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Quest Diagnostics (DGX) Grows in Digital Pathology With New Deal

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Quest Diagnostics (DGX - Free Report) recently announced a strategic collaboration with PathAI, a global leader in artificial intelligence-powered pathology technology, aimed at revolutionizing cancer and disease diagnosis. This partnership marks a significant step toward accelerated adoption of AI and digital pathology in Quest Diagnostics’ diagnostic services, promising enhanced quality, speed and efficiency in healthcare.

Transformative Acquisition of PathAI Diagnostics Assets

Under this definitive agreement, Quest Diagnostics will acquire select assets of PathAI Diagnostics (a business of PathAI that provides anatomic and digital pathology laboratory services), including its advanced digitized laboratory in Memphis, TN. This facility will serve as Quest Diagnostics’ AI and digital R&D center, supporting its specialized pathology businesses, AmeriPath and Dermpath Diagnostics.

The acquisition is set to be finalized in the second quarter of 2024. Financial terms of the deal have not been disclosed.

Advancing Digital Pathology Capabilities

Traditionally, a biopsied tissue is mounted on a glass slide for review under a microscope for abnormalities. However, when there is a need for multiple diagnoses, such as for a second opinion, the tissue biopsy must be physically couriered to another pathologist. Quest Diagnostics noted that digital pathology plays a crucial role in multiple testing of a biopsied tissue. Digital pathology enables the creation of digital images of glass slides that can be securely shared electronically with other pathologists.

The latest collaboration includes licensing PathAI's AISight digital pathology image management system to bolster Quest Diagnostics' pathology laboratories nationwide. This technology enables secure electronic sharing of digital slide images, streamlining collaboration among pathologists and reducing transportation needs. Additionally, Quest Diagnostics plans to leverage its deep pathology expertise to support PathAI's algorithm development for improved diagnostic accuracy.

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DGX's Cancer Care With AI

Quest Diagnostics’ commitment to maximizing patient impact is evident in its focus on AI-driven innovations for oncology care. By combining digital pathology with AI algorithms, pathologists can pinpoint areas of concern more effectively, leading to more accurate diagnoses. This approach will not only improve patient outcomes but also address workforce shortages and geographical disparities in pathology expertise.

So far, Quest Diagnostics has implemented AI, digital and automation technologies across several laboratory and business functions, including microbiology and cytogenetics to specimen processing and customer service. The company has piloted digital and AI pathology oncology solutions at Quest Diagnostics and AmeriPath sites in Clifton, NJ, Tampa, FL and Denver, CO.

The acquisition of PathAI Diagnostics aligns with Quest Diagnostics' long-term vision to extend digital pathology solutions to healthcare providers worldwide through its Global Diagnostic Network. This expansion will not only benefit provider customers but also advance the company’s presence in lucrative areas such as dermatopathology and gastrointestinal diseases.

Prospects of AI in Cancer Diagnosis

Per a Grand View Research report, AI in the cancer diagnostics market is poised for robust growth, with a projected CAGR of 26.3% from 2023 to 2030. Factors such as increased healthcare IT spending, a shortage of medical professionals and rising demand for early disease detection are driving this expansion. Government initiatives, startup collaborations and venture capital investments further fuel this sector. AI tools enhance imaging accuracy and speed, aiding oncology professionals in better cancer management. The pandemic has accelerated AI adoption, particularly in rapid diagnostics and personalized healthcare startups.

Share Price Performance

Year to date, shares of DGX have declined 1.6% against the industry’s 5.1% growth.

Zacks Rank and Key Picks

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

Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. (ALGN - Free Report) , Ecolab (ECL - Free Report) and Boston Scientific Corporation (BSX - Free Report) .

Align Technology, carrying a Zacks Rank of 2 (Buy) at present, reported first-quarter 2024 adjusted earnings per share (EPS) of $2.14, which beat the Zacks Consensus Estimate by 8.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology has a long-term estimated growth rate of 6.9%.

Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 13.3%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 1.7%.

Ecolab has a long-term expected growth rate of 13.5%.

Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the Zacks Consensus Estimate by 4.9%. The company currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 12.5%.

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