Dx Deals: Quest and Labcorp Move beyond Laboratory Testing

Quest Diagnostics and Labcorp have always been involved in deal-making, either acquiring smaller competitors or the outreach businesses of hospitals and healthcare systems. But the nation’s two biggest laboratory companies have also been willing in recent months to engage in more joint ventures to develop new products and initiatives that go beyond their base businesses.

Both companies have made moves in the past year to boost their diversification efforts. Labcorp spun off Fortrea last July to engage in drug development and clinical trial management.¹ Quest Diagnostics acquired Haystack Oncology, an early-stage company focused on minimal residual disease (MRD) testing to detect cancer recurrences.² Quest CEO James Davis told analysts during the company’s February 1 earnings call that Haystack’s MRD tests would be made available to physicians later this year from its specialized oncology laboratory in Lewisville, Texas.³

“I think Haystack was a particularly interesting acquisition because their MRD technology has great utilization in drug development, liquid biopsies, and other applications,” said Larry Worden, principal of IVD Logix, a Dallas-based consulting firm.

Both Quest and Labcorp are either using those spinoffs to engage in new deals, or entering into high-visibility joint ventures on their own because the growth in traditional testing is pretty flat, Worden added. “Where they’re getting better growth rates is in the new genomics areas,” he said.

In Quest’s case, Haystack has entered into a research collaboration with TriSalus Life Sciences to make informed diagnoses for patients suspected of having specific forms of liver or pancreatic cancer. The goal is to better develop customized immunotherapies for those with liver and pancreatic tumors.⁴

“Conventional imaging response assessment methods may be misleading in certain situations, and accurate ctDNA assays offer the potential to identify meaningful biologic activity in difficult to treat cancers,” said Steven Katz, MD, TriSalus’ chief medical officer, in a press release.⁴

According to Davis, Quest also entered into clinical trial collaborations with Rutgers Cancer Institute and Alliance Foundation Trials that will leverage Haystack’s MRD testing platform.³

However, Quest did not stop there. It entered into a deal with Ultima Genomics to use its next generation sequencing technology in oncology and other applications. The collaboration would benefit Haystack, as Quest said it would use the Ultima platform to create future laboratory-developed tests involving Haystack’s own cancer detection platform for “future clinical and biopharmaceutical MRD applications.”⁵

Labcorp is also not shying away from its own collaborations to move beyond conventional laboratory testing.

In fact, Labcorp’s biopharma efforts are growing more swiftly than other parts of its business. CFO Glenn Eisenberg noted during the company’s February 15 earnings call with analysts that its biopharma revenue is expected to grow 5.5 percent to 7.5 percent compared to 2023. By comparison, diagnostics revenue is projected to grow 3.2 percent to 4.8 percent. Overall enterprise revenue is projected to grow 4.7 percent to 6.5 percent.⁶

In January, Labcorp entered into a strategic collaboration with Hawthorne Effect, a California-based clinical trials company. The two companies will craft new approaches for supporting decentralized clinical trials for drug, biotech, and medical device firms looking for assistance in creating clinical trials for their products and recruiting participants.⁷

“The combined expertise of both Labcorp and Hawthorne Effect will allow clinical trials to operate more efficiently with greater patient access and higher levels of compliance, resulting in timeline acceleration for customers,” said Hawthorne founder and board member Jodi Akin in a press release.⁷

In another collaboration announced last spring, Labcorp entered into an agreement with Ohio-based Forge Biologics to develop new gene therapies and support platforms for such treatments.

“Through this strategic partnership with Forge, we can make significant progress to help patients access novel, potentially life-saving drugs,” said Maryland Franklin, Labcorp’s enterprise head of cell and gene therapy, in a press release.⁸

Takeaway: Both Quest and Labcorp are moving forward with deals and collaborations intended to diversify their enterprises beyond traditional laboratory testing.

References:

1. 1. https://ir.labcorp.com/news-releases/news-release-details/labcorp-completes-spin-fortrea

1. 1. https://www.prnewswire.com/news-releases/quest-diagnostics-to-acquire-haystack-oncology-adding-sensitive-liquid-biopsy-technology-for-improving-personalized-cancer-care-to-oncology-portfolio-301808987.html

1. 1. https://finance.yahoo.com/news/q4-2023-quest-diagnostics-inc-035613138.html

1. 1. https://newsroom.questdiagnostics.com/2024-01-22-Haystack-Oncology,-developer-of-Haystack-MRD-TM-,-and-TriSalus-Life-Sciences-collaborate-in-connection-with-the-clinical-development-of-TriSalus-TLR9-agonist-in-hepatocellular-carcinoma,-intrahepatic-cholangiocarcinoma,-and-pancreatic-adenocarc

1. 1. https://newsroom.questdiagnostics.com/2024-01-09-Quest-Diagnostics-and-Ultima-Collaborate-to-Scale-Ultimas-Technology-in-Fast-Growing-Minimal-Residual-Disease-and-Whole-Genome-Sequencing

1. 1. https://ir.labcorp.com/events/event-details/q4-2023-laboratory-corporation-america-holdings-earnings-conference-call

1. 1. https://www.labcorp.com/labcorp-and-hawthorne-effect-collaborate-bring-clinical-trials-directly-patients-and-investigators

1. https://www.labcorp.com/forge-biologics-and-labcorp-announce-strategic-aav-gene-therapy-development-and-manufacturing

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Here’s a summary of key strategic diagnostic deals announced in the period from mid-January 2024 to mid-February 2024:

Mergers and Acquisitions

Strategic Alliances

Government Contracts

None announced during the period.