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Laboratory Corporation of America Holdings (LH - Analyst Report), or LabCorp has started offering QIAGEN NV’s (QGEN - Analyst Report) therascreen KRAS RGQ PCR Kit, a companion diagnostic test for certain colorectal cancer patients, under the name KRAS Gene Mutation Analysis, Colorectal Cancer (CRC).

This is the sole FDA-approved companion diagnostic for use with ERBITUX (cetuximab), for patients with KRAS mutation-negative (wild type) epidermal growth factor receptor (EGFR)-expressing metastatic colorectal cancer. According to LabCorp, this therascreen KRAS test will help identify those patients who will be benefited from treatment with ERBITUX. 

An alarming number of 110,000 patients are detected annually with advanced colorectal cancer in the U.S. With the majority of them being KRAS-mutation negative (wild-type) and eligible for ERBITUX therapy, this test is expected to play an important role in the field of personalized medicine.

LabCorp is continuously striving toward a robust portfolio expansion in order to drive its top line. This remains a part of the company’s 5-pillar strategy that states continued scientific innovation to offer new tests at reasonable and appropriate pricing.

Apart from introducing this KRAS Gene Mutation Analysis in the U.S. market, the company recently launched cobas EGFR Mutation Test, a real-time PCR assay designed to detect deletion mutations in exon 19 and the substitution mutation, L858R, in exon 21. The cobas EGFR Mutation Test is used as a companion diagnostic for Tarceva. According to LabCorp, the targeted population is likely to experience greater clinical benefits compared with patients treated with chemotherapy.

Moreover, over the next several quarters, LabCorp plans to offer more comprehensive oncology panels that include additional content covering liquid tumors, gene rearrangements and prognostic and predictive markers. The product pipeline will also comprise targeted tests such as a test for Lynch Syndrome – an inherited genetic condition associated with increased risk of colorectal cancer. Given the continuous focus on portfolio expansion, we are confident about the company garnering higher revenues from specialized testing, going forward.

However, challenging volume environments for testing laboratories and utilization weaknesses across the healthcare sector are major causes of concern. Further, margins continue to remain under pressure. Although the company’s share buyback activity might provide some cushion, we remain watchful of the poor bottom-line guidance for 2013 which implies that industry trends are not expected to improve substantially in the near-term.

Accordingly, the stock carries a Zacks Rank #3 (Hold). However, better-performing medical devices stocks such as Align Technologies Inc., (ALGN - Analyst Report) and Mindray Medical International Ltd (MR - Analyst Report), which carry a Zacks Rank #1 (Strong Buy), are worth considering.

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