Hologic Faces Molecular Drag, But Here's Why It's Not a Major Concern

Hologic’s HOLX Molecular Diagnostics business posted a 7.8% (excluding COVID-19-related sales) growth in the second quarter of fiscal 2025, although results did not reflect its full potential.The performance was impacted by lower HIV testing sales in Africa due to significant funding cuts to USAID programs by the new administration. This $50 million annual revenue stream is now being conservatively excluded from the full fiscal outlook. Management noted that without this setback, molecular revenues would have grown at a low double-digit rate in the second quarter.

Even so, the long-term trajectory of the segment remains strong. Molecular Diagnostics continues to be the principal growth driver within Hologic’s Diagnostics division, with more than 20 assays running on the Panther and Panther Fusion platforms. The company is focused on driving more utilization of its existing menu, such as the test for Mycoplasma Genitalium (MGen), a prevalent but under-screened sexually transmitted disease (STD). Hologic’s revenue growth strategy rests on using both lab-sales force and physician-sales force to team up with lab customers, promote screening guidelines and drive test adoption.

Newer innovations, like the BV/CV/TV assay, have meaningfully contributed to growth and still offer room for more expansion. Vaginitis affects nearly 20 million women annually in the United States, yet fewer than 40% are tested. Hologic is addressing this gap by driving awareness and securing reimbursement for this high-throughput test, solidifying its position in this space. Another key asset is Biotheranostics, which Hologic acquired in 2021 to enter the fast-growing oncology adjacency. Biotheranostics’ unique Breast Cancer Index test continues to see higher adoption, helping determine the benefits of extended endocrine therapy.

Our model projects bullish growth for Hologic’s Molecular Diagnostics arm, which is likely to expand at a compound annual growth rate (CAGR) of 7.3% during the 2025-2027 period.

The Case for Hologic’s Rivals

Roche’s RHHBY infectious disease business was also affected by the USAID funding pause for testing, causing a decline of 5% in the first quarter of 2025. Still, without this effect, Roche’s Molecular Lab grew more than 6%. The company remains optimistic about the funding pause ending and a rebound in this business. This year, Roche is set to launch the cobas BV/CV assay in CE mark countries for use on the cobas 5800/6800/8800 platforms.

Abbott ABT is also exposed to the far-reaching implications of the USAID funding halt, which has disrupted the supply chain for essential medical products in underserved countries. Performance-wise, Abbott’s Diagnostics business revenues dropped 5% in the first quarter of 2025 due to weak COVID-19 testing sales. The impact of volume-based procurement programs in China led to low single-digit growth in ABT’s Core Laboratory Diagnostics.

HOLX Stock Performance, Valuation and Estimates

In the last 30 days, Hologic shares have risen 3.6% compared to the industry’s 0.7% fall.

Hologic is trading at a forward five-year sales multiple of 3.44X compared to the industry average of 4.11X. The stock carries a Value Score of B at present.

Consensus estimates for Hologic’s fiscal 2025 and 2026 earnings are showing a downward trend.

HOLX stock currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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