Dako and Merck Collaborate - Analyst Blog

Dako, an Agilent Technologies A subsidiary, entered into an agreement with Merck & Co. Inc. MRK to develop companion diagnostic test for detecting cancer susceptibility among people. Financial terms of the deal have not been disclosed.

The companion diagnostic test is being developed for the analysis of the potential tumor biomarker PD-L1. The test is part of Merck's clinical development program to study anti-PD-1 antibody to treat cancer.

Agilent acquired the Danish cancer diagnostics company, Dako, for $2.2 billion (on a debt-free basis) in 2012. Dako supplies antibodies, scientific instruments and software mainly to cancer-related diagnostic labs. It also collaborates with drug companies for developing methods to identify patients who are likely to benefit from certain therapies.

Currently, the healthcare sector is witnessing a revolution and companion diagnostics or personalized medicine is taking the center stage. It has been found that not all treatments are suitable for patients suffering from a specific disease as some require more specialized tests.

Dako's expertise in developing methods to identify patients likely to benefit from certain therapies will help Merck select patients who may benefit from its ongoing research in companion diagnostics; thus improving the diagnostic process.

There could be far-reaching effects on the entire healthcare system, as personalized medicine has a long way to go in improving patient care and reducing medical bills.

According to the Global Industry Analysts, the global market for companion diagnostics may reach $280.2 million by 2017, driven by the enhancement of a drug's clinical usage, thus reducing the overall cost and risk involved in drug development and commercialization.

Agilent's fiscal second-quarter earnings per share of 72 cents were in line with the Zacks Consensus Estimate. Revenues of $1.73 billion were up 3.1% sequentially but down 0.1% year over year. Life Sciences and Diagnostics Group revenues were up 1.1% sequentially, driven by strong performance in the pharma and diagnostics/clinical markets.

Currently, Agilent Technologies has a Zacks Rank #3 (Hold). Other stocks that are performing well at current levels include Applied Micro Circuits AMCC and Exar Corp. EXAR. All these stocks sport a Zacks Ranks #1 (Strong Buy).

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