LabCorp (LH) to Expand Oncology Portfolio With Latest Buyout
LabCorp's (LH) acquisition of PGDx will position the company at the forefront of driving better patient outcomes in oncology.
Laboratory Corporation of America Holdings LH or LabCorp entered a definitive agreement to acquire Personal Genome Diagnostics (“PGDx”) — a leader in cancer genomics with a portfolio of wide-ranging liquid biopsy and tissue-based products. The acquisition of PGDx is the newest development in LabCorp’s long-standing commitment to incorporate precision medicine into its comprehensive offering of oncology solutions.
It is worth mentioning that next-generation sequencing (NGS), including liquid biopsy, represents the future of treatment and response monitoring in people suffering from cancer. Liquid biopsy testing can also eliminate the need for an invasive biopsy procedure, reducing costs and improving patient outcomes. With more cancer patients gaining access to NGS testing, LabCorp will be able to offer enriched, actionable and data-driven insights.
Per the terms of the agreement, LabCorp will pay $450 million in cash at the closing of the deal and up to an additional $125 million on achieving performance milestones. The transaction is expected to close in the first half of 2022, subject to customary closing conditions and regulatory approvals, including those under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The acquisition is expected to be slightly dilutive to LabCorp’s diluted earnings per share (EPS) over the next couple of years and provide returns in excess of its cost of capital by year five.
Significance of the Acquisition
The addition of PGDx and its technology complements and boosts LabCorp’s existing liquid biopsy capabilities and expands its leading oncology portfolio of NGS-based genomic profiling capabilities. The acquisition will position LabCorp at the forefront of driving better patient outcomes in oncology.
PGDx enhances LabCorp’s ability to increase access to oncology care in the global community through kitted solutions. The acquisition will further help bring precision diagnostics closer to patients and help reduce a common gap in cancer care delivery.
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PGDx’s centralized and decentralized offerings will improve the scalability of the technology and support long-term growth across LabCorp’s oncology portfolio, while also allowing LabCorp to seamlessly offer oncology testing at every stage of care. Together the companies will accelerate access to customized treatments for cancer patients globally.
Per a report by Fortune Business Insights, the global oncology drugs market size was at $141.33 billion in 2019 and is projected to reach $394.24 billion by 2027, witnessing a CAGR of 11.6%. An increase in the prevalence of cancer disease, a rise in incidences of various cancer conditions, an increase in the popularity of advanced therapies (biological and targeted drug therapies), and a surge in the geriatric population worldwide are driving the market.
In December 2021, LabCorp collaborated with ConcertAI to optimize precision oncology research. The companies will work to launch clinical studies in ways that reduce the burden on physician practices, drive faster patient recruitment, maximize patient retention and ensure equitable access to research as a care option.
In the same month, LabCorp acquired Toxikon Corporation — a contract research organization delivering best-in-class non-clinical testing services. The addition of Toxikon to LabCorp Drug Development bolsters LabCorp’s strong non-clinical development portfolio. It also creates a strategic footprint for the company to partner with pharmaceutical and biotechnology clients in Boston, MA.
Shares of the company have gained 49.1% in a year compared with the industry’s rise of 15.5%.
Zacks Rank and Key Picks
LabCorp currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Thermo Fisher’s long-term earnings growth rate is estimated at 14%. TMO’s earnings yield of 3.7% compares favorably with the industry’s (3.6%).
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McKesson’s long-term earnings growth rate is estimated at 8.9%. MCK’s earnings yield of 9.9% compares favorably with the industry’s 3.2%.
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