Quest Diagnostics to Buy 2 Labs, Grow in Oncology Space

In order to accelerate growth in the cancer diagnostic segment, Quest Diagnostics DGX recently announced agreements to acquire two laboratory businesses in Lewisville, Texas, namely Med Fusion and Clear Point. The businesses jointly provide a complete range of diagnostic services to physicians and provider networks.

These deals are aimed at establishing a center of excellence for providing diagnostic services to detect and manage cancer for oncologists and patients all over the country. Baylor Scott & White Health (BSWH), The US Oncology Network or the Network (supported by McKesson Specialty Health), Texas Oncology and Pathologists Bio-Medical Laboratories PBM are co-owners of one or both the businesses.

Post the deal closure, Quest Diagnostics will become a preferred provider of advanced oncology diagnostics for The Network and Texas Oncology. The company will provide genomic and pathology testing solutions for oncologists to select and monitor treatment so that they can predict disease progression appropriately.

Quest Diagnostics Incorporated Price

 

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Also, Quest Diagnostics will be a preferred provider of a complete range of inpatient and outpatient diagnostic services for 12 hospitals of Baylor Scott & White Health in North Texas. Post the deal, Quest Diagnostics and PBM will also have a preferred provider relationship for various services.

Per management, partnering with McKesson Specialty Health and The Network will make Quest Diagnostics' advanced genomic analysis readily available to community oncologists everywhere. The company is also hoping to work with BSWH to offer wider access to high quality and high value services.

The deal is expected to be closed in the third quarter of 2017, subject to certain conditions.

The deal is in sync with Quest Diagnostics' goal to gain traction in the high-potential global oncology diagnostic market. On account of data provided by American Cancer Society, nearly 1.7 million people are expected to be diagnosed with cancer in the U.S. in 2017.

According to Markets and Markets, the global cancer diagnostics market is expected to reach a worth of $13.1 billion by 2020 at a CAGR of 12.9% during 2015 to 2020. The company clearly has bountiful opportunities in this niche market.

Recent Developments

Within its advanced diagnostics business, Quest Diagnostics, along with its onchology francise partner Memorial Sloan Kettering, has teamed up with IBM to form IBM Health Watson. With about 70% of the oncology prospects being in community healthcare centers instead of large urban centers, this is an opportunity for all the three companies to gain a significant portion of the market.

Zacks Rank & Key Picks

Quest Diagnostics currently carries a Zacks Rank #2 (Buy). Other top-ranked medical stocks are Align Technology, Inc. ALGN, Inogen, Inc. INGN and Accelerate Diagnostics, Inc. AXDX. Notably, Align Technology and Inogen sport a Zacks Rank #1 (Strong Buy), while Accelerate Diagnostics carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock added roughly 32.8% over the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of around 80%.

Accelerate Diagnostics has an expected long-term adjusted earnings growth of 30%. The stock added roughly 12% over the last three months.

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