Dive Brief:
- Quest Diagnostics said Wednesday it will buy PathAI’s diagnostic laboratory as part of a deal designed to “dramatically ramp” its capabilities in artificial intelligence and digital pathology.
- The lab in Memphis, Tennessee, will become Quest’s AI and digital R&D and solutions center and support the company’s specialty pathology businesses. PathAI is retaining its biopharma lab.
- Quest also secured a license to use PathAI’s digital pathology image management system and to be a preferred provider for the company’s biopharma clinical laboratory services. Neither party disclosed the terms of the deal.
Dive Insight:
PathAI has built a pathology platform with artificial intelligence capabilities. As well as providing a digital pathology image management system to third parties, the company offers clinical and biopharma lab services from its own facilities.
Labcorp, Quest’s main rival, invested in PathAI in 2019 and expanded a collaboration in 2021 to use the AI specialist’s technology in oncology clinical trials.
PathAI began offering clinical diagnostics services after buying a lab from Poplar Healthcare in 2021. The deal gave PathAI a 350-person diagnostics division based in Memphis. Less than three years later, PathAI is selling the diagnostics division to Quest.
As part of Quest, the Memphis site will support Ameripath and Dermpath Diagnostics, specialty pathology businesses that serve some of the same therapeutic areas.
Quest will use PathAI’s digital pathology image management system to support its pathology labs and customer sites in the U.S.
Kristie Dolan, Quest’s senior vice president of oncology, said the deal will improve the company’s ability to support hospital labs at a time when many sites are facing a shortage of the histotechs who prepare tissues for microscopic examination.
“With digital pathology, these labs can refer slide preparation to us while continuing to perform professional interpretation in-house,” Dolan said. “Digital pathology will also allow us to extend the interpretative expertise of our roughly 400 pathologists to hospitals and other labs who lack these skilled professionals on-staff, regardless of location.”
The deal is expected to close in the second quarter of 2024.
Quest disclosed the deal around one week after publishing first-quarter results. The company slightly raised its revenue expectations for the full year, after a quarter in which acquisitions helped revenues rise 1.5% year over year to $2.37 billion.
CEO Jim Davis said on an earnings call that the company had a “robust” funnel of M&A opportunities and highlighted investments in AI that are intended to improve productivity.