Dive Brief:
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Labcorp struck a deal Thursday to acquire clinical diagnostics, reproductive and women’s health testing assets from Bioreference Health, a subsidiary of Opko Health, for $237.5 million. Bioreference is retaining nationwide oncology and urology diagnostic services and all of its operations in New York and New Jersey.
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The acquisition will give Labcorp control of parts of Bioreference, a loss-making Opko unit that laid off 252 people last year as part of a push to return to profitability in the next few years.
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Labcorp has identified women’s health as one of four high-growth areas for its business.
Dive Insight:
Labcorp has established a “robust pipeline” of acquisition opportunities, leading it to recently increase its expectations for inorganic growth. While Bioreference will retain certain operations in New York and New Jersey, Labcorp is acquiring patient service centers and certain customer contracts and operating assets related to Bioreference’s reproductive and women’s health business.
The acquired assets generate about $100 million in annual revenue, according to the announcement.
“Today’s announcement appears to align well with [Labcorp’s] broader acquisition strategy of focusing on higher-growth testing areas as well as getting more involved in reproductive and women’s health. [Opko] disclosures further highlight that BioReference focuses primarily on larger metropolitan areas across the U.S.,” Evercore ISI analysts wrote in a note to investors.
Labcorp expanded its women’s health business by acquiring Ovia Health in 2021. On an earnings call in February, Labcorp CEO Adam Schechter pointed to a focus on women’s health and other higher-growth areas when an analyst asked why diagnostics earnings growth had outpaced the broader market.
Opko bought Bioreference for almost $1.5 billion in 2015, giving it control of the third-largest full service clinical laboratory in the U.S. The plan was to use Bioreference’s infrastructure to grow sales of Opko’s prostate cancer risk test, 4Kscore. However, Bioreference became a drag on the broader business as demand for COVID-19 testing fell, leading Opko to make cuts and scale back investments in the unit.
Bioreference narrowed its operating loss sequentially in the fourth quarter of 2023, reflecting efforts to cut spending and focus on opportunities in higher-value specialty segments such as oncology, women’s health and in urology. Opko president Elias Zerhouni told investors the goal was to “return this segment to profitability in the next few years” on an earnings call in February.
Opko CEO Phil Frost fielded a question about the potential to sell the diagnostic business on the call.
“At a particular point in time, if one approach seems advisable, we’ll certainly consider it seriously. I don’t want to be more specific than that right now,” Frost said. “But it’s clear that we have an asset on our books that is, at the moment, losing money, although we’re very optimistic about turning that around that has inherent value as an asset.”
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