A class action lawsuit was filed against Fortrea Holdings (FTRE) by Levi & Korsinsky on June 2, 2025. The plaintiffs (shareholders) alleged that they bought FTRE stock at artificially inflated prices between July 3, 2023, and February 28, 2025 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Fortrea Holdings stock during that period can click here to learn about joining the lawsuit.
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Fortrea is a global contract research organization (CRO) that provides clinical development and consulting services to biopharmaceutical, biotechnology, medical device, and diagnostic companies. Notably, Fortrea was spun off from the healthcare company Labcorp Holdings (LH) in June 2023. However, several long-term projects in Fortrea’s portfolio remained ongoing at that time (Pre-Spin Projects).
The company’s claims about revenue expectations from these Pre-Spin projects are at the heart of the current complaint.
Fortrea Holdings’ Misleading Claims
According to the lawsuit, Fortrea and two of its senior officers (the Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the amount of revenue the Pre-Spin Projects were likely to contribute to the Company’s 2025 earnings, and other issues, from SEC filings and related material.
During the Class Period, the company’s CEO stated in a press release that, following the spin-off, Fortrea had become an independent company with increased operational agility and financial flexibility. It possessed a global scale, access to clinical data-driven insights, strong site relationships, and decades of experience, enabling it to deliver tailored solutions to customers as a trusted partner.
Additionally, in a November 13, 2023, press release, the CEO noted that Fortrea’s transformation was on pace and the company needed to make strategic decisions to exit transition service agreements (TSAs) with its former parent, Labcorp. This would enable Fortrea to better meet industry expectations regarding its cost structure.
Finally, during a May 11, 2024, earnings call, the CEO highlighted that Fortrea had made strong progress in exiting the TSAs with Labcorp. By the end of 2023, the company had exited about 40% of its TSAs and had exited a few more in the first quarter of 2024.
However, subsequent events (mentioned below) reveal that the defendants failed to inform investors about the overstatement of revenue and costs associated with the Pre-Spin projects and its impact on Fortrea’s long-term performance.
Plaintiffs’ Arguments
The plaintiffs maintain that the defendants deceived investors by lying and withholding critical information about the business practices and prospects during the Class Period. Importantly, the defendants are accused of misleading investors about the exact revenue and costs related to the Pre-Spin projects.
The information became clear on March 3, 2025, when Fortrea released its fourth-quarter and full-year fiscal 2024 results. The company noted that it failed to achieve its targeted revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) trajectories for 2025. FTRE stock plunged 25% following the news.
Moreover, in an earnings call on the same day, the company stated that its Pre-Spin projects were late in their life cycle and were generating less revenue and lower profitability than expected for 2025. Also, the post-spin work was not materializing as rapidly as expected. As a result, Fortrea was unable to offset the unfavorable economics of the Pre-Spin contracts. To make matters worse, Fortrea noted that this “older versus newer mix issue” would continue to negatively impact its financial performance during 2025.
To conclude, the defendants misled investors by overestimating the revenue and cost savings from Fortrea’s spin-off from Labcorp and the exit from TSAs. As a result, the viability of Fortrea’s post-spin-off business model, as well as its financial prospects, were overstated. Owing to these issues, FTRE stock has lost 73% year-to-date.
