DGX to Improve Hepatitis Detection - Analyst Blog

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Recently, in a bid to enhance hepatitis C virus (HCV) detection and management, Quest Diagnostics (DGX) joined forces with the US Centers for Disease Control and Prevention (CDC). Through this collaboration, the company intends to improve the public health analysis of hepatitis C screening, diagnosis as well as treatment. The process of improving Hepatitis C detection will be based on the analysis of Quest's national hepatitis C virus diagnostic information.

HCV infection is a chronic blood borne infection, which is common in the US. It acts as a major cause of liver damage and cancer. However, early diagnosis and treatment can help prevent cirrhosis, liver cancer and death.

This collaboration came on the heels of the U.S. Preventive Services Task Force's recommendation in Jun 2013, which suggested one-time hepatitis C screening for adults born between 1945 and 1965. While targeting this "baby boomer" generation, Quest noted that this age group is five times more susceptible to HCV infection than other adults. Therefore, targeting this group may prevent over 120,000 deaths.

Quest Diagnostics is optimistic about this new alliance and expects to capture a large part of the growing HCV diagnosis and treatment market in the US. At present more than 3 million people in the US are infected with hepatitis C, while many others are still unaware as to whether they are infected. Moreover, deaths from hepatitis C have doubled over the past decade to more than 15,000 a year. Thus, screening and early detection may play a vital role in curbing the fatality rate.

Currently, Quest Diagnostics has been focusing on areas with high potential such as gene-based esoteric testing for cancer, cardiovascular disease, infectious disease and neurological disorders. The company has experienced increasing demand for gene-based and esoteric tests compare! d to routine tests on the back of increased esoteric mix contributed by Athena and Celera. As a part of this strategy, the company completed the divestiture of HemoCue diagnostics products business in April.

Radiometer Medical ApS acquired the HemoCue diagnostics products business for $300 million plus customary adjustments for cash balances. Last December, the company shed its OralDNA Labs salivary-diagnostics business in order to refocus its resources on core diagnostic information services.

However, we remain cautious about Quest Diagnostics as it continues to face weak testing volume. Concerns also linger about the soft industry trends due to a decline in physician office visits, flat pricing and low organic revenues.The stock retains a Zacks Rank #4 (Sell).

While we prefer to remain bearish on Quest Diagnostics, other medical device stocks worth a look are Tornier N.V. (TRNX), Lannett Company, Inc. (LCI) andKindred Healthcare Inc. (KND). All three stocks carry a Zacks Rank #1 (Strong Buy).