Dive Brief:
- Labcorp has completed its takeover of accredited specialty laboratory Millennium Health, the company said last week.
- The takeover, which Labcorp struck last month, is worth $245 million upfront plus up to $130 million in milestone payments.
- Labcorp bought Millennium to strengthen its toxicology capabilities and expand its geographic footprint.
Dive Insight:
Millennium offers urine- and oral-fluid-based tests for prescription, over-the-counter and illicit drugs. Labcorp already provides drug testing to help physicians monitor patients who are prescribed controlled substances, have a substance use disorder or are exposed to drugs unintentionally.
CEO Adam Schechter discussed Labcorp’s drug testing unit on an earnings call late last month, telling investors that “we do very well in that business.” Buying Millennium increases Labcorp’s presence in parts of the country where it previously lacked a strong footprint.
“It’s a business we know how to run, it’s a business we’ve been involved in for many years and it just expands our geographic footprint and enables us to be more competitive, improve access to parts of the country that we don’t have as much access to as of today,” Schechter said.
Labcorp did not disclose the financial terms of the takeover when it first announced the agreement. However, a subsequent financial regulatory filing revealed the size of the upfront fee, which Labcorp paid in cash, and potential payments tied to the outcome of “specified future events.”
The Millennium takeover was one of four deals Labcorp struck in September and October. Over those months, the company unveiled deals to buy MLM Medical Labs, laboratory testing businesses from Opko Health subsidiary BioReference Health and Myriad Genetics’ prenatal health testing business.
Asked by an analyst about the spate of takeovers, Schechter said, “You can't control the exact timing of deals, but when the pipeline is strong, the deals will come.” Labcorp has other deals in the pipeline, which remains strong, Schechter said. The CEO cited the Protecting Access to Medicare Act as a driver of deal opportunities.
“It ... increases the pipeline for business development,” Schechter said. “I think smaller hospital laboratories, regional/local laboratories, they're going to struggle a lot with PAMA, and it really does cause them to rethink about their business.”
