Yahoo Finance Quest Diagnostics (DGX) Inks Deal to Acquire PathAI Diagnostics
Quest Diagnostics DGX recently announced a multi-faceted collaboration with PathAI to accelerate the adoption of digital and AI pathology innovations to improve quality, speed and efficiency in diagnosing cancer and other diseases. Under a definitive agreement, the company will acquire select assets of PathAI Diagnostics, the business of PathAI that provides anatomic and digital pathology laboratory services.
The latest development builds on Quest Diagnostics’ leadership in oncology and subspecialized pathology services, enabling it to significantly ramp up its AI and digital pathology capabilities. The transaction is expected to be completed in the second quarter of 2024.
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Upon closing the deal, Quest will transform PathAI Diagnostics’ digitized laboratory in Memphis, TN, into its AI and digital R&D and solutions center to support its specialty pathology businesses — AmeriPath and Dermpath Diagnostics. However, PathAI will continue to support its biopharmaceutical clients with end-to-end clinical trial services capabilities at its biopharma lab, which is separate and distinct from the diagnostic laboratory business.
Under a separate agreement, 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 company’s deep pathology leadership may be leveraged to contribute to PathAI’s algorithm product development. In addition, Quest Diagnostics will be a preferred provider for PathAI’s biopharmaceutical clinical laboratory services.
The latest partnership and acquisition enhance DGX’s market-leading pathology offering with digitization and AI, bolstering its capability to serve patients across the entire oncology care continuum. With the American Cancer Society’s forecast suggesting more than two million new cancer cases in the United States in 2024, Quest Diagnostics’ ability to scale and provide high-quality, efficient and accessible innovations become increasingly crucial. PathAI’s industry-leading expertise in AI pathology innovation and state-of-the-art digitized laboratory in Memphis are poised to provide a platform for future growth.
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Potential in Digital Pathology
According to the senior vice president of Oncology at DGX, digital pathology will enhance its ability to provide flexible solutions to hospital laboratories, particularly those facing a shortage of histotechs. Labs can refer slide preparation to the company while continuing to perform professional in-house interpretation. This approach extends the interpretative expertise of DGX’s approximately 400 pathologists to hospital labs without these skilled professionals on staff, regardless of location.
AI builds upon digital pathology by identifying patterns in a digitized image that suggest cancer or other diseases, helping a pathologist concentrate on areas of concern for potentially more accurate diagnosis. Quest Diagnostics has a long history of strategic AI and automation deployment, having implemented AI, digital and automation technologies across several laboratory and business functions. In recent years, DGX has piloted digital and AI pathology oncology solutions at Quest and AmeriPath sites in Clifton, NJ, Tampa and Denver.
Over time, Quest Diagnostics expects its partnership with PathAI will enable it to deploy flexible digital slide preparation, diagnostics and second opinion consultation services to health systems and other providers in the United States and overseas. The acquisition will also extend the company’s anatomic pathology services to comparatively more profitable areas, including dermatopathology, as well as gastrointestinal and urological diseases.
Industry Prospects
Per a research report, the global digital pathology market was valued at $1.03 billion in 2023 and is expected to witness a CAGR of 8% by 2030.
The growth of the digital pathology market is driven by several factors, including the increasing prevalence of cancer, a focus on workflow efficiency and the demand for faster diagnostic tools. Additionally, investments in healthcare, the adoption of telepathology and a focus on drug discovery and precision medicine are important catalysts.
Recent Developments in the Oncology Space
Last month, 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. The partnership aims to demonstrate that WGS can replace the standard diagnostic cascade for potentially faster diagnosis and lower costs.
Price Performance
In the past six months, shares of DGX have increased 2.7% compared with the industry’s rise of 19.3%.
Zacks Rank and Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Medpace MEDP, ResMed RMD and HCA Healthcare HCA. While Medpace sports a Zacks Rank #1 (Strong Buy), ResMed and HCA Healthcare each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace’s stockhas surged 93.6% in the past year. Earnings estimates for Medpace have risen from $10.53 to $11.23 in 2024 and from $12.73 to $13.03 in 2025 in the past 30 days.
MEDP’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 12.8%. In the last reported quarter, it posted an earnings surprise of 30.6%.
Estimates for ResMed’s 2024 earnings per share have increased from $7.43 to $7.57 in the past 30 days. Shares of the company have decreased 9.2% in the past year compared with the industry’s fall of 4.1%.
RMD’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 2.8%. In the last reported quarter, it delivered an average earnings surprise of 10.9%.
Estimates for HCA Healthcare’s 2024 earnings per share have moved to $20.82 from $20.49 in the past 30 days. Shares of the company have increased 11.2% in the past year compared with the industry’s 13.9% rise.
HCA’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 5.6%. In the last reported quarter, it delivered an average earnings surprise of 6.9%.
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