Hologic (HOLX) has strengthened its molecular diagnostic portfolio with approval from the US Food and Drug Administration (FDA) for its Cervista HTA (high throughput automation) system. With this approval, Cervista HTA will be used with the company’s Cervista HPV HR test, which can detect 14 high risk types of HPV that are associated with cervical cancer and precancerous lesions.
The Cervista HTA system automates the DNA extraction and detection steps of the Cervista HPV HR test enabling users with ease of use, higher throughput and accurate results. Hologic is confident that the recent approval of Cervista HTA would help it to compete with higher volume labs thereby expanding the opportunity for the HPV franchise.
During the most recent quarter, Hologic’s Diagnostics segment generated sales of $150.5 million, up 11.7% year over year driven by increased revenues from both Cervista HPV and ThinPrep. The Molecular business increased 32% led by 44% growth in Cervista HPV. Besides, on a sequential basis, Cervista recorded double-digit growth with market share reaching the mid-tier level of the HPV market. The company is confident of the potential of Cervista and expects much from this product in fiscal 2012 and beyond.
Meanwhile, for the international market, Hologic has developed medium throughput automation (MTA) solution for Cervista testing, which will be a lower volume and lower cost alternative to HTA. The company received CE Mark approval for the MTA system on August 31 and commercialization of the product has already commenced. Hologic is also working on developing CT/NG and Trichomonas assays. While clinical trials are expected to commence in fiscal 2012, the company expects to submit application for approval to the FDA in fiscal 2013.
With a diverse product suite Hologic has become an industry giant in the field of women’s health. Moreover, the company is also undertaking several steps, including acquisitions, international expansion and product development to bolster its top line. Consequently, operating expenses are on the rise. Moreover, procedure volumes are feeling the brunt of a weak economy and persistent unemployment. Other players in this market, such as Qiagen (QGEN) and Becton Dickinson (BDX), are also experiencing the adverse impact of lower procedure volume. The situation is unlikely to improve in the near future with widespread economic uncertainty, austerity measures and the sovereign debt crisis in Europe.
We are currently Neutral on Hologic, in line with the short-term Zacks #3 Rank (Hold).
