Laboratory Corporation of America Holdings
) recently expanded its long-term alliance with
Bristol-Myers Squibb Company
) by signing a new five-year agreement. Under this agreement,
Bristol-Myers selected LabCorp Clinical Trials as a preferred
provider for the company's full-service global central laboratory
services and biomarker testing. However, financial terms of the
deal were not disclosed.
LabCorp remains hopeful about this new venture, which will
likely bring further flexibility and integration in laboratory
testing services. Thus, it is likely to support both the
companies' clinical development pipeline. Earlier, LabCorp's
global central lab, biomarker and specialty testing capabilities
supported Bristol-Myers Squibb's several early and late-stage
clinical development programs.
Currently, LabCorp is striving to strengthen its foothold in
the diagnostics space through both organic and inorganic means
and is planning to collaborate with leading companies and
academic institutions to provide a wider portfolio of tests. In
an attempt to diversify its portfolio, earlier in 2012, LabCorp
partnered Ariosa Diagnostics to offer the latter's Harmony
prenatal test, a non-invasive test for the detection of common
fetal trisomies, utilizing cell-free DNA (cfDNA) in maternal
blood. Furthermore, the company has completed the acquisition of
Medtox Scientific, which will likely strengthen LabCorp's
foothold in specialized toxicology testing.
Some of the other acquisitions include Orchid Cellmark, DCL in
Ind., Westcliff Medical Laboratories in Calif., where LabCorp has
a limited presence, and Genzyme Genetics in the area of esoteric
testing and personalized medicine business. The acquisition of
Genzyme Genetics has expanded the company's capabilities in
reproductive, genetic, hematology, oncology and clinical trial,
central laboratory testing.
Despite the near-term challenges from reimbursement issues,
LabCorp is working on portfolio expansion to drive top line. The
company is focusing more on the high-margin esoteric testing
business. The company recorded approximately 40% of total
revenues during the last reported quarter from the genomic,
esoteric and anatomic pathology categories, which is expected to
go up to 45% over the next 3−5 years. The esoteric volume during
the fourth quarter increased 3.5% on the back of decent growth in
specialized endocrinology and coagulation businesses, and
cardiovascular and chronic kidney disease programs.
Given the continuous focus on portfolio expansion, we are
confident about LabCorp garnering higher revenues from
specialized testing, going forward. The stock carries a Zacks
Rank #3 (Hold).
However, other stocks in the medical device sector, carrying a
Zacks Rank #1 (Strong Buy), such as
Medical Action Industries Inc.
) appear impressive.
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