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LabCorp (LH) Provides Update on Planned Spinoff of Fortrea

Laboratory Corporation of America Holdings or LabCorp LH recently provided an update on its decision to divest its Clinical Development business announced last year.

LabCorp, in July 2022, stated that a new independent and publicly-traded company would be formed by the planned spin-off of its Clinical Development business and will be named Fortrea. Per the update, Fortrea’s inaugural Investor Day was planned for Jun 6 in New York City.

Following the completion of the spin-off, Fortrea's common stock will be listed on The Nasdaq Stock Market LLC with the ticker “FTRE." Labcorp common shares will continue to trade on the New York Stock Exchange under the symbol "LH."

According to LabCorp, this planned spin-off is on track and will be completed anytime in mid-2023.

LabCorp’s latest decision to spin off its Clinical Development business remains part of the company’s decision to focus on high-growth businesses.

More on Fortrea

Fortrea, post the completion of the spin-off, will operate as a global contract research organization (CRO) that offers comprehensive drug and medical device development services. With more than 19,000 people, Fortrea will provide Phase I through IV clinical trial management and commercialization solutions to pharmaceutical and biotechnology organizations around the world.

Fortrea, as a leading, pure-play CRO, intends to help customers drive innovation and advance next-generation therapies for patients globally.

In February, LabCorp stated that it aimed to spin off its wholly owned Clinical Development business to LabCorp shareholders through a transaction intended to be tax-free for U.S. federal income tax purposes. The planned spin-off will result in two independent, publicly traded companies.

LabCorp's Recent Strategic Developments

LabCorp is currently focusing more on high-growth opportunity areas such as neurodegenerative, autoimmune and liver disease as well as cell and gene therapy.

In Oncology, another high-growth area, LabCorp continues to expand its capabilities to serve clinicians and drug development customers. In the first quarter, the company partnered with ImmunoGen on an Immunohistochemistry sponsored testing program to increase access for patients with ovarian cancer. LabCorp added HER2 low reporting to the IHC test for breast cancer. This test is the only FDA-approved companion diagnostic of HER2 low status for patients with metastatic breast cancer, impacting patient eligibility for treatments and therapies that can improve outcomes.

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During the first quarter of 2023, LabCorp also entered into a strategic collaboration with VieCure to provide clinicians greater access to precision oncology decision support. Moreover, the company continues to expand its digital health platform LabCorp OnDemand with the launch of three new tests in the first quarter, including a PSA prostate cancer screening test, a hepatitis B immunity test and a fatigue test for people with chronic fatigue systems, including post-COVID fatigue.

In February 2023, LabCorp expanded its Ovia app, which allows women to track menopause symptoms and access valuable resources and support to address the transition to menopause/perimenopause.

In 2022, the company launched a liquid biopsy test called LabCorp Plasma Focus. This test is used to match cancer patients with FDA-approved therapies using the patient's circulating tumor DNA taken from a blood draw. This is the first new product after Labcorp's acquisition of Personal Genome Diagnostics in 2022.

Share Price Performance

Over the past year, LabCorp has underperformed its industry. Shares of LabCorp have declined 11.3% against the industry’s 6.6% rise.

Zacks Rank and Key Picks

The stock carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Zimmer Biomet ZBH, Penumbra PEN and Hologic, Inc. HOLX.

Zimmer Biomet has an earnings yield of 5.71% compared to the industry’s -2.36%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have risen 10.8% against the industry’s 30% decline in the past year.

ZBH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have risen 129.4% compared with the industry’s 2.6% increase over the past year.

PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.

Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.92% compared to the industry’s -7%. Shares of HOLX have risen 4.5% compared with the industry’s 2.6% growth over the past year.

Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.

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