LabCorp To Acquire Covance For $6.1Billion

Laboratory Corporation of America Holdings (LabCorp), one of the largest medical testing companies in the U.S., announced that it will acquire drug development services firm Covance for an estimated $6.1 billion.

The acquisition will result in a unique combination of healthcare diagnostics based on LabCorp’s medical testing services and Covance’s contract research, giving LabCorp an edge in the market. According to The Wall Street Journal, the Association of Clinical Research Organizations estimates the CRO industry will generate revenue of $23.6 billion this year. Though the companies only have a 3 percent overlap, the opportunities between LabCorp and Covance are ‘absolutely stunning’, said Mr. Herring.

“This transaction provides LabCorp with immediate scale and a comprehensive market-leading platform in the $141 billion biopharmaceutical research & development market, while at the same time achieving the new sources of revenue, broader payor mix, and greater international presence we have long pursued. Covance also has market access and nutritional businesses that we view as great growth opportunities. … The combined company will be an industry leader in both the laboratory and CRO spaces,” said LabCorp Chairman and CEO David P. King.

Covance Chairman and CEO Joe Herring, who will manage LabCorp’s Covance division, said, “Covance generates more safety and efficacy data for the approval of innovative medicines than any other company in the world, and LabCorp has longitudinal diagnostic data from more than 75 million patients. This combination leads the way to more cost-effective healthcare by improving the safety and efficacy of drug therapies, enabling accurate patient diagnostics, and advancing evidence-based medicines… The result will be improved health outcomes and reduced treatment costs.”

The transaction is expected to be completed in the first quarter of 2015.