Diagnostics company LabCorp said Monday it had agreed to acquire Chiltern, a British contract research organization (CRO), for about $1.2 billion in a move to expand its biopharma services business.
The deal continues a wave of consolidation among CROs, which run clinical trials and perform other services for drugmakers wishing to cut research-and-development costs. Chiltern has conducted more than 1,800 studies across 87 countries in the past five years, generating forecasted revenue for 2017 of $550 million.
Once the transaction is complete, the U.K. firm will become part of the Covance CRO business that LabCorp acquired in 2015 for $6.2 billion.
“Our acquisition of Covance has demonstrated the value of combining diagnostic and CRO capabilities, expertise, data and leadership,” LabCorp CEO David P. King said in a news release. “The addition of Chiltern furthers our strategy and will provide us with enhanced capabilities across a broader client base as we continue to innovate and grow.”
Covance CEO John Ratliff said LabCorp’s CRO business had grown to nearly $3 billion in annual revenue since it bought Covance. The company reported total net revenues of nearly $9.5 billion for 2016.
As Business Insider reports, CROs have become more popular amid the cost-cutting efforts of drug companies. M&A spending in the CRO industry was $24 billion in 2016, with deals already reaching $14.2 billion so far this year.
The largest deal came in October when Quintiles International, the world’s largest CRO, combined with healthcare data and consulting firm IMS Health to form a $19 billion company, now known as QuintilesIMS.
LabCorp had previously been rumored to be negotiating an $8 billion acquisition of Pharmaceutical Product Development, while Chiltern acquired Theorem Clinical Research two years ago in a move to strengthen its global presence.
“Joining LabCorp and Covance will allow Chiltern to expand its collaborative approach to bring better, more personalized therapies to market for patients every day,” Chiltern CEO Jim Esinhart said. “Customers will benefit from the expanded capabilities this provides and our employees will have a greater opportunity to propel research into the future with strong, supportive partners.”