Quest unloads colon cancer Dx business as revamp marches on

Quest Diagnostics CEO Steve Rusckowski

Quest Diagnostics' ($DGX) ongoing revamp continued this week with news that an Australian company has snatched up its colorectal cancer screening test business.

Neither side is commenting on the financial details, but Clinical Genomics' purchase of Quest's Enterix arm gives it a manufacturing facility in New Jersey plus a diagnostics laboratory in Australia already approved by regulators there. As well, Clinical Genomics gets Quest's line of InSure FIT colorectal cancer screening tests, which it will sell along with its own related diagnostics offerings. Clinical Genomics said it will first target Australia with its long-gestating colorectal cancer blood test, with a planned rollout in early 2014. 

As for Quest, the company expects to record a loss on the sale of its Enterix business in the 2013 third quarter of about $25 million after tax, or 17 cents per share.

The Enterix sale is just the latest change since Quest announced its massive "Invigorate" reorganization plan last year, which called for up to 600 job cuts, a reorganization of its business units and a change in managerial structure in the face of sluggish revenue. The goal: to save $500 million in 2013.

So far this year, Quest has raised substantial amounts of cash as it has continued to reorganize. The company sold its share of Johnson & Johnson's ($JNJ) heavily hyped cancer drug ibrutinib to Royalty Pharma for $485 million. Quest also pulled in $300 million from the sale of its HemoCue diagnostics business to Danaher ($DHR). And Access Genetics bought its salivary testing subsidiary OralDNA for an undisclosed amount. In all, Quest said it generated about $800 million in gross proceeds from the collective sales, which has given it more wiggle room to drive shareholder value.

As of Aug. 20, Quest said it had $1.3 billion built up in a war chest devoted to its share repurchase program. So far, Quest repurchased $467 million of its shares in the first half of 2013 and inked a share repurchase agreement in September to buy back $350 million more. But Quest has also pursued acquisitions as it has sold off other parts of itself, including Dignity Health's lab outreach business and Concentra's toxicology arm.

Quest Diagnostics CEO Steve Rusckowski envisions a revamped company that is leaner and can better handle both declining Medicare reimbursements and a hostile market in the U.S. for tests. He's called 2013 a building year for the diagnostics giant. Now that 2013 is nearing an end, analysts will be looking closely at what he's helped construct.

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