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LabCorp Q1 Revenues Increase 30 Percent Driven by Covance Contribution

NEW YORK (GenomeWeb) – Laboratory Corporation of America today reported first quarter revenues of $2.30 billion, an increase of 30 percent year over year from $1.77 billion, driven by its acquisition of Covance.

The firm's revenues exceeded the average Wall Street estimate of $2.19 billion.

LabCorp acquired contract research firm Covance in Q4 2014 for about $6.1 billion in cash and stock. That acquisition, which closed on Feb. 19, 2015, contributed $687.3 million to LabCorp's net revenues, driving nearly 24 percent growth year over year.

Revenues from LabCorp's diagnostics business in the first quarter were $1.59 billion, a 7 percent increase from $1.48 billion in the first quarter of 2015. The Covance drug development segment brought in $703.1 million in revenues, a nearly 13 percent increase from $624.6 million in the year-ago period.

During the quarter, LabCorp invested $100 million in strategic tuck-in deals largely focused on esoteric testing, such as in anatomic pathology tests for determining cancer treatment strategy.

LabCorp CEO David King highlighted during an earnings call that the firm saw strong revenue growth in the companion diagnostics segment across therapeutic areas, such as oncology, inflammation, and central nervous system disorders. The CDx business is particularly helped by the fact that the combined capabilities of Covance and LabCorp can support customers' needs from discovery to test commercialization, as well as provide additional services, such as reimbursement support.

"Companion diagnostics are growing in importance to our customers to help them secure regulatory approval, reimbursement, and market adoption for their medicines in an increasingly demanding healthcare system," he said. The company is aiming to deliver $100 million in incremental revenues in its CDx business through 2018.

LabCorp reported Q1 net income of $160.2 million, or $1.55 per share, compared to $3.1 million, or $.04 per share, in the first quarter of 2015. The firm said its income included a net gain of $.05 per share on the sale of investment securities from its venture fund. On an adjusted basis, EPS was $2.02 in the first quarter, beating analysts' consensus estimate of $1.96.

The firm's SG&A costs were $411.9 million in the first quarter of 2016 compared to $442.3 million during the same period in 2015. The company also reported $44.3 million in charges for amortization of intangibles and other assets and $19.2 million in restructuring and other charges.

The firm finished the quarter with $696.3 million in cash and cash equivalents.

LabCorp also updated its 2016 guidance and is now projecting net revenue growth of between 8.5 percent and 10.5 percent compared to 2015 net revenue of $8.51 billion. Previously, the firm had said it was expecting a revenue increase of between 7.5 percent and 9.5 percent.

LabCorp is expecting its diagnostics business revenues to grow between 4 percent and 5.5 percent over 2015 pro forma revenues of $6.21 billion; and revenues from its Covance Drug Development business to grow between 6 percent and 9 percent over the prior-year pro forma revenue of $2.63 billion.

The company's FY2016 adjusted EPS estimate is now in a range of between $8.55 and $8.95, instead of the prior guidance of between $8.45 and $8.85.

In Monday morning trade on the New York Stock Exchange, shares of LabCorp were up around 2 percent at $123.77.