Recently, Quest Diagnostics (DGX) received approval for its ColoVantage test from New York State’s Department of Health for testing samples of patients. This will prove to be a convenient option for patients aged 50 years or more who resist detection of colorectal cancer by recommended screening methods.
Although the American Cancer Society recommends screening people above 50 years who are at risk of colorectal cancer, only half of this population is up-to-date on screening.
It has been observed that ColoVantage could identify colorectal cancer in 70% of patients diagnosed with the cancer. Moreover, it correctly detected the absence of colorectal cancer in about 89% of samples tested. This test could prove beneficial to huge patient population as colorectal cancer is the third most common cancer in men and women in the US.
Quest Diagnostics has been focusing on areas with high potential such as gene-based, esoteric and anatomic pathology testing, which accounted for approximately 36% of the company’s total revenues in 2010. Although the company has been witnessing a decline in revenues derived from anatomic pathology, we are encouraged by the 3% growth of gene-based and esoteric testing during the last reported quarter, driven primarily by sales to hospitals and specialist physicians.
The increase in esoteric testing was primarily driven by more than 30% growth in Vitamin D testing, which is being increasingly used for a range of conditions such as osteoporosis, cancer, diabetes and heart disease.
Moreover, revenues derived from testing for blood cancers, particularly the Leumeta family of blood tests, recorded robust growth. The company also made good progress with its product pipeline in the areas of cancer, infectious disease and cardiovascular disease.
While ColoVantage, the first blood test to detect colorectal cancer, has been introduced, Quest continues to witness growing interest in OVA1, a blood test to help detect ovarian cancer before surgery. In infectious disease, the recently introduced SureSwab real-time PCR test for gynecologic infections has been well-received. Moreover, the company’s Focus Diagnostics business has expanded the Simplexa platform with new influenza test.
Recommendation
With positive volume growth during the quarter coupled with stability in pricing, the company is set for gradual recovery. We are encouraged by Quest’s strong portfolio of tests, many of which are finding greater acceptance with time. However, the company faces steep competition from Laboratory Corporation of America Holdings (LH). Based on favorable demographic trends and strong focus, Quest will continue to be one of the leading players in the industry.
QUEST DIAGNOSTC (DGX): Free Stock Analysis Report
Zacks Investment Research
