Leading diagnostics player, Quest Diagnostics (DGX) entered into a multi-year collaboration agreement with a biotechnology company, Genomic Vision for the latter’s molecular combing (also known as DNA combing) genomic-analysis technology. The agreement provides Quest with rights to develop Genomic Vision’s DNA combing technology in the US, India and Mexico. However, the rights to market new tests developed from the collaboration in Europe (other than UK), Middle East and Africa lie with Genomic Vision.
Additional terms of the deal were not disclosed. Besides, Quest has made an equity investment in Genomic Vision for an undisclosed amount. The company believes that DNA combing can help in clinical testing and drug development based on its ability to analyze single DNA molecules.
The first test, based on DNA combing, is developed for detecting facioscapulohumeral muscular dystrophy and is expected to be released in 2012. Quest and Genomic Vision would also focus on developing tests for cancer and neurological disorders. Quest may also offer DNA combing based tests for new drug development to pharmaceutical companies through its clinical trials business and for research use to academic institutions, from 2012.
Quest is now focused on areas of high potential such as gene-based, esoteric and anatomic pathology testing, which accounted for approximately 36% of the company’s total revenues in 2010. Robust esoteric testing during the last reported quarter was primarily driven by double digit-growth in Vitamin D testing that is increasingly used for a range of conditions such as osteoporosis, cancer, diabetes and heart disease. Moreover, revenues derived from testing for blood cancers, particularly the Leumeta family of blood tests, recorded healthy growth.
We are encouraged by Quest’s strong portfolio of tests, many of which are finding greater acceptance with time. Based on favorable demographic trends and strong focus, Quest will continue to remain one of the leading players in the industry. However, the company faces stiff competition from the likes of Laboratory Corporation of America Holdings (LH) among others.
We are currently neutral on Quest Diagnostics, which also corresponds to Zacks #3 Rank (hold) in the short-term.


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