Pharma Focus America

Labcorp to Spin Off Clinical Development Business

Friday, July 29, 2022

Labcorp, a prominent global life sciences company, has announced that its Board of Directors has authorized the pursuit of a spin-off of its wholly owned Clinical Development business to Labcorp shareholders. This spin-off, which will be executed as a tax-free transaction, will result in the formation of two independent publicly traded companies, each poised for strong and sustainable growth.

Labcorp will continue to operate as a global laboratory business encompassing routine and esoteric labs, central labs, and early development research labs. With deep scientific expertise, extensive health data and insights, and a global laboratory network, Labcorp is a leader in the field. The Clinical Development business, on the other hand, will become a leading global Contract Research Organization (CRO) offering Phase I-IV clinical trial management, market access, and technology solutions to pharmaceutical and biotechnology organizations.

The decision to pursue the spin-off is a result of Labcorp's commitment to enhancing stakeholder value. By creating two standalone businesses, Labcorp aims to provide strengthened strategic flexibility and operational focus, focused capital structures and allocation strategies, and targeted investment opportunities for different investor bases. Adam Schechter, chairman and CEO of Labcorp, expressed confidence in the spin-off, stating that it will benefit customers and shareholders alike by allowing each company to concentrate on distinct strategic priorities, customer needs, and value creation.

Labcorp, as a standalone entity, will remain a global leader in advancing healthcare through science, innovation, and technology. With its extensive laboratory network and access to vast health data, Labcorp will continue to invest in research and development to launch diagnostic advancements globally and provide insights to advance innovation. The company will serve a broad and growing customer base, including pharmaceutical and biotechnology companies, physicians, health systems, consumers, and other laboratories requiring lab services or diagnostic testing.

The Clinical Development business, post-spin-off, will maintain its position as a leading global CRO, focusing on supporting biotechnology and pharmaceutical customers and driving innovation. With an emphasis on growth opportunities across clinical trials and expertise in therapeutic areas such as oncology, cell and gene therapy, and rare diseases, the Clinical Development business will work closely with pharmaceutical and biotechnology organizations to advance life-saving therapies. Additionally, the business will retain access to Labcorp's health and clinical data set to enhance trial execution and provide a differentiated value proposition.

Labcorp's routine and esoteric labs, central lab, and early development research lab businesses have demonstrated robust performance, generating substantial revenue over the last four quarters. Labcorp anticipates mid-single digit annual revenue growth and will maintain its commitment to its capital allocation strategy and investment-grade credit rating.

Adam Schechter will continue to lead Labcorp as chairman and CEO after the completion of the planned spin-off, which will keep Labcorp headquartered in Burlington, North Carolina. The Clinical Development business, as an independent entity, will focus on capitalizing on growth opportunities in clinical trials and bolstering its position as a leading global CRO.

The Clinical Development business has shown significant revenue growth over the past four quarters and is expected to maintain high-single-digit revenue growth moving forward. Both Labcorp and the Clinical Development business are well-positioned to thrive independently, offering unique value propositions and driving innovation in the global healthcare sector.

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