Full Press Release Details
358 South Main Street
Burlington, North Carolina 27215
Chairman, President and Chief Executive Officer
Dear Fellow Labcorp Stockholder
We are pleased to inform you that the board of directors of Laboratory Corporation of America Holdings ("Labcorp") has approved the spinoff to stockholders of our Clinical Development and Commercialization Services business. The Clinical Development and Commercialization Services business will be transferred to Fortrea Holdings Inc. ("Fortrea"), a newly incorporated Delaware corporation, and its shares will be distributed to Labcorp stockholders on June 30, 2023 as a pro rata distribution intended to be tax-free to our stockholders for U.S. federal income tax purposes, except to the extent of any cash received in lieu of fractional shares.
Fortrea will be a leading global contract research organization providing comprehensive phase I through IV biopharmaceutical product and medical device services, patient access solutions and other enabling services to pharmaceutical, biotechnology and medical device organizations. Its common stock will be listed on The Nasdaq Stock Market LLC under the symbol "FTRE."
As a Labcorp stockholder, you will receive one share of Fortrea common stock for every share of Labcorp common stock you hold as of the record date.
Stockholder approval of the distribution is not required, nor are you required to take any action to receive your Fortrea common shares.
Following completion of the spinoff, Labcorp common shares will continue to trade on the New York Stock Exchange under the symbol "LH" and Labcorp will remain a global leader advancing healthcare through science, innovation and technology with deep scientific expertise, vast health data and insights, and an extensive, advanced global laboratory network.
We invite you to learn more about Fortrea and the spinoff by reviewing the enclosed information statement, which contains important information about Fortrea, including financial information.
Thank you for your continued support of Labcorp and your future support of Fortrea.
| Sincerely, |
| Adam Schechter |
| Chairman, President and Chief Executive Officer |
| Laboratory Corporation of America Holdings |
Chairman and Chief Executive Officer
Dear Future Fortrea Stockholder
I am excited to welcome you as a future stockholder of Fortrea Holdings Inc. ("Fortrea"). Fortrea will hold Labcorp's Clinical Development and Commercialization Services business, and will be a leading global contract research organization providing phase I through IV biopharmaceutical product and medical device services, patient access solutions and other enabling services to global pharmaceutical, biotechnology and medical device organizations.
Following the spinoff, Fortrea will be positioned to
capitalize on growth opportunities across phases I through IV clinical trials and extend its leadership in oncology, cell and gene therapy, rare disease, and other emerging therapeutic areas
increase agility with large pharmaceutical and biotechnology clients, ranging from industry leaders to emerging organizations, to better serve customers and advance life-saving therapies
utilize access to Labcorp's vast health and clinical data set through an arrangement which will enable it to provide enhanced trial execution and a differentiated value proposition
continue to invest in capabilities, technologies, diverse talent and innovation to enhance trial execution and better serve all of its customers and
implement a capital structure that is tailored to support its growth strategy and enhance stakeholder value.
Fortrea's common stock will be listed on The Nasdaq Stock Market LLC under the symbol "FTRE."
We look forward to our future as an independent, publicly traded company and to your support as a stockholder of Fortrea.
| Sincerely, |
| Thomas Pike |
| Chairman and Chief Executive Officer |
| Fortrea Holdings Inc. |
INFORMATION STATEMENT
Fortrea Holdings Inc.
Shares of Common Stock
Laboratory Corporation of America Holdings ("Labcorp") is sending this information statement to its stockholders in connection with the pro rata distribution of all the outstanding shares of Fortrea Holdings Inc.'s ("Fortrea") common stock to holders of Labcorp's common stock. As of the date of this information statement, Labcorp wholly owns Fortrea.
On July 28, 2022, Labcorp announced a plan to pursue a separation of its Clinical Development and Commercialization Services business from Labcorp through a spinoff (the "spinoff"). Holders of Labcorp's common stock will be entitled to receive one share of Fortrea common stock for every share of Labcorp common stock owned as of 5 00 p.m., Burlington, North Carolina time, on the record date, June 20, 2023. The distribution date for the spinoff will be June 30, 2023 (the "distribution date"). After the spinoff, Fortrea will be an independent, publicly traded company. The spinoff is intended to be tax-free to Labcorp and its stockholders for U.S. federal income tax purposes, except, in the case of stockholders, to the extent of any cash received in lieu of fractional shares.
You will not be required to pay anything for the Fortrea common stock that will be distributed to you or to surrender or exchange your Labcorp common stock to receive Fortrea common stock in the spinoff. The spinoff will not affect the number of shares of Labcorp common stock that you hold. Immediately following the spinoff, your proportionate interest in Fortrea will be identical to your proportionate interest in Labcorp (as adjusted for any fractional shares). Fortrea common stock will be issued in book-entry form only, which means that no physical stock certificates will be issued. No approval by Labcorp stockholders of the spinoff is required or is being sought. You are not being asked for a proxy and you are requested not to send a proxy.
As discussed under "The Spinoff-Trading of Labcorp Common Stock After the Record Date and On or Prior to the Distribution," if you sell your Labcorp common stock in the "regular way" market after the record date and before or on the distribution date, you will be selling your right to receive Fortrea common stock in connection with the spinoff. You are encouraged to consult with your financial advisor regarding the specific implications of selling your Labcorp common stock before or on the distribution date.
There is no current trading market for Fortrea common stock. However, we expect that a limited market, commonly known as a "when-issued" trading market, for Fortrea common stock will begin on or about June 16, 2023, and we expect that "regular way" trading of Fortrea common stock will begin the first day of trading after the distribution date. We have applied to list Fortrea common stock on The Nasdaq Stock Market LLC ("NASDAQ") under the symbol "FTRE." The spinoff is contingent upon the acceptance of the Fortrea common stock for listing on a national securities exchange approved by Labcorp, such as NASDAQ, subject to official notice of issuance.
In reviewing this information statement, you should carefully consider the matters described under the caption "Risk Factors " beginning on page 26 of this information statement.
Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
Labcorp first mailed this information statement to its stockholders on or about June 15, 2023.
The date of this information statement is June 9, 2023.
| Page | |
| QUESTIONS AND ANSWERS ABOUT THE SPINOFF | 1 |
| SUMMARY | 8 |
| RISK FACTORS | 26 |
| CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS | 51 |
| THE SPINOFF | 54 |
| CAPITALIZATION | 63 |
| DIVIDEND POLICY | 64 |
| UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION | 65 |
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 74 |
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 92 |
| BUSINESS | 94 |
| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 109 |
| RELATIONSHIP WITH LABCORP AFTER THE SPINOFF | 110 |
| MANAGEMENT | 116 |
| EXECUTIVE COMPENSATION | 124 |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 149 |
| DESCRIPTION OF CERTAIN INDEBTEDNESS AND OTHER FINANCING | 151 |
| DESCRIPTION OF CAPITAL STOCK | 152 |
| INDEMNIFICATION OF DIRECTORS AND OFFICERS | 155 |
| WHERE YOU CAN FIND MORE INFORMATION | 157 |
| CHANGE IN LABCORP'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 158 |
| INDEX TO COMBINED FINANCIAL STATEMENTS | F- 1 |
Presentation of Information
Unless we otherwise state or the context otherwise indicates, all references in this information statement to "Fortrea," "us," "our," or "we" mean Fortrea Holdings Inc. and its subsidiaries, and all references to "Labcorp" mean Laboratory Corporation of America Holdings and its subsidiaries, other than, for all periods following the spinoff, Fortrea. When referenced individually, the Clinical Development and Commercialization Services business will refer to the business pre-spinoff, and Fortrea will refer to the business post-spinoff, unless the context otherwise specifies.
The term "GAAP" refers to generally accepted accounting principles in the United States of America (the "U.S.").
The transaction in which Fortrea will be separated from Labcorp and become an independent, publicly traded company is referred to in this information statement as the "spinoff" and the "separation." The pro rata distribution of Fortrea common stock to stockholders of Labcorp to affect to the spinoff is referred to in this information statement as the "distribution."
This information statement is being sent solely to provide information to Labcorp stockholders who will receive Fortrea common stock in connection with the spinoff. It is not provided as an inducement or encouragement to buy or sell any securities. You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information contained in this information statement, unless we are so required by applicable securities laws.
Trademarks and Copyrights
We use various trademarks, service marks, trade names, and brand names, such as Fortrea, endpoint, FSPx, and Xcellerate, that we deem particularly important to the advertising activities and operation of our business, and some of these marks are registered or pending registration in the U.S. and, in some cases, other jurisdictions. This information statement may also refer to the brand names, trademarks, or service marks of other companies. All logos, trademarks, service marks, trade names, brand names, and copyrights cited in this information statement are the property of their respective holders. For convenience, we may not include the SM, , or symbols, but such omission is not meant to indicate that we would not protect our intellectual property rights to the fullest extent allowed by law.
Market and Industry Data
This information statement includes estimates regarding market and industry data and forecasts, which are based on publicly available information, industry publications and surveys, reports from government agencies, reports by market research firms, and our own estimates based on our management's knowledge of, and experience in, the markets in which we compete. This information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process, and other limitations and uncertainties inherent in surveys of market size. Furthermore, all of this information involves a variety of assumptions, limitations, and methodologies and is inherently subject to uncertainties, and therefore you are cautioned not to give undue weight to these estimates.
QUESTIONS AND ANSWERS ABOUT THE SPINOFF
| Q | What is the spinoff |
| A | The spinoff is the method by which Fortrea will separate from Labcorp. To complete the spinoff, Labcorp will distribute, pro rata and as a dividend to its stockholders, all of the shares of Fortrea common stock that it owns. Following the spinoff, we will be an independent, publicly traded company, and Labcorp will not retain any ownership interest in us. You do not have to pay any consideration or give up any portion of your Labcorp common stock to receive our common stock in the spinoff. |
| Q | What is the expected date for the completion of the spinoff |
| A | The completion and timing of the spinoff are dependent on a number of conditions, but if the conditions are timely met, we expect the spinoff to be completed on June 30, 2023. See "The Spinoff-Spinoff Conditions and Termination." |
| Q | What are the reasons for the spinoff |
| A | Labcorp's Clinical Development and Commercialization Services business operates largely autonomously, although it and Labcorp have benefited by sharing executive management and some overhead costs. Among other benefits, the spinoff is expected to provide each of Labcorp and Fortrea with strengthened strategic flexibility and operational focus to pursue specific market opportunities and better meet customer needs, focused capital structures and capital allocation strategies to drive innovation and growth, a more targeted investment opportunity for different investor bases, the ability to align its particular incentive compensation with its financial performance, and an improved ability to use its equity as consideration for beneficial acquisitions. Labcorp expects that the spinoff will result in enhanced long-term performance of the businesses held by both Labcorp and Fortrea. For more information, see "The Spinoff-Reasons for the Spinoff." |
| Q | What is the Company |
| A | The Company is a Delaware corporation that was formed on January 31, 2023 for the purpose of holding the Fortrea businesses following the spinoff. Prior to the transfer by Labcorp of these businesses, which will occur in connection with the spinoff, we will have had no operations other than those incidental to our formation or undertaken in preparation for the spinoff. |
| Q | Who will manage Fortrea after the separation |
| A | We will benefit from an experienced leadership team after the separation. Thomas Pike, who served as President and Chief Executive Officer of the Drug Development, Clinical Development and Commercialization Services business unit of Labcorp since January 2023, will serve as our Chief Executive Officer bringing his 30+ years of industry experience to the job. Jill McConnell, the Chief Financial Officer of the Drug Development, Clinical Development and Commercialization Services business unit of Labcorp, will be appointed as our Chief Financial Officer in connection with the spinoff. Additionally, Mark Morais, President of Clinical Development and Commercial Solutions, within Labcorp Drug Development, and Chief Operating Officer and President of Labcorp Clinical Development, will serve as our Chief Operating Officer and President, Clinical Services. Mr. Pike will serve as Chairman of our board of directors. We will also benefit from the knowledge, experience, and skills of our full board of directors and officers. For more information regarding our management team and our board of directors following the separation, see "Management." |
| Q | What is being distributed in the spinoff |
| A | Labcorp will distribute one share of Fortrea common stock for every share of Labcorp common stock outstanding as of the record date for the spinoff. The number of Labcorp shares you own and your proportionate interest in Labcorp will not change as a result of the spinoff. Immediately following the spinoff, your proportionate interest in Fortrea will be identical to your proportionate interest in Labcorp (as adjusted for any fractional shares). |
| Q | What is the record date for the spinoff, and when will the spinoff occur |
| A | The record date is June 20, 2023, and ownership is determined as of 5 00 p.m., Burlington, North Carolina time, on that date. Fortrea common stock will be distributed on the distribution date, June 30, 2023. |
| Q | Can Labcorp decide to cancel the spinoff even if all the conditions have been met |
| A | Yes. The spinoff is subject to the satisfaction or waiver by Labcorp, at the direction of its board of directors, of certain conditions, including, among others, approval of the Labcorp board of directors, declaration of the effectiveness of our registration statement on Form 10 of which this information statement is a part, and receipt of (i) a private letter ruling from the U.S. Internal Revenue Service (the "IRS") regarding certain U.S. federal income tax matters relating to the spinoff and certain related transactions (which Labcorp has received) and (ii) an opinion of tax counsel regarding the qualification of the spinoff and certain related transactions as generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"). See "The Spinoff-Spinoff Conditions and Termination." Even if all the conditions are met, Labcorp has the right not to complete the spinoff if, at any time prior to the distribution, the board of directors of Labcorp determines, in its sole and absolute discretion, that the spinoff is not in the best interests of Labcorp or its stockholders, that a sale or other alternative is in the best interests of Labcorp or its stockholders, or that market conditions or other circumstances are such that it is not advisable to separate the Fortrea business from Labcorp at that time. In the event Labcorp, at the direction of its board of directors, amends, modifies, or abandons the spinoff, Labcorp will notify its stockholders in a manner reasonably calculated to inform them of such modifications or abandonment with a press release, Current Report on Form 8-K, or other similar means. |
| Q | Can Labcorp waive conditions and still proceed with the spinoff |
| Yes. Labcorp may waive conditions to the spinoff in its sole discretion and proceed with the spinoff even if such conditions have not been met. If the spinoff is completed and the Labcorp board of directors waived any such condition, such waiver could have a material adverse effect on (i) Fortrea's and Labcorp's respective business, financial condition or results of operations, (ii) the trading price of Fortrea's common stock, (iii) the ability of stockholders to sell their Fortrea shares after the distribution, including, without limitation, as a result of (a) illiquid trading if Fortrea common stock is not accepted for listing or (b) litigation relating to any injunctions sought to prevent the consummation of the spinoff or (iv) the tax consequences of the spinoff. In the event Labcorp, at the direction of its board of directors, waives a material condition or amends or modifies the spinoff or the ancillary agreements entered into thereto, Labcorp will evaluate the applicable facts and circumstances at that time and make such additional disclosure and take such other actions as Labcorp determines to be necessary and appropriate in accordance with applicable law. | |
| Q | As a holder of Labcorp common stock as of the record date, what do I have to do to participate in the spinoff |
| A | You are not required to take any action to participate in the spinoff, although you are urged to read this entire document carefully. You will receive one share of Fortrea common stock for every share of Labcorp common stock held as of the record date and retained through the distribution date. You may also participate in the spinoff if you purchase Labcorp common stock in the "regular way" market after the record date and retain your Labcorp common stock through the distribution date. See "The Spinoff-Trading of Labcorp Common Stock After the Record Date and On or Prior to the Distribution." |
| Q | If I sell my shares of Labcorp common stock before or on the distribution date, will I still be entitled to receive shares of Fortrea common stock in the spinoff |
| A | If you own shares of Labcorp common stock on the record date and hold such shares through the distribution date, you will receive one share of Fortrea common stock for every share of Labcorp common stock held as of the record date and retained through the distribution date. However, if you sell shares of Labcorp common stock after the record date and before or on the distribution date, you will also be selling your right to receive shares of Fortrea common stock in connection with the spinoff. See "The Spinoff-Trading of Labcorp Common Stock After the Record Date and On or Prior to the Distribution." You are encouraged to consult with your financial advisor regarding the specific implications of selling your Labcorp common stock before or on the distribution date. |
| Q | How will fractional shares be treated in the spinoff |
| A | Any fractional shares of common stock otherwise issuable to you will be sold on your behalf, and you will receive a cash payment with respect to that fractional share. For an explanation of how the cash payments for fractional shares will be determined, see "The Spinoff-Treatment of Fractional Shares." |
| Q | Will the spinoff affect the trading price of my Labcorp common stock |
| A | Yes, the trading price of Labcorp common stock immediately following the spinoff is expected to be lower than immediately prior to the spinoff because the trading price of Labcorp's common stock will no longer reflect the value of Fortrea and Labcorp. However, we cannot provide you with any guarantees as to the prices at which the Labcorp common stock or Fortrea common stock will trade following the spinoff. |
| Q | Will my Labcorp common stock continue to trade on a stock market |
| A | Yes, Labcorp common stock will continue to be listed on NYSE under the symbol "LH." |
| Q | What are the U.S. federal income tax consequences to me of the distribution of shares of Fortrea common stock pursuant to the spinoff |
| A | Labcorp has received a private letter ruling (the "IRS Ruling") from the IRS on certain issues relevant to the qualification of the spinoff and certain related transactions as tax-free under Sections 368(a)(1)(D) and 355 of the Code, based on certain facts and representations set forth in such request. The IRS Ruling does not address all of the requirements for tax-free treatment of the spinoff, and the spinoff is conditioned upon, among other things, Labcorp's receipt of an opinion of tax counsel regarding the qualification of the spinoff and certain related transactions as generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code. Assuming that the spinoff so qualifies, for U.S. federal income tax purposes, you will not recognize any gain or loss, and no amount will be included in your income in connection with the spinoff, except to the extent of any cash received in lieu of fractional shares. See "The Spinoff-Material U.S. Federal Income Tax Consequences of the Spinoff." You should consult your tax advisor as to the particular consequences of the spinoff and related transactions to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as any foreign tax laws. |
| Q | When will I receive my shares of Fortrea common stock Will I receive a stock certificate for my shares of Fortrea common stock distributed as a result of the spinoff |
| A | Registered holders of Labcorp common stock who are entitled to participate in the spinoff will receive a book-entry account statement reflecting their ownership of Fortrea common stock, which means that no physical stock certificates will be issued. For additional information, registered stockholders in the U.S., Canada, or Puerto Rico should contact Labcorp's transfer agent, American Stock Transfer Trust Company, at (800) 937-5449 or through email at help astfinancial.com. Stockholders located outside the U.S., Canada, and Puerto Rico may call +1 (718) 921-8137. If you would like to receive physical certificates evidencing your shares of Fortrea common stock, please contact Fortrea's transfer agent. See "The Spinoff-When and How You Will Receive Fortrea Shares." |
| Q | What if I hold my shares of common stock through a broker, bank, or other nominee |
| A | Labcorp stockholders who hold their shares of common stock through a broker, bank, or other nominee will have their brokerage account credited with shares of Fortrea common stock. For additional information, those stockholders should contact their broker, bank, or other nominee directly. |
| Q | What if I have stock certificates reflecting my shares of Labcorp common stock Should I send them to the transfer agent or to Labcorp |
| A | You should not send your stock certificates to the transfer agent or to Labcorp. You should retain your Labcorp stock certificates. |
| Q | Will Fortrea incur any debt or enter into any financing arrangements prior to or at the time of the spinoff |
| A | In connection with the spinoff, we expect to incur indebtedness in an aggregate principal amount of approximately $1,640 million, which we expect to consist of borrowings under senior secured term loan facilities and senior secured notes. We also expect to enter into a $450 million senior secured revolving credit facility, which we do not expect to borrow under prior to the spinoff, and an accounts receivable purchase program ("ARPP"), which we also do not expect to take advantage of, other than in a testing capacity, prior to the spinoff. The ARPP establishes a receivables purchase facility that provides for up to approximately $80 million in funding based on the availability of certain eligible receivables and the satisfaction of certain conditions. We expect to use the proceeds from these debt and other financing transactions to make an expected $1,605 million cash distribution to Labcorp as partial consideration for the assets that will be contributed to us in connection with the spinoff. After giving effect to such payment and approximately $35 million of associated fees and expenses incurred in connection with the entry into the above, we expect to begin operations as an independent company with a cash balance of approximately $120 million. The cash benefit to Labcorp of the dividend offset by the operating cash at spin is expected to be $1,485 million. Our capital structure, including the terms and conditions thereof, remains under review and will be finalized prior to the spinoff. Once finalized, disclosure regarding our capital structure will be provided in a current report on Form 8-K prior to the consummation of the spinoff. See "Capitalization," "Unaudited Pro Forma Combined Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity, Capital Resources and Financial Position" and "Description of Certain Indebtedness and Other Financing." For more information about risks related to our capital structure see "Risk Factors-We may not be able to access the capital and credit markets on terms that are favorable to us, or at all" and "Risk Factors-The terms and conditions of our expected new senior secured term loan facilities, senior secured revolving credit facility, the indenture governing our senior secured notes and the agreement governing the ARPP have not been finalized." |
| Q | Are there risks to owning common stock of Fortrea |
| A | Yes. Ownership of Fortrea common stock is subject to both general and specific risks relating to Fortrea's business, the industry in which it operates, its ongoing contractual relationships with Labcorp, and its status as a separate, publicly traded company. Ownership of Fortrea common stock is also subject to risks relating to the spinoff. See "Risk Factors." |
| Q | What will govern my rights as a Fortrea stockholder |
| A | Your rights as a Fortrea stockholder will be governed by Delaware law, as well as our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws. Below please find a table that outlines the specific material differences between the rights of the holders of Labcorp's common stock and Fortrea's common stock at the time of the distribution Other than the material differences outlined above, at the time of the distribution, we expect that there will be no other material differences between the rights of the holders of Labcorp's common stock and the holders of Fortrea's common stock. For additional details regarding the Fortrea stock and Fortrea stockholder rights, including the fact that rights denoted with a "*" will expire at the annual meeting of stockholders to be held in 2028, see "Description of Capital Stock." |
| Q | Does Fortrea intend to pay cash dividends |
| A | We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. Instead, we intend to retain earnings for use in the operation and expansion of our business. Any future payment of dividends will be at the discretion of our board of directors and will depend upon various factors then existing, including earnings, financial condition, results of operations, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law, general business conditions, and other factors that our board of directors may deem relevant. See "Dividend Policy." |
| Q | Will Fortrea common stock trade on a stock market |
| A | Yes. Currently, there is no public market for our common stock. We have applied to list our common stock on NASDAQ under the symbol "FTRE." We cannot predict the trading price for our common stock when such trading begins. |
| Q | What will happen to Labcorp stock options, restricted stock, performance stock unit awards, restricted stock units, and deferred stock unit awards |
| A | Generally, outstanding Labcorp equity awards held by employees of Fortrea will be converted into Fortrea equity awards, and outstanding Labcorp equity awards held by employees of Labcorp will remain Labcorp equity awards. As of the distribution date, (i) the exercise price and number of options subject to each outstanding Labcorp stock option award will be adjusted in a manner intended to provide the same value from immediately before the spinoff to immediately after the spinoff, (ii) each restricted stock unit award that is held immediately prior to the spinoff by any employee of Fortrea will be converted into a respective restricted stock unit award denominated in shares of our common stock and (iii) each outstanding performance share award that is held immediately prior to the spinoff by any employee of Fortrea will be treated as follows (a) performance share awards for the 2021 to 2023 performance period will be converted into time-based restricted stock units denominated in shares of our common stock based on achievement of performance goals as determined by the Compensation and Human Capital Committee (the "Labcorp Compensation Committee") of Labcorp's board of directors immediately prior to the spinoff (b) performance share awards for the 2022 to 2024 performance period will be converted into awards denominated in shares of our common stock, with 50% of the target number being converted into time-based restricted stock units based on achievement of performance goals as determined by the Labcorp Compensation Committee immediately prior to the spinoff and the remaining 50% of the target number being converted into performance shares of Fortrea subject to the achievement of performance criteria established by the Labcorp Compensation Committee, and subject to further review and modification by Fortrea in its discretion and (c) performance share awards for the 2023 to 2025 performance period shall be converted into performance shares of Fortrea subject to the achievement of performance criteria established by the Labcorp Compensation Committee, and subject to further review and modification by Fortrea in its discretion. Each of our converted awards will generally be subject to the same terms, vesting conditions and other restrictions that applied to the original Labcorp award immediately before the spinoff except that performance-vesting conditions applicable to performance share awards will be adjusted as described in the preceding sentence. For further information regarding the treatment of equity awards in the spinoff, see "The Spinoff-Stock-Based Plans-Treatment of Equity-Based Compensation." |
| Q | What will the relationship between Labcorp and Fortrea be following the spinoff |
| A | In connection with the spinoff, we and Labcorp will enter into a separation and distribution agreement that will contain key provisions relating to the separation of our business from Labcorp, the transfer of Labcorp's Clinical Development and Commercialization Services business to us, and the distribution of our common stock. In addition, we and Labcorp will enter into several agreements to govern our relationship following the distribution, including a tax matters agreement, an employee matters agreement, a transition services agreement, lease agreements and other agreements governing ongoing commercial relationships. See "Relationship with Labcorp After the Spinoff-Agreements Between Labcorp and Us." |
| Q | Will I have appraisal rights in connection with the spinoff |
| A | No. Holders of Labcorp common stock are not entitled to appraisal rights in connection with the spinoff. |
| Q | Who is the transfer agent for your shares of common stock |
| A | American Stock Transfer Trust Company. |
| Q | Who is the distribution agent for the spinoff |
| A | American Stock Transfer Trust Company. |
| Q | Whom can I contact for more information |
| A | If you have questions relating to the mechanics of the distribution of Fortrea common stock, you should contact the distribution agent |
| By Mail, Overnight Courier or Hand-Delivery to | |
| American Stock Transfer Trust Company Shareholder Services 6201 Fifteenth Avenue Brooklyn, NY 11219 | |
| By Phone or Email | |
| Telephone (800) 937-5449 Outside the U.S., Canada and Puerto Rico +1 (718) 921-8137 Email help astfinancial.com | |
| Before the spinoff, if you have questions relating to the spinoff, you should contact Labcorp at | |
| Laboratory Corporation of America Holdings 358 South Main Street Burlington, North Carolina 27215 Attention Chas Cook, VP Investor Relations Telephone +1 (336) 436-5076 | |
| After the spinoff, if you have questions relating to Fortrea, you should contact Fortrea at | |
| Fortrea Holdings Inc. 8 Moore Drive Durham, NC 27709 Attention Hima Inguva, SVP of Investor Relations, Corporate Development and Competitive Intelligence Telephone +1 (877) 495-0816 |
The following is a summary of some of the information contained in this information statement. It does not contain all the details concerning Fortrea or the spinoff, including information that may be important to you. We urge you to read this entire document carefully, including "Risk Factors" and "Unaudited Pro Forma Combined Financial Information" and the combined financial statements and the notes to those financial statements included elsewhere in this information statement.
Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement assumes the completion of the separation of Fortrea from Labcorp and the related distribution of our common stock.
We are a leading global contract research organization ("CRO") providing comprehensive phase I through IV biopharmaceutical product and medical device services, patient access solutions and other enabling services. For over 30 years, we have provided our global pharmaceutical, biotechnology, and medical device customers with clinical pharmacology, clinical development, and other service capabilities. In addition, we offer our customers highly flexible delivery models that include Full Service, Functional Service Provider ("FSP"), and Hybrid structures. We believe we are well positioned to leverage our global scale, access to clinical data-driven insights, industry network, and decades of experience to bring customers tailored solutions. Fortrea intends to capitalize on the global demand for clinical development services across a diverse set of therapeutic areas.
Our team of approximately 21,000 staff (including temporary staff and contractors, as well as more than 2,600 global, cross-functional clinical research associates) conducts operations in 90 countries and delivers a broad range of clinical development solutions and other services for our customers. Our services streamline the biopharmaceutical product and medical device development process. Additionally, we successfully utilize enabling technologies to optimize processes and evolve with a dynamic marketplace.
Figure 1 Fortrea's clinical experience over the past five years
Over the last five years, we have completed approximately 5,400 studies utilizing approximately 83,500 sites spanning 929,100 participants. These studies encompass more than 20 therapeutic areas and every phase of clinical trials. As the volume of clinical development spend outsourced to CROs continues to grow, we are bringing together global scale, deep scientific expertise, and a comprehensive suite of solutions to better serve our customers.
In sum, Fortrea combines decades of domain expertise with the nimbleness required to meet market demand for adaptable engagements with large and small customers. We intend to differentiate this pairing of technical expertise
with innovative solutions that provide access to unique clinical data assets. Our relationship with Labcorp and other leading third parties provides Fortrea with actionable and data-driven insights that accelerate investigator and patient recruitment. Further, this key differentiator positions Fortrea to enhance clinical trial diversity while streamlining protocol development processes. We seek to apply creativity and experience to every challenge, and our core competencies create efficiencies to deliver life-changing solutions faster.
Our expertise in the biopharmaceutical product and medical device development process has driven us to design service offerings to better meet the needs of customers. We have a robust customer base across pharmaceutical, biotechnology, and medical device organizations. We manage our business in two reporting segments - Clinical Services and Enabling Services. Our Clinical Services segment, which accounted for 91% of revenues and 94% of operating income in 2022, brings solutions to market which include clinical pharmacology and comprehensive clinical development capabilities. Our Enabling Services segment, which accounted for 9% of revenues and 6% of operating income in 2022, provides patient access and technology solutions which can be deployed across any of our global solutions depending on the scope of our customers' needs. This comprehensive platform provides our customers with efficient processes across delivery models.
Clinical Services Segment
Clinical Pharmacology. Our capabilities and solutions support early-phase studies in normal healthy volunteers, special populations, and patient populations across a spectrum of diseases. We deliver critical services to our customers including first-in-human trials ("FIH"), single ascending dose escalation studies ("SAD"), multiple ascending dose escalation studies ("MAD"), radiolabeled human absorption, metabolism, and excretion pharmacokinetics studies ("AME"), drug-drug interaction ("DDI"), hepatic and renal impairment, food effect, QTc interval, and other study types. In addition, we conduct phase Ib hybrid studies that move from normal healthy volunteers into patient populations, providing early insights into pharmacodynamics and signals of therapeutic effectiveness. We have developed a multi-national infrastructure of phase I facilities in both the U.S. and the United Kingdom ("U.K."). This infrastructure is part of an integrated platform designed to enable consistent execution of complex early-phase clinical trials. This includes project management, comprehensive monitoring, pharmacokinetic analysis, and biometrics. Over the past five years, we have conducted more than 600 clinical pharmacology studies.
Clinical Development. We are a leading full-service provider of phase I through IV clinical studies with a flexible approach to serving our customers. Clinical Development is Fortrea's largest offering in terms of annual revenue contribution, and has been for the last five years. Services include, but are not limited to, regulatory affairs, protocol design, operational planning, study and site start-up, patient recruitment, project management, comprehensive monitoring, data management and biostatistics, pharmacovigilance, medical writing, and mobile clinical services. Our service offerings are supported by technological innovations such as digital and decentralized clinical trial ("DCT") capabilities. We focus on rapidly expanding research areas such as oncology, rare diseases, and cell and gene therapies. Additionally, we have deep scientific expertise in a broad spectrum of therapeutic areas and diseases, such as cardiovascular, renal, central nervous system ("CNS") and neurodegenerative, autoimmune, metabolic, infectious disease, dermatology, ophthalmology, immunology, inflammation, respiratory, nephrology, rheumatology, women's health, and nonalcoholic steatohepatitis ("NASH"), among others. Over the past five years, we have conducted approximately 4,800 phase I through IV clinical trial projects. Clinical development is enhanced by our pharmacology learnings, which we apply to future clinical programs. We also have a significant medical device and diagnostics offering, and have conducted over 700 clinical trials in this area. We believe Fortrea is poised to capture additional market share in the large and expanding development market.
We offer our customers a tailored approach to clinical trial solutions through the use of three delivery models Full Service, FSP, and Hybrid.
Full Service. Integrates multiple disciplines from our service offering to comprehensively support our customers in their development programs across key geographies. Our service offering
integrates protocol design and operational planning, site start-up and patient recruitment, project and program management, comprehensive site monitoring, centralized monitoring and medical data review, clinical and biometrics services, medical writing, and mobile clinical services. Our project-centric approach utilizes dynamic team resourcing with agile role-based structures. This approach allows for more adaptability to trial types with customer-tailored designs. Our Full Service delivery model has a global reach with over 10,000 staff in over 60 countries, including a strong position in the Asia-Pacific market.
Functional Service Provider. Offers customers experienced personnel to perform targeted activities throughout their development programs. This approach reduces our customers' need to recruit and train dedicated internal resources which saves on cost and time and enables flexibility. Our service offering delivers comprehensive, strategic solutions designed to adapt to the level of customer control and infrastructure. Our FSP team can provide dedicated offerings in clinical operations, clinical data management, biostatistics, statistical programming, pharmacovigilance, mobile clinical services, and medical writing, among other customized solutions. Additionally, our Functional Service Provider delivery model has a global infrastructure, with in-country, regional, on, near and off-shore models and over 6,000 global staff.
Hybrid. Provides the project-centric approach of a Full Service model while integrating FSP models, to varying degrees on large portfolios with therapeutic similarities, to drive efficiencies and enhance sponsor control for clinical development. Our ability to tailor our services to customer needs demonstrates the flexibility we can offer customers across the industry value chain. Fortrea offers this flexibility at a global scale and we expect to position our team as a partner of choice for customers that require a tailored approach
Consulting Services. We provide consulting services that include product development strategy, protocol development, regulatory advisory, patient access guidance, and medical affairs advisory. This solution supports critical decision points in the lifecycle of our customers' products. Further, this spinoff gives Fortrea ample opportunity to expand customer relationships that bolt on additional services in our portfolio.
Enabling Services Segment
Patient Access. Fortrea has established a comprehensive portfolio of services to optimize patient support, adherence, and product access. We provide solutions for co-pay, reimbursement and affordability assistance, real-time analytics and market access consulting. Our team operates on behalf of biopharmaceutical product and medical device manufacturers by employing highly trained agents within contact centers and field-based teams. Our field reimbursement specialists enable healthcare practitioners in the United States to navigate product access for their patients. Our nurse-educator staffed call centers provide customized patient support programs designed to address barriers to product use and adherence. We have our non-commercial specialty pharmacy solution providing cold chain storage and specialty prescription dispensing on behalf of biopharmaceutical customers. Our priority is to help patients gain access to treatments on behalf of our customers.
Technology Solutions. We provide our customers access to products that support critical decision points in the lifecycle of their assets. Endpoint Clinical ("Endpoint") provides comprehensive randomization and trial supply management ("RTSM") technology solutions. Our Interactive Response Technology ("IRT") and clinical supplies management solution, streamlines complex randomization and trial supply methods, refines and improves drug supply management, and simplifies site, study and subject administration. Our flexible RTSM technology enables customers to manage a broad range of standard and complex randomization methods, supporting complex trial designs. We believe these products optimize the supply chain and minimize operational costs, while supporting timely and accurate patient dosing. We have invested in direct-to-patient technology that provides comprehensive DCT capabilities supporting electronic solutions and telemedicine to augment trial experiences by decreasing the burden of participation for patients. We also offer a suite of technology and data to deliver insights that enable development and oversight in the effort to maximize trial outcomes. These tools include modules focused on study design
optimization extensive risk, issue, and quality management centralized data and medical review diversity and inclusion study insights clinical monitoring and study oversight.
CROs provide services to assist in phase I through phase IV clinical trials and commercialization to accelerate the development and reach of safe, effective medical therapies and devices. Developing new biopharmaceutical products and medical devices for the treatment of human disease is a complex, costly, and lengthy process. Prior to commercialization, a biopharmaceutical product or medical device must undergo extensive pre-clinical and clinical testing as well as regulatory review to demonstrate an acceptable benefit-risk profile by regulatory authorities. As a result, bringing a new biopharmaceutical product or medical device to market can take up to 12 years and costs $2.5 billion or more on average.1
The biopharmaceutical product development process consists of three stages pre-clinical, clinical, and commercialization. The pre-clinical process is the stage of research that begins prior to clinical studies and collects data on the feasibility, efficacy, and safety of drugs through experiments outside of the human body. The clinical stage is the most time-consuming and expensive part of the drug development process. During this stage, the product candidate undergoes a series of tests on humans. In phase I, small groups of study volunteers are exposed to ascending doses of the experimental product in order to assess safety and to determine the distribution of the drug and maximally tolerated dose. Preliminary assessment of the relationships between dosage, safety, and effectiveness follow in phase II before expanding to larger trials, phase III, to formally test effectiveness and safety in the target population. Phase IV, or post-approval trials, involves monitoring or verifying the risks and benefits of a drug product.
The clinical development market is a large, attractive and growing market. Clinical development spend by the pharmaceutical and biotechnology industry was estimated at $100 billion in 20222. Of this, we estimate the current addressable market for Fortrea to be $35 billion. Over the next several years, pharmaceutical and biotechnology companies are projected to increase research and development ("R D") investment, grow their pipelines, and outsource more programs to CROs. We believe these underlying market trends represent a significant opportunity for us.
In addition to the growth in R D expenses, an increase in outsourcing has also supported the growth of the CRO sector. Global pharmaceutical and biotechnology companies are a major driver of this growth as they continue to outsource a significant amount of the biopharmaceutical product development process as they seek therapeutic diversity for their pipelines, target diverse global populations, and require deep scientific research. We believe there are three key trends affecting our end markets and believe that such trends will continue creating an increased demand for our services
Increasing Pharmaceutical and Biotechnology R D Spend. Growing R D investment will help propel the CRO market as new indications are discovered, resulting in a greater demand for clinical trials. Over the past decade, we have seen the biopharma industry leverage science, technology, and artificial intelligence ("AI") to advance the level of understanding of the pathogenesis of human disease, and to identify new therapeutic targets and treatments. Despite a relative downturn in 2022 compared to 2020 and 2021, over the medium to longer term we expect the biotechnology funding to be strong.
Elevated Outsourcing Levels. As large biopharmaceutical companies seek to reduce the cost and time to develop biopharmaceutical products, they have increasingly relied on CROs for services to preserve flexibility and reduce costs associated with clinical trials and improve time to market. According to multiple industry investment sources, the CRO market is expected to grow more slowly for the next two years, at approximately 3-5%, returning to a growth rate of 6-9% in the longer term. The growth is driven by low single-digit percentile growth from large pharmaceutical companies, double-digit percentile growth from smaller biotechnology companies, and a continued drive for more outsourcing generally.
1 Geoffrey Levitt testimony before Senate Judiciary Committee July 31, 2021.
2 Simoens S and Huys I (2021) R D Costs of New Medicines A Landscape Analysis Front. Med. 8 760762. doi 10.3389 fmed.2021.760762 and 2022 Pharma R D Spend. Evaluate Ltd.
Expanding Scope of Capabilities. CROs have successfully expanded the scope of services they are able to offer pharmaceutical, biotechnology, and medical device companies, increasing the addressable market that they serve. Examples include the expansion of DCT services, global logistics, and management of highly complex biologics, and cell and gene therapy trials. The need for biopharmaceutical companies to expand the commercial potential of their products internationally has been a catalyst for the increasingly global nature of clinical trials. CROs that can capitalize on extensive datasets to inform decisions and increase efficiency in international clinical trials have benefited from these changing dynamics. As R D pipelines continue to prioritize biologics and advanced therapies, such as cell and gene therapies, additional complex clinical trial capabilities will also be required from CROs. We are built to handle this increased complexity and global demand that underpin these industry tailwinds.
Despite the large, attractive and growing market that Fortrea operates in, our business is subject to a number of risks inherent to our industry, including our customers' ability to access sufficient funding to complete clinical trials, our ability to generate net new business awards or our new business awards being delayed, terminated, reduced in scope, or failing to go to contract, and our ability to contract with suitable investigators and recruit and enroll patients for clinical trials, among others. Any number of these factors could impact our business, and there is no guarantee that our historical performance will be predictive of future operational and financial performance. For a description of the challenges we face and the risks and limitations that could harm our prospects, see "Cautionary Statement Concerning Forward-Looking Statements," "-Summary of Risk Factors" and "Risk Factors" included elsewhere in this information statement.
Competitive Strengths
We believe we are strategically positioned to serve the pharmaceutical, biotechnology, and medical device industries. Our credibility and reputation in the market is a direct result of our multi-decade track record of operational execution, and effective flexible solutions. Our competitive strengths include
Extensive History as a Market Leader Across Clinical Development
We have over 30 years of experience providing clinical development services to the pharmaceutical, biotechnology, and medical device industries. We have conducted approximately 4,800 trials across all phases of clinical development in over 90 countries in the last five years. We have an extensive history as a leading organization with a differentiated service offering. We believe that our commitment to continuous services and technology innovations combined with Fortrea's customizable approach and experience across more than 20 therapeutic areas will enable us to continue to differentiate ourselves from peers in the CRO industry.
Large and Diversified Customer Base
We have a balanced and diverse customer mix serving large and mid-tier pharmaceutical, biotechnology, and medical device organizations. As of the fiscal year ended 2022, no single customer represented more than 10% of our revenue. We seek to be the partner of choice for both leading pharmaceuticals customers and innovative biotechnology companies. In 2022, 54% of our revenue came from leading pharmaceutical customers. We believe our customer base positions us at the forefront of innovation in healthcare and allows us to help our customers efficiently bring the best therapeutic solutions to patients.
Global and Stable Customer Relationships
Our scale and expertise are key competitive advantages that make us a multi-dimensional partner for our customers. Our top 20 customers have consistently represented approximately 60% of total revenue for 2022, 2021, and 2020. Additionally, most of our customers use us for more than one service. On average, our customers leverage three or more of our services. We believe that our global capabilities and expertise are considered a differentiator by our top customers. With a portfolio of projects that extend over multiple years, our longer-term contract durations give us confidence and visibility into our future revenues.
A selection of our customers can be found below
Access to Actionable Clinical Data and Insights
Access to data is foundational to any CRO and we believe our arrangement with Labcorp and other continuing strategic engagements will be differentiated by the quality of insights our data can provide. We intend to continue to prioritize actionable data as we further scale our data repositories. We believe that we have the opportunity to optimize the clinical development process through accelerating the recruitment, increasing the diversity and improving the retention of patients.
Through our unique relationship with Labcorp, we (i) have access to, in our opinion, one of the largest sets of global clinical trial data, which enables us to progress clinical trials forward more efficiently and (ii) are able to leverage Labcorp's world-class diagnostics network that performs over 600 million tests per year. Those test results help researchers, medical professionals, and patients make important health decisions and provide insights that help identify individuals who might benefit from enrolling in specific drug trials. Our initial two-year access to extensive health and clinical data provides strategic flexibility and operational direction to efficiently meet our customers' needs.
Expertise Across Rapidly Expanding Therapeutic Areas