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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[☒] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2020

or

[☐] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission file number - 1-11353

LABORATORY CORPORATION OF AMERICA HOLDINGS

(Exact name of registrant as specified in its charter)

358 South Main Street

Burlington, North Carolina 27215

(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code) 336-229-1127

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of exchange on which registered

Common Stock, $0.10 par value LH New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ].

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X].

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ].

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ].

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No [ ].

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [☐] No [X].

As of June 30, 2020, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $15.2 billion, based on the closing price on such date of the registrant’s common stock on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 97.6 million shares as of February 24, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated:

Portions of the Registrant’s Notice of Annual Meeting and Proxy Statement to be filed no later than 120 days following December 31, 2020, are incorporated by reference into Part III.

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Page

Summary of Material Risks 4

Part I

Item 1. Business 9

Item 1A. Risk Factors 30

Item 1B. Unresolved Staff Comments 45

Item 2. Properties 46

Item 3. Legal Proceedings 47

Item 4. Mine Safety Disclosures 47

Part II

Item 6. Selected Financial Data 49

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62

Item 8. Financial Statements and Supplementary Data 63

Item 9A. Controls and Procedures 63

Item 9B. Other Information 64

Part III

Item 10. Directors, Executive Officers and Corporate Governance 64

Item 11. Executive Compensation 64

Item 14. Principal Accountant Fees and Services 64

Part IV

Item 15. Exhibits and Financial Statement Schedules 65

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Summary of Material Risks

Laboratory Corporation of America® Holdings together with its subsidiaries (Labcorp® or the Company) is subject to a variety of risks and uncertainties, including risks that could have a material adverse effect on its business, consolidated financial condition, revenues, results of operations, profitability, reputation, and cash flows. This summary should be read together with the more detailed description of the risks that the Company deems material described under “Risk Factors” in Item 1A of this Annual Report on Form 10-K (Annual Report) and should not be relied upon as an exhaustive summary of the material risks facing the Company’s business. In addition to the following summary, investors should carefully consider all of the information set forth in this Annual Report, 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. This Annual Report also includes forward-looking statements, immediately following this risk summary, 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 risks described below and elsewhere.

Risks Related to the COVID-19 Pandemic

a.The effects of the COVID-19 pandemic could have material adverse impacts on the Company’s business, results of operations, cash flows, and financial position.

b.If the Company does not respond appropriately to the ongoing COVID-19 pandemic, or if the Company’s customers do not perceive its response to be adequate, the Company could suffer damage to its reputation, which could adversely affect its business.

c.The success of the Company is dependent in part on the efforts of its management team and employees, and the COVID-19 pandemic could divert or hinder the Company’s human capital resources.

d.The ongoing COVID-19 pandemic has created significant volatility, uncertainty, and economic disruption that could have an adverse effect on the Company’s financial position.

Risks Related to Regulatory and Compliance Matters

a.Changes in payer regulations or policies, insurance regulations or approvals, or changes in or interpretations of, other laws, regulations or policies in the U.S. or globally may have a material adverse effect upon the Company.

b.The Company could face significant monetary damages and penalties and/or exclusion from government programs if it violates anti-fraud and abuse laws.

c.The Company’s business could be harmed from the loss or suspension of a license or imposition of fines or penalties under, or future changes in, or interpretations of, the law or regulations of the Clinical Laboratory Improvement Act of 1967, and the Clinical Laboratory Improvement Amendments of 1988 (CLIA), or those of Medicare, Medicaid or other national, state, or local agencies in the U.S. and other countries where the Company operates laboratories.

d.Failure of the Company or its third party service providers to comply with privacy and 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.

e.The Company’s international operations could subject it to additional risks and expenses that could have a material adverse impact on the business or results of operations, including exposure to liabilities under tax, trade, anti-corruption, and data privacy laws.

f.Failure to comply with the regulations of drug regulatory agencies could result in fines, penalties, and sanctions and have a material adverse effect upon the Company.

g.Failure to conduct animal research in compliance with animal welfare laws and regulations could result in fines, penalties, and sanctions and have a material adverse effect upon the Company.

h.U.S. Food and Drug Administration (FDA) regulation of diagnostic products and increased FDA regulation of laboratory-developed tests (LDTs) could result in increased costs, fines, and penalties.

i.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 and penalties.

Risks Related to the Company’s Business

a.General or macro-economic factors in the U.S. and globally may have a material adverse effect upon the Company, and a significant deterioration in the economy could negatively impact testing volumes, drug development services, cash collections, and the availability of credit.

b.Healthcare reform and changes to related products, changes in government payment and reimbursement systems, or changes in payer mix, including an increase in capitated reimbursement mechanisms and evolving delivery models, could have a material adverse effect on the Company's revenues, profitability, and cash flow.

c.Changes in government regulation or in practices relating to the biopharmaceutical industry could decrease the need for certain services that the Company provides.

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d.Increased competition, including price competition, could have an adverse effect on the Company’s revenues and profitability.

e.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.

f.Discontinuation or recalls of existing testing products, failure to develop or acquire licenses for new or improved testing technologies, and competition from new products and technologies could adversely affect the Company’s business.

g.Operations may be disrupted and adversely impacted by the effects of adverse weather, natural disasters, geopolitical events, public health crises, hostilities or acts of terrorism, acts of vandalism, and other catastrophic events outside of the Company's control.

h.Changes or disruption in services, supplies, or transportation provided by third parties could adversely affect the Company’s business.

i.A failure to identify and successfully close and integrate strategic acquisition targets could have a material adverse effect on the Company's business objectives and its revenues and profitability.

j.Continued and increased consolidation of managed care organizations (MCOs), biopharmaceutical companies, health systems, physicians, and other customers could adversely affect the Company's business.

k.Unproductive labor environment, 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.

l.An inability to attract and retain experienced and qualified personnel, including key management personnel, could adversely affect the Company’s business.

m.Global economic conditions and government and regulatory changes, including, but not limited to, those arising from the U.K.'s exit from the European Union (EU), could adversely affect the Company’s business and results of operations.

Risks Related to Financial Matters

a.The Company bears financial risk for contracts that, including for reasons beyond the Company's control, may be underpriced, subject to cost overruns, delayed, terminated or reduced in scope.

b.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.

c.The Company's Drug Development segment revenues depend on the biopharmaceutical industry, including biopharmaceutical companies' R&D spending, ability to raise capital, reimbursement from governmental programs or commercial payers, and biopharmaceutical industry trends and other economic conditions.

d.Foreign currency exchange fluctuations could have a material adverse effect on the Company’s business.

e.The Company’s uses of financial instruments to limit its exposure to interest rate and currency fluctuations could expose it to risks and financial losses that may adversely affect the Company’s financial condition, liquidity, and results of operations.

f.The Company’s level of indebtedness could adversely affect the Company’s liquidity, results of operations and business.

Risks Related to Technology and Cybersecurity

a.Failure to maintain the security of information relating to the Company, or its customers, patients, or vendors, whether as a result of cybersecurity attacks on the Company’s information systems or otherwise, could damage the Company’s reputation, cause it to incur substantial additional costs, result in litigation and enforcement actions, and materially adversely affect the Company’s business and operating results.

b.Failure or delays in the Company’s information technology systems, including the failure to develop and implement updates and enhancements to those systems, could disrupt the Company’s operations or customer relationships.

c.The Company depends on third parties to provide services critical to the Company's business, and depends on them to comply with applicable laws and regulations. Breaches of the information technology systems of third parties could have a material adverse effect on the Company's operations.

Risks Related to Legal Matters

a.Adverse results in material litigation matters could have a material adverse effect upon the Company’s business.

b.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.

c.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.

d.If the Company fails to perform contract research services in accordance with contractual requirements and regulatory standards, the Company could be subject to significant costs or liability.

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FORWARD-LOOKING STATEMENTS

In this Annual Report, the Company makes, and from time to time may otherwise make in its public filings, press releases and discussions by Company management, forward-looking statements concerning the Company’s operations, performance and financial condition, as well as its strategic objectives. Some of these forward-looking statements relate to future events and expectations and can be identified by the use of forward-looking words such as “believes”, “expects”, “may”, “will”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, or “anticipates” or the negative of those words or other comparable terminology. Such forward-looking statements speak only as of the time they are made and are subject to various risks and uncertainties and the Company claims the protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those currently anticipated due to a number of factors in addition to those discussed elsewhere herein, including in the “Summary of Material Risks” above and in the “Risk Factors” section of this Annual Report, and in the Company’s other public filings, press releases, and discussions with Company management, including:

1.changes in government and third-party payer regulations, reimbursement, or coverage policies or other future reforms in the U.S. healthcare system (or in the interpretation of current regulations), new insurance or payment systems, including state, regional or private insurance cooperatives (e.g., health insurance exchanges) affecting governmental and third-party coverage or reimbursement for commercial laboratory testing, including the impact of the U.S. Protecting Access to Medicare Act of 2014 (PAMA);

2. significant monetary damages, fines, penalties, assessments, refunds, repayments, damage to the Company's reputation, unanticipated compliance expenditures, and/or exclusion or debarment from or ineligibility to participate in government programs, among other adverse consequences, arising from enforcement of anti-fraud and abuse laws and other laws applicable to the Company in jurisdictions in which the Company conducts business;

3. significant fines, penalties, costs, unanticipated compliance expenditures, and/or damage to the Company’s reputation arising from the failure to comply with applicable privacy and security laws and regulations, including the U.S. Health Insurance Portability and Accountability Act of 1996, the U.S. Health Information Technology for Economic and Clinical Health Act, the European Union's General Data Protection Regulation and similar laws and regulations in jurisdictions in which the Company conducts business;

4. loss or suspension of a license or imposition of fines or penalties under, or future changes in, or interpretations of applicable licensing laws or regulations regarding the operation of clinical laboratories and the delivery of clinical laboratory test results, including, but not limited to, CLIA and similar laws and regulations in jurisdictions in which the Company conducts business;

5. penalties or loss of license arising from the failure to comply with applicable occupational and workplace safety laws and regulations, including the U.S. Occupational Safety and Health Administration requirements, the U.S. Needlestick Safety and Prevention Act, and similar laws and regulations in jurisdictions in which the Company conducts business;

6. fines, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, damage to the Company's reputation, injunctions, or criminal prosecution arising from failure to maintain compliance with current good manufacturing practice regulations and similar requirements of various regulatory agencies in jurisdictions in which the Company conducts business;

7. sanctions or other remedies, including fines, unanticipated compliance expenditures, enforcement actions, injunctions or criminal prosecution arising from failure to comply with the Animal Welfare Act or applicable national, state and local laws and regulations in jurisdictions in which the Company conducts business;

8. changes in testing guidelines or recommendations by government agencies, medical specialty societies, and other authoritative bodies affecting the utilization of laboratory tests;

9. changes in applicable government regulations or policies affecting the approval, availability of, and the selling and marketing of diagnostic tests, drug development, or the conduct of drug development and medical device and diagnostic studies and trials, including regulations and policies of the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the Medicine and Healthcare products Regulatory Agency in the United Kingdom (U.K.), the National Medical Products Administration in China, the Pharmaceutical and Medical Devices Agency in Japan, the European Medicines Agency and similar regulations and policies of agencies in other jurisdictions in which the Company conducts business;

10. changes in government regulations or reimbursement pertaining to the biopharmaceutical and medical device and diagnostic industries, changes in reimbursement of biopharmaceutical products, or reduced spending on research and development by biopharmaceutical and medical device and diagnostic customers;

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11. liabilities that result from the failure to comply with corporate governance requirements;

12. increased competition, including price competition, potential reduction in rates in response to price transparency and consumerism, competitive bidding and/or changes or reductions to fee schedules, and competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry;

13. changes in payer mix or payment structure, including insurance carrier participation in health insurance exchanges, an increase in capitated reimbursement mechanisms, the impact of a shift to consumer-driven health plans or plans carrying an increased level of member cost-sharing, and adverse changes in payer reimbursement or payer coverage policies (implemented directly or through a third-party utilization management organization) related to specific diagnostic tests, categories of testing or testing methodologies;

14. failure to retain or attract MCO business as a result of changes in business models, including risk based or network approaches, out-sourced laboratory network management or utilization management companies, or other changes in strategy or business models by MCOs;

15. failure to obtain and retain new customers, an unfavorable change in the mix of testing services ordered, or a reduction in tests ordered, specimens submitted, or services requested by existing customers, and delays in payments from customers;

16. difficulty in maintaining relationships with customers or retaining key employees as a result of uncertainty surrounding the integration of acquisitions and the resulting negative effects on the business of the Company;

17. consolidation and convergence of MCOs, biopharmaceutical companies, health systems, large physician organizations and other customers, potentially causing material shifts in insourcing, utilization, pricing and reimbursement, including full and partial risk-based models;

18. failure to effectively develop and deploy new systems, system modifications or enhancements required in response to evolving market and business needs;

19. customers choosing to insource services that are or could be purchased from the Company;

20. failure to identify, successfully close and effectively integrate and/or manage acquisitions of new businesses;

21. inability to achieve the expected benefits and synergies of newly-acquired businesses, including due to items not discovered in the due diligence process, and the impact on the Company's cash position, levels of indebtedness and stock price;

22. termination, loss, delay, reduction in scope or increased costs of contracts, including large contracts and multiple contracts;

23. liability arising from errors or omissions in the performance of testing services, contract research services or other contractual arrangements;

24. changes or disruption in the provision or transportation of services or supplies provided by third parties; or their termination for failure to follow the Company's performance standards and requirements;

25. damage or disruption to the Company's facilities;

26. damage to the Company's reputation, loss of business, or other harm from acts of animal rights activists or potential harm and/or liability arising from animal research activities;

27. adverse results in litigation matters;

28. inability to attract and retain experienced and qualified personnel or the loss of significant personnel as a result of illness or otherwise;

29. failure to develop or acquire licenses for new or improved technologies, such as point-of-care testing, mobile health technologies, and digital pathology, or potential use of new technologies by customers and/or consumers to perform their own tests;

30. substantial costs arising from the inability to commercialize newly licensed tests or technologies or to obtain appropriate coverage or reimbursement for such tests;

31. failure to obtain, maintain, and enforce intellectual property rights for protection of the Company's products and services and defend against challenges to those rights;

32. scope, validity, and enforceability of patents and other proprietary rights held by third parties that may impact the Company's ability to develop, perform, or market the Company's products or services or operate its business;

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33. business interruption, receivable impairment, delays in cash collection impacting days sales outstanding, supply chain disruptions, increases in operating costs, or other impacts on the business due to natural disasters, including adverse weather, fires and earthquakes, political crises, including terrorism and war, public health crises and disease epidemics and pandemics, and other events outside of the Company's control;

34. discontinuation or recalls of existing testing products;

35. a failure in the Company's information technology systems, including with respect to testing turnaround time and billing processes, or the failure of the Company or its third-party suppliers and vendors to maintain the security of business information or systems or to protect against cybersecurity attacks such as denial of service attacks, malware, ransomware, and computer viruses, or delays or failures in the development and implementation of the Company’s automation platforms, any of which could result in a negative effect on the Company’s performance of services, a loss of business or increased costs, damages to the Company’s reputation, significant litigation exposure, an inability to meet required financial reporting deadlines, or the failure to meet future regulatory or customer information technology, data security and connectivity requirements;

36. business interruption, increased costs, and other adverse effects on the Company's operations due to the unionization of employees, union strikes, work stoppages, general labor unrest or failure to comply with labor or employment laws;

37. failure to maintain the Company's days sales outstanding levels, cash collections (in light of increasing levels of patient responsibility), profitability and/or reimbursement arising from unfavorable changes in third-party payer policies, payment delays introduced by third party utilization management organizations, and increasing levels of patient payment responsibility;

38. impact on the Company's revenues, cash collections, and the availability of credit for general liquidity or other financing needs arising from a significant deterioration in the economy or financial markets or in the Company's credit ratings by Standard & Poor's and/or Moody's;

39. failure to maintain the expected capital structure for the Company, including failure to maintain the Company's investment grade rating, or leverage ratio covenants under its term loan facility and revolving credit facility;

40. changes in reimbursement by foreign governments and foreign currency fluctuations;

41. inability to obtain certain billing information from physicians, resulting in increased costs and complexity, a temporary disruption in receipts, and ongoing reductions in reimbursements and revenues;

42. expenses and risks associated with international operations, including, but not limited to, compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, other applicable anti-corruption laws and regulations, trade sanction laws and regulations, and economic, political, legal and other operational risks associated with foreign jurisdictions;

43. failure to achieve expected efficiencies and savings in connection with the Company's business process improvement initiatives;

44. changes in tax laws and regulations or changes in their interpretation, including the U.S. Tax Cuts and Jobs Act;

45. global economic conditions and government and regulatory changes, including, but not limited to those arising from the U.K.'s exit from the European Union; and

46. effects, duration, and severity of the ongoing COVID-19 pandemic, including the impact on operations, personnel, liquidity, and collections, and the actions the Company, or governments, have taken or may take in response, and damage to the Company's reputation or loss of business resulting from the perception of the Company's response to the COVID-19 pandemic, including the availability and accuracy and timeliness of delivery of any tests that the Company develops, collaborates on, or provides for the detection of COVID-19, and the availability and timeliness of its drug development services.

Except as may be required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Given these uncertainties, any forward-looking statements should not be unduly relied upon.

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PART I

Item 1. BUSINESS

Labcorp® is a leading global life sciences company that provides vital information to help doctors, hospitals, pharmaceutical companies, researchers, and patients make clear and confident decisions. By leveraging its strong diagnostics and drug development capabilities, the Company provides insights and accelerates innovations to improve health and improve lives. With over 72,400 employees, the Company serves clients in more than 100 countries.

Through its Labcorp Diagnostics (Dx) and Labcorp Drug Development (DD) segments, the Company provides diagnostic, drug development, and technology-enabled solutions for more than 160 million patient encounters per year, or more than 3 million patients per week. The Company also supports clinical trial activity in approximately 100 countries through its industry-leading central laboratory, preclinical, and clinical development businesses.

The breadth of the Company's offerings has resulted in revenue growth of 23%, and operating income growth of 84%, from 2018 through 2020. The Company believes that its diversified service offerings across drug development and diagnostics also help to balance the impact of changes in the global economic and healthcare systems, and the influence of unplanned events such as the COVID-19 pandemic.

For the period ended December 31, 2020, the Company generated revenues of $13,978.5 million, diluted earnings per share of $15.88, and had a total operating cash flow of $2,135.3 million.

The Company believes that science, technology and innovation are behind its successes and are foundational to its future. The Company's commitment to leading with science and innovation enables it to improve the health and lives of people around the world.

Rebranding

In December 2020, the Company announced an evolution of its brand identity, to highlight the pivotal role the Company plays in healthcare and showcase the power of the Company’s combined diagnostic and drug development offerings through one powerful brand. As part of the rebranding, the Company introduced a new company logo and has begun associating its business unit brands with the Labcorp name. The Company’s drug development segment, formerly referred to as Covance Drug Development, became Covance by Labcorp for a transition period, and by mid-2021 is expected to transition to Labcorp Drug Development. The Company's diagnostics segment, formerly referred to as LabCorp Diagnostics, is transitioning to the Labcorp name and new logo during 2021.

Enterprise Strategy

Labcorp is positioned at the convergence of research and care delivery to enable more precise and individualized healthcare, bringing together world-class diagnostics and drug development capabilities.

The Company believes that it can continue to expand its role in the rapidly evolving healthcare environment by advancing the following strategic priorities:

1.Leveraging the Power of the Company’s Combined Capabilities

The combination of Dx’s and DD’s core capabilities and scientific and technological expertise uniquely enables the Company to create compelling solutions for clients. The Company’s combined strengths allow it to help biopharmaceutical and medical device partners design better clinical studies, execute those studies faster through enhanced patient recruitment, take greater advantage of virtual and hybrid study options, and satisfy post-market surveillance requirements. For example, the Company can advance companion and complementary diagnostics and other precision medicine innovations that match patients with targeted treatments based on genomics and other individual characteristics because of its experience, resources and data in both drug development and diagnostics. Through comprehensive integration of those capabilities, the Company has a unique opportunity to extend its position as a market leader in the development and commercialization of new therapies and tests, by providing data, insights, and answers for doctors, drug developers, and the public.

2. Advancing the Company's Leadership Position in Oncology

Oncology continues to receive significant investment in research and treatment, but despite decades of focus and research, it is still an area of great unmet medical need. The Company believes the diagnosis and treatment of cancer is expected to be the fastest-growing therapeutic area for the near future.

As oncology's standard of care trends towards the adoption of precision medicine, providers are relying on advanced testing to identify patients who will benefit from new, targeted treatments that are more effective, and usually have fewer side effects, than traditional treatments like chemotherapy. The Company is expanding its leadership through strategic partnerships in oncology testing, major customer wins in late-stage clinical trials, and the recruitment of leaders in the field to further build the

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Company's oncology team. In addition, the Company’s strong connections with patients, physicians, and health systems, along with its extensive data, are powerful tools to support the Company's leadership role in diagnosing and treating cancer and its goal of improving patient outcomes.

3. Integrating Artificial Intelligence, Data, Digitalization and Analytics Across the Company's Business

Advances in technology have impacted nearly every business, and healthcare more than most. By maximizing the use of technology, and in particular advances in artificial intelligence, data, digitalization, and analytics, the Company strives to improve operating efficiency and create new, differentiated products and services that the Company believes will help its customers and will deliver better care to patients.

Artificial intelligence helps the Company to better predict trends, such as where and when demand for certain tests is likely to change, which supports more efficient use of supplies, staffing adjustments, and the Company’s advanced logistics to route testing to the most appropriate laboratories to deliver results quickly. Artificial intelligence capabilities and advanced logistics have played an important role in the Company’s response to the demand for COVID-19 polymerase chain reaction (PCR) testing.

The Company creates, and has access to, significant volumes of data. By applying advanced analytics, the Company can help its customers improve their processes and reach better outcomes. The Company’s repository of test results help study sponsors assess patients' eligibility for clinical trials more quickly and accurately, enroll those patients faster, shorten the time needed for regulatory submission, and accelerate the availability of new medicines.

Digitalization is affecting every aspect of the Company’s business. For example, healthcare providers now have multiple ways to retrieve and analyze their patients' health data; MCOs have various tools to manage their membership; consumers can more readily access testing and their results to have more control over their care; and decentralized clinical trials can help remove barriers that have slowed or prevented studies from being conducted in the past. As the Company experienced in 2020, digitalization also allowed many of the Company’s employees to quickly shift from working in traditional offices to working remotely in response to COVID-19.

4. Putting Customers at the Center of All the Company Does

Labcorp serves a broad range of customers, including MCOs, biopharmaceutical, medical device and diagnostics companies, governmental agencies, physicians and other healthcare providers, hospitals and health systems, employers, patients and consumers, contract research organizations (CROs), and independent clinical laboratories. The Company prioritizes a consistent, coordinated focus across all aspects of the Company's operations, placing the customer at the center of its services, with the objective of becoming the customer's primary partner for solutions to their needs. Customer feedback, communication of best-practices and lessons learned, and robust employee training with respect to the needs of its customers are all methods that the Company employs to provide a top customer experience.

The introduction of the Company’s new branding is intended to send a clear signal of who the Company is, what it does, and how it is differentiated from its competitors. It is the Company's goal that the Labcorp brand represents a promise to its customers about how they will be treated, and the levels of service, quality, and innovation that the Company will deliver.

5. Evaluate and Execute on High-Growth Opportunities

The Company has a long history of disciplined use of capital to invest in the growth of the business. The Company has made significant investments in the deployment of new technologies through both licensing and internal research and development, strategic and fold-in acquisitions, and establishing collaborative partnerships with other leading companies and organizations that share the Company’s goals and expectations.

The Company continually evaluates its business and the broader healthcare and life sciences markets to proactively identify and assess:

•potential growth opportunities;

•business areas that might not support continued growth and should be revamped or divested;

•acquisition targets that meet its criteria for quality, value, and return on investment;

•new products that would successfully integrate with or extend the Company’s offerings; and

•a balanced formula for capital allocation.

Through continued focus on these priorities, the Company expects to be in the optimal position to make tough, disciplined choices that maximize shareholder value, better protect the Company from market fluctuations and outside impacts, and fuel significant, profitable revenue growth.

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COVID-19 Response

The Company has been intensely focused on supporting the fight against COVID-19 since the earliest stages of the pandemic.

Diagnostic Testing and Clinical Trial Leadership

In tandem with the first confirmed cases, the Company began preparations to be able to offer diagnostic testing to identify cases of COVID-19, working closely with diagnostic manufacturers and suppliers, and with regulators and public health authorities.

On March 5, 2020, the Company became the first commercial laboratory in the U.S. to launch PCR testing for COVID-19, and the Company received Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA) on March 16, 2020. That was the first of a steady series of innovations introduced by the Company to rapidly expand COVID-19 test capacity, options, access, and efficiency. These COVID-19 innovations include:

•the first FDA EUA for an at-home collection kit on its Pixel by Labcorp® platform;

•the first digital COVID-19 service, which is also available through healthcare providers from the Company’s Labcorp at Home offering;

•early participation in COVID-19 research projects in collaboration with partners that included Adaptive Biotechnologies, Microsoft, and Pacific Biosciences;

•introduction of new test options to increase test capacity, throughput, and efficiency to maximize use of supplies, including the introduction of a new method to extract RNA from samples using heat and technology; and

•the increased use of robotics and automation in the PCR testing process.

The Company has steadily increased its COVID-19 test capacity, from several thousand PCR tests per day in early March to 275,000 per day by the end of 2020. The Company performed over 31 million PCR tests and nearly 4 million antibody tests in 2020.

As a result, the Company developed an expertise and understanding of COVID-19 that led to it becoming a leader in supporting clinical trials of potential treatments and vaccines for the virus. By the end of 2020, the Company had won approximately 440 COVID-19 trial and study opportunities, from small nonclinical programs to late-stage clinical trials.

Base Business Normalization

In the initial months of the COVID-19 pandemic, the Company experienced a significant drop in its non-COVID-19 business (Base Business) as patients avoided routine medical care and most elective and non-emergency procedures were postponed. This decline, coupled with the suspension of most global clinical trial activity resulted in a negative impact to the Company's Base Business in the latter part of the first quarter and initial part of the second quarter of 2020. By the end of the second quarter of 2020, however, the Company experienced a steady recovery in its Base Business, which continued through the third quarter of 2020. During the fourth quarter, the Dx Base Business volume recovery flattened with volumes below prior year in the high single digits. Throughout 2020, the Company's PCR and antibody COVID-19 testing (COVID-19 Testing) has helped to more than offset the pressure experienced in the Base Business.

COVID-19 Outlook

COVID-19 has had, and continues to have, an extensive impact on the global health and economic environments. The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of the business, given the continued unpredictability and the corresponding government restrictions and customer behavior.

While the Company anticipates that COVID-19 will continue to have a significant impact on its business through 2021 and potentially beyond, the Company expects that the rollout of COVID-19 vaccines will likely lead to a gradual decline in the demand for COVID-19 Testing. As a result, COVID-19 Testing demand is not predicted to match 2020 levels. However, the Company believes that other diagnostic testing should continue to expand, and both COVID-19 and non-COVID-19 drug development activity is expected to grow in 2021.

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.

During 2020, the Company invested $267.6 million in strategic business acquisitions. The acquisitions have expanded 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

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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 2020, the Company purchased 0.6 million shares of its common stock at an average price of $178.85 for a total cost of $100.0 million. After making these purchases in the first quarter, the Company temporarily suspended its share repurchase program as a part of the fiscal measures it took in response to the uncertainty of the COVID-19 pandemic, to preserve liquidity and financial flexibility. The Company reinstated its share repurchase program in the fourth quarter but made no additional purchases in 2020. At the end of 2020, the Company had a remaining authorization with no expiration date to purchase an additional $800.0 million of Company common stock.

During 2020, capital expenditures were $381.7 million and the Company also repaid $412.2 million of its Senior Notes. The Company expects capital expenditures in 2021 to be approximately 4.0% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility expansion and updates, projects related to both ongoing and new LaunchPad initiatives, and further acquisition integration initiatives.

The Company will continue to evaluate all 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. Declines in testing volume reduce revenues, operating margins and cash flows. Operations are also 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 biopharmaceutical industry in R&D. In 2020, as discussed in more detail elsewhere in Item 1, COVID-19 had significant impact on the Company. This impact included both the effect of the Company’s response to the virus through its testing and drug development services and the effect of COVID-19 on the global economy and how that affected demand for the Company’s non-COVID-19 services.

In 2020, approximately 10.7% 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 Report 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.

The Company's Business

The Company experienced growth across all key financial metrics in 2020.

Years Ended December 31,

Cash flows from operating activities $ 2,135.3 $ 1,444.7

Basic earnings per common share $ 15.99 $ 8.42

Diluted earnings per common share $ 15.88 $ 8.35

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The Company reports its business in two segments, Dx and DD. In 2020, Dx and DD contributed 65% and 35%, respectively, of revenues to the Company, and in 2019 contributed 60% and 40%, 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. DD’s revenues are nearly evenly split between the U.S. and the rest of the world, with approximately 49% derived from the U.S. and approximately 51% 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, the Company continues to actively explore new and expanded business opportunities outside the U.S. to further diversify its sources of revenues. The Company's revenues by segment payers/customer groups and by geography for the years ended December 31, 2020, 2019 and 2018 are as follows:

Payer/Customer

Dx

Clients 20 % — % — % 20 % 17 % — % — % 17 % 18 % — % — % 18 %

Patients 6 % — % — % 6 % 8 % — % — % 8 % 8 % — % — % 8 %

Medicare and Medicaid 7 % — % — % 7 % 8 % — % — % 8 % 9 % — % — % 9 %

Third-party 32 % — % — % 32 % 27 % — % — % 27 % 27 % — % — % 27 %

Total Dx revenues by payer 65 % — % — % 65 % 60 % — % — % 60 % 62 % — % — % 62 %

DD

Dx Segment

During 2020, the Dx segment generated $9,253.4 million in total revenues and $2,634.9 million in operating income, resulting in an operating margin of 28.5%.

Dollars in millions Year Ended December 31,

Dx is an independent clinical laboratory business. It offers a comprehensive menu of frequently requested and specialty testing through an integrated network of primary and specialty laboratories across the U.S. This network is supported by a sophisticated information technology system, with more than 75,000 electronic interfaces to deliver test results, nimble and efficient logistics, and local labs offering rapid response testing.

Dx also provides patient access points, strategically and conveniently located throughout the U.S., including nearly 2,000 patient service centers (PSCs) operated by Dx and more than 6,000 in-office phlebotomists who are located in customer offices and facilities. 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, DNA 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 including 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 consumer-initiated wellness testing available online through its Pixel by Labcorp® platform, which saw growth and increased consumer awareness in 2020 as a result of offering the first at-home collection kit for COVID-19 PCR testing to receive an EUA from the FDA and the first to receive an EUA for retail availability without a prescription. The COVID-19 at-home collection kits are also available for healthcare providers to order for their patients through Labcorp at Home.

Through the dedicated effort of approximately 42,000 employees, Dx typically processes tests for more than 3 million patient encounters each week.

As part of an ongoing commitment to be an efficient and high value provider of laboratory services, beginning in 2015, Dx implemented a comprehensive business process improvement initiative, referred to as LaunchPad, to reengineer its systems and processes to create a sustainable and more efficient business model, and to improve the experience of all stakeholders. Dx achieved its goals for the initial phase of LaunchPad of delivering both short- and long-term savings, and implementing system

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and process improvements that are expected to continue to yield benefits for the foreseeable future. Dx has subsequently extended LaunchPad, adding new enterprise-wide projects and establishing the initiative as an ongoing continuous improvement program. Dx’s LaunchPad initiative is currently on track to deliver approximately $200.0 million in net savings for the period of late 2018 through the end of 2021, while incurring approximately $40.0 million in one-time implementation costs.

The Dx business can be categorized into the following components:

Service Key Features

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 and decreased test utilization for the clinical laboratory 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 Dx 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 2020, approximately 8.8% of Dx’s revenue was reimbursed under the CLFS (11.7% in 2019), and approximately 0.4% was reimbursed under the PFS (0.6% in 2019). Over the past several years, Dx has experienced governmental reimbursement reductions as a direct result of several Congressional acts and regulatory initiatives, the most significant of which was PAMA. PAMA, which became law on April 1, 2014, and which went into effect on January 1, 2018, resulted in a

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net reduction in reimbursement revenue of approximately $72.0 million in 2020 from all payers affected by the CLFS (approximately $107.0 million in 2019). These laws include provisions 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.

In 2020, Dx realized a net reduction of approximately $0.5 million in PFS revenue, driven by reductions in reimbursement for flow cytometry procedures ($1.9 million in 2019). In 2020, Dx realized an increase of approximately $10.1 million in aggregate Medicare reimbursement associated with the suspension of sequestration through December of 2020 as a result of provisions included in the CARES Act. In 2021, Dx anticipates it will realize increases of approximately $0.3 million in PFS revenue and $4.1 million in aggregate Medicare reimbursement associated with the extended suspension of sequestration through March 2021 as a result of provisions included in the Omnibus Appropriations and Coronavirus Relief Package.

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 2018-2020, a test price could not be reduced by more than 10.0% per year. As a result of provisions included within the CARES Act, passed by Congress in 2020, PAMA rate reductions for 2021 have been suspended, and therefore the Company will not experience any incremental reimbursement rate impact due to PAMA in 2021.

For 2022-2024, a test price cannot be reduced by more than 15.0% per year. The process of data reporting and repricing will be repeated every three years for Clinical Diagnostic Laboratory Tests (CDLTs) beginning in 2022. Under current law, as revised in the CARES Act, the next data reporting period for CDLTs (based on data collected in 2019) will occur during the first quarter of 2022, and new CLFS rates for CDLTs will be established based on that data beginning in 2023, subject to the previously described phase-in limits. The subsequent data reporting period for CDLTs (based on data collected in 2023) will occur during the first quarter of 2025, and new CLFS rates for CDLTs will be established based on that data beginning in 2026. CLFS rates for 2025 and subsequent periods will not be subject to phase-in limits. CLFS rates for Advanced Diagnostic Laboratory Tests will be updated annually.

The American Clinical Laboratory Association (ACLA) has filed a federal civil action challenging the legal basis for the data collection methodology CMS used to derive the data from which the median prices were calculated. 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) and the HHS Office of Inspector General (OIG) on PAMA implementation have identified certain instances of actual or potential increased Medicare expenditures under PAMA that could result in further efforts to amend PAMA by Congress.

ACLA continues 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 (LAB) Act, the Medicare Payment Advisory Commission is 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. 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, and what the long-term effect will be on the CLFS rates is not yet known.

Further healthcare reform could occur in 2021, including changes to the ACA and Medicare reform, initiatives to address surprise billing and increased price transparency, as well as administrative requirements that may continue to affect coverage, reimbursement, and utilization of laboratory services in ways that are currently unpredictable.

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.

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

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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 provided to MCO members during the month, regardless of the number of tests performed. For the year ended December 31, 2020, capitated contracts with MCOs accounted for approximately $319.0 million, or 3.4%, of Dx's revenues. 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.

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 lab 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.

Despite the overall negative market changes regarding reimbursement discussed above, Dx believes that the volume of clinical laboratory testing is positively influenced by several factors, including the expansion of Medicaid, managed care, and private insurance exchanges. In addition, Dx believes that increased knowledge of the human genome and continued innovation in laboratory medicine will continue to foster greater appreciation of the value of gene-based diagnostic assays. Additional factors that may lead to future volume growth include 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. Dx also believes that it and other large, independent clinical laboratory testing companies will be able to increase their share of the overall clinical laboratory testing market due to a number of market factors, primarily related to a continued drive to improve outcomes and reduce costs across the healthcare system. Dx believes that its enhanced and growing esoteric menu of tests, leading position with companion diagnostics, broad geographic footprint, and operating efficiency provide a strong platform for growth.

DD Segment

During 2020, the DD segment generated $4,877.7 million in total revenue and $37.3 million in operating income, resulting in an operating margin of 0.8%.

Dollars in millions Year Ended December 31,

DD provides end-to-end drug development, medical device and companion diagnostic development solutions from early-stage research to clinical development and commercial market access. Its customers are comprised of biopharmaceutical, medical device, and diagnostic companies across the world. With more than 28,000 employees worldwide and a global network of operations, DD offers deep expertise in early development and clinical trials in each therapeutic area. DD collaborated on 87% of the novel drugs approved by the U.S. FDA in 2020, including 86% of the novel oncology drugs and 88% of the rare and orphan disease drugs. Through its industry-leading central laboratory business it supports clinical trial activity in approximately 100 countries. In late 2018, the Company commenced a series of LaunchPad projects focused on DD, which delivered in excess of $150.0 million of net savings through 2020.

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Service Key Features

Human Capital

The purpose-driven mission of the Company is “improving health and improving lives.” Given the nature of the Company's global life sciences business, the Company's employees are critical to its success. It takes the efforts and focus of all of the Company's specialized and highly skilled employees to deliver the power of the combined Dx and DD segments to patients and customers throughout the world. The COVID-19 pandemic during 2020 provided unique challenges to the Company, and its employees were paramount to the Company's ability to meet the increasing needs of patients and customers.

Workforce Demographics

The Company's future success is dependent on its continued capabilities to recruit, develop, and retain a specialized and highly skilled global workforce, and the Company believes that it has good working relationships with its employees. The Company's 72,400 employees are globally dispersed, with 77% in the U.S. and Canada, 10% in the Asia region, 13% in the EMEA region, and less than 1% in the Latin American region. The Company's workforce is 61% in the Dx segment and 39% in the DD segment, with 90% full-time, and 10% part-time. Approximately 3.6% of the Company's global workforce is employed under a collective bargaining agreement. To manage fluctuations in volume and other business demands, the Company uses contingent labor to supplement its workforce by approximately 10%.

Throughout the pandemic, a significant portion of the Company's employees have been working diligently to serve patients and customers. To meet the increased demands of the pandemic, the Company increased its global workforce by 12.5% during

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2020. To promote the safety and welfare of its employees, the Company transitioned those employees who do not work with patients, animals, in labs or logistics, to remote working.

Diversity and Inclusion

The Company has a diverse workforce with a broad range of unique experiences and talents. The Company believes that the diversity of its employees and its inclusive programs contribute to a healthy, productive, and respectful work environment.

Workforce Diversity Profile:

United States: Gender and Ethnicity

U.S. Employees Male Female White Total Non White Black Hispanic Asian Other

Total U.S. headcount on payroll as of 12/31/20, excluding casual employees and event workers employed by Labcorp Staffing Solutions.

Global: Gender

Total U.S. headcount on payroll as of 12/31/20, excluding casual employees and event workers employed by Labcorp Staffing Solutions.

The social unrest and unique impact of the pandemic around the world in 2020 provided the Company an opportunity to refocus efforts to further improve its diversity profile for the benefit of employees, patients, and customers. The Company appointed a new Chief Diversity and Inclusion Officer (CDIO), who reports dually to the Chief Executive Officer (CEO) and Chief Human Resources Officer (CHRO). The CDIO also provides periodic reports to the Compensation and Human Capital Committee of the Board of Directors.

The Company’s key diversity and inclusion priorities going forward include: empowering inclusive leadership, developing and sustaining a diverse talent pipeline, and creating an environment for engagement across the Company and in its communities. The Company's leadership is engaging with its six employee resource groups with 50 chapters around the world, to drive these diversity and inclusion priorities.

In 2021, the Company was recognized for the fourth consecutive year as a Best Place to Work for LGBTQ Equality with a perfect score from Human Rights Campaign's Corporate Equality Index, the nation's premier benchmarking survey and report on corporate policies and practices related to LGBTQ workplace equality. The Company was also named to FORTUNE® magazine's 2021 List of World's Most Admired Companies, making the annual list for the third time, as well as the 2020 List of World's Best Employers and as one of Forbes' 2020 List of the Best Employers for New Graduates.

Compensation and Benefits

As the Company's business becomes increasingly complex, global, mobile, and technology-enabled, it recognizes the importance of having compensation and benefits programs that provide sufficient flexibility to attract and retain the specialized and skilled talent needed to move the business forward. The Company continually monitors market activity and employee movement to maintain competitiveness in a dynamic life sciences industry.

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During the pandemic, the Company has taken steps to protect our competitive positioning with a focus on front line workers, given their on-premises direct interaction with patients and the handling of specimens and results throughout the supply chain and operations. Although the Company initially suspended discretionary payments, such as the annual merit adjustments and U.S. 401K company contributions, in July 2020, as business improved, the Company retroactively reinstated both programs, returning over $100 million back to our employees globally. In addition, during 2020, the company provided over $50 million in discretionary incentives and awards to our employees globally to thank and reward them for their response to the pandemic. The Company also made over $8 million in broad, off-cycle wage rate adjustments, primarily to its U.S. non-exempt employees.

The Company is focusing on enhancing our benefits positioning by not increasing employee contributions in 2021 for the U.S. non-union medical, dental, and vision plans, as well as providing disability coverage at no cost to U.S. non-union employees. In the area of wellness, the Company covered the cost or provided a subsidy to all global employees for flu shots to protect their health and safety, as well as the health and safety of patients and customers. The Company built these enhancements on top of other benefits and wellness programs, such as in the U.S. medical plans where the Company subsidizes part of the monthly contributions for employees earning less than $50,000 annually and provides up to $1,000 in medical reimbursements for engaging in healthy activities. The Company also provides U.S. employees a $300 fitness reimbursement to encourage healthy lifestyles.

Development and Training

Because the life sciences industry is heavily regulated, the Dx and DD segments require a significant investment in technical training to prepare their workforces to meet the necessary standards to run and manage business operations. Across the enterprise considerable attention is focused on employee skills training.

While the technical training is important to the Company’s success in differentiating its science and technology, the Company also invests in training for the professional development of its talent and to retain its best employees for future opportunities in the Company. In 2020, 3,500 employees attended professional development webinars consisting of 7,000 hours of professional development. To strengthen leadership capabilities, the organization provided 6,200 hours of core leadership training to early in career leaders. Finally, the expanded mentoring program had 2,100 employees participate with 10,200 mentoring hours recorded from April to December 2020.

The pandemic has provided challenges to the ability to provide both technical and leadership training. The Company has adapted by utilizing technology to deliver unique virtual learning and development opportunities.

Health and Safety

The nature of the Dx and DD business segments requires employees to work directly with patients, handle, process or test human specimens on a daily basis. As a result, the health and safety of the Company's employees is a primary concern. The Company has established procedures, processes and controls, including providing personal protective equipment (PPE) to protect our employees. During the pandemic, the Company supplied more than 250 million units of PPE to employees, including personal cloth facemasks for each employee, N95 respirators, and ear-loop masks, gloves, face shields and disposable lab coats.

Employee Giving

The COVID-19 crisis left many communities and individuals facing health challenges and financial crisis. Through the Company’s U.S. annual Employee Giving Campaign, donations helped to support the American Cancer Society, American Heart Association, American Diabetes Association, American Red Cross Disaster Relief, United Way, and the National Urban League. The National Urban League was added based on feedback from the Company's employees requesting a charity focused on social and economic justice. The Company and its employees focused their efforts on helping the underserved in 2020 by donating to local food pantries and shelters, by supporting educational programs aimed at helping to provide students and teachers with the resources they needed during the pandemic and supporting a number of patient assistance programs aimed at helping the underserved while they received care. In addition, the Company established the Labcorp Charitable Foundation which supports the Company’s strategic mission of improving health and improving lives with contributions focused on health and welfare, education and community.

Customers

The Company provides its services to a broad range of customers across Dx and DD. The primary customer groups serviced by the Company include:

•MCOs. The Company serves many MCOs, each of which operate on a national, regional, or local basis.

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•Biopharmaceutical, Medical Device, and Diagnostics Companies. The Company provides development services to hundreds of biopharmaceutical (including pharmaceutical and biotechnology-based organizations), medical device, and diagnostics companies, ranging from the world's largest multi-nationals to emerging, mid-market companies.

•Physicians and Other Healthcare Providers. Physicians who require clinical laboratory testing for their patients are a primary source of requests for Dx's testing services.

•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 DD. 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, CROs, crop protection and chemical companies, academic institutions and independent clinical laboratories.

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 generally include primary care, women's health, specialty medicine (e.g., infectious diseases, endocrinology, gastroenterology, and rheumatology), oncology, ACOs, and hospitals and health systems, with different representatives focused on each segment to better understand and respond to the unique needs of each clinical area. DD’s global sales organization provides customer coverage across the biopharmaceutical industry for services including lead optimization, preclinical safety assessment, analytical services, clinical trials, central laboratories, biomarkers, and companion diagnostics, market access and technology solutions. As part of its ongoing strategic priority to maximize the power of the combined, sales representatives from each business segment work together on outreach to potential customers of each business, including hospitals and health systems that may purchase testing and participate in clinical trials, or biopharmaceutical companies whose studies may benefit from use of Dx’s specialty testing or network of PSCs.

In 2020, the Company initiated a greater emphasis on establishing a centralized marketing program to support both of its primary business segments, rather than separate programs for each segment. The Company anticipates that this will provide further support for fully leveraging the power of its combined capabilities, and it is also aligned with the Company’s rebranding initiative, which was launched in December 2020.

Market Opportunity

Dx

The Company believes that in 2020, 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. CMS has estimated that in 2020 there were approximately 9,100 hospital-based laboratories, more than 121,000 physician-office laboratories and approximately 6,500 independent clinical and anatomic pathology laboratories in the U.S. Dx competes with all of those laboratories.

Dx believes that the selection of a laboratory is primarily based on the following factors, all of which the Company believes it competes favorably in:

•quality, timeliness and consistency in reporting test results;

•reputation of the laboratory in the medical community or field of specialty;

•contractual relationships with MCOs;

•service capability and convenience;

•number and type of tests performed;

•connectivity solutions offered; and

•pricing of the laboratory’s services.

Dx believes that consolidation in the clinical laboratory testing business will continue. In addition, Dx believes that it and other large, independent clinical laboratory testing companies will be able to increase their share of the overall clinical laboratory testing market due to a number of factors, including cost efficiencies afforded by large-scale automated testing, mergers and acquisitions of complementary businesses, changes in payment models to performance and value-based reimbursement to deliver better outcomes at lower cost, and the increasing importance of large, integrated service networks. In

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addition, legal restrictions on physician referrals and physician ownership of laboratories, as well as ongoing regulation of laboratories, are expected to continue to contribute to the ongoing consolidation of the industry.

DD

Drug development services companies like DD are also referred to as CROs and typically derive substantially all of their revenue from research and development (R&D), as well as marketing expenditures, of the biopharmaceutical industry.

Outsourcing of R&D services by biopharmaceutical companies to CROs has increased in the past, and is expected to continue increasing in the future. Increasing pressures to improve return on investment, to increase R&D productivity, to stay abreast of scientific advances and to comply with stringent government regulations have all contributed to this outsourcing to CROs. A CRO provides biopharmaceutical companies flexibility in aligning resources to demand. 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 DD and other CROs 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 CROs with global capabilities. DD competes against these small and large CROs, as well as in-house departments of biopharmaceutical, medical device and diagnostic companies, and to a lesser extent, selected academic research centers, universities and teaching hospitals.

DD believes that customers selecting a CRO often consider 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;

•post approval and market access services;

•ability to recruit patients;

•scope of service offerings;

•strengths in various geographic markets;

•price;

•quality of facilities;

•quality of relationships, including investigator and patient;

•ability to manage large-scale clinical trials both domestically and internationally, including the recruitment of appropriate and sufficient clinical trial subjects;

•size and scale; and

•access to talent.

Quality

Dx and DD 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, DD’s Global Regulatory Compliance and Quality Assurance Unit, DD's clinical trial services global vendor management department, DD'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 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; data integrity; patient satisfaction; and billing. The Company’s quality program includes 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 and competency 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, in addition to surveys and proficiency testing, by local or national government agencies; independent external accrediting programs; and inspections and audits by customers.

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Thirty-four of the Company's laboratories have received ISO-15189 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 to 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 tremendous operational efficiencies, enabling the Company to achieve consistent, structured, and standardized operating results and superior patient care.

In addition, Dx and DD each offer proprietary and industry-leading information systems, which are discussed in more detail in the sections dedicated to each of those segments.

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 or 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 a number of distinct environments and in a variety of locations worldwide, it is subject to numerous, and sometimes overlapping, regulatory requirements. Both the clinical laboratory industry and the drug development business are subject to significant governmental regulation at the national, state and local levels. As described below, these regulations concern licensure and operation of clinical laboratories, claim submission and reimbursement for laboratory services, healthcare fraud and abuse, drug development services, security and confidentiality of health information, quality, and environmental and occupational safety.

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 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

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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 the FDA in the U.S., have regulatory responsibility over the development, testing, manufacturing, labeling, advertising, marketing, distribution, storage, import, export, and surveillance of diagnostic and therapeutic products and services, including certain products and services offered by the Company, and the development of therapeutic products that comprise the majority of DD’s business. The FDA and other regulatory agencies periodically inspect and review the manufacturing processes and product performance of diagnostic and therapeutic products. The FDA and other regulatory agencies also periodically inspect clinical study sites and CROs that conduct clinical trials, including test facilities that perform tests on samples from 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. There are similar national and regional regulatory agencies in the jurisdictions outside the U.S. in which the Company operates.

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 (although COVID-19 diagnostic PCR LDTs have been subject to FDA pre-market requirements as modified by guidance issued by FDA on February 29, 2020, as a consequence of the national health emergency). Various regulatory and legislative proposals are under consideration, including some that could increase general FDA oversight of clinical laboratories and LDTs. The outcome and ultimate impact of such proposals on the Company is difficult to predict at this time.

DD’s laboratory facilities and Dx's clinical laboratory facilities that perform testing in support of clinical trials, must conform to a range of standards and regulations, including good laboratory practice (GLP) and good clinical practice (GCP), good manufacturing practice (cGMP), human subject protection and investigational product exemption regulations, and quality system regulation (QSR) requirements, as applicable. The preclinical and clinical studies that the Company conducts are subject to periodic inspections by the FDA as well as other regulatory agencies 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 U.K., 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 and GCP 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 and/or GCP standards, the regulatory agency may issue a formal notice, which may be followed by a warning letter if observations are not addressed satisfactorily. Noncompliance may result in, among other things, unanticipated compliance expenditures, or the regulatory agency seeking civil, criminal or administrative sanctions and/or remedies against the Company, including suspension of its operations.

Additionally, certain DD services and activities, such as chemistry, manufacturing, and controls (CMC) services and manufacturing of investigational medicinal products for use in certain Phase I studies managed by DD, must conform to cGMP. DD 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.

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Animal Welfare Laws and Regulations

The conduct of animal research at DD’s facilities in the U.S. must be in compliance with the AWA, whichgoverns 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.DD complies with licensing and registration requirement standards set by the USDA and similar agencies in foreign jurisdictions such as the European Union, the U.K., and China for the care and use of regulated species. If the USDA determines that DD’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 DD’s animal-related activities may be subject to regulation by the U.S. Centers for Disease Control and Prevention (CDC), 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.

Payment for Clinical Laboratory Services

In 2020, Dx derived approximately 11.3% 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 reducing reimbursement for clinical laboratory services.

Reimbursement under the Medicare PFS is capped at different rates in each Medicare Administrative Contractor's jurisdiction. Pursuant to PAMA, 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 2020-2025, 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. 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. In 2020, with the exception of those specifically related to COVID-19 testing, there were limited coding and billing changes. While limited changes are expected to be implemented in 2021, the Company typically expects some delays in pricing and reimbursement as new codes are introduced.

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 2021, including changes to the ACA and Medicare reform, initiatives to address surprise billing and increased price transparency, 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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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, which requires the use of a unique employer identifier in connection with certain electronic transactions; (v) the National Provider Identifier Rule, which requires the use of a unique healthcare provider identifier in connection with certain electronic transactions; and (vi) the Health Plan Identifier Rule, which required the use of a unique health plan identifier in connection with certain electronic transactions. The Company believes that it is in compliance in all material respects with each of the HIPAA Rules identified above.

The Privacy Rule regulates the use and disclosure of protected health information (PHI) by covered entities. It also sets forth certain rights that an individual has with respect to his or her 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 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. The Company believes that it is in compliance in all material respects with the requirements of the HIPAA Privacy Rule.

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. The Company believes its policies and procedures and privacy notice comply with the Privacy Rule access requirements.

On December 12, 2018, HHS issued a request for information (RFI) seeking input from the public on how the HIPAA regulations and the Privacy Rule, in particular, could be modified to amend existing, or impose additional, obligations relating to the processing of PHI. Subsequent to the RFI, on January 21, 2021, HHS published a notice of proposed rulemaking (NPRM) containing potential modifications to the Privacy Rule addressing standards that may impede the transition to value-based health care. The Company is monitoring the NPRM process. If modifications to the Privacy Rule are adopted, they may impact the Company's compliance obligations under HIPAA.

The U.S. Health Information Technology for Economic and Clinical Health Act (HITECH), which was enacted in February 2009, with regulations effective on September 23, 2013, strengthened and expanded the HIPAA Privacy and Security Rules and their restrictions on use and disclosure of 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 fundamentally changes a business associate’s obligations by imposing 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 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 Company believes its policies and procedures are fully compliant with HIPAA as modified by the HITECH requirements.

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. The Company believes that it is in compliance with the HIPAA National Provider Identifier Rule in all material respects.

The Health Plan Identifier (HPID) was a unique identifier designed to furnish a standard way to identify health plans in electronic transactions. CMS published the final rule adopting the HPID for health plans required by HIPAA on September 12, 2012. Effective October 31, 2014, CMS announced a delay, until further notice, in enforcement of regulations pertaining to health plan enumeration and use of the HPID in HIPAA transactions adopted in the HPID final rule. On October 28, 2019, CMS published a final rule rescinding the adopted standard unique HPID and implementation specifications and requirements for its use and other entity identifier and implementation specifications for its use, effective December 27, 2019. This delay remains in effect. The Company will continue to monitor future developments related to the HPID and respond accordingly.

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 significantly strengthened HIPAA enforcement by increasing the civil penalty amounts that may be imposed, requiring HHS to conduct periodic audits to confirm compliance and authorizing state attorneys general to bring

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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 meeting 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.

In addition to the HIPAA regulations described above, numerous other data protection, privacy and similar laws govern the confidentiality, security, use, and disclosure of personal information. 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., 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.

Congress and state legislatures also have been considering new 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 new 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 introduced by the CPRA go into effect on January 1, 2023, and new implementing regulations are expected to be introduced by the CPPA. 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. The Company implemented processes to manage compliance with the CCPA and continues to assess the impact of the CPRA on the Company’s business as additional information and guidance becomes available.

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, 42 Code of Federal Regulations Part 2. 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.

The European Union General Data Protection Regulation (GDPR) Regulation (EU) 2016/679, became effective May 25, 2018, replacing Directive 95/46/EC. The GDPR established 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 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. Personal data may only be transferred outside of the European Union to a country that offers an adequate level of data protection under standards set by the European Union. 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 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, Latin America, and Europe, and in countries such as Canada 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.

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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, 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 regulations such as 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 the Deficit Reduction Act of 2005, which includes 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. healthcare program business. Violations can result in imprisonment, fines, penalties, and/or exclusion from participation in U.S. 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 and healthcare providers 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 certain laboratory services at prices below fair market value in return for referrals of other tests that are billed to Medicare at higher rates; (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) compensation paid by laboratories to physicians for blood specimen processing and for submitting patient data to registries; and (viii) the provision of discounts on laboratory services billed to customers in return for the referral of U.S. healthcare program business.

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 (SUPPORT 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. The Company is working through its trade association to address the scope of EKRA and is seeking clarification or correction.

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 (1) has uncollected debt; (2) has been or is subject to a payment suspension under a federal health care program; (3) has been or is excluded by the OIG from Medicare, Medicaid, or CHIP; or (4) 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

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fraud, waste, or abuse. CMS is phasing in this new affiliation disclosure requirement.

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 commercial 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 commercial 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 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 the regulations implementing the Anti-Kickback Statute and the Stark Law, respectively. The amendments are 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 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. 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.

Environmental, Health, and Safety

The Company is subject to licensing and regulation under laws and regulations relating to the protection of the environment, and human health and safety laws and regulations relating to the handling, transportation and disposal of medical specimens and hazardous materials, infectious and hazardous waste and radioactive materials. All Company laboratories are subject to applicable laws and regulations relating to biohazard disposal of all laboratory specimens, and the Company generally utilizes outside vendors for disposal of such specimens. In addition, the U.S. Occupational Safety and Health Administration (OSHA) has established extensive requirements relating to workplace safety for healthcare employers, including clinical laboratories, whose workers may be exposed to blood-borne pathogens such as HIV, HCV and hepatitis B virus (HCB). These regulations, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations, and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens. Other countries where the Company conducts business have similar laws and regulations concerning the environment and human health and safety with which the Company must also comply.

The Company is committed to reducing its carbon footprint. Energy-saving measures are continuing at Company facilities, including installation of energy-saving LED lighting, engaging in waste-to-energy projects, and helping reduce waste going to landfills, as well as capital investments to systems to improve energy and water usage. Funding for these and similar projects continued through 2020 and are continuing in 2021.

The Company seeks to comply with all relevant environmental and human 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; Spokane, Washington; and St. Paul, Minnesota are all SAMHSA certified.

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Controlled Substances

DD handles controlled substances as part of the services it provides in preclinical testing and clinical trials. The use of controlled substances in testing for drugs of abuse is regulated by the U.S. Drug Enforcement Administration. The Company seeks to conduct its business in compliance with these regulations as applicable. Violations of these rules may result in criminal and civil fines and penalties.

Compliance Program

The Company maintains a comprehensive, 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, 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 drug development business. The clinical laboratory industry and drug development 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.

Information Security

Information security is one of the Company's top priorities. Securing personal and health information is critical to the Company’s business operations and to future growth, as the Company is committed to using technology to improve the delivery of care. A security breach could have a material adverse operational, financial, regulatory, and reputational impact to the Company. The Company employs a secure technology framework that enables continuous operations of laboratory devices, computers, and communications systems. The Company has experienced and expects to continue to confront attempts by cybercriminals who seek access to its systems and data.

The Company uses state-of-the art tools and advanced analytics to proactively identify and protect against potential information system disruptions and breaches; to monitor, test and secure key networks and services; and to facilitate prompt resumption of operations if a system disruption or interruption should occur. The Company has implemented policies and procedures designed to comply with global laws and regulations related to the privacy and security of personal or health information. In addition, the Company follows protocols for evaluating the cybersecurity status of vendors or third-parties that will have access to the Company's data or information technology systems. The Company also carries cybercrime and business interruption insurance.

Over the past several years, the Company has significantly increased its investment in cybersecurity technology and training to help protect its information technology systems and operations in response to the ever-evolving cyber threat landscape. Additional resources have been and will be dedicated to expanding the Company’s ability to investigate and remediate any cybersecurity vulnerabilities, and to manage any impact of a cybersecurity event on its business and operations.

In July 2018, the Company experienced a ransomware incident which affected certain Dx information technology systems. The incident temporarily affected test processing and customer access to test results, and also affected certain other information technology systems involved in conducting Company-wide operations. The investigation determined that the ransomware did not and could not transfer patient or client data outside of Company systems and that there was no theft or misuse of patient or client data.

The Company is also exposed to risks related to information security arising from the information technology systems and operations of third parties, including those of the Company's vendors and partners. For example, on May 14, 2019, Retrieval-Masters Credit Bureau, Inc. d/b/a/ American Medical Collections Agency (AMCA), an external collection agency, notified the Company about a security incident AMCA experienced that may have involved certain personal information about some of the

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Company's patients (the AMCA Incident). The Company referred patient balances to AMCA only when direct collection efforts were unsuccessful. The Company's systems were not impacted by the AMCA Incident. Upon learning of the AMCA Incident, the Company promptly stopped sending new collection requests to AMCA and stopped AMCA from continuing to work on any pending collection requests on behalf of the Company. AMCA informed the Company that it appeared that an unauthorized user had access to AMCA's system between August 1, 2018 and March 30, 2019, and that AMCA could not rule out the possibility that personal information on AMCA's system was at risk during that time period. Information on AMCA's affected system from the Company may have included name, address, and balance information for the patient and person responsible for payment, along with the patient's phone number, date of birth, referring physician, and date of service. The Company was later informed by AMCA that health insurance information may have been included for some individuals, and because some insurance carriers utilize the Social Security Number as a subscriber identification number, the Social Security Number for some individuals may also have been affected. No ordered tests, laboratory test results, or diagnostic information from the Company were in the AMCA affected system. The Company notified individuals for whom it had a valid mailing address. For the individuals whose Social Security Number was affected, the notice included an offer to enroll in credit monitoring and identity protection services that will be provided free of charge for 24 months. The Company has incurred, and expects to continue to incur, costs related to the AMCA Incident. The Company is involved in pending and threatened litigation related to the AMCA Incident, as well as various government and regulatory inquiries and processes. For additional information about the AMCA Incident, see Note 16 Commitments and Contingencies to the Consolidated Financial Statements.

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 COVID-19 Pandemic

The effects of the outbreak of the COVID-19 pandemic could have material adverse impacts on the Company’s business, results of operations, cash flows, and financial position.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business. In the second half of March 2020, daily volume for routine tests started to decline as a result of decreased consumer demand driven by a significant reduction in physician office visits, the cancellation of elective medical procedures, and the negative impacts on discretionary spending resulting from the economic downturn, among other factors. In addition, the performance of the Company’s drug development business was challenged by COVID-19 due to actions that clients have taken and are taking that slowed clinical trial progress and the associated testing as well as restrictions in trial site access in certain countries and interruptions in the supply chain. Given the continued unpredictability pertaining to the COVID-19 pandemic and the corresponding government restrictions and customer behavior, the impact on the Company's business continues to be uncertain and depends on a number of evolving factors that the Company may not be able to predict or effectively respond to.

The further spread of COVID-19, including the rise of variants, and the Company’s initiatives to help limit the spread of the illness, will impact the Company’s ability to carry out its business as usual, which could materially adversely impact its business and financial condition. The Company has incurred additional costs in order to provide for the safety of its employees and the continuity of its operations, including increased frequency of deep cleaning and sanitation at each of its physical locations, additional safety training and processes, enhanced hygiene practices and materials, flexible and remote working where possible, and allowing for greater social distancing for the Company’s employees who must work on-site. Additionally, the Company has made a number of changes at the Company’s patient service centers for the comfort and safety of the patients, many of which have also increased costs for the Company. For example, the Company has set aside the first business hour of every day for vulnerable patients, launched a mobile check-in process that allows patients to wait for their appointment from within their car or other nearby location, and increased sanitation and disinfection in check-in areas, waiting rooms, bathrooms, and hallways with CDC-approved disinfectants.

The Company faces increased cybersecurity risks due to the number of employees that are working remotely in regions impacted by stay-at-home orders. 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. The Company may also be subject to increased cyber-attacks, such as phishing attacks by threat actors using the attention placed on the pandemic as a method for targeting the Company's personnel. In addition, technological resources may be strained due to the number of remote users.

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Adverse changes in government and third-party payer regulations, reimbursement, or coverage policies (or in the interpretation of current regulations) relating to COVID-19 testing could materially impact the Company's results of operations, cash flows and financial position.

The Company expects to continue to incur additional costs, which may be significant, as it continues to implement operational changes in response to this pandemic. Further, the COVID-19 outbreak has disrupted and could continue to disrupt the Company’s supply chain, including by impacting its ability to secure test collection supplies, equipment and testing supplies for its facilities, personal protective equipment for its employees in its testing locations, patient service centers, and drug development clinics. For similar reasons, the COVID-19 pandemic has also adversely impacted, and may continue to adversely impact, third parties that are critical to the Company’s business, including vendors, suppliers, and business partners. These developments, and others that are difficult or impossible to predict, could materially impact the Company’s business, financial results, cash flows, and financial position.

During 2020, the Company diverted resources to developing and enhancing the accessibility of COVID-19 testing, while at the same time taking certain steps with respect to its business strategy in order to increase cash flexibility. For example, the Company temporarily suspended its share repurchase program, applied a heightened threshold to acquisition activity, and delayed some of its non-COVID-19 related capital expenditures. These measures, and any other measures the Company has taken and will continue to take to mitigate COVID-19, may be insufficient to ensure the financial stability of the Company, or may have other adverse impacts on the Company’s business, results of operations, cash flows, and financial position. Additionally, if the pandemic continues for an extended period of time, the Company may be forced to prioritize its application of resources to the continued mitigation of COVID-19, at the expense of other potentially profitable opportunities or initiatives, such as through the development of new products or selected business acquisitions.

If the Company does not respond appropriately to the ongoing COVID-19 pandemic, or if the Company’s customers do not perceive its response to be adequate, the Company could suffer damage to its reputation, which could adversely affect its business.

On March 11, 2020, the outbreak of COVID-19 was declared a global pandemic and containment and mitigation measures were recommended; six days prior to this characterization, the Company announced the availability of its Labcorp 2019 Novel Coronavirus (COVID-19) PCR test, which detects the presence of the underlying virus that causes COVID-19, for use with patients who meet current guidance for evaluation of infection with COVID-19. On April 9, 2020, the Company announced an agreement to collaborate on a comprehensive U.S.-based COVID-19 patient data registry. The Company also launched a self-collection kit for its COVID-19 PCR test under an emergency use authorization from the FDA, expanded availability of antibody tests to detect antibodies to the virus that causes COVID-19, and launched a series of innovations to increase test capacity, throughput, and efficiency to maximize the use of supplies. The Company performed approximately 35 million COVID-19 tests in 2020, which represents about 31 million PCR tests and over 4 million antibody tests. As of February 25, 2021, the Company has the capacity to perform 275,000 PCR tests per day, but the Company's testing capacity is dependent on access to multiple testing platforms and the availability of equipment and testing supplies and key personnel. The Company's central laboratory business has also seen a significant increase in demand for sample collection supplies and kits and for clinical trials testing, which has put some pressure on the Company's supply chain and caused some delays in delivery of kit orders and clinical trial testing result delivery. Despite the Company's efforts to obtain adequate clinical trial kit and testing supplies and expand its capacity to make clinical trials collection kits and perform clinical trials testing, the Company may not be successful in meeting the increased demand, and the Company’s customers and other stakeholders may perceive the Company’s responses to the pandemic as insufficient, inadequate or not equivalent to or better than competitors, including with respect to the availability of testing, collection kits, and the amount of time it takes for delivery of test results or fulfillment of kit orders. Factors that may be out of the Company’s control, such as the availability of equipment, supplies, and key personnel and geographical changes in demand, may impact the Company’s ability to meet customer demand and the Company's other responses to the COVID-19 pandemic, and may have an adverse effect on the Company’s operations. Any such disruptions could result in negative publicity, and the Company could suffer damage to its reputation, which could adversely affect its business, results of operations, cash flows, and financial position.

The success of the Company is dependent in part on the efforts of its management team and employees, and the COVID-19 pandemic could divert or hinder the Company’s human capital resources, which may adversely affect the Company’s operations.

The Company’s management team and employees have been acutely focused on efforts to respond to and mitigate COVID-19, including developing COVID-19 Testing. The Company has been continuously working to increase the number of tests that can be performed and improve the time for delivering test results. The Company’s management team is also working closely with federal and state authorities, health officials, and other key constituencies to make testing available to patients who meet the CDC criteria for who should be tested, and HHS guidance for prioritization of testing. These response efforts have required, and will continue to require, a large investment of time and resources that would otherwise be focused on the

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development and growth of the Company. Further, the Company's ability to maintain and expand testing capacity depend upon maintaining and expanding its employee population. If the Company’s management team or employees become unavailable due to illness or from other related factors, its operations could be materially adversely affected.

The ongoing COVID-19 pandemic has created significant volatility, uncertainty, and economic disruption that could have an adverse impact on the Company’s financial position.

While the Company believes that it maintains a solid financial position, including a strong balance sheet, investment grade ratings, and significant access to credit, the sweeping nature of the ongoing COVID-19 pandemic has created cascading effects, all of which are difficult to predict. The Company may also experience greater than normal impact due to fluctuations in foreign exchange rates and interest rates, decreased sales volumes, changes in employment rates and health insurance coverage, the speed of the anticipated recovery, the ability of its customers to pay for its services, and governmental and business reactions to the pandemic, all of which are highly uncertain and cannot be predicted. In March of 2020, the Company implemented several measures in order to increase cash flexibility in light of these economic uncertainties, including temporarily suspending its share repurchase program, applying a heightened threshold to acquisition activity, and delaying some of its non-COVID-19 related capital expenditures. In October of 2020, the Company reinstituted its share repurchase program. If the pandemic creates further disruptions or turmoil in the credit and financial markets, the Company’s ability to access capital on favorable terms and continue to meet its liquidity needs in the future could be adversely impacted which may have other adverse impacts on the Company’s business, results of operations, cash flows, and financial position.

Risks Related to Regulatory and Compliance Matters

Changes in payer regulations or policies (or in the interpretation of current regulations or policies), insurance regulations or approvals, or changes in other laws, regulations or policies in the U.S., may adversely affect U.S. governmental and third-party coverage or reimbursement for clinical laboratory testing and may have a material adverse effect upon 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 annually subject to certain phase-in limits through 2025, 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. Reimbursement for pathology services performed by Dx 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 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

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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 to comply with privacy and 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 does 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 or criminal sanctions.

In the U.S., the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy and security regulations, including the expanded requirements under U.S. Health Information Technology for Economic and Clinical Health Act (HITECH), establish comprehensive standards with respect to the use and disclosure of protected health information (PHI), by covered entities, in addition to setting standards to protect the confidentiality, integrity and security of PHI.