Dive Brief:

• Hologic and Thermo Fisher Scientific reported earnings benefiting from strong demand for their respective SARS-CoV-2 assays. Hologic's fourth-quarter revenue of $1.32 billion beat the Street by $280 million, while Thermo Fisher's third-quarter revenue of $9.33 billion beat analyst estimates by $920 million.  
• The two lateral flow assay companies have ridden the recent wave of strong COVID-19 testing demand in the molecular diagnostics category, which has proven to be just as robust as the rapid, at-home antigen tests that have seen a comeback from Abbott and Quidel.     
• Thermo Fisher credited a surge in the delta variant for strong testing demand globally in the quarter, which resulted in $1.55 billion in revenue. However, CFO Stephen Williamson told investors last week that Thermo expects COVID-19 testing to produce $450 million in revenue expected in the fourth quarter. Hologic CFO Karleen Oberton said on Monday's earnings call that while the company expects a "meaningful" contribution from coronavirus-related revenue in its fiscal first quarter, the pandemic remains highly unpredictable.

Dive Insight:

Although COVID-19 testing revenue for both Hologic and Thermo Fisher declined in their respective quarters compared to the prior year, it still exceeded analyst expectations as the delta variant drove demand for molecular diagnostics. The turnaround is far cry from the cautious expectations that executives from both companies provided in early 2021 for their coronavirus test businesses.      

Thermo Fisher CEO Marc Casper said on last week's earnings call that in August the company started seeing the delta variant creating major demand for COVID-19 tests. Hologic CEO Stephen MacMillan told investors on Monday that its Street revenue beat in the September quarter was driven by coronavirus-related assay revenue of $443 million globally, versus guidance of $150 million to $170 million, with two-thirds of the demand coming from the United States.

Going forward, MacMillan said that if the pandemic "drags on" Hologic will be able to "respond aggressively and generate financial upside." However, Hologic's CFO Oberton warned that the pandemic "remains highly unpredictable" and that the company is "not immune from the supply chain challenges" that have been hitting the medtech industry.

"In the last 12 months, we have seen testing demand increase rapidly then decline rapidly, then increase rapidly again," Oberton told investors. "Demand remains unpredictable and a lot can change between now and the end of our fiscal 2022. So we continue to forecast conservatively."

Hologic expects COVID-19 assay sales to be at least $200 million in the first quarter of 2022 and at least $300 million for the full year. Coronavirus-related testing at this point is "heavily weighted to the first half of the year," Oberton said, adding that the company "assumes a pretty low COVID contribution as we exit the year."

William Blair analysts in a Tuesday note wrote that Hologic's COVID-19 revenues are "completely incremental to long-term growth expectations and could provide meaningful upside in the short term should testing remain elevated." Jefferies analysts similarly predict that Hologic coronavirus assay revenue of $300 million in 2022 is "overly conservative" with significant potential to the upside.     

Looking forward to 2022, Thermo Fisher expects to see $750 million of COVID-19 testing revenue, a figure that Casper said the company would narrow at the start of the new year.