Eric Coldwell: Great. And if I could get one more in here, the stranded cost commentary, could you just remind us what you’re sharing in terms of what those total costs were, how they phase out, and what happens at the end of 2024 when Fortrea, thinks they’re going to be completing their biggest TSA transitions, particularly on the IT side? I’m just, what is the impact to Labcorp over the next handful of quarters and into 2025 as you face these stranded costs, but they start to come out, and then what happens at the end of the TSAs? Thank you very much.
Glenn Eisenberg: No, sure, Eric. So from the stranded costs, we commented that we had around $45 million of stranded costs and that our initial target was to take out that $25 million at a run rate this year, which, again, we’ve achieved. So there’s more to come. So in the fourth quarter, call it around a $6 million headwind that we had due to stranded costs that obviously impact margins. As we go forward with the TSA support, so what we’re doing to support Fortrea, IT and other areas, that’s effectively a pass-through, right? We’re providing the service. They’re paying us for that service. Once they’re fully sustainable on their own and the TSAs would go away, our costs go away because, frankly, most of the costs are contract labor-related on the IT side.
So when the job’s done, those costs are gone overall, but we continue to tackle the other stranded costs as well. So when you look at it, the goal was, to have all the TSAs completed within two years. I can tell you Fortrea and Labcorp are both very motivated to see and incentivized to see that transition happen as soon as possible. The good news is that both are focused on it. We’re making good progress. Fortrea is making very good progress and we would expect to hopefully see those TSAs expire earlier than what we had planned or at least what we had planned for, but again, the costs will go with that.
Operator: Our next question comes from Lisa Gill with JPMorgan. Your line is open.
Lisa Gill: Thanks for taking my question. I first wanted to start with the guidance range. Glenn, can you help us understand, it’s a pretty wide range. What’s in the low end of the range and what gets you to the upper end of the range would be my first question. And then secondly, I just want to understand managed care contracting and pricing for 2024. You talked about volume and pricing mix, but just curious as to do you have many contracts that are up for renewal? Is there anything that’s different when we think about contracting with managed care entities?
Adam Schechter: Yes. So I’ll take the second one first, which is, we feel confident in our contracts that we had put a few in place last year, but this year, there’s no major expiration. So we feel good about where we are and there’s not much risk in the guidance range as we go through this year and the next. But with regard to the ranges and certain things that go to the upper end of the funnel, obviously, the bottom of the revenue range, obviously, the diagnostic volume looks great and we’re expecting that to continue. The weather is a bit of what’s taking us a little bit back to the midpoint. So the weather is 10% to 15% impact, but the volume continues to be very, very strong. The rate in which we integrate the hospital deals will help us and we have very good track record of doing that.
But the good news is there’s not as much volatility this year as there’s been in years in the past with COVID. So I feel good about the range. And in fact, the EPS range, we’ve narrowed it versus what that means would have been last year, the year before that, because there is less volatility and then I’d say in the biopharma services business, I would say that the strength we have and momentum is great. The thing that we’re watching carefully are when the cancellations, in particular in early development, start to come back to more normal.
Glenn Eisenberg: Yeah. And Lisa, I think on Adam’s comment that when you look at the profile of Labcorp now that we’ve spun the clinical development business, it has taken out some of the volatility and variability, if you will. So the guidance ranges really across the businesses and the enterprise are actually a little bit tighter than what we normally do. Obviously, we’re just starting out the year. The midpoint, obviously, our guidance is our best expectation that we have, realizing obviously higher demand would promote more on the upper end or softer demand down below, but needless to say as we go through the year, we’ll continue to tighten the ranges with less time left in the year.
Operator: [Operator instructions] Our next question comes from Derik de Bruin with Bank of America. Your line is open.
John Kim: Hey, good morning. This is John Kim on for Derek. I think a lot of the key questions I had have been answered, but I wanted to ask about the esoteric versus routine testing you laid out or you reaffirmed your focus on the four therapeutic areas and it seems like the esoteric had a pretty good growth in the fourth quarter. But going forward, can we continue to expect that high single digit, low double digit growth in the esoteric and then the rest of it would be made up in routine?
Adam Schechter: Yes. So if you look at the esoteric testing volume, we continue to have a significant focus on the four therapeutic areas that we talked about. And we did, in fact, see in the fourth quarter and the full year that esoteric testing volume grew slightly faster than the routine, but it’s strong to note that both of them grew strongly and we expect them to continue to both grow strongly, but we would expect esoteric to grow at a slightly higher rate in both volume and the volume obviously is at higher dollars. So maybe a little bit faster in the dollars.
John Kim: And then in terms of pricing, you mentioned that you’re expecting mostly flat pricing in 2024. There are no major contract renewals coming up and PAMA has obviously been pushed out, but if I look at the margins between biopharma and diagnostics, biopharma had a pretty strong margin compared to the diagnostics in the fourth quarter and you mentioned that there’s going to be a slight expansion in diagnostics. What’s going to be the dynamic between the two for the full year 2024? Can we — is the fourth quarter a good jumping off point for the biopharma margins?
Adam Schechter: Yeah, no, I wouldn’t use any one quarter for the margins. We expect the margins to actually improve across the business, across both diagnostics and biopharma. Diagnostics in the fourth quarter was impacted to some degree by the hospital integrations that we’re doing, that there were several new ones. And although they’re accretive in the first year, they were dilutive in the first couple of months. We expect that to improve as we go into next year. As we go to next year, there’s still a COVID overhang in the diagnostic business, probably about $130 million or so, but even with that, we expect to get some slight margin improvement in that business and overcome that.
Adam Schechter: Okay. So in closing, I know we’re at the end of the hour. I just want to thank everybody for joining us today. I want to thank our team here at Labcorp for their focus and dedication and everything that they do to serve the patients that we all are trying to do the best we can to improve health and to improve lives. And we look forward to sharing more with you as we go through the year. Thank you.
Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
