Facing a Dx sales slump, Quest taps Illumina, Life Tech and UCSF for R&D

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Quest Diagnostics ($DGX), which is facing a challenging reimbursement environment that's dampening sales, has signed three deals that the New Jersey company says will enhance its ability to develop next-generation diagnostic devices.

First, Quest will team up with the University of California in San Francisco to research genetic mutations and other biomarkers that can predict how patients will react to particular drugs. Jay G. Wohlgemuth, senior vice president for science and innovation at Quest, told the Wall Street Journal that the plan is to package the genetic data and information on family history with standard medical tests such as MRIs to help guide treatment plans. Quest should be able to tack higher price tags on such tests than it can on standard biopsies and blood tests, Wohlgemuth said.

"Quest needs first-rate academic centers with research expertise in identifying biomarkers, and UCSF needs a developer to pull it together and bring it into clinical use," Wohlgemuth told the WSJ.

Quest also formed a multi-year licensing deal with San Diego-based Illumina ($ILMN). Under the terms of the agreement, Quest will be able to use Illumina's sequencing and genotyping technology to develop lab tests for several diseases, according to a press release. Quest will also employ Illumina's biomarker testing technology in clinical trials it performs for biotech and pharma clients.

Finally, Quest signed a licensing deal with Carlsbad, CA-based Life Technologies ($LIFE), which will give Quest the right to develop molecular tests using Life's famed Ion Torrent next-generation sequencing (NGS) technology. "Quest is actively developing NGS-based tests and working with top providers, such as Life Technologies, to expand our capabilities in this exciting new field," Wohlgemuth said in a press release about the deal.

Quest has been under pressure from private and government insurers that are no longer willing to pay top dollar for its diagnostic tests, which has only exacerbated an overall drop in demand for those tests. To recharge its top and bottom lines, Quest reorganized some business units, cut 600 jobs, expanded its presence in India and sold off its share of Johnson & Johnson's ($JNJ) cancer drug ibrutinib to Royalty Pharma for $485 million.

Quest may need to work a bit harder to regain investor confidence, though. In December, the company said it expects adjusted earnings per diluted share of $3.90 to $3.95, which was slightly better than its earlier guidance of $3.85 to $3.95--but sales will still come in about 3.5% lower than 2012 revenues. Quest's stock, which was trading around $63 a share in early November, opened today at $53.19.

- read the WSJ's take on the UCSF deal (sub. req.)
- here's the Illumina release
- and the Life Technologies release

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