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Barry Cohen
Barry Cohen
Articles (262) 

Covid Testing Bonanza Helps Drive Hologic Acquisitions

Company makes 2 additions to strengthen its diagnostics business

January 07, 2021 | About:

In my November 2020 article on Hologic Inc. (HOLX), I opined that the company was likely to pursue acquisitions given the windfall from sales of its Covid-19 diagnostic tests. It didn't take long for the Marlborough, Massachusetts-based medtech to pull the trigger, making two deals—one big, one small—on consecutive days this week.

On Jan. 4, Hologic announced it was planning on spending $64 million to buy Somatex Medical Technologies of Germany, which produces breast cancer biopsy markers and guidance equipment. Hologic said it plans to fold Somatex's product line into its breast health business, according to an article in FierceBiotech. Hologic was already distributing a Somatex line of tissue markers.

It turns out Somatex was just an appetizer. The next day. Hologic got to the main course when it shelled out about $230 million to onboard privately-held cancer diagnostic maker Biotheranostics. The San Diego firm has two polymerase chain reaction products, Breast Cancer Index for helping physicians decide on a course of extended endocrine therapy and CancerTYPE ID aimed at metastatic disease. Hologic said San Diego-based Biotheranostics had sales of about $33 million last year. The deal is supposed to close next month.

Kevin Thornal, the company's division vice president of diagnostics, said the following in a news release:

"Together with the Biotheranostics team, we can leverage our commercial capabilities and expertise in molecular diagnostics automation to accelerate growth, help physicians make more informed decisions, and deliver more personalized treatment and better clinical outcomes for more women."

Investors applauded Hologic's moves, sending the stock to a 52-week high of just under $80 before settling in at a dollar below that at the Wednesday close. In the past year, the company's shares have climbed more than 45%.

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In the company's fiscal fourth quarter, which ended Sept. 30, Hologic's sales were $1.3 billion, up more than 55% over the same period a year earlier. Sales of its molecular diagnostics jumped 375%, in great part due to Covid tests for its high-throughput Panther diagnostic systems.

The acquisitions should provide a nice cushion when Covid-19 testing eventually peaks and begins falling. That's important because sales in other parts of Hologic's business have been dropping. In the U.S., the picture wasn't pretty; domestic revenue declined more than 16% in the fourth quarter.

Hologic is taking steps to ensure it keeps its momentum, and things in motion tend to stay in motion. Despite the run-up in price, 17 polled analysts rate the stock a buy, with a median target price of $85, a low of $80 and a high of $103, reported CNN Business.

Disclosure: The author has no position in any of the stocks mentioned in this article.

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About the author:

Barry Cohen
Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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