Quintiles, Quest Diagnostics launch JV merging lab services

Upon closing of the transaction, Quintiles will own 60% and Quest Diagnostics will own 40% of the new JV, which would have generated approximately $575m (€535m euros) in revenues in 2014. The transaction is expected to close in Q3 of this year. The central labs market is valued at nearly $2bn and is growing about 5% annually, Quintiles said.

Tom Pike, CEO of Quintiles, said in a conference call on Tuesday: “What we’re going to do is take our central labs services, genomics services and bioanalytical services and put them into the JV and that’s along with Quest’s assets in the clinical trial space​.”

The combined scale of the new entity will benefit from the operational expertise and purchasing power, as well as the logistics and supply chain network of Quest, which serves half of the physicians in US hospitals, Steve Rusckowski, CEO, Quest Diagnostics, said Tuesday.

Pike also noted that customers will gain an advanced testing menu, including services designed to support trials and to enable end-to-end companion diagnostic development with regulatory, reimbursement and commercial strategies, particularly for biopharma customers’ precision medicine efforts. 

Central lab tests have become more complex over time, Pike added, noting that out of the 41 novel drugs approved last year by the US FDA, nine have biomarkers associated with them. And more than half of all drugs in biopharma companies’ pipelines have a biomarker associated with them, he added.

Analysts were upbeat on the prospect of the partnership, as well. Citi Research's Garen Sarafian said in a note to investors: "The deal is a positive for Quintiles where we expect the added scale from Quest positions the companies more appropriately to compete with LabCorp for central labs business, particularly after the Covance acquisition​."

Beyond the immediate opportunity in lab services support for clinical trials, Quintiles and Quest expect to benefit from opportunities to collaborate in other areas, as well, including new ways to enhance patient recruiting and retention for clinical trials; speed the validation, development and commercialization of companion diagnostics; enhance support of real-world late phase studies; and develop new population-health analytics and tools.

Pike added that over time, there will be synergies that could consolidate some mutual space as the integration of the companies moves forward.

The joint venture will be led by Quintiles’ Costa Panagos, SVP, and John Haydon, VP of JVs for Quest.