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Quest Diagnostics (DGX) Divests Minority Share of Q2 Solutions

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Quest Diagnostics Incorporated DGX recently announced the divestment of its ownership interest in Q2 Solutions to IQVIA – a global provider of advanced analytics, technology solutions, and clinical research services to the life sciences industry. Notably, the deal is an all-cash transaction worth $760 million.

For investors’ note, Quest Diagnostics will remain the preferred laboratory provider for Q2 Solutions' clients, providing a range of complementary lab testing capabilities under a multi-year agreement.

Per the company, the divestment will enable Quest Diagnostics to focus on its core and profitable diagnostics information services arm.

More in the News

In 2015, Quest Diagnostics entered into a joint venture with IQVIA to establish Q2 Solutions, with IQVIA owning a 60% majority share and Quest Diagnostics owning a 40% minority share.

Notably, Q2 Solutions is a global clinical laboratory services organization that provides comprehensive testing, project management, supply chain, biorepository, biospecimen and consent tracking solutions for clinical trials.

Per Quest Diagnostics’ management, the divestment of Q2 Solutions will boost Quest Diagnostics’ vision to be focused on empowering better health with diagnostic information services. For investors’ note, in the last-reported fourth quarter of 2020, the company’s diagnostic information services business registered revenue growth of 58.4% year over year.

Notably, IQVIA will lead Q2 solutions on the next stage of its journey in central lab services as a global leader.

Recent Notable Developments

In March 2021, Quest Diagnostics entered into a definitive agreement to acquire the outreach laboratory services business of Mercy to expand access to the innovative, convenient and cost-effective laboratory services to deliver affordable patient care throughout the Midwest. Physicians and patients across the Arkansas, Kansas, Missouri and Oklahoma will take advantage from access to Quest Diagnostics’ highly innovative test menu, a large network of patient service centers, extensive health plan coverage and competitive pricing.

During the same month, Quest Diagnostics renewed its long-standing relationship with BlueCross BlueShield of Western New York and BlueShield of Northeastern New York to provide comprehensive clinical laboratory services to the members of BlueCross BlueShield of Western New York and BlueShield of Northeastern New York.

Industry Prospects

Per The Business Research Company, the global medical and diagnostic laboratory services market is expected to rise from $115.89 billion in 2020 to $157.45 billion in 2025, at a CAGR of 8.3%. Market growth is mainly being driven by the companies rearranging their operations and recovering from the COVID-19 impact, which had earlier led to restrictive containment measures.

Price Performance

Shares of the company have gained 64.5% in a year’s time compared with the industry’s growth of 36.2%.

Zacks Rank and Key Picks

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

A few better-ranked stocks from the broader medical space are DENTSPLY SIRONA, Inc. XRAY, Invacare Corporation IVC and McKesson Corporation MCK, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA has a projected long-term earnings growth rate of 20%.

Invacare has an estimated long-term earnings growth rate of 62%.

McKesson has a projected long-term earnings growth rate of 7%.

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