LabCorp's profits slide 8.9% amid costly restructuring

LabCorp CEO David King

LabCorp ($LH) is reshaping its business to stay profitable, and while the diagnostics giant eked out revenue growth in the first quarter, a spike in costs pulled net profit down 8.9%.

The North Carolina company booked $1.4 billion in sales on the quarter, a 1.2% increase over the same period last year, but profits slipped to $147.2 million thanks to costs related to LabCorp's ongoing restructuring. The company said it spent $7.6 million on layoffs and $1.8 million on facility closures in Q1, all part of its effort to slim down in the face of declining testing demand. 

Testing volume increased just 1.1% on the quarter, LabCorp said, but the company expects its $242.2 million acquisition of Medtox, which closed last year, to push that number up in the future.

Still, LabCorp is projecting a fairly staid 2013. The company is counting on Medicare reimbursement cuts to drive down testing volume, making it difficult to grow revenue beyond 2% to 3% on the year. But the company is being proactive through CEO David King's "5-pillar strategy," which involves cutting costs and investing in high-growth spaces that can balance out the slump in testing revenue.

So far, that means LabCorp is upping its commitment to diagnostic development and focusing on its clinical trials business. In January, LabCorp signed a companion diagnostics deal with Verastem ($VSTM), agreeing to validate biomarkers and develop accompanying tests for the biotech's in-development mesothelioma treatment. Early this month, LabCorp nailed down a contract research deal with Bristol-Myers Squibb ($BMY), a 5-year partnership to help the drugmaker develop its pipeline treatments.

- read LabCorp's full results