Labcorp to split in two

Following on from a decision last year to evaluate options to boost value, the board of Labcorp has authorised a spin-off of its clinical development business to shareholders through a tax-free transaction. This should be completed in 2H 2023.

LabCorp is expected to continue being publicly traded on the New York Stock Exchange and the clinical development business should also be publicly listed. This will lead to the creation of two independent companies with “distinct strategic priorities, customer needs and value creation”, the company said:

* LabCorp, a global laboratory business comprising the routine and esoteric labs, central labs and early development research labs, which CEO Adam Schechter will continue to lead

* The clinical development business, whose name will be announced later, which will a CRO providing Phase I-IV clinical trial management, market access and technology services to pharmaceutical and biotechnology companies

LabCorp said that the spin-off will give both companies greater strategic flexibility and operational focus, focused capital structures and capital allocation strategies and a more targeted investment opportunity for different investor bases. “Our shareholders will be able to participate in the upside potential of two market-leading businesses in the global healthcare sector, each of which will be well-capitalised and positioned to generate sustainable growth with strong free cash flows and attractive returns,” Schechter added.

The laboratory business had revenues of $12.7 billion ($10.5 billion excluding COVID-19 testing) in the 12 months to 30 June 2022, while the clinical development business had sales of $3.0 billion. They achieved 5.5% and 8.0% year-on-year growth from Q2 2019 to Q2 2022 respectively. Projected revenue growth rates going forward are mid- and high-single digits respectively.