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Quest Diagnostics' (DGX) New Buyout Ramps Up Cancer Diagnosis

Quest Diagnostics DGX recently completed the acquisition of the PathAI Diagnostics business from PathAI, the global provider of artificial intelligence (AI)-powered technology for pathology. The multi-faceted collaboration, announced on May 1 this year, aims to accelerate the adoption of AI and digital pathology to improve the diagnosis of cancer and other diseases.

The transaction builds on Quest Diagnostics’ leadership in oncology and subspecialized pathology services. It will support PathAI's strategy to amplify its investments in AI technology and expand its software and algorithm business.

News in Detail

As part of the acquisition, the PathAI Diagnostics state-of-the-art digitized laboratory in Memphis has been rebranded as AmeriPath.  The facility will act as the national AI and digital R&D and solutions center supporting Quest Diagnostics' specialty pathology businesses — AmeriPath and Dermpath Diagnostics. As an independent company, PathAI will continue to maintain a separate research laboratory at the same site in Memphis, TN, to support its biopharmaceutical clients.

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Additionally, both companies have formed separate agreements to further accelerate the adoption of AI and digital pathology based on their strengths and scale. Quest Diagnostics will license PathAI's AISight digital pathology image management system to support its pathology laboratories and customer sites in the United States. The diagnostics information services provider remains a preferred partner of lab services for PathAI's biopharmaceutical clients.

Furthermore, PathAI and Quest Diagnostics may collaborate on developing AI algorithms with potential research and clinical applications.

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Importance of the Acquisition

Digital pathology unlocks the next phase of cancer innovation by enabling the creation of digital images of glass slides that can be securely shared electronically with other pathologists. Apart from reducing transportation needs and speeding testing and results reporting, it also extends access to expert consults in geographic areas where pathologists are in short supply. Moreover, digital pathology can seemingly help alleviate workforce pressures due to a shortage of pathologists and histotechnologists, the skilled laboratory professionals who prepare tissue slides.

The latest transaction will significantly ramp up Quest Diagnostics’ capabilities in AI and digital pathology. The company has a long history of strategic AI and automation deployment, having implemented AI, digital and automation technologies across several laboratory and business functions, from microbiology and cytogenetics to specimen processing and customer service, improving quality, efficiency, and customer and employee experiences.

Industry Prospects

Per a research report, the global AI in pathology market was valued at $24 million in 2023 and is expected to witness a CAGR of 15.6% by 2030.

AI in pathology offers numerous advantages, including improved accuracy, increased efficiency and enhanced patient care. Furthermore, the growing demand for misdiagnosis, funding initiatives for improving patient care quality and increasing emphasis on cost control and efficiency improvement in hospitals are fueling the market growth.

Other Notable Developments

In April 2024, Quest Diagnostics launched a new blood biomarker test associated with Alzheimer's Disease (“AD”). p-tau217 or phosphorylated tau 217 adds to the company’s AD-Detect portfolio of blood tests for assessing the risk of AD, joining an array of AD biomarkers, including p-tau181 and amyloid beta proteins, as well as Apolipoprotein E isoform and plasma testing, for patients with cognitive impairment.

Additionally, the company announced a research collaboration with Broad Clinical Labs to demonstrate the clinical value of WGS (whole genome sequencing) as a first-line genetic test for postnatal diagnosis of developmental delay disorders. WGS has the potential to enable a new diagnostic paradigm where a physician can access genetic insights faster on the patient's diagnostic journey without multiple doctor visits and lab tests.

Price Performance

In the past year, shares of DGX have decreased 1.2% against the industry’s rise of 15.2%.

Zacks Rank and Key Picks

Quest Diagnostics currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Hims & Hers Health HIMS, Medpace MEDP and ResMed RMD. While Hims & Hers Health sports a Zacks Rank #1 (Strong Buy), Medpace and ResMed carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks Rank #1 stocks here.

Hims & Hers Heath stock has surged 178.7% in the past year. Estimates for the company’s earnings have remained constant at 18 cents in 2024 and increased 3.1% to 33 cents in 2025 in the past 30 days.

HIMS’ earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. In the last reported quarter, it posted an earnings surprise of a staggering 150%.

Estimates for Medpace’s 2024 earnings per share have remained constant at $11.29 in the past 30 days. Shares of the company have surged 78.7% in the past year compared with the industry’s 4.7% growth.

MEDP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.

Estimates for ResMed’s fiscal 2024 earnings per share have remained constant at $7.70 in the past 30 days. Shares of the company have declined 3.9% in the past year compared with the industry’s fall of 1.8%.

RMD’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 2.8%. In the last reported quarter, it delivered an earnings surprise of 10.9%.

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Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report

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