BY Richard Summerfield
A $6.1bn M&A deal which has seen Laboratory Corporation of America Holdings (LabCorp) agree to buy Covance Inc will result in a major new company providing services to physicians, pharmaceutical companies and patients.
The deal will see LabCorp’s current chief executive officer, David King, lead the newly combined company, while Covance’s chairman and chief executive , Joe Herring, will continue to operate Covance as a division of LabCorp.
LabCorp and Covance are headquartered in North Carolina and Princeton respectively.
“As a combined company, we will be well positioned to respond to and benefit from the fundamental forces of change in our business, including payment for outcomes, pharmaceutical outsourcing, global trial support, trends in pharmaceutical R&D spending, personalised medicine, and big data and informatics,” said Mr King.
Mr King believes that the acquisition of Covance will result in cost reductions of around $100m annually within three years of closure, positioning LabCorp as the world’s leading healthcare diagnostics company.
Covance’s Joe Herring is equally sure as to the solidity of the deal. He said “Covance generates more safety and efficacy data for the approval of innovative medicines than any other company in the world, and LabCorp has longitudinal diagnostic data from more than 75 million patients.
“This combination leads the way to more cost-effective healthcare by improving the safety and efficacy of drug therapies, enabling accurate patient diagnostics, and advancing evidence-based medicines which will enable our clients to substantiate the value of their products and services to patients and payors.”
The deal, however, has attracted criticism from some analysts with the apparent incompatibility of the two firm’s businesses being a bone of contention: LabCorp’s core business entails the processing of patient samples for doctors and hospitals while Covance assists drug manufacturers with the running of clinical trials for their new products.
Although still subject to various approvals, the transaction is expected to close in the first quarter of 2015.