Fortrea Class Action Lawsuit: An Authoritative Guide for Investors on Everything They Need to Know

Fortrea is a global clinical research organization (“CRO”) that provides biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology, and medical device customers.  According to the complaint, in June 2023, Labcorp Holdings Inc. spun off Fortrea as a standalone, publicly traded company (the “Spin-Off”).  At the time of the Spin-Off, certain of the long-term projects in Fortrea’s portfolio remained ongoing (the “Pre-Spin Projects”). 

In connection with the Spin-Off, Labcorp and Fortrea entered into several transition services agreements (the “TSAs”), pursuant to which Fortrea pays Labcorp to provide certain transitional services for a set period.

The Fortrea class action lawsuit alleges that defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that:

1. Fortrea overestimated the amount of revenue the Pre-Spin Projects were likely to contribute to Fortrea’s 2025 earnings;
2. Fortrea overstated the cost savings it would likely achieve by exiting the TSAs;
3. As a result, Fortrea’s previously announced EBITDA targets for 2025 were inflated; and (iv) accordingly, the viability of Fortrea’s post-Spin-Off business model, as well as its business and/or financial prospects, were overstated.

The Fortrea class action lawsuit further alleges that on September 25, 2024, Jefferies published a report downgrading Fortrea from buy to hold, citing perceived weaknesses in Fortrea’s business model as a CRO amid pressure on biotechnology funding and suggested that the cost savings Fortrea expects to achieve by exiting the TSAs are “[n]ot as [m]aterial as [o]ne [m]ight [t]hink,” stating that “IT infrastructure costs to exit the TSAs are already non-GAAPed out of adjusted EBITDA.  Thus, once TSAs are exited, [Fortrea] will just be replacing TSA costs with internal operating costs.”  On this news, the price of Fortrea stock fell more than 12%, according to the complaint.

Then, on December 6, 2024, market analyst Baird Equity Research downgraded Fortrea to neutral from outperform after Fortrea abruptly cancelled two scheduled conferences, stating that “[g]iven our ongoing concerns around the sector, [Fortrea’s] choppy history post spin, and lack of clarity on the abrupt communications course change, we cannot recommend an actionable investment (buy or sell),” according to the complaint.  The Fortrea lawsuit alleges that on this news, the price of Fortrea stock fell more than 8%.

Finally, on March 3, 2025, the Fortrea class action lawsuit further alleges that Fortrea announced its fourth quarter and full year 2024 financial results, disclosing that its “targeted revenue and adjusted EBITDA trajectories for 2025 [were] not in line with [its] prior expectations.”  According to the complaint, specifically, in an earnings call held that same day, Fortrea revealed that Fortrea’s Pre-Spin projects are “late in their life cycle [and] have less revenue and less profitability than expected for 2025,” that “post-spin work is not coming on fast enough to offset the pre-spin contract economics,” and that “older versus newer mix issue will continue to negatively impact [Fortrea’s] financial performance during 2025.” 

On this news, the price of Fortrea stock fell more than 25%, according to the Fortrea class action lawsuit.