Labcorp Goes on Spring Spending Spree

Labcorp has been on a spring acquisition spree, buying out virtually all of Invitae’s assets in an auction and wrapping up two hospital lab outsourcing deals.

Invitae, which focuses on genetic testing for diseases such as cancer, filed for Chapter 11 bankruptcy protection in February.¹ It reported total assets of $535.1 million versus liabilities of more than $1.6 billion. Most of Invitae’s liabilities are to its primary lender, U.S. Bank, to which it owes $1.4 billion.²

For the first nine months of 2023, Invitae reported a net loss of $1.35 billion on revenue of $359.1 million. It lost $3 billion on revenue of $393.8 million for the first nine months of 2022.³ Labcorp bid $239 million for what it described as “select assets of Invitae,” although court records indicate it essentially acquired the entire company.⁴ The sales agreement would transfer Invitae’s inventory, property leaseholds, intellectual property, and equipment (including vehicles) to Labcorp. The only items excluded from the deal are Invitae’s bank accounts, accounts receivable, and most of its liabilities. As part of the transaction, Labcorp has agreed to make job offers to at least 95 percent of Invitae’s employees.⁵

“Invitae will complement our business and advance our leadership in genetic screening, diagnostics, and specialty testing,” said Labcorp chief executive officer Mark Schroeder in a press release.⁴

The deal was approved by a bankruptcy judge during the first week in May. The acquisition is subject to regulatory review and is expected to close by the third quarter of this year.⁴

Labcorp stated that the acquisition is expected to increase annual revenue by about $275 million per year, or about a 2.2 percent increase based on its 2023 revenues of $12.16 billion.^6,7

“The Court’s approval of our proposed sale to Labcorp is a positive step forward in our restructuring process,” said Invitae chief executive officer and president Ken Knight in a statement.⁴

Labcorp noted in its statement that the acquisition would boost its testing abilities in oncology and rare diseases.⁴ Company spokespersons for both Labcorp and Invitae did not respond to phone and email queries seeking comment.

Bruce Carlson, producer of the Eye on IVD newsletter, believes the acquisition is a significant plus for Labcorp. He noted that Invitae’s financial woes mostly came from undertaking too many acquisitions. Meanwhile, it was able to grow revenue nearly seven-fold between 2017 and last year, demonstrating a proven business model. And the company’s genetic tests have high margins.

The deal allows Labcorp to “eliminate a competitor in those specialty, higher price-and-profit markets which they want to be more present in,” Carlson said in written comments provided to Lab Industry Advisor.

In its two other deals, Labcorp finalized the acquisition of a portion of the laboratory outreach business of Providence Health & Services, a non-profit hospital chain based in Renton, Washington.⁸

The deal applies to a large portion of Providence’s outreach business in California, where it operates 17 of its 51 hospitals. Labcorp is acquiring Providence’s outreach business in Orange County and Northern California, although it also operates several hospitals in the Los Angeles area. Terms of the deal were not disclosed.⁸

“We plan to use our expertise and capabilities to improve the efficiency and access of laboratory testing services for physicians and patients across California,” said Rajat Mehta, senior vice president of Labcorp’s West Division, in a press release.⁸

In addition to the acquisition, Labcorp said it was opening up four new draw stations in Northern and Southern California to improve and expedite services in the region.⁸

The other outreach deal included Labcorp acquiring the outreach business of Baystate Health, which operates five hospitals and 25 laboratories throughout Massachusetts. Labcorp also opened up a regional laboratory at Baystate’s hospital in Holyoke, Massachusetts.⁹

References:

1. https://www.kccllc.net/invitae
2. https://www.kccllc.net/invitae/document/2411362240213000000000002
3. https://ir.invitae.com/news-and-events/press-releases/press-release-details/2023/Invitae-Reports-Third-Quarter-2023-Financial-Results/default.aspx
4. https://www.labcorp.com/invitae-receives-court-approval-sale-labcorp
5. https://www.kccllc.net/invitae/document/2411362240507000000000006
6. https://ir.labcorp.com/news-releases/news-release-details/labcorp-announces-winning-bid-select-assets-invitae
7. https://ir.labcorp.com/news-releases/news-release-details/labcorp-announces-2023-fourth-quarter-and-full-year-results
8. https://www.labcorp.com/labcorp-finalizes-acquisition-providences-outreach-laboratory-business-northern-california-and
9. https://www.labcorp.com/labcorp-and-baystate-health-finalize-strategic-relationship-diagnostics-services-0

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Other recent mergers, collaborations, and alliances in the laboratory sector include:

Mergers and Acquisitions

Strategic Alliances

Government Contracts

None announced during the period.