Dive Brief:
- Labcorp has agreed to buy certain laboratory testing businesses from Opko Health subsidiary BioReference Health for $722 million, plus an additional sum of up to $150 million tied to revenue from a prostate cancer blood test. The final purchase price could be adjusted based on closing revenues, the companies said Thursday.
- Labcorp is acquiring businesses focused on clinical and women’s health testing services, urology and diagnostic services provided to correctional institutions. The deal also adds more than 80 patient service centers to Labcorp’s network.
- In addition, the lab services provider is gaining BioReference Health’s 4Kscore test, which has Food and Drug Administration approval to help predict the likelihood of finding aggressive prostate cancer before a biopsy decision.
Dive Insight:
The transaction fits with Labcorp’s strategy of expanding in higher-growth specialty testing, Evercore ISI analysts said in a research note. Labcorp expects to gain about $250 million in revenue in the first year after closing.
Last year, Labcorp acquired BioReference’s oncology testing businesses, paying up to $225 million. That deal added about $85 million to $100 million to Labcorp’s annual revenue.
Evercore ISI analysts said Labcorp can leverage its infrastructure to improve the economics of BioReference’s regional business and use its national commercial reach to broaden adoption of the 4Kscore prostate cancer test. BioReference has historically concentrated on offering lab testing services in New York and New Jersey.
“In our view, women’s health strengthens the specialty offering, while 4Kscore adds a differentiated asset with an opportunity for broader distribution rather than simply more routine testing volume,” the analysts wrote.
William Blair analysts called the 4Kscore test a “particularly compelling asset” with opportunity for broader adoption. The test could help identify patients for further evaluation and avoid unnecessary biopsies, they said.
Opko CEO Phillip Frost said in the announcement that the deal will allow his company to streamline operations and focus resources on its biopharmaceutical business.
The transaction is subject to regulatory approvals, and both companies will continue to run independently with no changes to operations or services until the transaction closes.
