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Hologic Fiscal Q1 Revenues Fall 27 Percent as COVID-19 Assay Sales Continue Slide

NEW YORK – Hologic reported after the close of the market Wednesday that the firm's revenues for the fiscal first quarter of 2023 declined 27 percent year over year with the continued fall of COVID-19 assay sales as well as difficulties securing semiconductor chips for its breast health business.

The Marlborough, Massachusetts-based company said that, for the three months ended Dec. 31, it had $1.07 billion in revenues compared to $1.47 billion in fiscal Q1 2022. It still beat the Wall Street consensus prediction of $1.00 billion and the firm's Q1 revenue guidance of $940 million to $980 million announced Oct. 31, 2022.

Hologic CEO Steve MacMillan said on a conference call that the firm saw strong performance from its non-COVID-19 diagnostics business, including 25 percent growth in its other molecular diagnostics business. Excluding COVID-19 assays, the firm's organic diagnostics revenues increased 12 percent year over year to $387.7 million from $345.5 million.

"Now, as the COVID cloud begins to clear, it is increasingly more evident that we are geared for success, geared for growth, and geared to sustain performance over the long term," he said.

Hologic's COVID-19 assay revenue fell to $126.9 million for the quarter, down from $523 million in Q1 2022. The firm's cytology and perinatal diagnostic businesses brought in about $126.8 million in revenue, down 3 percent from $130.7 million in Q1 2022.

MacMillan said the company is gaining ground in molecular diagnostics markets through the expanded use of its Panther instruments, which the company previously reported grew about 75 percent during the pandemic to 3,250 instruments installed worldwide. The system now has 19 available assays for women's health and infectious diseases. He said customers with installed Panther instruments are adding newer assays for vaginitis and Mycoplasma genitalium while the company is further encouraging test adoption through its women's health clinical channel and using that installed Panther base to expand into virology and respiratory testing.

MacMillan had indicated during the 41st Annual JP Morgan Healthcare Conference in January that Hologic was also developing a combination test for SARS-CoV-2, influenza A and B, and respiratory syncytial virus and tests for group B Streptococcus, Epstein-Barr and BK viruses, Clostridioides difficile, and Mpox.

CFO Karleen Oberton said during the call that revenues from the company's sexually transmitted infection menu exceeded pre-pandemic levels during the first quarter and revenue from vaginitis panels more than doubled year over year.

"Further, our non-COVID respiratory portfolio delivered revenue ahead of expectations in the period as we saw uptake in testing for flu and RSV given heightened prevalence and public awareness of these pathogens," Oberton said.

During the quarter, Hologic said it had secured a $19 million contract with the US Department of Health and Human Services' Biomedical Advanced Research and Development Authority for research, development, and approval of a COVID-19 and combination respiratory infection tests. Under the contract, the firm plans to align its Panther Fusion SARS-CoV-2/Flu A/B/RSV assay and Aptima SARS-CoV-2 assay with US Food and Drug Administration in vitro diagnostic standards.

In its other businesses, Hologic's Q1 breast health revenues were $334.2 million, down 7 percent from $359.3 million in the year-ago quarter; its gynecologic surgical revenues were $154.1 million, up 15 percent from $134.3 million the prior year; and its skeletal health revenues were $26.6 million, down 2 percent from $27.1 million in Q1 2022. However, company officials said the breast health business was recovering in part because of improving semiconductor chip supplies.

About 77 percent of Hologic's revenues come from the US market, although MacMillan and Oberton said during the JP Morgan conference that the firm had been expanding its global reach. The firm has campaigned for expanded global access to women's health testing and viral load monitoring through its Global Access Initiative, which has driven growth for Hologic, especially in Africa.

MacMillan also sees opportunities through Hologic's Mobidiag subsidiary, which will eventually help Hologic enter the large, emerging syndromic panel market with its Novodiag instrument. That fully automated molecular diagnostic system launched in Europe in October 2021, but MacMillan said it's still several years away from a US market debut.

Hologic reported net income of $187.4 million for the quarter, or $.75 per share, compared to $499.2 million, or $1.95 per share, in the prior-year quarter. It reported an adjusted EPS of $1.07, beating the analysts' consensus estimate for adjusted EPS of $.91.

For its fiscal Q2, the firm is guiding to revenues of between $930 million and $980 million. EPS is expected to be between $.60 and $.70, while non-GAAP EPS is anticipated to be between $.80 and $.90.

Hologic officials predict that when COVID-19 revenues are excluded, the company will have low-double-digit organic revenue growth, in constant currency, in each division for the second quarter and full fiscal year 2023.

The company adjusted its fiscal 2023 revenue guidance to between $3.85 billion and $4.00 billion, up from a prior guidance of between $3.70 billion and $3.90 billion, and adjusted its earnings per share guidance to between $2.69 and $2.99 per share from an earlier range of $2.51 to $2.81. Non-GAAP EPS was changed to a new range of $3.55 to $3.85 from earlier guidance of between $3.30 and $3.60.

Hologic ended Q1 with $2.44 billion in cash and cash equivalents. Oberton said, "Although it may appear to the outside eye that we are letting our cash balance build, rest assured, our M&A teams in each division are incredibly active."

The firm is watching for potential purchases that align with its existing divisions and would take advantage of its strengths and commercial channels, she said. MacMillan declined to disclose the potential scale of those targets but said Hologic has strong base businesses, a clear mission to be a champion of women's health, and the luxury to be patient in developing those businesses.

In premarket trading Thursday on the Nasdaq, Hologic's shares were up about 1 percent to $83.90 per share.