Participants

Christin O'Donnell; Vice President, Investor Relations; Labcorp Holdings Inc

Adam Schechter; Chairman, President, and Chief Executive Officer; Labcorp Holdings Inc

Julia Wang; Executive Vice President and Chief Financial Officer; Labcorp Holdings Inc

Michael Cherny; Analyst; Leerink Partners

Ann Hynes; Analyst; Mizuho Securities USA

Erin Wright; Analyst; Morgan Stanley

Elizabeth Anderson; Analyst; Evercore ISI

Lisa Gill; Analyst; JPMorgan

Jack Meehan; Analyst; Nephron Research LLC

Luke Sergott; Analyst; Barclays

Kevin Caliendo; Analyst; UBS

Michael Ryskin; Analyst; BofA Global Research

Patrick Donnelly; Analyst; Citi

Eric Coldwell; Analyst; Robert W. Baird & Co., Inc.

Kieran Ryan; Analyst; Deutsche Bank

Presentation

Operator

Good day, and thank you for standing by. Welcome to the Q1 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.

Christin O'Donnell

Thank you, operator. Good morning, and welcome to LabCorp's first-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 investor relations presentation with additional information on our business and operations which include a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures, both of which are discussed during today's call. 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 conditions, including global economic and market conditions, future business strategies, expected savings, benefits, and synergies from the launch pad 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.

Adam Schechter

Thank you, Christin, and good morning, everyone. We appreciate you joining us today to discuss our first quarter 2025 financial results and progress towards advancing our strategic priorities. Performance in the first quarter was solid, with 5% revenue growth or 6% on a constant currency basis across the enterprise.
The performance was driven by 6% growth in our Diagnostics Laboratories business where there was a strong rebound in volume in March after impact from weather in January and February. Our strong managed care access and our peer contracts continue to serve us well in the marketplace.
Adjusting for Invitae and weather, the margin in a Diagnostics business improved 50 basis points. Invitae continues to perform very well and remains on track to achieve 10% revenue growth and to be slightly accretive to earnings for the full year. Our Biopharma Laboratory Services Segment grew 3%, excluding currency.
Margin for BLS was strong, improving 80 basis points, and the quarter book-to-bill was also strong at 1.13, with a trailing 12 months of 1.07. Adjusted earnings per share of $3.84 were up 4% year-over-year. It is certainly a very dynamic environment and our team is closely evaluating the ongoing shifts in the macroeconomic and regulatory landscapes. We are pleased with the outcome of the court's decision in the challenge of the LDT rule.
We believe it's in the best interests of bringing new innovative tests to patients as quickly as possible. We are also contingency planning for various tariffs and regulatory scenarios. We have developed duplicative, flexible supply chains, and we're in communications with our customers and suppliers.
While we do anticipate some impact, our guidance range includes what we believe to be the most likely scenarios at this time. The essential nature of our work has enabled us to be successful through many different economic cycles over time, and we will continue to focus on serving the needs of our customers and driving growth, all while delivering value for shareholders as we advance our mission to improve health and to improve lives.
Based upon our performance and outlook, we have reaffirmed our revenue and free cash flow guidance while increasing the midpoint of our EPS guidance by $0.05 per share, with implied growth at the midpoint of approximately 10% for the year.
We also continue to expect margin expansion in each segment for the full year. Julia will provide more details on our results and the 2025 outlook in just a moment. We continue to execute well on the strategic priorities of being a partner of choice for health systems and regional local laboratories by launching new tests in important high growth therapeutic areas and by harnessing science, innovation, and advanced technology to bring valuable services and capabilities to our customers while improving operational efficiency.
In the first quarter, Labcorp became the partner of choice for several health systems and regional local labs. These partnerships enable us to accelerate growth and to expand into important geographies and therapeutic areas.
In January, we announced a strategic collaboration with New Jersey-based Inspira Health to manage the operations of the health systems hospital laboratories and to serve as the primary lab for the physician network. In March, we announced an agreement to acquire select assets of Bioreference Health, oncology and related clinical testing services. This transaction will extend our leadership in oncology.
We also completed the acquisition of select assets of North Mississippi Health Services, ambulatory outreach laboratory business and we became a referral lab for its seven hospitals and clinical laboratories. Looking ahead, we have a strong business development pipeline, and we look forward to sharing additional growth opportunities with you in the coming quarters.
We also continue to incorporate the power of science of innovation and advanced technology across the organization. We are focused on bringing new tests into four strategic areas: oncology, women's health, autoimmune disease and neurology. These areas have significant unmet needs for patients and are expected to grow up to 3 times faster than other therapeutic areas and they are proving to do so. Having the latest innovative test in these areas enables us to successfully capture more volume across testing for those patients.
For example, in the quarter, we introduced Labcorp Plasma Complete, a groundbreaking liquid biopsy test to aid in personalized cancer treatment decisions. This advancement significantly expands Labcorp's extensive ecology portfolio. We made significant strides, bringing Invitae's genetic testing solutions to our customers by launching patient affordability and access tools by introducing two additional genetic risk panel tests. Labcorp OnDemand launched several new consumer initiatives tests including electrolytes, GGT, Hepatitis A and total testosterone for women.
Subsequent to the quarter, we introduced HPV and STI self-collection options in Labcorp patient service centers and physician offices. These solutions help overcome barriers to essential health screening by providing convenient private testing options. And in April, we launched our pTau Beta Amyloid ratio test, a powerful new blood-based biomarker test to aid in the diagnosis of Alzheimer's disease.
This first of its kind immunoassay further expands our leading portfolio for Alzheimer's disease and dementia. Launching test in these important areas will enable us to outpace the growth in the overall market over time.
We're also using AI and technology to enhance our customer experience and to bring forward new operational efficiencies to improve our margins. For example, earlier this month, Labcorp received a modern healthcare 2025 Innovators Award for Labcorp Diagnostic Assistant, a digital solution integrated into electronic health records that supports providers with real-time access to comprehensive laboratory data, instants and self-service capabilities.
This award recognizes us as a leader in driving innovation that improved care and achieves measurable results. We also launched eClaim Assist a next-generation digital platform that introduces smarter workflows to improve efficiencies in billing, payer alignment and denials. We will continue to find operational efficiencies and through technology in all aspects of our business.
Lastly, we released the Labcorp Corporate Responsibility Report which highlights our significant progress in key areas such as reduced water withdrawal and improved fuel efficiency. We invite you to review the report on our Investor Relations website.
In summary, our business continues to perform well, and we are making strong progress against our strategy. We believe that Labcorp will continue to be successful and will lead the way with our relentless focus on science, innovation and advanced technology. We remain committed to providing value to our customers and our shareholders alike.
With that, I'll turn the call over to Julia.

Julia Wang

Thank you, Adam. Let me start with a review of our Q1 financials. Revenue for the quarter was $3.3 billion, an increase of 5.3% compared to last year, driven by organic growth of 2.1% and the impact from net acquisitions of 3.7%, partially offset by foreign currency translation of 0.5%. Operating income for the quarter was $326 million or 9.7% of revenue, which is 14% on an adjusted basis.
During the quarter, we had $73 million of restructuring charges and special items, primarily related to acquisitions and LaunchPad savings. Excluding these items and amortization of $70 million, adjusted operating income in the quarter was $469 million or 14% of revenue compared to $453 million or 14.3% of revenue last year.
The increase in adjusted operating income was primarily due to demand and LaunchPad savings, partially offset by higher personnel costs. The 20 basis point decline in adjusted operating margin included headwinds from Invitae and the weather, excluding which enterprise margins would have been up 60 basis points.
The adjusted tax rate for the quarter was 22.5% compared to 23% last year. We continue to expect our adjusted tax rate for full year 2025 to be approximately 23%. Net earnings for the quarter were $213 million, or $2.62 per diluted share. Adjusted EPS were $3.84 in the quarter, up 4% from last year. Operating cash flow was $19 million in the quarter compared to a use of $30 million a year ago.
The increase in cash flow was primarily due to the timing of working capital. Capital expenditures totaled $126 million in the quarter. For the full year, we continue to expect cash flow expenditures to be approximately 3.8% revenue. Free cash flow for the quarter was a use of $108 million compared to a use of $164 million last year. The first quarter is typically the company's lowest quarter for free cash flow.
We continue to expect free cash flow for the full year to be $1.1 billion to $1.25 billion. During the quarter, the company invested $211 million in acquisitions and partnerships and paid out $62 million in dividends. At quarter end, we had $369 million in cash, while total debt was $5.6 billion. Our debt leverage as of quarter end was 2.5 times, gross debt to trailing 12-month adjusted EBITDA at the low end of our targeted leverage of 2.5 times to 3 times.
Now I will review our segment performance, beginning with Diagnostics Laboratories. Revenue for the quarter was $2.6 billion, an increase of 6% compared to last year, with organic growth of 1.6% and net acquisitions of 4.7%, partially offset by foreign currency translation of 0.3%.
Organic growth was impacted by approximately 190 basis points from weather and one fewer revenue days, which is timing related within the year. Total volume increased 3% compared to last year as organic volume contributed 0.9%, while acquisitions net of divestitures contributed 2.1%. Organic volume also includes the negative impact from weather and one fewer revenue day.
Price mix increased 3% versus last year due to organic growth of 0.7% and acquisitions net of divestitures of 2.6%, partially offset by foreign currency translation of 0.3%. Organic price mix was up due to mix as we benefited from an increase in test per accession and lab management agreement. Diagnostics adjusted operating income for the quarter was $428 million, or 16.3% of revenue compared to $418 million or 16.9% of revenue last year. Adjusted operating margin was down 60 basis points due to Invitae and weather. Excluding these items, adjusted operating margin would have been up approximately 50 basis points.
As the benefit of organic demand and LaunchPad savings was partially offset by higher personnel costs. Invitae remains on track to be slightly accretive for full year 2025. Now I will review the segment performance of Biopharma Laboratory Services or BLS.
Revenue for the quarter was $721 million, an increase of 1.5% compared to last year due to an increase in organic revenue of 2.6%, partially offset by foreign currency translation of 1.1%. Excluding currency, early development revenue growth was approximately 5%, while Central Labs revenue growth was approximately 2%.
As expected, the Central Labs growth rate was low in Q1 2025 as we had a large amount of COVID vaccine and therapeutic revenue in Q1 of 2024. Our segment quarterly book-to-bill was strong at 1.13, bringing the trailing 12-month book-to-bill to 1.07.
BLS adjusted opening income for the quarter was $107 million or 14.8% of revenue compared to $100 million or 14.1% of revenue last year. Adjusted operating income margin increased due to organic demand and LaunchPad savings, partially offset by higher personnel costs. We ended the quarter with a backlog of $8.2 billion, and we expect approximately $2.6 billion of this backlog to convert into revenue over the next 12 months.
Now I will discuss our updated 2025 to full year guidance, which assumes foreign exchange rates effected as of March 31, 2025, for the remainder of the year. The enterprise guidance only includes the impact from currently anticipated capital allocation, utilizing free cash flow for acquisitions, share repurchases and dividends.
We are operating in a dynamic macro environment, and there are a series of regulatory developments that we continue to monitor closely. Our guidance has taken into account various scenarios of the ever-changing tariff and regulatory landscape.
Based on what we believe to be the most likely scenario at this time and the resilience of our businesses, we are reaffirming our enterprise revenue and free cash flow guidance while raising the midpoint of adjusted EPS.
Enterprise revenue growth guidance remains 6.7% to 8% compared to 2024. Diagnostics continues to perform well. Consistent with prior guidance, we expect Diagnostics revenue to be up 6.5% to 7.7% compared to 2024. We still expect BLS revenue to grow 3% to 5% compared to 2024.
This includes the negative impact of 30 basis points from foreign currency. Prior guidance included a negative impact of 140 basis points. We continue to expect enterprise margins to be up with margin improvement in both Diagnostics and BLS in 2025 versus 2024, driven by top line growth and LaunchPad savings.
Our guidance range for adjusted EPS is $15.70 to $16.40 with an implied growth rate at the midpoint of 10%. As compared to prior guidance, we have narrowed the range and raised the midpoint by $0.05. Our free cash flow guidance range is $1.1 billion to $1.25 billion, all changed from prior guidance. And due to normal seasonality, we expect it to be weighted towards second half of the year.
In summary, we had a solid first quarter with a dynamic macro environment. We expect to drive continued profitable growth and strong free capital generation that will be used for acquisitions that support our strategy and supplement our organic growth while also returning capital to shareholders through our share repurchase program and dividends.
Operator, we will now take questions.

Question and Answer Session

Operator

(Operator Instructions)
Michael Cherny, Leering Partners.

Adam Schechter

Good morning, Michael.

Michael Cherny

Morning Adam, thank you so much for taking the question. Maybe just, I'll just have one here, and it ties to the BLS segment on both Central Lab and early development. Obviously, there's a lot of noise and volatility tied to the changing administration, tied to changes of the FDA. As you progress through the quarter and as you think about what's embedded in your guidance now, how much variability versus what you'd expect to be normalized demand is incorporated there?
And are you seeing any feedback on either Central Lab or early development, any pushback relative to awards to starts based on the uncertainty that's clearly been created by the current administration?

Adam Schechter

Yeah, no, thank you for the question, Michael. And what I'd start off with, if you look at the BLS business, we had about 3% growth overall and it was about 2% in CLS and about 5% in early development. And what we saw was continued strength in the book-to-bill. So the book-to-bill actually was 1.13 for the quarter and the trailing 12 months increased to 1.07. So we feel good about where we are right now.
When you look at the range that we gave for the revenue, we gave 3% to 5%, which with a midpoint of 4%. You could have said, well, with exchange, why did you not increase the range? The reason we didn't increase the range is because there is some unknowns in the landscape to which you acknowledge and brought up.
So we wanted to give ourselves room within the range. If foreign exchange stayed right where it is today, and we didn't see any additional impact from some of the things in the macro environment, we'd end up at the high end of the range, the highest end. If we see some of these other things like a delay in study starts due to getting regulatory information in a timely way, well, then that could bring us more towards the midpoint of the range or maybe below the midpoint of the range.
So we feel like with the range that we gave, it takes into account the various different things that could occur within the landscape with the midpoint data, what we think is most likely. So I really believe that we have room within the range for things that could occur. As we sit here today, we have not seen study delays. We have not seen studies that have not progressed. We saw one larger cancellation for COVID trial in our book-to-bill.
But you can see from our strength of our book-to-bill, we more than overcame that one trial. But other than that, it seems to be steady as we go at the moment. But we'll continue to monitor it. It is a very fast-moving environment, but I feel good about where we are and what the range is.

Operator

Thank you.
Ann Hynes, Mizuho.

Adam Schechter

Morning Ann.

Ann Hynes

Hi, good morning. So yeah, you were saying that you have tariffs now embedded in guidance, which I don't believe was an original guidance. Can you let us know how much tariffs now are embedded in guidance? And I assume that implies the underlying operations are doing better than your initial expectations?

Adam Schechter

Yeah, thanks, Ann. So as I think about the tariffs, first, I'd say we are well positioned, and we expect to continue to deliver on the commitments that we put forward. First and foremost, we've built duplicative and flexible supply chains that I think really helps and improves our resiliency. There will be some impact from the tariffs, but our guidance range includes what we think are the most likely scenarios, but just to give some context in.
So the vast majority of our vendor spend is from US companies where we're not the importer of record. If you look at our contractual arrangements with secured pricing represents more than 80% of our spend. Many of these deals are multiyear contracts. So some of them come up every year for renewal. We're going to work on our supplier community, we're going to negotiate hard. And accordingly, if you look at like items that we buy directly from countries like China, they're mostly like plastics, consumables, supply, stuff like that.
But it's minimal today and we are looking to shift to more favorable countries as best we can. And I think we have a pretty good path forward for that. If you look at Biopharma and you look at Central Labs in particular, there is some impact from kits moving in and out of the United States. But a lot of that is transportation and a lot of those costs can be typically put through pass-throughs, which is going to help us manage it.
So as I look at the range of different possibilities within what we think are most likely scenarios through continued expense focus, continued focus on our operations, we think we'll be able to offset the impact from the tariffs. And that's why we felt comfortable with the guidance that we gave for revenue of 6.7% to 8% with a midpoint of 7.5% and holding to that. And we feel comfortable and actually raised the bottom end of our adjusted EPS based upon that strength.

Ann Hynes

Great thanks.

Operator

Thank you.
Erin Wright, Morgan Stanley.

Adam Schechter

Good morning, Erin

Erin Wright

Good morning. Could you break down a little bit in terms of your expectations on underlying organic growth across the Diagnostics business for the balance of the year? How much is from acquisitions versus organic? And has anything changed in terms of your expectations there in terms of underlying utilization trends? And if I could also ask more of a housekeeping one, but how did that weather impact of $0.10, you previously alluded to actually shake out relative to your expectations? Thanks.

Adam Schechter

Yeah, no thanks, Erin. So in general, we still expect about half to come from organic and inorganic. If you look at the first quarter, organic growth was 1.6%. But if you just adjusted for weather and the revenue day, it would have been 3.5%. And therefore, I think it would be more of what you would expect typically. I don't know, Julia, if you want to provide some additional context there.

Julia Wang

Absolutely. Good morning, Erin. So we were pleased with our results for the Diagnostics business in the first quarter. As you've seen in our release, we grew revenue about 6% in the quarter versus a year ago, which was supported by strong volume growth of 3% and scalable price mix impact of 3%. As Adam just shared, if you were to neutralize the unfavorable impact of additional weather as well as the one less revenue day, the organic revenue in the quarter would have grown about 3.5%.
It was in line with our historical trends as well as our expectation going forward for 2025. If you just anchor ourselves the organic revenue growth reported in the quarter of 1.6%. Organic volume was 0.9% of growth once again, that was impacted by one less revenue day and weather. The organic price mix was up 0.7% primarily due to higher test per accession and increased lab management agreements.
If you neutralize the impact of weather as well as the one less revenue day, the volume to price mix growth contribution would be approximately 3:1 ratio, once again in line with our historical trend. Now looking forward, we are pleased about the trajectory of Invitae integration, once again as Adam shared in the prepared remarks, we continue to expect that business to be slightly accretive in earnings for full year 2025, and we have reaffirmed the revenue guidance for the full year for Diagnostics to be between 6.5% to 7.7%.
And we look forward to expanding the margin for the business as well versus 2024, which will contribute to our expectation that we will not to expect the enterprise margin for 2025 versus 2024 as well.

Erin Wright

Great. And if I could have a follow-up on the policy front and regulatory front, we obviously got the LDT favorable rule there. But on PAMA versus PAMA reform, what are your latest thoughts in terms of timing and magnitude? Obviously, this is a degree of positive from the original PAMA methodology. But how big of a difference will that be?

Adam Schechter

Yeah, so Erin, first of all, we were very pleased with the court ruling regarding LDTs. As I said before, it wasn't a significant impact to us in terms of revenue or expense because we were doing a lot of the work by submitting to New York State already. But I felt that would really impact innovation in getting test patients as quickly as possible. I think that we ended up in a good place there, and I think it will enable us to meet patients needs in the marketplace.
As I look at PAMA, I mean, for the last five years, we've been trying to get legislation in place that makes more sense than the current legislation. And we export from Republicans and Democrats, and we've had that for five years now. But unfortunately, we haven't gotten legislation through, which has led to each year a delay.
We'll work with our trade group, ACLA, to continue to see there's better legislation that can be passed, we'll continue to work hard to see if that can be done. At the same time, we'll try to find ways to look for additional delays. But I continue to put in our base case that each year, the next year, PAMA will come so I assume in January of next year, there will be an impact from PAMA that, that impact would be around $100 million for the full year, and we'll build a plan that makes us successful despite that.
If you look at our three-year guidance that we provided a bit ago, that included an impact from PAMA. So we have always anticipated that in our base case that it will be coming and planning around that. So we'll continue to do so, but we'll do everything in our means to get better legislation pass or to get another delay.

Erin Wright

Okay, great. Thank you.

Operator

Thank you.
Elizabeth Anderson, Evercore ISI.

Adam Schechter

Morning, Elizabeth.

Elizabeth Anderson

Good morning, Adam. Thanks so much for the question. I noticed you guys mentioned a couple of times higher personnel costs in the quarter. And I just wanted to clarify, is that something that you're sort of seeing overall? Or was that specifically a function of the revenue sort of cost and cost day impact in the quarter? And any one timers just to point out on the 2Q that you would call out right now? Thank you.

Adam Schechter

Yeah, no thanks, Elizabeth. So when we talk about higher personnel costs, it's just the inflation of personnel, which we expect every year to be 3% to 3.5%. And we work hard with our LaunchPad initiative to offset that. So nothing other than what would be typical in the normal range of higher personnel costs due to inflation.

Elizabeth Anderson

Okay, that's super helpful. And any onetime items you would call out so far, particularly impacting the 2Q outlook? Or so far, that seems to be on track. Okay, perfect.

Adam Schechter

It was on track, nothing to call out.

Elizabeth Anderson

Great, thanks.

Julia Wang

And our Diagnostic volume continues to perform well into April, which continues the strength of what we saw in March. So we are very encouraged by that.

Adam Schechter

Okay, great. Thank you.

Operator

Lisa Gill, JPMorgan.

Adam Schechter

Good morning, Lisa.

Lisa Gill

Hi, good morning, Adam and Julia. Thanks for taking my question. Adam, I just want to go back to your earlier comments when we think about potential changes on the FDA side. There's been some talk on the early development side of the business around animal testing. Can you maybe just remind us in early development, how much of the business is today with animal testing and if that were to change what the potential impact would be?

Adam Schechter

Yeah, so I'll start with some context, Lisa, and then I'll provide some additional information. So as we look at non-animal testing, we've always said that as soon as the market can move to that, will be very supportive. In fact, we have about 90 PhDs or MDs are working all day every day to try to find non-animal models to move forward with.
As we think about, that will become a bigger business over time, and we want to be part of that business over time. Of course, we'll continue to work with regulators, and we're committed to complying with all regulatory compliance guidelines in the research that we conduct. There's currently no full replacement for animal models and research and development that we're aware of.
But we're going to continue to work to find ways to do that. So there's no doubt that any new guidance would have to be implemented over time, of which we'll collaborate and work with the folks over time. When you look specifically about the animal testing that they were looking at impacting the monoclonal antibodies in the beginning that's roughly 10% to 15% of our total revenue so it's not a big piece of our BLS business. And I think for other parts to move to non-animal models is just going to take a lot longer.
So I would summarize it to say we don't expect any significant impact this year. We're going to work on non-animal models with regulators as soon as they're ready, we're ready. We want to be part of that business into the future. And if monoclonal antibodies were the first place to move, then it would not be that big of an impact of our total business.

Lisa Gill

So just so I understand it. So is the 10% to 15% of the operating profit of BLS? And so if I think about it for the total enterprise, it would be single digit right? Is that the way to think about it?

Adam Schechter

Well, so that's revenue and operating profits will be less than that. And then it will be very small, very, very small in terms of the total revenue for the company.

Lisa Gill

Perfect. Thank you so much.

Adam Schechter

Sure.

Operator

Thank you.
Jack Meehan, Nephron Research.

Adam Schechter

Good morning, Jack.

Jack Meehan

Good morning. Hope you're doing well. I wanted to follow up on your comments around Invitae traction toward getting to accretive slightly accretive for the year. In the quarter, I think the math you laid out implied between in Invitae and weather, it was about a $30 million EBIT impact to the Dx segment. I was wondering could Invitae being around $20 million?
And then maybe just talk about like how do you get that to be a positive number later in the year?

Adam Schechter

Yeah, so I think it's such less enough, but I'll have Julia talk about that specifically. I just want to give some context to Invitae. The integration is going very well. In fact, that argue is going better than what I had even anticipated. And we continue to make a lot of progress. As we think about the full year, we still expect the revenue growth is going to be over 10%.
And we've said that we believe women's health, autoimmune disease, oncology and neurology represents opportunities to have outpaced growth as the overall diagnostic market. We believe that this is a piece of that. And this is another proof point to show that when you're in women's health or oncology, you can get faster growth. So I feel very good about the revenue, I feel very good about the integration.
We remain on track to have Invitae accretive for the full year. And when you look at the way in which we've gone after the expenses, we've been very methodical. We've taken the best of the best approach. We take the best science, the best customer interactions either Labcorp or Invitae and then we apply it across the organization.
So it's taken us a little bit longer to get the cost out than we typically would see but it's going very well, and now I'm confident to reiterate that we believe it will be accretive for the full year.

Julia Wang

Yeah. The only additional comment I would add is as it relates to the Invitae impact in the quarter. So what we shared was if you look at our enterprise AOI in the quarter, you saw a 20 basis point decline versus a year ago and the major drivers were a combination of Invitae and weather. When you exclude those two items, the enterprise margins would have been up about 60 basis points.
Now as Adam reiterated earlier, our expectations as we progress throughout 2025, you'll start seeing Invitae shifting from a loss to an application, particularly in the second half, so much that for the full year, we expect Invitae to be slightly accretive. That's the impact of Invitae.

Jack Meehan

Okay, thank you. And then maybe as a follow up just on lab M&A, how do you -- how would you characterize the environment right now? And you have leverage at 2.5 times, you're integrating a lot of deals you've done over the last year? Just how should we expect kind of the pace of activity throughout the rest of the year? Thank you.

Adam Schechter

I would say the pipeline remains very strong. And I would say with some tariff implications to hospital systems as well as some of the other things they could be facing in the macroeconomic landscape, we're actually seeing more outreach to us to actually have discussions.
As you recall, some of these discussions take a very long time. Some of them go in a shorter time than others. But over time, the pipeline looks really good. And I would expect we'll have more to share with you as we go through each quarter this year.

Jack Meehan

Okay, thank you guys.

Operator

Thank you.
Luke Sergott, Barclays.

Adam Schechter

Morning Luke.

Luke Sergott

Good morning. Thank you. I just wanted to dig in a little bit on the Diagnostic operating margin expansion, just kind of laid out there from Invitae. But I was hoping you can dig in there a little bit on kind of the puts and takes or bucket out the individual components for what's driving that OMX for the year.
So you talked a little bit about Invitae, but if you could talk about like how the recent M&A contributes, maybe some of the tariffs or tariff offsets, the core improvements from the eClaims, your pricing mix, just kind of the underlying assumptions based on that OMX assumption?

Adam Schechter

Yes, so I'll start with if you look at the operating margin for Diagnostics, it was down 60 basis points. That was due to Invitae and weather. If you adjust for that, it would have been up 50 basis points. We still expect margins to actually be up this year versus last year when you look across the year. So that tells you we see strength in the Diagnostic business margins as we go through the year.
A lot of that is the overlap of Invitae once we overlap that, and it becomes accretive, it actually helps us with the margins overall. The second thing is we continue to focus on our LaunchPad initiatives where we take out between [$100 million to $125 million], and a lot of that still comes out of the Diagnostic business. So we continue to see benefit there. And we're continuing to see some benefit from mix in terms of esoteric testing as well. All those things give us a reason that we expect the margins to increase and get better as we go through the year.

Luke Sergott

Great. And then just a follow-up here and go back to the BLS booking strength. There's the overhang or the thought from pharma tariffs coming on that get initiated another round of restructuring. Just interested in what you guys are hearing from your various customer bases across biotech, large pharma? How they're thinking about the tariff? And if there's -- you think that there's more pipeline rationalize or R&D cuts that are still -- that could be on the come?

Adam Schechter

So as I look at that, I look at our Central Laboratory business first. And I look at our Central Laboratory, most of that is Phase II, Phase III trials. And I think that's the last phase pharma would ever go to reduce cost because the Phase II, Phase III is the future growth of future pipeline. So I feel good about the pipeline as I look at the CLS and I look at the book-to-bill. We continue to have good RFPs in early development.
Our win rate continues to do well, and the book-to-bill continues to look good. But that's an area we'll have to continue to watch closely because I think that could be impacted more by some of the things that you mentioned over time. But we have and we continue to work towards getting a larger mix of business and early development from mid-to-larger-size pharma. And I think as we shift that mix, it will serve us well over time as well.

Luke Sergott

Great, thanks.

Operator

Thank you.
Kevin Caliendo, UBS.

Adam Schechter

Good Morning Kevin.

Kevin Caliendo

Morning, Adam. Good morning, Julia. Thanks for taking my question. I want to talk a little bit about the margin and Diagnostics again, just a little bit further. I know you've touched on it a bit here. If we think about the first quarter, 60 basis points net of Invitae being better, 60 basis points in Invitae net of weather. Is the weather number a net number or just the number for the quarter? Because presumably, there was weather in 1Q '24 as well, right?

Adam Schechter

It's a net number, yeah, it's a net number, Kevin.

Kevin Caliendo

Yes, fantastic. That's super helpful. So then if I think about what's going on and the fact that March -- the strength in March goes into April, as Julia mentioned. And we think about the improvement in margin year-over-year for 2Q because I don't think there was any weather comp or anything else in 2Q.
Should we be thinking about a year-over-year margin improvement within Invitae getting a little bit better, that maybe you could is that 60 basis points sort of the baseline on a year-over-year basis that we'd be thinking about for 2Q? And is that like a progression over the year? Is that how we should think about it net-net?

Julia Wang

Yeah, so thank you for the question. We don't guide to the quarter. But directionally, your thought process is reasonable. Typically, you see Q2 being a strong quarter definitely from a pipeline standpoint.
And then to your point, as we continue to make progress towards shifting Invitae to be accretive. Obviously, that would have the overall margin for the Diagnostics business in particular. So the thought process once again is reasonable.

Kevin Caliendo

Fantastic. Thank you very much.

Operator

Thank you.
Michael Ryskin, Bank of America.

Adam Schechter

Morning, Michael.

Michael Ryskin

Morning, thanks for the question, Adam. I just want to go back to your BLS comments earlier a little bit, the reduction in FX headwind sort of absorbing that given some of the macro uncertainty and that certainly makes sense. But just you haven't seen anything yet, obviously. You talked about the strong book-to-bill in the first quarter. It doesn't see outside of that COVID contract that you called out that you've seen any weakness. Sort of how did you approach that resetting guide?
Is there anything that's come up in conversations with customers? And I guess sort of what are you monitoring as you go through the year to assess the health of that end market? Is it -- is it the evolution of tariffs? Is it something on the policy front? Is it biotech funding?
Just sort of walk us through what you see as the leading indicators there?

Adam Schechter

Yeah, no, thanks for the question, and I want to provide some context to the BLS business, in particular, with the Central Laboratory business. So we had expected the first quarter would be the lowest growth rate when we compared to the remainder of the year. And the reason that was is because we saw strength in the first quarter of last year.
If you go back to the first quarter of 2023, we saw -- or 2024, we saw some real strength. Within that strength was about $18 million of COVID vaccine and therapeutic graph. That was about the same, frankly, as the first quarter of 2023. So first quarter 2024 was about the same as first quarter 2023. In 2025, we had virtually zero COVID related work.
So it's not a big delta when you compare that to the broader CLS business, but it gives you a sense of the underlying growth rate and impact. So as I look at the BLS business, the first quarter, we expected to be the toughest compared to last year. As I look at the rest of the year, we continue to expect business to grow better, and that's why we feel confident in the 3% to 5% guidance range.
The reason we didn't raise that range based upon current ForEx is for multiple reasons that we can see post and pulse. What I'm looking for is do the trial start on time that we expect the trial to start. They have up until now.
But we've heard some noise about how fast people are getting regulatory input to some of their trials. And we want to make sure that the trial start at times to get the input that they need in order to start those trials in time. So we're going to watch that very carefully. We'll watch the impact of tariffs. And do people change where they're running some of these trials in different parts of the world is that we have to make some adjustments.
So we'll watch that as well. And then we'll continue to watch our early development business where up until now, the signs are strong. But we're going to watch that for biotech funding and so forth. So the reason we didn't change the range is because I believe that if ForEx dig where it was today and everything continues to go well, we'd be at the highest end of that range.
If things get a little bumpy in terms of timing of trial starts, I don't think it's going to impact whether the trials go on or not, but it could impact the timing, well, then it could bring you back more towards the midpoint. Foreign exchange could change. We've seen it be very dynamic in the marketplace. So we don't want to make a change based upon ForEx that we've seen kind of bumping up and down so fast in the marketplace.
So for all those reasons, we felt confident to confirm the 3% to 5% guidance range with the 4% midpoint.

Michael Ryskin

Okay. That's really helpful. I appreciate that color just a quick follow up on that. Any change in your expectations on pricing, or have you had any early conversations on, maybe customers being a little bit more price sensitive?

Adam Schechter

You know what we can -- the customers are always going to be price sensitive. I think with some of the issues that everybody is facing, we're all more price sensitive than we are today. We're being harder on our suppliers than we typically can. And I would expect that our customers will be hard on us as well. But with all of that said, as we sit here today, most of our business is a backlog-driven business with study is already under contract and so forth.
So I feel pretty good about where we are as we go through this year. And then we'll continue to look for ways to reduce costs and offset any pressure that we face. And that's why I feel confident not only in the guidance that we provided, but the fact that we expect that margins will improve this year in both the Biopharma Laboratory business and Diagnostic business versus last year because we'll continue to find ways to offset any of those pricing headwinds with additional cost reductions and other things.

Michael Ryskin

Great, thank you. Thanks.

Operator

Thank you.
Patrick Donnelly, Citi.

Adam Schechter

Hi Patrick, good morning.

Patrick Donnelly

Hey Adam, how are you? Thanks for taking the question. Maybe one, I know you just talked about BLS pricing a little bit. On the lab side, can you talk about the conversations there? I know pricing has been a little bit more firm on your guys side. Do the tariffs change anything? Are you guys having different pricing conversations we're going to pass anything on? Just curious what those conversations have looked like recently.

Adam Schechter

Yeah, so a lot of our business is contracted, but every year, the new contracts that open up. Most of the contracts are multiyear contracts in the Diagnostic business. But even the ones that are opening up, we're still having a very good constructive dialogue price has been relatively flat for us. What we're looking for is to improve our volume, which we've seen organic volume growth, and we're going to continue to focus on that volume growth.
But I would say we have very good payer access. We have very good managed care access. We have very constructive dialogues with the payers. So as I sit here today, I feel very good about where we are and the discussions that we're having and the strength of the business overall.

Patrick Donnelly

Okay, and then just a quick follow up on Mike's question there on the kind of pacing of BLS. I know Central Lab, basically a backlog business as you look at this year. So in terms of your answer, it sounds like it's just a matter of when these trials take off. They're all in the backlog, do some of them slip or not is going to be the delta in terms of the guidance range. Is that the right way to think about it?

Adam Schechter

That's a big part of what we're watching. Like I said, there was one trial that was canceled. It was a COVID-related trial. But that's in our book-to-bill. And you can see the strength of our book-to-bill would have been even stronger if that didn't get delayed. So I think COVID trials, we've seen a little bit different than other trials to be frank, but we don't have many of those in our book-to-bill any longer.
It's all non-COVID related work. So the question to me is more of a timing issue. Do the sponsors get the information they need from the regulatory agencies in order to feel comfortable that their protocols will suffice in order to get approval of the product. It's not whether they'll get the comments, it's how quickly and will it be on time. At this point, we've not seen any issues, but it's something we'll watch.

Patrick Donnelly

Understood. Thank you, guys.

Operator

Thank you.
Eric Coldwell, Baird.

Adam Schechter

Good morning, Eric.

Eric Coldwell

Thanks. Good morning. Just a couple of clarifications or add-ons here to other Q&A that's happened. On the Central Lab COVID comp in Q1, are there additional COVID comps throughout 2025 that we should be aware of?

Adam Schechter

Yeah, no, that's a great question, Kevin. I'm sorry, Eric. And I want to start off, Eric, by saying that when I think about the COVID vaccine-related works, in general, it's not a big number. It's about $18 million, we did $18 million last year, we did $18 million in the first quarter of the year before.
This year, we did virtually 0. So it's just in the context of the growth rate we thought it was good to point that out. But in terms of $18 million on a base of $500 million-some odd, it's not a huge number. As I look at the rest of this year, if I assume I have 0 for the rest of this year, I had about $18 million for the whole rest of last year. So it was $18 million in the first quarter last year, and then the next three quarters was $18 million.
So you figure for the rest of this year, it is 0 versus $18 million spread out over three quarters last year, just to give you that context.

Eric Coldwell

Perfect. That's helpful. And then I know you've mentioned a few times the COVID cancel and Central Lab, and you've talked about the book-to-bill would have actually been better absent that, of course, would you care to quantify that cancellation?

Adam Schechter

So we don't typically give numbers, but I would say it was larger slightly larger than about $100 million. So just to give you a round number of where it was about.

Eric Coldwell

So a very strong book-to-bill, excluding that?

Adam Schechter

Yes.

Eric Coldwell

Yeah, okay. And then last one. You've done a lot of discussion on tariffs and how you're planning to offset and absorb them, which is very encouraging. I am curious if you'd be willing to give us a ballpark gross estimate of what kind of headwind you need to absorb? Is it a 1% enterprise revenue kind of impact 2%, something less than that? I'm just trying to get a sense on how much you actually think you need to observe at this point?

Adam Schechter

Yes. So I don't want to give a specific number because we have a whole range of scenarios, to be honest with you. And what I've done with my team, if I looked at the low end, I've looked at the high end of kind of the most likely scenarios. And we know it's crazy scenarios that could take you down a path of one or the other that we don't think are likely. But within that likely scenario, what we're doing is planning for the worst of the most likely scenarios, and I'm hoping for the best, and it gives me a little bit of breathing room.
So what I would tell you versus others in other industries, ours is a relatively small impact because when you think about 80% of our spend being under contract and you think about the majority of our spend coming from the US, you can get to a number that's relatively manageable under all those scenarios.

Eric Coldwell

Very good, thanks again. I appreciate it.

Adam Schechter

Sure, thanks, sir.

Operator

Thank you.
Pito Chickering, Deutsche Bank.

Adam Schechter

Morning Peter. Hi there.

Kieran Ryan

Hi there. You've got a Kieran Ryan on for Peter. Thanks for our questions. I don't have much left here, but I know the -- I know it's still pretty limited visibility, but I was just wondering if you have any thoughts or comments around any potential impacts to your business from some of the changes to Medicaid or ACA exchange subsidies that are being discussed? I know Medicaid and Medicare are only, I think, 10% of your Diagnostic revenues are not very large, but any comments you have would be helpful. Thank you.

Adam Schechter

Yeah, what I would say is that it's together, they're about 10%. As I think about the business there, we've seen switching between so many different parts of the healthcare system would it be Medicare to manage Medicaid to Medicare. And we've seen lots of movement under those scenarios, we continue to do well. What worry would be if there was a significant number of uninsured people that had to pay out of their pocket.
Now I don't think that's likely. I don't think that would be tenable for the states, not for the federal government. But that's where I'd be more worried than seeing a shift between Medicaid, Medicare, Managed Medicaid or going into private plans. So I think all those other things are manageable, and they have different pushes or pulls. Some may have more test recessions. I mean you have a higher price per test.
So I think the pushes and pulls offset themselves to some degree. As long as people have insurance coverage, I think that in those scenarios, we do really well.

Kieran Ryan

Thank you.

Operator

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Adam Schechter for closing remarks.

Adam Schechter

Well, thank you all for joining us today. We look forward to discussing the business with you in the future. Hopefully, you walk away realizing that our Diagnostic business remains very strong. Our BLS business remains strong as well and that we are committed to our patients and to our shareholders alike. I hope you have a great day, and we'll talk to you all soon.

Operator

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