"Dark Index"

Investors Pump $107 Million Into Unilab’s Stock Offering

California laboratory company’s shares open at $16, then move rapidly to $23

HERE’S ENCOURAGING NEWS for owners of independent regional laboratories: investors on Wall Street continue to like the laboratory business…a lot!

Latest confirmation of this fact came on June 6, when Unilab Corporation of Tarzana, California funded its initial public offering (IPO). Unilab sold 6.7 million shares at $16 per share, raising a total of $107.2 million.

Good Share Price

Unilab’s $16 share price at offering eclipses share prices generated last November by both Dynacare Inc. and Specialty Laboratories, Inc. at their IPOs ($10 and $17, respectively).

It demonstrates that the professional investment community continues to view the laboratory testing industry with favor. It also is a sign that investors are bullish on Unilab’s future growth in revenues and net profits.

From an industry-wide perspective, Unilab’s successful IPO will encourage at least two consequences. One, the investment community will continue to search for independent laboratories that can be acquired and used as a platform for regional and national growth. Because it takes some months to negotiate and close on such deals, there may be a quiet period before news of any additional laboratory acquisitions become public.

Two, Unilab will use its new capital infusion to expand its marketing. This will impact lab competitors in California, including hospital labs with outreach programs. Within the state, Unilab must pick up additional market share if it is to sustain investor interest.

However, because Unilab already has such a dominant competitive position within California, THE DARK REPORT predicts that Unilab will enter other regional markets. Phoenix and Tucson are the most likely targets, since these are a short plane flight from Los Angeles and have competitive advantages not found in, say, Las Vegas or Albuquerque.

Stock Split At IMPATH

Unilab is not the only public lab company which is actively courting investor favor. Quest Diagnostics Incorporated did a two-for-one stock split on June 1, 2001. Meanwhile, Roche Holdings AG is preparing to sell 5.5 million of its Laboratory Corporation of America shares, worth some $756 million at the offered price.

The booming finances of the public lab companies should not be ignored by regional lab executives or hospital-based lab outreach programs. During the past five years, public labs turned inward to solve operational problems. Now they are ready to turn outward and build market share.

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