Triad Business Journal - Planet LabCorp

LabCorp’s global presence has exploded, with no slowdown in sight. CEO David King speaks to why. STORY BY JESSICA SEAMAN, PAGES 4-6

PLANETLABCORP

LARGEST TRIAD FOUNDATIONS 17

HEADLINE GOES IN HERELY XX

FIRST ANNIVERSARY FOR THE BARN

WHAT’S NEW AT REYNOLDA VILLAGE 10

BIOTECH FUNDING

WFU prof snags grant for bacteria research Patricia Dos Santos is awarded $680,000 to study bacterial physiology and provide a mentoring lab program. JESSICA SEAMAN, 12

AVIATION MAINTENANCE

Triad firm to benefit from $40M dealPiedmont Aviation Component Services will perform work on a large fleet of Boeing and Airbus aircraft. KATIE ARCIERI, 8

TRUCKING AHEAD

Mack sets out to win market shareMack Trucks’ new Anthem truck, which received engineering support in Greensboro, is sleeker and more operator-friendly. KATIE ARCIERI, 8

DOWNTOWN DIGS

Grubb reveals details for W-S apartmentsDesign is underway for the $48 million, 240-unit apartment and retail project next to Don Flow’s GMAC tower. JOHN BRASIER, 10

JESSICA SEAMANReporter | Triad Business Journal

It has been a busy summer for Burlington-based LabCorp. In June, the company teamed up with drugstore giant Walgreens to offer patient service centers. A month later, LabCorp announced its plans to acquire Chiltern International Ltd. in a $1.2 billion deal. And though these two deals expanded separate business divisions, they reflect a common goal: LabCorp’s aggressive transformation into a global life science and diagnostic company.

After spending almost a decade on an acquisition spree, Laboratory Corporation of America Holdings (NYSE: LH) has bolstered

its services beyond laboratory diagnostics, and in doing so, the company has placed itself on the world stage. But the company’s growth hasn’t just been for size and scale; the diversification of its operations and new partnerships also are aimed at cementing its

place in an evolving health care market. LabCorp is growing its presence in the world, and it’s not about to slow down.

“Our acquisitions are a means to support our strategy of delivering world-class diagnostics, bringing innovative medicines to patients faster, and using technology to improve the delivery of care,” LabCorp CEO David King told Triad Business Journal. “As those who have followed the company know, acquisitions are an important part of our business model, and you should expect us to continue to seek out desirable assets that create long-term shareholder value.”

LabCorp does not announce all of its acquisitions, but the company says it has spent more than $2.5 billion on such deals in the past five years, on top of its $6.2 billion takeover of Covance in 2015.

By the Triad Business Journal’s count, Lab-Corp has purchased at least 19 companies since

2008, having added at least one new business to its portfolio every year or so. In absorbing these other businesses, LabCorp has been able to en-hance its services over the years while gradually stepping onto a global platform.

Through acquisitions and partnerships, LabCorp has entered new markets, including Canada, Europe, Asia Pacific and the Middle East, leading the company’s global workforce to nearly double from 28,000 employees in 2008 to more than 57,000.

As LabCorp has expanded globally, the com-

pany’s presence in the Triad has also soared. LabCorp has seen its workforce in the Triad climb almost 50 percent in the past nine years, with the company now employing 4,884 people in the region. This has led LabCorp to become the eighth-largest employer in the Triad and the largest employer in Alamance County. The com-pany employs 6,992 workers statewide.

The company’s market value, which now stands at $15.4 billion, has also risen more than 50 percent since 2008, and it ranks as the state’s 10th largest public company. Meanwhile, its an-

OCTOBER 6, 2017

This article appeared in the Triad Business Journal on October 6, 2017 on the cover and pages 4-6. It has been reprinted by the Triad Business Journal and further reproduction by any other party is strictly prohibited. Copyright ©2017 Triad Business Journal, 100 South Elm Street, Suite 400, Greensboro NC 27401

TRIAD BUSINESS JOURNAL

A team of technicians work with patient samples in a laboratory at LabCorp.

LABCORP GOES GLOBALThe Burlington-based company is in full-on growth mode

David King

nual revenue, which reached $9.4 billion in 2016, has more than doubled since 2008.

LabCorp’s broader focusLabCorp has a long history of gobbling up

other companies, but the firm took its first step overseas in the early 2000s with clinical trial sites in Belgium and Singapore. The company followed the move with its acquisition of Dyna-care Laboratories, which was based in Dallas, in 2002, which King says gave the company labora-tory presence in Canada.

“Given that our world has many global health needs that diagnostics and drug development are critical components of addressing, we see global expansion as a moral imperative,” King said. “Happily, globalization of our business also presents excellent growth opportunities.”

Of LabCorp’s acquisitions, it is the company’s purchase of Covance that is considered to be the deal that both expanded LabCorp’s operations internationally and sealed the company’s posi-tion as a global player in the industry. The trans-action, which was completed in 2015, broadened LabCorp’s operations by giving the company a footing in the contract-research (CRO) sector.

“The shift to global happened when they ac-quired Covance,” said Nicholas Jansen, an analyst with Raymond James and Associates. “The move into the CRO world was driven by (David King’s) broader view of the marketplace. And strategic

thinking of where the industry was headed.”The Covance acquisition gave LabCorp a

platform in the biopharmaceutical research and development market, along with advancing its ability to support personalized medicine.

When the deal was announced in 2014, Co-vance had more than 12,500 employees in more than 60 countries. The company was also already handling drug trials in more than 100 countries.

In buying Covance, LabCorp was able to in-

crease its focus on companion diagnostics, which are tests used to determine how a person will likely respond to a specific treatment. This has aided the company’s ability to adapt to a health care industry that is increasingly embrac-ing precision and genomic medicine.

“The combined capabilities of our businesses have made us the market leader in the develop-ment and commercialization of companion di-agnostics,” King said. “We see companion diag-nostics as a tremendous growth opportunity for the next decade because we believe that medical understanding of the specific causes of disease will become increasingly precise.”

LabCorp’s recent purchase of Chiltern, which was completed in September, adds to the com-pany’s CRO business. Chiltern, which is based in Slough, U.K. and has its North American head-quarters in Wilmington, N.C., also gives LabCorp a bigger presence in Asia, observed Amanda Murphy, an analyst with William Blair, in a re-cent note.

King said the melding of Covance with Lab-Corp’s operations not only broadens the compa-ny’s services but it also has spurred revenue and profit growth. The company’s annual revenue jumped more than 10 percent from 2015 to 2016.

But that doesn’t mean there haven’t been a few headaches along the way.

“It’s been a little bit of messiness over the last few years,” Jansen, the analyst, said, adding that there have been some issues such as trial cancel-lations and a lost customer in Sanofi.

LabCorp knew its site-support agreement with Sanofi would expire in 2015, but the loss, along with other issues, affected the company’s

OCTOBER 6, 2017TRIAD BUSINESS JOURNAL

LabCorp uses a robotics system, called Propel, at its 1447 York Court location in Burlington. The robots help split and sort laboratory samples, improving efficiency and cutting costs.


Mike Thomas, a technologist at LabCorp, works with patient samples.


growth, Jansen said.“They still need to prove that this combined

model is the right approach to the marketplace,” he said. “They need to execute this strategy, and as they execute this strategy the market will re-spond.”

How LabCorp’s growth hits homeLabCorp’s roots are in Burlington, where the

company was founded in 1969. The kinship be-tween LabCorp and the community is empha-sized by both the company and local officials.

“It didn’t start out where it is today, but the idea about what LabCorp is doing began here,” said Mac Williams, president of the Alamance County Area Chamber of Commerce. “LabCorp and Alamance County have a long tightly woven relationship with one another, and we would love to be part of the continuing story of Lab-Corp’s growth well into the future.”

Locals say the company has been proactive in providing job opportunities for residents, along with igniting the redevelopment of downtown Burlington. In 2014, LabCorp pledged to invest $12 million over a five-year period for renova-tions in downtown Burlington.

Even now, LabCorp is busy renovating its location at 1447 York Court. The company, in a move to replace its old HVAC systems, has been able to add additional space to the building, including plans for a second robotics system.

“They’re certainly good corporate citizens,” said Tom McGowen, a partner with accounting

firm Stout Stuart McGowen & King in Burling-ton. “You have to have in a community a place for well-paying jobs and professionals. If a com-munity wants to be prosperous, you need people working there.”

LabCorp is also one of the Triad’s leaders in harnessing technology and innovation, which has become increasingly important as traditional industries have waned. LabCorp, which landed on Forbes’ 2017 list of “The World’s Most Inno-vative Companies,” has been able to cut costs, while also improving consistency and accuracy by using robots and automation, King said.

For years, there has been an underlying fear in the community about whether Burlington could someday lose LabCorp, either by being acquired or because of its proximity to the Research Tri-angle Park and the Triangle region, where many of its top executives — including King — live.

But King says he sees no need to relocate, tell-ing TBJ that, “although we have employees across North Carolina, including in RTP, Greensboro, Raleigh, Cary, Wilmington, and Charlotte, we are proud that Burlington is our home, and we see no reason why that should change.”

Some in the community see the company’s growth as a way of ensuring its continued pres-ence in the area.

“One of the things that is really nice to see happen is that with their continued growth, is that there are fewer companies that can acquire LabCorp,” said Yonnie Butler, executive direc-tor of the Biotechnology Center of Excellence at

Alamance Community College. Butler started his career at Roche Biomedical, which became Lab-Corp after merging with National Health Labora-tories in the 1990s.

“I’d hate to think about where Alamance County would be without LabCorp,” Butler said. “It would be drastically different because we don’t have the opportunities in the other indus-tries that we once did.”

LabCorp’s place in the health care industryJust as LabCorp was able to boost its abilities

in precision medicine with its purchase of Co-vance, the company has also been able utilize its partnerships and acquisitions as a way to keep pace with an evolving health care industry.

“Some of what LabCorp has done from an acquisition perspective is battle through some of the industry dynamics,” Jansen, the analyst, said. “In the new health care world, scale is go-ing to matter. You’re going to see more and more (merger and acquisition) activity across the en-tire health care industry.”

The health care industry is in the process of shifting towards value- based care, which incen-tivizes providers who are able to keep patients healthy and out of the hospital. As part of the transition, health care providers are taking steps to help patients manage chronic and other dis-eases, such as diabetes.

LabCorp’s laboratory diagnostic services not only can help with the diagnosis and treatment of diseases, but the company, through Covance, is also able to provide patients with access to new drugs and devices that are in the development stage, King said.

The company’s partnership with Walgreens also follows the shift in the market, especially in following the rise of retail health. Retail health involves clinics, which are most often based in pharmacies and big-box stares, that provide con-venient care at an affordable cost.

It was a recognition of that trend that spurred LabCorp’s partnership with Walgreens.

Through the partnership, LabCorp opened seven patient service centers at drugstores, and the company is looking at expanding “the scope and capabilities” of the sites, King said.

Overall, he said, LabCorp has plans to further its global expansion, in both the CRO space and laboratory diagnostics. In fact, the company is “deep in discussions with a major European lab about collaborating to offer companion diagnos-tics and other esoteric tests.”

“I fully expect that global engagement will be a critical component of our future growth,” King said.


Charity Lawler, a technologist with LabCorp, enters sample information into the company’s system.



ANNUAL REVENUE

$8.5B

$6B$5.8B

$4.5B$4.7B

$5B

$5.5B$5.7B

$9.4B

’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

2009: Monogram Biosciences Inc., San Francisco ($106.7 million)

2010: DCL Medical Laboratories, Indianapolis

2010: Genzyme Genetics, a division of Genzyme Corp. in Cambridge, Mass ($925 million)

2011: Westcliff Medical Laboratories, California, $57.5 million

2011: Clearstone Central Laboratories, Toronto

2011: Orchid Cellmark, New Jersey ($85 million)

TOTAL GLOBAL EMPLOYEES

52K+50K+

36K+34K+34K+

31K+31K+28K+28K+

’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

57K+

’17

TOTAL LOCAL EMPLOYEES

4,354

4,449

3,3003,300 3,300

4,8004,836

4,354

3,200

4,884

’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17

MARKET CAP

$11.8B

$9.3B

$9.94B

$7.51B$7.84B

$8.25B $8.38B

$6.75B

$11.39B

$14.44B

’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’172017: ChromaDex Corp.’s analytical testing services. ChromaDex is based in California ($8.5 million)

2008: Tandem Labs, locations in New Jersey and Massachusetts

2012: MEDTOX Scientific Inc., Minnesota ($241 million)

2014: LipoScience Inc., Raleigh. ($63 million)

2014: Bode Technology Group Inc., Lorton, Va.

2015: Covance Inc., based in Princeton, N.J. ($6.2 billion)

2015: Physicians Reference Laboratory in Kansas

2015: Safe Foods International Holdings, along with its two companies: International Food Network, locations in Ithaca, NY, Naples, Fla., and Reading, U.K., and The National Food Laboratory, two locations in Livermore, California

2016: Pathology Inc., based in California

2016: Sequenom, based in California (more than $370 million)

2017: assets of Mount Sinai Health System’s Clinical Outreach Laboratories in New York City

2017: Pathology Associates Medical Laboratories in Washington State

2017: Chiltern International Ltd., Slough, U.K. ($1.2 billion)

LABCORP ACQUISITIONS

Triad Business Journal - Planet LabCorp

Documents

Transcript of Triad Business Journal - Planet LabCorp