Quest Diagnostics (DGX), one of the leading providers of commercial laboratory services in North America, recently received the 510(k) clearance from the US Food and Drug Administration (FDA) for its Simplexa C.difficile Universal Direct Test that run on the 3M Integrated Cycler. The test has been developed by Quest’s Focus Diagnostics business and enables rapid detection of Clostridium difficile-associated disease, a potentially fatal virus infection that causes diarrhea and other intestinal problems in patients.
Using a proprietary technique, this test can eliminate nucleic-acid sample extraction, a process that is time consuming. As per the recent data published by US Centers for Disease Control and Prevention, currently around 14,000 people die annually suffering from C. difficile-associated disease in the US. Thus, the latest FDA approval for this new diagnostic test kit will enable Quest to market the test in the US and this is expected to work favorably for Quest’s growth. Earlier in the second quarter of fiscal 2011, Quest commercially launched the Simplexa C. difficile Universal Direct Test in Europe.
In November last year, Quest received CE Mark approval for Simplexa Flu A/B & RSV Direct test. Again in the same month, the company received CE Mark approval for Simplexa Cytomegalovirus (CMV) molecular test kit. This test enables detection of CMV, a virus infection in patients with compromised immunity or those undergoing organ transplantation.
Again in January this year, Questreceived market authorization from the FDA for its STRATIFY JCV Antibody ELISA testing service. As the first antibody-based blood test of its kind to receive FDA approval, STRATIFY JCV enables qualitative detection of antibodies to the polyomavirus JC virus (JCV) for determining the risk arising from progressive multifocal leukoencephalopathy (PML).
Quest Diagnostics is currently focusing on latent areas such as drugs-of-abuse testing, gene-based, esoteric testing for cancer, cardiovascular disease, infectious disease and neurological disorders. The company is witnessing higher demand for these tests compared to routine tests.
In order to bolster this specialized side of business, Quest has been pursuing accretive acquisitions. The acquisitions of Athena and Celera are expected to strengthen the company’s foothold in gene-based and esoteric testing. Apart from that, we are encouraged by Quest’s efforts to improve its sales effectiveness and strengthen its relationship with health plans and payors.
The company is also focusing on women’s health. It has launched SureSwab for gynecological infections and also Spinal Muscular Atrophy testing, which has been witnessing significant acceptance. Encouraged by these factors, we expect higher sales from esoteric testing in the forthcoming period.
However, the company continues to witness challenges with testing volume. Moreover, the competitive landscape is tough with the presence of Laboratory Corporation of America Holdings (LH). LabCorp is also targeting the esoteric testing space and has acquired Genzyme Genetics to meet its objective. Quest currently retains a short-term Zacks #4 Rank(Sell).We currently have a Neutral recommendation on Quest and Lab Corp over the long term.
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