In an attempt to bolster its molecular offerings and its clinical trials business, national player LabCorp has purchased a Seattle-based genomics laboratory from New Jersey-based drug development giant Covance for an undisclosed amount. “The platforms and capabilities available at this laboratory are complementary to and broaden LabCorp’s existing global clinical trials service offerings, and we will continue to work further to develop and expand these capabilities in the future. The addition of scientific, technical and sales team members is also an important aspect of this transaction,” the Burlington, N.C.-based LabCorp said in a statement. “The acquisition enhances LabCorp’s existing biomarker development and companion diagnostics capabilities and it confirms our commitment to advance our industry-leading genomic services.” Additionally, LabCorp has entered into a five-year contract to continue to provide Covance with specialty genomics services it can offer to its clients. The Pennsylvania-based investment banking firm Fairmount Partners assisted Covance in the sale of the lab, which closed on Jan. 31. David Windley, an analyst with Jeffries, noted that the lab had been an underperforming asset for Covance and that the company would rely more on its central labs for future product development. Covance had acquired the facility in 2009 from Merck. […]
In an attempt to bolster its molecular offerings and its clinical trials business, national player LabCorp has purchased a Seattle-based genomics laboratory from New Jersey-based drug development giant Covance for an undisclosed amount.
“The platforms and capabilities available at this laboratory are complementary to and broaden LabCorp’s existing global clinical trials service offerings, and we will continue to work further to develop and expand these capabilities in the future. The addition of scientific, technical and sales team members is also an important aspect of this transaction,” the Burlington, N.C.-based LabCorp said in a statement. “The acquisition enhances LabCorp’s existing biomarker development and companion diagnostics capabilities and it confirms our commitment to advance our industry-leading genomic services.”
Additionally, LabCorp has entered into a five-year contract to continue to provide Covance with specialty genomics services it can offer to its clients.
The Pennsylvania-based investment banking firm Fairmount Partners assisted Covance in the sale of the lab, which closed on Jan. 31. David Windley, an analyst with Jeffries, noted that the lab had been an underperforming asset for Covance and that the company would rely more on its central labs for future product development.
Covance had acquired the facility in 2009 from Merck. It has been in operation since 2001. Based on a statement issued by Covance in 2011, the lab runs about 45,000 tests per year. It has 50 employees, according to a Covance spokesperson, who declined to provide additional information.
Neither LabCorp Chief Executive Officer Dave King nor Covance officials have suggested in recent earnings calls that the transaction will have a significant impact on their bottom lines.
However, King, in a presentation at the J.P. Morgan Healthcare Conference in San Francisco in January, stressed the importance of molecular testing to the company’s future.
“The movement toward companion diagnostics and personalized medicine is a long-term opportunity for growth,” King said at the presentation, later adding that the company is focused on making smaller, strategic acquisitions.
LabCorp did not respond to repeated requests seeking comment.
Although LabCorp controls roughly 10 percent of the U.S. lab testing market, like many other labs it is facing declines in reimbursement from public and private payers and is struggling with flat growth. Its 2013 revenue grew slightly more than 2 percent, from $5.67 billion to $5.8 billion, while net income was down slightly.
“If their growth is being impeded by declining reimbursement and economic conditions, they will turn their attention towards alternate growth strategies. This type of acquisition will afford them an opportunity to grow and it will complement and augment their existing operations and distribution systems,” said Susan Dougherty, Vice President of Operations at Chi Solutions Inc, a Michigan-based laboratory consulting firm. “If LabCorp believes in the molecular testing market estimates and continues to focus on the evolving dynamics of medicine, this type of acquisition strategy can better position them for the future.”
In addition to the Covance acquisition, LabCorp also announced that it was making available Thermo Scientific’s ImmunoCAP allergy testing panel. The company noted that allergies affect about 60 million Americans and that there is a well-documented link between allergies and asthma.
“We will develop customized panels to improve treatment practices and enhance patient outcomes,” said Mark Brecher, M.D., LabCorp’s chief medical officer.
Takeaway: Struggling with organic revenue growth, LabCorp is continuing to focus on strategic acquisitions in the molecular arena and other forms of specialty testing.
