LabCorp has reached an agreement to acquire LipoScience, the Raleigh diagnostics company that has struggled since going public in early 2013, for $85.3 million.
Burlington-based LabCorp is paying $5.25 per share for the company. LipoScience’s shares rose 62 percent on the news to close Thursday at $5.19, up $2.
LipoScience makes a diagnostic test called NMR LipoProfile that measures lipoprotein particles in the bloodstream that cause arterial plaque buildup and lead to heart disease. LabCorp is LipoScience’s largest customer, accounting for about 35 percent of all the tests the company sells.
LipoScience has struggled to get more insurers to cover its test, and to convince more doctors to adopt it. Howard Doran, LipoScience’s CEO, said LabCorp should be able to change that given the company’s size and extensive relationships with doctors and insurers. LabCorp operates more than 1,700 labs for blood tests and tissue analysis.
“LabCorp obviously has fabulous relationships with all the clinicians. They have great access into the offices themselves, they know the doctors extremely well, and obviously they have a whole lot more folks out in the marketplace than we do,” Doran said. “Just through their channel and their strength that will very much, I believe, change the adoption curve of our test.”
LabCorp has more than 34,000 employees worldwide. LipoScience employs about 180 people, including 120 in Raleigh.
Doran said no decision has been made about whether the Raleigh office will remain, or whether the acquisition will result in layoffs. He said his hope is that employees will find opportunities either continuing to work on NMR LipoProfile or elsewhere within LabCorp.
“They value quality and high-performing employees, and we think we’ve got a bunch of them here at LipoScience,” Doran said. Doran also said no decision has been made about his future with the company.
LipoScience’s board of directors unanimously approved the deal, which is expected to close in the fourth quarter. The agreement includes a “go-shop” provision allowing LipoScience to entertain and solicit other takeover proposals until Oct. 19. The company may be required to pay a termination fee of $2.56 million to LabCorp if the deal doesn’t close. The fee would be $1.7 million if the deal is terminated because LipoScience receives a superior offer before the end of the go-shop period.
Stephen Brozak, an analyst with WBB Securities in New Jersey, said LipoScience’s ability to scale its business became more difficult given the poor performance of the company’s stock. The company went public at $9 a share in January 2013, but the stock has traded below $6 for more than a year.
“You want to raise money, you want to do anything it becomes very, very difficult,” Brozak said. “You don’t get the same institutional investors, you don’t get the same anything.”
The company needed either to be acquired or to somehow boost its stock price, Brozak said.
“Obviously, LabCorp is going out there and they are buying potential new technologies, that’s what it comes down to,” he said. “Lipo’s never really been able to get off the ground.”
LipoScience raised $44.4 million in a public stock offering in January 2013, but the company quickly stumbled. It was forced to downgrade its financial forecast twice within the first seven months of being a public company.
In August of last year CEO Richard Brajer left the company after 10 years at the helm. Doran was named CEO in January, replacing Robert Greczyn, a LipoScience board member who had served as interim CEO since Brajer’s departure.
Earlier this year LipoScience laid off 22 employees and severed a contract with Health Diagnostic Laboratory after the Richmond-based company put out a product to compete with LipoScience. In August, LipoScience reported that its second-quarter sales fell and its net loss widened, largely because of the loss of the HDL contract.
Brozak has maintained a buy rating on LipoScience’s stock, saying he was basically betting on the technology.
“This is an example of people having to wait for really good technology and now all of a sudden someone’s going to make it standard care,” he said.