Hologic, Roche, Thermo Fisher Scientific and Qiagen posted quarterly revenue that beat estimates on higher sales of their COVID-19 tests. Still, demand for testing likely will wane for the rest of the year, the companies warned.
The rise of COVID-19 testing sales in the quarter are in line with comments from Abbott Laboratories in its first-quarter earnings call and Quidel, which released preliminary results on April 7 and reports final figures on Wednesday.
While Quidel's preliminary first-quarter report beat estimates, analysts noted that coronavirus testing demand going forward likely will decline.
"If this is the last quarter of surging COVID-19 sales (as our modeling suggests), it was quite a quarter to go out on,” William Blair analysts wrote of Quidel's preliminary results.
While Thermo Fisher had forecast that COVID-19 testing would generate $1.75 billion in 2022, the business pulled in $1.68 billion in the first quarter alone. That performance spurred Thermo Fisher to raise its full-year outlook.
Across the whole business, Thermo Fisher increased its 2022 revenue forecast by $450 million to $42.45 billion, which would represent a growth of 8% over last year. The company now expects full-year COVID-19 test revenue of $2.1 billion, up $350 million from its prior forecast.
Still, the forecast assumes a slowdown in COVID-19 testing revenue with the company expecting testing sales to fall to $225 million in the second quarter and then hit an endemic run rate of $100 million a quarter for the rest of the year.
That forecast leaves Thermo Fisher looking to other parts of the business for growth. A year-on-year drop in COVID-19 testing dented healthcare and diagnostic revenues in the first quarter, even though Thermo Fisher gave an upbeat appraisal of its core business.
“In terms of healthcare and diagnostics, the core there was actually quite good. We had broad-based strength in terms of core growth there in the high single digits. So, I feel good about that,” Thermo Fisher CEO Marc Casper said on an April 28 call with investors. “There was obviously some level of COVID disruptions and things of that sort, but in aggregate, the results were strong across healthcare and diagnostics.”
“Beijing is working quite normally at the moment. Shanghai is not. And so our current model is thinking that this very strict lockdown of Shanghai is going to remain in place for four to six weeks. This is what is in our current forecast.”
Roche's diagnostic sales rose 24% in the first quarter as the emergency use authorization of a rapid antigen test in the U.S. late last year spurred a 59% gain in North American revenue. Across all markets, COVID-19 diagnostic sales totaled 1.9 billion Swiss Francs ($1.95 billion), an increase from the $1.2 billion generated in the first three months of 2021 and the previous quarterly high of $1.3 billion.
The $1.95 billion in sales may represent a peak for Roche’s COVID-19 testing business as the company joined its peers in predicting a sharp decline in the market over the next two quarters.
“We expect [growth] to come down as of now, actually, as we expect the slowdown of our COVID-related business for the remainder of the year. There is, of course, the potential that during the winter season in the fourth quarter, we see, again, an increasing demand for COVID solutions, but that is not what we have planned,” Roche CEO Severin Schwan told investors on an April 25 conference call.
Roche has other diagnostic growth drivers to help offset a drop off in COVID-19 testing sales.
Thomas Schinecker, CEO of Roche Diagnostics, said the molecular lab unit, excluding COVID-19 PCR tests, grew more than 30% in the first quarter. Pathology sales rose 14%, helping the non-COVID-19 business climb 10% even amid a contraction of the diabetes franchise.
Roche expects combined sales of COVID-19 tests and therapeutics to total $5.1 billion in 2022, down from roughly $7.2 billion last year.
Roche's COVID-19 sales over the past five quarters
|Q1 2021||Q2 2021||Q3 2021||Q4 2021||Q1 2022|
|COVID-19 Sales (Swiss Francs)||1.2B||1.3B||1B||1.2B||1.9B|
SOURCE: Roche earnings presentation
Hologic fiscal second-quarter sales beat estimates on the strength of COVID-19 testing revenue. While down year on year, COVID-19 test sales grew 11% sequentially to $658 million. The increase was driven by rising sales volumes, with Hologic shipping 28.5 million tests, up 24%.
After factoring in the results, Hologic added $67 million in COVID-19 sales to the midpoint of its full-year forecast.
In a note to investors, analysts at BTIG said that, while “on the surface results are strong,” excluding sales of COVID-19 tests shows the diagnostic unit would have missed the consensus estimate by 17%. The miss may reflect the impact of COVID-19 on core diagnostics, which analysts at William Blair said “is inversely related to COVID-19 incidence as women postpone office visits.”
Hologic expects COVID-19 test sales to be at least $100 million in the third quarter and around $1.25 billion for the full year. As COVID-19 test sales fall and other businesses normalize, the coming quarters may provide a clearer picture of whether Hologic’s use of its cash windfall has created a stronger core business.
Based on the performance in March, CFO Karleen Oberton says the core business may be getting back on track.
“We were encouraged by improving trends throughout March as COVID cases declined. This gives us great confidence in the underlying health of our base diagnostics franchise,” Oberton told investors during an April 27 call.
Qiagen reported first-quarter sales growth of 15% to $628.4 million, beating its forecast of a 7% gain in revenue. COVID-19 testing sales climbed 18% and revenue from the rest of its business climbed 14% in the period.
Based on the results, Qiagen increased its full-year sales forecast by $50 million to $2.12 billion.
Analysts at William Blair addressed the size of the forecasted gain in sales in a note to investors.
“We know some would have liked to see a bit more offered in terms of a raise, but management’s outlook going forward is that it is still early in the year and there are uncertainties related to COVID-19 and macro concerns in China, with supply chains and inflation. Thus, we see as prudent its decision to take the roughly $50 million in upside in the quarter and only roll that through.”
The 2022 forecast reflects Qiagen’s optimism that double-digit growth in its core business can offset an anticipated “significant decline” from last year’s $704 million in COVID-19 in sales.
CFO Roland Sackers told investors on April 28 that “an important amount” of COVID-19 testing sales for 2022 were generated in the first quarter.
The company is contending with the drop of COVID-19 testing sales while also facing a disruption of its business in China.
“Beijing is working quite normally at the moment. Shanghai is not. And so our current model is thinking that this very strict lockdown of Shanghai is going to remain in place for four to six weeks. This is what is in our current forecast,” Qiagen CEO Thierry Bernard said during the earnings call.