Over the past several years,
), a prominent player in the field of diagnostic testing, has
been making efforts to align assets with its core strategies. The
latest among these is the divestment of considerably all the
assets of OralDNA Labs salivary-diagnostics business to Access
Genetics, a clinical laboratory with advanced molecular
diagnostics test development capabilities. Financial terms of the
deal were not disclosed.
Since 2008, Access Genetics has provided support and expertise
for OralDNA-based testing services for dental professionals.
Following the recent transaction, OralDNA's testing services will
be consolidated under Access Genetic's CLIA- and CAP-certified
laboratory in Minnesota.
At present, Quest Diagnostics is focusing on areas with
high-growth potential and is striving to increase its operational
efficiency. Consistent with this, earlier in October 2012, the
company announced a major organizational restructuring that will
replace the company's existing business structure with two new
business groups - Diagnostic Information Services and Diagnostic
Solutions (effective January 1, 2013). According to the company,
these structural changes will eliminate three management layers
representing 400-600 management positions by the end of 2013,
thereby making an annualized savings of $65 million.
According to Quest Diagnostics, the divestiture of OralDNA
will benefit the company by allowing it to refocus its resources
to core diagnostic information services; drive operational
excellence and restore growth. We hold a favorable view
about this divestment along with the organizational structure
developed by the company's new CEO, Steve Rusckowski. We also
expect this to run successfully adding synergies to the company's
ongoing $500 million restructuring initiative associated with its
However, challenges remain in the form of pressure on testing
volume. Moreover, reimbursement pressure from government and
other payers continue. Concerns linger regarding the anticipated
reimbursement cut effective January 1, 2013. The competitive
landscape is also tough with the presence of
Laboratory Corporation of America Holdings
). We currently have a Neutral recommendation on Quest
Diagnostics over the long term. The stock retains a short-term
Zacks #3 Rank (Hold).
QUEST DIAGNOSTC (DGX): Free Stock Analysis
LABORATORY CP (LH): Free Stock Analysis
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