Quest Diagnostics (DGX), a leading player in the diagnostic testing market, recently launched the world’s first-of-its-kind molecular Renal Transplant Monitoring test to identify renal organ-transplant rejection. Quest claims that this test can detect kidney failure faster than other conventional tests and clinical indications. Thus, this will help increase patient care in kidney transplantation while reducing healthcare costs associated with this treatment.
This test is based on the RNA genetic markers forkhead box P3 (FoxP3), granzyme B (GZMB), and perforin (PRF1). These biomarkers are licensed from the Beth Israel Deaconess Medical Center (BIDMC) in Boston and the New York City-based WeillCornell Medical College. Quest entered into a research and development collaboration deal with both BIDMC and Weill Cornell Medical College for renal transplantation. Recently, a study published by Dr. Strom and Manikkam Suthanthiran demonstrated that certain biomarkers including FoxP3 can help detect acute cellular rejection of renal transplants.
Organ transplant failure plays a vital role in driving treatment costs to a huge extent. Overall health care costs increase significantly when kidney transplants fails with the kidney being the most commonly transplanted organ (in the US, the number of kidney transplants reached almost 17,000 during 2009).
The 2010 annual report of the US Organ Procurement and Transplantation Network and the Scientific Registry of Transplant Recipients stated that around 70% of transplants from a deceased donor fail within 5 years. The 2007 US Government Accountability Office report further illustrated that the median annual Medicare cost for a beneficiary whose kidney transplant failed was 500% higher (at $50,938) than the median annual Medicare cost for a beneficiary with a functioning transplant ($8,550).
Quest expects this new renal monitoring test to significantly reduce the occurrence of kidney transplant failure, thereby reducing expenses.
Despite the current challenging environment, we appreciate Quest’s commitment towards improving the specialized testing business and balancing capital deployment philosophy. We are encouraged by Quest’s strong portfolio of tests, many of which are finding greater acceptance with time. Apart from this, the company is looking to improve its sales effectiveness and strengthen its relationship with health plans and other payors. Besides, the company is adopting several strategies such as suitable acquisitions, increased sales force and geographic expansion to drive its top line.
However, the company continues to witness challenges with testing volume. Moreover, the competitive landscape remains tough with the presence of Laboratory Corporation of America Holdings (LH). We currently have a Neutral recommendation on Quest, in line with Lab Corp. Both the companies retain Zacks #3 Rank (short-term Hold rating).
To read this article on Zacks.com click here.
Zacks Investment Research
