LabCorp 2015 Annual Report Download - page 31
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Index
CDD’s customers may spend less, or reduce their growth in spending on R&D.
The operation of CDD's preclinical laboratory facilities and clinical trial operations must conform at all times to GLP and GCP as well as all other
applicable standards and regulations, respectively, as further described in "Business" in Item 1 of this report.
Additionally, certain CDD services and activities must conform to cGMP as further described in "Business" in Item 1 of this report. Failure to maintain
compliance with GLP, GCP, or cGMP regulations and other applicable requirements of various regulatory agencies could result in warning letters, fines,
unanticipated compliance expenditures, suspension of manufacturing, civil, criminal or administrative sanctions and/or remedies against CDD, including
suspension of its laboratory operations, which could have a material adverse effect upon the Company.
Both LCD and CDD operate in highly competitive industries. The clinical laboratory business is intensely competitive both in terms of price and service.
Pricing of laboratory testing services is often one of the most significant factors used by healthcare providers and third-party payers in selecting a laboratory.
As a result of significant consolidation in the clinical laboratory industry, larger clinical laboratory providers are able to increase cost efficiencies afforded
by large-scale automated testing. This consolidation results in greater price competition. LCD may be unable to increase cost efficiencies sufficiently, if at
all, and as a result, its net earnings and cash flows could be negatively impacted by such price competition. The Company may also face increased
competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry. Additionally,
the Company may also face changes in fee schedules, competitive bidding for laboratory services or other actions or pressures reducing payment schedules
as a result of increased or additional competition.
Competitors in the CRO industry range from small providers to full service global CROs. CDD’s main competition consists of in-house departments of
pharmaceutical companies, full-service and functional CROs, and, to a lesser degree, universities and teaching hospitals. CDD competes on a variety of
factors, including:
• reputation for on-time quality performance and regulatory compliance;
• expertise and experience in specific areas;
• scope of service offerings;
• strengths in various geographic markets;
• price;
• technological expertise and efficiency of drug development processes;
• quality of facilities;
• ability to acquire, process, analyze and report data in a rapid and accurate manner;
• quality of relationships;
• ability to manage large-scale clinical trials both domestically and internationally;
• expertise and experience in market access services; and
• size and scale.
CDD’s services have from time to time experienced periods of increased price competition which had an adverse effect on a segment's profitability and
consolidated net revenues and net income.
There is competition among CROs for both clients and potential acquisition candidates. Additionally, entities considering entering the CRO industry will
find few barriers to entry, thus further increasing possible competition. These competitive pressures may affect the attractiveness of CDD’s services and
could adversely affect its financial results and the financial results of the Company.
To offset efforts by payers to reduce the cost and utilization of clinical laboratory services and to otherwise maintain and grow its business, the Company
needs to obtain and retain new customers and business partners. In addition, a reduction in tests ordered
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