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Hologic's Gen-Probe Business Logs Nearly 6 Percent Organic Growth in Q3

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Hologic's Gen-Probe unit logged nearly 6 percent organic year-over-year revenue growth in its fiscal third quarter — including a more than 9 percent spike in clinical diagnostics sales — helping to drive an overall 33 percent year-over-year increase in Hologic's revenues, the company said this week.

In addition, company executives provided investors with an update on how Hologic's recently announced strategic alliance with Quest Diagnostics to more broadly offer sexually transmitted infection testing based on Hologic's Gen-Probe-derived Aptima family of products is expected to drive future growth in the company's molecular diagnostics portfolio.

For the three months ended June 29, Hologic's revenues increased to $626.1 million, up from $470.2 a year ago. Revenues from legacy Gen-Probe products are now included in Hologic's Diagnostics business unit, which rose 87 percent to $297.4 million from $158.7 million in fiscal Q3. Gen-Probe, which Hologic acquired last year, contributed $146.9 million in revenues in the quarter, up 2 percent from Gen-Probe’s Q2 revenues last year on a pro forma basis.

During a conference call discussing Hologic's Q3 earnings, CFO Glenn Muir noted that in the third quarter of last year, Gen-Probe received a one-time $5 million milestone payment from Novartis related to a pre-existing blood screening agreement between the companies.

"Therefore, we exclude this one-time payment and view the business as having grown almost 6 percent, allowing us to more clearly analyze Gen-Probe's growth and to assess its performance," Muir said.

Muir also said that clinical diagnostics product sales in the Gen-Probe business grew by more than 9 percent, driven by low-single-digit growth in chlamydia/gonorrhea testing, high-double-digit growth in Trichomonas testing, and triple-digit growth in Aptima human papillomavirus assays.

"These results reflect only a modest contribution from assay sales associated with our recent Panther account wins, and have yet to reflect incremental sales from our recently announced strategic alliance with Quest, aside from a small amount of equipment sales," Muir said.

In June, Hologic and Quest disclosed their alliance, under which Quest will more broadly offer testing with Hologic's Aptima family of products (PCR Insider, 6/13/2013). The agreement, which is nonexclusive over five years, covers women's health in general, but centers on molecular testing for HPV. In addition, the companies plan to co-develop and promote other undisclosed diagnostic products for women's health.

"Although Quest has long been one of our largest lab customers, we historically have garnered a relatively small portion of Quest's chlamydia and gonorrhea test volumes and virtually no HPV test volumes," recently minted President and CEO John Cumming said during the earnings call.

Cumming added that the strategic alliance is significant on several fronts. "First, it brings us the opportunity for substantial market gains in CT/GC and HPV and Trichomonas testing, along with associated revenues. Second, it represents a strong endorsement of our relatively new Aptima HPV assay, which is clearly differentiated from competing tests on the basis of comparable sensitivity yet superior specificity."

In November 2011, prior to its acquisition by Hologic, Gen-Probe received US Food and Drug Administration approval for its Aptima HPV assay, and claimed that the test's high degree of specificity would help differentiate it from competing products — a claim it made based on the Clinical Evaluation of Aptima HPV RNA, or CLEAR, trial, which involved approximately 11,000 women undergoing routine Pap testing at 18 US clinics. The study specifically compared the Aptima assay with the Qiagen Digene HC2 test and found that Aptima HPV had comparable sensitivity for the detection of cervical disease, but a higher degree of specificity (PCR Insider, 11/3/2011).

Finally, Cumming said that the strategic alliance with Quest "is a tangible example of the revenue synergies we expected to generate from our acquisition of Gen-Probe, as we clearly believe this is the type of alliance that neither Gen-Probe nor Hologic could have achieved as a standalone company."

Further detailing the potential impact of the Quest alliance, Rohan Hastie, Hologic's new senior vice president and group general manager of diagnostics, said during the call that through the agreement Hologic hopes that "the majority of the chlamydia and gonorrhea [testing at Quest] will be migrated over to our platforms, and then a majority of our HPV testing will be carried over as well."

He noted that the company would likely begin to see material contribution from CT/GC testing at Quest in the next quarter, but that HPV "will be a little bit slower than that just because of the time it takes to validate HPV tests. It takes longer to migrate an HPV test over than it does for chlamydia and gonorrhea."

Further, "Quest did very little Trichomonas testing with us … so we hope that [also] will start to contribute materially next quarter," Hastie said.

Hologic's Aptima HPV assay runs on the Tigris molecular diagnostics platform, which is intended for use in higher volume testing labs. The assay uses transcription-mediated amplification to detect mRNA from two viral oncogenes, E6 and E7, in 14 of the highest-risk HPV types associated with cervical cancer and precancerous lesions.

"Our service organization is working very hard in getting instruments installed and getting ready to get the switch on over there at Quest," Hastie added. "There will be a considerable number of [Tigris] instruments … with Quest being 25 percent of the chlamydia and gonorrhea testing market within the US. [At this] very moment … those instruments are actually being placed across the Quest network of testing."

Meantime, Hologic's Gen-Probe also sells the Panther molecular testing system, which is designed more for mid- to low-throughput labs. Last month the US Food and Drug Administration approved the Aptima HPV assay for use on Panther (PCR Insider, 7/25/2013), and Hologic expects to win FDA approval for an HPV genotyping assay on Panther by the end of this year, Cumming said during the call.

"The Panther system remains a prime driver of growth for our Diagnostics segment," Cumming, who previously served as CEO of Hologic between 2001 and 2009, said. "We have begun to successfully build Panther into the platform of choice for mid-sized molecular labs and, as a result, we have secured a number of new account wins in the past two quarters and have taken market share from our competitors, a trajectory we believe will continue. Over time, we'll continue to expand the menu of assays that run on Panther, as we recognize menu consolidation is an important element of its appeal, in addition to its superior automation capabilities."

Muir said during the call that Hologic is on track for 1,000 total Panther installations by the end of fiscal 2015. "Since most have been installed in the current fiscal year, and considering the lag time in ramping up volumes, we have not yet seen the real revenue contribution from these systems," he said.

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