Pathology providers Sonic Healthcare and Healius to reap billions from Covid until 2024

Two major pathology providers have already experienced multibillion-dollar revenue uplifts amid a testing boom, as analysts predict even more to come.

Covid-19 testing lines at the Royal Brisbane Women's Hospital on Wednesday. Picture: David Clark

The Covid-19 Omicron variant will be an earnings boon for the country’s largest pathology providers, with testing expected to continue until at least 2024.

More than 55 million polymerase chain reaction (PCR) tests have been completed across the country, with pathology providers receiving an $85 Medicare rebate for every test. This has increased from $28.65 per test at the start of the pandemic.

Even with an increase in the cheaper rapid antigen tests – which can be bought in bulk for about $10 – Covid-19 testing is expected to keep pathology providers, who have already experienced multi-billion revenue uplifts, busy for several years.

Sonic Healthcare – which has performed about 36 million PCR tests in seven countries – has yet to provide earnings guidance for the financial year citing “Covid- related unpredictability”.

But company estimates show revenues rising 5 per cent to $3.09bn in the four months to the end of October, with earnings up 16 per cent to $991m, compared with the previous corresponding period.

This has prompted equity analysts at investment bank Citi to lift earnings forecast.

Demand at Covid-19 testing centres across Melbourne has increased in recent weeks. Picture: Diego Fedele/Getty Images

“We have reviewed our forecasts in light of the Omicron variant, but more generally post our review of global vaccination/booster rates. Previously, we were forecasting Covid PCR revenue of $2133m for FY22, $599m for FY23 and no Covid testing for FY24,” Citi analyst John Deakin-Bell said in a note to investors.

“We are now forecasting Covid testing as follows: FY22 $2168m, FY23 $900m, FY24 $298m – in other words about a 60 per cent decline in FY23 and still minimal testing in FY24.”

Sonic Healthcare revenues.

The provision of PCR tests have added more than $2bn to the company's revenue in the last financial year.

Healius is also experiencing a dramatic uplift, with first quarter revenue rising to $689.9m from $480.2m in 2020. Earnings have almost tripled to $201.9m.

Chief executive Malcolm Parmenter said Healius had established 89 drive-through Covid-19 collection centres and upgraded its laboratories.

“Covid PCR test volumes have averaged above 40,000 per working day and that has continued into October, while commercial Covid testing continues to perform well, with testing being performed for government, sporting codes, film production and mining companies,” Dr Parmenter said at Healius’s AGM last year.

Such is the demand from record Covid-19 infections that some testing centres are turning people away, leaving some undiagnosed and heaping pressure on the public system.

NSW Health is urging people with symptoms to get tested immediately “so cases in the community can be identified as quickly as possible”.

The Victorian Health Department is warning a number of private pathology testing sites had “suspended operations and will remain closed for at least the remainder of this week”.

“This is so private providers can process a backlog of outstanding tests. Larger testing centres delivered by the Department of Health remain open,” the department said in a statement.