EDGAR 10-K Filing

Company CIK: 920148
Filing Year: 2025
Filename: 920148_10-K_2025_0000920148-25-000032.json

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ITEM 1. BUSINESS
Item 1. BUSINESS
Labcorp® Holdings Inc. (Labcorp or the Company) is a global leader of innovative and comprehensive laboratory services that provides vital information to help doctors, hospitals, pharmaceutical companies, researchers, and patients make clear and confident decisions. By leveraging its unparalleled diagnostics and drug development capabilities, the Company provides insights and accelerates innovations to improve health and improve lives. The Company’s nearly 70,000 employees serve clients in approximately 100 countries, provided support for more than 75% of the new drugs and therapeutic products approved in 2024 by the FDA, and performed more than 700 million tests annually for patients around the world.
On April 25, 2024, Laboratory Corporation of America Holdings (LCAH) announced plans to implement a new public holding company structure, with Labcorp Holdings Inc. as the holding company. On May 17, 2024, the Company completed the holding company reorganization (Reorganization) and became the successor issuer to LCAH. Labcorp Holdings Inc. has no independent assets or operations and its sole ownership interest is in LCAH.
The Company is organized under two segments, consisting of Diagnostics Laboratories (Dx), which includes routine testing and specialty/esoteric testing, and Biopharma Laboratory Services (BLS), consisting of Early Development Research Laboratories (ED) and Central Laboratory Services. The Company’s strength in science, technology, and innovation, as well as its global scale, enable it to play a leading role in advancing healthcare across the globe.
The significant reach, breadth, and advancement of the Company’s offerings have resulted in Base Business revenue growth of 4.9% from 2023 through 2024 and 7.4% versus 2019 compound annual growth rate (CAGR). Base Business includes the Company’s business operations except for COVID-19 PCR testing (COVID-19 Testing).
For the year ended December 31, 2024, the Company generated revenues of $13,008.9 million, diluted earnings per share from continuing operations of $8.84, and had a total operating cash flow provided by continuing operations of $1,585.8 million.
The Company believes that science, technology, and innovation drive its continued success, differentiate the Company, and are foundational to its future. They are critical to the Company’s ability to carry out its mission to improve health and improve lives.
Spin-off of Fortrea Holdings Inc.
On June 30, 2023, the Company completed the previously announced separation (Spin-off) of its former clinical development and commercialization services (CDCS) business, Fortrea Holdings Inc. (Fortrea), through the Company’s pro-rata distribution of 100% of the outstanding shares of Fortrea common stock to holders of record of Labcorp common stock (Common Stock). Each holder of record of Common Stock received one share of Fortrea common stock for every share of Common Stock.
Upon closing of the Spin-off, Fortrea made a cash distribution to the Company of approximately $1,600.0 million. In 2023, these proceeds were mainly used to repurchase approximately $1,000.0 million in the aggregate of Common Stock pursuant to accelerated share repurchase agreements and paying down $300.0 million of debt that matured in 2023. The remaining funds were used in 2024 to support continued programs to return value to shareholders, through cash dividends and/or share repurchases.
As a result of the Spin-off, all current and historical operating results of Fortrea are presented as Earnings from discontinued operations, net of tax, in the Consolidated Statements of Operations and the Company has recast its BLS segment results to exclude the historical results of the CDCS business for all periods presented.
Enterprise Strategy
Through leadership in science, technology and innovation, the Company provides vital information and services to help its customers make clear and confident health decisions and helps millions of people improve health and improve lives.
The Company is expanding its role in the rapidly evolving healthcare market by strengthening its positions across its portfolio of capabilities, growing strategic opportunities that drive new business, and differentiating its unique offerings, capabilities, and financial performance. The Company is focused on two near-term strategic opportunities for growth across both Dx and BLS:
1.Be the Partner of Choice for Health Systems and Local and Regional Laboratories
The Company expects industry consolidation to continue, as hospitals and health systems focus on investing in core patient care services. The depth and the breadth of opportunity and the quality of the pipeline is robust, and the Company is optimistic
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about continued expansion. The Company seeks partnerships that meet financial criteria, including being accretive in the first year, returning each transaction’s cost of capital within three years, and providing a clear path to improve margins.
The Company signed or completed 10 collaboration transactions with health systems and local and regional laboratories in 2024. The Company believes it is an attractive partner for hospitals and health systems for multiple reasons, including its:
•innovative offerings in high growth specialty areas;
•industry-leading test portfolio and national presence;
•unique data and analytics capabilities; and
•ability to integrate a hospital’s laboratory services seamlessly.
2.Lead in the Development, Licensing, and Scaling of Specialty Testing
The Company is focused on four primary specialty testing areas: oncology, women's health, autoimmune disease, and neurology, which the Company believes represent significant growth areas. The development of specialty tests and companion diagnostics (CDx) are attractive to health systems partners and biopharma as they continue to develop more products in specialty areas and cell and gene therapy. The Company has demonstrated its ability to provide comprehensive portfolios in these four areas, which comprise more than half of clinical trials conducted in its Central Laboratory Services business.
Longer-term, the Company is focused on three enterprise-wide strategic priorities to drive growth:
1.Establish leadership and partnership capabilities in cell and gene therapy
Cell and gene therapy is a growing focus of biopharma pipelines, with approximately 2,000 clinical trials being conducted globally and representing approximately 20% of all biopharma drug pipelines. The Company expects the cell and gene therapy market to grow at a substantially higher rate than other types of therapies over the next five years. As cell and gene therapies expand, the Company has an opportunity to leverage its strong drug development capabilities, scientific expertise, and pharma relationships to become a development lab of choice. Longer-term as these therapies develop, the Company believes it can harness its diagnostic assets to support biopharma in commercializing cell and gene therapies and scaling these therapies through its hospital and health system business over time.
2.Expand Consumer-centric Capabilities
Consumerism trends, such as greater choice, convenience, and transparency, continue to have a growing influence across the healthcare landscape and present new opportunities for growth. Through its core customer groups, the Company has approximately 175 million patient encounters per year and has invested in modern capabilities to digitize and improve the patient journey across patient service centers. Through the Labcorp OnDemand™ channel, the Company has also demonstrated its ability to connect with consumers directly and is now offering 75 health and wellness tests through Labcorp OnDemand. Across its core businesses, the Company has an opportunity to make strategic investments to continue to enhance the customer experience through its patient portal, patient service center network, and other consumer-focused initiatives, and to capitalize on select direct revenue streams that require elevated consumer capabilities. The Company’s scaled operations, trusted brand, scientific leadership, and broad customer base are key differentiators that will support its efforts to expand over time to meet the evolving needs of its customer groups.
3.Expand Global Reach, Including Through Companion Diagnostics
International expansion of specialized diagnostics remains a key opportunity for future growth as the Company continues to add to its pipeline of specialty diagnostics. The Company is already a key partner to biopharma in CDx. As its pipeline of specialty diagnostics grows, the Company will seek to leverage its scientific leadership in new markets through a differentiated set of capabilities, including:
•a global central laboratory footprint;
•innovative science and technology;
•a comprehensive and competitive testing portfolio; and
•deep customer relationships in diagnostics and biopharma laboratory services.
As CDx continues to become more important for serving customers across the enterprise, the Company has a unique set of capabilities to be an end-to-end partner to biopharma and will continue to expand these capabilities to fuel further targeted growth internationally.
Capital Allocation
The Company believes it has a strong track record of deploying capital to investments that enhance the Company’s business and return capital to shareholders.
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During 2024, the Company invested $839.0 million in strategic business acquisitions. The acquisitions have enhanced the Company’s service offerings, expanded its customer and revenue mix, and strengthened and broadened the scope of its geographic presence. The Company continues to evaluate acquisition opportunities that leverage the Company’s core competencies, complement existing scientific and technological capabilities, increase the Company’s presence in key geographic, therapeutic and strategic areas, and meet or exceed the Company’s financial criteria.
During 2024, the Company repurchased 1.1 million shares of Common Stock at an average price of $219.57 per share for a total cost of $250.1 million and paid dividends of $243.1 million. At the end of 2024, the Company had outstanding authorization from its Board of Directors (Board) to purchase up to $1,280.4 million maximum value of Common Stock.
During 2024, capital expenditures were $489.9 million, or 3.8% of the Company’s revenues. The Company expects this level of spending to remain consistent in 2025, primarily in connection with projects to support growth in the Company’s core businesses, facility expansion and updates, projects related to its LaunchPad initiative, and further acquisition integration initiatives.
The Company will continue to evaluate opportunities for strategic deployment of capital in light of market conditions.
Seasonality and External Factors
The Company experiences seasonality across its business. For example, testing volume generally declines during the year-end holiday period and other major holidays and can also decline due to inclement weather or natural disasters. Testing volumes can also be impacted by changes in the global economy, exchange rate fluctuations, political and regulatory changes, the progress of ongoing studies and the startup of new studies, as well as the level of expenditures made by the pharmaceutical, biotechnology and medical device industries in research and design (R&D). Declines in testing volume reduce revenues, operating margins, and cash flows.
In 2024, approximately 13.7% of the Company’s revenues were billed in currencies other than the U.S. dollar, with the Swiss franc, British pound, Canadian dollar, and the euro representing the largest components of its currency exposure.
Given the seasonality and changing economic factors impacting the business, comparison of the results for successive quarters may not accurately reflect trends or results for the full year.
Company Reporting
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are made available free of charge through the Investor Relations section of the Company’s website at www.labcorp.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC). Additionally, the SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC.
The matters discussed in this “Business” section should be read in conjunction with the Consolidated Financial Statements found in Item 8 of Part II of this Annual Report, which include additional financial information about the Company. This Annual Report includes forward-looking statements that involve risks or uncertainties. The Company’s results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risk factors described in Item 1A of Part I of this Annual Report and elsewhere. For more information about forward-looking statements, see “Forward-Looking Statements” included prior to Part I in this Annual Report.
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The Company’s Business
For the year ended December 31, 2024, the Company’s revenues were $13,008.9 million, an increase of 7.0% from $12,161.6 million in 2023. The 7.0% increase in revenues for the year ended December 31, 2024, as compared to the corresponding period in 2023, was primarily due to organic revenue of 3.9%, acquisitions, net of divestitures of 2.8%, and favorable foreign currency translation of 0.2%. The 3.9% increase in organic revenue was due to a 4.9% increase in the Company’s organic Base Business, partially offset by an 1.0% decrease in COVID-19 Testing.
In Millions, Except Per Share Data Year Ended December 31,
2024 2023
Revenues $ 13,008.9 $ 12,161.6
Gross profit $ 3,624.4 $ 3,364.9
Operating income $ 1,086.7 $ 725.6
Net earnings attributable to Labcorp Holdings Inc. $ 746.0 $ 418.0
Cash flows provided by continuing operating activities $ 1,585.8 $ 1,202.3
Basic earnings per common share from continuing operations $ 8.89 $ 4.35
Diluted earnings per common share from continuing operations $ 8.84 $ 4.33
The Company reports its business in two segments, Dx and BLS. In 2024, Dx and BLS contributed 78% and 22%, respectively, of revenues to the Company, and in 2023 contributed 77% and 23%, respectively. Nearly all of Dx’s revenues are generated in the U.S., with a smaller portion in Canada and a relatively small amount in the rest of the world. BLS’s revenues are nearly evenly split between the U.S. and the rest of the world, with approximately 41% derived from the U.S. and approximately 59% from other countries. Although this allocation of revenues provides some protection from economic shifts in any one country, it is still heavily tilted towards the U.S. As a result, to further diversify its operations, the Company may explore select business opportunities outside the U.S. The Company’s revenues by segment payers/customer groups and by geography for the years ended December 31, 2024 and 2023 are as follows:
Year Ended December 31, 2024 Year Ended December 31, 2023
North America Europe Other Total North America Europe Other Total
Payer/Customer
Dx
Clients 24 % - % - % 24 % 24 % - % - % 24 %
Patients 10 % - % - % 10 % 9 % - % - % 9 %
Medicare and Medicaid 8 % - % - % 8 % 8 % - % - % 8 %
Third party 36 % - % - % 36 % 36 % - % - % 36 %
Total Dx revenues by payer 78 % - % - % 78 % 77 % - % - % 77 %
BLS
Pharmaceutical, biotechnology and medical device companies 9 % 9 % 4 % 22 % 10 % 9 % 4 % 23 %
Total revenues 87 % 9 % 4 % 100 % 87 % 9 % 4 % 100 %
Diagnostics Laboratories Segment
During 2024, the Dx segment generated $10,144.3 million in revenues and $1,606.3 million in segment operating income, resulting in an operating margin of 15.8%.
In Millions Year Ended December 31,
2024 2023
Revenues $ 10,144.3 $ 9,415.1
Dx segment operating income $ 1,606.3 $ 1,591.3
Dx offers a comprehensive menu of frequently requested core testing and specialty testing through an integrated network of primary and specialty laboratories across the U.S. and Canada. This network is supported by a sophisticated information technology system, with more than 80,000 electronic interfaces to deliver test results, nimble and efficient logistics, and local labs offering rapid response testing.
Dx also provides patient access points that are strategically and conveniently located throughout the U.S., including more than 2,200 patient service centers (PSCs) and more than 6,800 in-office phlebotomists located in customer offices and facilities.
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Although testing for healthcare purposes and customers who provide healthcare services represents the most significant portion of the clinical laboratory industry, clinical laboratories also perform testing for other purposes and customers, including employment and occupational testing, deoxyribonucleic acid testing to determine parentage and to assist in immigration eligibility determinations, environmental testing, wellness testing, toxicology testing, pain management testing, and medical drug monitoring. Dx offers an expansive test menu that includes a wide range of clinical, anatomic pathology, genetic and genomic tests, and regularly adds new tests and improves the methodology of existing tests to enhance patient care. Dx also offers more than 75 consumer-initiated wellness tests available online through its Labcorp OnDemand platform.
As part of an ongoing commitment to be an efficient and high-value provider of laboratory services, Dx implemented and has maintained a comprehensive business process improvement initiative known as LaunchPad. The initiative was designed to reengineer the Company’s systems and processes to create a sustainable and more efficient business model, and to improve the experience of all stakeholders.
The Dx business can be categorized into the following components:
Service Key Features
Testing Operations and Productivity •Network of PSCs offering specimen collection services
•Comprehensive, nimble supply chain for transferring specimens across the entire life cycle of a patient sample
•One- to two- day turnaround time for most test results, with the vast majority of results delivered electronically to healthcare providers and to patients who have a Labcorp Patient™ account
•Rigorous standard of quality - 25 regional/specialty labs hold International Organization for Standardization (ISO) 15189 certification, five labs hold ISO 13485 certification, and two labs hold both
Testing and Related Services •Standard Testing Services - frequently-ordered tests used in regular patient care include blood chemistry analyses, urinalyses, blood cell counts, thyroid tests, PAP tests, hemoglobin A1C, prostate-specific antigen (PSA), tests for sexually transmitted diseases (e.g., chlamydia, gonorrhea, trichomoniasis, human immunodeficiency (HIV), and hepatitis C (HCV)), vitamin D, microbiology cultures and procedures, and alcohol and other substance abuse tests
•Specialty Testing Services - industry leader in gene-based and esoteric testing; advanced tests that target specific diseases and use new technologies; services include anatomic pathology/oncology, cardiovascular disease, coagulation, diagnostic genetics, endocrinology, infectious disease, women’s health, pharmacogenetics, parentage and donor testing, occupational testing services, medical drug monitoring services, chronic disease programs, and kidney stone prevention
•Dx offers a range of health and wellness services to employers and MCOs, including health fairs, on-site and at-home testing, vaccinations and health screenings
Development of New Tests •Nearly 100 new tests launched in 2024
•Active diagnostics and therapeutics research division: approximately 750 studies, articles, and presentations produced in 2024
•Continuous investing, internally and externally, in new testing technologies and advanced testing capabilities
Technology-Enabled Services and Support A range of services and support using proprietary technologies to improve the customer and patient experience and provide convenient access to data and analytics, including:
•More than 6.7 million enhanced clinical decision support (CDS) reports delivered to physicians and health systems
•Online and mobile applications improving the patient experience by allowing patients to learn about the Company’s offerings, schedule PSC visits, check-in upon PSC arrival, complete documentation, access tests and test results, and manage their accounts
•Online applications for providers, MCOs and accountable care organizations (ACOs) to obtain test results and population and health management data
Effect of U.S. Market Changes on the Clinical Laboratory Business
The delivery of, and reimbursement for, healthcare continues to change in the U.S., impacting all stakeholders, including the clinical laboratory business. Medicare (which principally serves patients who are 65 and older), Medicaid (which principally serves low-income patients), and insurers have increased their efforts to control the cost, utilization, and delivery of healthcare services. Measures to regulate healthcare delivery in general and clinical laboratories in particular have resulted in reduced prices, added costs, increased coverage denials and claims edits, and decreased test utilization for the clinical laboratory
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industry by imposing new, increasingly complex regulatory and administrative requirements. The government also has continued to adjust the Medicare and Medicaid fee schedules at the national and local level, and the Company believes that pressure to reduce government reimbursement will continue.
Fees for most laboratory services reimbursed by Medicare are established in the Clinical Laboratory Fee Schedule (CLFS) and fees for other testing reimbursed by Medicare, primarily related to pathology, are covered by the Physician Fee Schedule (PFS). During 2024, approximately 8.8% of Dx’s revenue was reimbursed under the CLFS (8.8% in 2023), and approximately 0.4% was reimbursed under the PFS (0.4% in 2023). Dx has experienced governmental reimbursement reductions as a direct result of several Congressional acts and regulatory initiatives, including those designed to control healthcare expenses reimbursed by government programs through a combination of reductions to fee schedules, incentives to physicians to participate in alternative payment models such as risk-sharing, and new methods to establish and adjust fees.
The most significant of these developments was the Protecting Access to Medicare Act (PAMA). Beginning in 2018, under PAMA, the Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS) set the CLFS using the weighted median of reported private payer prices paid to certain laboratories that receive a majority of their Medicare revenue from the CLFS and PFS and that bill Medicare under their own National Provider Identifier (NPI). Applicable labs, including Dx, were required to begin reporting their test-specific private payer payment amounts to CMS during the first quarter of 2017. CMS used that private market data to calculate weighted median prices for each test (based on applicable current procedural technology (CPT) codes) to represent the new CLFS rates beginning in 2018, subject to certain phase-in limits. For 2018 through 2020, a test price could not be reduced by more than 10.0% per year. PAMA resulted in a net reduction in reimbursement revenue of approximately $245.0 million between 2018-2020 from all payers affected by the CLFS.
Since 2021, the implementation of additional PAMA reporting and reimbursement changes have been delayed each year by legislators. Pursuant to PAMA as amended, for 2026 through 2028, a CLFS test price cannot be reduced by more than 15.0% per year (excluding non-PAMA reimbursement changes). CLFS rates for 2029 and subsequent periods will not be subject to phase-in limits. The phase-in of rates for Clinical Diagnostic Laboratory Tests (CDLTs) established in 2018 will resume in 2026. New CLFS rates will be established in 2027 based on data from 2019 to be reported in 2026. New CLFS rates will be established in 2030 based on data from 2028 to be reported in 2029. CLFS rates for Advanced Diagnostic Laboratory Tests will be updated annually. Unless implementation of PAMA is further delayed or changed, additional reductions in reimbursements of $100.0 million are expected for 2026 from all payers affected by the CLFS.
The American Clinical Laboratory Association (ACLA) filed a federal civil action in 2017 challenging the legal basis for the data collection methodology CMS used to derive the data from which the median prices were calculated. On July 15, 2022, the U.S. Court of Appeals for the D.C. Circuit ruled in favor of ACLA on the merits, finding that CMS harmed laboratories by collecting data in an arbitrary and capricious manner, but refused to grant relief due to PAMA’s statutory bar on judicial review of establishment of the rates.
Since the initial data collection, CMS has revised its PAMA regulations to increase the number of hospital outreach labs that will be required to report private market data in future collections. Reports by the U.S. Government Accountability Office (GAO), the HHS Office of Inspector General (OIG), and the Medicare Payment Advisory Commission (MedPAC) on PAMA implementation have identified certain instances of actual or potential increased Medicare expenditures under PAMA, as well as potential alternative methodologies for data collection under PAMA, which could result in further efforts to amend PAMA by Congress.
ACLA has continued to work with Congress on potential legislative reform of PAMA, which if adopted could reduce the negative impact of PAMA as currently implemented by CMS. Under the Laboratory Access for Beneficiaries Act, MedPAC was required to conduct a study and make recommendations to Congress on ways to improve data collection, reporting, and rate setting under PAMA to achieve, in a less burdensome manner, CLFS rates that accurately and fairly reflect private market rates. MedPAC’s June 2021 report to Congress included an analysis of potential statistical sampling methodologies that could accomplish that objective, and ACLA incorporated the concept in PAMA reform proposals to Congress. On June 22, 2022, the Saving Access to Laboratory Services Act (SALSA), was introduced in both the U.S. Senate and the U.S. House of Representatives to provide for permanent reform of PAMA incorporating many of ACLA’s proposals. SALSA was re-introduced in the US. Senate on March 28, 2023, and in the U.S. House of Representatives on March 29, 2023. ACLA is considering amendments and alternatives to SALSA that remain under evaluation. The Company supports the ongoing efforts to prevent or lessen the negative impact of the changes to the CLFS pursuant to PAMA, and the full impact of those efforts, but what the long-term effect will be on the CLFS rates is not yet known.
Further healthcare reform could occur in 2025, including changes to the Patient Protection and Affordable Care Act (ACA) and Medicare and Medicaid reform, as well as administrative requirements that may continue to affect coverage, reimbursement, and utilization of laboratory services in ways that are currently unpredictable.
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In addition, market-based changes have affected and will continue to affect the clinical laboratory business. Reimbursement from commercial payers for diagnostic testing may shift away from traditional, fee-for-service models to alternatives, including value-based, bundled pay-for-performance, and other risk-sharing payment models. The growth of the managed care sector and consolidation of MCOs present various challenges and opportunities to Dx and other clinical laboratories. Dx’s ability to attract and retain MCO customers has become even more important as the impact of various healthcare reform initiatives continues, including expanded health insurance exchanges and ACOs.
The Company serves many MCOs. These organizations have different contracting philosophies, which are influenced by the design of their products. Some MCOs contract with a limited number of clinical laboratories and engage in direct negotiation of rates. Other MCOs adopt broader networks with generally uniform fee structures for participating clinical laboratories. In some cases, those fee structures are specific to independent clinical laboratories, while the fees paid to hospital-based and physician-office laboratories may be different and are typically higher. MCOs may also offer managed Medicare or managed Medicaid plans. In addition, some MCOs use capitation rates to fix the cost of laboratory testing services for their enrollees. Under a capitated reimbursement arrangement, the clinical laboratory receives a per-member, per-month payment for an agreed upon menu of laboratory tests or based upon the proportionate share earned by the clinical laboratory from a capitation pool. When the agreed upon reimbursement is based solely on an established rate per member, revenue is not impacted by the volume of testing performed. Under a capitation pool arrangement, the aggregate value of an established rate per member is distributed based on the volume and complexity of the procedures performed by laboratories participating in the agreement. For the year ended December 31, 2024, capitated contracts with MCOs accounted for approximately $366.0 million, or 3.6%, of Dx’s revenues.
In addition to reductions in test reimbursement, the Company also anticipates potential declines in test volumes as a result of increased controls over the utilization of laboratory services by Medicare, Medicaid, and other third-party payers, particularly MCOs. MCOs are implementing, directly or through third parties, various types of laboratory benefit management programs, which may include laboratory networks, utilization management tools (such as prior authorization and/or prior notification), and claims edits, which impact coverage and reimbursement of clinical laboratory tests. Some of these programs address clinical laboratory testing broadly, while others are focused on certain types of testing, including molecular, genetic, and toxicology testing. In addition, continued movement by patients into consumer-driven health plans may have an impact on the utilization of laboratory testing.
Helping to balance the overall negative market changes regarding reimbursement discussed above, the Company believes that the volume of clinical laboratory testing is positively influenced by several factors, including an increase in the number and types of tests that are readily available (due to advances in technology and increased cost efficiencies) for the diagnosis of disease, and the general aging of the U.S. population. Periodic infectious disease outbreaks such as the SARS-CoV-2 virus also have the potential to generate additional testing volume in the future and enhance stakeholders’ appreciation for the value of laboratory testing in combating future potential outbreaks. Dx believes that its enhanced and growing menu of tests, focus on high-potential clinical areas, leading position with CDx, broad geographic footprint, and operating efficiency make it well positioned for growth due to a number of market factors, primarily related to a continued drive to improve outcomes and reduce costs across the healthcare system, including but not limited to greater price transparency required under “surprise billing” laws and regulations requiring disclosure of hospital charges.
Biopharma Laboratory Services Segment
During 2024, the BLS segment generated $2,922.6 million in revenues and $458.9 million in segment operating income, resulting in an operating margin of 15.7%.
In Millions Year Ended December 31,
2024 2023
Revenues $ 2,922.6 $ 2,774.2
BLS segment operating income $ 458.9 $ 396.3
BLS provides drug development, medical device and CDx development solutions from early-stage research to clinical development, along with support for crop protection and chemical testing, through its ED and Central Laboratory Services businesses. Its customers are comprised of pharmaceutical, biotechnology, medical device, and diagnostic companies across the world. With a global network of operations, BLS offers deep expertise in early development and clinical trials in each therapeutic area. BLS had provided support for more than 75% of the new drugs and therapeutic products approved in 2024 by the FDA, including 86% of those specific to oncology, 74% of those submitted by biotechnology companies, and 80% of those submitted by leading and large pharmaceutical companies. Through its industry-leading central laboratory business, it supports clinical trial activity in approximately 100 countries.
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Service Key Features
Early Development Research Laboratories
•Lead optimization: connects early discovery activities to regulated preclinical studies
•Analytical services: bioanalytical testing services offering appropriate dose and frequency of drug administration
•Safety assessment: general, genetic, and immunotoxicology services; nonclinical pathology; safety pharmacology services; preclinical medical device services; respiratory services; and developmental and reproductive toxicology (DART) studies
•Chemistry manufacturing services: robust, cost-effective solutions in the areas of safety, identity, strength, quality, and purity assessments for biologics
•Early phase development solutions: focused, multidisciplinary teams of experts that craft integrated solutions to identify and develop lead drug candidates and reduce development challenges
•Crop protection and chemical testing: Consulting services for chemical manufacturers and other firms engaged in the development of modern crop protection technology
Central Laboratory Services •Clinical laboratory services for individuals participating in clinical studies
•Provided to biopharmaceutical customers through its global network of central laboratories in the U.S., Europe, and Asia
•Operates world’s largest automated clinical trial sample collection kit production lines that enable kits to be produced with 5.5 sigma precision
•6 ISO 15189-certified laboratories
Technology Solutions Proprietary digital tools and services providing customers with greater access to key insights and results, enhanced transparency, quality, and speed of clinical trial patient recruitment, resulting in reduced costs and increased market potential for customers:
•Metrics and benchmarking applications for monitoring patient recruitment for clinical site selection, protocol design, and optimization
•Ability to communicate with patients in the U.S. who may be eligible for clinical trials
Human Capital
Mission and Culture
The Company believes in the power of science to change lives. The Company’s culture centers around its mission to improve health and improve lives. The Company’s nearly 70,000 employees located across 17 countries are essential to the Company’s ability to innovate and advance science and technology to empower patients, providers, and pharmaceutical companies to make clear and confident decisions. Engaging the collective expertise and passion of its employees across the globe is vital to achieving the Company’s mission, which permeates its performance-driven, collaborative, inclusive, customer-centered, and inquisitive culture.
Workforce Demographics
The Company’s global talent is core to its ability to innovate and meet a wide range of patient and customer needs. The Company’s employees are globally dispersed, with 89% in the U.S. and Canada, 5% in Asia, and 6% in Europe. Of the Company’s global workforce, 87% of employees are full time, and 13% are part time. Approximately 71% of the Company’s employees globally are women. Of the U.S.-based employees, approximately 52% of the team are people of color. About 2.5% of the Company’s global workforce is employed under a collective bargaining agreement. Depending on business demand and the availability of talent, the Company supplements up to 8% of its workforce with contingent workers.
In 2024, the Company made investments in its talent to support retention and enable the Company’s growth. For the fourth consecutive year, hiring outpaced voluntary attrition, both globally and in the U.S.
Talent Initiatives
The Company’s talent initiatives support the development of inclusive leadership and culture, enhancing the team member experience, and supporting community engagement and patient focus. Highlights for 2024 include:
•Launch of a listening strategy, including measuring employee experience, inclusion, and well-being;
•Supporting our Employee Resource Groups (ERGs), which are created and led by employee volunteers and open to all employees. ERGs are important resources to foster cross-connections, encourage belonging, support career development, and champion employee voices. The Company now has nine unique ERGs - with 118 local chapters across eight countries (United States, Belgium, China, Switzerland, Germany, India, Singapore, and United Kingdom)
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with 7,900 participating employees, representing a growth of 43% participation compared to the year prior. Each ERG has executive sponsorship from senior leadership;
•Recognition of locally relevant celebrations of cultural events reflecting the breadth of different cultures, constituencies, and observances throughout the year;
•Continued deployment of anti-harassment training to employees around the world;
•Continued support of mentoring programs, including a formal mentoring initiative;
•Continued opportunities for greater engagement between employees and management, including quarterly global town halls, which are held virtually and are open to all employees, interactions with front-line employees on visits to the Company’s facilities, and in-person town halls with employees across business units and functions;
•Harmonization of the U.S. paid holiday policy to now recognize six company-designated holidays and one floating holiday - providing a more consistent and inclusive experience for eligible U.S. non-exempt employees. By offering the flexibility of a floating holiday, the Company aims to better accommodate the unique needs, beliefs, and backgrounds of our workforce; and
•Received several awards, such as Silver Military Friendly Award, Best Place to Work for Disability Inclusion, and Forbes’ Best Places to Work for Diversity.
Rewards
The Company operates in a complex, global, and dynamic healthcare industry and believes that its compensation and benefits programs are comprehensive and flexible to attract and retain the caliber of talent needed for the sustained growth and success of the business.
The Company regularly monitors market activity and employee movement within and outside of the healthcare industry to maintain competitiveness. In 2024, the Company awarded $93 million in annual merit increases to recognize its talent and foster pay competitiveness in the market.
Employee Well-being
The Company believes that its investments in compensation and employee well-being are crucial to maintaining comprehensive positioning and a productive, engaged workforce. The Company fulfills its commitment to employee well-being by investing in a variety of holistic tools and resources to support its employees’ physical, emotional, and financial well-being.
In early 2024, the Company re-launched its wellness program making it more inclusive of both domestic and international employees. This new program, called “Best You”, translates easily into the different languages of our international employees and can be tailored to local needs by “Best You Champions” that are present in most countries where the Company has in-office employees. The Company is integrating Best You into the fabric of our company worldwide. The Company has outreach programs to support its ERGs and other groups in providing wellness support to members.
In support of Best You, the Company continues to offer zero-cost telehealth and implemented free virtual Primary care visits for medical, dermatological, and behavioral treatment as part of its medical plans in the U.S., employer matching 401(k) contributions, financial wellness workshops, and custom stress management strategies for teams around the world.
The Company also understands the importance of providing mental health resources to support employees and their families. In 2024, the Company implemented a global employee assistance program (EAP) solution to support employee mental health across the globe. In addition, a suite of People Leader Mental Health Trainings was expanded to further support employees. Best You wellbeing breaks were leveraged by leaders for their teams across the globe, with sessions such as guided meditations and stretch breaks. In partnership with EAP providers, the Company recognized World Kindness Day in November 2024 with events and education throughout the whole month, including videos from our executive leadership team educating and supporting a culture of Kindness, which also helps build an inclusive culture committed to the Company’s mission and strategy.
Additional efforts in support of employee wellbeing include:
•Reducing the cost of monthly medical insurance contributions by $240 per year for more than 17,500 employees in the U.S. earning less than $50,000 per year who participate in Company medical plans;
•Offering free annual wellness screenings for U.S. employees and covered spouses/domestic partners focusing on identifying metabolic conditions that can increase the risk of heart attack, stroke and diabetes. Nearly 28,000 U.S. employees and their covered spouses completed the no-cost screening and earned an annual medical plan contribution discount of up to $4,560;
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•Providing up to $1,000 in health reimbursement arrangement and health savings account contributions, available to approximately 31,000 employees and their spouses or domestic partners to encourage health and wellness education and activities;
•Reimbursing up to $300 in fitness-related expenses for more than 13,000 employees across the U.S. and Canada;
•Providing free ColoFitTM kits to over 5,000 employees to enhance colon cancer awareness and screenings;
•Offering Weight Watchers at no cost to employees and adding Weight Watchers Clinic access to support weight health with more than 7,400 employees actively engaged; and
•Expanding $0 MDLIVE services to include Virtual Primary Care alongside Urgent Care, Behavioral Health, and Dermatology for U.S. medical plan participants.
The Company’s No Charge Laboratory Testing program enables eligible U.S. employees and their covered dependents to offset any outstanding balance for most lab work sent to a Company facility or patient service center, following insurance claim processing. Additionally, the Company offers global initiatives to encourage sustainable transportation through programs such as discounted transportation vouchers, reduced-cost bicycle leases, and mileage reimbursement for bicycle commuters, with benefits varying by country.
To enable its employees to establish ownership in the Company, the Company offers an employee stock purchase plan that permits substantially all U.S., Canada, and United Kingdom employees to purchase Common Stock at a 15% discount.
Development and Training
As an organization that pursues answers to the world’s most critical healthcare questions, the Company supports its employees with a work environment that emphasizes continuous learning and development. Through these learning and development opportunities, the Company encourages learning, growth, and innovation to deliver better patient care and new solutions for its customers. The Company provides professional skills training and role specific training, along with formal and informal mentoring and job rotations. The Company onboards and develops new hires through extensive training provided by a dedicated team of technical skill trainers with different departments and functions.
2024 Training Milestones:
•Provided more than 13,000 courses, many of which are available virtually within the global learning management system;
•Completed over 1.1 million hours of training, primarily consisting of regulatory and technical training;
•Offered mentoring programs that nearly 2,800 employees participated in as either mentors or mentees; and
•Completed more than 15,000 hours of professional development.
As a leader in science, the Company has almost 12,000 science-based jobs and leverages several internal scientific forums to help scientists at all levels of experience continuously learn, innovate, and advance their skills in the healthcare industry. Through these forums, those in scientific roles are staying current in their fields of study, sharing their knowledge with others, and helping to expand the skills and experience of their colleagues.
The Company’s ongoing investment in the development of its people stems from a continuing commitment to build a highly talented team. In addition to traditional tuition reimbursement, over the past four years Labcorp Education Advantage has actively supported employees in their pursuit of higher education by covering tuition costs for healthcare or life science degree programs that contribute to their career advancement within the Company. To date, more than 1,800 employees have benefited from this initiative, while also avoiding student loan debt.
To assist with creating a pipeline of future medical lab scientists to support its customers, the Company established the Labcorp School of Medical Laboratory Sciences. The National Accrediting Agency of Clinical Laboratory Sciences approved the Company’s application, which allowed the Company to host an inaugural class of students as part of its accreditation process. In September 2024, five students across three U.S. sites joined the inaugural class. The Company is providing training to students tuition free to support them in obtaining certification for technical careers that are in high demand. Students have the option to work in the Company’s laboratories outside of school hours.
Health and Safety
The nature of the Company’s business requires employees to work directly with patients and animals. This includes the handling, processing, and testing of human or animal specimens on a daily basis. As the health and safety of employees is a primary concern, the Company has established numerous employee health and safety protocols, including engineering and administrative controls, policies, procedures, processes, and training to minimize the potential for, and the severity of, work-related injuries and illnesses.
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In 2024, the Company reduced its work-related injury rate per 100 employees by 14.2% and its work-related lost work injury rate per 100 employees by 24.7%. The Company completed a Corporate EHS Audit on 11 significant laboratory facilities, allowing it to assess locations against common expectations and performance criteria. The Company also completed nearly 120,000 safety training sessions covering topics that included bloodborne pathogen, chemical safety, and employee health and safety general awareness.
Community Engagement
Labcorp fosters a culture of giving back beyond the scope of day-to-day tasks. The Access for All initiative leads community engagement efforts of Labcorp and its employees to make a positive impact across the globe. The Labcorp Charitable Foundation extends Labcorp’s commitment to Access for All by investing in programs in communities across the globe in the areas of health, education and community.
In 2024, colleagues continued to support the Company’s global Employee Giving Campaign. Through the campaign, colleagues are able to collectively support the following charities: American Cancer Society, American Heart Association, American Diabetes Association, American Red Cross, United Way, National Urban League, Project HOPE, and new in 2024 to expand Labcorp’s global reach, the International Committee of the Red Cross. These agencies align with Labcorp’s mission to improve health and improve lives by leading the way in healthcare research, providing services to benefit the underserved, and supporting those affected by disaster. Additionally, The Labcorp Charitable Foundation offers a match opportunity for contributions made through the campaign.
Labcorp, its employees and The Labcorp Charitable Foundation are committed to expanding access to healthcare, education, housing, and community support through strategic philanthropy and volunteerism. The Company’s initiatives address social determinants of health while fostering science, technology, engineering, and math education, particularly in underserved communities. By investing in the well-being of those Labcorp serves, the Company helps build stronger communities, remove barriers to healthcare and create opportunities for success.
Throughout the year, whether through financial grants or employee volunteerism, the Company is focused on providing Access for All. Labcorp’s employees assisted in building homes, collecting food, serving meals, and providing essential items to help in underserved communities. The Company financially supported patient assistance programs and community education programs to help improve health of the patients it serves.
Dynacare, a Labcorp company committed to Canada’s health and wellness, continued their efforts to raise awareness about type 2 diabetes and provide testing to those that need it most. During Diabetes Awareness Month, Dynacare partnered with Diabetes Canada to organize five mobile clinics in communities that are most at risk of developing diabetes.
Continuing efforts to make a positive impact, colleagues from across the globe teamed up to serve their communities through the Healthy Communities Contest. This contest ran for three months and encouraged Labcorp employees to unite in acts of kindness to advance Access for All through volunteerism. In return, three teams were selected for their chosen charity to receive a grant from The Labcorp Charitable Foundation.
The Labcorp Charitable Foundation, a private, charitable 501(c)(3) organization established and supported by the Company, invested in more than 200 programs in 2024 that align with the Company’s strategic mission to improve health and improve lives by supporting efforts that increase access to health services, particularly for underserved populations across the globe. Through a partnership with Project HOPE, the Labcorp Charitable Foundation supported a rural health program in China to increase access to pediatric and cancer care services.
The Labcorp Charitable Foundation remained committed to providing relief to communities in need following disaster through support of the American Red Cross Disaster Responder Program. This ongoing commitment supports enables the American Red Cross to provide individual emergency assistance, disaster preparedness, food, shelter and relief items, health and emotional support, and community recovery leading up to and following a disaster or crisis. The Foundation also matched employee donations made to qualified health and humanitarian organizations.
Additionally, in response to the devastation caused by storms such as Hurricanes Helene and Milton along the U.S. East Coast, Labcorp employees mobilized to raise funds, organize donation drives and directly assist impacted communities.
In 2024, Labcorp continued to empower its employees to serve as agents of positive change, aligning their personal values with the Company's mission of enhancing health, through two signature employee engagement programs. Double Your Donation offers a 1:1 match by The Labcorp Charitable Foundation for Labcorp employee donations to qualifying non-profit organizations. Dollars for Doers encourages Labcorp employees to support their communities through volunteer service by offering a monetary donation from The Labcorp Charitable Foundation in recognition of their volunteer or board service to eligible non-profit organizations.
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Customers
The Company provides its services to a broad range of customers across Dx and BLS. The primary customer groups serviced by the Company include:
•Payers - Health Plans. The Company serves many health plans, including MCOs, employer plans, and other health insurance providers, each of which operates on a national, regional, or local basis. In certain locations, health plans may delegate to independent physician associations (IPAs) or other alternative delivery systems (e.g., ACOs) the ability to negotiate for services on behalf of certain members.
•Pharmaceutical, Biotechnology, Medical Device, and Diagnostics Companies and Contract Research Organizations (CROs). The Company provides services to hundreds of pharmaceutical, biotechnology, medical device, and diagnostics companies and CROs ranging from the world’s largest multi-nationals to emerging, small and mid-market companies.
•Physicians, Large Provider Organizations, and Other Healthcare Providers. Physicians and other healthcare providers who are authorized to order clinical laboratory testing for their patients are a primary source of requests for Dx’s testing services. These physicians and other providers may practice in a range of settings, including small medical practices, community-based clinics, and large, multidisciplinary organizations.
•Hospitals and Health Systems. The Company provides hospitals and health systems with services ranging from core and specialty testing to supply chain and technical support services, and the opportunity to be a research partner for participation in studies and clinical trials with BLS. In some cases, a hospital’s on-site laboratory may be operated or managed by an outside contractor or independent laboratory, including the Company.
•Other Customers. The Company serves a broad range of other customers, including, but not limited to, governmental agencies, employers, patients and consumers, crop protection and chemical companies, academic institutions, independent clinical laboratories, and retailers.
Sales, Marketing, and Customer Service
The Company offers its services through a sales force focused on serving the specific needs of customers in different market segments. The Company’s sales force is responsible for both new sales and for customer retention and relationship building.
For Dx, these market segments have different representatives focused on each segment in order to better understand and respond to the unique needs of each segment. These include clinical areas, such as primary care, oncology, women’s health, autoimmune diseases, neurology, infectious diseases, endocrinology, gastroenterology, rheumatology and other specialties; payers, such as ACOs, MCOs, and employers, and customers, such as physicians and physician organizations, and hospitals and health systems. The BLS global sales organization provides customer coverage across the pharmaceutical, biotechnology, and medical device industries for services including lead optimization, preclinical safety assessment, analytical services, clinical trial enablement through data insights, central laboratory services, biomarker testing, CDx, and technology solutions. As part of the Company’s ongoing strategic priority to maximize the value of its unique leadership in both diagnostics and biopharma laboratory services, sales representatives from each business segment work together on outreach to potential customers of both businesses, including hospitals and health systems that may purchase testing and participate in clinical trials, or pharmaceutical, biotechnology, or medical device companies whose studies may benefit from use of Dx’s specialty testing, companion diagnostics, and network of PSCs.
Market Opportunity
Dx
The Company believes that in 2024, the U.S. clinical laboratory testing industry generated revenues of more than $80 billion. The clinical laboratory industry consists primarily of three types of providers: hospital-based laboratories, physician-office laboratories, and independent clinical and anatomical pathology laboratories, such as those operated by Dx.
The clinical laboratory business is intensely competitive, and the Company believes that both competition and consolidation in the clinical laboratory business will continue. CMS has estimated that, as of March 2024 (the most recent data available as of the filing of this report), there were nearly 320,000 clinical laboratories of all types, including approximately 9,200 hospital-based laboratories, just under 123,000 physician-office laboratories, and approximately 8,500 independent clinical and anatomic pathology laboratories in the U.S. Dx competes with all of those laboratories. In addition, an increasing number of health system laboratories have been expanding their operations and business, resulting in greater competition for testing from physicians within those systems and from unaffiliated physicians in the health system laboratories’ service areas.
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Dx believes that the selection of a laboratory is primarily based on the following factors, all of which the Company believes Dx competes favorably in:
•brand strength and reputation;
•leadership in science, technology, and innovation;
•patient satisfaction levels;
•national scale, and local presence with access to testing within 10 miles of most households;
•quality, timeliness, and consistency in reporting test results;
•contractual relationships with MCOs;
•number and type of tests performed;
•connectivity solutions offered; and
•pricing of the laboratory’s services.
In addition to the factors listed above, the Company believes that the operational and economic efficiencies provided by its integrated service and logistics network, large-scale automated testing, and regular introduction of new technologies will allow the Company to compete effectively with other providers of laboratory services.
BLS
The Company believes that in 2024, the global pharmaceutical industry spent more than $200 billion on R&D. Drug development services businesses like BLS typically derive most of their revenue from R&D, as well as marketing expenditures, of the pharmaceutical, biotechnology, and medical device industries.
Outsourcing of R&D services to CROs and other service providers remains integral to the drug development process. The pharmaceutical market will continue to feel the pressure to improve return on investment, increase R&D productivity, stay abreast of scientific advancements and comply with stringent government regulations and attempts to reduce and control the price of prescription drugs, all supporting the outsourcing model. In the face of mounting complexity, the investment and amount of time required to develop new products are significant and have been increasing. These trends create opportunities for BLS and other companies providing drug development services that can help make the development process more efficient.
The drug development industry has many participants ranging from hundreds of small providers to a limited number of large companies with global capabilities. BLS competes against these small and large businesses, as well as in-house departments of pharmaceutical, biotechnology, medical device, and diagnostic companies, and to a lesser extent, selected academic research centers, universities, and teaching hospitals.
BLS believes that the selection of a drug development partner is primarily based on the following factors, all of which the Company believes it competes favorably in:
•reputation for quality and regulatory compliance;
•efficient, timely performance;
•expertise and experience in operations;
•application of technology and innovation;
•specific therapeutic and scientific expertise;
•data and analytical capabilities;
•ability to enhance patient recruitment;
•scope of service offerings;
•strengths in various geographic markets;
•price;
•quality of facilities;
•quality of relationships;
•size and scale;
•ability to support decentralized clinical trials;
•ability to develop CDx; and
•access to talent.
Quality
Dx and BLS have comprehensive quality systems and processes appropriate for their respective businesses. The Company’s quality programs are overseen by Dx’s National Office of Quality, BLS’s Global Regulatory Compliance and Quality Assurance Unit, BLS’s central laboratory services expanded laboratory management services department, and the Company’s global supply chain management department and project management staff. The Company has procedures for monitoring its internal performance, as well as that of its vendors, suppliers, and other key stakeholders. In addition, various groups and
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departments within the Company provide oversight to monitor and control vendor products and performance and play an essential role in the Company’s approach to quality through improvements in processes and automation.
Virtually all facets of the Company’s services are subject to quality programs and procedures, including accuracy and reproducibility of tests, turnaround time, customer service, marketing communications, data integrity, patient satisfaction, and billing. The Company’s quality programs include measures that compare current performance against desired performance goals to monitor critical aspects of service to its customers and patients. This includes licensing, credentialing, training, competency assessments of professional and technical staff, and internal auditing. In addition to the Company’s own quality programs, the Company’s laboratories, facilities, and processes are subject to on-site regulatory agency inspections and accreditation evaluations, surveys and proficiency testing by local or national government agencies and independent external accrediting programs, and inspections and audits by customers.
Thirty-five of the Company’s laboratories have received ISO 15189, ISO 17025, ISO 13485 and/or ISO 14791 accreditation, demonstrating that they meet international standards for quality and technical competence.
Information Systems
The Company is committed to developing and commercializing technology-enabled solutions it believes will support its operations and provide better care. The Company operates standard platforms for its core business services and its financial and reporting systems. These standard systems provide consistency within workflows and information as well as a high level of system availability, security, and stability. The primary laboratory systems include standardized support for molecular diagnostics, digital pathology, and enhanced specialty laboratory solutions. The Company’s centralized information systems are responsible for operational efficiencies, enabling the Company to achieve consistent, structured, and standardized operating results and effective patient care.
The information systems used by Dx and BLS are discussed in more detail in the sections dedicated to each of those segments. The Company’s cybersecurity processes and systems are discussed in more detail under “Cybersecurity” in Item 1C.
For several years the Company has deployed AI and machine learning tools to supplement its existing data analysis projects and support greater efficiency in its operations. The Company is currently evaluating and testing various additional applications of AI and machine learning tools, while also implementing policies and processes to provide appropriate oversight over the use of AI and machine learning tools by the Company.
Intellectual Property Rights
The Company relies on a combination of patents, trademarks, copyrights, trade secrets, and nondisclosure and non-competition agreements to establish and protect its proprietary technology. The Company has filed and obtained numerous patents in the U.S. and abroad, and regularly files patent applications, when appropriate, to establish and protect its proprietary technology. Occasionally, the Company also licenses U.S. and non-U.S. patents, patent applications, technology, trade secrets, know-how, copyrights, and trademarks owned by others. The Company believes, however, that no single patent, technology, trademark, intellectual property asset, or license is material to its business as a whole.
Patents covering the Company’s technologies are subject to challenges. Issued patents may be successfully challenged, invalidated, circumvented, or declared unenforceable so that patent rights would not create an effective competitive barrier. In addition, the laws of some countries may not protect proprietary rights to the same extent as do the laws of the U.S.
Parties may file claims asserting that the Company’s technologies infringe on their intellectual property. The Company cannot predict whether parties will assert such claims against it, or whether those claims will harm its business. If the Company is forced to defend against such claims, the Company could face costly litigation and diversion of management’s attention and resources. As result of such disputes, the Company may have to develop costly non-infringing technology or enter into licensing agreements. These agreements, if necessary, may require financial or other terms that could have an adverse effect on the Company’s business and financial condition.
Regulation and Reimbursement
General
Because the Company operates in multiple distinct environments and in a variety of locations worldwide, it is subject to numerous, and sometimes overlapping, regulatory requirements. Both the clinical laboratory and the biopharma laboratory businesses are subject to significant governmental regulation at the international, national, state, and local levels. As described below, these regulations concern licensure and operation of clinical laboratories, claims submission and reimbursement for laboratory services, healthcare fraud and abuse, biopharma laboratory services, security and confidentiality of health information, quality, and environmental and occupational safety.
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Regulation of Clinical Laboratories
Virtually all clinical laboratories operating in the U.S. must be certified by the federal government or by a federally approved accreditation agency. In most cases, that certification is regulated by CMS through the Clinical Laboratory Improvement Act of 1967 and the Clinical Laboratory Improvement Amendments of 1988 (CLIA), which requires that applicable clinical laboratories meet quality assurance, quality control, and personnel standards. Laboratories also must undergo proficiency testing and are subject to inspections. Clinical laboratories in locations other than the U.S. are generally subject to comparable regulation in their respective jurisdictions.
Standards for testing under CLIA are based on the complexity of the tests performed by the laboratory, with tests classified as “high complexity,” “moderate complexity,” or “waived.” Laboratories performing high-complexity testing are required to meet more stringent requirements than moderate-complexity laboratories. Laboratories performing only waived tests, which are tests determined by the FDA to have a low potential for error and requiring little oversight, may apply for a certificate of waiver exempting them from most CLIA requirements. All major and many smaller Company facilities hold CLIA certificates to perform high-complexity testing. The Company’s remaining smaller testing sites hold CLIA certificates to perform moderate-complexity testing or a certificate of waiver. The sanctions for failure to comply with CLIA requirements include suspension, revocation, or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, cancellation or suspension of the laboratory’s approval to receive Medicare and/or Medicaid reimbursement, as well as significant fines and/or criminal penalties. The loss or suspension of a CLIA certification, imposition of a fine or other penalties, or future changes in the CLIA law or regulations (or interpretation of the law or regulations) could have a material adverse effect on the Company.
The Company is also subject to state and local laboratory regulation. CLIA provides that a state may adopt laboratory regulations different from or more stringent than those under federal law, and a number of states have implemented their own laboratory regulatory requirements. State laws may require that laboratory personnel meet certain qualifications, specify certain quality controls, or require maintenance of certain records.
The Company believes that it is in compliance in all material respects with all laboratory requirements applicable to its laboratories operating both within the U.S. and in other countries. The Company’s laboratories have continuing programs to maintain operations in compliance with all such regulatory requirements, but no assurances can be given that the Company’s laboratories will pass all future licensure or certification inspections.
FDA and Other Regulatory Agency Laws and Regulations
Various regulatory agencies, including CMS and the FDA in the U.S., regulate the development, testing, manufacturing, labeling, advertising, marketing, distribution, storage, import, export, performance, and surveillance of diagnostic and therapeutic offerings, including certain offerings provided by the Company and the development of therapeutic products that comprise the majority of BLS’s business. The FDA and other regulatory agencies periodically inspect and review the manufacturing processes and performance of diagnostic and therapeutic products, while CMS, certain state programs, and accreditation entities inspect and review the facilities, personnel, and procedures of clinical laboratories and their laboratory operations. The FDA and other regulatory agencies also periodically inspect test facilities that perform tests on samples from preclinical studies and on human subjects enrolled in such clinical studies of drugs, biologics, and medical devices. These agencies have the authority to take various administrative and legal actions for noncompliance, such as fines, withdrawal of product approval, warning or untitled letters, seizures, recalls, injunctions, and other civil and criminal sanctions.
Since 2014, there have been ongoing discussions and advocacy between stakeholders, including the clinical laboratory industry, the FDA, and Congress, about potential FDA regulation of laboratory-developed tests (LDTs), which are assays developed and performed in-house by clinical laboratories and can be made available to the public without pre-market review by the FDA, with limited exceptions that require LDTs to follow pre-market requirements, such as during the COVID-19 public health emergency.
On September 29, 2023, the FDA released a proposed rule to regulate LDTs as medical devices, which was formally published in the Federal Register on October 3, 2023. The proposed rule sought to make explicit that in vitro diagnostic products (IVDs) are devices under the Federal Food, Drug and Cosmetic Act, including when the manufacturer of the IVD is a clinical laboratory. In conjunction with this proposed rule and issuance of new regulations, the FDA proposed a policy by which the FDA would phase out its general enforcement discretion approach for LDTs over a period of four years after the publication of a final rule so that LDTs manufactured by a clinical laboratory would, over the transition period, fall under the existing enforcement approach for IVDs. The proposed rule would not grandfather existing tests or exempt academic medical centers or small laboratories, but the FDA requested public comments on whether it should include those features in a final rule. ACLA disputes FDA’s assertion that LDTs are medical devices and filed comments in December 2023 opposing the proposed rule and urging its withdrawal for the reasons set forth in ACLA’s comments. Both ACLA and the Company have urged FDA
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to continue working with Congress and stakeholders toward enactment of appropriate legislation instead of pursuing device regulation of LDTs through rulemaking.
On May 6, 2024, the FDA published a final rule adopting its proposal to regulate LDTs as medical devices over a four-year phase-in period, but with certain changes related to ongoing enforcement discretion for certain categories of LDTs. The final rule became effective on July 5, 2024, and in the absence of a successful legal challenge, the first phase of compliance obligations will begin on May 6, 2025. Most notably, under the final rule, the FDA intends to exercise enforcement discretion and generally not enforce premarket review and most quality system requirements (except for records requirements) for tests currently marketed as LDTs that were first marketed prior to the issuance of the final rule, as long as they are not significantly modified; intends to exercise enforcement discretion and generally not enforce premarket review and most quality system requirements (except for records requirements) for LDTs offered by a laboratory integrated within a healthcare system to meet an unmet need of patients receiving care within the same healthcare system; intends to exercise enforcement discretion and generally not enforce premarket review requirements for tests that are approved by the New York State Clinical Laboratory Evaluation Program (NYS CLEP); and intends to exercise enforcement discretion and generally not enforce premarket review requirements for certain modifications made to 510(k)-cleared and de novo classified tests by CLIA-certified, high-complexity laboratories, even if that 510(k) clearance or classification is held by a different manufacturer. However, the FDA noted that it could change these enforcement discretion policies at any time in the future. The Company expects to be in material compliance with the final rule at applicable compliance dates if the final rule remains in force.
On May 29, 2024, ACLA and its member company, HealthTrackRx, filed a civil action in the U.,S. District Court for the Eastern District of Texas against the Secretary of the HHS seeking to overturn the final rule on grounds that HHS (and by delegation, FDA) lacks jurisdiction to regulate LDTs as medical devices and that even if such jurisdiction exists, the rule is unlawfully arbitrary and capricious. A similar civil action filed by the Association for Molecular Pathology has been consolidated with the ACLA action.
On November 21, 2024, ACLA submitted a formal request to the transition team for then President-elect Donald Trump to announce a policy of non-enforcement of the final rule together with a notice of intent to rescind the rule through notice and comment rulemaking. Discussions with Congress and other stakeholders on potential legislative alternatives to the final rule are ongoing.
There are similar national and regional regulatory agencies and regulations in the jurisdictions outside of the U.S. in which the Company operates. For example, the European Union (EU) Medical Device Regulation (EU MDR) which became applicable on May 26, 2021, and the In Vitro Diagnostics Regulation (IVDR), which became applicable on May 26, 2022, established a new legislative framework for medical devices and in vitro diagnostic devices (IVDs), including a rule-based classification and quality and safety standards. In contrast to the former Regulation, the IVDR also applies to IVDs used in diagnostic and therapeutic services provided outside the EU to patients based in the EU. After the new EU MDR and IVDR had come into force, it soon emerged that the transitional periods originally specified therein were not sufficiently long and were extended for the MDR up to December 31, 2028, and up to December 31, 2029, depending on the risk class of the device.
BLS’s laboratory facilities and Dx’s clinical laboratory facilities that perform testing services in support of preclinical studies and clinical trials must conform to a range of standards and regulations, including good laboratory practice (GLP) and good clinical practice (GCP), current good manufacturing practice (cGMP), human subject protection and investigational product exemption regulations, and quality system regulation (QSR) requirements, as applicable. The preclinical and clinical testing intended to support applications for research or marketing, and the studies that the Company conducts, are subject to periodic inspections by the FDA, as well as other pharmaceutical and medical device regulators in the jurisdictions outside the U.S. in which the Company operates, which may include, without limitation, the Medicines and Healthcare products Regulatory Agency (MHRA) in the United Kingdom (UK), the European Union, the European Medicines Agency, the National Medical Products Administration in China, and the Pharmaceuticals and Medical Devices Agency in Japan, to determine compliance with GLP, GCP, and cGMP, as well as other applicable standards and regulations. If a regulatory agency determines during an inspection that the Company’s equipment, facilities, laboratories, operations, or processes do not comply with applicable regulations and GLP, GCP and/or cGMP standards, the regulatory agency may issue a formal notice (e.g., Form FDA 483), which may be followed by a warning letter or other enforcement actions if observations are not addressed satisfactorily. Noncompliance may result in, among other things, unanticipated compliance expenditures, the regulatory agency seeking civil, criminal or administrative sanctions, and/or other remedies against the Company, including suspension of its operations, and related customer contractual claims and other liabilities.
The FDA Modernization Act 2.0 was enacted in December 2022 as Section 3209 of the Consolidated Appropriations Act, 2023. This Act amended Section 505 of the Federal Food, Drug and Cosmetic Act to clarify the methods manufacturers and sponsors can use to investigate the safety and efficacy of a drug or the toxicity of a biosimilar biologic product to include tests on animals, as well as certain tests that are not performed on animals. Specifically, the Act replaces a statutory reference to “tests on animals” as a viable option for preclinical testing with a reference to “nonclinical tests”, which includes animal testing,
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cell-based assays, microphysiological systems, or bioprinted or computer models. The Act does not eliminate animal testing or require the use of non-animal models. FDA previously had the authority to allow non-animal data to be considered during safety and efficacy reviews of new drugs and had previously issued related guidance. However, many procedures intended to reduce animal tests are still in various stages of development. Such alternative methodologies must first be validated before FDA will approve of their use instead of validated animal models, so the practical impact of the Act is likely to be limited for some time.
Additionally, certain BLS services and activities, such as chemistry, manufacturing, and controls (CMC) services, must conform to cGMP. BLS is subject to periodic inspections by the FDA and the MHRA, as well as other regulatory agencies in the jurisdictions outside the U.S. in which the Company operates, in order to assess, among other things, cGMP compliance. If a regulatory agency identifies deficiencies during an inspection, it may issue a formal notice, which may be followed by a warning letter if observations are not addressed satisfactorily. Failure to maintain compliance with cGMP regulations and other applicable requirements of various regulatory agencies could result in, among other things, fines, warnings or untitled letters, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, product seizures or recalls, injunctions, or criminal prosecution.
Some Dx offerings are regulated as medical devices by the FDA and other similar national regulatory agencies in jurisdictions outside the U.S. in which the Company operates. The FDA defines a medical device in part as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article which is intended for the diagnosis of disease or other conditions or in the cure, mitigation, treatment, or prevention of disease in man. FDA regulatory requirements include: all of the relevant elements of the QSR, which requires manufacturers to follow stringent design, testing, control, documentation, and other quality assurance procedures; labeling regulations; restrictions on promotion and advertising; Medical Device Reporting regulations, which require the manufacturer to report to the FDA if its device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; the Reports of Corrections and Removals regulations, which require manufacturers to report certain recalls and field actions to the FDA;, and other post-market requirements.
On January 31, 2024, the FDA issued a final rule amending the device current good manufacturing practice (CGMP) requirements of the QSR to incorporate by reference the quality management system requirements of the international standard specific for medical device quality management systems set by the International Organization for Standardization (ISO), ISO 13485:2016. The revised regulation is now referred to as the Quality Management System Regulation (QMSR).The FDA has determined that the requirements in ISO 13485 are substantially similar to the requirements of the former QSR regulation, but the final rule establishes additional requirements that clarify certain expectations and certain concepts used in ISO 13485 to avoid inconsistencies with other applicable FDA requirements. The FDA will begin to enforce the QMSR requirements on the effective date, February 2, 2026.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions, operating restrictions, partial suspension, or total shutdown of production, refusal to grant clearance or approvals of new devices, withdrawal of clearance or approval, and civil or criminal prosecution.
Animal Welfare Laws and Regulations
The conduct of animal research at BLS’s facilities in the U.S. must be in compliance with the Animal Welfare Act (AWA), which governs the care and use of warm-blooded animals for research in the U.S., other than laboratory rats, mice, and chickens, and is enforced through periodic inspections by the U.S. Department of Agriculture (USDA). The AWA establishes facility standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering, handling, veterinary care, and recordkeeping. BLS complies with licensing and registration requirement standards set by the USDA and similar agencies in foreign jurisdictions such as the European Union, the UK, and China for the care and use of regulated species. If the USDA determines that BLS’s equipment, facilities, laboratories, or processes do not comply with applicable AWA standards, it may issue an inspection report documenting the deficiencies and setting deadlines for any required corrective actions. The USDA may impose fines, suspend and/or revoke licenses and registrations, or confiscate research animals. Other countries where the Company conducts business have similar laws and regulations with which the Company must also comply. In addition, certain of BLS’s animal-related activities may be subject to regulation by the U.S. Centers for Disease Control and Prevention, the Office of Laboratory Animal Welfare of the National Institutes of Health, the U.S. Fish and Wildlife Service, and similar organizations in other jurisdictions in which the Company operates.
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Payment for Clinical Laboratory Services
In 2024, Dx derived approximately 10.5% of its revenue directly from traditional Medicare and Medicaid programs. In addition, Dx’s other commercial laboratory testing business that is not directly related to Medicare or Medicaid nevertheless depends significantly on continued participation in these programs and in other government healthcare programs, in part because customers often want a single laboratory to perform all of their testing services. In recent years, both governmental and private-sector payers have made efforts to contain or reduce healthcare costs, including for clinical laboratory services.
Reimbursement under the PFS is capped at different rates in each Medicare Administrative Contractor’s jurisdiction. Pursuant to PAMA, unless modified by Congress, reimbursement under the CLFS is set at a national rate that is updated every three years for most tests. State Medicaid programs are prohibited from paying more than the Medicare fee schedule limit for clinical laboratory services furnished to Medicaid recipients. Laboratories primarily bill and are reimbursed by Medicare and Medicaid directly for covered tests performed on behalf of Medicare and Medicaid beneficiaries. For beneficiaries that participate in managed Medicare and managed Medicaid plans, laboratory bills are submitted to and paid by MCOs that manage those plans. Approximately 8.8% of Dx’s revenue is reimbursed directly by Medicare under the CLFS.
Many pathology services performed by Dx are reimbursed by Medicare under the PFS. The PFS assigns relative value units to each procedure or service, and a conversion factor is applied to calculate the reimbursement. The PFS is also subject to adjustment on an annual basis. Such adjustments can impact both the conversion factor and relative value units. The Sustainable Growth Rate (SGR), the formula previously used to calculate the fee schedule conversion factor, would have resulted in significant decreases in payment for most physician services for each year since 2003. However, Congress intervened repeatedly to prevent these payment reductions, and the conversion factor was increased or frozen for the subsequent year. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) permanently replaced the SGR formula and transitioned PFS reimbursement to a value-based payment system. MACRA retroactively avoided a 21.2% reduction in PFS reimbursement that had been scheduled for April 1, 2015, and provided for PFS conversion factor increases of 0.5% from July 1, 2015 to December 31, 2015, and 0.5% in each of years 2016-2019, followed by no updates for 2020 through 2025, and updates that vary based on participation in alternative payment models in subsequent years. These changes to the conversion factor may be offset by reductions to the relative value units, as was the case with the 2016 PFS reductions. For 2022, Congress increased the conversion factor by 3.0% over the amount announced in the final rule, instead of allowing a 3.75% reduction to take effect. In the Consolidated Appropriations Act of 2023, Congress mitigated PFS cuts in 2023 and 2024 by 2.5% and 1.25%, respectively, that would otherwise have been reduced by 4.47% in 2023 based on the conversion factor put forward in the 2023 Medicare PFS Final Rule. Approximately 0.4% of Dx’s revenue is reimbursed under the PFS.
In addition to changes in reimbursement rates, Dx is also impacted by changes in coverage policies for laboratory tests and annual CPT coding revisions. Medicare, Medicaid and private payer diagnosis code requirements and payment policies negatively impact Dx’s ability to be paid for some of the tests it performs. Further, some payers require additional information to process claims, employ third-party utilization management tools, or have implemented prior authorization policies which delay or prohibit payment.
Future changes in national, state, and local laws and regulations (or in the interpretation of current regulations) affecting government payment for clinical laboratory testing could have a material adverse effect on the Company.
Further healthcare reform could occur in 2025, including changes to the ACA and Medicare reform, as well as administrative requirements that may continue to affect coverage, reimbursement, and utilization of laboratory services in ways that are currently unpredictable.
Privacy, Security and Confidentiality of Health Information and Other Personal Information
In the U.S., the Health Insurance Portability and Accountability Act of 1996 (HIPAA) was designed to address issues related to the security and confidentiality of health information and to improve the efficiency and effectiveness of the healthcare system by facilitating the electronic exchange of information in certain financial and administrative transactions. These regulations apply to health plans and healthcare providers that conduct standard transactions electronically and healthcare clearinghouses (covered entities). Six such regulations include: (i) the Transactions and Code Sets Rule; (ii) the Privacy Rule; (iii) the Security Rule; (iv) the Standard Unique Employer Identifier Rule; (v) the National Provider Identifier Rule; and (vi) the Health Plan Identifier Rule. The Company, which may act as a HIPAA covered entity in certain circumstances, believes that it is in compliance in all material respects with each of the HIPAA Rules identified above.
The U.S. Health Information Technology for Economic and Clinical Health Act (HITECH) strengthened and expanded the HIPAA Privacy and Security Rules and their restrictions on use and disclosure of protected health information (PHI). HITECH includes, but is not limited to, prohibitions on exchanging PHI for remuneration and additional restrictions on the use of PHI for marketing. HITECH also imposes a number of Privacy Rule requirements and a majority of Security Rule provisions directly on business associates that were previously only directly applicable to covered entities. Moreover, HITECH requires covered
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entities to provide notice to individuals, HHS, and, as applicable, the media when unsecured PHI is breached, as that term is defined by HITECH. Business associates are similarly required to notify covered entities of a breach.
The Privacy Rule regulates the use and disclosure of PHI by covered entities. It also sets forth certain rights that individuals have with respect to their PHI maintained by a covered entity, such as the right to access or amend certain records containing PHI or to request restrictions on the use or disclosure of PHI. The HIPAA Privacy Rule requires covered entities to contractually bind third parties, known as business associates, in the event that they perform an activity or service for or on behalf of the covered entity that involves the creation, receipt, maintenance, or transmission of PHI.
On February 6, 2014, CMS and HHS published final regulations that amended the HIPAA Privacy Rule to provide individuals (or their personal representatives) with the right to receive copies of their test reports from laboratories subject to HIPAA, or to request that copies of their test reports be transmitted to designated third parties.
On April 22, 2024, HHS issued a final rulemaking containing modifications to the HIPAA Privacy Rule to address the use or disclosure of PHI in relation to the provision of reproductive health care. The Company will implement appropriate processes to manage compliance with these changes as applicable. On December 27, 2024, HHS published a notice of proposed rulemaking (NPRM) containing potential modifications to the HIPAA Security Rule addressing prescriptive requirements for administrative, physical, and technical safeguards in response to increased cybersecurity incidents in the health care industry. The public comment period for the NPRM is expected to close on March 7, 2025. The Company is monitoring the NPRM process. If modifications to the HIPAA Security Rule are adopted, they may impact the Company’s compliance obligations under HIPAA.
The administrative simplification provisions of HIPAA mandate the adoption of standard unique identifiers for healthcare providers. The intent of these provisions is to improve the efficiency and effectiveness of the electronic transmission of health information. The National Provider Identifier Rule requires that all HIPAA-covered healthcare providers, whether they are individuals or organizations, must obtain an NPI to identify themselves in standard HIPAA transactions. NPI replaces the unique provider identification number and other provider numbers previously assigned by payers and other entities for the purpose of identifying healthcare providers in standard electronic transactions.
Violations of the HIPAA provisions could result in civil and/or criminal penalties, including significant fines and up to 10 years in prison. HITECH also requires HHS to conduct periodic audits to confirm compliance and authorizes state attorneys general to bring civil actions seeking either injunctions or damages in response to violations of the HIPAA privacy and security regulations that affect the privacy of state residents.
The total cost associated with complying with the ongoing requirements of HIPAA and HITECH is not expected to be material to the Company’s operations or cash flows. However, future regulations and interpretations of HIPAA and HITECH could impose significant costs on the Company.
The information blocking provisions (Information Blocking Rules) of the 21st Century Cures Act became effective on April 5, 2021. The Information Blocking Rules prohibit covered actors, including healthcare providers, from engaging in activity that is likely to interfere with the access, exchanges, or use of electronic health information unless such activity falls into one of eight exceptions. The Information Blocking Rules provide for civil monetary penalties for noncompliance by healthcare information technology vendors and, separately, “appropriate disincentives” for noncompliance by healthcare providers.
In addition to the regulations described above, numerous other data protection, privacy and similar laws govern the confidentiality, security, use, and disclosure of personal information, as well as breach notification responsibilities. These laws vary by jurisdiction, but they most commonly regulate or restrict the collection, use, and disclosure of medical and financial information and other personal information. In the U.S., the Federal Trade Commission has authority to regulate unfair or deceptive acts or practices, including with respect to data privacy and security. If the Company’s public statements about collection, use, or disclosure of personal information are perceived to be inconsistent with the Company’s actual practices, the Company may face accusations of unfairness or deception under the Federal Trade Commission Act of 1914 or state law equivalents. In addition, some state laws are more restrictive and, therefore, are not preempted by HIPAA. Penalties for violation of these laws may include sanctions against a laboratory’s licensure, as well as civil and/or criminal penalties.
Effective August 14, 2020, the Substance Abuse and Mental Health Services Administration of HHS (SAMHSA) announced the finalization of proposed changes to the Confidentiality of Substance Use Disorder Patient Records regulation. This regulation protects the confidentiality of patient records relating to the identity, diagnosis, prognosis, or treatment that are maintained in connection with the performance of any federally assisted program or activity relating to substance use disorder education, prevention, training, treatment, rehabilitation, or research. Under the regulation, patient identifying information may only be released with the individual’s written consent, subject to certain limited exceptions. The latest changes to this regulation seek to better facilitate care coordination, while maintaining more stringent confidentiality of substance use disorder information. The Company adopted changes to its policies and procedures necessary for compliance.
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Congress and state legislatures also have been adopting legislation relating to privacy and data protection. For example, on June 28, 2018, the California legislature passed the California Consumer Privacy Act (CCPA), which became effective January 1, 2020. The CCPA created transparency requirements and granted California residents several new rights with regard to their personal information. In addition, in November 2020, California voters approved the California Privacy Rights Act (CPRA) ballot initiative, which introduced significant amendments to the CCPA and established and funded a dedicated California privacy regulator, the California Privacy Protection Agency (CPPA). The amendments to the CCPA introduced by the CPRA went into effect on January 1, 2023. Implementing regulations have been introduced by the CPPA and additional regulations are anticipated. Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages. In addition, California residents have the right to bring a private right of action in connection with certain types of incidents. These claims may result in significant liability and potential damages. Other states have passed legislation similar to the CCPA that generally mirror the principles and requirements of the CCPA; however, some of these laws do not provide for a private right of action. Additionally, Connecticut, Washington and Nevada have passed legislation specific to consumer health data. The Company has developed appropriate processes to manage compliance with these laws as applicable.
The EU General Data Protection Regulation (GDPR) establishes requirements applicable to the use and transfer of personal data and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue. The GDPR, as well as the UK’s implementation -- the UK General Data Protection Regulation -- requires transparency with regard to the means and purposes of processing of personal data, collection of consent to process personal data in certain circumstances, the ability to provide records of processing upon request by a supervisory authority or data controller, implementation of appropriate technical and organizational measures to maintain security of personal data, notification of personal data breaches to supervisory authorities, data controllers, and individuals within expedient time frames, and performance of data protection impact assessments for certain processing activities. The GDPR also provides individual data subjects with certain rights, where applicable, including the right of access, the right to rectification, the right to be forgotten, the right to restrict or object to processing, and the right to data portability. The GDPR requires that personal data may only be transferred outside of the EU to a country that offers an adequate level of data protection under standards set by the EU, or where such transfer is otherwise pursuant to a legal framework approved by the EU. On July 16, 2020, the Court of Justice of the EU released its decision in Data Protection Commission v. Facebook Ireland Limited, (Schrems II), which invalidated the EU-U.S. Privacy Shield as a legal framework for the transfer of personal data outside of the EU, and suggesting additional safeguards for the use of Standard Contractual Clauses (SCCs) as a legal framework for the transfer of personal data outside of the EU. On June 4, 2021, the European Commission release updated SCCs, which, in part, adopted many of the additional safeguards highlighted in the Schrems II decision. Companies using SCCs for the transfer of personal data outside of the EU are required to use the new SCCs or an alternate approved form of data transfers. The Company has established processes and frameworks to manage compliance with the GDPR and other global privacy and data protection requirements, and to manage preparation for future enacted regulations. Compliance could impose significant costs on the Company.
In addition to the GDPR, numerous other countries have laws governing the collection, use, disclosure, and transmission (including cross-border transfer) of personal information, including medical information. The legislative and regulatory landscape for privacy and data protection is complex and continually evolving. Data protection regulations have been enacted or updated in regions where the Company does business including in Asia and Europe, and in countries such as Canada, India, and the UK. Failure to comply with these regulations may result in, among other things, civil, criminal and contractual liability, fines, regulatory sanctions, and damage to the Company’s reputation.
Potential government regulation related to AI use and ethics may also increase compliance costs and impact operations as the Company continues to develop, test, adopt, and maintain AI within the Company’s operations and in its offerings. The rapid evolution of AI, and potential government regulation, will require the application of resources to allow the Company to implement AI appropriately in order to minimize unintended, harmful impact, including from the exposure of Company or third-party information or the Company relying on flawed AI outputs. The Company has implemented an AI Code of Ethics and established an AI Ethics Board to review and help maintain compliance with AI ethical principles and regulatory requirements in the development and use of AI systems, including generative AI tools.
Fraud and Abuse Laws and Regulations
Existing U.S. laws governing federal healthcare programs, including Medicare and Medicaid, as well as similar state laws, impose a variety of broadly described fraud and abuse prohibitions on healthcare providers, including clinical laboratories. These laws are interpreted liberally and enforced aggressively by multiple government agencies, including the U.S. Department of Justice (DOJ), OIG, and various state agencies. Historically, the clinical laboratory industry has been the focus of major governmental enforcement initiatives. The U.S. government’s enforcement efforts have been conducted under statutory authorities such as those contained in HIPAA, which includes several provisions related to fraud and abuse enforcement, including the establishment of a program to coordinate and fund U.S., state and local law enforcement efforts, and in the Deficit
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Reduction Act of 2005, which included requirements directed at Medicaid fraud, including increased spending on enforcement and financial incentives for states to adopt false claims act provisions similar to the U.S. False Claims Act. Amendments to the False Claims Act, and other enhancements to the U.S. fraud and abuse laws enacted as part of the ACA, have further increased fraud and abuse enforcement efforts and compliance risks. For example, the ACA established an obligation to report and refund overpayments from Medicare or Medicaid within 60 days of identification (whether or not paid through any fault of the recipient); failure to comply with this requirement can give rise to additional liability under the False Claims Act and Civil Monetary Penalties statute.
The U.S. Anti-Kickback Statute prohibits knowingly providing anything of value in return for, or to induce the referral of, Medicare, Medicaid, or other U.S. federal healthcare program business. Violations can result in imprisonment, fines, penalties, and/or exclusion from participation in U.S. federal healthcare programs. The OIG has published “safe harbor” regulations that specify certain arrangements that are protected from prosecution under the Anti-Kickback Statute if all conditions of the relevant safe harbor are met. Failure to fit within a safe harbor does not necessarily constitute a violation of the Anti-Kickback Statute; rather, the arrangement would be subject to scrutiny by regulators and prosecutors and would be evaluated on a case-by-case basis. Many states have their own Medicaid anti-kickback laws, and several states also have anti-kickback laws that apply to all payers (i.e., not just government healthcare programs).
From time to time, the OIG issues alerts and other guidance on certain practices in the healthcare industry that implicate the Anti-Kickback Statute or other fraud and abuse laws. OIG Special Fraud Alerts and Advisory Opinions relevant to the Company set forth a number of practices allegedly engaged in by some clinical laboratories, healthcare providers, and biopharmaceutical manufacturers that raise issues under the U.S. fraud and abuse laws, including the Anti-Kickback Statute. These practices include: (i) providing employees to furnish valuable services for physicians (other than collecting patient specimens for testing) that are typically the responsibility of the physicians’ staff; (ii) offering or providing discounted laboratory services billed to referral sources in return for referrals of other tests that are billed to U.S. federal healthcare programs; (iii) providing free testing to physicians’ managed care patients in situations where the referring physicians benefit from such reduced laboratory utilization; (iv) providing free pickup and disposal of biohazardous waste for physicians for items unrelated to a laboratory’s testing services; (v) providing general-use facsimile machines or computers to physicians that are not exclusively used in connection with the laboratory services; (vi) providing free testing for healthcare providers, their families and their employees (i.e., so-called “professional courtesy” testing); (vii) rental of space in physician offices by equipment suppliers or other healthcare entities to which the physicians make referrals; (viii) compensation paid by laboratories to physicians and hospitals for blood specimen processing and for submitting patient data to registries; (ix) remuneration provided to physicians and other health care professionals by pharmaceutical and medical device companies in connection with company-sponsored speaker programs; (x) arrangements between telemedicine companies and healthcare professionals that result in the fraudulent ordering or prescribing of medically unnecessary services, including prescription drugs, durable medical equipment, and clinical laboratory testing; and (xi) the provision of free genetic and other testing sponsored by biopharmaceutical manufacturers for use in making diagnostic or other clinical decisions related to use of the manufacturers’ products.
In addition to the Anti-Kickback Statute, in October 2018, the U.S. enacted the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act. EKRA is an all-payer anti-kickback law that makes it a criminal offense to pay any remuneration to induce referrals to, or in exchange for, patients using the services of a recovery home, a substance use clinical treatment facility, or laboratory. Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce patronage of substance use recovery and treatment, the language in EKRA is broadly written. As drafted, an EKRA prohibition on incentive compensation to sales employees is inconsistent with the federal anti-kickback statute and regulations, which permit payment of employee incentive compensation, a practice that is common in the industry. Significantly, EKRA permits the U.S. Department of Justice to issue regulations clarifying EKRA’s exceptions or adding additional exceptions, but such regulations have not yet been issued, and there is no additional DOJ or other government guidance to indicate how and to what extent it will be applied and enforced in the industry. The Company continues to work through its trade association to address the scope of EKRA.
Under another U.S. statute, known as the Stark Law or “physician self-referral” prohibition, physicians who have a financial or a compensation relationship with a clinical laboratory may not, unless an exception applies, refer Medicare or Medicaid patients for testing to the laboratory, regardless of the intent of the parties. Similarly, laboratories may not bill Medicare or Medicaid for services furnished pursuant to a prohibited self-referral. There are several Stark Law exceptions that are relevant to arrangements involving clinical laboratories, including: (i) fair market value compensation for the provision of items or services; (ii) payments by physicians to a laboratory for clinical laboratory services; (iii) ancillary services (including laboratory services) provided within the referring physician’s own office, if certain criteria are satisfied; (iv) physician investment in a company whose stock is traded on a public exchange and has stockholder equity exceeding $75.0 million; and (v) certain space
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and equipment rental arrangements that are set at a fair market value rate and satisfy other requirements. Many states have their own self-referral laws as well, which in some cases apply to all patient referrals, not just government reimbursement programs.
In December 2020, the OIG and CMS published final rules to amend certain regulations implementing the Anti-Kickback Statute and the Stark Law, respectively. The amendments were primarily intended to alleviate perceived impediments to coordinated care and value-based compensation arrangements through new safe harbors to the Anti-Kickback Statute and new exceptions to the Stark Law and have varying degrees of applicability to laboratories. The CMS final rule incorporates laboratories and permits support for value-based arrangements, under certain conditions for purposes of the Stark Law. However, the OIG final rule generally excludes laboratories from protection under the Anti-Kickback Statute safe harbors for value-based arrangements.
There are a variety of other types of U.S. and state fraud and abuse laws, including laws prohibiting submission of false or fraudulent claims and that require certain companies to disclose payments and other transfers of value to certain healthcare professionals and providers. The Company seeks to conduct its business in compliance with all U.S. and state fraud and abuse laws. The Company is unable to predict how these laws will be applied in the future, and no assurances can be given that its arrangements will not be subject to scrutiny under such laws. Sanctions for violations of these laws may include exclusion from participation in Medicare, Medicaid, and other U.S. or state healthcare programs, significant criminal and civil fines and penalties, and loss of licensure. Any exclusion from participation in a U.S. healthcare program, or material loss of licensure, arising from any action by any federal or state regulatory or enforcement authority, would likely have a material adverse effect on the Company’s business. In addition, any significant criminal or civil penalty resulting from such proceedings could have a material adverse effect on the Company’s business.
Enrollment and re-enrollment in U.S. healthcare programs, including Medicare and Medicaid, are subject to certain program integrity requirements intended to protect the programs from fraud, waste, and abuse. In September 2019, CMS published a final rule implementing program integrity enhancements to provider enrollment requiring Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) providers and suppliers to disclose on an enrollment application or a revalidation application any current or previous direct or indirect affiliation with a provider or supplier that (i) has uncollected debt; (ii) has been or is subject to a payment suspension under a federal health care program; (iii) has been or is excluded by the OIG from Medicare, Medicaid, or CHIP, or (iv) has had its Medicare, Medicaid, or CHIP billing privileges denied or revoked. This rule permits CMS to deny enrollment based on such an affiliation when CMS determines that the affiliation poses an undue risk of fraud, waste, or abuse. CMS is phasing in this new affiliation disclosure requirement.
In November 2021, CMS published the 2022 Medicare PFS Final Rule, which included further program integrity requirements. CMS finalized its proposal to expand the categories of parties within the purview of the denial and revocation provisions to include excluded administrative or management services personnel who furnish services payable by a federal healthcare program, such as a billing specialist, accountant, or human resources specialist. CMS also codified the billing privilege deactivation rebuttal process, under which a provider or supplier would have 15 calendar days from receipt of written notice of a deactivation to submit a rebuttal, and CMS could, in its discretion, extend the 15-day period to account for certain special situations. In addition, CMS defined factors it would use to determine whether revocation or suspension of billing privileges is appropriate due to a pattern or practice of non-compliant billing, which would be: (i) the percentage of submitted claims that were denied during the period under consideration; (ii) whether the provider or supplier has any history of final adverse actions and the nature of any such actions; (iii) the type of billing non-compliance and the specific facts surrounding said non-compliance (to the extent this can be determined); and (iv) any other information regarding the provider’s or supplier’s specific circumstances that CMS deems relevant to the determination. This is a reduction in the number of factors that were previously considered and a revision of some previous factors.
Environment, Health, Safety, and Sustainability
The Company is subject to licensing and requirements under laws and regulations relating to the protection of the environment and employee health and safety. These laws and regulations, designed to minimize risk to employee health and safety and to the environment, include the safe handling, use, transportation, and disposal of potentially infectious and hazardous materials; the assessment of potential work-related risks and establishment of work practice and engineering controls, and providing protective clothing and equipment, training, and medical surveillance.
The Company is committed to reducing its carbon footprint. The Company participates in the CDP and the EcoVadis sustainable procurement rating processes. In 2023, the Company’s greenhouse gas emission (GHG) reduction science-based targets were accepted by the Science Based Targets initiative, and the Company has committed to reducing Scope 1 and 2 GHG emissions 42% and Scope 3 GHG emissions by 25% by year end 2030, versus a 2020 baseline.
Energy-saving measures at Company facilities include for example, installation of energy efficient boilers, chillers, ventilation systems, and light-emitting diode lighting, and engaging in waste-to-energy disposition. The Company is committed
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to reducing the fuel use of its courier fleet, and in 2024 the Company added nearly 469 hybrid vehicles to its fleet, to help achieve its goals of reducing fuel use. Funding for these and similar projects continued through 2024 and is expected to continue through 2027.
The Company seeks to comply with all relevant environment, employee-health, and safety laws and regulations. Failure to comply could subject the Company to various administrative and/or other enforcement actions.
Drug Testing
Drug testing for public sector employees is regulated by the SAMHSA, which has established detailed performance and quality standards that laboratories must meet to be approved to perform drug testing on employees of U.S. government contractors and certain other entities. To the extent that the Company’s laboratories perform such testing, each must be certified as meeting SAMHSA standards. The Company’s laboratories in Research Triangle Park, North Carolina; Raritan, New Jersey; Houston, Texas; Southaven, Mississippi; St. Paul, Minnesota; and Portland, Oregon, are all SAMHSA certified. Each laboratory also maintains state licensure and laboratory certifications required to provide testing for private sector employers.
Controlled Substances
BLS handles controlled substances as part of the services it provides in preclinical testing. The use of controlled substances is regulated by the U.S. Drug Enforcement Administration under the Controlled Substances Act (CSA) and its implementing regulations. The CSA establishes, among other things, certain registration, security, recordkeeping, reporting, import, export, and other requirements for controlled substances. The Company seeks to conduct its business in compliance with these requirements as applicable. Violations of these rules may result in criminal and civil fines and penalties.
Compliance Program
The Company maintains a global compliance program that includes ongoing evaluation and monitoring of its compliance with the laws and regulations of the U.S. and the other countries in which it has operations. The objective of the Company’s compliance program is to develop, implement, monitor, and update compliance safeguards, as appropriate. Although the Company is subject to a broad range of regulations, its compliance program has a particular focus on regulations related to healthcare fraud and abuse, anti-kickback, physician self-referral, government reimbursement programs, anti-bribery/anti-corruption, anti-human trafficking, and trade sanctions, among others. Emphasis is placed on developing and implementing compliance policies and guidelines, personnel training programs, risk assessment, monitoring and auditing activities, and providing systems for reporting and investigation of potential or actual compliance concerns. The compliance program demonstrates the Company’s commitment to conducting business at the highest standards of ethical conduct and integrity.
The Company seeks to conduct its business in compliance with all statutes, regulations, and other requirements applicable to its clinical laboratory operations and biopharma laboratory services business. The clinical laboratory industry and biopharma laboratory services industries are, however, subject to extensive regulation, and many of these statutes and regulations have not been interpreted by the courts. In addition, the applicability or interpretation of statutes and regulations may not be clear in light of emerging changes in clinical testing science, healthcare technology, and healthcare organizations. Applicable statutes and regulations may be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that would materially adversely affect the Company. Potential sanctions for violation of these statutes and regulations include significant civil and criminal penalties, fines, exclusion from participation in governmental healthcare programs, and the loss of various licenses, certificates, and authorizations necessary to operate, as well as potential liabilities from third-party claims, all of which could have a material adverse effect on the Company’s business.

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ITEM 1A. RISK FACTORS
Item 1A. RISK FACTORS
Investors should carefully consider all of the information set forth in this Annual Report, including the following risk factors, before deciding to invest in any of the Company’s securities. The risks below are not the only ones that the Company faces. Additional risks not presently known to the Company, or that it presently deems immaterial, may also negatively impact the Company. The Company’s business, consolidated financial condition, revenues, results of operations, profitability, reputation or cash flows could be materially impacted by any of these factors.
Risks Related to the Company’s Business and Operations Including Global Economic and Geopolitical Factors
General or macro-economic factors and significant fluctuations in economic conditions in the U.S. and globally may have a material adverse effect upon the Company.
The Company’s operations are dependent upon ongoing demand for diagnostic testing and biopharma laboratory services by patients, physicians, hospitals, MCOs, pharmaceutical, biotechnology and medical device companies and others. Significant changes in global economic conditions, and an increase in the costs of goods and services, could negatively impact testing volumes, the demand for biopharma laboratory services, cash collections, profitability, and the availability and cost of credit.
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Pressures on and uncertainty surrounding the U.S. federal government’s budget, and potential changes in budgetary priorities, could adversely affect the funding for government programs that comprise a portion of the Company’s revenues. In addition, uncertainty in the credit markets and interest rate volatility could reduce the availability and increase the cost of credit and impact the Company’s ability to meet its financing needs in the future.
Operations may be disrupted and adversely impacted by events beyond the Company’s control, including natural disasters, adverse weather, geopolitical events, public health crises, acts of terrorism, disruption to supply chain, and inaccessibility of natural resources.
Natural disasters, such as adverse weather, fires, earthquakes, power shortages and outages, geopolitical events, such as terrorism, war, political instability, or other conflict, public health crises and disease epidemics and pandemics, criminal activities, disruptions to supply chains, inaccessibility of natural resources, and other disruptions or events beyond the Company’s control could negatively affect the Company’s operations. Any of these events may result in a temporary decline of testing volumes and other work in both segments. In addition, such events may temporarily interrupt the Company’s ability to transport specimens, efficiently commence, continue, or complete its work on studies, utilize information technology systems, utilize certain laboratories, and/or to receive material from its suppliers. Such events can also affect customer operations and thereby impact testing volume. Long-term disruptions in the infrastructure and operations caused by such events (particularly involving locations in which the Company has operations), could harm the Company’s operating results.
An inability to attract, retain, and develop experienced and qualified personnel, including key management personnel, and increased personnel costs, could adversely affect the Company’s business.
The loss of key management personnel or the inability to attract, retain, and develop experienced and qualified employees, at the Company’s clinical laboratories, drug development, and diagnostic facilities, and increased costs related to such personnel and employees, could adversely affect the business. The success of the Company is dependent in part on the efforts of key members of its management team. Success in maintaining the Company’s leadership position in genomic and other advanced testing and diagnostic technologies will depend in part on the Company’s ability to attract and retain skilled research professionals. In addition, the success of the Company’s early discovery, clinical, and commercial laboratories also depend on employing and retaining qualified and experienced professionals, including specialists, who perform laboratory research activities and testing services. The same is true for patient-facing staff with specialized training required to perform activities related to specimen collection or clinical research activities. In the future, if competition for the services of these professionals increases, the Company may not be able to continue to attract and retain individuals in its markets. Changes in key management, or the ability to attract, develop, and retain qualified personnel, as a result of increased competition for talent, wage growth, or other market factors, could lead to strategic and operational challenges and uncertainties, distractions of management from other key initiatives, and inefficiencies and increased costs, any of which could adversely affect the Company’s business, financial condition, results of operations, and cash flows.
Continued changes in healthcare reimbursement models and products (e.g., health insurance exchanges), changes in government payment and reimbursement systems, or changes in payer mix, including an increase in third-party benefits management and value-based payment models, could have a material adverse effect on the Company’s revenues, profitability and cash flow.
Dx testing services are billed to MCOs, Medicare, Medicaid, physicians and physician groups, hospitals, patients, and employer groups. Most testing services are billed to a party other than the physician or other authorized person who ordered the test. Increases in the percentage of services billed to government and MCOs could have an adverse effect on the Company’s revenues.
The Company expects the efforts to impose reduced reimbursement, more stringent payment policies, and utilization and cost controls by government and other payers to continue. If Dx cannot offset additional reductions in the payments it receives for its services by reducing costs, increasing test volume, and/or introducing new services and procedures, it could have a material adverse effect on the Company’s revenues, profitability, and cash flows. In 2014, Congress passed PAMA, requiring Medicare to change the way payment rates are calculated for tests paid under the CLFS, and to base the payment on the weighted median of rates paid by private payers. Pursuant to PAMA, reimbursement rates for many clinical laboratory tests provided under Medicare were reduced from 2018 through 2020. Enforcement of PAMA was suspended each year from 2021 through 2025, but a long-term resolution through legislation has not yet been achieved, and the next round of PAMA reductions are currently on track to be implemented in 2026. Unless implementation of PAMA is further delayed or changed, additional reductions in reimbursements of $100.0 million are expected for 2026 from all payers affected by the CLFS.
The Company’s ability to attract and retain MCOs is critical given the impact of healthcare reform, changes in coverage and evolving value-based care and risk-based reimbursement delivery models (e.g., accountable care organizations (ACOs) and Independent Physician Associations (IPAs)).
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A portion of the managed care fee-for-service revenues is collectible from patients in the form of deductibles, coinsurance and copayments. As patient cost-sharing continues to increase, the Company’s collections may be adversely impacted.
In addition, Medicare and Medicaid and private insurers have increased their efforts to control the cost, utilization and delivery of healthcare services, including commercial laboratory services. Measures to regulate healthcare delivery in general, and clinical laboratories in particular, have resulted in reduced prices, added costs and decreased test utilization for the commercial laboratory industry by increasing complexity and adding new regulatory and administrative requirements.
The Company has periodically experienced delays in the pricing and implementation of coding and billing changes among various payers, including Medicaid, Medicare and commercial carriers. Payer policy changes in coverage, along with coding and billing changes, have had a negative impact over time on revenue, revenue per requisition, and margins and cash flows. In 2024, limited coding and billing changes were implemented. While limited changes are expected to be implemented in 2025, the Company typically expects some delays in pricing and reimbursement as new codes are introduced.
The Company expects the efforts to impose reduced reimbursement, more stringent payment policies, and utilization and cost controls by government and other payers to continue. If Dx cannot offset additional reductions in the payments it receives for its services by reducing costs, increasing test volume, and/or introducing new services and procedures, it could have a material adverse effect on the Company’s revenues, profitability and cash flows.
Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that BLS provides.
BLS assists pharmaceutical, biotechnology, and medical device companies in navigating the regulatory approval process. Changes in government regulations, such as a relaxation in regulatory requirements or the introduction of simplified approval procedures or an increase in regulatory requirements that BLS may have difficulty satisfying or that may make its services less competitive, could eliminate or substantially reduce the demand for its services. Also, if government efforts to contain drug and medical product and device costs impact profits from such items, or if health insurers were to change their practices with respect to reimbursement for those items, some of BLS’s customers may spend less, or reduce their growth in spending on R&D.
Increased competition, including price competition, could have an adverse effect on the Company’s revenues and profitability.
As further described in Item 1 and Item 1A of Part I of this Annual Report, both Dx and BLS operate in competitive industries. The commercial laboratory business is intensely competitive in terms of price, service, specialty offerings, and the type and number of commercial laboratories. Dx and BLS compete against a wide range of businesses, as well as in-house departments of pharmaceutical, biotechnology, medical device, and diagnostic companies, and to a lesser extent, selected academic research centers, universities, and teaching hospitals. In addition, BLS’s services periodically experience periods of increased price competition that may have an adverse effect on the segment’s profitability and consolidated revenues and net earnings.
Failure to obtain and retain new customers, the loss of existing customers or material contracts, or a reduction in services or tests ordered or specimens submitted by existing customers, or the inability to retain existing and/or create new relationships with health systems could impact the Company’s ability to successfully grow its business.
To maintain and grow its business, the Company needs to obtain and retain new customers and business partners. In addition, a reduction in tests ordered or specimens submitted by existing customers, a decrease in demand for the Company’s services from existing customers, or the loss of existing contracts, without offsetting growth in its customer base, could impact the Company’s ability to successfully grow its business and could have a material adverse effect on the Company’s revenues and profitability. The Company competes primarily on the basis of reputation, efficient and timely performance, and leadership in science, technology and innovation. The Company’s failure to successfully compete in any of these areas could result in the loss of existing customers, an inability to gain new customers, and reduced or stagnant growth of the Company’s business.
Discontinuation or recalls of products used in the performance of testing, failure to develop or acquire licenses for new or improved testing technologies, or the Company’s customers using new technologies to replace offerings currently provided by the Company could adversely affect its business.
From time to time, manufacturers discontinue or recall reagents, test kits, or instruments used by the Company to perform laboratory testing. Such discontinuations or recalls could adversely affect the Company’s costs, testing volume and revenue.
The commercial laboratory industry is subject to changing technology and the introduction of new and improved test offerings. The Company’s success in maintaining a leadership position in genomic and other advanced testing technologies will depend, in part, on its ability to develop, acquire or license new and improved technologies on favorable terms and to obtain
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appropriate coverage and reimbursement for these technologies. The Company may not be able to negotiate acceptable licensing arrangements, and it cannot be certain that such arrangements will yield commercially successful diagnostic tests. If the Company is unable to license these testing methods at competitive rates, its R&D costs may increase as a result. In addition, if the Company is unable to license new or improved technologies to expand its esoteric testing operations, its testing methods may become outdated and testing volume and revenue may be materially and adversely affected.
In addition, advances in technology may lead to the development of more technologies, such as point-of-care testing equipment, that can be operated by healthcare providers in their offices or by patients themselves without requiring the services of commercial laboratories. Development of such technology and its use by the Company’s customers could reduce the demand for its laboratory testing services and the utilization of certain tests offered by the Company and negatively impact its revenues. Similarly, application of artificial intelligence to testing could reduce demand for the Company’s services, or competitors could adopt use of these technologies and derive benefits from them sooner than the Company.
Manufacturers of laboratory equipment and test kits could seek to increase their sales by marketing point-of-care laboratory equipment to physicians and by selling test kits approved by regulatory agencies for home or physician office use to both physicians and patients. Increased approval and use of such test kits could lead to increased testing by physicians in their offices or by patients at home, which could affect the Company’s market for laboratory testing services and negatively impact its revenues.
Changes or disruption in services, supplies, or transportation provided by third parties have impacted and could continue to impact or adversely affect the Company’s business.
The Company depends on third parties to provide supplies and services critical to the Company’s business. Although the Company has a significant proprietary network of ground and air transport capabilities, certain of the Company’s businesses are heavily reliant on third-party ground and air travel for transport of clinical trial and diagnostic testing supplies and specimens, research products, and people. A significant disruption to these travel systems, or the Company’s access to them, could have a material adverse effect on the Company’s business. The Company is also reliant on an extensive network of third-party suppliers and vendors of certain services and products, including for certain animal populations. Disruptions to the continued supply, or increases in costs, of these services, products, or animal populations may arise from export/import restrictions or embargoes, political or economic instability, pressure from animal rights activists, adverse weather, natural disasters, public health crises, transportation disruptions, cybersecurity incidents, or other causes, as well as from termination of relationships with suppliers or vendors for their failure to follow the Company’s performance standards and requirements. Disruption of supply and services has impacted and could continue to impact or have a material adverse effect on the Company’s business.
A failure to identify suitable acquisition targets and successfully close and integrate acquisitions could have a material adverse effect on the Company’s business objectives and its revenues and profitability.
Part of the Company’s strategy involves deploying capital in investments that enhance the Company’s business, which includes pursuing strategic acquisitions to strengthen the Company’s scientific capabilities and enhance therapeutic expertise, enhance esoteric testing and global drug development capabilities, and increase presence in key geographic areas. Since January 1, 2020, the Company has invested net cash of approximately $3.4 billion in strategic business acquisitions. However, the Company cannot assure that it will be able to identify acquisition targets that are attractive to the Company or that are of a large enough size to have a meaningful impact on the Company’s operating results. Furthermore, the successful closing and integration of a strategic acquisition entails numerous risks, including, among others:
•failure to obtain regulatory clearance, including due to antitrust concerns;
•loss of key customers or employees as a result of the acquisition;
•difficulty in consolidating redundant facilities and infrastructure and in standardizing information and other systems;
•unidentified regulatory problems at the acquired company or business;
•failure to maintain the quality of services that such companies or businesses have historically provided;
•unanticipated costs and other liabilities;
•potential liabilities related to litigation related to the acquired company or business, or from its prior owners;
•failure to timely identify and remediate noncompliant activities of the acquired company or business;
•potential periodic impairment of goodwill and intangible assets acquired;
•coordination of geographically separated facilities and workforces; and
•the potential disruption of the Company’s ongoing business and diversion of management’s resources.
The Company cannot assure that current or future acquisitions, if any, or any related integration efforts will be successful, or that the Company’s business will not be adversely affected by any future acquisitions, including with respect to revenues and profitability. Even if the Company is able to successfully integrate the operations of companies and businesses that it acquires in the future, the Company may not be able to realize the benefits that it expects from such acquisitions.
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Unfavorable labor environments, union strikes, work stoppages, union or works council negotiations, or failure to comply with labor or employment laws could adversely affect the Company’s operations and have a material adverse effect upon the Company’s business.
The Company is a party to a limited number of collective bargaining agreements with various labor unions and is subject to employment and labor laws and unionization activity in the U.S. Similar employment and labor obligations exist across other countries in which it conducts business, including appropriate engagement with works councils in Europe. Disputes with regard to the terms of labor agreements or obligations for consultation, potential inability to negotiate acceptable contracts with these unions, unionization activity, or a failure to comply with labor or employment laws could result in, among other things, labor unrest, strikes, work stoppages, slowdowns by the affected workers, fines and penalties. If any of these events were to occur, or other employees were to become unionized, the Company could experience a significant disruption of its operations or higher ongoing labor costs, either of which could have a material adverse effect upon the Company’s business. Additionally, future labor agreements, or renegotiation of labor agreements or provisions of labor agreements, or changes in labor or employment laws, could compromise its service reliability and significantly increase its costs, which could have a material adverse effect upon the Company’s business. Also, the Company may incur substantial additional costs and become subject to litigation and enforcement actions if the Company fails to comply with legal requirements affecting its workforce and labor practices, including laws and regulations related to wage and hour practices, Office of Federal Contract Compliance Programs compliance, and unlawful workplace harassment and discrimination.
Continued and increased consolidation of pharmaceutical, biotechnology and medical device companies, health systems, physicians and other customers could adversely affect the Company’s business.
Many healthcare companies and providers, including pharmaceutical, biotechnology and medical device companies, health systems, and physician practices are consolidating through mergers, acquisitions, joint ventures, and other types of transactions and collaborations. In addition to these more traditional horizontal mergers that involve entities that previously competed against each other, the healthcare industry is experiencing an increase in vertical mergers, which involve entities that previously did not offer competing goods or services. As the healthcare industry consolidates, competition to provide goods and services may become more intense, and vertical mergers may give those combined companies greater control over more aspects of healthcare, including increased bargaining power. This competition and increased customer bargaining power may adversely affect the price and volume of the Company’s services.
In addition, as the broader healthcare industry trend of consolidation continues, including the acquisition of physician practices by health systems, relationships with hospital-based health systems and integrated delivery networks are becoming increasingly important. Dx has a well-established base of relationships with those systems and networks, including collaborative agreements. Dx’s inability to retain its existing relationships with those physicians as they become part of healthcare systems and networks and/or to create new relationships could impact its ability to successfully grow its business.
Damage or disruption to the Company’s facilities or operations therein could adversely affect the Company’s business.
Many of the Company’s facilities or the operations conducted therein could be difficult to replace in a short period of time. Any event that causes a disruption of the operation of these facilities might impact the Company’s ability to provide services to customers and, therefore, could have a material adverse effect on the Company’s financial condition, results of operations, and cash flows.
The failure to establish, update, or perform to appropriate quality standards could adversely affect the Company’s business and reputation.
The Company has quality control systems and processes to support the performance and delivery of its services. A failure to establish, update, or perform in accordance with those systems or processes could adversely affect the Company’s business operations, resulting in the loss of customers, loss or suspension of licensure or certifications, imposition of sanctions or other penalties, damage to the Company’s reputation, or other adverse effects.
Risks Related to Financial Matters
The Company bears financial risk for contracts that, including for reasons beyond the Company’s control, may be underpriced, subject to cost overruns, delayed, or terminated or reduced in scope.
The Company has many contracts that are structured as fixed-price for fixed-contracted services or fee-for-service with a cap. The Company bears the financial risk if these contracts are underpriced or if contract costs exceed estimates. Such underpricing or significant cost overruns could have an adverse effect on the Company’s business, results of operations, financial condition, and cash flows.
Many of BLS’s contracts may be terminated or reduced in scope either immediately or upon notice. Cancellations may
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occur for a variety of reasons, including:
•failure of products to satisfy safety requirements;
•unexpected or undesired results of the products;
•insufficient clinical trial subject enrollment;
•insufficient investigator recruitment;
•a customer’s decision to terminate the development of a product or to end a particular study; and
•BLS’s failure to perform its duties properly under the contract.
Although BLS’s contracts typically entitle the Company to receive all fees earned up to the time of termination, and often also the costs of winding down the terminated projects, the loss, reduction in scope or delay of large or multiple contracts could materially adversely affect BLS.
A significant increase in the Company’s days sales outstanding could have an adverse effect on the Company’s business, including its cash flow, by increasing its bad debt or decreasing its cash flow.
Billing for laboratory services is a complex process. Laboratories bill many different payers, including doctors, patients, health plans, Medicare, Medicaid, and employer groups, all of which have different billing requirements. A material increase in Dx’s days sales outstanding level, which could be caused by multiple reasons due to the complexity of billing for laboratory services, could have an adverse effect on the Company’s business, including potentially increasing its bad debt rate and decreasing its cash flows. Although BLS does not face the same level of complexity in its billing processes, it could also experience delays in billing or collection, and a material increase in BLS’s days sales outstanding could have an adverse effect on the Company’s business, including potentially decreasing its cash flows.
BLS’s revenues depend on the pharmaceutical, biotechnology and medical device industries.
BLS’s revenues depend greatly on the expenditures made by the pharmaceutical, biotechnology and medical device industries in R&D. In some instances, these companies are reliant on their ability to raise capital in order to fund their R&D projects. These companies may be reliant on reimbursement for their products from government programs and commercial payers. Accordingly, economic factors and industry trends affecting BLS’s customers in these industries may also affect BLS. If these companies were to reduce the number of R&D projects they conduct or outsource, whether through the inability to raise capital, reductions in reimbursement from governmental programs or commercial payers, industry trends, economic conditions or otherwise, BLS could be materially adversely affected.
Foreign currency exchange fluctuations could have an adverse effect on the Company’s business.
The Company has business and operations outside the U.S., and BLS derives a significant portion of its revenues from international operations. Since the Company’s Consolidated Financial Statements are denominated in U.S. dollars, fluctuations in exchange rates from period to period will have an impact on reported results. In addition, BLS may incur costs in one currency related to its services or products for which it is paid in a different currency. As a result, factors associated with international operations, including changes in foreign currency exchange rates, could significantly affect BLS’s results of operations, financial condition and cash flows.
The Company’s uses of financial instruments to limit its exposure to interest rate and currency exchange fluctuations could expose it to risks and financial losses that may adversely affect the Company’s financial condition, liquidity and results of operations.
To limit the Company’s exposure to interest rate fluctuations and currency exchange fluctuations, it has entered into, and in the future may enter into for these or other purposes, financial swaps, or hedging arrangements, with various financial counterparties. In addition to any risks related to the counterparties, there can be no assurances that the Company’s hedging activity will be effective in insulating it from the risks associated with the underlying transactions, that the Company would not have been better off without entering into these hedges, or that the Company will not have to pay additional amounts upon settlement.
The Company’s level of indebtedness and debt service requirements could adversely affect the Company’s liquidity, results of operations and business.
At December 31, 2024, indebtedness on the Company’s outstanding senior notes totaled approximately $6.2 billion in aggregate principal, of which $1.0 billion is payable within the next 12 months. The Company is also a party to credit agreements relating to a $1.0 billion revolving credit facility. Under the revolving credit facility, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment-grade-rated borrowers, and the Company is required to maintain a leverage ratio within certain limits.
The Company’s level of indebtedness and debt service requirements could adversely affect its business. In particular, it
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could increase the Company’s vulnerability to sustained, adverse macroeconomic weakness, limit its ability to obtain further financing or refinance existing debt at maturity, and limit its ability to pursue certain operational and strategic opportunities, including large acquisitions. Additionally, the Company’s cost of funds could increase due to the impact of increases in prevailing interest rates on its variable rate debt and should the Company refinance existing debt at maturity or obtain further financing.
The Company may also enter into additional transactions or credit facilities, including other long-term debt, which may increase its indebtedness and result in additional restrictions upon the business. In addition, major debt rating agencies regularly evaluate the Company’s debt based on a number of factors. There can be no assurance that the Company will be able to maintain its existing debt ratings, and failure to do so could adversely affect the Company’s cost of funds, liquidity and access to capital markets.
The Company’s quarterly operating results may vary.
The Company’s operating results may vary significantly from quarter to quarter and are influenced by factors over which the Company has little control, such as:
•changes in the global economy;
•currency exchange rate fluctuations;
•the commencement, completion, delay or cancellation of large projects or contracts or groups of projects;
•the progress of ongoing projects;
•adverse weather, natural disasters, geopolitical events, public health crises, hostilities or acts of terrorism, acts of vandalism, disruption to supply chains, inaccessibility of natural resources, and other events beyond the Company’s control;
•the timing of and costs associated with completed acquisitions or other events; and
•changes in the utilization mix of the Company’s services.
The Company believes that operating results for any particular quarter are not necessarily a meaningful indication of future results. While fluctuations in the Company’s quarterly operating results could negatively or positively affect the market price of the Company’s common stock, these fluctuations may not be related to the Company’s future overall operating performance.
The Company depends on a variety of U.S. and international financial institutions to provide us with banking services. The default or failure of one or more of the financial institutions that the Company relies on may adversely affect the Company’s business and financial condition.
The Company maintains the majority of its cash and cash equivalents in accounts with major U.S. and international financial institutions, and its deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where the Company maintains its cash and cash equivalents, there can be no assurance that the Company would be able to access uninsured funds in a timely manner or at all. Additionally, bank payment processes could become unavailable which could temporarily impact the Company’s ability to conduct business with suppliers and pay its employees on a timely basis. Any inability to access or delay in accessing these funds could adversely affect the Company’s business and financial condition.
The Company might not be able to engage in certain desirable capital-raising or strategic transactions.
The Company’s ability to engage in certain transactions could be limited or restricted in order to preserve, for U.S. federal income tax purposes, the tax-free qualification of the Fortrea spin-off and certain related transactions under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code. Even if the Spin-off and certain related transactions otherwise qualify for tax-free treatment under Section 355 of the Code, they may result in corporate-level taxable gain to the Company if there is a 50% or greater change in ownership, by vote or value, of shares of the Company’s stock, Fortrea’s stock, or the stock of a successor of either occurring as part of a plan or series of related transactions that includes the Spin-off, which is generally presumed to include any acquisitions or issuances of stock within two years of the Spin-off. To avoid realizing such taxable gain, the Company may be restricted or limited in its capital-raising or in the strategic transactions that it elects to pursue during such time period.
The spin-off of Fortrea may not achieve the intended results.
On June 30, 2023, the Company completed the previously announced spin-off of Fortrea. The Spin-off poses risks and challenges that could impact the Company’s business, including, but not limited to, the failure to receive tax-free treatment for U.S. federal income purposes, and potential exposure to unexpected claims, liabilities, or costs under the Company’s agreements with Fortrea in connection with the Spin-off.
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Risks Related to Technology and Cybersecurity
Failure to maintain the security of customer-related information or compliance with security requirements could damage the Company’s reputation with customers, cause it to incur substantial additional costs and become subject to litigation and enforcement actions.
The Company receives, stores, transmits, and processes certain personal and financial information about its customers. In addition, the Company depends upon the secure transmission of confidential information over public networks, including information permitting cashless payments. The Company also works with third-party service providers and vendors that provide technology systems and services that are used in connection with the receipt, storage, transmission, and processing of customer personal and financial information. A compromise of the Company’s systems, or those of the Company's third-party service providers and vendors, that results in customer personal information being obtained or altered by unauthorized persons, or the Company’s third party's failure to comply with security requirements, including but not limited to security standards for payment cards (e.g., the Payment Card Industry Data Security Standard), could adversely affect the Company’s reputation with its customers and others, as well as the Company’s results of operations, financial condition and liquidity. It could also result in litigation against the Company and the imposition of fines and penalties. For example, in connection with the AMCA Incident (as defined below under “Cybersecurity” in Item 1C) the Company has incurred, and expects to continue to incur, costs, and the Company is involved in pending and threatened litigation, as well as various government and regulatory inquiries and processes. For additional information about the AMCA Incident, see Note 15 Commitments and Contingencies to the Consolidated Financial Statements of Part III of the Annual Report.
Failure in the Company’s information technology systems or delays or failures in the development and implementation of new systems or updates or enhancements to existing systems could disrupt the Company’s operations or customer relationships.
The Company’s operations and customer relationships depend, in part, on the continued performance of its information technology systems. An information technology or process failure could impede the processing of data, delivery of data and services, customer orders, and day-to-day management of the business, and could result in the corruption or loss of data. Despite security measures and other precautions the Company has taken, including the development of contingency and disaster recovery plans, its information technology systems are potentially vulnerable to physical break-ins, fire, natural disaster, power loss, telecommunications failures, cybersecurity incidents and similar disruptions, and there may not be adequate protections, mitigation, backups, and/or redundant facilities available in the event these threats are realized. In addition, the Company may experience system failures, or interruptions, including cybersecurity incidents, as it integrates the information technology systems of newly acquired businesses. Failures or interruption of the Company’s systems in one or more of its operations could result in interruptions of service, disrupt the Company’s ability to process laboratory requisitions, perform testing, provide test results or drug development data in a timely manner, and/or conduct timely billing operations. Such system failures could require the Company to transfer operations to an alternative provider of services, which could result in delays in the delivery of offerings to customers and other operations. Additionally, significant delays in the planned delivery of system enhancements or improvements, or inadequate performance of the systems once they are complete, could damage the Company's reputation and harm the business. Furthermore, failure of the Company’s information technology systems could adversely affect the Company’s business, profitability, financial condition, and reputation.
Cybersecurity incidents and unauthorized access to the Company's or its customers’ data could harm the Company’s reputation and adversely affect its business.
The Company has previously experienced and expects to continue to experience attempts by unauthorized parties to compromise the Company’s cybersecurity controls, like the 2018 ransomware attack. The Company has also experienced and expects to continue to experience similar attempts by threat actors to penetrate the systems of third-party suppliers and vendors to whom the Company has provided data, like the 2019 AMCA data breach. These attempts, if successful, could result in the misappropriation or compromise of personal information or proprietary or confidential information stored within the Company's systems or within the systems of third parties, create system disruptions or cause shutdowns. Threat actors have a variety of attack methods, including without limitation, by developing and deploying viruses, worms, and other malicious software programs that attack the Company’s systems, the systems of third-parties, or otherwise exploit any security vulnerabilities. In addition, the increased use of AI by threat actors is enhancing the scale sophistication and effectiveness of their cyberattacks. Outside parties may also attempt to fraudulently induce employees to take actions, including the release of confidential or sensitive information or to make fraudulent payments through illegal electronic spamming, phishing, spear phishing, and other tactics.
The Company has implemented a formal cybersecurity program; however, because the techniques used by threat actors to obtain unauthorized access, disable or degrade service, or sabotage systems continue to evolve (and often are not recognized until launched against a target), the Company may be unable to anticipate and/or implement appropriate controls needed to
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protect against these evolving threats. In addition, as cyber threats continue to evolve including the use of AI by threat actors to compromise systems, the Company may be required to expend additional resources to continue to enhance the Company’s cybersecurity measures or to investigate and remediate any cybersecurity vulnerabilities. The Company’s remediation efforts may not be sufficient and could result in interruptions, delays, cessation of service, loss of data integrity, loss of confidentiality, and/or loss of data. This could also impact the cost and availability of cyber insurance to the Company. Cybersecurity incidents affecting the Company’s or third parties' security measures and the unauthorized dissemination of personal, proprietary or confidential information about the Company or its customers or other third parties could expose customers’ private information. Such incidents could expose customers to the risk of financial or medical identity theft or expose the Company or other third parties to a risk of loss or misuse of this information, result in litigation and potential liability for the Company, damage the Company’s brand and reputation, or otherwise harm the Company’s business. Any of these incidents could have a material adverse effect on the Company’s business, regulatory compliance, financial condition, reputation, and/or results of operations.
In addition, the Company faces increased cybersecurity risks due to the number of employees that continue to work remotely, which remains at levels higher than prior to the COVID-19 pandemic as a result of changes in the workplace and to management and employee expectations. Increased levels of remote access create additional opportunities for cybercriminals to exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts. In addition, technological resources may become strained due to the number of remote users.
The use of AI and machine learning tools in our operations and the services of our third-parties may introduce risks that could adversely affect our business, financial condition, and reputation.
The Company and its third parties leverage AI and machine learning tools to increase productivity and innovation. The Company also faces potential risks from the use of AI and machine learning tools. The Company, or its customers' sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with employees' or vendors' use of generative AI technologies. In addition, the Company may use AI outputs to inform certain decisions, and AI models may create incomplete, inaccurate, or otherwise flawed outputs, some of which may appear correct. Due to the potential flaws in the use of AI, the Company could make incorrect decisions, including decisions that could bias certain individuals or classes of individuals and adversely impact their rights. The rapid development of AI tools could render obsolete certain technologies or tools we currently use, or otherwise provide competitors with a technological edge. New or evolving legislation or regulations might impose restrictions on how AI and machine learning tools can be used, requiring the Company to adapt its tools or face various penalties for non-compliance, including potential disgorgement of data and associated capabilities. As a result, the Company could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liabilities. The AI tools may also be subject to additional, and as yet unidentified, security threats.
Any cybersecurity incidents affecting the information technology systems of third parties that provide services to the Company could have a material adverse effect on the Company's operations.
The Company depends on third parties to provide services critical to the Company's business, including supplies, ground and air transport of clinical and diagnostic testing supplies and specimens, research products, and people, among other services and depends on them to comply with applicable laws and regulations. Third parties that provide services to the Company are subject to similar risks related to security of customer-related information and compliance with U.S., state, local, or international environmental, health and safety, and privacy and security laws and regulations as the Company. Any failure by third parties to comply with applicable laws, or any failure of third parties to provide services more generally, could have a material impact on the Company, whether because of the loss of the ability to receive services from the third parties, legal liability of the Company for the actions or inactions of third parties, or otherwise.
In addition, third parties to whom the Company outsources certain services or functions may process personal data, or other confidential information of the Company. A cybersecurity incident affecting these third parties, like the AMCA Incident, could also harm the Company's business, results of operations and reputation.
Risks Related to Regulatory and Compliance Matters
Changes in payer regulations or policies, insurance regulations or approvals, or changes in laws, regulations, or policies in the U.S. or globally, including changes in their interpretation, may adversely affect the Company.
U.S. and state government payers, such as Medicare and Medicaid, as well as insurers, including MCOs, have increased their efforts to control the cost, utilization and delivery of healthcare services. From time to time, Congress has considered and implemented changes in Medicare fee schedules in conjunction with budgetary legislation. The first phase of reductions pursuant to PAMA came into effect on January 1, 2018, and will continue subject to certain delays in implementation and phase-in limits through 2027, and without limitations for subsequent periods. Further reductions due to changes in policy regarding coverage of tests or other requirements for payment, such as prior authorization, diagnosis code and other claims edits, may be implemented from time to time. Medicare reimbursement for pathology services performed by Dx, which are paid
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for under the PFS, is also subject to statutory and regulatory reduction. Reductions in the reimbursement rates and changes in payment policies of other third-party payers may occur as well. Such changes in the past have resulted in reduced payments as well as added costs and have decreased test utilization for the commercial laboratory industry by adding more complex new regulatory and administrative requirements. Further changes in third-party payer regulations, policies, or laboratory benefit or utilization management programs may have a material adverse effect on Dx’s business. Actions by federal and state agencies regulating insurance, including healthcare exchanges, or changes in other laws, regulations, or policies may also have a material adverse effect upon Dx’s business.
The Company could face significant monetary damages and penalties and/or exclusion from government programs if it violates anti-fraud and abuse laws.
The Company is subject to extensive government regulation at the federal, state, and local levels in the U.S. and other countries where it operates. The Company’s failure to meet governmental requirements under these regulations, including those relating to billing practices and financial relationships with physicians, hospitals, and health systems, biopharmaceutical manufacturers, and others could lead to civil and criminal penalties, exclusion from participation in Medicare and Medicaid and possible prohibitions or restrictions on the use of its laboratories. While the Company believes that it is in material compliance with all statutory and regulatory requirements, there is a risk that government authorities might take a contrary position. This risk includes, but is not limited to, the potential that government enforcement authorities may take a contrary position with respect to the Eliminating Kickbacks in Recovery Act, given the lack of associated regulations to clarify or add exceptions. Such occurrences, regardless of their outcome, could damage the Company’s reputation and adversely affect important business relationships.
The Company’s business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or interpretations of, the law or regulations of CLIA, Medicare, Medicaid or other national, state, or local agencies in the U.S. and other countries where the Company operates laboratories.
The commercial laboratory testing industry is subject to extensive U.S. regulation, and many of these statutes and regulations have not been interpreted by the courts. CLIA extends federal oversight to virtually all clinical laboratories operating in the U.S. by requiring that they be certified by the federal government or by a federally approved accreditation agency. The sanction for failure to comply with CLIA requirements may be suspension, revocation, or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. In addition, the Company is subject to regulation under state law. State laws may require that laboratories and/or laboratory personnel meet certain qualifications, specify certain quality controls or require maintenance of certain records. The Company also operates laboratories outside of the U.S. and is subject to laws governing its laboratory operations in the other countries where it operates.
Applicable statutes and regulations could be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that would adversely affect the Company’s business. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses, certificates, and authorizations, which could have a material adverse effect on the Company’s business. In addition, compliance with future legislation could impose additional requirements on the Company, which may be costly.
Failure of the Company or its third-party service providers to comply with privacy and data security laws and regulations could result in fines, penalties and damage to the Company’s reputation with customers and have a material adverse effect upon the Company’s business.
If the Company and its third-party service providers do not comply with existing or new laws and regulations related to protecting the privacy and security of personal or health information, it could be subject to monetary fines, civil penalties, litigation, or criminal sanctions.
In the U.S., the Health Insurance Portability and Accountability Act of 1996, the U.S. Health Information Technology for Economic and Clinical Health (HITECH) Act, and their implementing privacy and security regulations (collectively, HIPAA) establish comprehensive standards with respect to the use and disclosure of protected health information (PHI), by covered entities as well as their “business associates” as defined in HIPAA, in addition to setting standards to protect the confidentiality, integrity and security of PHI.
HIPAA restricts the Company’s ability to use or disclose PHI, without patient authorization, for purposes other than payment, treatment or healthcare operations (as defined by HIPAA), except for disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations. HIPAA provides for significant fines and other penalties for wrongful use or disclosure of PHI in violation of the privacy and security regulations, including potential civil and criminal fines and penalties. The regulations establish a complex framework on a variety of subjects, including:
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•the circumstances under which the use and disclosure of PHI are permitted or required without a specific authorization by the patient, including, but not limited to, treatment purposes, activities to obtain payments for the Company’s services, and its healthcare operations activities;
•a patient’s rights to access, amend and receive an accounting of certain disclosures of PHI;
•the content of notices of privacy practices for PHI;
•administrative, technical and physical safeguards required of entities that use or receive PHI; and
•the protection of computing systems maintaining electronic PHI.
In addition to the existing requirements under HIPAA, HHS issued an NPRM regarding revising the HIPAA Security Rule, which, if adopted, would impose increased requirements on regulated entities such as the Company. The Company has implemented policies and procedures designed to comply with the HIPAA privacy and security requirements as applicable. The privacy and security regulations establish a “floor” and do not supersede state laws that are more stringent. Therefore, the Company is required to comply with both additional federal privacy and security regulations and varying state privacy and security laws. To the extent applicable, newer laws like the California Consumer Privacy Act (CCPA) as amended by the California Privacy Rights Act (CPRA), the Washington My Health My Data Act, and similar consumer privacy laws in other states, may impose additional obligations on the Company. Federal and state laws that protect the privacy and security of patient information may be subject to enforcement and interpretations by various governmental authorities and courts, resulting in complex compliance issues. In addition, laws regulating artificial intelligence and machine learning, including the use of algorithms and automated processing, may impact the Company and lead to increases in the cost of compliance. Noncompliance with these laws could result in the imposition of fines, penalties, or orders to stop certain activities, and potentially expose the Company to actions for the wrongful use or disclosure of health information or other personal information.
The Company may also be required to comply with the data privacy and security laws of other countries in which it operates or with which it transfers and receives data. For example, the EU’s General Data Protection Regulation (GDPR) includes compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue for the most serious breaches of data protection obligations, and similar obligations exist under the UK GDPR. The Company has established processes and frameworks to manage compliance with the GDPR. Potential fines and penalties in the event of a violation of the GDPR could have a material adverse effect on the Company’s business and operations. In addition, similar data protection regulations addressing access, use, disclosure and transfer of personal data have been enacted or updated in regions where the Company does business, including in Asia, Latin America, and other parts of Europe.
The Company may be required to make changes to its business practices and to incur additional costs associated with compliance with these evolving and complex regulations.
The Company’s international operations could subject it to additional risks and expenses that could adversely impact the business or results of operations.
The Company’s international operations expose it to risks from potential failure to comply with foreign laws and regulations that differ from those under which the Company operates in the U.S. In addition, the Company may be adversely affected by other risks of operations in foreign countries, including, but not limited to: changes in reimbursement by foreign governments for services provided by the Company; compliance with export controls and trade regulations; changes in tax policies or other foreign laws; compliance with foreign labor and employee relations laws and regulations; restrictions on currency repatriation; judicial systems that less strictly enforce contractual rights; countries that do not have clear or well-established laws and regulations concerning issues relating to commercial laboratory testing or drug development services; countries that provide less protection for intellectual property rights; and procedures and actions affecting approval, production, pricing, reimbursement and marketing of its offerings. Further, international operations could subject the Company to additional expenses that the Company may not fully anticipate, including those related to enhanced time and resources necessary to comply with foreign laws and regulations, difficulty in collecting accounts receivable and longer collection periods, and difficulties and costs of staffing and managing foreign operations. In some countries, the Company’s success will depend in part on its ability to form relationships with local partners. The Company’s inability to identify appropriate partners or reach mutually satisfactory arrangements could adversely affect the business and operations.
International operations may increase the Company’s exposure to liabilities under applicable anti-corruption laws.
Anti-corruption laws in the countries where the Company conducts business, including the FCPA, UK Bribery Act, and similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly obtaining or retaining business. The Company operates in parts of the world where corruption may be common and where anti-corruption laws may conflict to some degree with local customs and practices. The Company maintains an anti-corruption
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program including policies, procedures, training and safeguards in the engagement and management of third parties acting on the Company’s behalf. Despite these safeguards, the Company cannot guarantee protection from corrupt acts committed by employees or third parties associated with the Company. Violations or allegations of violations of anti-corruption laws could have a significant adverse effect on the business or results of operations.
Failure to comply with the regulations of pharmaceutical and medical device regulators, such as the FDA, the Medicines and Healthcare products Regulatory Agency in the United Kingdom, the European Union, the European Medicines Agency, the National Medical Products Administration in China, and the Pharmaceuticals and Medical Devices Agency in Japan, could result in fines, penalties, and sanctions against BLS and have a material adverse effect upon the Company.
The operation of BLS’s preclinical laboratory facilities and central laboratory operations must conform to good laboratory practice (GLP) and good clinical practice (GCP), as applicable, as well as all other applicable standards and regulations, as further described in Item 1 of Part I of this Annual Report. The business operations of BLS’s clinical and preclinical laboratories also require the import, export and use of medical devices, in vitro diagnostic devices, reagents, and human and animal biological products. Such activities are subject to numerous applicable local and international regulations with which BLS must comply. If BLS does not comply, BLS could potentially be subject to civil, criminal or administrative sanctions and/or remedies, including suspension of its ability to conduct preclinical and clinical studies, and to import or export to or from certain countries, which could have a material adverse effect upon the Company.
Additionally, certain BLS services and activities must conform to current good manufacturing practice (cGMP), as further described in Item 1 of Part I of this Annual Report. Failure to maintain compliance with GLP, GCP, or cGMP regulations and other applicable requirements of various regulatory agencies could result in warning or untitled letters, fines, unanticipated compliance expenditures, suspension of manufacturing, and civil, criminal or administrative sanctions and/or remedies against BLS, including suspension of its laboratory operations, which could have a material adverse effect upon the Company.
Increased regulations and restrictions on the import of research animals, limitations of supply of research animals, and actions of animal rights activists may have an adverse effect on the Company.
BLS’s preclinical services utilize animals in preclinical testing of the safety and efficacy of drugs and devices. Such activities are required for the development of new medicines and medical devices under regulatory regimes in the U.S., Europe, Japan, and other countries. Increased regulations and restrictions on the import of research animals into various countries, as well as limitations of supply could impact BLS’s ability to conduct preclinical research and could have an adverse effect on BLS’s financial condition, results of operations, and cash flows. In addition, acts of vandalism and other acts by animal rights activists who object to the use of animals in drug development could have an adverse effect on the Company.
Animal populations may suffer diseases that can damage BLS’s inventory, harm its reputation, or result in other liability.
It is important that research products be free of diseases, including infectious diseases. The presence of diseases can distort or compromise the quality of research results, cause loss of animals in BLS’s inventory, result in harm to humans or outside animal populations if the disease is not contained to animals in inventory, or result in other losses. Such results could harm BLS’s reputation or have an adverse effect on BLS’s financial condition, results of operations, and cash flows.
Failure to conduct animal research in compliance with animal welfare laws and regulations could result in sanctions and/or remedies against BLS and have a material adverse effect upon the Company.
The conduct of animal research at BLS’s facilities must be in compliance with applicable laws and regulations in the jurisdictions in which those activities are conducted. These laws and regulations include the U.S. Animal Welfare Act (AWA), which governs the care and use of warm-blooded animals for research in the U.S. other than laboratory rats, mice and chickens, and is enforced through periodic inspections by the U.S. Department of Agriculture (USDA). The AWA establishes facility standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering, handling, veterinary care, and recordkeeping. Similar laws and regulations apply in other jurisdictions in which BLS conducts animal research, including the UK, EU, and China. BLS complies with licensing and registration requirement standards set by these laws and regulations in the jurisdictions in which it conducts animal research. If an enforcement agency determines that BLS’s equipment, facilities, laboratories or processes do not comply with applicable standards, it may issue an inspection report documenting the deficiencies and setting deadlines for any required corrective actions. For noncompliance, the agency may take action against BLS that may include fines, suspension and/or revocation of animal research licenses, or confiscation of research animals.
U.S. Food and Drug Administration (FDA) regulation of laboratory-developed tests (LDTs) and regulation by other countries of diagnostic offerings could have a material adverse effect upon the Company’s business.
The FDA has regulatory responsibility for instruments, test kits, reagents and other devices used by clinical laboratories. The FDA enforces laws and regulations that govern the development, testing, manufacturing, performance, labeling, advertising,
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marketing, distribution, and surveillance of diagnostics, and it regularly inspects and reviews the manufacturing processes and performance of diagnostics. Dx’s point-of-care testing devices are subject to regulation by the FDA.
Historically, LDTs developed by high complexity clinical laboratories have been generally offered as services to health care providers under the CLIA regulatory framework administered by CMS, without the requirement for FDA clearance or approval. On April 29, 2024, the FDA released a final rule purporting to clarify its authority to regulate LDTs as medical devices under the federal Food, Drug, and Cosmetic Act, under which it will phase out its general enforcement discretion approach for LDTs under a four-year period subject to certain continuing enforcement discretion policies. The final rule was published on May 6, 2024, and became effective on July 5, 2024. In the absence of a successful legal challenge, the first phase of compliance obligations will begin on May 6, 2025. On May 29, 2024, the American Clinical Laboratory Association (ACLA) and its member company, HealthTrackRx, filed a lawsuit against the FDA in the United States District Court for the Eastern District of Texas, challenging the FDA’s final rule. While the lawsuit may change the final rule or delay or prevent its enforcement, the issuance of the final rule presents an increased risk of FDA enforcement actions for laboratory tests offered by companies without FDA clearance or approval that do not fall within the ongoing enforcement discretion policies. However, the outcome and its ultimate impact on the Company’s business remain difficult to predict at this time.
Current FDA regulation of the Company’s diagnostic offerings and the potential for future increased regulation of the Company’s LDTs could result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, suspensions, recalls, injunctions, and other civil and criminal sanctions, and could impair the development and commercialization of new tests, which could have a material adverse effect upon the Company.
Regulation of diagnostics offerings in jurisdictions outside the U.S. in which the Company operates may impact laboratory testing offered by the Company in both Dx and BLS. For example, the European Union In Vitro Diagnostics Regulation (Regulation (EU) 2017/746 (EU IVDR)) established a new legislative framework for in vitro diagnostic devices that are used in certain circumstances and includes a rule-based classification and quality and safety standards. The EU IVDR, where applicable to BLS’s services, could impact BLS’s ability to support trials, result in increased costs and administrative and legal actions, and have an adverse effect.
Failure to comply with U.S., state, local, or international environmental, health and safety laws and regulations, including the U.S. Occupational Safety and Health Administration Act and the U.S. Needlestick Safety and Prevention Act, could result in fines, penalties and loss of licensure, and have a material adverse effect upon the Company.
As previously discussed in Item 1 of Part I of this Annual Report, the Company is subject to licensing and regulation under laws and regulations relating to the protection of the environment and human health and safety, including laws and regulations relating to the handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials, as well as regulations relating to the safety and health of laboratory employees. Failure to comply with these laws and regulations could subject the Company to denial of the right to conduct business, fines, criminal penalties and/or other enforcement actions that would have a material adverse effect on its business. In addition, compliance with future legislation could impose additional requirements on the Company that may be costly.
Views on matters relating to corporate responsibility and governance and the perception of the Company’s activities in these areas by stakeholders may impact the Company’s business and reputation.
Governmental authorities, non-governmental organizations, customers, investors, external stakeholders, and employees are sensitive to matters of corporate responsibility and governance, such as environmental sustainability. This focus on these concerns may lead to new requirements that could result in increased costs associated with developing, manufacturing, and distributing the Company’s offerings. The Company’s ability to compete could also be affected by changing preferences and requirements on these matters and the Company’s ability to meet them. If the Company does not meet the evolving and varied preferences and requirements of governmental authorities and others on these matters, the Company could experience reduced demand for its offerings, loss of customers, and other negative impacts on the Company’s business and results of operations.
Risks Related to Legal Matters
Adverse results in material litigation matters could have a material adverse effect upon the Company’s business.
The Company is currently and may continue to be subject in the ordinary course of business to legal actions related to, among other things, intellectual property disputes, contract disputes, data and privacy issues, professional liability and employee-related matters, which may be or may become material. The Company also has received and may in the future receive inquiries and requests for information from governmental agencies and bodies, including Medicare or Medicaid payers, requesting comment and/or information on various matters, including allegations of billing irregularities, billing and pricing arrangements, or privacy practices that are brought to its attention through audits or third parties. Legal actions can result in
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substantial monetary damages as well as damage to the Company’s reputation with customers, which could have a material adverse effect upon its business.
The failure to successfully obtain, maintain, and enforce intellectual property rights and defend against challenges to the Company’s intellectual property rights could adversely affect the Company.
Many of the Company’s offerings and processes rely on intellectual property, including patents, copyrights, trademarks, and trade secrets. In some cases, that intellectual property is owned by another party and licensed to the Company, sometimes exclusively. The value of the Company’s intellectual property relies in part on the Company’s ability to maintain its proprietary rights to such intellectual property. The Company has been in the past and may be unable in the future to obtain or maintain the proprietary rights to its intellectual property, to prevent attempted infringement against its intellectual property, or to defend against claims that it is infringing on another party’s intellectual property, and the Company could be adversely affected.
For example, in October 2020, Ravgen Inc. filed a patent infringement lawsuit against the Company alleging infringement of two Ravgen-owned U.S. patents. In September 2022, a jury rendered a verdict in favor of Ravgen on the remaining patent at issue and awarded damages of $272.0 million. In May 2023, the court awarded Ravgen additional enhanced damages in the amount of $100.0 million, and in January 2025, the court awarded Raygen post-verdict supplemental damages of $2.6 million, an ongoing royalty of $100 per test through the life of the patent as issue, pre- and post-judgement interest, and other relief. The Company strongly disagrees with the verdict, based on a number of legal factors, and will vigorously defend the lawsuit through the appeal process. On June 4, 2021, the Company also instituted proceedings before the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office challenging the validity of the Ravgen patent at issue in the trial. In November 2022, the Patent Trial and Appeal Board issued a decision upholding the validity of the Ravgen patent, and that decision was upheld on appeal before the U.S. Court of Appeals for the Federal Circuit in January 2025.
Adverse effects resulting from the failure to successfully obtain, maintain, and enforce intellectual property rights and defend against challenges to the Company’s intellectual property rights could include the Company having to abandon, alter and/or delay the deployment of offerings or processes that rely on such intellectual property; having to procure and pay for licenses from the holders of intellectual property rights that the Company seeks to use, having to pay damages, fines, court costs and attorney’s fees in connection with intellectual property litigation, and reputational damage.
Changes in tax laws and regulations or the interpretation of such may have a significant impact on the financial position, results of operations, and cash flows of the Company.
U.S. and foreign governments continue to review, reform and modify tax laws, including with respect to the Organisation for Economic Co-operation and Development’s base erosion and profit shifting initiative. Changes in tax laws and regulations could result in material changes to the domestic and foreign taxes that the Company is required to provide for and pay.
In addition, the Company is subject to regular audits with respect to its various tax returns and processes in the jurisdictions in which it operates. Errors or omissions in tax returns, process failures or differences in interpretation of tax laws by tax authorities and the Company may lead to litigation, payments of additional taxes, penalties and interest.
Contract services in the drug development industry create liability risks.
In contracting to work on drug development trials and studies, BLS faces potential risks inherent to the provision of diagnostic information services for clinical trial participants. Users of BLS for clinical trials may have a greater sensitivity to errors than the users of services or products that are intended for other purposes, such as research only. Other potential liabilities may include:
•Errors or omissions that create harm to clinical trial subjects during a trial or to consumers of a drug after the trial is completed and regulatory approval of the drug has been granted;
•Risks that animals in BLS’s facilities may be infected with diseases that may be harmful and even lethal to themselves and humans despite preventive measures contained in BLS’s business policies, including those for the quarantine and handling of imported animals; and
•Errors and omissions during a trial or study that may undermine the usefulness of a trial or study, or data from the trial or study or that may delay the entry of a drug to the market.
While BLS endeavors to include in its contracts provisions entitling it to be indemnified and entitling it to a limitation of liability, these provisions are not always successfully obtained and, even if obtained, do not uniformly protect BLS against liability arising from certain of its own actions. BLS could be materially and adversely affected if it were required to pay damages or bear the costs of defending any claim that is not covered by a contractual indemnification provision, or in the event that a party which must indemnify it does not fulfill its indemnification obligations, or in the event that BLS is not successful in limiting its liability or in the event that the damages and costs exceed BLS’s insurance coverage. BLS may also be required to agree to contract provisions with clinical site selection or its customers related to the conduct of clinical trials, and BLS could
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be materially and adversely affected if it were required to indemnify a site or customer against claims pursuant to such contract terms. There can be no assurance that BLS will be able to maintain sufficient insurance coverage on acceptable terms.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
Item 2. PROPERTIES
The Company’s corporate headquarters are located in Burlington, North Carolina, and include facilities that are both owned and leased.
Dx operates through a network of patient service centers, branches, rapid response laboratories, primary laboratories, and specialty laboratories. The table below summarizes certain information as to Dx’s principal operating and administrative facilities at December 31, 2024.
Location Nature of Occupancy
Primary Facilities:
Birmingham, Alabama Leased
Phoenix, Arizona Owned
Los Angeles, California Leased
Monrovia, California Leased
San Diego, California Leased
San Francisco, California (2) Leased
Shelton, Connecticut Leased
Tampa, Florida Leased
South Bend, Indiana Leased
Wichita, Kansas Leased
Baltimore, Maryland
Leased
Holyoke, Massachusetts Leased
Westborough, Massachusetts Leased
Troy, Michigan Leased
St. Paul, Minnesota Owned
Raritan, New Jersey Owned
Burlington, North Carolina (5) Owned/Leased
Research Triangle Park, North Carolina (3) Leased
Dublin, Ohio Owned
Tulsa, Oklahoma Leased
Brentwood, Tennessee Leased
Dallas, Texas Leased
Houston, Texas Leased
Herndon, Virginia Leased
Seattle, Washington Leased
Spokane, Washington (2) Leased
Oak Creek, Wisconsin Leased
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BLS operates on a global scale. The table below summarizes certain information as to BLS’s principal operating and administrative facilities at December 31, 2024.
Location
Nature of Occupancy
Primary Facilities:
Mechelen, Belgium Leased
Shanghai, China (2) Leased/Owned
Muenster, Germany Owned
Bangalore, India Leased
Kawagoe, Japan Leased
Singapore Leased
Geneva, Switzerland (2)
Owned/Leased
Eye, United Kingdom Owned
Harrogate, United Kingdom Owned
Huntingdon, United Kingdom Owned
Shardlow, United Kingdom Owned
York, United Kingdom Leased
Los Angeles, California Leased
Greenfield, Indiana Owned
Indianapolis, Indiana Leased
Bedford, Massachusetts Owned
Ann Arbor, Michigan Leased
Somerset, New Jersey Owned
Denver, Pennsylvania Leased
Brentwood, Tennessee Leased
Chantilly, Virginia Leased
Madison, Wisconsin Owned
All of the Company’s primary facilities have been built or improved for the purpose of providing commercial laboratory testing or biopharma laboratory services. The Company believes that these existing facilities and plans for expansion are suitable and adequate and will provide sufficient production capacity for the Company’s currently foreseeable level of operations. The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases, it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. LEGAL PROCEEDINGS
See Note 15 Commitments and Contingencies to the Consolidated Financial Statements.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s common stock, par value $0.10 per share, or Common Stock, trades on the New York Stock Exchange or NYSE under the symbol “LH”.
Holders
On February 24, 2025, there were approximately 1,038 holders of record of the Common Stock.
Transfer Agent
The transfer agent for the Company’s Common Stock is Equiniti Trust Company, LLC, 48 Wall Street, Floor 23, New York, NY 10005, telephone: 800-468-9716, website: www.https://equiniti.com/us/.
Dividends
The Company initiated a quarterly dividend beginning in the second quarter of 2022. The Company’s ability to pay dividends is primarily dependent on earnings from operations, the adequacy of capital and the availability of liquid assets for distribution.
For the year ended December 31, 2024, the Company paid $243.1 million in Common Stock dividends. The Company expects common dividend declarations, if made, to occur in January, April, July, and October with payment dates in March, June, September and December, and are subject to Board approval. There can be no assurance that the Company will continue to pay quarterly cash dividends at the current rate or at all.
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Common Stock Performance
The graph below shows the cumulative total return assuming an investment of $100 on December 31, 2019, in each of the Company’s Common Stock, the Standard & Poor’s, (S&P) 500 Index and the S&P 500 Health Care Index, and assuming that all dividends were reinvested. For the purpose of this graph, the distribution of 100% of the outstanding Common Stock of Fortrea to the Company’s shareholders, pursuant to which Fortrea became an independent company, is treated as a non-taxable cash dividend of $33.11 per share, an amount equal to the opening price of Fortrea common stock when it began trading on June 20, 2023, that was deemed reinvested in the Company’s Common Stock at the closing price on June 20, 2023.
Comparison of Cumulative Total Return
12/2019 12/2020 12/2021 12/2022 12/2023 12/2024
Labcorp Holdings Inc. $ 100.00 $ 120.32 $ 185.74 $ 140.40 $ 159.82 $ 163.37
S&P 500 Index $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02
S&P 500 Health Care Index $ 100.00 $ 113.45 $ 143.09 $ 140.29 $ 143.18 $ 146.87
Issuer Purchases of Equity Securities (all amounts in millions, except per share amounts)
The following table sets forth information with respect to purchases of shares of the Company’s Common Stock made during the quarter ended December 31, 2024, by or on behalf of the Company:
Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Repurchased as Part of Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Repurchased Under the Program
October 1 - October 31 - $ - - $ 1,355.4
November 1 - November 30 0.3 $ 240.63 0.3 $ 1,280.4
December 1 - December 31 - $ - - $ 1,280.4
0.3 $ 240.63 0.3
During the year ended December 31, 2024, the Company purchased 1.1 shares of its Common Stock at an average price per share of $219.57 for a total cost of $250.1. When the Company repurchases shares, the amount paid to repurchase the shares in excess of the par or stated value is allocated to additional paid-in-capital unless subject to limitation or the balance in additional paid-in-capital is exhausted. Remaining amounts are recognized as a reduction in retained earnings. At the end of 2024, the Company had outstanding authorization from its Board to purchase up to $1,280.4 maximum value of the Company’s Common Stock. The repurchase authorization has no expiration date.
During the year ended December 31, 2023, the Company purchased 4.8 shares of its Common Stock at an average price per share of $206.85 for a total cost of $1,000.0.
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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL (dollars in millions)
For the year ended December 31, 2024, the Company’s revenues were $13,008.9, an increase of 7.0% from $12,161.6 for the corresponding period in 2023. The 7.0% increase in revenues for the year ended December 31, 2024, as compared to the corresponding period in 2023, was primarily due to organic revenue of 3.9%, acquisitions, net of divestitures of 2.8%, and favorable foreign currency translation of 0.2%. The 3.9% increase in organic revenue was due to a 4.9% increase in the Company’s organic Base Business (Base Business includes the Company’s business operations except for COVID-19 Testing), partially offset by a 1.0% decrease in COVID-19 Testing.
The Company defines organic growth as the increase in revenue excluding the year over year impact of acquisitions, divestitures, and currency. Acquisition and divestiture impact is considered for a twelve-month period following the close of each transaction.
Separation of Fortrea Holdings Inc.
On June 30, 2023, Labcorp completed the previously announced separation (Spin-off) of its former Clinical Development and Commercialization Services (CDCS) business into Fortrea.
All historical operating results of Fortrea are presented as Earnings from discontinued operations, net of tax, in the Company’s Consolidated Statements of Operations. The spin-off is expected to be treated as tax-free for the Company and its shareholders for U.S. federal income tax purposes.
As a result of the separation of Fortrea, the Company recast segment results to exclude the historical results of the CDCS business for all periods presented. The remaining operations of the previously reported Drug Development segment have been renamed the Biopharma Laboratory Services (BLS) segment.
RESULTS OF OPERATIONS (dollars in millions)
The following tables present the financial measures that management considers to be the most significant indicators of the Company’s performance. For discussion of 2023 results and comparison with 2022 results refer to “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Revenues
Year Ended December 31,
2024 2023 Change
Dx $ 10,144.3 $ 9,415.1 7.7 %
BLS 2,922.6 2,774.2 5.3 %
Intercompany eliminations and other (58.0) (27.7) 109.4 %
Total $ 13,008.9 $ 12,161.6 7.0 %
Dx revenues for the year ended December 31, 2024, were $10,144.3, an increase of 7.7% compared to revenues of $9,415.1 in the corresponding period in 2023. The increase was due to organic revenue of 4.1% and acquisitions, net of divestitures of 3.7%. The 4.1% increase in organic revenue was due to a 5.4% contribution from organic Base Business, partially offset by a 1.3% decrease in COVID-19 Testing. Total Base Business growth compared to the Base Business in the prior year was 9.2%.
Total volume, measured by requisitions, increased by 5.3% as acquisitions, net of divestitures, volume contributed growth of 2.7%, and organic volume increased by 2.6%. Organic volume was impacted by a 3.3% increase in the Base Business, partially offset by a 0.8% decrease in COVID-19 Testing. Price/mix increased by 2.5% due to organic Base Business growth of 2.1% and acquisitions, net of divestitures, of 1.0%, partially offset by a decrease in COVID-19 Testing of 0.5%.
BLS revenues for the year ended December 31, 2024, were $2,922.6, an increase of 5.3% over revenues of $2,774.2 in the corresponding period in 2023. The increase in revenues was primarily due to organic growth of 4.3% and favorable foreign currency translation of 1.1%.
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Cost of Revenues
Year Ended December 31,
2024 2023 Change
Cost of revenues $ 9,384.5 $ 8,796.7 6.7 %
Cost of revenues as a % of revenues 72.1 % 72.3 %
Cost of revenues increased 6.7% for the year ended December 31, 2024, as compared with corresponding period in 2023, and decreased as a percentage of revenues to 72.1% for the year ended December 31, 2024, as compared to 72.3% for corresponding period in 2023. This decrease in cost of revenues as a percentage of revenues was primarily due to higher organic demand and LaunchPad savings, partially offset by higher personnel costs and lower COVID-19 Testing.
Selling, General and Administrative Expenses
Year Ended December 31,
2024 2023 Change
Selling, general and administrative expenses $ 2,230.0 $ 2,021.4 10.3 %
SG&A as a % of revenues 17.1 % 16.6 %
Selling, general and administrative expenses as a percentage of revenues increased to 17.1% for the year ended December 31, 2024, as compared to 16.6% for the corresponding period in 2023. The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to higher personnel costs, a reduction in COVID-19 Testing revenues, and the impact from the Invitae transaction, partially offset by LaunchPad savings and demand.
Goodwill and Other Asset Impairments
Years Ended December 31,
2024 2023 Change
Goodwill and other asset impairments $ 5.3 $ 349.0 (98.5) %
The impairment charges for the year ended December 31, 2024, were primarily due to the decommissioning of an information system and a robotic asset. The impairment charges for the year ended December 31, 2023, were primarily comprised of $333.6 of goodwill impairment for the ED reporting unit, which is part of the BLS segment.
Amortization of Intangibles and Other Assets
Year Ended December 31,
2024 2023 Change
Amortization of intangibles and other assets $ 256.4 $ 219.8 16.7 %
The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to December 31, 2023.
Restructuring and Other Charges
Year Ended December 31,
2024 2023 Change
Restructuring and other charges $ 46.0 $ 49.1 (6.3) %
For the year ended December 31, 2024, the Company recorded net restructuring charges of $46.0. The charges were comprised of $43.0 in severance and other personnel costs, and $5.9 in facility-related costs primarily associated with general integration activities. The charges were adjusted by the reversal of previously established liability of $2.5 in unused severance and $0.4 in unused facility-related costs.
For the year ended December 31, 2023, the Company recorded net restructuring charges of $49.1. The charges were comprised of $33.4 in severance and other personnel costs and $22.3 in facility-related costs primarily associated with general integration activities. The charges were adjusted by the reversal of previously established liability of $1.7 in unused severance and $4.9 in unused facility-related costs.
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Interest Expense
Year Ended December 31,
2024 2023 Change
Interest expense $ 208.3 $ 199.6 4.4 %
The increase in interest expense for the year ended December 31, 2024, as compared with the corresponding period in 2023 is primarily due to higher borrowings under its revolving credit facility, senior notes, and the new accounts receivable securitization facility.
Equity Method Income, Net
Year Ended December 31,
2024 2023 Change
Equity method income, net $ (1.4) $ (1.4) - %
Equity method income, net represents the Company’s ownership share in joint venture partnerships along with equity investments in other companies in the health care industry, which remained flat in the year ended December 31, 2024, as compared with the corresponding period in 2023.
Other, Net
Year Ended December 31,
2024 2023 Change
Other, net $ 60.2 $ 15.5 288.4 %
Other, net for the year ended December 31, 2024, was primarily due to $80.0 of transition services fees charged to Fortrea related to administrative and IT systems support. The costs to provide these services are included in operating income, but the service fees are included in other income. In addition, the Company recorded a $6.4 gain related to the divestiture of Beacon Laboratory Benefit Solutions, Inc. This income was partially offset by foreign currency transaction losses of $15.3 and an $11.4 loss on investments.
Other, net for the year ended December 31, 2023, was primarily due to $46.1 of transition services fees charged to Fortrea related to administrative and IT systems support, partially offset by pension plan settlement charges of $10.9 and a $4.8 loss on investments.
Provision for Income Taxes
Year Ended December 31,
2024 2023
Income tax expense $ 212.4 $ 188.5
Income tax expense as a % of income before tax 22.1 % 33.1 %
The decrease in effective tax rate as compared with the prior year is primarily attributable to the unfavorable impact of the prior year goodwill impairment of the ED reporting unit, while no goodwill impairment was recognized during the year ended December 31, 2024.
Operating Results by Segment
Year Ended December 31,
2024 2023 Change
Dx segment operating income $ 1,606.3 $ 1,591.3 0.9 %
Dx segment operating margin 15.8 % 16.9 % (1.1) %
BLS segment operating income 458.9 396.3 15.8 %
BLS segment operating margin 15.7 % 14.3 % 1.4 %
Segment operating income 2,065.2 1,987.6 3.9 %
General corporate and unallocated expenses (670.8) (644.1) 4.1 %
Amortization of intangibles and other assets (256.4) (219.8) 16.7 %
Restructuring and other charges (46.0) (49.1) (6.3) %
Goodwill and other asset impairments (5.3) (349.0) (98.5) %
Total operating income $ 1,086.7 $ 725.6 49.8 %
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Dx operating income was $1,606.3 for the year ended December 31, 2024, an increase of 0.9% over operating income of $1,591.3 in the corresponding period of 2023, and Dx operating margin decreased 110 basis points year-over-year. The decrease in operating margin was primarily due to higher personnel costs, partially offset by organic demand.
BLS operating income was $458.9 for the year ended December 31, 2024, an increase of 15.8% from operating income of $396.3 in the corresponding period of 2023, and BLS operating margin increased 140 basis points year over year. The increase was primarily due to organic growth and LaunchPad savings, partially offset by higher personnel costs.
General corporate expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology. Corporate expenses were $670.8 for the year ended December 31, 2024, an increase of 4.1% over corporate expenses of $644.1 in the corresponding period of 2023, primarily due to higher costs related to acquisitions and personnel.
LIQUIDITY AND CAPITAL RESOURCES (dollars and shares in millions)
The Company’s strong cash-generating capability and financial condition typically have provided ready access to capital markets. The Company’s principal source of liquidity is operating cash flow, supplemented by proceeds from debt offerings. The Company’s senior unsecured revolving credit facility is further discussed in Note 11 Debt to the Company’s Consolidated Financial Statements.
In summary the Company’s cash flows were as follows:
Year Ended December 31,
2024 2023
Net cash provided by continuing operating activities $ 1,585.8 $ 1,202.3
Net cash used for continuing investing activities (1,366.8) (1,146.8)
Net cash provided by (used for) continuing financing activities 779.9 (1,559.0)
Effect of exchange rate on changes in cash and cash equivalents (17.0) 9.9
Net cash impact from discontinued operations - 1,600.4
Net change in cash and cash equivalents $ 981.9 $ 106.8
Cash and Cash Equivalents
Cash and cash equivalents at December 31, 2024, and 2023 totaled $1,518.7 and $536.8, respectively. Cash and cash equivalents consist of highly liquid instruments, such as time deposits and other money market investments, which have original maturities of three months or less.
Cash Flows from Operating Activities
During the year ended December 31, 2024, the Company’s continuing operations provided $1,585.8 of cash as compared to $1,202.3 in 2023. The $383.5 increase in cash provided from operations in 2024, as compared with the corresponding 2023 period, was primarily due to higher cash earnings and favorable working capital requirements.
Cash Flows from Investing Activities
Net cash used for continuing investing activities for the year ended December 31, 2024, was $1,366.8 as compared to $1,146.8 for the year ended December 31, 2023. The increase in net cash used for investing activities for the year ended December 31, 2024 as compared to the year ended December 31, 2023, was primarily due to an increase in business acquisitions and higher capital expenditures.
Capital expenditures were $489.9 and $453.6 for the years ended December 31, 2024, and 2023, respectively. Capital expenditures in 2024 were 3.8% of revenues, primarily in connection with projects to support growth in the Company’s core businesses. The Company expects this level of spending to remain consistent in 2025, primarily in connection with projects to support growth in the Company’s core businesses, facility expansion and updates, projects related to its LaunchPad initiative, and further acquisition integration initiatives.
Cash Flows from Financing Activities
Net cash provided by continuing financing activities for the year ended December 31, 2024, was $779.9 compared to cash used in continuing financing activities of $1,559.0 for the year ended December 31, 2023. This movement in cash within financing activities for 2024, as compared to 2023, was primarily due to $2,000.0 of proceeds from new debt securities and $300.0 of proceeds from the new accounts receivable facility described below, partially offset by $1,000.0 of payments towards the Company’s senior notes, $250.1 of share repurchases, and $243.1 of dividends paid, compared to $1,000.0 of share repurchases and $300.0 of payments towards the Company’s senior notes, and $254.0 of dividends paid in 2023.
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On September 23, 2024, LCAH (the Issuer) entered into a base indenture with U.S. Bank Trust Company, National Association, as trustee (the Trustee) (the 2024 Indenture). On September 23, 2024, the Company, the Issuer and the Trustee entered into supplemental indentures to the 2024 Indenture under which the Issuer issued, and the Company guaranteed, $2,000.0 in debt securities, consisting of $650.0 aggregate principal amount of 4.35% senior notes due 2030, $500.0 aggregate principal amount of 4.55% senior notes due 2032, and $850.0 aggregate principal amount of 4.80% senior notes due 2034, with interest payable semi-annually on April 1 and October 1 of each year, commencing April 1, 2025. Net proceeds from these offerings were approximately $1,983.0 after deducting underwriting discounts and other estimated expenses of the offering. The net proceeds were used to redeem or repay indebtedness and, to the extent not used for such purpose, for other general corporate purposes. Indebtedness redeemed or repaid or to be redeemed or repaid at or prior to maturity were the Company’s 2.30% senior notes due December 2024, its 3.60% senior notes due February 2025, and $500.0 of borrowings under its revolving credit facility.
On January 13, 2023, LCAH amended and restated its revolving credit facility. It consists of a five-year revolving facility in the principal amount of up to $1,000.0, with the option of increasing the facility by up to an additional $500.0, subject to the agreement of one or more new or existing lenders to provide such additional amounts and certain other customary conditions. The Company is required to pay a facility fee on the aggregate commitments under the revolving credit facility, at a per annum rate ranging from 0.100% to 0.225%, depending on the Company’s debt ratings. Borrowings under the revolving credit facility will accrue interest at a per annum rate equal to, at the Company’s election, either (x) a LIBOR (changed to SOFR in 2023) rate plus a margin ranging from 0.775% to 1.275% or (y) a base rate plus a margin ranging from 0% to 0.275%, in each case, depending on the Company’s debt ratings.
On August 23, 2024, the Company and a bankruptcy-remote special purpose vehicle entered into a $300.0 three-year accounts receivable securitization facility with PNC Bank, National Association (PNC) as administrative agent (AR Facility). The AR Facility provides for purchases of accounts receivable by PNC in an amount of up to $300.0 through August of 2027 and may increase to up to $700.0, subject to the satisfaction of certain conditions.
On January 31, 2025, the Company amended its AR Facility (AR Facility Amendment). The AR Facility Amendment increased the amount the Company can borrow from PNC from $300.0 to $700.0 through August of 2027. In addition, pursuant to the terms of the AR Facility Amendment (i) the Toronto-Dominion Bank became a party to the underlying receivables purchase agreement as a committed purchaser through January 2026 and (ii) MUFG Bank Ltd. and certain of its related conduit purchasers became parties to the underlying receivables purchase agreement as purchasers and the loans or investments of such conduit purchasers may accrue interest as specified in the AR Facility Amendment and receivables purchase agreement.
On February 18, 2025, the Company borrowed an additional $225.0 under the AR Facility Amendment, bringing the amount outstanding under the AR Facility Amendment to $525.0.
At December 31, 2024, the Company had $1,518.7 of Cash and cash equivalents and $1,000.0 of available borrowings under its revolving credit facility, which does not mature until 2026. Under the Company’s credit facilities and indentures relating to the Company’s senior notes, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment grade-rated borrowers, and with respect to the credit facilities, the Company is required to maintain certain leverage ratios. The Company was in compliance with all covenants under the credit facilities and the indentures related to the Company’s outstanding senior notes as of December 31, 2024. The Company expects that it will remain in compliance with all covenants associated with its existing debt obligations for the next twelve months.
On July 24, 2024, the Board adopted a new share repurchase plan authorizing the repurchase of up to $1,000.0 maximum value of the Company’s shares in addition to the remaining amount outstanding under the previous plan. At December 31, 2024, the Company had outstanding authorization from its Board to purchase up to $1,280.4 maximum value of Company Common Stock. The repurchase authorization has no expiration date.
For the year ended December 31, 2024, the Company paid $243.1 in Common Stock dividends. On January 8, 2025, the Company announced a cash dividend of $0.72 per share of Common Stock for the first quarter, or approximately $61.0 in the aggregate. The dividend will be payable on March 12, 2025, to stockholders of record of all issued and outstanding shares of Common Stock at the close of business on February 27, 2025. The declaration and payment of any future dividends will be at the discretion of the Company’s Board.
Guarantor Information
In connection with the Reorganization, the Company, LCAH and the Trustee entered into a seventeenth supplemental indenture (the Seventeenth Supplemental Indenture) to the indenture, dated as of November 19, 2010, between LCAH and the Trustee (the 2010 Indenture). In addition, the Company, LCAH and the Trustee entered into the 2024 Indenture (the 2010 Indenture, together with the 2024 Indenture, the Indentures). The Seventeenth Supplemental Indenture, among other things, provides for the full and unconditional guarantee by the Company of LCAH’s obligations under the 2010 Indenture and each
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series of senior unsecured notes issued and outstanding thereunder, and the 2024 Indenture provides for the full and unconditional guarantee by the Company of LCAH’s obligations and each series of senior unsecured notes issued and outstanding, thereunder (collectively, the Labcorp Holdings Guarantees). Also, the Indentures permit the Company to satisfy LCAH’s reporting obligations so long as the Labcorp Holdings Guarantees remain in place and the Company’s financial statements and other information comply with the requirements of Rule 3-10 of Regulation S-X.
At December 31, 2024, there was $4,073.2 and $2,000.0 aggregate principal amount of issued and outstanding senior notes of LCAH, issued under the 2010 Indenture and the 2024 Indenture, respectively, that are fully and unconditionally guaranteed by the Company. Accordingly, pursuant to Rule 3-10 of Regulation S-X, separate consolidated financial statements of LCAH have not been presented. As permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial information for LCAH because the assets, liabilities and results of operations of LCAH are not materially different than the corresponding amounts in the Company’s Consolidated Financial Statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.
Credit Ratings
The investment grade debt ratings from Moody’s and S&P contribute to the Company’s ability to access capital markets.
Off-balance Sheet Arrangements
The Company does not have any variable interest entities or special purpose entities whose financial results are not included in the Company’s Consolidated Financial Statements and the Company does not have any off-balance sheet financing other than normal, short-term leases and letters of credit.
Other Commercial Commitments
The Company has debt instruments outstanding. At December 31, 2024, the Company had total future payments of $6,373.9, with $1,000.4 payable within 12 months.
The Company has leases for patient service centers, laboratories and testing facilities, clinical facilities, general office spaces, vehicles, and office and laboratory equipment. At December 31, 2024, the Company had total future lease payments of $1,140.3, with $190.7 payable within 12 months.
At December 31, 2024, the Company had provided letters of credit aggregating approximately $102.7, primarily in connection with certain insurance programs which are renewed annually.
The contractual value of the noncontrolling interest put in the Company’s Ontario subsidiary totaled $14.3 and $15.5 at December 31, 2024, and 2023, respectively, and has been classified as mezzanine equity in the Company’s Consolidated Balance Sheets.
Based on current and projected levels of cash flows from operations, coupled with availability under its revolving credit facility, the Company believes it has sufficient liquidity to meet both its anticipated short-term and long-term cash needs for the next 12 months and the reasonably foreseeable future; however, the Company continually reassesses its liquidity position in light of market conditions and other relevant factors.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles in the U.S., requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. While the Company believes these estimates are reasonable and consistent, they are by their very nature estimates of amounts that will depend on future events. Accordingly, actual results could differ from these estimates. The Company’s Audit Committee periodically reviews the Company’s significant accounting policies. The Company’s critical accounting policies arise in conjunction with the following:
•Revenue recognition;
•Business combinations;
•Income taxes;
•Goodwill and indefinite-lived assets; and
•Legal contingencies.
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Revenue Recognition
Dx
Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition form to perform a diagnostic test. The information provided on the requisition form is used to determine the party that will be billed for the testing performed and the expected reimbursement. Dx recognizes revenue and satisfies its performance obligation for services rendered when the testing process is complete, and the associated results are reported. The Dx segment also enters into lab management agreements which have monthly and non-testing-based fees which are recognized each month as the services are provided. Revenues are distributed among four payer portfolios -clients, patients, Medicare and Medicaid, and third party. Dx considers negotiated discounts and anticipated adjustments, including historical collection experience for the payer portfolio, when revenues are recorded.
The following are descriptions of the Dx payer portfolios:
Clients
Client payers represent the portion of Dx’s revenue related to physicians, hospitals, health systems, accountable care organizations, employers, and other entities where payment is received exclusively from the entity ordering the testing service. Generally, client revenues are recorded on a fee-for-service basis at Dx’s client list price, less any negotiated discount. A portion of client billing is for laboratory management services, collection kits and other non-testing offerings. In these cases, revenue is recognized when services are rendered or delivered.
Patients
This portfolio includes revenue from uninsured patients and member cost-share for insured patients (e.g., coinsurance, deductibles, and non-covered services). Uninsured patients are billed based upon Dx’s patient fee schedules, net of any discounts negotiated with physicians on behalf of their patients. Dx bills insured patients as directed by their health plan and after consideration of the fees and terms associated with an established health plan contract.
Medicare and Medicaid
This portfolio relates to fee-for-service revenue from traditional Medicare and Medicaid programs. Net revenue from these programs is based on the fee schedule established by the related government authority. In addition to contractual discounts, other adjustments including anticipated payer denials are considered when determining net revenue. Any remaining adjustments to revenue are recorded at the time of final collection and settlement. These adjustments are not material to Dx’s results of operations in any period presented.
Third Party
Third party includes revenue related to MCOs. The majority of Dx’s third-party revenue is reimbursed on a fee-for-service basis. These payers are billed at Dx’s established list price and revenue is recorded net of contractual discounts. The majority of Dx’s MCO revenues are recorded based upon contractually negotiated fee schedules with revenues for non-contracted MCOs recorded based on historical reimbursement experience.
Third-party reimbursement is also received through capitation agreements with MCOs and IPAs. Under capitated agreements, revenue is recognized based on a negotiated per-member, per-month payment for an agreed upon menu of tests, or based upon the proportionate share earned by Dx from a capitation pool. When the agreed upon reimbursement is based solely on an established rate per member, revenue is not impacted by the volume of testing performed. Under a capitation pool arrangement, the aggregate value of an established rate per member is distributed based on the volume and complexity of the procedures performed by laboratories participating in the agreement. Dx recognizes revenue monthly, based upon the established capitation rate or anticipated distribution from a capitated pool.
Dx has a formal process to estimate implicit price concessions for uncollectable accounts. The majority of Dx’s collection risk is related to accounts receivable from both insured and uninsured patients who are unwilling or unable to pay. Anticipated write-offs are recorded as adjustments to revenue at an amount considered necessary to record the segment’s revenue at its net realizable value. In addition to contractual discounts, other adjustments including anticipated payer denials and other external factors that could affect the collectability of its receivables are considered when determining revenue and the net receivable amount. Any remaining adjustments to revenue are recorded at the time of final collection and settlement. These adjustments are not material to Dx’s results of operations in any period presented.
BLS
BLS revenue is generally recognized over time, as the services are delivered to the customer, based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services to be provided. The majority of BLS’s contracts contain a single
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performance obligation, as BLS provides a significant service of integrating all promises in the contract and the promises are highly interdependent and interrelated with one another. For contracts that include multiple performance obligations, BLS allocates the contract value to the goods and services based on a customer price list, if available. If a price list is not available, BLS will estimate the transaction price using either market prices or an “expected cost plus margin” approach. The total contract value is estimated at the beginning of the contract, and is equal to the amount expected to be billed to the customer. These contracts generally take the form of fixed-price or fee-for-service arrangements subject to pricing adjustments based on changes in scope.
Fixed-price contracts are typically recognized as revenue over time based on a proportional-performance basis, using either input or output methods that are specific to the service provided. In an output method, revenue is determined by dividing the actual units of output achieved by the total units of output required under the contract and multiplying that percentage by the total contract value. When using an input method, revenue is recognized by dividing the actual costs incurred by the total estimated cost expected to complete the contract, and multiplying that percentage by the total contract value. Contract costs principally include direct labor costs, research model costs, and allocated overhead costs. The estimate of total costs expected to complete the contract requires significant judgment and these estimates are reviewed periodically. Any adjustments to these estimates are recognized on a cumulative catch-up basis in the period they become known.
Fee-for-service contracts are typically priced based on transaction volume or time and materials. For volume-based contracts, the contract value is entirely variable, and revenue is recognized as the specific service is completed. For services billed based on time and materials, revenue is recognized using the right to invoice practical expedient.
Contracts are often modified to account for changes in contract specifications and requirements. Generally, when contract modifications create new performance obligations, the modification is considered to be a separate contract and revenue is recognized prospectively. When contract modifications change existing performance obligations, the impact on the existing transaction price and measure of progress for the performance obligation to which it relates is generally recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Most contracts are terminable with or without cause by the customer, either immediately or upon notice. These contracts often require payment to BLS of expenses incurred and fees earned to date and, in some cases, a termination fee or a payment to BLS of some portion of the fees or profits that could have been earned by BLS under the contract if it had not been terminated early. Termination fees are included in revenues when services have been performed and realization is assured.
BLS incurs sales commissions in the process of obtaining contracts with customers, which are recoverable through the service fees in the contract. Sales commissions that are payable upon contract award are recognized as assets and amortized over the expected contract term, along with related payroll tax expense. The amortization of commission expense is based on the weighted-average contract duration for all commissionable awards in the respective business in which the commission expense is paid, which approximates the period over which goods and services are transferred to the customer. The amortization period of sales commissions ranges from approximately 1 to 5 years, depending on the business. For businesses that enter into primarily short-term contracts, BLS applies the practical expedient, which allows costs to obtain a contract to be expensed when incurred if the amortization period of the assets that would otherwise have been recognized is one year or less. Amortization of assets from sales commissions is included in selling, general, and administrative expense.
Business Combinations
The Company accounts for business combination transactions under the acquisition method of accounting and reports the results of operations of the acquired entities from its respective date of acquisition. Assets acquired are recorded at their estimated fair values as of the acquisition date. Estimated fair values are based on various valuation methodologies, including an income approach using primarily discounted cash flow techniques for the customer relationships intangible assets. The aforementioned income methods utilize management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration conveyed over the fair value of the assets acquired are recorded as goodwill. The goodwill reflects management’s expectations of the ability to gain access to the acquired entities’ historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive industry and market conditions.
Income Taxes
The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company does not recognize a tax benefit, unless the Company concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely
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on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that the Company believes is greater than 50% likely to be realized. The Company records interest and penalties in Provision for income taxes in the Consolidated Statements of Operations.
Goodwill and Indefinite-Lived Intangible Assets
The Company assesses goodwill and indefinite-lived intangible assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The annual impairment test for goodwill includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value. Reporting units are businesses with discrete financial information that is available and reviewed by management. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs the quantitative goodwill impairment test. The Company may also choose to bypass the qualitative assessment for any reporting unit in its goodwill assessment and proceed directly to performing the quantitative assessment. The Company recognizes an impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value.
In the qualitative assessment, the Company considers relevant events and circumstances for each reporting unit, including (i) current year results, (ii) financial performance versus management’s annual and five-year strategic plans, (iii) changes in the reporting unit carrying value since prior year, (iv) industry and market conditions in which the reporting unit operates, (v) macroeconomic conditions, including discount rate changes, and (vi) changes in offerings provided by the reporting unit. If applicable, performance in recent years is compared to forecasts included in prior quantitative valuations. Based on the results of the qualitative assessment, if the Company concludes that it is not more likely than not that the fair value of the reporting unit is less than its carrying values of the reporting unit, then no quantitative assessment is performed.
The quantitative assessment includes the estimation of the fair value of each reporting unit as compared to the carrying value of the reporting unit. The Company estimates the fair value of a reporting unit using both income-based and market-based valuation methods. The income-based approach is based on the reporting unit’s forecasted future cash flows that are discounted to the present value using the reporting unit’s weighted-average cost of capital. For the market-based approach, the Company utilizes a number of factors such as publicly available information regarding the market capitalization of the Company, as well as operating results, business plans, market multiples, and present value techniques. Based upon the range of estimated values developed from the income and market-based methods, the Company determines the estimated fair value for the reporting unit. If the estimated fair value of the reporting unit exceeds the carrying value, the goodwill is not impaired, and no further review is required.
The income-based fair value methodology requires management’s assumptions and judgments regarding economic conditions in the markets in which the Company operates and conditions in the capital markets, many of which are outside of management’s control. At the reporting unit level, fair value estimation requires management’s assumptions and judgments regarding the effects of overall economic conditions on the specific reporting unit, along with assessment of the reporting unit’s strategies and forecasts of future cash flows. Forecasts of individual reporting unit cash flows involve management’s estimates and assumptions regarding:
•Annual cash flows, on a debt-free basis, arising from future revenues and profitability, working capital changes, capital spending and income taxes for at least a five-year forecast period.
•A terminal growth rate for years beyond the forecast period. The terminal growth rate is selected based on consideration of growth rates used in the forecast period, historical performance of the reporting unit, and economic conditions.
•A discount rate that reflects the risks inherent in realizing the forecasted cash flows. A discount rate considers the risk-free rate of return on long-term treasury securities, the risk premium associated with investing in equity securities of comparable companies, the beta obtained from the comparable companies, and the cost of debt for investment grade issuers. In addition, the discount rate may consider any specific risk in achieving the prospective financial information.
Under the market-based fair value methodology, judgment is required in evaluating market multiples and recent transactions. Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the reporting units.
Management performed its annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of 2024. The Company elected to perform a quantitative assessment for goodwill and indefinite-lived intangible assets for each of its reporting units. Based upon the results of the quantitative assessments, the Company concluded that the fair values of each of its reporting units, as of October 1, 2024, were greater than the carrying values.
Although the Company believes that the current assumptions and estimates used in its goodwill analysis are reasonable, supportable, and appropriate, continued efforts to maintain or improve the performance of these businesses could be impacted
Index
by unfavorable or unforeseen changes which could impact the existing assumptions used in the impairment analysis. Various factors could reasonably be expected to unfavorably impact existing assumptions primarily delays in new customer bookings and the related delay in revenue from new customers, increases in customer termination activity, or increases in operating costs. Accordingly, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill impairment analysis will prove to be accurate predictions of future performance. It is possible that the Company’s conclusions regarding impairment or recoverability of goodwill or indefinite-lived intangible assets in any reporting unit could change in future periods. There can be no assurance that the estimates and assumptions used in the Company’s goodwill and indefinite-lived intangible asset impairment testing performed as of the beginning of the fourth quarter of 2024 will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2024 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and earnings before interest, taxes, depreciation, and amortization.
Legal Contingencies
The Company is involved from time to time in various claims and legal actions, including arbitrations, class actions, and other litigation (including those described in more detail below), arising in the ordinary course of business. These matters include, but are not limited to, intellectual property disputes, commercial and contract disputes, professional liability claims, employee-related matters, transaction related disputes, securities and corporate law matters, and inquiries, including subpoenas and other civil investigative demands, from governmental agencies, Medicare or Medicaid payers and MCOs reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties.
The Company also is named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws. These suits typically allege that the Company has made false statements and/or certifications in connection with claims for payment from U.S. federal or state healthcare programs. The suits may remain under seal (hence, unknown to the Company) for some time while the government decides whether to intervene on behalf of the qui tam plaintiff. Such claims are an inevitable part of doing business in the healthcare field today.
The Company believes that it is in compliance in all material respects with all statutes, regulations, and other requirements applicable to its commercial laboratory operations and drug development support services. The healthcare diagnostics and drug development industries are, however, subject to extensive regulation, and the courts have not interpreted many of the applicable statutes and regulations. Therefore, the applicable statutes and regulations could be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that would adversely affect the Company. Potential sanctions for violation of these statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, additional liabilities from third-party claims, and/or exclusion from participation in government programs.
The Company records an aggregate legal reserve, which is determined using calculations based on historical loss rates and assessment of trends experienced in settlements and defense costs. In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 450 “Contingencies,” the Company establishes reserves for judicial, regulatory, and arbitration matters outside the aggregate legal reserve if and when those matters present loss contingencies that are both probable and estimable and would exceed the aggregate legal reserve. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. For more information about legal contingencies, see Note 15 Commitments and Contingencies to the Consolidated Financial Statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK (dollar in millions)
Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates, interest rates and other relevant market rate or price changes. In the ordinary course of business, the Company is exposed to various market risks, including changes in foreign currency exchange and interest rates, and the Company regularly evaluates the exposure to such changes. The Company addresses its exposure to market risks, principally the market risks associated with changes in foreign currency exchange rates and interest rates, through a controlled program of risk management that includes, from time to time, the use of derivative financial instruments such as foreign currency forward contracts, cross currency swaps and interest rate swap agreements. The Company does not hold or issue derivative financial instruments for trading purposes.
Index
Foreign Currency Exchange Rates
Approximately 13.7% and 12.9% of the Company’s revenues for the year ended December 31, 2024, and 2023, respectively, were denominated in currencies other than the U.S. dollar (USD). The Company’s Consolidated Financial Statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the Company’s consolidated financial results. In 2024 and 2023, the most significant currency exchange rate exposures were to the Canadian Dollar, Swiss Franc, Euro, and British Pound. Excluding the impacts from any outstanding or future hedging transactions, a hypothetical change of 10% in average exchange rates used to translate all foreign currencies to USD would have impacted income before income taxes for 2024 by approximately $27.4. Accumulated currency translation adjustments recorded as a separate component of Shareholders’ equity were $(217.1) and $183.1 for the years ended December 31, 2024, and 2023, respectively. The Company does not have significant operations in countries in which the economy is considered to be highly inflationary.
The Company earns revenue from service contracts over a period of several months and, in some cases, over a period of several years. Accordingly, exchange rate fluctuations during this period may affect the Company’s profitability with respect to such contracts. The Company is also subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions. The Company limits its foreign currency transaction risk through exchange rate fluctuation provisions stated in some of its contracts with customers, or it may hedge transaction risk with foreign currency forward contracts. At December 31, 2024, the Company had 12 open foreign exchange forward contracts with various amounts maturing monthly through January 2025 with a notional value totaling approximately $302.4. At December 31, 2023, the Company had 9 open foreign exchange forward contracts with various amounts maturing monthly through January 2024 with a notional value totaling approximately $305.8.
The Company is a party to USD to Swiss Franc cross-currency swap agreements with an aggregate notional amount of $1,200.0, $300.0 maturing in 2029, $300.0 maturing in 2031 and $600.0 maturing in 2034, as a hedge against the impact of foreign exchange movements on its net investment in a Swiss Franc functional currency subsidiary.
Interest Rates
Some of the Company’s debt is subject to interest at variable rates. As a result, fluctuations in interest rates affect the Company’s financial results. The Company attempts to manage interest rate risk and overall borrowing costs through an appropriate mix of fixed and variable rate debt, including the utilization of derivative financial instruments, primarily interest rate swaps.
Borrowings under the Company’s term loan credit facilities and revolving credit facility are subject to variable interest rates, unless fixed through interest rate swaps or other agreements.
In May 2021, to hedge against changes in the fair value portion of the Company’s long-term debt, the Company entered into fixed-to-variable interest rate swap agreements for the 2.70% senior notes due 2031 with an aggregate notional value of $500.0 and variable interest rates based on three-month London Interbank Offered Rate (LIBOR), which changed to Secured Overnight Financing Rate (SOFR) in 2023, plus 1.0706%.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company required in this item are set forth beginning on page of this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report, the Company carried out under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
Index
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Report of Management on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).
The internal control over financial reporting at the Company was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. Internal control over financial reporting includes those policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the U.S.;
•provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the Company’s Consolidated Financial Statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control - Integrated Framework 2013” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Company’s management determined that, as of December 31, 2024, the Company maintained effective internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of the Company’s Board.
Deloitte and Touche LLP, an independent registered public accounting firm, who audited and reported on the Consolidated Financial Statements of the Company included in this Annual Report, also audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, as stated in its report, which is included herein immediately preceding the Company’s audited Consolidated Financial Statements.
Index

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ITEM 9B. OTHER INFORMATION
Item 9B. OTHER INFORMATION
Insider Adoption or Termination of Trading Arrangements:
During the quarter ended December 31, 2024, none of the Company’s directors or officers informed it of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408, except as described in the table below:
Name and Title Date Adopted Character of Trading Agreement Aggregate Number of Shares of Common Stock to be (Sold) Purchased Pursuant to Trading Agreement Duration
Mark S. Schroeder 11/26/2024 Rule 10b5-1 Trading Arrangement Up to (10,115) (1) (2) 11/7/2025 (3)
President, Diagnostics Laboratories and Chief Operations Officer
Amy B. Summy 11/26/2024 Rule 10b5-1 Trading Arrangement Up to (1,234) (1) 11/14/2025 (3)
Chief Marketing Officer
(1)The figure presented represents the shares to be sold on the vesting of equity awards and may vary subject to the achievement of certain performance conditions and/or shares to be withheld for tax purposes.
(2)Mr. Schroeder’s plan provides for the exercise of vested stock options and the associated sale of up to 3,903 shares of the Company’s Common Stock and 76 shares of Common Stock previously acquired from an equity award vesting event.
(3)This trading arrangement permits transactions through and including the earlier to occur of (a) the completion of all sales on the respective order entry date or (b) the date listed in the table.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by the item regarding directors is incorporated by reference to the Company’s Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held in 2025 (2025 Proxy Statement) under the caption Election of Directors. Information regarding executive officers is incorporated by reference to the Company’s 2025 Proxy Statement under the caption Executive Officers. Information concerning the Company’s Audit Committee, including the designation of audit committee financial experts is incorporated by reference to the Company’s 2025 Proxy Statement under the captions Corporate Governance and Delinquent Section 16(a) Reports, respectively. Information concerning the Company’s code of ethics is incorporated by reference to the Company’s 2025 Proxy Statement under the caption Corporate Governance Policies and Procedures.
Insider Trading Arrangements and Policies
The Company is committed to promoting high standards of ethical business conduct and compliance with applicable laws, rules and regulations. As part of this commitment, the Company has adopted the Insider Trading Policy governing the purchase, sale, and/or other dispositions of its securities by the Company’s directors, officers, employees and designated contractors, as well as by Labcorp Holdings Inc. itself, that the Company believes is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us. A copy of our insider trading policy is filed as Exhibit 19.1 to this Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to information in the 2025 Proxy Statement under the captions “Executive Compensation” and “Director Compensation.”

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
See Note 14 Stock Compensation Plans to the Consolidated Financial Statements for a discussion of the Company’s stock compensation plans. Except for the above referenced footnote, the information called for by this item is incorporated by reference to information in the 2025 Proxy Statement under the captions “Security Ownership of Certain Beneficial Holders and Management,” “Compensation Discussion & Analysis” and “Executive Compensation.”

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to information in the 2025 Proxy Statement under the captions “Board Independence” and “Related Party Transactions.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to information in the 2025 Proxy Statement under the caption “Fees to Independent Registered Public Accounting Firm.”
Index
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of documents filed as part of this Annual Report:
(1) Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm included herein:
See Index on page
(2) Financial Statement Schedules:
All schedules are omitted as they are inapplicable or the required information is furnished in the Consolidated Financial Statements or notes thereto.
(3) Index to and List of Exhibits
2.1†* Separation and Distribution Agreement, dated June 29, 2023, by and between Laboratory Corporation of America Holdings and Fortrea Holdings Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 3, 2023).
2.2 Agreement and Plan of Merger, dated May 17, 2024, by and among Laboratory Corporation of America Holdings, Labcorp Holdings Inc. and Radiance Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on May 17, 2024)
3.1 Amended and Restated Certificate of Incorporation of Labcorp Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K12B filed on May 17, 2024).
3.2 Amended and Restated By-Laws of Labcorp Holdings Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on May 17, 2024).
4.1 Indenture, dated as of November 19, 2010, between the Company and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 19, 2010).
4.2 Ninth Supplemental Indenture, dated as of January 30, 2015, between the Company and U.S. Bank National Association, as trustee, including the form of the 2025 Notes (incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on January 30, 2015).
4.3 Tenth Supplemental Indenture, dated as of January 30, 2015, between the Company and U.S. Bank National Association, as trustee, including the form of the 2045 Notes (incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on January 30, 2015).
4.4 Twelfth Supplemental Indenture, dated as of August 22, 2017, between the Company and U.S. Bank National Association, as trustee, including the form of the 2027 Notes (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on August 22, 2017).
4.5 Fourteenth Supplemental Indenture, dated as of November 25, 2019, between the Company and U.S. Bank National Association, as trustee, including the form of the 2029 Notes (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on November 25, 2019).
4.6 Fifteenth Supplemental Indenture, dated as of May 26, 2021, between the Company and U.S. Bank National Association, as trustee, including the form of the 2026 Notes (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 26, 2021).
4.7 Sixteenth Supplemental Indenture, dated as of May 26, 2021, between the Company and U.S. Bank National Association, as trustee, including the form of the 2031 Notes (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on May 26, 2021).
4.8 Seventeenth Supplemental Indenture dated as of May 17, 2024, by and among Laboratory Corporation of America Holdings, as issuer, Labcorp Holdings Inc., as guarantor, and U.S. Bank National Trust Company Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 17, 2024).
4.9 Description of the Registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K12B filed on May 17, 2024).
4.10 New Holding Company Guarantee, dated May 17, 2024, by Labcorp Holdings Inc. (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on May 17, 2024).
4.11 Indenture, dated as of September 23, 2024, between Laboratory Corporation of America Holdings, as issuer, and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 23, 2024).
Index
4.12 First Supplemental Indenture, dated as of September 23, 2024, among Laboratory Corporation of America Holdings, as issuer, Labcorp Holdings Inc., as guarantor, and U.S. Bank Trust Company, National Association, as trustee, including the form of the 2030 Notes (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on September 23, 2024).
4.13 Second Supplemental Indenture, dated as of September 23, 2024, among Laboratory Corporation of America Holdings, as issuer, Labcorp Holdings Inc., as guarantor, and U.S. Bank Trust Company, National Association, as trustee, including the form of the 2032 Notes (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on September 23, 2024).
4.14 Third Supplemental Indenture, dated as of September 23, 2024, among Laboratory Corporation of America Holdings, as issuer, Labcorp Holdings Inc., as guarantor, and U.S. Bank Trust Company, National Association, as trustee, including the form of the 2034 Notes (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on September 23, 2024).
10.1+
Labcorp Holdings Inc. Amended and Restated 2016 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K12B filed on May 17, 2024).
10.2+
Labcorp Holdings Inc. Amended and Restated 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K12B filed on May 17, 2024).
10.3 Assignment and Assumption Agreement, dated as of May 17, 2024, by and among Laboratory Corporation of America Holdings, Labcorp Holdings Inc. and Adam H. Schechter (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K12B filed on May 17, 2024).
10.4 Assignment and Assumption Agreement, dated as of May 17, 2024, by and among Laboratory Corporation of America Holdings, Labcorp Holdings Inc. and Radiance Merger Sub Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K12B filed on May 17, 2024).
10.5+
National Health Laboratories Incorporated Pension Equalization Plan (incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992).
10.6+
Laboratory Corporation of America Holdings Amended and Restated New Pension Equalization Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004).
10.7+
First Amendment to the Laboratory Corporation of America Holdings Amended and Restated New Pension Equalization Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004).
10.8+
Second Amendment to the Laboratory Corporation of America Holdings Amended and Restated New Pension Equalization Plan (incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.9+
Third Amendment to the Laboratory Corporation of America Amended and Restated New Pension Equalization Plan (incorporated herein by reference Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005).
10.10+
Laboratory Corporation of America Holdings Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.22 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.11+
First Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).
10.12+
Second Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005).
10.13+
Third Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006).
10.14+
Fourth Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
10.15+
Amended and Restated Laboratory Corporation of America Holdings Master Senior Executive Severance Plan (incorporated by reference to 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2024).
10.16 Third Amended and Restated Credit Agreement, dated as of April 30, 2021, among the Company, Bank of America N.A., as administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2021).
Index
10.17 Amendment No. 1, dated as of January 13, 2023, to the Third Amended and Restated Credit Agreement (originally dated as of April 30, 2021), among the Company, Bank of America, N.A., as administrative agent, and lenders party thereto (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022).
10.18 Guarantor Joinder Agreement, dated May 17, 2024, by and between Labcorp Holdings Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K12B filed on May 17, 2024).
10.19 Term Loan Credit Agreement, dated June 3, 2019, by and among Laboratory Corporation of America Holdings, Bank of America, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 3, 2019).
10.20 Amendment No. 1, dated as of May 7, 2020, to the Term Loan Credit Agreement, dated June 3, 2019, among Laboratory Corporation of America Holdings, Bank of America, N.A. as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020).
10.21 Receivables Purchase Agreement, dated as of August 23, 2024, by and among Labcorp Receivables, LLC, as seller, persons from time to time party hereto, as purchasers, PNC Bank National Association, as administrative agent, Laboratory Corporation of America Holdings, as Servicer, and PNC Capital Markets, as structuring agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 23, 2024).
10.22 First Amended Receivables Purchase Agreement, dated as of January 31, 2025, by and among Labcorp Receivables, LLC, as seller, persons from time to time party hereto, as purchasers, PNC Bank National Association, as administrative agent, Laboratory Corporation of America Holdings, as Servicer, and PNC Capital Markets, as structuring agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 31, 2025).
10.23 Sale and Contribution Agreement, dated as of August 23, 2024, by and among each of the persons from time to time party hereto, as originators, Laboratory Corporation of America Holdings, as an originator and as servicer, and Labcorp Receivable LLC, as buyer (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 23, 2024).
10.24 Performance Guaranty, dated as August 23, 2024, by Labcorp Holdings, Inc., in favor of PNC Bank National Association, as administrative agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 23, 2024).
10.25**
Aircraft Time Sharing Agreement by and between Laboratory Corporation of America Holdings and Adam H. Schechter on November 18, 2024.
16.1 Letter of PricewaterhouseCoopers LLP, dated November 5, 2020 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed on November 5, 2020).
16.2 Letter of PricewaterhouseCoopers LLP, dated March 3, 2021 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K/A filed on March 3, 2021).
19.1**
Insider Trading Policy, revised March 2023
Index
21.1** List of Subsidiaries of the Company
22.1** Subsidiary Issuers of Guaranteed Securities
23.1** Consent of Deloitte & Touche LLP, an independent registered public accounting firm
24.1** Power of Attorney of Kerrii B. Anderson
24.2** Power of Attorney of Jeffrey A. Davis
24.3** Power of Attorney of D. Gary Gilliland, M.D., Ph.D.
24.4** Power of Attorney of Kirsten M. Kliphouse
24.5** Power of Attorney of Garheng Kong, M.D., Ph.D.
24.6** Power of Attorney of Peter M. Neupert
24.7** Power of Attorney of Richelle P. Parham
24.8** Power of Attorney of Paul B. Rothman, M.D.
24.9** Power of Attorney of Kathryn E. Wengel
31.1**
Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2**
Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32**
Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
97 Incentive Compensation Recoupment Policy, effective October 11, 2023 (incorporated by reference to Exhibit 97 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023).
101.INS**
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH**
Inline XBRL Taxonomy Extension Schema
101.CAL**
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF**
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB**
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE**
Inline XBRL Taxonomy Extension Presentation Linkbase
104**
Cover Page Interactive Data File (embedded within the Inline XBRL document)
+ Management contracts or compensatory plans or arrangements
† Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally copies of any of the omitted schedules to the Securities and Exchange Commission upon its request.
* Certain portions of this exhibit have been redacted pursuant to Item 601(b)(2)(ii) and Item 601(b)(10)(iv) of Regulation S-K, as applicable. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Commission upon its request.
** Filed or furnished herewith, as required
Index