Labcorp Moves Forward With Planned CRO Spinout of Fortrea

By Alex Keown
April 25, 2023

North Carolina-based Labcorp is moving closer to the planned spinout of its independent clinical development business, Fortrea. The new company is expected to launch in the second half of 2023.

Fortrea will provide Phase I through IV clinical trial management and commercialization solutions to client companies across the globe. The new company will launch with a staff of more than 19,000 people. Drug development makes up about 37% of Labcorp’s overall business, according to company data.

In a quarterly financial conference call April 25, Adam Schechter, chairman and CEO of the RTP-adjacent company, said the company remains on track for the planned spinout to be completed by mid-2023. Although Labcorp’s current contract development business has slowed somewhat due to shortages of active pharmaceutical ingredients, as well as the choice of some current customers to hold off on development plans until the launch of Fortrea is complete, Schechter said they anticipate business will accelerate in the second half of 2023. He noted that the current customers who await the finalization of the spin-out remain in contact with Labcorp.

“Customers have been positive about the transaction and progress,” Schechter said during the call.

When it launches, Fortrea will be helmed by Tom Pike. He will serve as both chairman and chief executive officer of the new company. Pike joined Labcorp at the beginning of 2023. He previously served as CEO of the biopharmaceutical services company Quintiles Transnational Holdings, Inc., which merged with IMS Health, Inc. in 2016 to form Durham-based IQVIA, one of the world’s largest contract research organizations. Schechter touted Pike’s leadership experience and said the new company will be in good hands when it begins to operate. Additional leadership announcements are expected ahead of the launch, Schechter added.

Labcorp first announced plans to spin off a contract development organization in July 2022. Spinning off Fortrea into a separate company is expected to provide Labcorp with strategic flexibility and operational focus to pursue specific market opportunities and better meet customer needs. Additionally, the company said spinning out Fortrea will provide new capital allocation strategies that will enable it to drive innovation and growth.

Although it will operate as a separate entity, Fortrea will retain access to Labcorp’s vast health and clinical data set. This will allow the new company to offer “enhanced trial execution and a differentiated value proposition.”

At the time the spin-off was announced in July 2022, company data showed Labcorp’s clinical development business generated $3 billion in revenue over the previous year. From 2019 to mid-2022, the business saw an 8% growth. That trajectory is expected to continue to increase over the next few years, the company said.

The company said the Fortrea was a reaction to the needs of its drug development partners. The new company will provide Phase I-IV clinical trial management services. Additionally, Fortrea will also offer regulatory guidance, patient access solutions and market access consulting.