Dive Brief:
- Hologic on Wednesday said fiscal third-quarter revenue and earnings far exceeded its projections as it benefited from surging demand for its two COVID-19 tests that run on the Panther and Panther Fusion systems. Molecular diagnostics revenue of $460.3 million was up 169.3% in the quarter.
- CEO Steve MacMillan on a call said the U.S. is on track to perform about 23 million tests in July, more than double the level conducted in May. As for Hologic, MacMillan estimated the company provided one-fourth to one-third of the test results delivered in the United States during the quarter.
- "We essentially established a goal to achieve our 10-year expansion plan in about six months," MacMillan said. The company also partnered with Stratec to roughly double production of its Panther instruments.
Dive Insight:
With demand for COVID-19 tests outstripping supply, MacMillan said the company was overwhelmed with calls from customers "everywhere" as soon as it launched its first assay, a PCR test, in March. The company set a goal to produce 1 million COVID-19 tests a week starting in late May and double its molecular diagnostics manufacturing capacity by fall, to at least 40 million tests per quarter.
But Hologic found it was able to exceed that goal, instead boosting its total molecular diagnostics test production by about 50% in the quarter to 30 million tests. It shipped nearly 13 million COVID-19 tests to customers.
MacMillan boasted that "brute force" was among the factors pushing production.
The company validated use for COVID-19 testing of one of its specimen transfer tubes that is typically used with its ThinPrep Pap tests. It also validated a new sample collection and loading method that reduces the use of penetrable caps.
In early March, Hologic received close to $700,000 from the Biomedical Advanced Research and Development Authority to support development of its first COVID-19 test, compatible with the company's Panther Fusion system. Later that month, it received an FDA emergency use authorization for the test. In May, Hologic received an EUA for a second assay, called Aptima, for its more widely used Panther platform.
Production is running around the clock at the company's San Diego facility, where staff from areas such as finance were trained to work on the packaging lines as the company worked to hire over 150 new operations employees. A plant in the U.K. began producing COVID-19 tests at the end of June.
The momentum has continued, with the Department of Health and Human Services and Department of Defense this past weekend announcing a commitment of up to $7.6 million to support Hologic's increased production of sample collection and processing supplies.
MacMillan said the company expects to invest more than $50 million in capital to expand COVID-19-related production, with about $14 million of that spent through the third quarter. Hologic is installing new high-speed filling lines and custom machinery to produce more penetrable caps.
The actions have given Hologic the capacity to produce at least 1.5 million COVID-19 tests per week on average and should enable related sales to increase sequentially in the fourth quarter, the CEO said.
Hologic reported a third-quarter decline of 3.5% in revenue, to $822.9 million, from the year-ago period, which included the since-divested Cynosure business. Excluding acquisitions and divestitures, third-quarter revenue rose 7.7%. Net income climbed 46.9% to $137.9 million.
William Blair analysts said Hologic's success with coronavirus testing products will bleed into its other business lines.
"As we look beyond this crisis ... the business captured additional worldwide market share that should put its core molecular business on a growth curve we would not have thought possible a few months ago," the analysts wrote in a report to clients.
As for risks, an effective vaccine and supply chain disruptions are among those William Blair cited.
