Labcorp to spin off clinical-development business

(Reuters) – Laboratory Corp of America Holdings said on Thursday it would spin off its wholly owned business focused on clinical drug trials, sending its shares up nearly 4%.

The planned spin-off will result in two independent, publicly traded companies – Labcorp and the clinical development business, the company said.

The clinical-development segment was started in 2014 after the $6.1 billion acquisition of Covance Inc.

Contract research organizations, which were hurt after clinical trials were disrupted due to the pandemic, have seen a resurgence in demand as drugmakers and governments invest in newer treatments.

The sector saw several multi-billion dollar deals last year, with medical device maker Thermo Fisher Scientific Inc acquiring contract researcher PPD Inc for $17.4 billion and Icon Plc buying rival PRA Health Sciences in a roughly $12 billion deal.

Labcorp initiated a strategic review last year after investor pressure from Jana Partners, but that ended without a merger or an acquisition as Labcorp offered its shareholders dividend and approved a $2.5 billion buyback program.

Adam Schechter will continue to lead Labcorp as chairman and chief executive officer following the completion of the planned spin-off, which is expected to complete in the second half of 2023.

Shares of Labcorp were up nearly 4% at $258.80 in premarket trading.

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