NEW YORK — Laboratory Corporation of America said Tuesday that it has entered an agreement with Opko Health subsidiary BioReference Health to acquire its oncology and oncology-related clinical laboratory business for up to $225 million.
The acquisition adds to Labcorp's oncology testing business, which has been a fast-growing segment for the company.
BioReference, meanwhile, continues to shed assets as it chases profitability. The agreement follows a previous sale of assets to Labcorp that was announced in March of last year. In that deal, BioReference sold its US clinical diagnostics and reproductive and women's health testing business outside of New York and New Jersey to Labcorp for $237.5 million.
Following the newly announced deal, BioReference will retain its core clinical testing businesses in New York and New Jersey and its 4Kscore prostate cancer testing business. Together these businesses represented roughly $300 million in revenue in 2024.
"By integrating BioReference Health's oncology and related clinical testing services into our portfolio, we're providing greater access to our world-class services to patients, physicians, and healthcare providers across the country," Mark Schroeder, executive VP and president of diagnostics laboratories and chief operations officer at Labcorp. "This acquisition also aligns with our strategy to lead in oncology and reinforces our commitment to advancing cancer care through innovative and comprehensive laboratory services."
"This transaction with Labcorp represents another important step for Opko Health to further streamline BioReference Health's operations to achieve profitability," Opko Chairman and CEO Phillip Frost said in a statement. "We believe the sale of these oncology diagnostic assets is an important catalyst to unlock additional value."
BioReference expanded its operations and head count significantly during the COVID-19 pandemic, peaking at around 8,000 employees, but has struggled to achieve profitability in the years following the pandemic and has taken a number of actions to streamline its business. By the middle of 2022, it had cut its head count by more than half to around 3,600 employees. By the end of that year, it had trimmed its annualized expenses to roughly $140 million. Also in 2022, it sold its GeneDx molecular diagnostics business to Sema4 for $623 million.
The following year saw more cuts, as BioReference laid off another 252 employees. Then came the March 2024 sale of clinical lab assets to Labcorp, which Opko highlighted as a key step in its move toward profitability.
The "transaction will streamline our laboratory services businesses and support our work to reestablish profitability in the near future," Opko President and Vice Chairman Elias Zerhouni said discussing the sale of those assets on a conference call following release of the company's Q2 2024 financial results in August. He said the deal would allow the company to further reduce its cost structure and focus on high-growth areas like oncology and urology.
During the company's Q4 2024 earnings call two weeks ago, Opko Senior VP and CFO Adam Logal, said that following the close of the Labcorp deal, the firm saw "a pretty good glide path into the first quarter" for BioReference "to achieve breakeven during the quarter and then profitability thereafter."
Additionally, Zerhouni noted during the Q4 call that BioReference's workforce was down to 2,000 and added that "restructuring efforts are ongoing." However, the firm did not suggest that it was considering selling the BioReference oncology business. Rather, Zerhouni said that specialty testing in oncology was an area of focus and that it continued to expand its test menu in this area, particularly in cancer genomics and hereditary cancers. During Q4, the oncology segment finalized nine new hospital reference accounts and posted 5 percent revenue growth year over year, he said.
The oncology assets included in the Labcorp deal generate roughly $85 million to $100 million in annual revenue. The deal, which is anticipated to close in the second half of the year, includes $192.5 million payable at close and up to $32.5 million in an earnout based on performance. Labcorp said it expects the purchase to be accretive in the first year following the close of the deal.