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Quest Diagnostics to Buy MedXM, Boost Home Health Services

Quest Diagnostics DGX recently announced a definitive agreement to buy a leading national provider of home-based health risk assessments and related services — Mobile Medical Examination Service (MedXM). The financial terms of the deal, slated to close in the first quarter of 2018, have been kept under wraps.

Based in Santa Ana, CA, MedXM has an extensive national network of more than 1,700 medical professionals. It provides enhanced member satisfaction for health plans, particularly Medicare Advantage and managed Medicaid, and also enriched quality of care. Thus, the acquisition will strengthen Quest Diagnostics’ position in extended care and widen its scale and reach in the mobile/home segment as well.

Going by data published in a report by Grand View Research, the deals seems to be lucrative as well as strategic. Per the report, the global home healthcare market is likely to see a CAGR of 7.8% between 2014 and 2025. Growth will mainly be driven by factors such as rising old-age demography across the globe, growing need of cost-effective healthcare, rising incidences of chronic diseases and technological advancements in devices.

We are also optimistic about the company’s focus on its two-point strategy. According to Quest Diagnostics, its planned divestiture of the Focus Diagnostics products business is part of its strategy to refocus on diagnostic information services. 

Additionally, several new collaborations with hospitals and integrated delivery networks have turned out to be major growth drivers in the past. In this regard, we are encouraged by the company’s completion of thebuyout of outreach laboratory service operations of Hartford HealthCare hospitals — The William W. Backus Hospital and The Hospital of Central Connecticut. The company has also completed the acquisition of Med Fusion and Clear Point in Texas forming a national precision oncology center of expertise. Moreover, the company’s agreement to purchase Shiel Medical Laboratory and plans to acquire the outreach laboratory services business of Cape Cod Healthcare buoy optimism.

We are also upbeat about Quest Diagnostics and Clinical Genomics, a major player in the field of colorectal cancer detection, jointly announced FDA clearance of the latter’s InSure ONE. Notably, with the FDA approval, Quest Diagnostics will make InSure ONE available to its broad base of physicians, organized provider groups and Accountable Care Organizations (ACOs) in the United States. InSure ONE is expected to be commercially available in early 2018. This development is in line with Quest Diagnostics’ consistent efforts to grow in cancer diagnostics.

The company’s relationship with PeaceHealth has also been fortified. The partnership entails the acquisition of an outreach laboratory as well as a professional laboratory service agreement to manage laboratories at 11 PeaceHealth Medical Centers in Washington State, Oregon and Alaska.

Per the company, these tuck-in acquisitions fit well within the ambit of the M&A guidelines. Quest Diagnostics’ takeover plans are consistent with its goal of contributing 1-2% to revenues annually through accretive acquisitions. Thus, we believe this latest buyout will widen the customer base of this leading diagnostic services information provider.

Quest Diagnostics faces intense competition in diagnostic testing laboratory space, primarily from Laboratory Corporation of America Holdings LH and other commercial laboratories and hospitals.  Moreover, in the clinical laboratory market some of the major players are Myriad Genetics MYGN and Genomic Health GHDX.

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Myriad Genetics, Inc. (MYGN): Free Stock Analysis Report
 
Genomic Health, Inc. (GHDX): Free Stock Analysis Report
 
Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report
 
Laboratory Corporation of America Holdings (LH): Free Stock Analysis Report
 
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