2 Key Questions About Hologic’s Future Answered

There are some huge questions surrounding Hologic’s future.

First, there’s the question of whether Hologic could still maintain momentum received from the high demand for COVID-19 testing was answered by its 3Q23 earnings. And the second question is what will be the new dynamic now that Steve MacMillan, Hologic’s president and CEO, has been appointed as Illumina’s board chairman.   

The answer to the first question is that after a few years of sales that turned the Hologic into an earnings juggernaut, the Waltham, MA-based company still hasn’t settled into its new normal. Tuesday gave a clearer picture as COVID-19 testing boosts were non-existent to sales.

“In the early days of COVID, when fear and uncertainty led to closures and shutdowns, we delivered our highly accurate COVID molecular diagnostic tests around the globe, playing a pivotal role in helping get the world back on its feet,” Stephen MacMillan, Hologic president and CEO said, according to a Seeking Alpha transcript.  “With COVID surges and high testing volumes now further in the rearview mirror, our ongoing performance shows that we are much more than a great pandemic story.”

Hologic posted revenue of $984.4 million (-1.8% Y/Y, -1.6% xFx, 18.4% organic (ex-COVID) and adj earnings per share of $0.93 exceeded Street estimates of revenue and adjacent EPS of $960.2 million and $0.89 as Breast Health and GYN-Surgical lifted organic growth to 18.4%.

“If you go from Q2 to Q3, the gross margin declines primarily lower COVID revenue, said Karleen Oberton, Hologic’s CFO, according to a transcript from Seeking Alpha. “So again, we had over $70 million of COVID assay revenue in Q2 and just under $30 million here in Q3.”

BTIG analyst Ryan Zimmerman wrote in a research note, “management had their finger on the trigger, in hopes to raise LT guidance beyond 5% to 7%, but ultimately chose not to as too many headwinds remain such as the loss of upside from OUS markets (Russia and China), higher inventory costs running through the P&L in FY1H24, and the loss of COVID assay sales (which are margin-accretive). These dynamics are driving the key question Hologic will have to face in FY24, what will normalized underlying margins look like?”

In terms of the new dynamic created by MacMillan becoming Illumina’s board chair – well, he addressed that head-on during the earnings call.

“Let's be really clear,” he said during an earnings call, according to a Seeking Alpha transcript.  “I'm at Hologic through the end of my useful life in terms of what I've worked for, built for. And as a reminder to everybody, I am personally a top 15 shareholder in Hologic. So, this is my day job. This is my passion. This is my love. What I have to see is the company five minutes away, that's troubled that I thought, frankly, I could also help out in a different role, which is as Chairman of the Board.

According to the Seeking Alpha transcript of the earnings call, he added, “And I'm very proud that I think I can do both. If I didn't have the great team around me at Hologic wouldn't be able to. Frankly, over there, it's going to be about also just getting a great CEO in place. And we're making a couple of key decisions there, which are probably pretty obvious. And then it's going to be a normal Chairmanship from there. So, this is my love and my passion and frankly, where I'm fully engaged. Sometimes more than my teams would like.”

Illumina has been under mountain of scrutiny recently, stemming from its acquisition of Grail. Part of the controversy, which included a proxy battle with activist investor Carl Icahn, the gene sequencing company’s CEO ended up stepping down.

The Rise of Hologic

 The boom in COVID-19 testing resulted in unprecedented growth for Hologic. The company was able to successfully diversify itself through both organic R&D as well as strategic tuck-in acquisitions.

The company’s first year of the COVID-19 pandemic made such an impression on our readers that it was voted MD+DI Readers' Choice for Medtech Company of the Year 2020.

The following year, Hologic was again honored by MD+DI readers for its commitment to women's health, and also was selected by our editorial team as the Medtech Company of the Year 2021.