Quest Diagnostics Partners with Veracyte for Cancer Testing

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Quest Diagnostics IncorporatedDGX has recently entered into an agreement with genomic diagnostics company Veracyte, Inc. VCYT , for the extended access of the latter's laboratory-developed test, Afirma Gene Expression Classifier (GEC). This deal will enable Quest Diagnostics to meet growing physician demand for advanced genomic testing services on thyroid cancer diagnosis. However, financial terms of the deal are kept under wraps.

The Afirma GEC test is useful for physicians who perform fine needle aspiration biopsies to evaluate thyroid nodules for potential cancer. Under the agreement, the broad physician client network of Quest Diagnostics will be able to order the test on behalf of patients and refer patient specimens to Veracyte for genomic testing. Notably, Quest Diagnostics currently serves approximately half the physicians and hospitals in the U.S.

The service will be available through Quest Diagnostics' anatomic pathology business, AmeriPath for use on cytopathology results of biopsies in indeterminate cases (not clearly benign or malignant). The company expects to begin offering the test in the second quarter of 2017.

Taking into consideration the huge and growing market of genomic diagnostics, we believe the Veracyte deal will prove beneficial in significantly accelerating Quest Diagnostics' growth in this niche. Recent data is pretty impressive in this respect showing the importance of Afirma GEC in comparison with traditional procedures.

Over 520,000 patients undergo evaluation for potentially cancerous thyroid nodules in the U.S. each year. Among them, 15-30% receives indeterminate results. Earlier, most of these patients were again directed to undergo thyroid surgery for a definitive diagnosis where post-surgery, 70-80% of cases proved benign implying that the surgery was a waste. We believe that Afirma GEC should well address this problem and create huge customer acceptance.

Quest Diagnostics Incorporated Price

Quest Diagnostics Incorporated Price | Quest Diagnostics Incorporated Quote

In this regard we note that, Quest Diagnostics significantly outperformed the Zacks categorized Medical - Outpatient and Home Healthcare industry with respect to share price movement, over the past three months. The upside is backed by the successful execution of the company's strategy to grow its esoteric testing and drive profitable growth. Quest Diagnostics has gained 15.72% over this period, compared with 12.93% gain of the broader industry. We expect the latest deal to add further impetus to the present momentum.

Zacks Rank & Key Picks

Quest Diagnostics currently has a Zacks Rank #3 (Hold). A couple of better-ranked medical stocks include Glaukos Corporation GKOS and Neogen Corp. NEOG . Glaukos sports a Zacks Rank #1 (Strong Buy) while Neogen carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Glaukos gained over 100% in the last one year in comparison to the S&P 500's gain of only 23.8%. The company has a stellar four-quarter average earnings surprise of over 100%.

Neogen gained 32.7% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared with the industry average of 15.2%.

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Neogen Corporation (NEOG): Free Stock Analysis Report

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Veracyte, Inc. (VCYT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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