Though only in the pilot study phase, results correlate with earlier studies where both dogs and humans were able to “smell” specific diseases in people
Man’s best friend has risked life and limb to save humans for centuries. Now, researchers in Germany have discovered that pooches may be useful in the fight against COVID-19 as well, along with the added benefit that such testing would be non-invasive. In fact, some people believe disease-sniffing dogs may give clinical laboratory testing a run for its money.
Further, even if this approach were not warranted as a clinical diagnostic procedure, trained dogs could be deployed at airports, train stations, sporting events, concerts, and other public places to identify individuals who may be positive for SARS-CoV-2, the coronavirus that causes the COVID-19 illness. Such an approach would make it feasible to “screen” large numbers of people as they are on the move. Those individuals could then undergo a more precise medical laboratory test as confirmation of infections.
After only one week of training, the dogs were able to accurately detect the presence of the infection 94% of the time.
According to a live interview, which featured Holger Volk, PhD, Department Chair and Clinical Director of the Small Animal Clinic at the University of Veterinary Medicine Hannover and Maren von Köckritz-Blickwede, PhD, Professor of Biochemistry of Infections and Head of Scientific Administration and Biosafety at the Research Center for Emerging Infections and Zoonoses at TiHo, “The samples were automatically distributed at random and neither the dog handlers involved nor the researchers on site knew which samples were positive and which were used for control purposes. The dogs were able to distinguish between samples from infected (positive) and non-infected (negative) individuals with an average sensitivity of 83% and a specificity of 96%. Sensitivity refers to the detection of positive samples. The specificity designates the detection of negative control samples.
In their published study, the authors wrote, “Within randomized and automated 1,012 sample presentations, dogs achieved an overall average detection rate of 94% with 157 correct indications of positive, 792 correct rejections of negative, 33 false positive and 30 false negative indications.” They concluded, “These preliminary findings indicate that trained detection dogs can identify respiratory secretion samples from hospitalized and clinically diseased SARS-CoV-2 infected individuals by discriminating between samples from SARS-CoV-2 infected patients and negative controls. This data may form the basis for the reliable screening method of SARS-CoV-2 infected people.”
In the live interview, Dr. Köckritz-Blickwede said, “We think that this works because the metabolic processes in the body of a diseased patient are completely changed,” adding, “We think that the dogs are able to detect a specific smell of the metabolic changes that occur in those patients.”
“People have not really realized the potential the dog could have to detect disease from lung-diseased patients,” said Holger Volk, PhD (above with his dog Jo), Department Chair and Clinical Director of the Small Animal Clinic at the University of Veterinary Medicine Hannover and one of the authors of the paper, in a live interview. (Photo copyright: University of Veterinary Medicine Hannover.)
Using Dogs as Part of Clinical Laboratory Testing
The American Kennel Club (AKC) estimates that a dog’s sense of smell is 10,000 to 100,000 times greater than that of humans. This gives dog’s the ability to detect diseases in early stages of development.
“The next steps will be that we try to differentiate between sputum samples from COVID patients versus other diseases, like, for example from influenza patients,” said Köckritz-Blickwede. “That will be quite important to be able to differentiate that in the future.”
“This method could be employed in public areas such as airports, sport events, borders or other mass gatherings as an addition to laboratory testing, helping to prevent further spreading of the virus or outbreaks,” the live interview description states.
During a pandemic, employers might be able to use dogs to screen employees as they arrive for work. Dogs also could be used as an alternative or in addition to clinical laboratory testing to help prevent the spread of COVID-19. But more work must be done.
“What has to be crystal clear is that this is just a pilot study,” said Volk. “So, there is a lot of potential to take this further to really make it possible to use these dogs in the field.”
An article on the VCA Hospitals website, titled, “How Dogs Use Smell to Perceive the World,” states that dogs devote much of their brain power to the interpretation of smells and they have more than 100 million sensory receptor sites located in their nasal cavity.
By contrast, humans have only six million sensory receptor sites in their nasal cavity. The area of a dog’s brain that is dedicated to the analysis of odors is about 40 times larger than the comparable part of a human brain and dogs are capable of detecting odors thousands of times better than humans.
The article also further explains how dog’s olfactory glands are very unique when compared to other animals and humans. “Unlike humans, dogs have an additional olfactory tool that increases their ability to smell. Jacobson’s organ is a special part of the dog’s olfactory apparatus located inside the nasal cavity and opening into the roof of the mouth behind the upper incisors. This amazing organ serves as a secondary olfactory system designed specifically for chemical communication.
“The nerves from Jacobsen’s organ lead directly to the brain and are different from the other nerves in the nose in that they do not respond to ordinary smells. In fact, these nerve cells respond to a range of substances that often have no odor at all. In other words, they work to detect “undetectable” odors.”
VCA Hospitals is a chain of veterinary hospitals with more than 1,000 facilities located in 46 states and five Canadian provinces.
Could dogs help prevent hospital-acquired infections? It is an interesting question, and one that has been asked before. In “C. diff-sniffing Beagle Dog Could Lead to Better Infection Control Outcomes in Hospitals and Nursing Homes,” January 2013, Dark Daily reported on a beagle named Cliff (above), which could sniff out Clostridium difficile (C. diff), a potentially deadly bacteria. In a study conducted by researchers at Vrije University Medical Center (VUMC) in Amsterdam, Cliff detected C. diff in both stool samples and the air surrounding infected patients in hospitals. In one test, Cliff correctly identified 50 out of 50 stool samples that were C. diff positive. He correctly identified 47 of 50 negative samples. That’s a sensitivity rate of 100% and a specificity rate of 94%. (Photo copyright: ABC News.)
Dogs are amazing, that’s for sure. But for canines to become widely used to detect infections there would have to be a way to validate each dog’s ability to detect diseases, so that the diagnostics would be consistent across all the dogs being used.
So, while there appears to be potential for utilizing a dog’s uncanny sense of smell to detect disease—including COVID-19—more research is needed before development of clinical testing can take place. And, perhaps, a set of canine billing codes.
The KCL researchers’ new models for predicting which patients will need hospitalization and breathing support may be useful for pathologists and clinical laboratory scientists
One more window into understanding the SARS-CoV-2 coronavirus may have just opened. A British study identified six distinct “clusters” of symptoms that the research scientists believe may help predict which patients diagnosed with COVID-19 will require hospitalization and respiratory support. If further research confirms these early findings, pathologists and medical laboratory managers may gain new tools to diagnose infections faster and more accurately.
Launched in March in the United Kingdom and extended to the United States and Sweden, the app has attracted more than four million users who track their health and potential COVID symptoms on a daily basis.
Increased Accuracy in Predicting COVID-19 Hospitalizations
KCL researchers identified six distinct “types” of COVID-19, each distinguished by a particular cluster of symptoms. They include headaches, muscle pains, fatigue, diarrhea, confusion, loss of appetite, shortness of breath, and more. The researchers also found that COVID-19 disease progression and outcome also vary significantly between people, ranging from mild flu-like symptoms or a simple rash to severe or fatal conditions.
Using app data logged by 1,600 users in March and April, the researchers developed an algorithm that combined information on age, gender, body mass index (BMI), and pre-existing conditions with recorded symptoms from the onset of the illness through the first five days. The researchers then tested the algorithm using a second independent dataset of 1,000 users, logged in May.
In a news release, the KCL researchers identified the six clusters of symptoms as:
Flu-like with No Fever: Headache, loss of smell, muscle pains, cough, sore throat, chest pain, no fever.
Flu-like with Fever: Headache, loss of smell, cough, sore throat, hoarseness, fever, loss of appetite.
Gastrointestinal: Headache, loss of smell, loss of appetite, diarrhea, sore throat, chest pain, no cough.
Severe Level One, Fatigue: Headache, loss of smell, cough, fever, hoarseness, chest pain, fatigue.
Severe Level Two, Confusion: Headache, loss of smell, loss of appetite, cough, fever, hoarseness, sore throat, chest pain, fatigue, confusion, muscle pain.
Severe Level Three, Abdominal and Respiratory: Headache, loss of smell, loss of appetite, cough, fever, hoarseness, sore throat, chest pain, fatigue, confusion, muscle pain, shortness of breath, diarrhea, abdominal pain.
Using the data, the researchers were able to more accurately predict—78.8% versus 69.5%—which of the six symptom clusters placed patients at higher risk of requiring hospitalization and breathing support (ventilation or additional oxygen) than with prediction models based on personal characteristics alone. For example, nearly 50% of the patients in cluster six (Severe Level Three, Abdominal and Respiratory) ended up in the hospital, compared with 16% of those in cluster one (Flu-like with No Fever).
“These findings have important implications for care and monitoring of people who are most vulnerable to severe COVID-19,” Claire Steves, MD, PhD (above left), Clinical Senior Lecturer at King’s College London, said in the KCL news release. “If you can predict who these people are at day five, you have time to give them support and early interventions, such as monitoring blood oxygen and sugar levels, and ensuring they are properly hydrated—simple care that could be given at home, preventing hospitalizations and saving lives.” (Photo copyright: King’s College London.)
According to the Zoe website, the ongoing research is led by:
Prof. Tim Spector, FMedSci, Professor of Genetic Epidemiology at King’s College London and Director of TwinsUK, an adult registry of twins in the United Kingdom;
Andrew Chan, MD, Professor of Medicine at Harvard Medical School, Professor of Immunology and Infectious Diseases, Harvard T.H. Chan School of Public Health and Chief of the Clinical and Translational Epidemiology Unit, CTEU Massachusetts General Hospital; and
Encouraging Everyone to Use the COVID-Symptom Study App
The study points out that—broadly speaking—people with cluster four, five, or six COVID-19 symptoms tended to be older and frailer and were more likely to be overweight and have pre-existing conditions, such as diabetes or lung disease, than those with cluster one, two, or three symptoms.
“Our study illustrates the importance of monitoring symptoms over time to make our predictions about individual risk and outcomes more sophisticated and accurate,” said lead researcher Carole Sudre, PhD (above), a Research Fellow at King’s College London and the study’s lead researcher, in the KCL news release. “This approach is helping us to understand the unfolding story of this disease in each patient so they can get the best care.” (Photo copyright: University College London.)
Tim Spector, FMedSci, Head of the Department of Twin Research and Genetic Epidemiology, and Professor of Genetic Epidemiology at King’s College London, encourages everyone to download the COVID Symptom Study app and help increase the data available to researchers.
“Data is our most powerful tool in the fight against COVID-19,” Spector said in the KCL news release. “We urge everyone to get in the habit of using the app daily to log their health over the coming months, helping us to stay ahead of any local hotspots or a second wave of infections.”
As the body of knowledge surrounding COVID-19 grows, clinical laboratory professionals would be well advised to remain informed on further research regarding not only the potential for COVID-19 variants to exist, but also the evolving guidance on infection prevention and testing.
Understanding how superspreading occurs can help clinical lab leaders slow and even prevent the spread of SARS-CoV-2 within their communities and health systems
Clinical laboratories understand the critical importance of preventing the spread of infection. However, according to the Boston Globe, researchers worldwide are learning that roughly 80% of new COVID-19 cases are caused by just 10% of infected people. Those people are called superspreaders.
It’s critical that medical laboratory managers are aware of the role superspreaders play in transmitting SARS-CoV-2, the coronavirus that causes the COVID-19 illness.
Clinical lab leaders who understand how superspreading occurs can take steps to protect staff, patients, and anyone who visits the facility. Because lab personnel such as couriers and phlebotomists, among others, come into contact with large numbers of people daily, understanding how to identify superspreaders could limit transmissions of the coronavirus within the laboratory, as well as within hospital networks.
Superspreading versus Plodding
Influenza and other viruses tend to spread in a way that epidemiologists call “plodding.” One person infects another, and the virus slowly spreads throughout the population. However, scientists around the globe are finding that SARS-CoV-2 transmission does not fit that pattern. Instead, a few infected people appear to be transmitting the virus to dozens of other people in superspreading events, Boston Globe reported.
“You can think about throwing a match at kindling. You throw one match, it might not light the kindling. You throw another match, it may not light the kindling. But then one match hits the right spot and all of a sudden the fire goes up,” Ben Althouse, PhD, principal scientist and co-chair of epidemiology at the Institute for Disease Modeling in Bellevue, Wash., told the Boston Globe.
But because roughly 90% of infected people aren’t spreading the virus, identifying who the superspreaders are can be a challenge. Nevertheless, limiting situations in which superspreading is likely to occur could greatly reduce the spread of infection.
Samuel Scarpino, PhD (above), Assistant Professor in the Network Science Institute at Northeastern University, says that “preventing superspreader events could go a long way toward stopping COVID-19,” Scientific American reported. “All of the data I’m seeing so far suggest that if you tamp down the superspreader events, the growth rate of the infections stops very, very quickly,” Scarpino said. (Photo copyright: University of Vermont.)
Examples of Superspreading Events
One of the first big outbreaks in the United States was an example of a superspreading event. The Biogen (NASDAQ:BIIB) leadership conference in late February in Boston resulted in at least 99 cases of COVID-19 just in Massachusetts, reported the Boston Globe.
Several superspreading events have occurred in houses of worship. One well-documented example prompted a CDC Morbidity and Mortality Weekly Report, titled, “High SARS-CoV-2 Attack Rate Following Exposure at a Choir Practice—Skagit County, Washington.” The 122-member choir met for practice twice in March. On March 3 no one had symptoms, but one person had cold-like symptoms at the March 10 practice. Eventually, 53 members tested positive for SARS-CoV-2.
On May 30, a Texas family held a birthday party, Medical Xpress reported. Twenty-five people attended the party, which only lasted a few hours. The family followed the state’s guidelines for gatherings, however one of the hosts was infected with the SARS-CoV-2 coronavirus and wasn’t aware of it. Seven attendees contracted it, and those seven spread the virus to an additional 10 family members. A total of 18 members of a single family were infected.
There are commonalities among the documented superspreading events. Most occur indoors, often in poorly ventilated areas. Some activities cause more respiratory droplets to be expelled than others, such as singing. Some respiratory droplets are released simply by breathing, and many more are expelled when a person talks. Talking louder expels even more droplets into the air.
Are Some People More Likely to Spread the Coronavirus than Others?
The fact that so few people are responsible for the majority of transmissions of the virus raises questions. Do some people simply have more virus particles to shed? Is biology a factor?
One factor may be how long the SARS-CoV-2 coronavirus is in the body before symptoms of the COVID-19 illness manifest.
“If people got sick right away after they were infected, they might stay at home in bed, giving them few opportunities to transmit the virus,” noted Scientific American in “How ‘Superspreading’ Events Drive Most COVID-19 Spread.” However, CDC states on its website that “The incubation period for COVID-19 is thought to extend to 14 days, with a median time of 4-5 days from exposure to symptoms onset. One study reported that 97.5% of persons with COVID-19 who develop symptoms will do so within 11.5 days of SARS-CoV-2 infection.”
During that time, infected individuals may transmit the virus to dozens of other people. The CDC estimates that about 40% of transmission occurs in pre-symptomatic people, Scientific American reported.
But it’s not all bad news. The fact that circumstances may be more important than biology might be good news for clinical laboratories. “Knowing that COVID-19 is a superspreading pandemic could be a good thing. It bodes well for control,” Nelson told the Boston Globe.
Clinical laboratory managers are encouraged to follow CDC recommended safety protocols, titled, “Guidance for General Laboratory Safety Practices during the COVID-19 Pandemic.” They include social distancing, setting up one-way paths through lab areas, sanitizing shared surfaces such as counters and benchtops, and implementing flexible leave policies so that sick employees can stay home.
Following these guidelines, and being aware of superspreaders, can help medical laboratories and anatomic pathology groups keep staff and customers free of infection.
Researchers from multiple countries looked at sewage samples collected from 2018 through early 2020, with findings that may interest microbiologists and medical laboratory scientists
Clinical laboratory tests for the SARS-CoV-2 coronavirus can identify COVID-19 cases in individuals. But in multiple countries, researchers have tested untreated sewage for remnants of the pathogen, and some scientists have arrived at a surprising but unconfirmed theory—that the coronavirus appeared in Europe long before the first reported cases in Wuhan, China.
In an article for The Conversation, titled, “Coronavirus: Wastewater Can Tell Us Where the Next Outbreak Will Be,” Davey Jones, PhD, Professorial Chair of Soil and Environmental Science at Bangor University in the UK, wrote, “For the past three months, we have been using a test called polymerase chain reaction (PCR) to find traces of SARS-CoV-2 in untreated wastewater. We believe this could form a valuable part of disease surveillance. Most UK towns and cities are served by just one or two wastewater treatment works, so a single sample—about a liter of water—can provide information on millions of people.”
The Lancet reported on similar research being conducted in Barcelona, Spain. At the University of Barcelona (UB) researchers analyzed raw sewage samples taken between April 13 and May 25 from two large wastewater treatment plants in the city. In addition, they analyzed frozen archival samples taken from one of the plants in 2018 (January-March), 2019 (January, March, September-December), and 2020 (January-March).
They reported presence of the virus in samples taken as early as Jan. 15, 2020, 41 days before the Barcelona’s first known case was reported on Feb. 25. Most surprisingly, they reported the presence of two genetic fragments—IP2 and IP4—in a sample taken on March 12, 2019.
That would seem to conflict with early reports that the first human infections occurred in Wuhan, China, in November to December of 2019.
All other Barcelona samples from 2018 and 2019, with the exception of one, tested negative, said Albert Bosch, PhD, in a press release. Bosch is professor at the Faculty of Biology at UB, head of the Enteric Virus laboratory at UB, president of the Spanish Society of Virology, and one of the lead study’s researchers. In the March 12 sample, he said, “the levels of SARS-CoV-2 were low but were positive, using two different targets.”
Scientists all over the world, like those seen above in China, are testing sewer wastewater looking for remnants of the SARS-CoV-2 coronavirus, following multiple reports from several countries suggesting that the COVID-19 pandemic may not have originate at the Wuhan, China, market. (Photo copyright: The Telegraph.)
Similar Findings in Brazil and Italy
Researchers in Brazil and Italy also have reported the early presence of SARS-CoV-2 in wastewater samples.
In northern Italy, researchers tested samples taken from five wastewater plants between October 2019 and February 2020 and reported positive test results in samples taken on December 18 in Milan and Turin. The country’s first case of COVID-19 was documented on Feb. 21. Those findings were published June 26 on medRxiv, titled, “SARS-CoV-2 Has Been Circulating in Northern Italy Since December 2019: Evidence from Environmental Monitoring.” The study has not been peer reviewed.
Researchers in Florianópolis, Brazil, tested wastewater samples taken between late October and early March. They reported presence of the virus in two samples from Nov. 27, 2019. Those findings, also not peer-reviewed, were published June 29 on medRxiv.
Questioning China Origins
The findings from Spain and Italy led Oxford University epidemiologist Tom Jefferson, MD, Honorary Senior Research Fellow, Center For Evidence Based Medicine, to speculate that the SARS-CoV-2 virus did not originate in China. “I think the virus was already here—here meaning everywhere,” he told The Telegraph. “We may be seeing a dormant virus that has been activated by environmental conditions.”
He repeated his assertions in an interview with CGTN, an English-language news channel controlled by the Chinese government. “We know that for certain it was recognized as a newly identified disease in Wuhan,” he said. “I think there’s little doubt about that. But being newly identified in Wuhan and being originated from Wuhan are two different things. It’s not necessarily cause and effect.”
In addition to questioning the origins of the virus, “Dr. Jefferson believes that the virus may be transmitted through the sewage system or shared toilet facilities, not just through droplets expelled by talking, coughing, and sneezing,” The Telegraph reported.
“There is quite a lot of evidence that huge amounts of the virus in sewage [are] all over the place, and an increasing amount of evidence there is fecal transmission,” he told The Telegraph. “There is a high concentration where sewage is four degrees [Celsius], which is the ideal temperature for it to be stabled and presumably activated. And meatpacking plants are often at four degrees. These meat packing clusters and isolated outbreaks don’t fit with respiratory theory, they fit with people who haven’t washed their hands properly.”
“It’s implausible that there was a hidden pandemic before it actually started,” he told Euronews. “If that’s the assertion, that’s a pretty wild accusation actually, because it flies in the face of all we know about how this epidemic has evolved.”
Lundgren also questioned the findings from Spain, Italy, and Brazil. “They haven’t found the same virus,” he said, only “molecular evidence that there is shared genetic material.”
The Spanish, Italian, and Brazilian studies have not been peer reviewed, and some experts have suggested alternative explanations for the positive test results, including “the potential for a false positive due to the virus’ similarities with other respiratory infections,” Reuters reported.
“When it’s just one result, you always want more data, more studies, more samples to confirm it and rule out a laboratory error or a methodological problem,” Joan Ramon Villalbi, MD, PhD, MPH, of the Spanish Society for Public Health and Sanitary Administration told Reuters. “But it’s definitely interesting, it’s suggestive,” he added.
Writing in The Conversation about the Barcelona study, Claire Crossan, PhD, Research Fellow, Virology, Glasgow Caledonian University, raised the possibility of lab contamination and questioned why there were no reported spikes in respiratory disease cases after the sample was taken.
“If this result is a true positive it suggests the virus was present in the population at a high enough incidence to be detected in an 800ml sample of sewage, but then not present at a high enough incidence to be detected for nine months, when no control measures were in place,” she wrote.
Though nothing definitive may come from these studies, they do indicate that there’s still much to learn about the origin of the SARS-CoV-2 coronavirus. Clinical laboratory leaders would be wise to keep an eye on these developments.
Though lenders and landlords may be willing to renegotiate terms, communication is key, the lawyers suggest
COVID-19 has vastly increased demand for clinical laboratory testing. But at many labs, the pandemic has caused much damage to the bottom line. Due to numerous factors—including reductions in elective procedures and increased operating costs—many independent lab companies have seen a 30% to 60% cut in revenue, says attorney Richard S. Cooper, JD, of McDonald Hopkins, a law firm that represents more than 350 medical laboratories across the US.
“Some of that was offset where clinical laboratory companies took on COVID testing. But in our experience, it was a partial offset at best,” he said in an exclusive interview with Dark Daily. Cooper is co-chair of the firm’s National Healthcare Practice Group.
To address these challenges, the firm has advised lab companies to take a hard look at their:
operations,
market conditions,
supplier relationships,
lender agreements, and
other elements of their businesses.
Lab executives, he says, should consider steps to reduce expenses or increase revenues, such as increasing prices if conditions permit. In extreme cases, medical laboratories may have to consider:
Chapter 11 bankruptcy,
Consensual out-of-court restructuring, or
Buyouts.
“I think lenders have been willing to work with borrowers, but I don’t think this has been a ‘get out of jail free’ card,” Richard S. Cooper, JD (above), co-chair of the National Healthcare Practice Group at McDonald Hopkins, told Dark Daily. “Lenders are going to look at borrowers that were struggling before the whole COVID-19 situation with a more critical eye. Lenders seem to be more willing to work with borrowers that were doing well, but then were hit with a temporary hiccup.” (Photo copyright: McDonald Hopkins.)
Cooper, and colleague Jason M. Smith, JD, elaborated on these points during the interview. Smith is chair of the Commercial Finance Group. “The vast majority of my work is representing either lenders or borrowers in credit relationships,” Smith explained.
Dealing with Lenders
For many lab companies facing financial distress, the most important action, the lawyers suggest, may be to review loan or credit agreements and get a better understanding of the lab’s obligations. Then, the lab can approach lenders for potential relief, such as deferred payments or temporary adjustments to reporting requirements.
Either way, “communication is key,” Smith said, adding that labs should first “come up with projections and cashflow analyses and figure out which of those requirements they are not going to be able to meet.”
Then, Smith added, labs should reach out proactively. “Lenders generally don’t like surprises,” he said. “They’re going to be a lot more willing to work with you when they find out about any issues directly from you, as opposed to after receiving financial statements and discovering the issues for themselves.”
Ultimately, clinical lab companies may be able to negotiate better terms, not only with financial institutions, but also with landlords, Cooper said. For example, labs may ask for rent abatement or payment deferrals. These steps “may reduce or eliminate the need to cut back on staff,” Cooper said, “which may be less disruptive of operations.”
When dealing with lenders, Cooper advises against a “Let’s throw everything at the wall and see what sticks” approach. Instead, labs should try “concrete, smaller lists of things that are really important. That’s the best way to come up with a reasonable ask for your lenders and have them take you seriously.”
When to Call Your Lawyer
Cooper says lawyers can play two different roles in these negotiations. “It’s important that lab executives discuss with their lawyers any potential violations of lease and lending documents, what the obligations are, and what the potential legal impact may be.” He added, “Labs should engage and discuss with a lawyer who’s experienced in those areas to understand how lenders and financial institutions might be willing to accommodate the lab’s financial situation by suspending or temporarily modifying the terms of those documents.”
Jason M. Smith, JD (above), chair of the Commercial Finance Group at McDonald Hopkins, told Dark Daily, “Clinical laboratory companies could approach their lender and/or landlord directly. You don’t necessarily need a lawyer to do that. On the other hand, a lot of clients prefer that their lawyer at least participate in any dialogue with the landlord and lender. But it’s not absolutely necessary. So, the lawyer can be an information resource or an active participant in negotiating.” (Photo copyright: McDonald Hopkins.)
The Bankruptcy Option
Clinical laboratory companies that are in serious financial trouble may have to consider drastic measures, such as bankruptcy. In a Chapter 11 bankruptcy, Cooper explains, you can continue to operate under supervision of the court while restructuring the business and renegotiating terms with lenders. But “there’s always a stigma attached to any kind of restructuring filing,” he said. “It’s public and it can raise questions among your suppliers and customers as to whether you’re sustainable. So, it would be more of a last measure.”
A more preferable course, he says, may be to negotiate a consensual out-of-court workout in which creditors agree to extend repayment terms or reduce debt.
A Good Time for Buyouts?
Another option for distressed lab companies may be buyouts. “We are starting to see a pickup in [merger and acquisition] activity,” Cooper says. “Some of it is normal activity not necessarily driven by financial distress. There’s a company that’s attractive in the marketplace and buyers are interested in that laboratory.”
In other situations, he noted, clinical laboratories might not feel compelled to sell, but “they want to become part of a larger platform with better capital resources to help them withstand the COVID-19 scenario and future market-altering events.”
Cooper continued, “there are other labs that basically say, ‘We’re not going to make it on our own. We need to find a buyer. We need to find capital.’ And then, of course, there are buyers that see market opportunities in labs which are available for acquisition that otherwise might not have been, and perhaps on more favorable terms.”
Some labs, he says, may wait for their revenues to recover, so they can “go to market in a stronger position.” But, “there clearly will be some labs out there that will be available, and available at a lower price than they would have been pre-COVID.”
Regardless of which path a financially-distressed clinical lab company chooses to take as a way to resolve the situation, it is best to take the initiative to consult with experienced attorneys, CPAs, and other advisors while there is still time to negotiate different solutions with lenders, landlords, mortgage companies, and others.
