Dive Brief:
- Labcorp has been selected as the winning bidder in the bankruptcy court-supervised sale of medical genetics company Invitae.
- The laboratory services giant will pay $239 million in cash to acquire most of Invitae’s assets, Invitae said in a statement late Wednesday.
- Labcorp is being aggressive in its M&A strategy, said William Blair analyst Andrew Brackmann. The acquisition comes shortly after Labcorp announced in March it would buy Bioreference Health’s laboratory testing businesses focused on clinical diagnostics and reproductive and women's health for $237.5 million.
Dive Insight:
Labcorp said the Invitae acquisition will further expand the company’s test offerings. “This transaction will advance our strategy to launch and scale specialty testing in areas such as oncology and rare diseases,” Labcorp said in its first-quarter earnings release on Thursday.
The company expects the deal to generate about $275 million to $300 million in annual revenue upon completion.
San Francisco-based Invitae filed for Chapter 11 in February, after struggling to strengthen its balance sheet. Before seeking bankruptcy protection, Invitae sold its reproductive health business to Natera and reduced its workforce by more than 1,200 employees. Invitae had about $535 million in assets and about $1.62 billion in debts as of Sept. 30.
William Blair’s Brackmann said Invitae could be a “compelling add” to Labcorp’s portfolio if the outward flow of cash can be stemmed. But Brackmann does not expect the Invitae and Bioreference deals to accelerate Labcorp’s segment revenue growth by more than one percentage point over the coming years.
“Adding scale and solutions for the long term is critical in this evolving landscape, and these acquisitions could certainly open new customer doors for the company,” the analyst wrote in a note to clients Thursday.
A court hearing to approve the Invitae sale is scheduled for May 6, and the transaction is subject to customary regulatory approvals and closing conditions. Labcorp and Invitae expect to complete the sale process in the third quarter.
Labcorp said it closed three other purchases in the quarter, scooping up outreach laboratory businesses from Providence in California and Baystate Health in Massachusetts and acquiring a regional lab in California.
In 2023, Labcorp completed the spinoff of Fortrea, which offers independent clinical trial management for pharma and biotech companies.
Labcorp rival Quest Diagnostics is similarly focused on buying hospital outreach and smaller, independent labs to drive growth. On an earnings call Tuesday, CEO Jim Davis said the company’s M&A pipeline remains robust, noting that hospitals continue to re-evaluate their lab strategies as they face both staffing and cost challenges.
