Businessmodel of LabCorp

Customer Segments

According to its annual report, LabCorp serves more than 220,000 customers around the world. The Company’s client base can be organised broadly into three separate categories:

• Individuals, including general consumers and patients of various conditions and diseases;
• Healthcare Organisations, managed care organisations, biopharmaceutical companies, independent physicians and physician groups, hospitals, specialist care facilities, and health systems;
• Commercial and Government Entities, providing alcohol and drug abuse testing services to employers across multiple industries, in the private and public sector, as well as specialist testing for food manufacturers. LabCorp principally serves a large domestic customer base in the US. The Company, however, also serves a large international client base, supporting trial activity in approximately 100 countries across the Americas, Europe, and Asia Pacific.

Value Propositions

LabCorp provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as a leading name in the medical testing field, with a reputation for providing reliable, efficient, and high-quality services to its customers;
• Its international service reach, with the Company an extensive international customer base, spanning around 100 North America, Latina America, Europe, and Asia Pacific, and directly operating facilities in more than 30 countries worldwide;
• Its extensive testing capabilities, with the Company able to process around 500,000 specimens on a daily basis through its network of patient service centres, laboratories, and STAT laboratories;
• Its proprietary technologies, with the Company utilising a range of patented technologies and processes in its testing facilities, enabling it to provide a unique and innovative service to its customers that cannot be replicated elsewhere; and
• Its specialist expertise and experience, with the Company employing highly-trained medical testing specialists across its operating segments, as well as a team of experienced industry executives. ### Channels

LabCorp operates a website at www.labcorp.com, through which it provides information on its various services, testing capabilities, and corporate activities. While the Company does not operate an online sales channel, it does provide tools that enable customers to find labs and arrange appointments. It also provides an online customer portal, through which customers are able to pay bills, access resources, and manage their accounts, as well as a mobile app which enables clients to review test results on the go.

LabCorp provides services to its customers through its network of operating facilities and offices spread across more than countries in the Americas, Asia Pacific, and Europe. This includes the Company’s numerous primary testing laboratories, specialty testing laboratories, branches, patient service centres, and STAT laboratories. The Company also operates a number of operating branches, which serve as central facilities that collect specimens in a region for shipment to one of the Company’s laboratories for testing.

These branches are also used as a base for sales and distribution staff, who deal directly with customers. Specimens are typically collected from customer locations and patient service centres and delivered through the Company’s in-house courier system.

LabCorp additionally provides contract research and laboratory testing services to clients through its global network of central laboratories in the US, Switzerland, Belgium, Singapore and China, as well as an alliance for central laboratory services testing in Japan with BML Inc.

Customer Relationships

LabCorp does not make sales or provide services to its customers on a self-service basis. It does, however, provide a range of online tools and a client portal, which enable customers to manage their accounts, make payments, and receive test results without interacting directly with members of the Company’s sales service teams.

LabCorp makes sales through its dedicated sales force, the members of which consult directly with the Company’s clients in order to agree the details of each individual sales and service contract. Larger companies and institutions, particularly within the healthcare and pharmaceutical sector, are afforded their own account management teams, which can serve clients directly.

LabCorp provides a range of online support resources for both patients and healthcare providers through its website, including publications, presentations, FAQs, and technical information. The Company also operates a dedicated support organisation, which customers are able to contact over the phone or via an online contact form in order to receive personalised assistance with queries and enquiries.

LabCorp additionally operates its own social media accounts, including with Twitter, through which it is able to interact directly with its clients and provide updates on its corporate activities.

Key Activities

LabCorp is a healthcare diagnostics company. Together with its subsidiaries, it is engaged in the provision of clinical laboratory services and drug development support.

The Company aligns its operations into two reportable business segments: LabCorp Diagnostics, which operates as an independent clinical laboratory business, consisting of a network of approximately 40 primary laboratories and approximately 1,700 patient service centres, as well as a number of branches and STAT laboratories, through which it provides routine and frequently ordered tests; and Covance Drug Development, through which the Company provides drug development services, as well as a range of drug development solutions to customers around the world. LabCorp serves a global customer base, principally serving companies operating in the pharmaceutical and biotechnology industries.

Key Partners

LabCorp works closely with a network of partner companies and organisations in order to ensure the efficient and reliable processing of specimens. These companies can be organised broadly into the following categories:

• Supplier and Vendor Partners, comprising suppliers of services, tools, equipment, and technologies that are utilised as part of the Company’s testing and research processes, as well as companies to which certain non-technical functions can be outsourced;
• Insurer Partners, comprising various medical insurance and managed care service providers with which the Company works to process insurance claims on behalf of its patients;
• Courier and Distribution Partners, comprising various third party delivery and courier service providers that assist in transporting specimens from clients and customer service centres to the Company’s various laboratories; and
• Strategic and Alliance Partners, market leading companies across multiple sectors, particularly within the pharmaceutical and laboratory testing sectors, with which the Company collaborates on various branding, operational, and other joint projects. LabCorp has a number of partnerships in place. This includes a strategic alliance with Pacific Pathology Partners, a laboratory services partnership with Genesis Health System, and an educational partnership with the Perinatal Quality Foundation.

Key Resources

LabCorp’s key resources are its intellectual properties and technologies, its equipment and laboratory facilities, its supply chain and materials, its IT and communications infrastructure, its network of branches and service centres, its partnerships, and its personnel.

LabCorp relies on a combination of patents, trademarks, copyrights, trade secrets, nondisclosure and non-competition agreements to establish and protect its proprietary technologies, which are used in the Company’s testing processes. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in LabCorp’s name, including applications entitled ‘Methods and systems for the detection of bacteria’, ‘Mutations associated with cystic fibrosis’ and ‘HER-3 antibodies and methods of use’.

LabCorp additionally owns and or leases a portfolio of facilities across the Americas, Asia Pacific, and Europe that are key to its business. This includes its primary laboratory and drug development facilities, STAT laboratories, branches, and administrative offices.

Cost Structure

LabCorp incurs costs in relation to the development of its technologies and intellectual properties, the procurement of materials and equipment, the operation of its laboratory facilities, the maintenance of its IT and communications infrastructure, the procurement of services, the implementation of marketing campaigns, the management of its partnerships, and the retention of its personnel.

In 2015 LabCorp recorded total cost of revenue in the amount of $5.78 billion, and selling, general, and administrative costs in the amount of $1.62 billion.

Revenue Streams

LabCorp generates revenue through the provision of laboratory testing services and drug development solutions, as well as through corporate alcohol and substance abuse testing services. The Company derives revenue in the form of sales and service fees.

In 2015 LabCorp generated net revenue of $8.51 billion, up on the $6.01 billion recorded by the Company in 2014. The bulk of this revenue, approximately $6.20 billion, was attributed to the Company’s LabCorp Diagnostic segment. LabCorp’s Covance Drug Development segment recorded revenue for the year of $2.31 billion.