Labcorp is paying $210 million plus inventory for a business it expects to bring in about $160 million of revenue in the first year, about 1.3 times that figure. Myriad says the sale strengthens its balance sheet; Labcorp expects it to be only slightly accretive at first.
The price Labcorp is paying for Myriad Genetics' prenatal testing business is modest by the buyer's standards. For the seller, it is transformational.
Myriad and Labcorp said on Tuesday at 8:30 a.m. Eastern that Myriad will sell its Prenatal Health testing business, which includes the Prequel, Foresight, SneakPeek and FirstGene tests, to Labcorp for $210 million in cash plus the value of the unit's inventory at closing. The deal is expected to close by early 2027.
Myriad shares were up 37.2% at $5.775 at about 2 p.m., having opened at $5.34. Labcorp was up 0.7% and Quest Diagnostics 0.2%.
Sized against the seller
Myriad's market value was about $403 million at Monday's close. The $210 million cash payment is equal to about 52% of that. Even after Tuesday's gain lifted Myriad's value to about $552 million, the cash is still nearly two-fifths of it.
The timing suggests that ratio, more than the deal's size, drove the stock. The market added about $150 million of value on a day the health-care sector rose about 2.3%, so most of the gain is specific to Myriad.
"This announcement is the direct outcome of our disciplined strategic review process," said Sam Raha, Myriad's chief executive, adding that the sale is expected to add to Myriad's revenue growth and profitability "while meaningfully strengthening the balance sheet."
Sized against the business
The buyer's view is more measured. Labcorp said it expects the business to add about $160 million of revenue in its first year, to be slightly accretive to adjusted earnings in that year and to reach the diagnostics segment's average margins by the end of the second year. At $210 million, Labcorp is paying about 1.3 times the revenue it expects.
Labcorp's language implies that the unit currently earns less than Labcorp's average diagnostics business, since it will take two years to get there. For Myriad, that suggests the prenatal business was a drag on margins, which is consistent with management calling the sale accretive to profitability. Myriad has not yet said how much of its own revenue or profit the unit accounts for.
The fine print
The asset purchase agreement has an outside date of Feb. 19, 2027, which extends automatically to Oct. 19, 2027, if only regulatory approvals remain outstanding. Labcorp would owe a $10.5 million fee if regulatory clearance fails. Myriad will provide transition services after closing and said it will discuss the deal further, along with "other related organizational changes," on its third-quarter call on Nov. 4.
Market implications
One reading is that Myriad has unlocked value. It is converting a lower-margin unit into cash equal to half its prior market value and refocusing on its core testing businesses, and the market's reaction suggests investors value the cash more than the revenue being sold.
A second reading is that the company is getting smaller at a modest price. A little over one times expected revenue is not a rich multiple, the regulatory timeline could stretch into late 2027, and the details of what remains, including the organizational changes, are deferred to November.
What to watch
Myriad's Nov. 4 call for the unit's revenue and profit contribution, the use of proceeds and the scope of the organizational changes; regulatory filings; Labcorp's commentary on integration; and whether Myriad's shares hold their gain. A plan that directs most of the cash to debt reduction or reinvestment in oncology testing would support the value-unlock reading.