Quintiles, Quest create JV to offer clinical trial lab services, companion diagnostics

Quest Diagnostics ($DGX) is the latest diagnostics player to further ingratiate itself into the drug development process. It's partnering with contract research organization Quintiles ($Q) to create a joint venture to provide a range of clinical trial services to biopharmas including laboratory testing and patient recruitment and retention as well as development and commercialization of companion diagnostics. It also expects to support postapproval studies, as well as population health analytics.

The new entity will be the second-largest central laboratory services provider, the partners said.

The joint venture will include all the clinical trial-related business from each company, which would have generated about $575 million in 2014 revenues. Its customers will also include all of the 20 largest biopharma companies.

"This joint venture builds upon the best of Quintiles' and Quest Diagnostics' strengths," Quintiles CEO Tom Pike said in a statement. "It will join together the scale, expertise and end-to-end capabilities of the broader Quintiles and Quest Diagnostics organizations with a laser-like focus on providing world-class laboratory services that will help improve customers' probability of success."

He noted on a conference call about the deal that of the 41 novel drugs approved last year, 9 of them had associated biomarkers.

Quintiles will hold 60% of the JV, while Quest has the remaining 40%. Further financial terms remain undisclosed. The financial impact is slightly dilutive to Quintiles' 2015 earnings but is expected to become accretive in 2016. The newly formed JV will provide further financial details after the deal closes, which is expected in the third quarter.

The integral participation of diagnostics companies in the drug development process has been highlighted of late with high-profile deals between diagnostics players and biopharma, such as some recent partnerships for consumer-facing genomic information player 23andMe. Further developing its clinical offerings was already a priority for Quest. Last October, it brought in former president and CEO of Mayo Medical Laboratories and chair of lab medicine and pathology Franklin Cockerill to oversee Quest's clinical lab testing business.

"This transaction is about creating a better model for maximizing the scale and the expertise of two of the world's healthcare service leaders to improve drug development," said Quest Diagnostics CEO Stephen Rusckowski on a conference call about the JV.

He later elaborated, "This joint venture will enable us to focus on our core capabilities in the precision medicine space, including informatics and genomics to enhance drug development. In this way, we believe the joint venture model is the best path to generate growth and value from our clinical trials assets, to advance precision medicine, and simultaneously strengthen our focus on our core diagnostic information systems business."

- here is the release