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FDA Advises Zika Test for All U.S. Blood: Will Hologic Gain?
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In the wake of fresh cases of Zika virus being reported in Florida over the past few weeks, the FDA recently issued a guidance recommending universal testing of all donated Whole blood and blood components for Zika virus in the U.S. and its territories. Notably, the agency took this step to prevent any further transmission of this deadly virus through blood supply, across the nation.
Following this recommendation, the FDA has granted special approval to Hologic Inc.’s (HOLX - Free Report) Procleix Zika test and Roche Holding AG’s (RHHBY - Free Report) Cobas Zika assay to conduct the country-wide blood supply screening for Zika virus. Consequently, Hologic’s shares gained 1% to close at $38.80 on Friday, displaying investors’ optimism with regard to this news.
Reasons behind the New Guidelines
The Zika infection had not become a worldwide threat until the last year, as this virus predominantly affected the tropical countries. However, the virus’ outbreak in May 2015 in Brazil and thereafter its rapid proliferation across the globe, forced the World Health Organization (WHO) to declare Zika virus as a Public Health Emergency of International Concern (PHEIC) in Feb 2016.
Following this, the FDA’s initial guidance was issued in the same month, which recommended screening of blood supply for Zika virus only for individuals who had travelled recently to the contaminated areas, or had come in contact with someone potentially exposed to the virus or had a confirmed Zika infection. However, the entire scenario has changed over the past few weeks.
Per recent reports from the Center for Disease Control and Prevention (CDC), 471 new confirmed cases were reported from Florida, 601 from New York, 152 from California, 125 from Texas and 91 from New Jersey. These numbers evidently point to the rapid spread of the virus across the nation and thus to prevent any more proliferation of the disease, which in turn may even result in an epidemic, the FDA introduced the new guidelines to screen the entire country’s blood supply.
The blood screening will start with immediate effect for Florida and Puerto Rico, from where the maximum numbers of cases with Zika virus have been reported. In 11 states, including Alabama, Arizona, California, Georgia, Hawaii, Louisiana, Mississippi, New Mexico, New York, South Carolina and Texas, the guidelines must be implemented within four weeks. For the rest of the U.S., the FDA plans to enforce the guidelines within 12 weeks of the announcement.
Will Hologic Gain from the New Recommendation?
In late Jun 2016, Hologic’s Procleix assay, developed as part of the company’s long-standing partnership with Grifols, won the FDA’s Investigational New Drug (IND) study protocol to detect the presence of Zika virus in donated blood. Unquestionably, the recent FDA recommendation allowing Hologic’s Procleix assay to be one of the two tests to be used in the nationwide screening will boost its test revenue growth.
Per investment bank, Piper Jaffray, the revised guidance could result in a revenue benefit of $13–$25 million for Hologic and 2–5 cents of annual earnings per share. Under a national screening program and possible FDA approval of Hologic's assay, the revenue benefit could rise up to about $39 million. On the other hand, investment bank Evercore ISI suggested that the total revenue benefit of the revised guidelines to Hologic could be about $15 million, with lower profitability until the test wins the FDA nod.
In this context it is worth noticing that, despite the market availability of other diagnostic tests for identification of Zika virus like Quest Diagnostics, Inc.’s (DGX - Free Report) Euroimmun Anti-Zika Virus Elisa and indirect immunofluorescence (IFA) test and a few others, FDA chose Hologic’s Procelix to be one among the two for the nationwide screening. As a result, we anticipate Hologic to gain a competitive leverage over others in the multibillion dollar molecular diagnostics market. However, Roche’s Cobas Zika test being the other assay approved in this recommendation might offer some level of rivalry for Hologic in this space.
Zacks Rank
Currently, Hologic and Quest Diagnostics carry a Zacks Rank #3 (Hold), while Roche Holdings retains a Zacks Rank #4 (Sell). A better-ranked stock in the medical instrument space is IDEXX Laboratories, Inc. (IDXX - Free Report) , which sports a Zacks Rank #1 (Strong Buy).
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FDA Advises Zika Test for All U.S. Blood: Will Hologic Gain?
In the wake of fresh cases of Zika virus being reported in Florida over the past few weeks, the FDA recently issued a guidance recommending universal testing of all donated Whole blood and blood components for Zika virus in the U.S. and its territories. Notably, the agency took this step to prevent any further transmission of this deadly virus through blood supply, across the nation.
Following this recommendation, the FDA has granted special approval to Hologic Inc.’s (HOLX - Free Report) Procleix Zika test and Roche Holding AG’s (RHHBY - Free Report) Cobas Zika assay to conduct the country-wide blood supply screening for Zika virus. Consequently, Hologic’s shares gained 1% to close at $38.80 on Friday, displaying investors’ optimism with regard to this news.
Reasons behind the New Guidelines
The Zika infection had not become a worldwide threat until the last year, as this virus predominantly affected the tropical countries. However, the virus’ outbreak in May 2015 in Brazil and thereafter its rapid proliferation across the globe, forced the World Health Organization (WHO) to declare Zika virus as a Public Health Emergency of International Concern (PHEIC) in Feb 2016.
Following this, the FDA’s initial guidance was issued in the same month, which recommended screening of blood supply for Zika virus only for individuals who had travelled recently to the contaminated areas, or had come in contact with someone potentially exposed to the virus or had a confirmed Zika infection. However, the entire scenario has changed over the past few weeks.
Per recent reports from the Center for Disease Control and Prevention (CDC), 471 new confirmed cases were reported from Florida, 601 from New York, 152 from California, 125 from Texas and 91 from New Jersey. These numbers evidently point to the rapid spread of the virus across the nation and thus to prevent any more proliferation of the disease, which in turn may even result in an epidemic, the FDA introduced the new guidelines to screen the entire country’s blood supply.
The blood screening will start with immediate effect for Florida and Puerto Rico, from where the maximum numbers of cases with Zika virus have been reported. In 11 states, including Alabama, Arizona, California, Georgia, Hawaii, Louisiana, Mississippi, New Mexico, New York, South Carolina and Texas, the guidelines must be implemented within four weeks. For the rest of the U.S., the FDA plans to enforce the guidelines within 12 weeks of the announcement.
Will Hologic Gain from the New Recommendation?
In late Jun 2016, Hologic’s Procleix assay, developed as part of the company’s long-standing partnership with Grifols, won the FDA’s Investigational New Drug (IND) study protocol to detect the presence of Zika virus in donated blood. Unquestionably, the recent FDA recommendation allowing Hologic’s Procleix assay to be one of the two tests to be used in the nationwide screening will boost its test revenue growth.
Per investment bank, Piper Jaffray, the revised guidance could result in a revenue benefit of $13–$25 million for Hologic and 2–5 cents of annual earnings per share. Under a national screening program and possible FDA approval of Hologic's assay, the revenue benefit could rise up to about $39 million. On the other hand, investment bank Evercore ISI suggested that the total revenue benefit of the revised guidelines to Hologic could be about $15 million, with lower profitability until the test wins the FDA nod.
In this context it is worth noticing that, despite the market availability of other diagnostic tests for identification of Zika virus like Quest Diagnostics, Inc.’s (DGX - Free Report) Euroimmun Anti-Zika Virus Elisa and indirect immunofluorescence (IFA) test and a few others, FDA chose Hologic’s Procelix to be one among the two for the nationwide screening. As a result, we anticipate Hologic to gain a competitive leverage over others in the multibillion dollar molecular diagnostics market. However, Roche’s Cobas Zika test being the other assay approved in this recommendation might offer some level of rivalry for Hologic in this space.
Zacks Rank
Currently, Hologic and Quest Diagnostics carry a Zacks Rank #3 (Hold), while Roche Holdings retains a Zacks Rank #4 (Sell). A better-ranked stock in the medical instrument space is IDEXX Laboratories, Inc. (IDXX - Free Report) , which sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>