LabCorp target INC Research posts strong Q1, 175 posts axed

Wall Street

INC Research ($INCR) booked strong growth in the first quarter as rumors of the next big purchase for LabCorp swirl. But the shine was taken off INC after it announced a staff cull.

Net service revenue for Q1 jumped 17.7% to $249 million, compared to last year, with this growth primarily driven by a particularly strong showing in the central nervous system, oncology and other complex therapeutic areas.

The company credited its strong backlog and an 18.3% increase in new business awards during the quarter for the increase. Income from operations for the three months also nudged up by 0.4% to $32.5 million. The company’s results exceeded Wall Street’s expectations

But the CRO also announced that it had axed 175 people worldwide--nearly 3% of its employees--as part of a broader realignment of its workforce, including 30 from its Raleigh HQ.

But it is however still planning to add to its employee list this year, and in fact took on around 200 people during the first quarter. During a conference call with analysts, INC disclosed that it took a $5.6 million restructuring charge to cover employee severance.

INC is also said to be in the crosshairs of major acquirer LabCorp, which recently bought the NJ-headquartered CRO Covance in a deal worth just over $6 billion.

Wells Fargo Securities analyst Gary Lieberman also noted that INC “brings certain capabilities” that LabCorp’s Covance unit lacks and that a deal “would make strategic sense.” Neither companies have commented on the rumors, which originated last month from “people familiar with matter” speaking to Bloomberg.

Looking past the layoffs and takeovers speculation, CEO Jamie Macdonald said: “INC is off to an excellent start in 2016 with our first quarter results driven by robust awards and a strong book-to-bill ratio.

“We continue to strengthen our position as an innovative clinical development partner to our customers and remain focused on our goal to make INC Research the CRO of Choice for all of our stakeholders.”

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