Medtox's toxicology offerings contribute to LabCorp acquisition, as contract manufacturing shrinks

Thanks to its strong laboratory offerings and financial standing, CMO and lab service provider Medtox Scientific ($MTOX) has been acquired by LabCorp ($LH) for $241 million. With Medtox at its disposal, the diagnostic giant LabCorp hopes to strengthen its own work in providing toxicology services.

"This transaction highlights the fundamental value of the Medtox brand, the talent and expertise of our team and the quality of our products and testing services," said Medtox CEO and Chairman Dick Braun in a statement. "As part of LabCorp with its substantial resources and infrastructure, we expect to accelerate Medtox's profitable growth and provide a stable and sustainable environment for our employees and clients."

The Medtox acquisition bucks a recent trend of diminished toxicology demand among contract organizations. Bioanalytical Systems ($BASI), Covance ($CVD) and Charles River Laboratories ($CRL) admitted in recent financial reports that demand has dwindled, so much so that Covance decided to shutter its Chandler, AZ, laboratory. Whereas those CROs experienced losses on that end recently, Medtox has seen revenue increase in its laboratory services branch every year since 2009, according to its 2011 annual report. It generated more than $108 million in revenue in 2011.

Given that Medtox is primarily a forensic and clinical laboratory, its acquisition by LabCorp, which focuses on diagnostics and genomic testing, is a good fit. But as Medtox grows on that end, its contract manufacturing arm is shrinking, as the company announced in its annual report that it is "phasing-out" that branch.

- get the deal announcement
- see FierceMedicalDevices' take
- read Medtox's annual report (PDF)

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