Labcorp To Spin Off Its Clinical Trial Business, Posts Mixed Q2 Earnings

  • Laboratory Corp of America Holdings LH plans to spin off its unit focused on the clinical development business. Wall Street Journal was the first to report the news.
  • The clinical drug trial business operates as a Contract Research Organization, providing Phase I-IV clinical trial management, market access, and technology solutions to pharmaceutical and biotechnology organizations.
  • According to WSJ, the move will create a new stand-alone company in the fast-growing contract-research sector.
  • Labcorp plans to retain the parts of the drug-development business that focus on early-stage development and central laboratory work, given that they require similar resources to its diagnostics operation, WSJ reported.
  • The spun-off business delivered total revenue of $3.0 billion in the 12 months ending June. It grew 8% on a CAGR basis from Q2 2019 to Q2 2022. 
  • The Clinical Development business is expected to deliver high-single-digit revenue growth in the future.
  • Labcorp is targeting completion of the planned spin-off in 2H of 2023.
  • The company reported Q2 sales of $3.70 billion, missing the consensus of $3.75 billion, down 3.7% Y/Y due to lower COVID-19 PCR and antibody testing.
  • Q2 adjusted EPS reached $4.96 versus $6.13 last year, beating the consensus of $4.70.
  • Guidance: Labcorp expects FY22 EPS of $19.00 - $21.25, compared to the prior guidance of $18.25 - $21.00 and the consensus of $19.70.
  • Price Action: LH shares are up 0.61% at $251.00 during the premarket session on the last check Thursday.
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