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Dako, an Agilent Technologies (A - Analyst Report) subsidiary, entered into an agreement with Merck & Co. Inc. (MRK - Analyst Report) to develop technologies in the field of companion diagnostics for cancer-fighting drugs. Financial terms of the deal have not been disclosed.

Agilent acquired the Danish cancer diagnostics company, Dako, for $2.2 billion (on a debt-free basis) in 2012. Dako supplies antibodies, scientific instruments and software mainly to cancer-related diagnostic labs. It also collaborates with drug companies for developing methods to identify patients who are likely to benefit from certain therapies.

Currently, the healthcare sector is witnessing a revolution and companion diagnostics or personalized medicine is taking the center stage. It has been found that not all treatments are suitable for patients suffering from a specific disease as some require tests that are more specialized in nature.

Dako’s expertise in the development of methods to identify patients likely to benefit from certain therapies will help Merck select patients who may benefit from its ongoing research in companion diagnostics; thus improving the diagnostic process.

There could be far-reaching effects on the entire healthcare system, as personalized medicine has a long way to go in improving patient care and reducing medical bills.

According to the Global Industry Analysts, the global market for companion diagnostics may reach $280.2 million by 2017, driven by the enhancement of a drug’s clinical usage, thus reducing the overall cost and risk involved in drug development and commercialization.

Agilent’s fiscal fourth-quarter earnings per share of 81 cents beat the Zacks Consensus Estimate by 5 cents, or 6.1%, driven by good expense control and stronger mix. However, revenues of $1.72 billion missed our expectations due to unfavorable currency changes.

Currently, Agilent Technologies has a Zacks Rank #3 (Hold). Other companies, such as Ametek Inc. (AME - Snapshot Report) and Daktronics Inc. (DAKT - Snapshot Report), with a Zacks Ranks #2 (Buy), are also worth considering.

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