Analyst casts doubt on Big Data potential of Covance-LabCorp merger

LabCorp ($LH) closed its $5.7 billion takeover of Covance this week and immediately began talking up the potential for its testing data to turbocharge the CRO's clinical trial business. However, not everyone is convinced the combination will have a big impact on the business or clinical trials.

As LabCorp sees it, the combination of its database of 70 million patient records and Covance's clinical trial IT infrastructure--which was bolstered by heavy investment in 2012 and 2013--will help the CRO overcome the age-old problem of slow patient recruitment. Now, when Covance needs to recruit patients with certain characteristics, it can look for them in LabCorp's database. Having identified the patients, the CRO can then contact them directly--if they have consented--or reach them through their physicians.

The potential to turn the current trawl for patients into a more targeted pursuit is attractive, but analysts expressed skepticism on LabCorp's fourth-quarter call and in notes to investors. Wells Fargo analyst Tim Evans sees three issues with LabCorp's vision, two of which relate to the predominance of results from immunochemistry tests of U.S. patients in its database. With trials globalizing and going after niche patient populations, Evans has doubts about the utility of the data. Finally, Evans notes CROs have historically struggled to cash in on their databases. 

Covance and LabCorp are bullish on the Big Data idea though, which they say has already tipped a deal in their favor. Joe Herring, CEO of LabCorp's Covance Drug Development unit, said the CRO was neck-and-neck with a rival in a race to win the contract for a non-small cell lung cancer precision medicine trial before it brought LabCorp's data to the negotiating table. "We assured the client and said there are over a 1,000 patients in the LabCorp database that fit the inclusion, exclusion and genetic marker for this study," Herring said. The next day, Covance won the $45 million deal. 

- read LabCorp's transcript
- here's Outsourcing-Pharma's take