Derik de Bruin: So changing track a little. Look, the LDT legislation looks like it’s making more progress than it has. It’s like — can you quantify what your exposure is to LDTs and sort of your thought process here? I mean, you’re introducing a bunch of new tests would qualify for that. So how do you think about incremental investments if that goes through? And would you discontinue to test there? And then as a follow-up, there’s been some legal movement lately on the MRD space. There’s been some litigation that’s happened that has blocked some other players from the market. Does Haystack have freedom to operate as you sort of look at what’s changed in the IP landscape on that? And how do you think about your IP portfolio on Haystack and being able to not get sued?
Jim Davis: Yes. So let me address your second question first. We have no risk with respect to the IP on the underlying technology that we’re using in Haystack. We feel very confident about it. Much of that IP comes out of John Hopkins University, and we’re solid there. So no risk. In terms of LDTs, I think we’ve said in the past about 10% of our tests are considered LDTs. We’ll wait to hear from the FDA in April what the final rule is, and then we’ll make decisions as an industry from there. What I would tell you is that we do a significant amount of work for the pharmaceutical industry today, and we do a significant amount of work for four international laboratories. Both of those require us to be ISO certified. And when you’re doing work for the pharmaceutical industry, especially for companion diagnostics, you’re essentially operating already under FDA regulation.
So it’s not going to be anything radical that we don’t know what we need to do. Will there be further investments and steps required to get all of our laboratories that do LDTs accredited? Yes, there will be. But it’s not a heavy lift for Quest Diagnostics.
Operator: [Operator Instructions] The next question will come from Andrew Brackmann of William Blair.
Andrew Brackmann : I want to go back to the Alzheimer’s offerings and the investments that you’re making there. Can you maybe just sort of talk at a high level about the opportunity that you see for that category? Should we sort of think about this market kind of ultimately looking at something like oncology where you have screening therapy selection monitoring et cetera? Or does it sort of take a different path for you guys?
Jim Davis: Yes. So thanks for the question. It’s a great question. So first, I would say that there’s just broader awareness of testing options that are now available to both consumers and to physicians. In part, this is because of new therapeutics that have been introduced has just created widespread awareness. As you know, the majority of testing today for Alzheimer’s is conducted via PET-CT, which are expensive $2,500 to $4,000 exams or CSF testing, cerebral spinal fluid, which is not an expensive lab test. However, the procedure to extract CFS out of the human body is an expensive procedure. And likewise, the total cost of that is roughly $1,000. We have brought up blood-based assays for ApoE, which is a genetic risk for Alzheimer’s.
We brought up a blood-based assay for what we call AB42/40, which is generally considered the earliest indicator amyloid plaque, the earliest indicator of dementia and/or Alzheimer’s onset. And then we brought up one of the two protein markers that are also involved, the Tau markers. We brought up 181 and there’s a second one 217 that we will be bringing up later this year. That, in essence, completes our blood-based offering. And I think there’s widespread consumer interest, widespread interest amongst primary care physicians. And we’ve had double-digit growth all year long in both our blood-based assays and CSF testing, and we expect that double-digit growth to continue on in 2024 and beyond.
Operator: The next question will come from Stephanie Davis of Barclays.
Stephanie Davis: So I was hoping to dig in a little bit more on to the AI question you’re having and discussions around the prepared remarks. Could you tell me just a little bit more about what you’ll be investing into and how maybe the rollout of things of the AI job, the AI job helper will help you guys out? And then I guess on a follow-up to that one, is it safe to assume that you’ll have more IT investments as you develop some of these AI solutions that will then have more out year yield for your margin opportunity?
Jim Davis: Yes. So good question. The AI tool that we referred to with respect to our Clifton lab, is really — it was a tool that we used to analyze the workflow within several departments in the Clifton Laboratory, that actually looked at from fairly simple things like steps and movement between equipment, loading and unloading of certain racks and we reviewed it and you find some really quick easy simplification efforts to adjust equipment, move equipment to minimize the human content or labor involved in each one of these steps. More broadly, we’ve deployed AI in two critical areas. One is in microbiology. Microbiology, as you know, you grow things in a dish, you look at it under a microscope. But with one of our partners, we now — we can take digital images of what’s growing in the dish and the system actually reviews those images and makes the initial call of a negative or positive.
We still review the positives by high, but it’s a digital image as opposed to doing it under a microscope. But it’s a much quicker read because the system has generally indicated — this system is already indicated if it is positive. We’re also in the process of deploying artificial intelligence and digitizing pathology. So as you know, pathology is generally read under a microscope. We’re in the process of implementing digital systems that allow for one to read off of a monitor versus under a microscope. And once you’ve digitized that slide, you’re now able to apply algorithms to, again, at least help with what we call region of interest, pointing out to the pathologist where they should look and inevitably helping the pathologists make the proper diagnosis.
Operator: And the last question for today’s call will come from Eric Coldwell of Baird.
Eric Coldwell: I have actually going to have a couple here. First, the — I missed this. What was the M&A contribution to revenue growth in 2024 guidance?
Sam Samad: So it’s about 50 basis points right now is what’s in the guide, Eric. And it really reflects, as we mentioned in the prepared remarks, the carryover that we have from the acquisitions that we did in ’23, which is really NewYork-Presbyterian, The Steward Health Care, the Lenco acquisition that we signed. And really, that’s it.
Eric Coldwell: So if I take mid-point revenue guidance at $1.6 million, remove the COVID headwind, you get to about 3.5% on the base and then take out 50 bps from M&A, you’re at 3% organic on the base.
