Labcorp Holdings Inc. · NYSE:LH
Labcorp — Laboratory Corp of America Holdings — Barclays Global Healthcare Conference 2015
28 slides from Labcorp's conference presentation, Mar 10, 2015
Slide 1: Barclays Global Healthcare Conference, March 10, 2015
MARCH 10, 2015 | MIAMI, FL BARCLAYS GLOBAL HEALTHCARE 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: Introduction to LabCorp
2 INTRODUCTION TO LABCORP • >$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 tests • Processes ~5
Slide 4: Creating the World's Leading Healthcare Diagnostics Company: Acquisition of Covance
3 CREATING THE WORLD'S LEADING HEALTHCARE DIAGNOSTICS COMPANY Acquisition of Covance Growth: New value for pharma, payers, providers, and consumers • Consideration: $75.76 in cash and 0.2686 LabCorp shares per Covance share • Valuation: Approximately $5.7 billion, net of cash acquired • Financing: A
Slide 5: Introduction to Covance
4 INTRODUCTION TO COVANCE • >$2.5B in revenue last year • Serves $140 billion global pharmaceutical 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 / preclinical services • ~$90
Slide 6: Transformative Combination: Creating the World's Leading Healthcare Diagnostics Company
5 TRANSFORMATIVE COMBINATION: CREATING THE WORLD'S LEADING HEALTHCARE DIAGNOSTICS COMPANY Powerful combination of personnel, assets, and capabilities Strong management teams Commercial infrastructure and global footprint Physician and consumer access and connectivity Scientific, bioinformatics and a
Slide 7: Combination Creates the Best End-to-End Partner for Pharmaceutical and Biotech Development
6 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 8: LabCorp Will Be the Partner of Choice for Biopharma and Improve the Lives of Patients
7 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 9: 2015 and 2016 Priorities
8 2015 AND 2016 PRIORITIES Deliver synergies ($100M annual cost reduction by 2017) Fully deploy top three value creation opportunities Continue core business initiatives (Business process re-engineering, BeaconLBS, Enlighten Health) Capitalize on the enhanced capabilities of our combined lab organiz
Slide 10: Combination Provides Significant New Growth Avenues
9 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 Phase IV trial experience and post-mark
Slide 11: Detail on the Top Three Opportunities
10 DETAIL ON THE TOP THREE OPPORTUNITIES Enhance Phase IV 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 12: Top Three Value Creators to Bring to Market in 2016
11 TOP THREE VALUE CREATORS TO BRING TO MARKET IN 2016 Enhance Phase IV trial experience and post-market surveillance 3 Deliver faster clinical trial enrollment 1 Partner of choice to develop and commercialize companion diagnostics 2
Slide 13: Acquisition Allows Us to Identify and Target Patient Populations
12 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 14: Combined Company Has Opportunity to Benefit from CRO Market Expansion
13 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 15: Top Three Value Creators to Bring to Market in 2016
14 TOP THREE VALUE CREATORS TO BRING TO MARKET IN 2016 Enhance Phase IV 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 Drug Trials Requiring CDx 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: Companion Diagnostics Capabilities Add >$100M Revenue by 2018
16 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 18: Top Three Value Creators to Bring to Market in 2016
17 TOP THREE VALUE CREATORS TO BRING TO MARKET IN 2016 Enhance Phase IV trial experience and post-market surveillance 3 Deliver faster clinical trial enrollment 1 Partner of choice to develop and commercialize companion diagnostics 2
Slide 19: Unmet Needs Addressed by Enhanced Phase IV Patient Experience and Post-Market Surveillance
18 UNMET NEEDS ADDRESSED BY COMBINED COMPANY'S ENHANCED PHASE IV PATIENT EXPERIENCE AND POST-MARKET 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 company
Slide 20: Opportunity to Grow Share in Phase IV Trials and Post-Market Surveillance
19 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 21: Combined Company Retains Financial Strength
20 COMBINED COMPANY RETAINS FINANCIAL STRENGTH 2014 Financial Review and 2015 Financial Guidance
Slide 22: Combined Company Retains Financial Strength: No Fundamental Shift in Capital Allocation
21 COMBINED COMPANY RETAINS FINANCIAL STRENGTH: NO FUNDAMENTAL SHIFT IN LONG-TERM CAPITAL ALLOCATION STRATEGY • Accretive to Adjusted EPS before synergies in Year 1; Earns cost of capital by Year 4 • Commitment to investment grade balance sheet • Near-Term Free Cash Flow used to pay down debt and in
Slide 23: 2015 Financial Guidance
22 2015 FINANCIAL GUIDANCE • Total revenue growth: Approximately 40% - 44%(1) • Clinical lab business revenue growth: Approximately 3% - 5% • Covance business revenue growth: Approximately 4% - 6%(2) • Adjusted EPS: $7.35 - $7.70 • Operating cash flow: $1,075 Million - $1,100 Million(3) • Capital ex
Slide 24: Combination Creates the World's Leading Healthcare Diagnostics Company
23 COMBINATION CREATES THE WORLD'S LEADING HEALTHCARE DIAGNOSTICS COMPANY • Improve people's health • Drive profitable growth • Create shareholder value LabCorp • Faster, higher quality clinical trials at lower cost • Increased sales during patent lifetime • Expedited commercialization of companion
Slide 25: Appendix
24 Appendix
Slide 26: Reconciliation of Non-GAAP Financial Measures: LabCorp Adjusted Operating Income
25 (In millions, except per share data) Year Ended Adjusted Operating Income December 31, 2014 Operating income 910.4$ Restructuring and other special charges (1) 17.8 Consulting fees and CFO transition expenses (1) 23.4 Adjusted operating income 951.6$ RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Slide 27: Reconciliation of Non-GAAP Financial Measures: LabCorp Adjusted EPS
26 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES LabCorp Adjusted EPS (1) The after tax impact of the restructuring and other special charges decreased net earnings for the year ended December 31, 2014, by $29.1 million and diluted earnings per share by $0.34 ($29.1 million divided by 86.4 million s
Slide 28: Reconciliation of Non-GAAP Financial Measures: Covance Adjusted Operating Income
27 (1) During 2014, Covance incurred restructuring and transaction related expenses of $17.1 million. The charges included $7.6 million in restructuring costs, $5.5 million in other cost reduction actions and $4.0 million in transaction related expenses. In addition to these restructuring charges an
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