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LabCorp (LH) to Expand Nonclinical Development With New Buyout

Laboratory Corporation of America Holdings or LabCorp LH recently entered into a definitive agreement to acquire Toxikon, a contract research organization delivering best-in-class nonclinical testing services. Toxikon, headquartered in Bedford, MA, provides in vivo, in vitro, and analytical testing services for pharmaceutical, biotechnology and medical device companies worldwide. Its Bedford facility is also expandable, giving Labcorp Drug Development the ability to expand its traditional toxicology business.

The transaction is expected to close in the fourth quarter of 2021, subject to fulfillment of customary closing conditions and regulatory approvals, including those required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Specific terms of the transaction were kept under wraps.

Per LabCorp’s management, the Toxikon addition demonstrates the company’s commitment to nonclinical development and expands its capabilities in both drug development and medical device testing. This acquisition bolster’s LabCorp’s full-service drug development and medical device solutions' portfolio from discovery to market approval.

Strategic Significance

Upon completion, the Toxikon acquisition is expected to create a strategic footprint for LabCorp in Boston, MA, allowing it to partner with pharmaceutical and biotechnology clients based in the region, as well as expand its strong nonclinical development portfolio. Toxikon’s strategic location can also allow LabCorp to engage in nonclinical work with large pharmaceutical companies and biotech firms in the region while facilitating entry into medical device investigational device exemption submissions.

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Toxikon is also expected to complement LabCorp’s existing nonclinical medical device efficacy and safety testing, and the related clinical work conducted by the latter’s medical device and diagnostics unit.

Industry Prospects

Per a report published in Grand View Research, the global in vitro toxicology testing market is expected to see a CAGR of 10.7% from 2021 to 2028. Factors such as significant advancements in toxicology science, along with high costs and socio-ethical concerns associated with conventional animal tests are anticipated to fuel market growth. Meanwhile, according to another report published in MarketsandMarkets, the global in vivo toxicology market is projected to see a CAGR of 5.5% during 2020-2025. Growing pharmaceutical R&D activities, innovations in animal models, development of exclusive in vivo toxicology tests and the surge in demand for personalized medicine are among a few factors attributable to driving market growth.

Given the substantial market prospects in vitro and in vivo toxicology testing markets, LabCorp’s recent agreement to acquire Toxikon seems well-timed.

Notable Developments

In November 2021, LabCorp collaborated with the National Kidney Foundation (“NKF”) to promote the NKF Patient Network, the first national registry for chronic kidney disease patients in the United States. This registry is a first-of-its kind national repository that obtains essential data using both self-reporting and electronic health records with patients’ consent. Physicians will have access to more data and insights through the NKF Patient Network, while patients with kidney disease are expected to have improved access to clinical trials.

In October 2021, the company announced the receipt of the FDA’s Emergency Use Authorization for a combined home collection kit that can simultaneously detect COVID-19 and influenza A/B in individuals aged two years and older. The kit will be given at no upfront cost to individuals who meet the clinical guidelines, such as experiencing symptoms, being exposed to someone infected with COVID-19, or those being asked to be tested by a health care provider. The new combined collection kit allows people to test for both flu and COVID-19 in the safety of their homes, avoiding the risk of spreading the virus to others.

Share Price Performance

The Labcorp stock has outperformed its industry over the past year. It has rallied 41.8% compared to the industry’s growth of 21.7%.

Zacks Rank and Key Picks

Currently, Labcorp carries a Zacks Rank #2 (Buy).

A few better-ranked stocks in the broader medical space are GlaxoSmithKline plc GSK, Chemed Corporation CHE and BellRing Brands, Inc. BRBR, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GlaxoSmithKline has a long-term earnings growth rate of 5.8%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 15.3%.

GlaxoSmithKline has underperformed its industry over the past year. GSK has gained 12.1% compared with the industry’s 19.8% rise.

Chemed has a long-term earnings growth rate of 7.7%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering a surprise of 5.6%, on average.

Chemed has outperformed its industry over the past year. CHE has gained 2% against the 37.5% industry decline.

BellRing Brands has a long-term earnings growth rate of 29.1%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 23.2%.

BellRing Brands has outperformed the industry it belongs to in the past year. BRBR has gained 14.5% versus the industry’s 0% growth.

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