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Quest Diagnostics (DGX - Analyst Report), a leading player in the field of diagnostic testing, has expanded its portfolio with a new test to help physicians determine whether a thyroid gland is cancerous and requires surgical removal. This test would help in thyroid biopsy testing and prevent unnecessary removal of healthy thyroids in many patients.  

Currently in use cytology test methods often lead to indeterminate results in the detection of cancer. As per estimates, approximately 54,500 new cases of thyroid cancer will be diagnosed in the US in 2012. The company will share details about its various tests at the 2012 ASCO (American Society of Clinical Oncology) annual meeting currently underway.

The launch of the thyroid test comes on the heels of four new test panels introduced last month for congenital adrenal hyperplasia (“CAH”), an endocrine disorder mostly found in newborns, children and women. These tests mark a definite improvement over traditional methods, leading to better treatment from faster detection.

Quest Diagnostics has been working continuously on expanding its portfolio. Other significant tests that were launched over the recent past include the c. difficile test and a test to detect rejection in kidney transplant patients earlier than conventional tests. This renal transplant monitoring test enables physicians to adjust therapy based on an individual's genetic makeup. The test not only improves patient care but also reduces the high cost associated with failed kidney transplants.

Quest Diagnostics is currently focusing on latent areas such as drugs-of-abuse testing, gene-based, esoteric testing for cancer, cardiovascular disease, infectious disease and neurological disorders. The company has been witnessing brisk demand for these tests (20% year over year growth during the most recent quarter) compared to routine tests. In order to bolster this specialized niche,

Quest Diagnostics has engaged in accretive acquisitions such as Athena and Celera. This apart, we are encouraged by Quest’s efforts to improve its sales effectiveness and strengthen its relationship with health plans and payors.

However, the company continues to witness challenges with respect to physician office visits, which continues to remain soft. Moreover, the competitive landscape is tough with the presence of Laboratory Corporation of America Holdings (LH - Analyst Report). LabCorp is also targeting the esoteric testing space and has acquired Genzyme Genetics to meet its objective.

We currently have a Neutral recommendation on Quest Diagnostics over the long term. The stock retains a short-term Zacks #3 Rank (Hold).

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