Labcorp, a leading contract research organization, has revised its annual revenue growth forecast for its contract research unit, citing a prolonged funding crunch affecting its early-stage drug development clients. The company’s CEO, Adam Schechter, highlighted the challenges faced by the unit during a call with analysts, stating that the timing of study starts has been delayed, impacting expected revenue growth.
This news has caused Labcorp’s shares to dip by 5.5% in afternoon trading, despite the company exceeding third-quarter earnings expectations and raising its annual profit forecast. Analysts, such as Michael Cherny from Leerink Partners, believe that while the weakness in early-stage development is concerning, it may not have a significant impact on the company’s overall profitability.
Labcorp now expects its contract research unit to grow by 5.7% to 7.1% this year, down from its previous range of 6.1% to 7.5%. Additionally, early-stage revenue for 2025 is projected to grow at a lower rate than previously estimated. To address weaker demand in this area, Labcorp is taking action by divesting or restructuring approximately $50 million in annual revenue through site consolidation.
The company has also adjusted its full-year revenue growth forecast to be in the range of 7.4% to 8%, down from the previous estimate of 7.5% to 8.6%. This adjustment is attributed to a stronger dollar and the timing of certain acquisitions. Labcorp expects its adjusted profit for 2025 to be between $16.15 and $16.50 per share, an increase from the previous range of $16.05 to $16.50 per share.
In the third quarter ended September 30, Labcorp reported adjusted earnings of $4.18 per share, surpassing analysts’ consensus estimate of $4.13. Despite the challenges faced by its contract research unit, Labcorp remains optimistic about its future performance and is taking proactive steps to navigate the current funding environment.
This article was reported by Sahil Pandey and Puyaan Singh in Bengaluru and edited by Alan Barona. Stay tuned for more updates on Labcorp’s financial performance and strategic initiatives.
