PMLS 2018

Quest Diagnostics to Form Precision Oncology Center of Excellence Through Acquisition of Two Texas Laboratory Businesses to Serve Oncologists Nationwide

Quest Diagnostics (NYSE: DGX)  announced that it has signed definitive agreements to acquire two laboratory businesses in Lewisville, Texas, with the aim to establish a center of excellence providing diagnostic services to aid the detection and management of cancer for oncologists and patients nationwide.

The two businesses, Med Fusion and Clear Point, together provide a full range of diagnostic services to physicians and provider networks. Baylor Scott & White Health (BSWH), the largest not-for-profit health care system in the state of Texas; The US Oncology Network (The Network), supported by McKesson Specialty Health, a division of McKesson Corporation; Texas Oncology; and Pathologists Bio-Medical Laboratories (PBM) are co-owners of one or both businesses.

Upon the completion of the transaction, Quest will become a preferred provider of advanced oncology diagnostics for The Network, including Texas Oncology. The Network is the largest of its kind, consisting of more than 400 locations across the United States and over 1,400 independent, community-based physicians. The advanced diagnostics Quest will provide include genomic and pathology testing, such as tumor sequencing, typically used by oncologists to select and monitor treatment and predict disease progression. Inherited genetic testing, such as for BRCA breast cancer screening, typically offered by non-oncologists, will not be part of a preferred provider relationship.

In addition, Quest will be a preferred provider of a full range of inpatient and outpatient diagnostic services for 12 hospitals of Baylor Scott & White Health in North Texas. Quest will provide these services from the center of excellence site in Lewisville upon close of the transaction. Quest and PBM will also have a preferred provider relationship for several services assuming the completion of the transaction.

“Precision medicine is changing the way we treat cancer and giving new hope to people living with the disease, but too often advanced diagnostics that facilitate the best possible care are out of reach of community oncologists and their patients,” said Steve Rusckowski, chairman, president and CEO, Quest Diagnostics. “By partnering with McKesson Specialty Health and The Network, we will make Quest’s state-of-the-art genomic analysis readily available to community oncologists everywhere. We also look forward to working with BSWH, a leading health system, to deliver broad access to high quality, high value services. This transaction will not only accelerate Quest’s growth in cancer diagnostics, but also holds the promise of improving care for patients with cancer in Texas and the entire United States.”

The transaction is expected to be completed in the third quarter of calendar year 2017, subject to the satisfaction of customary closing conditions, including obtaining required regulatory approvals. Additional terms were not disclosed.

Precision medicine diagnostics are intended to help guide personalized treatment, based on genomic, proteomic or other characteristics unique to the patient. Following the closing of the transaction, Quest Diagnostics and McKesson Specialty Health, with The Network and Texas Oncology, will collaborate on the development of standardized, evidence-based services for guiding treatment decisions within the electronic patient record and care plan workflow, building off a model spearheaded by Med Fusion. Quest expects to be able to offer versions of these services, once developed, to other providers in the United States with the goal to advance better cancer outcomes.

The center will complement Quest’s existing centers of excellence in San Juan Capistrano and Valencia, California; Chantilly, Virginia; and Marlborough, Massachusetts. These laboratories generally specialize in advanced diagnostic services for marquee health systems and specialty physicians. In Texas, Quest Diagnostics also operates full-service laboratories in Irving and Houston.

Nearly 1.7 million people are expected to be diagnosed with cancer in the United States in 2017, according to the American Cancer Society.

Ziegler, a specialty investment bank, acted as the financial advisor to Med Fusion on the transaction.

“The US Oncology Network will benefit from our collaboration with Quest Diagnostics, a leader in innovative oncology and genomic testing,” said Kirk Kaminsky, president, The US Oncology Network and Practice Management, McKesson Specialty Health. “We’re excited about the opportunity for enhanced access to advanced diagnostic tools for the community-based oncology practices that we support.”

“Quest is well positioned to expand med fusion’s vision, helping deliver precision medicine in an unrelenting environment of value improvement for patients, physicians and other stakeholders,” said John McWhorter, chief operating officer at Baylor Scott & White Health.

“By joining forces with Quest Diagnostics, Med Fusion will speed the development and adoption of its novel framework for precision medicine diagnostics developed in recent years by our team,” said Jon L. Hart, chief executive officer, Med Fusion. “This relationship has tremendous potential to generate value and better outcomes and care for cancer patients.”