a CAGR to 2019 similarly, within the range, gets us back to our historical growth rates, again, depending where you are in the range. So with the recognition that there's still going to be some softness in the base business that's expected in the first half of 2021 because of the pandemic still here with the vaccine not broadly available. But clearly, with the second half of the year expectations, we're now growing relative to 2019 at a more historical level.

And then just a follow-up on the $100 commentary for COVID testing. I just want to make sure that's across your managed care book as well. And has there been any discussion or pushback, if you will, with managed care or perhaps the argument of a lower rate for maybe more favorable pricing terms on sort of that base business longer term? Thanks.

Yes. So average price is about $90. And of course, we're happy to discuss with managed care. But as the volume has gone down significantly, and we see the testing not where it was, say, back in December, those discussions continue to happen, but I think we have a very strong rationale based upon the CMS price and guidance.

And our next question comes from the line of Eric Coldwell with Baird.

Yes. Wouldn't you know, Ralph, got my two questions kind of wrapped up in the last one there, but I'm going to just jump off that a little bit. I mean, ultimately, I think I was going in the same direction, which is peeling back the layers of the onion on diagnostics on the base business. You clearly have a lot of layers. You have hospital lab management, which impacts revenue and pricing, but not volumes, you have easy comps, you have no PAMA, M&A, even a little FX. It sounds like you're saying the 2021 core-based volumes maybe start the year below 2019, finish the year the second half above 2019. So are you basically seeing a flat year on volume in total or maybe a little bit of growth in total? And then I have a follow-up clarification after that.

Yes. Again, Eric, it's where you're looking at it relative to the range. So part of the supplemental information that we provided, we actually did give, call it compound growth rates for the businesses based on the Base Business and COVID testing to kind of frame the growth. To your point, within that, obviously, there is some M&A and currency that impacts the numbers. But as we think about, again, the volume for Diagnostics, depending where you are in the range, at some point, we're going to cross over to being favorable volume. And so again, at the midpoint of the range, just assume that's relatively midpoint of the year. After that point, we're then looking at getting back to more historical growth rates. But even there, the trajectory of the recovery could be stronger. It could be a little softer. But overall, we do expect to see, depending on where you are from the range to - for the full year, we could be still below on volume for the full year, but favorable on price/mix. Or at the upper end of the range, we can be both favorable on volume as well as favorable on price for the full year. So again, just a very degree of how fast the recovery will come and how much it accelerates.

My quick follow-up here is within Diagnostics, obviously, you are doing M&A. You have a positive outlook on M&A. I'm curious what percentage growth in that 11% to 13.5% base, what percent of that is actually M&A driven as opposed to not?

Yes. So when you look at the guidance that we provide for, call it, for both of our businesses. The M&A that's associated in our guidance range is all deals that have been done in the past. So you're just getting the annualization part of that growth, if you will. In our enterprise numbers, we do assume that part of our capital allocation will go to M&A. So we reflect some of that growth in revenue at the enterprise level for that. But if you think about just the level of M&A in the quarter that we had, for Diagnostics was 0.9%. So obviously, we'll look to see that number be a smaller piece within the guidance range that we had for 2021, subject to any deals that we do would be additive to that.

And our next question comes from the line of Eugene Kim with Wolfe Research.

Thank you, and congrats on the strong quarter. I guess a quick follow-up to Ralph's question earlier on the COVID side. You are expecting Base Business revenues to come in about 15% higher than 2019 at the midpoint. Can you maybe break down how much of that is driven by COVID related trials versus non-COVID business?

Yes. So if you look at the growth that we had for the fourth quarter, it was very strong. It was about 8.4% if you take out the PCR testing. And its strength is coming from all three businesses. It's coming from the early stage, the central laboratory as well as the clinical development business. As we look at the COVID trials and what they accounted for, it was about 12% of our net orders across the last three quarters. So you can see that it's meaningful, but it's not that much. We still would have had great growth even without the COVID trials in terms of our net orders.

And quickly on share repo, apologies if I missed this, but have you provided how much buyback you're assuming in your full year EPS guidance?

No. Eugene, what we've said is that we expect to target the free cash flow that we generate this year to both M&A and the buybacks. So assume that we will be in the market each quarter within buybacks, but the level of buybacks will be, as Adam commented earlier, driven off of the amount of acquisitions we do. And we have a good pipeline of deals. But like in most years, or at least most normal years, always expect it to be - they're not mutually exclusive that we expect to continue to do strategic M&A acquisitions as well as repurchasing shares with our excess cash flow. But we've not quantified the amount, but obviously, it would be within a range of our guidance.

Our next question comes from the line of Pito Chickering with Deutsche Bank.

So two quick ones here. As you think about deals for 2021, obviously, the COVID tailwinds helps out some of the smaller hospital labs are struggling previously. Do you think that deals will sort of pause during 2021 as COVID tailwinds normalize and so wait until 2022 until the normal environment comes back?

No. I think the deals are going to continue to be at least at the same pace in Paseo. In fact, I think there might be some acceleration based upon the number of discussions that we're having. And I think there's a couple of reasons why one is, for example, hospitals have realized how capital-intensive this business is. So many hospitals had to update their labs to be able to do COVID testing at any scale. And as they start to look at keeping those labs updated outside of COVID, they realize they probably need to do some additional upgrading to the equipment. So they'd rather use that capital for example, for a new surgery suite versus us having to just update the lab to run the test that they've done in the past. The second thing is that even though COVID has been significant, many of the hospitals haven't had their base business back to the level that we've seen, and they don't have the COVID testing ability that we have. So the COVID testing has not necessarily offset the other base business issues that they face. So I feel pretty good about deals this year, and I don't think it will slow down. If anything, I think it will be the same or accelerate.

Next question, your capacity for COVID testing is obviously above the demand right now, and you're guiding to a decline throughout 2021. If I think about COVID testing globally, there's still a lot of countries that don't have the capacity to test as the U.S. does. Is there any opportunity to use the excess testing capacity to work with other countries to assist in their COVID testing?

So we do testing in Canada. We also have the capacity to do some testing in the U.K. because we have a lab there that has the equipment. Outside of that, we don't necessarily do testing in any other country. The U.S. is obviously where we do the vast, vast majority of the testing. What I'd worry about with other countries has turned around time. Would it be easy to get the samples to the U.S. and turn those around fast enough? And then the ability to move equipment or have equipment in those other parts of the world, I don't think is necessarily that feasible. So the good news is that there are many additional alternatives that are coming to market. And I think that most countries right now have learned how to use the testing they have. In some countries don't use nearly as much testing as the U.S. So for example, in Japan, they do significantly less testing even though they have the capacity that they could do more if they chose to. So I think it really is country-by-country based on how they approach it. And it's not in our plan to expand outside of where we currently are for testing.

Your next question comes from the line of Adam Noble with UBS.

This is Adam Noble on for Kevin. I just wanted to go back to kind of PCR volumes, understanding that the infection rates have gone down. And to the extent that those continue to go down, that would be a headwind to the PCR volumes. But I think from your previous comments, you guys have - because of the active infections, you haven't had a chance to go too far down the pipeline of back to work, back-to-school, asymptomatic testing. And just curious if you could comment on your pipeline there and what are your expectations for those volumes as the year progresses?

Yes. Thank you, Adam. And again, the reason we gave such wide guidance of minus 35% to minus 50, because there's still so many unknowns. For back to work, back-to-school, we've been a big part of that. But many companies have not gone back to work yet, and you see more and more companies saying that they might not go back to work in the ways that they've done it in the past. Some of the companies that we're working with were actually using point-of-care testing to help them get up and running. Some were using our Pixel by LabCorp at home tests where they can send them to employees, particularly if they have large sales forces across the country. It's a very easy way for them to do it. So our LabCorp employee services is very busy with back to work and back-to-school. And it really is just a matter of how many of those tests do you do while you're also vaccinating people. And then at the end of the day, frankly, it's going to come down to in the fall, where there'll be another strain, and will there be another outbreak will be a big flu season, and everybody has flu, you're going to want a test for both COVID and for flu. So, I do believe that there's opportunity in the second half of the year potentially, it's just too hard to know right now, and that's why we gave you such a wide range of possibilities.

That makes a ton of sense. Maybe just to sneak on in on Covance. Appreciate the guidance you guys gave on it breaking out the COVID side specifically. Just curious if you could kind of break that out further between COVID trial work versus the Central Lab impact that's obviously benefited at the end of this year. But if volumes come down for COVID testing, I guess we could probably expect that to come down as the year progresses as well.

Yes. So I think if you look at the different parts. So for example, Central Laboratory work, we've been very busy, but we would probably fill that with other potential opportunities. So to me, it's kind of we're building capacity. We're doing both COVID and non-COVID Central Laboratory work, and we're very busy in Central Laboratories, as you can imagine. In terms of the trials, again, we're doing mostly non-COVID trials, clinical trials, but we're also doing some COVID clinical trials. I think the best way for you to kind of engage it is to know that the trials were 12% of our net orders over the last three quarters. That should give you the best sense of what that's going to look like over time. I don't think it's going to slow down a lot this year. I think there's going to be more work that you're going to need for variance for vaccines, for example. There's still a lot of anti-virals that are being studied. So I do think for this year, you're going to still see significant work for Covance. And then we'll have to see where it ends up as we go to next year.

And our next question comes from the line of Ricky Goldwasser with Morgan Stanley.

Adam, in response to one of the questions, I think you said something really interesting in terms of the pricing dynamics and the fact that you're seeing a higher number of tests per visit or fewer visits and more tests. Do you think that this is sort of a new sort of step-up in the demand curve? Or is this sort of a temporary catch up?

Yes, Ricky, it's a very important question. We have that discussion often amongst ourselves. I believe that because people are not going to their doctor as often as they have, where they may have missed their wellness programs that when the doctors are seeing the patients who are just trying to get as many tests on as they can to make sure they can treat that patient appropriately. I do not personally believe it's going to be a long-term sustainable number of tests per acquisition. I think we'll get back to closer to where it was. But we're also trying to understand the difference between telemedicine and doctor visits. And if there's a difference there, we don't think there is, but we're still trying to understand that. So our base case assumes that as the business comes back and starts to grow again, that it's not based upon increasing numbers of tests per acquisition. It's based upon more people going to their physicians.

And to your point on telemedicine, it's interesting, right? Because is it about 50% of our acquisitions that are done in your sites versus physician offices. Do you think that there's anything that's going to impact physician behavior because they're not getting reimbursed for drawing the specimen when it's a telehealth visit?

You know, Ricky, I think that, first of all, telemedicine has been very important as we've gone through the pandemic. I think that there have been some restrictions that have lifted that will probably stay lifted in terms of being able to do things over state lines and so forth. And I think it's going to be important to understand it more as we move forward. The good news for LabCorp is that we're involved with almost every major telemedicine company. So if they can easily access the ability to get testing done for patients. And we have so many service centers across the country, including the ones through Walgreens that I believe that we're easily accessible to patients, whether it's in their physicians' offices or through telemedicine. But I do believe it's here to stay, and I - that we're part of it and we're able to make it an easy transition through their EMRS.

And then just one last one on the utilization. You broke for us the core revenue growth. I think, sort of, 4% for the year, half from M&A, half organic. How should we think about utilization exit run rate in 2021?

Yes. So Ricky, the - as we talked about just thinking about it as organic core volume for us. We were down 7.7%. So we saw a good trend throughout the year. As you'll recall, we ended the third quarter - call it 8.9%, but the end of the quarter was more like an 8% number. So we have seen that the base volumes have stabilized. We've seen that throughout the quarter. And frankly, we've seen it also into January of this year. Obviously, we're going to start to see the favorable comps as we compare against a pandemic year in 2020. But again, as we talked about earlier, when we look at the range of guidance we gave for the business, depending upon where we are in the range of guidance that we do expect to see, call it midyear into the second half of the year as the midpoint of the guidance that you should see the organic volumes be picking up relative to 2019 levels.

Your next question comes from the line of Matt Larew with William Blair.

I appreciate that there's a wide range potential COVID volumes built into your guidance. But could you maybe comment on whether this is, sort of, your perspective on how the COVID testing market is going to evolve over time? So in other words, is it going to evolve into more of a point-of-care market like flu where reference aren't really playing much of a role unlike it's a reflex? Or maybe do you think it's going to go away entirely? Just an update on how the broader market is going to evolve?

Yes. Hi, Matt. I think it's going to depend on the treatments that we have available and the anti-virals and how effective they are. If at the end of the day, you're diagnosed with COVID in the future, but we know you're not going to end up in a hospital, you're going to die because we have great ways to treat it, then I think it could become point-of-care testing like flu. If it's as serious as it is today, where people aren't vaccinated, they could end up in a hospital to end of time then I think it's going to end up PCR testing, particularly for people with symptoms. Because we do know that the point-of-care testing is not necessarily as accurate, and you do miss some people through that. I don't think you're going to want to miss people if they can end up in a hospital die. So I think it's really going to take some time for us to understand how good the therapeutics work outside of vaccinations. Because when you think about it, if 20% or 25% of the population doesn't get vaccinated, and if the vaccine doesn't work in 10% of the population, that's 35% of several hundred million people in the U.S., that's a big number of people that we're still going to have to worry about getting COVID over time. And the real question, it's going to be how well are those therapeutics? And our hope is that we get great therapeutics and that we can keep everybody out of the hospital and from dying, but we just don't know yet. If it ends up there, it will be more point-of-care. I think that we're going to end up doing PCR testing for quite some time at some level.

And then just on the drug development side, as you look to create differentiation there. Obviously, there were two capability additions you made back in October with Snap and Global Care. Maybe just give us a sense for where you look to continue to create differentiation and how maybe to measure the success of some of these capability additions, if not through revenue as perhaps through win rates or broader business?

Yes. So to me, the differentiation is having diagnostic capabilities, including companion diagnostics with drug development. The ability to do virtual in hypercritical trials, I think, everybody is going to have to do that, and you have to do it extraordinarily well. But the difference that we have versus others is our companion diagnostics and our diagnostic capabilities. And you've seen it with COVID. I believe you're going to see it with oncology and then in other therapeutic areas as well.

And our next question comes from the line of Brian Tanquilut with Jefferies.

Congrats on the quarter and the good guidance for 2021. I guess just a couple of questions. On the CRO side, would you be able to give us kind of, like a balance of the bookings across preclinical, central lab and clinical? Because obviously, that's pretty good growth you've shown on the bookings number for Q4?

Yes. So we don't break it out necessarily by the individual areas. What I would say is that we've shown strength across all three of the therapeutic areas. If you look historically, we have real strength in early clinical development. We're a leader there. We have strength in our central laboratories. We're a leader there where we're continuing to progress and where we want to grow more substantially moving forward, is in the clinical trials, in particular, late-stage III clinical trials. So you are going to see us continue to have a major focus to win more in that area as we move forward. And I would expect over time that we would disproportionately grow from that area.

Yes. When you look at the working capital for the quarter, it was probably a little - there was a drag that we saw in Q4. Is that going to normalize in 2021? Or how should we be thinking about working capital trends? Yes. When you look at the fact that our guidance range for earnings is kind of flat to slightly down, but our free cash flow is kind of flat to slightly up, if you will, from a year ago. It's really from working capital. So to your point, we've used cash from working capital to support the strong growth that we had as that growth rate that tempers as the PCR or call it, the COVID testing comes down, we expect to monetize the cash from that working capital buildup. And then obviously, partially offsetting that, we do expect to see a higher level of our cash spend for capital expenditures in 2021 that we kind of held back a little bit in 2020 as we were obviously dealing through the pandemic.

So we're going to try to get through two last questions as fast as we possibly can in respect of everybody's time.

And our next question comes from the line of Derik De Bruin with Bank of America.

Thank you for squeezing me in. Can we talk a little bit about oncology testing trends and NIPT and consumer genomics. Can we talk about where those expectations are and sort of the esoteric testing businesses there and how they're picking up and sort of where you're exiting the year?

Yes. So if you look at the esoteric testing, that declined the least amount, frankly, as we began with the pandemic, and it's recovered the best, about the same, frankly, as our base business now. So it's still down a bit versus prior year, but nowhere near what it was down in March. In March, obviously, it was down less than our core business was I have no doubt that oncology testing is going to continue to be important. And as we think about things like liquid biopsy, I think that's going to be increasingly important in the future. So I was glad that we're part of that market now with our non-small cell lung cancer capabilities, and we're going to continue to look for opportunities to be involved in that moving forward.

Great. And if I can do one follow-up. We - there's - LabCorp has a very long history of doing more technology-focused acquisitions. And given sort of the expansion of at-home and clinic care testing, do you have any desire to sort of become an equipment manufacturer or equipment provider as opposed to just a testing lab?

So as I've said before, when we look at our capital allocation. First and foremost, we want to do additional laboratory acquisitions. But then I would say we want to look at our strategic pillars. And if we see something, for example, in oncology that makes sense that would be our next area that we would go for acquisitions. At this moment, we're not looking at equipment and paying equipment makers. But I can tell you, we are looking at other areas to kind of enhance our core focused strategic areas.

Our next question comes from the line of Donald Hooker with KeyBanc.

All right. I made it in barely at the end. So I guess your relationships with some of the big managed care companies were probably fairly distracted, particularly the UNH relationship, preferred the PLN. Would it be fair for us to assume there's maybe some pent-up momentum with UnitedHealth and some of the big managed care companies as COVID went down, the distraction stayed away or are they going to kind of step up their - revisit their strategies, maybe more earnestly to kind of drive volumes to the more efficient labs like LabCorp and others?

Yes. Don, I think that's an important point. And we have a great relationship with UnitedHealthcare. We have great relationships with the managed care organizations across the country. And I do believe that as things go back to kind of more of a normal scenario, though I don't think it will ever be completely normal what we had in the past. I do think there will be opportunities for us to work with them closer. So for example, on the PLN, the Preferred Laboratory Network, I would have thought we'd make more progress together. But with the distraction of COVID, it's been nearly impossible to do that. I'm hopeful that we'll be able to get back to that when things normalize a bit. Terrific. Thank you. So the last thing I wanted to say is, first of all, thank you for joining us. And there's no doubt that we achieved strong performance in the fourth quarter and full year of 2020. But the beginning of the pandemic, we've been focused on what we can do to help as best we can. And I think our agility, our ability to move quickly combined with our science, innovation, and technology is what has really differentiated us. And what we learned about agility, and we've equity in the marketplace is here to stay. And I think that's going to continue to serve us well as we go into the future. So thanks for your time today. We look forward to talking to you soon.

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