Biotech Values

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NEO: LabCorp to buy Covance to enter clinical trials business

(Reuters) - Laboratory Corp of America Holdings , a major provider of healthcare diagnostic services, said it would buy Covance Inc for about $6.1 billion in cash and stock to expand into the contract clinical trial business.

LabCorp and larger rival Quest Diagnostics Inc have been under pressure due to cuts in reimbursement rates for certain diagnostic tests and fewer tests being ordered.

"For LabCorp, the last few years have been challenging with regards to volume and price perspective," Evercore ISI analyst Michael Cherny said. "And so to diversify away to a more pharma-related customer base will help mitigate some of those risks in the long term."

NEO has/had a deal to provide CVD with genetics testing services for clinical trials. During the last CC (last week), mgmt reported that they expected to start accruing revenue from this deal in the next quarter. It remains to be seen if there will be anything left from this deal after the acquisition has been completed, but I'm not optimistic. That said, the premium that Labcorp is paying indicates that the value of this business remains high and further, nixing this revenue stream does not impact NEO's continued 30% YOY growth in clinical services.

http://news.yahoo.com/labcorp-buy-covance-6-l-billion-112210379--finance.html