Recently, in a bid to enhance hepatitis C virus (HCV)
detection and management
, Quest Diagnostics
) 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 compared 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
Lannett Company, Inc.
Kindred Healthcare Inc.
). All three stocks carry a Zacks Rank #1 (Strong Buy).
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