), recently announced that Radiometer Medical ApS has agreed to
purchase the HemoCue diagnostic products business for $300
million plus customary adjustments for cash balances. This
leading diagnostic testing company had earlier disclosed its
plans to sell off the particular business.
HemoCue develops point-of-care testing systems like
hemoglobin, glucose and others worldwide. The company believes
that, in addition to its earlier divestment of OralDNA Labs
salivary-diagnostics business to Access Genetics, the latest
divesture of HemoCue will allow it to refocus resources toward
core diagnostic information services, drive operational
excellence and restore growth.
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 experienced increasing demand for
gene-based and esoteric tests compared with routine tests, on the
back of increased esoteric mix contributed by Athena and
Earlier in Dec 2012, as a part of this strategy, the company
shed OralDNA Labs salivary-diagnostics business in order to
refocus its resources to core diagnostic information services.
Recently, Quest developed a number of gene-based and esoteric
tests, made strategic acquisitions and entered into partnerships
to further strengthen its foothold in this segment.
Although we remain concerned with Quest Diagnostics' overall
sales disruption in the recent past, we are optimistic regarding
the company's strategy to refocus on Diagnostic Information
Services along with the organizational structure developed by the
company's new CEO, Steve Rusckowski. We also expect this to run
successfully adding synergies to its ongoing $500 million
restructuring initiative, associated with its Invigorate
We remain concerned about Quest Diagnostics as it is
continuously witnessing challenges with testing volume. Concerns
also remain about a conservative 2013 revenue outlook, indicating
that the industry trend will not improve in the near future.
Moreover, reimbursement pressure from government and other payers
continue. Concerns linger regarding the reimbursement cut, which
has been in effect from Jan 1, 2013. The competitive
landscape is also tough with the presence of
Laboratory Corporation of America Holdings
Other Stocks to Consider
Quest Diagnostics retains a Zacks Rank #5 (Strong Sell). While
we strongly recommend a 'Sell' rating for the stock, other
medical device stocks worth a look are
Medical Action Industries Inc.
Given Imaging Ltd.
). Both the stocks carry a Zacks Rank #1 (Strong Buy).
QUEST DIAGNOSTC (DGX): Free Stock Analysis
GIVEN IMAGING (GIVN): Free Stock Analysis
LABORATORY CP (LH): Free Stock Analysis
MEDICAL ACTION (MDCI): Free Stock Analysis
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