Hologic Inc., of Marlborough, Mass., is introducing another tool to help combat COVID-19, revealing the impending launch of a new Aptima molecular assay to detect the SARS-CoV-2 virus that will run on its Panther system. The company expects to be able to provide its lab customers with about 3 million Aptima tests next week. In addition, it anticipates producing about 1 million tests a week starting late next month.
For his part, William Blair analyst Brian Weinstein labeled the announcement as “monumental.” He added that the ability to produce this number of tests by the end of May was in line with what his organization had predicted. “To put this in some sort of perspective, Panther will basically double the testing capacity in the entire United States!”
Weinstein wasn’t the only analyst excited by this news and the company’s second-quarter results, which were reported April 29. “There is a lot to like about HOLX's results even in the midst of suspended guidance and near-term revenue risk,” wrote BTIG’s Ryan Zimmerman. He highlighted the rapid development of the assays, adding that management predicted a more than $150 million opportunity. That estimate could end up being a conservative estimate if that virus lingers, he added.
The Aptima announcement came about a month and a half after the company said the U.S. FDA had granted emergency use authorization (EUA) for the Panther Fusion SARS-CoV-2 assay, a molecular diagnostic test. As a result, the test was available on Hologic’s fully automated Panther Fusion system.
Steve MacMillan, Hologic's CEO, started the earnings call by noting that the company had been doing “exceptionally well until late March,” when COVID-19 started having a big impact. Recognizing the threat of the pandemic, the company pivoted to boost investments in its diagnostics business while scaling back in other areas.
As a result of this targeted work, Hologic anticipates that it will have the ability to distribute a research-use only version of its Aptima SARS-CoV-2 test to hospitals, public health and reference laboratories that are certified under the Clinical Laboratory Improvement Amendments to perform high complexity tests next week. These facilities can use the assay for clinical testing on Hologic’s Panther system after completing performance verification testing.
The company also expects to apply next week for an EUA for the assay, while next month should see it register for a CE mark.
Hologic has confidence in its ability to deliver. “[B]ecause our supply chain has been scaled to produce massive numbers of Aptima tests for other infectious diseases, we can now redirect these manufacturing resources to produce large quantities of coronavirus assays,” MacMillan explained.
“Customers using our Aptima assays do not need to perform additional sample preparation steps or buy other commercial reagents for nucleic acid extraction,” MacMillan continued. “This should help reduce competition for raw materials and further increase global testing capacity.”
Hologic also is doing its part to relieve shortages of common sample collection swabs and transport media. To that end, it has validated its Aptima multitest swab specimen collection kit, which typically is used for sexually transmitted disease testing for use with both the Aptima and Panther Fusion SARS-CoV-2 assays.
Further, there are more than 1,800 Panthers in use worldwide vs. about 200 of the newer Panther Fusion platform. The company noted that the Biomedical Advanced Research and Development Authority has backed its COVID-19 work.
For his part, Tycho Peterson, of JP Morgan Chase, asked how COVID testing could drive incremental Panther placements. “We have, as you can imagine, been getting a significant increase in interest in Panthers around the world,” MacMillan replied. “And I think everybody is realizing just what an incredible platform it is.” He went on to note that the company has placed roughly 200 to 250 Panthers a year.
CFO Karleen Oberton provided an overview of quarterly results, noting revenue of $756.1 million, a drop of 7.1% as a result of the divestiture of Cynosure. Hologic reported last November that it was selling off the aesthetics unit to private equity firm Clayton, Dubilier & Rice for a total purchase price of $205 million in cash, subject to certain closing adjustments. The company anticipated net cash proceeds of about $138 million.
At the time of the announcement, MacMillan said the divestiture would permit a greater focus on his company’s strength: detecting diseases in women early. “Since we acquired Cynosure in 2017, it has significantly underperformed our expectations,” he noted. “Moving forward, our business development strategy remains focused on the smaller, tuck-in deals that have been performing well for us and strengthening our core franchises.”
The company reported that it had completed the divestiture in late December.
Oberton then turned to each division, noting that diagnostics grew 8.3%. “Cytology had a good quarter internationally, driven by Germany's decision to adopt co-testing for cervical cancer screening,” she noted. Molecular proved especially strong, with good growth in Africa due to the uptake of viral load assays.
Breast health remained solid, but the pandemic did have an impact, preventing the installation of new products. Sales in breast health came in at $307.8 million, a decline of 3.7%. Excluding the $5.8 million of sales from Supersonic Imagine, global sales decreased 5.5%. Despite the delay of elective surgeries, surgical grew 3.6% for the full quarter as a result of good performance in January and February.
Looking at the business overall, Zimmerman expressed optimism about the company. "With management focus on the core business after the aesthetics divestiture, we believe investors will be able to home in on the combination of reasonable valuation, a stable business, and the opportunity for upside if [management] can accelerate core growth. Over the long term, we view international growth, R&D/new product launches, further margin expansion and consistent capital allocation as reasons to own HOLX.”