Labcorp to Split into Two Separate Companies
Burlington-based Labcorp plans to spin off its wholly owned Clinical Development business as an independent, publicly traded company.
The transaction “will benefit customers and shareholders by creating two standalone businesses that are poised to accelerate growth and focus resources on distinct strategic priorities, customer needs and value creation," said Adam Schechter, chairman and chief executive officer of Labcorp.
“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-capitalized and positioned to generate sustainable growth with strong free cash flows and attractive returns,” Schecter said. “Our customers will continue to have access to our full range of capabilities with the same quality and seamless delivery of services they have come to expect from our teams.”
Labcorp’s board of directors has authorized the company to execute the spinoff through a dividend of the Clinical Development business’ shares to Labcorp’s shareholders. The transaction is intended to qualify as tax-free for U.S. federal income tax purposes.
The spinoff will result in two independent, publicly traded companies.
Labcorp will continue as a global laboratory business composed of the company’s routine and esoteric labs, central labs and early development research labs. The laboratory business generated total revenue of $12.7 billion, or $10.5 billion excluding COVID-19 testing revenues, in the last four quarters ending June 30.
The Clinical Development business will continue as a global Contract Research Organization (CRO) providing Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations. The business generated total revenue of $3 billion over the last four quarters ending June 30.
Following the transaction, expected to be completed in the second half of 2023, Labcorp will continue to be publicly traded on the New York Stock Exchange and expects the Clinical Development business to be publicly listed.
Schechter will continue to lead Labcorp as chairman and CEO, and Labcorp will keep its headquarters in Burlington.
The board of directors, executive leadership, and company name of the Clinical Development business will be determined and announced later as plans for the spin-off progress.
Historically Labcorp had focused on laboratory diagnostics work until it bought Covance, a CRO, in 2015 for about $6.2 billion. That acquisition expanded Labcorp’s business into clinical drug and diagnostics development services for pharmaceutical and biotech clients – the business it is now planning to spin off.
Labcorp is a global life sciences company with over 75,000 employees who serve clients in more than 100 countries. About 10,000 of those employees are in North Carolina, about half of them in Alamance County near the headquarters. The company reported $16 billion in revenue in fiscal year 2021.
“Labcorp continues to be a highly engaged and critical contributor to our regional distinction in labs and diagnostics,” said Nancy Johnston, executive director of the North Carolina Biotechnology Center’s Piedmont Triad Office.
“It is exciting see this homegrown business thrive and further contribute to North Carolina’s leadership as the largest concentration of contract research & testing organizations in the world.”