CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Labcorp demerger of clinical development business: LH spin-off date and details in full

By Joyanta Acharjee

15:06, 24 August 2022

Photo of a pipette in use at a medical lab
Life sciences firm Labcorp (LH) demerger set for second half of this year – Photo: Shutterstock

A North American life sciences company is splitting part of its business into a separate listed company, in hopes of unlocking shareholder value as it focuses on core operations.

Tracing its origins back to 1905, Laboratory Corporation of America (Labcorp) is a life sciences company with over 75,000 employees, providing diagnostic and other services to clients in more than 100 countries.

Slide showing Labcorp at-a-glanceLabcorp

In 2021, Labcorp reported revenues of $16.1bn (£13.7bn, €16.2bn). It was added to the S&P 500 in 2004.

Spin-off

Slide showing Labcorp's proposed demergerLabcorp

Late last month the company announced plans to spin off its clinical development operations into a stock exchange-listed entity, with Labcorp retaining its core lab testing business.

The spin-off – intended to qualify as a tax-free transaction for US federal income tax purposes – is expected to be completed in the second half of the year, subject to regulatory approval.

Slide showing Labcorp's demerger rationale Labcorp

“Our shareholders will be able to participate in the upside potential of two market-leading businesses in the global healthcare sector, each of which will be well-capitalized and positioned to generate sustainable growth with strong free cash flows and attractive returns,” Labcorp chairman and CEO Adam Schechter said in a press release.

“Our customers will continue to have access to our full range of capabilities with the same quality and seamless delivery of services they have come to expect from our teams.”

What is your sentiment on US500?

5261.2
Bullish
or
Bearish
Vote to see Traders sentiment!

Activist pressure

Labcorp said its management team and board continued to evaluate all avenues to further enhance stakeholder value after its decision to start paying a dividend and speed up its stock repurchase programme last year.

The proposed transaction also follows pressure from activist investor Jana Partners, which took a $192m stake in Labcorp last year and had been pushing for corporate change including a spin-out of non-core business operations.

Adam Schechter will continue to lead Labcorp as chairman and CEO while the executive leadership and name of the spun-out Clinical Development business will be determined and announced in the future.

NVDA

1,141.05 Price
+0.030% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.60

TSLA

176.06 Price
-0.330% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.22

COIN

236.80 Price
-3.370% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 1.05

AMD

164.95 Price
-3.890% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.20

Labcorp said that the two separate businesses will be positioned to advance innovation to meet distinct customer needs and deliver next generation solutions, while also driving sustainable growth with strong free cash flow and attractive returns for investors.

Clinical Development

Slide showing Labcorp's demerged businessLabcorp

The Clinical Development business, acquired in 2014 when Labcorp bought Covance for $5.6bn, is a global contract research organisation which provides Phase I to IV clinical trial management and technology solutions to pharmaceutical and biotechnology companies.

Pharma companies often reduce drug development costs by contracting-out certain services to contract research organisations.

The business reported total revenues of $3bn for the year to 30 June and is expected to deliver high-single-digit revenue growth in the future, as it had a compound annual growth rate of 8% from the second quarter of 2019 to the second quarter of 2022.

Q2 earnings

At the same time as the proposed spin-off, Labcorp reported second-quarter adjusted earnings of $4.96 on revenues which fell 3.7% to $3.7bn.

Analysts had been expecting adjusted earnings of $4.70 on revenue of $3.75bn, according to figures widely available on financial news sites.

Labcorp's future earnings guidanceLabcorp

Looking ahead, Labcorp said it expects full-year earnings per share in the range of $19.00 to $21.25 compared to its prior guidance of $18.25 to $21.00.

Investors will get an update on the business when Labcorp reports third-quarter earnings in October.

 

Markets in this article

US500
US 500
5261.2 USD
-44 -0.830%

Related topics

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 610,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading