Back to top

LabCorp to Add ChromaDex's Arm, Inorganic Expansion On Track

Read MoreHide Full Article

Healthcare diagnostics company Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp successfully continues to expand through acquisition strategy. Apart from huge buyouts like Covance, the company continues to add complementary capabilities through targeted tuck-in mergers.

Latest on the list is the company’s agreement to purchase the analytical testing services business of ChromaDex Corp. (CDXC). The transaction is expected to complete in early September. This newly acquired entity will become part of LabCorp’s Covance Food Solutions business.

Notably, ChromaDex is a natural product company working on health, wellness and nutritional ingredients, creating science-based solutions for dietary supplement, food and beverage, skin care, sports nutrition and pharmaceutical products.

Although both the companies haven’t disclosed the deal’s financial terms through press release, per a report by American City Business Journals, the deal value has been fixed at $8.5 million. Per this report, “Covance will buy the analytical testing business for $7.5 million. Under the agreement, ChromaDex is also able to receive an earnout payment of up to $1 million, according to a filing with the Securities and Exchange Commission.”

It is important to make a note of LabCorp’s $5.6 billion mega buyout of Covance by virtue of which, the company is full on force to expand a range of diagnostic offerings and create a new industry leader in both laboratory testing and CRO (contract research organization) spaces, slated to act as a leading provider of medical testing besides operating as a premier full-service drug development organization.

Per the company, Covance Drug Development is the only CRO, providing full spectrum of drug development capabilities — from research to real-world evidence studies — creating commercial and scientific advantage for LabCorp’s partners.

Apart from Covance, another recent significant buyout is Sequenom, a prominent player in the field of non-invasive prenatal testing (NIPT) for reproductive health. Sequenom’s NIPT and genetic testing capabilities has further added an impetus to LabCorp’s extensive women’s health test menu. This inclusion has also expanded the company’s geographic reach both domestically and internationally (particularly in the EU and Asia-Pacific region).

In May, the company acquired Pathology Associates Medical Laboratories (PAML) from former owners Providence Health & Services (Providence) and Catholic Health Initiatives (CHI). PAML is one of the nation’s premier medical reference laboratories and a healthcare solutions company. All these acquisitions are consistent with the company’s efforts to strengthen foothold in the personalized diagnostics testing market.

Last three months, LabCorp has been trading above the broader industry. Over this period, the stock has gained 9.2% as against the industry’s 1.1% loss.

Zacks Rank & Key Picks

LabCorp currently has a Zacks Rank #3 (Hold). A few better-ranked medical stocks are Edwards Lifesciences Corporation (EW - Free Report) , Lantheus Holdings, Inc. (LNTH - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) . While Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), Lantheus Holdings and IDEXX Laboratories carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied around 20.5% over the last six months.

Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has surged 28.5% over the last six months.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock has gained roughly 6.8% over the last six months.

One Simple Trading Idea

Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.

This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.

Learn more >>

More from Zacks Analyst Blog

You May Like