LabCorp seals its $6B deal for Covance

One of the world's largest CROs is no longer an independent entity as Covance has folded into testing giant LabCorp ($LH), closing a $6 billion deal and altering the industry landscape.

LabCorp CEO David King

LabCorp, a leader in diagnostic tests, says it's building a company like no other in life sciences, merging its own testing prowess with Covance's share of the drug development market to create an outfit that can support a candidate therapy from its preclinical inception to well past its market debut.

Through decades of running clinical trials and diagnostic tests, the two companies have amassed longitudinal data on millions of patients, LabCorp says, and their merger will help clients of all stripes make more informed decisions and pave the way for more cost-effective healthcare, according to the company.

"Our complementary services and capabilities will enable us to pursue multiple strategic opportunities in both the clinical laboratory and drug development businesses," LabCorp CEO David King said in a statement. "... I have worked closely with the Covance team since November and am impressed with their talents and scientific expertise. Combined with the enormously talented people of LabCorp, we will employ our capabilities to enhance drug development, diagnostic services and the delivery of healthcare to better address the system's demand for improved outcomes at lower costs."

Covance CEO Joe Herring

LabCorp is also bringing in a growing giant: Last year, Covance banked $2.5 billion in sales, a nearly 5% rise over 2013.

The combined company's headquarters are in Burlington, NC, but Covance will remain in operation under its own name in Princeton, NJ, with CEO Joe Herring at the helm.

The deal is part of a continuing wave of consolidation in the CRO space, which is dominated by an increasingly smaller number of big players. Over the past year, industry giants including Quintiles ($Q), PRA and Charles River Laboratories ($CRL) have all bought out rivals in hopes of broadening their platforms and securing a larger slice of the growing market for outsourced drug development.

And it's a good time to be among the world's largest CROs: Big Pharma is finally getting back to spending big on R&D after some lean years post-downturn, and biotech is enjoying a protracted bit of bullishness that has lined pockets around the industry.

- read the announcement