Covance acquisition begins paying off for LabCorp in Q2

By Zachary Brennan

- Last updated on GMT

Covance acquisition begins paying off for LabCorp in Q2

Related tags Central labs Laboratory

LabCorp revealed a more than 46% increase in quarterly revenue from the same quarter last year as the recent $6.2bn acquisition of Covance brought in $620.8m of the overall company’s $2.2bn in Q2.

Dave King, chairman and CEO, told investors in a conference call Tuesday that early development work for Covance had strong growth and margin expansion “as the toxicology market continues to improve​,” according to a Seeking Alpha​ transcript of the call. 

Central labs revenue increased nicely on a sequential basis due to higher kit receipts as we predicted on our first quarter call. Central labs also contributed strong new orders in the quarter​,” King said.  Glenn Eisenberg, CFO and EVP of LabCorp said the company’s other growth was “primarily due to strong organic volumes across both core and esoteric testing​.” 

However, lower-than-expected clinical business net orders combined with slower-than-typical revenue conversion resulted in growth below LabCorp’s expectations and caused the company to lower its guidance for Covance for the rest of the year. 

King laid out four major drivers for future growth: the strength of the company’s central labs business, higher kit shipments, positive momentum in early drug development fuelled by more biotech funding, larger investments in growing the company’s clinical business, and capturing cost synergies from the Covance acquisition. 

He also noted that the company’s clinical team is using its patient database as a competitive differentiator to enhance patient enrolment in trials, which has generated a positive response from clients. 

Using diagnosis codes in our patient database we obtained unique insights that allowed us to identify eligible patients and their treating physicians, which gave our client confidence in our ability to enroll the study​,” King said. 

The plan for future growth comes as LabCorp also named Deborah Keller as the successor to Joseph Herring as CEO of Covance. Most recently, Keller served as EVP of Covance and Group President of R&D Laboratories, where she led the combined central laboratory and early development laboratory organizations of more than 6,000 employees at 18 facilities across the globe.

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