Labcorp Holdings Inc. · NYSE:LH
Labcorp — Laboratory Corp of America Holdings — Bank of America Merrill Lynch Health Care Conference 2015
32 slides from Labcorp's conference presentation, May 14, 2015
Slide 1: Bank of America Merrill Lynch Health Care Conference
MAY 14, 2015 | LAS VEGAS, NV BANK OF AMERICA MERRILL LYNCH HEALTH CARE CONFERENCE
Slide 2: Forward Looking Statement
1 FORWARD LOOKING STATEMENT Cautionary Statement Regarding Forward Looking Statements This presentation contains forward-looking statements including with respect to estimated 2015 guidance and the impact of various factors on operating results. Each of the forward-looking statements is subject to c
Slide 3: LabCorp Overview
2 • Provides diagnostic, drug development and knowledge services for >70 million patients per year • Leading national clinical laboratory – LabCorp Diagnostics • Leading Contract Research Organization (CRO) – Covance Drug Development • $8.5B revenue in 2014 (pro forma1) • >48,000 employees worldwide
Slide 4: Diversified Revenue Base
3 DIVERSIFIED REVENUE BASE(1) (FY2014 PRO FORMA REVENUE DISTRIBUTION) 30% 30% 23% 12% 3% 2% Pharma & Biotech Managed Care (Fee for Service) Client (2) Medicare & Medicaid Patient Managed Care (Capitated) (1) Revenue presented on a proforma basis that assumes acquisition of Covance closed on January
Slide 5: LabCorp Diagnostics Overview
4 LABCORP DIAGNOSTICS OVERVIEW • Approximately $6B in revenue in 2014 • $60B US Clinical Laboratory market • >36,000 employees worldwide • National network of 37 primary laboratories and 1,750 patient service centers • Offers broad range of 4,500+ clinical, anatomic pathology, genetic and genomic te
Slide 6: LabCorp Diagnostics – Providing a Valuable Service
5 Valuable Service • Small component of total cost influences large percentage of clinical decisions • Screening, early detection, and monitoring reduce downstream costs • Decision support tools guide providers to better patient outcomes LABCORP DIAGNOSTICS – PROVIDING A VALUABLE SERVICE Growth Driv
Slide 7: Covance Drug Development Overview
6 COVANCE DRUG DEVELOPMENT OVERVIEW • >$2.6B in revenue in 2014 • Serves $140 billion global biopharmaceutical R&D market • Only provider of full spectrum of drug development services • Involved in the development of all of the top 50 drugs on the market • #1 in central laboratory / early developmen
Slide 8: Combination Creates the Best End-to-End Partner for Pharmaceutical and Biotech Development
7 Diagnostic development Biomarker discovery & validation Pre- clinical Phase IV On-market care delivery • Post-mkt drug surveillance • Lab services • Monitoring outcomes COMBINATION CREATES THE BEST END-TO-END PARTNER FOR PHARMACEUTICAL AND BIOTECH DEVELOPMENT New/small position Leading position St
Slide 9: LabCorp Will Be the Partner of Choice for Biopharma and Improve the Lives of Patients
8 LABCORP WILL BE THE PARTNER OF CHOICE FOR BIOPHARMA AND IMPROVE THE LIVES OF PATIENTS • Faster, higher quality clinical trials at lower cost • Increased sales during patent lifetime • Expedited commercialization of companion diagnostics • Data analytics reduce safety recalls • Greater access to cl
Slide 10: 2015 and 2016 Priorities
9 2015 AND 2016 PRIORITIES Covance Drug Development Initiatives Fully Deploy Top Three Value Creation Opportunities Integrate Organizations Develop Technology-Enabled Solutions LabCorp Diagnostics Initiatives
Slide 11: Combination Provides Significant New Growth Avenues
10 COMBINATION PROVIDES SIGNIFICANT NEW GROWTH AVENUES Prioritized top 3 opportunities based on materiality, feasibility, and strategic fit Deliver faster clinical trial enrollment 1 Partner of choice to develop and commercialize companion diagnostics 2 Enhance “real-world” trial experience and post
Slide 12: Detail on the Top Three Opportunities
11 DETAIL ON THE TOP THREE OPPORTUNITIES Enhance “real-world” trial experience and post-market surveillance 3 Deliver faster clinical trial enrollment 1 Partner of choice to develop and commercialize companion diagnostics 2 >$150M >$100M >$50M Incremental 2018 Revenue
Slide 13: Top Three Value Creators to Bring to Market in 2016
12 TOP THREE VALUE CREATORS TO BRING TO MARKET IN 2016 Enhance “real-world” trial experience and post-market surveillance 3 Deliver faster clinical trial enrollment 1 Partner of choice to develop and commercialize companion diagnostics 2
Slide 14: Acquisition Allows Us to Identify and Target Patient Populations
13 ACQUISITION ALLOWS US TO IDENTIFY AND TARGET PATIENT POPULATIONS WITH SPECIFIC DISEASE CONDITIONS Before: Direct outreach to cancer center in search for patients Now: Leveraging LabCorp database for (1) patient locations & (2) viable sites 1 2 >1000 patients in Florida with at least 25 viable sit
Slide 15: Top Three Value Creators to Bring to Market in 2016
14 TOP THREE VALUE CREATORS TO BRING TO MARKET IN 2016 Enhance “real-world” trial experience and post-market surveillance 3 Deliver faster clinical trial enrollment 1 Partner of choice to develop and commercialize companion diagnostics 2
Slide 16: Combined Company Will Drive CRO Share Gain for Companion Diagnostics Programs
15 Capabilities Capabilities CDx development enabled by biomarker discovery and validation Market-leading biomarker and early stage trial support Execution on lab-based CDx for clinical validation in trials Late stage trial support linked seamlessly with CDx validation CDx approval and commercializa
Slide 17: Top Three Value Creators to Bring to Market in 2016
16 TOP THREE VALUE CREATORS TO BRING TO MARKET IN 2016 Enhance “real-world” trial experience and post-market surveillance 3 Deliver faster clinical trial enrollment 1 Partner of choice to develop and commercialize companion diagnostics 2
Slide 18: Unmet Needs Addressed by Enhanced Real-World Trial Experience
17 UNMET NEEDS ADDRESSED BY COMBINED COMPANY'S ENHANCED “REAL-WORLD” TRIAL EXPERIENCE AND POST-MARKETING SURVEILLANCE 3 LabCorp patient web portal eliminates scheduling hassle 1,750 LabCorp patient service centers and ~5,000 phlebotomists in physician offices make testing more convenient Combined co
Slide 19: Combined Company Retains Financial Strength
18 COMBINED COMPANY RETAINS FINANCIAL STRENGTH Financial Review and 2015 Financial Guidance
Slide 20: Consistent, Long-Term Revenue Growth
19 CONSISTENT, LONG-TERM REVENUE(1) GROWTH (DOLLARS IN BILLIONS) $3.591 $4.068 $4.513 $4.695 $5.004 $5.542 $5.671 $5.808 $6.012 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2015 Guidance: 39%-42% Growth (1) 2006-2014 revenues excludes Covance r
Slide 21: Consistent, Long-Term EPS Growth
20 CONSISTENT, LONG-TERM EPS(1)(2) GROWTH (ADJUSTED EXCLUDING AMORTIZATION) $3.53 $4.45 $4.91 $5.24 $5.98 $6.37 $6.82 $6.80 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e $6.95 2015 Adjusted EPS Guidance: $7.55 - $7.90 (1) EPS, as presented,
Slide 22: Combined Company Retains Financial Strength – 1Q15 Results
21 COMBINED COMPANY RETAINS FINANCIAL STRENGTH – 1Q15 RESULTS (1) Adjusted Operating Income and Adjusted EPS exclude amortization, restructuring and special items (2) See appendix for reconciliation of non-GAAP financial measures The following consolidated first quarter results include Covance as of
Slide 23: 2015 Financial Guidance
22 2015 FINANCIAL GUIDANCE (ISSUED APRIL 27, 2015; ASSUMES FX RATES AS OF MARCH 31, 2015) Total net revenue growth: Approximately 39% - 42%(1) LabCorp Diagnostics net revenue growth: Approximately 3% - 5%(2) Covance Drug Dev. net revenue growth: Approximately 0% - 2%(3) Adjusted EPS: $7.55 - $7.90 O
Slide 24: The LabCorp of the Future: Improving Health, Improving Lives
23 THE LABCORP OF THE FUTURE: IMPROVING HEALTH, IMPROVING LIVES LEADING PROVIDER OF DRUG DEVELOPMENT SOLUTIONS USE DATA TO CHANGE DECISION MAKING TECHNOLOGY- ENABLED SOLUTIONS SCALABLE PLATFORMS AND APPLICATIONS FOR CUSTOMERS • World Class Diagnostics • Changing the Way Care is Provided • Bringing I
Slide 25: Appendix
24 Appendix
Slide 26: Opportunity to Benefit from CRO Market Expansion and Increase in Share
25 COMBINED COMPANY HAS THE OPPORTUNITY TO BENEFIT FROM CRO MARKET EXPANSION AND AN INCREASE IN SHARE 1 2014 2016 2018 Biopharma spend on Phase II-III trials1 $30B $32B $34B CRO served Phase II-III trial spend (% served by CROs)1 $12B (40%) $13B (42%) $15B (44%) Combined company revenue for Phase II
Slide 27: Companion Diagnostics Capabilities Add >$100M Revenue by 2018
26 COMPANION DIAGNOSTICS CAPABILITIES ADD >$100M REVENUE BY 2018 1. Based on estimated biomarker testing revenue of $200K per compound and total historical downstream testing revenue equal to 8.6x biomarker testing revenue 2. Covance estimates for currently obtainable projects with CDx development p
Slide 28: Opportunity to Grow Share in Phase IV Trials and Post-Market Surveillance
27 COMBINED COMPANY HAS OPPORTUNITY TO GROW SHARE IN PHASE IV TRIALS AND POST-MARKET SURVEILLANCE 3 2014 2016 2018 Biopharma Phase IV and post-market spend1 $12B $13B $14B CRO served Phase IV / post- market spend (% served by CROs) 1 $5B (38%) $5B (39%) $6B (40%) Combined company revenue for Phase I
Slide 29: 2014 Pro Forma Segment Net Revenue
28 (1) Adjustments include the removal of LabCorp’s legacy clinical trial services business and the addition of Covance’s nutritional chemistry and food safety business. (2) Adjustments include the addition of LabCorp’s legacy clinical trial services business and the removal of Covance’s nutritional
Slide 30: 2014 Pro Forma Net Revenue by Geography
29 2014 PRO FORMA NET REVENUE BY GEOGRAPHY (DOLLARS IN MILLIONS) FY14 U.S. Net Revenue $6,786 % of total 79.5% ROW Net Revenue $1,747 % of total 20.5% Total Net Revenue $8,533 Pro forma results assume that the acquisition of Covance closed on January 1, 2014
Slide 31: Reconciliation of Non-GAAP Financial Measures
30 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES The following consolidated results include Covance as of February 19, 2015; prior to February 19, 2015, all consolidated results exclude Covance Adjusted Operating Income 2015 2014 Operating Income 130.2$ 203.3$ Acquisition-related costs 113.4 - Restr
Slide 32: Reconciliation of Non-GAAP Financial Measures - Footnotes
31 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - FOOTNOTES 1) During the first quarter of 2015, the Company recorded net restructuring and other special charges of $19.3 million. The charges included $3.2 million in severance and other personnel costs along with $1.0 million in costs associated wi