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Dx Deals: Labcorp Acquires Stake in European Testing Giant

by Ron Shinkman | Oct 28, 2024 | Deals-lir, Essential, Lab Industry Advisor

$152.1 million SYNLAB deal is expected to create a new channel for Labcorp to market its sophisticated specialty assays

A doctor stands next to a microscope with a European Union flag, graphs, and DNA helix in the background, illustrating the concept of diagnostics industry deals in the EU. — iStock, Arseniy45

Labcorp has announced a deal expected to give it a greater toehold in Europe for the distribution of its tests. The North Carolina-based Labcorp announced on September 17 that it will acquire a 15 percent stake in SYNLAB from British private equity firm Cinven at a purchase price of about $152 million, based on recent exchange rates. The deal is expected to close in the first quarter of 2025.¹

Based in Munich, Germany, SYNLAB is the largest laboratory company in Europe. It has 27,000 employees and performed 600 million tests last year. The company’s 2023 revenue was $2.9 billion,¹ although that is less than a quarter of Labcorp’s 2023 revenue of $12.2 billion.²

Although SYNLAB has operations on four continents, the vast bulk of its business is in Europe. It has a sprinkling of labs and services in the African countries Egypt, Nigeria, and Ghana, as well as in the South American countries Peru, Columbia, and Brazil. SYNLAB also has a few locations in the Middle East, including Lebanon and Cyprus. In North America, it has a facility in Mexico City, but no operations in the United States.³

A source close to the deal, but who requested anonymity, said that Labcorp sees the transaction as more exploratory in nature rather than a plan to expand its operations significantly in Europe. “At this stage, this is a financial investment for Labcorp to have an exposure and better understanding of how European markets work,” the source said.

That appears to have been confirmed by Labcorp chief financial officer Glenn Eisenberg:

“Our investment in SYNLAB as a minority shareholder provides Labcorp with a role on the co-investors’ holding company board and the commitment to explore possible opportunities in the future to bring Labcorp’s innovative specialty tests to markets in Europe, consider possible procurement collaborations, evaluate opportunities to support advances in clinical trials and enrollment, and improve personalized care,” Eisenberg said in a statement announcing the deal.¹

A Labcorp spokesperson did not respond to email and phone requests seeking comment. A Cinven spokeperson declined to comment.

An indirect entry into the European market

Bruce Carlson, publisher of the Eye on IVD newsletter, suggests that the deal gives Labcorp an indirect entry further into the European market, noting that the US lab testing giant will not gain service locations with the acquisition.

Instead, he suggests that SYNLAB could be used to distribute some of Labcorp’s more specialized tests, such as OmniSeq^® INSIGHT. That’s a 523-gene next-generation sequencing panel for analyzing tumor biopsies that is marketed to oncologists in the United States. The test is touted by Labcorp as generating a “comprehensive, easy-to-read report with clinical guidance for more precise, targeted therapies and trials for…patients.”⁴ That test, which was introduced in 2021,⁵ has helped grow the company’s bottom line in the years since. Carlson noted that Labcorp has several specialty tests that would likely do well in Europe.

“This will help Labcorp to sell tests like this into SYNLAB’s large network of service labs,” Carlson observes. The company’s hub-and-spoke system in Europe includes more than 30 central laboratories, he added.

In addition to the stake in SYNLAB, Labcorp will also receive a single seat on the Cinven board, said a source close to the deal.

“We are very pleased to welcome Labcorp as a shareholder in SYNLAB,” said Cinven senior principal Anastasya Molodykh-McFarlane in a statement.⁶ We have great respect for the long-term growth story and healthcare excellence at Labcorp and believe that Labcorp’s investment underscores the future potential of SYNLAB. The investment by Labcorp is another significant milestone in Cinven’s strong healthcare track record.”

Labcorp has significant portions of its business outside of the US, with locations in about 100 countries. It operates various kinds of labs in the United Kingdom, the European Union, Singapore, and China, including central labs in Shanghai, Singapore, and Geneva, Switzerland. The company also operates kit production facilities in Belgium and China as well as a central lab in Japan in conjunction with Japanese lab company BML. Labcorp recently opened a new facility with BML in Kawagoe, Japan.⁷

The long-term effects of the deal remain to be seen. Labcorp’s stock has dropped about 5 percent in value since the SYNLAB deal was announced in mid-September.

London-based Cinven and SYNLAB have had a business relationship for the better part of a decade. Cinven acquired SYNLAB in 2015 for around $2 billion.⁸ Cinven also acquired Labco, another company with large European operations, that same year and merged the two entities. Cinven then invested heavily in the growth of the combined companies. In 2021, Cinven took SYNLAB public on the Frankfurt Stock Exchange, but then spent $2.4 billion last year to take it private again.^9,10

Two pending deals completed

In other deals in the diagnostics industry, Quest Diagnostics announced it has completed its acquisition of select assets of hospital system OhioHealth, which also included the system’s outreach business.¹¹ OhioHealth operates 15 hospitals, clinics, and other services in 47 of Ohio’s 88 counties. That deal was originally announced in early July. Quest said in a statement that most of OhioHealth’s outreach lab activities will be undertaken by its own laboratory in Pittsburgh, PA.¹²

Numerous hospitals and hospital systems have sold their outreach operations to either Labcorp or Quest. The two companies have executed at least 29 such deals since 2013.¹³

Labcorp also completed another deal—the acquisition of BioReference Health from parent company OPKO Health.¹⁴ The deal was announced last March.¹⁵ The final purchase price for BioReference’s patient service centers, customer contracts, and other operating assets was $237.5 million.¹⁴

“We are thrilled to close an acquisition that will expand our clinical diagnostics footprint with assets that will immediately benefit from Labcorp’s scale and expertise,” said Labcorp chief operations officer and executive vice president Mark Schroeder in a statement.¹⁴