LabCorp completes Orchid Cellmark acquisition, with conditions

By Gareth Macdonald

- Last updated on GMT

LabCorp completes Orchid Cellmark acquisition, with conditions
LabCorp has finally been cleared to buy DNA testing services firm Orchid Cellmark after the US Federal Trade Commission (FTC) OKed the deal, albeit, with some conditions.

LabCorp had been trying to acquire Orchid since April - stating then that the move would bolster its presence in the US and Europe and predicting the deal would complete in the second quarter.

However, in May LabCorp revealed that the FTC had asked for more information to allay concerns the deal would unfairly reduce competition in the US. In subsequent months LabCorp extended the deadline for its offer several times.

And, late last week, the North Carolina film announced that the deal was finally done and that its takeover subsidiary – named OCM Acquisition Corp - had acquired 86.5 per cent of Orchid’s shares for $2.80 each.

But to get to this point LabCorp had to agree to some tough conditions imposed by the FTC, the most notable of which - given the firm's US growth ambitions - being the requirement that it sells Orchid’s US contract paternity testing assets.

The business watchdog explained that, as originally planned, the deal would have given LabCorp control of 90 per cent of US government paternity testing contracts, which are worth around $27m a year. Orchid’s US paternity assets will be sold to privately-held US testing firm, DNA Diagnostics Center.

LabCorp did not respond to Outsourcing-pharma.com's request for additional information.

Diversification

The US testing services giant generates around 60 per cent of its sales from routine analysis work with the remaining 40 per cent coming from its clinical trial, genetics, infectious, disease, oncology and forensic sciences businesses.

LabCorp’s clinical trial testing services wing – which includes Esoterix​ and Tandem Labs​ - expanded earlier this year when the firm bought Clearstone Central Laboratories​. At the time it said the deal was designed to build its presence in Asia.

The Clearstone purchase and the now complete Orchid takeover fit with LabCorp’s efforts to diversify its business beyond its core testing services offering.

Analysts at Zacks Equity Research​ said that LabCorp like competitor Quest Diagnostics – which recently bought Athena Diagnostics and Celera Corp - is “striving for a greater share of the high-margined, specialized testing business​.”

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