LabCorp 2011 Annual Report Download - page 4

2
Deploy฀capital฀rst฀to฀acquisitions฀that฀
enhance our footprint and test menu,
then to repurchase shares
No฀acquisition฀in฀our฀history฀has฀been฀more฀important฀than฀
Genzyme฀Genetics2, which significantly expanded our leadership
in฀esoteric฀testing฀and฀personalized฀medicine.฀The฀transaction,฀
closed฀in฀December฀2010,฀enabled฀us฀to฀reach฀our฀goal฀of฀deriving฀
40 percent of revenue from esoteric testing — a goal that we have
since elevated to 45 percent within the next three to five years.
The฀acquisition฀of฀Genzyme฀Genetics฀created฀the฀premier฀genetics฀
and oncology business in our industry. Our complementary
services introduce significant customer benefits in areas such
as prenatal genetic tests, which are performed during pregnancy
to screen for birth defects. With our businesses combined,
our customers have broad access to novel testing technologies
such฀as฀the฀SMA฀molecular฀genetics฀assay฀and฀the฀entire฀Reveal®
family฀of฀SNP฀Microarrays.฀As฀market฀demand฀for฀prenatal฀
genetics increases, LabCorp will be well positioned to provide
the broadest range of services.
In฀oncology,฀LabCorp’s฀broad฀molecular฀oncology฀test฀menu฀
and฀specialized฀sales฀force฀complement฀the฀strong฀pathology฀
expertise฀provided฀by฀Genzyme฀Genetics.฀In฀addition,฀LabCorp’s฀
extensive฀test฀menu฀allowed฀us฀to฀internalize฀approximately฀
50฀tests฀that฀Genzyme฀Genetics฀previously฀referred฀to฀other฀labs.฀
Integration That Produces Results
I฀am฀very฀pleased฀with฀our฀progress฀in฀integrating฀these฀businesses.฀
As฀with฀every฀acquisition,฀the฀rst฀objective฀is฀to฀retain฀revenue฀
and the customer relationships that underpin that revenue. Our
employees have worked to combine the businesses without
disruption to our customer base, and the limited customer attrition
we have experienced to date is evidence of their success. We are
extremely appreciative of the skill and dedication of personnel
from both companies, who have worked exceptionally well
together to form a single team dedicated to patient care.
In฀addition฀to฀focusing฀on฀customer฀service฀and฀revenue฀retention,฀
we have collectively worked to reduce expenses and improve
efciencies฀for฀the฀Genzyme฀Genetics฀business.฀As฀we฀have฀
stated, we expect the transaction to be neutral to slightly
accretive to our 2012 earnings, and will reach corporate margin
during฀2013.฀
We also made good progress on the integration of two other
sizeable฀acquisitions,฀Westcliff฀Medical฀Laboratories฀and฀DCL฀
Medical฀Laboratories.฀These฀transactions฀bolstered฀our฀
presence฀in฀Southern฀California฀and฀Indianapolis,฀where฀we฀
historically฀have฀been฀underrepresented.฀Further,฀in฀line฀with฀our฀
strategic฀model,฀we฀executed฀a฀number฀of฀smaller฀acquisitions฀
to enhance our test menu and our geographic footprint.
In฀December฀of฀2011,฀we฀closed฀our฀acquisition฀of฀Orchid฀Cellmark,฀
an฀international฀provider฀of฀DNA฀testing฀services฀primarily฀for฀
forensic฀and฀family฀relationship฀applications.฀This฀acquisition฀
strengthens LabCorp’s capabilities in forensics and identity
testing฀and฀establishes฀our฀presence฀in฀the฀United฀Kingdom.
In฀2011,฀we฀extended฀our฀record฀of฀deploying฀cash฀to฀return฀
value฀to฀shareholders฀through฀share฀repurchase.฀For฀the฀year,฀
we฀acquired฀7.4฀million฀LabCorp฀shares฀for฀$644฀million.฀This฀
brings฀our฀total฀repurchases฀since฀2004฀to฀more฀than฀$3.9฀billion,฀
at฀an฀average฀price฀of฀approximately฀$65.
2 We฀now฀provide฀reproductive฀genetic฀testing฀services฀under฀the฀name฀Integrated฀Genetics,฀
and฀oncology฀genetic฀testing฀services฀under฀the฀name฀Integrated฀Oncology.
Pillar One