HOW MANY OF YOU REMEMBER WHEN, JUST A FEW YEARS AGO, it was MetPath/Corning Clinical Laboratories (CCL) which was on the financial ropes? At that time, SmithKline Beecham, PLC was expected to be the likely purchaser of CCL.
The date was January 31, 1996. The Wall Street Journal reported that Corning Incorporated, CCL’s parent, “is looking to unload its faltering laboratory division” and mentioned that SmithKline Beecham was talking with Corning to explore the possibility of acquiring CCL.
Obviously that deal never happened, nor did any deal involving any combination of the three blood brothers. Robert Michel, our editor, predicted in THE DARK REPORT of April 29, 1996, that the national laboratory companies would be: 1) forced to take major write-downs; 2) undergo significant restructuring; and 3) there would be no acquisition of one major lab company by another in the immediate future. Rather, a divestiture would be the most likely way that either Corning Clinical Labs or SmithKline Beecham Clinical Labs (SBCL) would become uncoupled from its parent corporation.
In that prediction he was prescient. On December 31, 1996, Corning spun off CCL to its shareholders, creating Quest Diagnostics Incorporated. In the process, Quest wrote off $445 million of intangibles, in addition to other write-downs at CCL during 1996. On top of past operational charge-offs, Laboratory Corporation of America has yet to write down its intangibles. THE DARK REPORT estimated that, in 1997, it would require a $355 million write down to accomplish the job. (See TDR, April 21, 1997.) SBCL’s write downs were never as large at those at Quest. But it took SmithKline’s board three more years to fulfill our editor’s prediction of divestiture, as the stories on pages 2-6 demonstrate.
I mention these facts for a reason. Clients and readers of THE DARK REPORT have consistently gotten a more relevant objective analysis about the laboratory marketplace than even financial analysts and reporters from THE WALL STREET JOURNAL. Our discussion of laboratory overcapacity and the destructive pricing strategies for lab testing contracts provides lab executives and pathologists with invaluable management advice. It helps them improve the financial stability and competitive position of their laboratories. It is a major reason why THE DARK REPORT is the trusted information resource for so many lab industry leaders and executives.