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Hologic Continues to Ramp MDx Manufacturing Capacity in COVID-19 Fight


NEW YORK – Hologic has already increased its output of molecular diagnostic tests significantly as a result of the COVID-19 pandemic and has plans to continue expanding its capacity throughout the upcoming cold and flu season.

During a conference call to discuss the company's third quarter financial results, CEO Steve MacMillan said the firm increased its total molecular diagnostic test production by 50 percent to 30 million tests during Q3. Almost 13 million of those were tests for SARS-CoV-2 running on Hologic's Panther and Panther Fusion instruments, which resulted in $324 million in revenue. 

But MacMillan noted the company wasn't done expanding just yet. Hologic has plans to double its pre-COVID molecular diagnostic manufacturing capacity by the fall to 40 million tests per quarter, along with doubling production of its Panther instruments.

Part of the reason Hologic was able to scale its manufacturing so significantly in a comparatively short time is the reduced demand for its other flagship tests, such as its assays for women's health. As a result, the firm redirected its capacity for its base business tests to its SARS-CoV-2 assays and merged the supply chains for COVID-19 and legacy products, MacMillan said.

He noted that the firm was "producing millions of tests that weren't even invented a few short months ago" and operating 24/7 at its facility in San Diego to continue manufacturing the tests. Hologic also has hired more than 150 new operations employees while also training team members in other departments to work the production lines to meet the demand. 

Although the ability to produce tests is strong, MacMillan did note that supplies of ancillary ingredients, such as pipette tips, were a potential constraint, since Hologic doesn't produce them and has no control over shortages.

Hologic's goal at the end of the second quarter was to produce 1 million tests per week in May, and MacMillan reported the company significantly exceeded that goal, producing at least 1.5 million tests each week on average. MacMillan said the volume of COVID-19 tests should still be able to increase sequentially in the fourth quarter while accommodating the higher volumes of women's health tests.

CFO Karleen Oberton added on the call that weekly demand for the base business tests declined 90 percent during the height of pandemic-related shutdowns, but there was "steady substantial improvement" in May and June.

MacMillan noted a number of benefits for Hologic as a result of the high demand for its SARS-CoV-2 tests, including driving strong overall growth as the base business continues to recover. Oberton noted on the conference call that they expected demand for COVID-19 assays to exceed supply once again in the fourth quarter, which should enable an increase in COVID-19 sales and a significant jump in diagnostics revenue.

Going into the cold and flu season this fall, MacMillan emphasized that "every single person that sneezes or coughs from September through the next season is going to end up getting tested for COVID-19," not just in the US but globally. As people across the world go back to work and school, he said, "Testing is key area to get people comfortable," and he sees the demand for testing lasting well throughout the rest of the year. 

MacMillan said he anticipates "an ongoing trail of testing just for prevalence or something else, and population screening, for at least another year or two."

In the medium-term, he said the "record number" of Panther placements would likely increase the pull-through of other assays beyond SARS-CoV-2. Hologic usually places 228 Panther systems per year, but in the third quarter alone the company placed 208 systems, leading to global placements of more than 2,000 systems total – 45 percent of which are outside the US, MacMillan added. He said Hologic expects to place 500 Panthers in this fiscal year, with 60 percent of the US placements replacing Hologic's old Tigris system. The other 40 percent displaced competitors or were new customers, MacMillan said.

Placements of the instruments will be lower throughout the next quarter, however, because Hologic "drained everything we had in inventory" and now has to produce the platforms from scratch, although the company is building the instruments at double the rate. In the third quarter, 50 Panthers were refurbished from research labs and placed throughout the US.

In the long-term, MacMillan said he expected the SARS-CoV-2 tests to drive growth even as vaccines for COVID-19 become available. Because "the strength and duration of immunity still has to be established," the arrival of a vaccine won't spell the end of the market for SARS-CoV-2 testing.

MacMillan said that he expects a long-term market for COVID-19 testing on a global basis, similar to the influenza or human papillomavirus markets. It will also take months to get people vaccinated, and throughout that time people will still be contracting the virus and testing will still be needed, he said.

Although the "vast majority" of the company's COVID-19 revenues came from the US, MacMillan emphasized the strengthening of the company's global position and international sales as a major growth driver. In 2016, the company had 226 Panther instruments installed in Europe, and by the end of this year's third quarter that number had doubled, MacMillan said. Hologic has also signed contracts to secure $500 million of COVID-19 testing revenue over the next four quarters in Europe, including a contract with the UK Department of Health for $190 million.

Hologic is also working on a test for the Panther that will combine influenza and SARS-CoV-2, although VP of Investor Relations and Corporate Communications Michael Watts declined to speculate on when it would be available, saying only the company's goal was to launch in time for this fall's flu season.