Leading diagnostic testing player Quest Diagnostics (DGX) did not miss World Kidney Day. The company came up to support the updated guideline of the National Kidney Foundation Kidney Disease Outcomes Quality Initiative ("KDOQI") Chronic Kidney Disease ("CKD").
With roughly 26 million Americans currently suffering from CKD, we expect this initiative from Quest Diagnostics to be a strategic fit and improve the company’s specialized testing business.
Chronic Kidney Disease is a state of gradual loss of kidney function. Recently, CKD has become more prevalent in young adults due to the increasing problem of obesity, which leads to diabetes and hypertension (high blood pressure).
According to Quest Diagnostics, awareness among patients about CKD is vital because early detection is essential before the kidneys stops working. This way, with the help of proper detection through laboratory tests, one can avoid the extreme aftermaths like dialysis or kidney transplant.
The updated guideline by National Kidney Foundation broadened the CKD classification system with the inclusion of albuminuria, protein in the urine, and glomerular filtration rate ("GFR") stage. According to Quest Diagnostics, these modifications will be helpful in detecting a patient's condition.
Despite the current challenging environment, we appreciate Quest Diagnostics’ commitment toward improving the specialized testing business.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 has experienced increasing demand for gene-based and esoteric tests compared with routine tests on the back of increased esoteric mix contributed by Athena and Celera.
As a part of this strategy, Quest Diagnostics recently shed its OralDNA Labs salivary-diagnostics business and HemoCue diagnostic products business. This would enable the company to refocus its attention on its core diagnostic information services. In the recent past, Quest developed a number of gene-based and esoteric tests.
We also believe that the acquisition of UMass Medical Lab is in sync with its goal to create a planned 'lab of the future,' which will help it increase long-term growth opportunities in the rapidly growing esoteric markets. We assume all these endeavors could very well turn around the company’s fortunes going ahead.
However, Quest Diagnostics continues to witness 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 effective from Jan 1, 2013.
The stock currently carries a Zacks Rank #3 (Hold). However, other medical device stocks worth a look are Given Imaging (GIVN), Medical Action Industries Inc. (MDCI) and Cytokinetics Incorporated (CYTK). All these stocks carry a Zacks Rank #1 (Strong Buy).
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