Hologic Balances Strength in New Diagnostics With Waning COVID-19 PCR Demand

Hologic’s fiscal first quarter outpaced our expectations, despite the ongoing headwind of declining COVID-19 diagnostics. The impressive underlying growth in nonpandemic diagnostics should play a larger role than we’d expected in softening the consolidated decline in 2023, and we plan to moderately raise our fair value estimate to reflect that strength. We applaud Hologic for how it navigated the pandemic, both extending itself to meet overwhelming demand in 2020 for its diagnostic platforms, and then parlaying the related cash windfall and investing in more types of assays. Management’s strategy of bulking up its array of molecular diagnostic test menu to take advantage of its newly enlarged base of installed Panther platforms seems to be paying off. Through the pandemic, Hologic has managed to reinforce its narrow economic moat through expansion of switching costs.