Quest Diagnostics 2006 Annual Report Download - page 25

near the patient will be available for electronic medical records and will display in similar format to tests
performed in our centralized laboratories. This will differentiate our near patient testing products from
other products that are not integrated into our customers’ electronic records. Since July 2006, we have
made several acquisitions that enable us to serve this near patient testing market, including HemoCue,
Focus Diagnostics and Enterix. See “Recent Acquisitions”. We believe that these acquisitions and our
overall near patient strategy will strengthen our relationship with our customers by enabling us to offer
more solutions that improve their effectiveness and the care of their patients by enabling faster diagnosis
and treatment. We will consider additional acquisitions or exclusive licenses of selective products to
complement the products and services we provide.
•Acquisitions and International Expansion: The clinical laboratory industry in the United States remains
fragmented. We expect to continue to selectively evaluate potential acquisitions of domestic clinical
laboratories that can be integrated into our existing laboratories, thereby increasing access for patients and
enabling us to reduce costs and improve efficiencies. While over the long term we believe positive
industry factors in the U.S. diagnostic testing industry and the differentiated services we offer to our
customers will enable us to grow organically, we see a number of opportunities to grow beyond our
current principal business of operating diagnostic testing laboratories in the United States. We are actively
exploring opportunities, including acquisitions, in the area of near patient testing to augment our laboratory
testing business. Given that physicians and hospitals are primary sources for both near patient testing and
laboratory performed tests, we believe providing both services will strengthen our relationships with
customers and accelerate our growth.
Additionally, we see opportunities to bring our experience and expertise in diagnostic testing to
international markets, particularly developing countries where the testing markets are highly fragmented
and less mature. In addition, expansion into near patient testing and international markets will diversify
our revenue base, and add businesses which are growing faster and are more profitable than our principal
business of U.S. based clinical laboratory testing.
People enable us to realize our mission. In this regard, an important challenge is to prepare our workforce
for the future. Our people strategy is built on concepts of stringent employee selection, effective engagement and
ongoing development resulting in a staff of highly qualified and motivated employees who are committed to our
goals. In addition, we are committed to improving the health of our employees and reducing healthcare costs for
them and our Company. Through our HealthyQuest initiative, we provide employees with the opportunity to lose
weight, quit smoking and generally pursue healthier lifestyles. Quest Diagnostics is recognized as a “best place to
work” in numerous locales as a consequence of our workplace initiatives that reflect our belief that people are
our most important asset. We take diversity seriously, believing that our organization should reasonably reflect
the communities that we serve. We strive to make all of our employees effective ambassadors of our Company.
Recent Acquisitions
On January 31, 2007, we acquired POCT Holding AB (“HemoCue”), a company headquartered in
Angelholm, Sweden, that specializes in near patient testing, in an all-cash transaction valued at approximately
$420 million, including $123 million of assumed debt of HemoCue. HemoCue, which has annualized revenues of
approximately $90 million, is the leading global provider in near patient testing for hemoglobin, with a growing
share in the near patient markets for professional glucose and microalbumin testing. HemoCue’s handheld systems
are used in physician’s offices, blood banks, hospitals, diabetes clinics and public health clinics. In developing
countries these systems are used as the primary means to screen for anemia. The measurement of hemoglobin is
important for patients being treated by transfusion, or undergoing dialysis or chemotherapy, where instant test
results can lead to immediate treatment decisions. Approximately 50% of HemoCue’s products are sold outside
the United States. HemoCue has a strong product development pipeline, based on its pioneering use of its
patented microfluidic systems, and is currently developing new tests, including one to determine white blood cell
counts. This test will help physicians quickly determine the presence of an infection and, consequently, the need
for antibiotic treatment, potentially reducing the overuse of antibiotics, an ongoing public health concern. In
addition, we intend to make HemoCue’s near patient handheld systems compatible with our Care360 portal,
which enables doctors to store, access and share patient information. We financed the purchase price through a
$450 million one-year term loan.
In September 2006 we acquired Enterix, Inc. (“Enterix”), an Australia-based company, in an all-cash
transaction valued at approximately $44 million. Enterix manufactures the InSureTM fecal immunochemical test
for screening for colorectal cancer and also performs the InSureTM test for patients. Prior to the acquisition, we
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