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Hologic Q2 Revenues Drop 8 Percent on Coronavirus Impact

NEW YORK – Hologic reported after the close of the market on Wednesday that its fiscal second quarter revenues fell 8 percent year over year, driven by a negative impact from the coronavirus pandemic.

The firm also announced that it plans to launch a new Aptima molecular assay that will run on its Panther system, the firm's second assay developed to detect the SARS-CoV-2 virus.

For the three months ended March 31, the firm reported revenues of $756.1 million compared to $818.4 million in fiscal Q2 2018, in line with preliminary revenues reported earlier this month and beating the consensus Wall Street estimate of $745.9 million.

Revenues from Hologic's global diagnostics business were $319.2 million, up 8 percent year over year from $296.7 million. The firm said total Diagnostics revenues excluding its divested blood screening business were $304 million, up 7 percent year over year from $283.3 million.

Within diagnostics, the company said its molecular products revenues were $190.6 million, up 14 percent from $167.8 million in Q2 2019, while cytology and perinatal sales were $113.4 million, down 2 percent from $115.5 million. The firm's blood screening revenues were $15.2 million, up 14 percent year over year from $13.4 million.

The company noted that its molecular product revenues included $3.4 million in sales of its Panther Fusion SARS-CoV-2 assay, which received Emergency Use Authorization from the US Food and Drug Administration.

Hologic said it has successfully scaled up manufacturing and is now producing almost 600,000 Panther Fusion SARS-CoV-2 tests a month, representing a twelvefold increase in the company’s prior capacity for similar tests that run on the Panther Fusion system.

Hologic posted Breast Health revenues of $307.8 million, down 4 percent compared to $321.5 million a year earlier. The company said it had no revenues for its Medical Aesthetics business, which it divested in December 2019, but reported $73.8 million for the business in Q2 2019.

"Our second quarter revenue results reflect the strong underlying momentum that has been building at Hologic over the last few years, and give us confidence that we will emerge from the current COVID-19 pandemic as a stronger company," Stephen MacMillan, Hologic’s chairman, president, and CEO, said in a statement. He added that "disruptions caused by COVID-19 had a significant negative impact on sales in late March, as elective procedures and appointments were deferred, and many of our customers focused on responding to the pandemic."

On a conference call to discuss the firm's financial results, MacMillan said that the coronavirus pandemic prompted Hologic to scale back in some areas in the short term while simultaneously boosting investments in its diagnostics business.

"Our goals were to keep our good people, reduce outright layoffs as much as possible, and be in a position to emerge quickly on the other side of the pandemic," he said. "In total, these and other actions should help us to temporarily reduce operating expenses compared to the second quarter run rate by about $40 million in the third quarter."

The company laid off some temporary employees and contractors, furloughed other employees, temporarily shut down some manufacturing plants, and implemented broad pay reductions.

Sales of its women's health products have been hit particularly hard by the outbreak of the coronavirus, MacMillan said. However, "when the pandemic is under control," demand for the firm's women's health products will return, because early detection of diseases for breast and cervical cancer will always be important, he said.

In Q2, revenue growth in Hologic's global molecular diagnostics business was the highest that company has experienced since 2012. Excluding sales associated with its COVID-19 assay, "the business still grew more than 12 percent, as we continue to layer additional tests … onto our installed base," MacMillan said.

Hologic reported net income attributable to the firm of $96.3 million, or $.36 per share, compared to a net loss of $272.6 million, or $1.01 per share in Q2 2019. The net loss in Q2 2019 included an aggregate $443.8 million of non-cash impairment charges related to the divested Medical Aesthetic business. The company said that non-GAAP diluted EPS attributable to the firm was $.57 for the recently completed quarter, matching the analysts' average estimate.

Its R&D costs dropped 14 percent to $49.3 million from $57.3 million in Q2 2019, and its SG&A costs fell 21 percent to $177.1 million from $223.4 million.

Hologic ended the quarter with $799.8 million in cash and cash equivalents.

The firm had previously announced that it has withdrawn its 2020 financial guidance due to the uncertain economic impact on its business of the COVID-19 pandemic.

The company additionally said that next week, it expects to begin distributing a research-use-only version of its Aptima SARS-CoV-2 test to hospital, public health, and reference laboratories certified under CLIA to perform high-complexity tests.

The assay's development has been funded in whole or in part by the US Department of Health and Human Services' Biomedical Advanced Research and Development Authority. Labs may use the assay for clinical testing on Hologic’s Panther system after completing performance verification testing, the firm said.

Next week, Hologic expects to apply for FDA Emergency Use Authorization for the Aptima SARS-CoV-2 assay. The firm said it anticipates applying later in May for a CE mark for diagnostic use of the assay in Europe.

Hologic expects to initially provide its laboratory customers with approximately 3 million research-use-only tests. Starting in late May, it expects to begin producing at least 1 million Aptima SARS-CoV-2 assays per week on average, and it is planning to increase its production capacity further in the coming months.