Hologic, Inc. (HOLX) Earnings Call Transcript & Summary

Joining us this afternoon. I'm Vijay Kumar, the med tech and life sciences analyst at Evercore. A pleasure to have with us Hologic. From the company, we have CFO Karleen Oberton. And I think from Investor Relations, we have Ryan Simon floating around, I think, in the hallway.

But maybe Karleen, starting with you, I mean, fiscal '23 was really, really strong for Hologic. And in the guide -- I think when I look at your fiscal '24, excluding days, I think 5% to 8% is above your LRP rate. Comps were tougher despite that the guidance is pretty solid. And I think people are still trying to struggle with like the drivers, what has caused this turnaround rate? Let's start with molecular grew mid-teens in '23, pretty strong -- what are the big assays that's driven this growth? Like how big are these markets? Like how much runway do you have for some of these end markets?

Sure. Well, thanks for having us, Vijay. And yes, '23 was a great year for Hologic, ended on a strong note and really in a really strong financial position with the exceptional balance sheet to help us deliver growth moving forward. But when we look at the growth drivers moving forward, maybe we'll start with molecular. As we look at '23, BV/CV was really the standout assay that drove growth and I would say, early innings still for BV/CV, and we see that an assay in the $100 million range, which still is accretive to growth. I would say, in the medium term, again, early innings with that. I think in '23, we also had a strong contribution from our respiratory assays. We've probably planned a little more conservatively that we don't anticipate a flu season quite like we had in '23. But certainly, if demand is there, we'll be able to respond in Biotheranostics is also growing faster than the average. And so I believe that will continue to be a growth driver in the molecular space moving forward.

Got you. And sorry, just maybe sticking with the molecular, I think in the past, you've given some stats about in a number of instruments placed during the pandemic years and what percent of them are being used for non-COVID test. Can you just remind us what those numbers are? And what are those [ non-COVID ] tests? Like are they BV/CV or other tests?

Sure. So what I would say at the highest level, growth is coming across our menu. BV/CV is a leader, but all of our assays are growing. We've given -- and we have expanded the installed base. We go back to 2019 prior to the pandemic, we had about 1,700 Panthers globally. At the earnings call, we said we're about 32/60 now globally. So a significant growth in that installed base. We've also talked about our new customers. So new customers acquired since April 2020. Over 90% of them are running at least one other assay besides COVID. Over 55% of them are running at least two other assays. So that is a testament to the stickiness of that Panther once it's installed. And then if we look even broader at all of our customers, in the U.S., we went back to 2019, only 20% of our customers were running four more assays. At the end of '23, that was over a third running four more assays, and we've got 21 approved. So that allows you to understand that two things. One is driving revenues about driving content in the Panther, driving utilization. And two, we don't have to pay place any more Panthers for a while and still realize that level of growth. It's all about getting the content on the Panthers that are out there already.

I think a lot of us are trying to do the math and utilization per instrument and trying to compare it versus pre-pandemic and trying to look at what the growth would look like. Is that the right way to think about when you look at that [ 30 to 100 ] change installed base, what's the right way to think about underlying molecular growth going forward?

Yes. I would say that we think about molecular growth moving forward is going to be higher than our long-term revenue plan of 5% to 7%. So think about molecular above 7%. So high single, low double-digit growth. And then from a utilization perspective, we have not updated the utilization, but we have in our last corporate presentation said that utilization per Panther has continued to improve over the last couple of quarters. So I think we've kind of started to get to that point where we've recapitalize larger customers from Tigris to Panther and getting back to a point where we can see that utilization growing.

And just on the utilization for Panther continuing to grow, Karleen, is that being driven by perhaps tests being shifted away from central lab to now perhaps a Panther -- or where is this growth coming from?

Yes, I don't think it's less of a shift because if you think about -- well, there's consolidation too. There's this close to the patient and the labs continue to acquire. So either way there's a shakeout for us. But I think it's some of our secret sauce is our physician sales force, where we're able to partner with our lab customers to get customer level data to go out and educate physicians on guidelines and how -- what screening should be performed. So again, the growth is broad-based across that complete menu as well as international to think about international is growing faster than the U.S.

Got you. Then maybe shifting gears to Biotheranostics. I think it's a pretty differentiated test. It's part of the guidelines, has pretty healthy reimbursement. Can you just remind us on what is this test what should be the TAM for this kind of a test? And what's driven this like 30% growth, I think, last year.

Yes. So the Breast Cancer Index test is a test that a woman takes to understand whether or not she'll benefit from endocrine therapy. So think about endocrine therapy is something that typically post diagnostics a woman has for 5 years and has pretty awful side effects, right? So if you take a test that says, "Hey, you're not going to benefit from this. That's a good thing both for her that she doesn't have to take this test with nasty side effects as well as from the health care system, we don't have to pay to deliver that therapy. So great test differentiated test. As you said, grew over 30% last year. We think it's going to be another double-digit grower in '24, certainly growing faster than the rest of the molecular business. And Vijay, we really don't want to put cap on what this can be. It clearly is underpenetrated at the time of acquisition. I think we said it was about 5% penetrated. So early innings.

Got you. So we're still in early innings. I think the other part of that, when you think about diagnostics, cytology comes up in that I think -- the Street is concerned about this USPSTF guidelines. Maybe high level, like why is -- the Street concerned about USPSTF? And what's the real risk from a change in guidelines here?

Yes. Well, let me start by saying co-testing PAP plus HPV screening is the best, is the best medicine is the best for cervical cancer screening. We believe that an even since 2018, there's been no new data that would dispute that. So at the highest level, with no new data there's really no reason for the USPSTF to change coverage for co-testing or PAP alone. So let's start with that. And so this is something that we think about all the time, right? We want to make sure we're getting the best care to women. From a Street perspective, obviously, if the guidelines come up and co-testing wasn't covered, that is the concern and rightfully so. But the reality that less than 1% of physicians practice HPV primary. The predominant practice is PAP or co-testing. That's what physicians practice. This understand that HPV alone, primary alone, misses 1 in 5 cancers. It also leads to excessive colposcopy, which is a pretty invasive procedure for a woman as often HPV primary will resolve on its own. So that's the reality of the situation, Vijay. I think as we think about it, again, we believe that co-testing will likely be covered. If it's not covered, and it comes out in the draft guidelines, as was initially what happened in 2018, we'll certainly go into action partner with KOLs and societies to course correct, hopefully. But again, the reality is just because it's not covered doesn't mean that private payers won't cover it, right? So that USPSTF is Medicare, Medicaid, right? And then it's just the behavior of changing physician practice. Again, predominant, it's code testing or PAP alone is what physicians used to screen for cervical cancer.

Got you. And within your current book of business, what percentage is Medicare versus commercial?

I don't have that visibility, but I would think it's probably primarily commercial coverage, given the age, we're talking about where women often get the most screening. But what I would say is that our cytology and perinatal business globally is about $450 million. Probably $400 million roughly of cytology and only 60% of that is in the U.S.

And then anything from a pipeline perspective within molecular that's exciting that we should look out for?

Yes. So certainly, what's most exciting is BV/CV. While it's been the driver of growth over the past year, it will continue to be a driver of growth over the medium term. We do have a few other assays that are in development, whether it's GI or hospital-acquired infections. Those will likely be on the Panther Fusion platform. And those are probably more complementary versus blockbuster nature. I would say that on the development front is a digital cytology, which is approved in the EU, I think that could be exciting once that's approved in the U.S.

In that digital cytology, is that just automating the slides or even the primary analysis for diagnosis is there like a softer algorithm component that...

Yes. So I think there's the ability to more accurately and faster read images with software with some level of AI, but there's also the ability to capture an image in if you think about a hub and spoke, where you could have reading capability centralized, but acquiring the samples more dispersed and allow that digital transmission of the image.

Got you. Is there -- when you think about pricing, right, and this is something that comes up. I think one of the questions I've gotten was a lot of your peers they've seen their installed base expand now the pandemic years. Is there an excess capacity in the industry could pricing for the industry come down -- what are you seeing from pricing trends? And what is the guide assuming for pricing?

Yes. So pricing pressure is not new to molecular diagnostics. This is something that we've always dealt with. And it's kind of part of our lock-to-socket strategy and why we have a menu of over 20 assays approved on the Panther or Panther Fusion. And so this is part of the ongoing dialogue with our customers that if the customer is running a couple of our women's health assays. And again, we're having a discussion about, hey, why don't you take on BV/CV, they might say, well, I want some better pricing on my legacy assays, and that's okay because usually, it's a win-win for us in that not only are we getting them to take on a new assay, but we're extending that life of that contract, and it just increases the stickiness of the Panther.

And sorry, is the pricing in the guidance? Is that like flat currently? Or is that like.

Yes. I would say that within the range of the guide that some pricing assumed. And again, this is not new because of the pandemic. This is something that we've always dealt with.

And I know [indiscernible] within Breast Health, Obviously, on the gantry side, you had the benefit of converting backlog given the chip shortage. And when you think about that gantry backlog, like how large is that backlog? Have you worked through most of it? Or is that -- is that still a sizable chunk for you guys?

Yes. So the backlog is giving us great visibility. I would say that we're going to work through that backlog over the course of '24 and to likely '25. I think, Vijay, what we've seen is the ability to engage with our customers at a more strategic level -- so there's not -- you can't take for granted that you can order a gantry in a quarter and receive at that quarter. So we actually have -- what we're seeing in the backlog is some larger orders that will work through over multiple years. So talking to customers about their entire installed base and an upgrade strategy versus just onesie-twosies. So actually, it's enhanced, I would say, the quality of our backlog.

And any way to quantify the size of this backlog versus historical levels?

I don't think we've quantified it per se. I think what we're saying is it's definitely over 4 quarters worth of backlog again, giving us good visibility into that product line.

Sorry, did you say you have 4 quarters or at least -- at least decrease -- that's pretty sizable. How -- have you seen any change in customer either cancellation rates or perhaps [deliver] dates or are customers pushing out?

No. We haven't seen any meaningful change in cancellation rates on any orders. And in fact, anecdotally, we did have one cancellation, and it was because they found the product from a party. They still wanted a Hologic 3D gantry, but they were able to get it somewhere else and we kind of work that situation separately. But yes, no meaningful change in cancellation rates.

And just given the higher interest rates, any change from customer CapEx budget outlook perspective?

No, we really haven't heard much and think about the gantry as a price tag in that $350,000 range. probably a smaller price tag compared to $1 million robotic instrument and also think about the gantries -- moneymakers for the hospital, they run or breast centers, they kind of operate all day long, and there's good reimbursement there.

And just when you think about innovation within that space, is there anything new that's expected to come within breast imaging.

Yes. Well, we're certainly working on a next-generation gantry. I don't expect any meaningful impact for '24. But we're focused on image quality, workflow and patient experience. So those are the three things you can expect that would be highlighted and focused on the next gen. But Vijay, we've been pretty deliberate in doing updates, whether it's software or other updates that are backwards compatible to that installed base so that people don't have to wait to get enhancements for the next gen. So really trying to get away from that boom bust of a gantry replacement cycle that we've seen in the past and more of a steady cadence of gantry purchasing.

And when you look at the other parts within that segment, your service is making a really big component -- and that's pretty high visibility at [attach rate] when you sell an instrument a gantry, like what's your tax rate on service? Where was that a few years ago? Has that increased?

Yes. So we have a pretty high attach rate on the 3D entry over 80%, some real stickiness with those customers. But I would say, opportunity in the rest of the Breast Health portfolio. So some of our other instruments, say, for instance, Brevera Trident only have about a 60% attach rate. So that there's opportunity there, certainly to drive that attach rate, but really has been healthy on the 3D.

And when you think about what else you could do within that segment, are there any other adjacencies which would make sense just given you have such a leading position in this market?

Yes. So we're always looking across what we call the patient continuum of care. We're the right spots for us to invest in and to be players. But I think more specifically, recently, both internally investing in AI as well as making some bets with some other investments that we're making to make sure that we're a leader in AI at the appropriate time.

And when you look at the LRP of 5% to 7%, I think, Steve, in the past has mentioned perhaps Breast Health segment should be at the lower end of the -- and for me, I'd always thought of gain fees as more for a replacement market. In my mind, it was always like a low single, low single plus -- so help us bridge that sort of disconnect between the view. It's a replacement market versus what gets us to [indiscernible] plus.

Yes. So I think you're not wrong in that the gantry business in a normalized condition is probably at that low single-digit the service is probably between the low to mid-single digit, maybe approaching the mid if we grow that attach rate on other products. And then it's the interventional piece of the business that's probably growing a little stronger high -- mid- to -high single digits that's getting that overall division coupled with international is growing faster than the U.S. as we still have opportunity to go direct in certain key markets that will elevate the revenue growth rate.

I see. I could perhaps international be an opportunity within this segment.

Yes. So certainly, international, there's still opportunity to convert from 2D to 3D as well as the opportunity potentially in newer markets, emerging markets for some lower technology as well.

Understood. And then perhaps switching gears to surgical 6% to 8% guide coming off of, I think, teams last year. Those are some pretty impressive numbers, right? Talk about visibility. What is driving this growth?

So let me just clarify that. I think the guide for surgical is closer to 5% to 7%. It's if you adjust for the selling days, you get to the 6% to 8% -- so that reported is the 5% to 7%. Certainly, '23, there were some benefit of easier comps in the prior period. But yes, over the last 2 quarters, we continue to see nice growth rate in surgical. And it's broad-based. It's continued high single-digit growth with MyoSure. It's double digit -- low double-digit growth with Fluent fluid management. Think about that as an instrument placement along with a disposable, the flow pack that's sold on a per procedure basis. And then finally, it's the acquisitions that we did, the laparoscopic portfolio that is growing double digits as well. So broad-based elements to that division's performance.

And how big is fluent in LAP portfolio within that segment -- is that like 20% of the segment right now, which is growing double digits.

Yes. I think it's rationally probably $100 million product line item. And again, nice recurring element to that product.

And is there a TAM for Fluent, you say that's $100 million, which is growing in double digits?

It's a little hard to quantify. I mean, I think we don't want to cap the potential there as it could use potentially for more and more procedures. And similar to MyoSure, I don't think we have a thought MyoSure be the size it is, but we continue to drive procedure adoption for that product line.

And then MyoSure growth, I think last year was pretty impressive -- came back pretty strongly. Was this just procedure catch-up? Or did something happen in '23, which drove the strong growth?

Yes. I think there's probably like a little element of procedure catch-up as well as, again, the easier comps in the first half of the year. But again, just driving commercial execution with our sales force and driving that revenue.

And when I think about how large is your surgical sales force at this point in time?

Well, we think that's a competitive secret, but it is our largest sales force. And so certainly, even from an M&A perspective, we're always looking at what else can we put in that back bag of the sales force?

Right. Because that's where I was going with my next question. It's a bag, what 3 or 4 product trade. Could you -- even if not outright M&A, would it make sense for you guys to partner with someone else, market other products in a way of products in that segment.

Yes. I mean I think the team is always looking at different opportunities to leverage that sales force. But I think something that's meaningful would likely come from M&A versus a partnership.

Sure. And when you think about the M&A opportunity set within surgical, how is the funnel looking?

Yes, the funnel is good. The teams are active. Certainly, the recent acquisitions, particularly Boulder, really opens the door to more than just GYN surgical procedures. So that's an exciting opportunity.

And just to remind us, what does Boulder do? What does the Acessa do?

Yes, sure. So Acessa is treats larger fibroids. So think about MyoSure treats, I think, 0 to 2 in size, fibroids, smaller and Acessa treats, fibroids that might be on the outer side of the uterus and larger in size using laparoscopic procedure to do that. And then Boulder is vessel sealing capabilities, primarily within pediatrics at this point, but opportunity to expand.

And who do you compete in these markets? Are you guys the market leader?

Yes. Certainly, on NovaSure and MyoSure we're kind of market leader really in a niche perspective, but the competitors would be formable in that area, J&J, Medtronic.

And when you think about the sort of broader women's health category, certainly on the surgical side, robotics, obviously, has been a pretty big theme out there. I'm curious what other kinds of procedures could you attack with an endoscopic minimally invasive approach, which doesn't compete against robotics.

Well, that's an interesting one. I'd have to give that a little more thought and talk with the teams to give you an appropriate answer on that.

Understood. And then maybe a few questions here on the guidance, Karleen. LRP days adjusted 6% to 8%, which came in above your typical 5 to 7, right? Is that 6 to 8 just being driven by this backlog in Breast Health? Or are we seeing strength in other parts of the business?

Yes. I would say, certainly, in the first quarter, the strength and we'll have an itsized growth rate for Breast Health in Q1 as Q1 '23 was another declining quarter I think we'd get to a harder comp for Breast Health in Q2, which was a larger quarter in '23.

Okay.

But then, again, we think about nice growth, both surgical and diagnostics are in that 5% to 7%, probably towards the higher end.

I see. And without, I guess, the breast health -- the backlog within the gantry side should it have been days adjusted within the 5% to 7% LRP?

So minimal impact on the days the breast health impact from days comes from service, right? So the service revenue we take on a daily basis and a little bit on the disposable element, not really much impact on the gantries on the days.

Okay. And then I think you also mentioned like respiratory season. What's the headwind from respiratory season that you're assuming within the guide?

Yes. So think about our respiratory portfolio is relatively new, really launched just prior to the pandemic. Prior to the pandemic, that portfolio did about $20 million to $25 million annually. Think about we did that level of revenue in Q1 alone of 23%. So we have not assumed that level of respiratory demand in fiscal '24. So total respiratory higher than prior to the pandemic, but not that level of elevated testing we saw in Q1.

And so far, I think we're still tracking below last year, right. And given these days headwinds, is there -- should they become like [Calvin] when you're thinking about fiscal '25 because you have an extra week?

No, no. So the extra week was last year in '23. So it's a headwind in '24. And God willing, there's no change in days, '24 to '25.

And then I think some below-the-line guidance assumptions. Interest income was something that caught a lot of attention. Just walk us through on what did the guide assume for interest income just given your sizable cash balance, it seems a little conservative.

It certainly is conservative. So we have assumed probably about $50 million of interest income. So that would have an assumption of deployment of most of our cash in Q2, our fiscal Q2, calendar Q1. I think that was just a -- we didn't want to count on it. So it's just upside.

Okay. And just to be clear, sorry, what is the current guidance you made for interest income?

So the current guide, we gave a range of net interest expense of $40 million to $60 million.

And then I think margins are something which comes up a lot, Karleen. I know there's been a lot of moving parts between the chip shortage, inflation, supply chain disruption I think in the past, you had said base business ex code should be around 30% and then expect some margin expansion off of those levels. What is the base margin right now and when do we get back to that 30% level?

Yes. So let me frame it and step back and frame it a little higher in terms of earnings. So when we talk about our long-term revenue growth of 5% to 7%, we will grow earnings faster. So thinking about growing EPS 10% a year. And so we'll leverage the entire P&L to do that. It won't solely be on operating margin expansion, I think, both significant intentionality on our part to make sure that we're continuing to invest in R&D so that we continue to have that nice organic pipeline. What I would say is in terms of baseline for margins, I think we point Q2 of 2020 just prior to COVID, operating margin was around 31%, right? I think what we'll see is we'll likely exit the year at that rate. Exit '24 at that rate, we'll see improvement as we move throughout the quarter.

Sorry, exiting fiscal '24, you should get that 30% level?

Yes.

And given that you're exiting fiscal '23, but when you think about fiscal '21, should we have like 1 year of abnormal step-up in margins, you normalize at 30% and then you spotting out or -- how should we think about the cadence of margin expansion?

So we haven't given '25 guidance, so we're not going to give it here. But I think if we exit '24 at that 31%, again, I think that's back to a normalized base that we would build from.

Okay. And you said EPS, double-digit EPS growth of 5% to 7% top line -- is that like double digit if revenues came in at the low end of 5%, -- like are we still looking at like 10% EPS? Or is that more of a...

Well, I think what I said is that we'd grow it faster than the 5% to 7%. So maybe if we're at 5%, it's 9%, 8%. But I think we would certainly adjust as we needed to deliver our earnings.

And when you think about the margin cadence throughout the year, right, like high 20s in Q1, exiting Q4 I think low 30s. What's driving that step up when you think about the progression?

Yes. So there's a couple of things that are happening. We're -- one, we're working down the higher-cost chips. So I think we've talked about during the peak of the supply chain crisis. We had to secure chips at exponential costs from what we normally would -- so those are sitting on the balance sheet, and those will turn through the P&L as we work through the backlog. So that will -- that's kind of little front-end weighted. We'll also -- we are also running dual facilities right now for our Breast Health division as we consolidate manufacturing into one new location. So that's, again, a burden that will kind of ease throughout the course of the year. And then in general, some other things where we had higher inflationary costs, we'd expect to kind of ease the course of the year. But in general, even though that gantry will have a higher cost associated with it, it is -- the gantry itself is accretive to the corporate average of gross margins.

So is this a modern cadence entirely almost tripling driven by gross margin step-up? Or is there an operating leverage?

No, there's operating leverage as well. So think about Q1 as our highest operating expense quarter. because this is the quarter where we have our national sales meeting. We have RNA, which is going on the site in Chicago, the radiologist convention, which is a considerable expense for us. And this is the quarter where all on merit and compensation kind of resets to the highest quarter of operating expenses right here.

Got you. And that sorry again, back to that cadence, Q1 versus Q4, how much of this, what percentage of that is the gross margin step-up versus leverage?

It's both. It's full. I don't think we've given that level of detail at this point.

Okay. And I think you mentioned running dual facilities within your Breast Health segment. Is that -- when did that happen, Karleen, I was not aware of this. Is that something new? Or...

Yes. So the project's been underway, you think about it for a couple of years. Obviously, this is something that impacts employees. So I don't think it was something that we were fairly vocal about, but it's really in this year where we actually have the dual operation, and that's why we're talking about it, and it's really the impact is this year.

And is that -- is that -- when is that expected to complete this transition?

It's expected late '24, early '25.

And is there -- once you transition to the new facility, are there any advantages, benefits or just expanding capacity?

So I think there'll be -- we haven't quantitative a number to it, but qualitatively, we will, for the first time, have R&D detector manufacturing and gantry manufacturing under the same roof. I mean that has to have some natural efficiencies to it to have all those teams working together under the same roof. So we're really excited about it.

I see it. And when you say working down higher-priced chips, so these are chips which are on the inventory, which are now flowing through the P&L. So that's pretty high visibility on the gross or expansion cadence.

Yes.

And then when you look at the cash balance here. I think when I look at the M&A history it's been an interesting evolution for Hologic, right? You've had some successes. Once, I think when it went outside your core adjacencies didn't play out pretty well. how you're thinking about from a deal size perspective, hurdle rates that you're looking at?

Yes. So certainly, from a capital allocation perspective, M&A is at the forefront, that is our priority. BD sits within the division. So the divisions are out there identifying assets, cultivating relationships and feel like we've got good pipelines of potential deals. I think we've been patient on acting on deals. We want to see things that are both revenue accretive and earnings accretive. And those things are a little harder to find, unfortunately, and they typically command quite a premium. So being disciplined as we look at those assets.

Would you consider a margin dilutive or EPS dilutive deal if it was accretive to top line?

So I think we did several of those. And so I think we would certainly look at deals and likely, we'll have to look at deals that from a percentage basis are dilutive to operating margins from a percentage perspective, but are actually positive, I think, is where we'd like to look.

Yes. Diluted to more since that I get, but what about deals, which perhaps assets with negative margins.

For the right deal, I think we'd consider it. And again, we've done several of those. I think we're prioritizing deals that are accretive to earnings.

Sure. And what would those -- when you mentioned these areas, right, I'm assuming they're all in adjacencies. Can you give us a flavor of what in those different buckets is the diagnostics is this surgical, where you're looking at?

Yes. I would say that all of the divisions are looking at different assets in different ways. I would say that Diagnostics did a fair number of acquisitions in the '21 time frame that they're still absorbing and working on. And I would say surgical is a really nice spot to look, right? I think there's probably a little more assets in the criteria that I talked about that are actually available. And I think that the surgical leadership team would like to not be the smallest division anymore. So I think that certainly is an opportunity for us.

And what's your current exposure to ASC right now, like I'm assuming the majority of your surgical businesses, ASC exposure?

I don't think so. I don't think so. I think there is a balance there.

And then from a pipeline perspective, anything else that we should be focused on?

Yes. So I'd say, certainly, we talked about a next-gen gantry that is under development. I wouldn't expect anything significant for '24, but potentially in '25 and again, working on image -- quality of image, image improvement workflow and patient experience, trying to improve on all those things. I mentioned AI is certainly in active development, not only in breast but in other divisions as well. Certainly, digital cytology, leverages AI is approved in the EU and looking to -- we'll be excited to get that in the U.S. And then Diagnostics, we continue to develop assays, but believe that there's a lot of run room with the menu that we currently have.

When you think about these new products, should pricing on these new products be incremental should be accretive?

I think it depends on the nature of the product. Certainly, some of the newer assays that have more analytes will have a higher price target in the diagnostics business, certainly a next-gen gantry is going to have a higher price point than the legacy gantry in digital cytology should have some incremental pricing as well.

And the last time, I think when you launched the gantry, it was double-digit price increase. Is that in the ballpark?

I don't think it's that much. I mean we're already a premium-priced gantry. So I don't think we'll be able to have that quite a level of step change.

And then just maybe from a big picture perspective, I look at the stock. The stock's lag, for your growth, your visibility, I don't know if that's the USPSTF headline risk, but what is the Street missing when you just look at the valuation versus the growth outlook you just laid out?

Yes. So I think a couple of things. I think one, the sector in general has been under pressure. And so we haven't -- even though GLP-1s really we don't see an impact to us. Certainly has been, I think, part of the drag. I think the biggest is really this USPSTF concern about updated guidelines. I think we've talked about that at length. At this point, we don't believe it's a significant issue, but I think it's an uncertainty that is out there. And I think as you -- some of the questions that we've addressed here, Vijay, whether it's margin, product mix, supply chain recovery. I think there's just been a lot of nuance to our story, a lot of detail that you have to dig in to understand what's really happening to the underlying growth drivers. And I think at the end of the day, we keep delivering really strong growth. I think we keep delivering on our expectations and even raising expectations as we proceed.

And just to hammer home that point, I think I think was the first time Hologic announced an ASR in the company's history, I think it was $500 million.

It's the second time. The second time, we did a smaller one back in 2020. I think it was -- but yes, so it was exciting to do that and excited about returning some capital to shareholders. And yes, it was a good thing to do.

And what's the timing of this completion for this ASR and share count for Q1?

Yes. So minimal impact for share count in the first quarter through the balance of the year, it's probably close to 7 million shares. And it should be completed, I think, in the second quarter, our second fiscal quarter.

Fantastic. I think -- with that, I'm out of questions. Karleen, thanks so much for being here. This was helpful.

Thank you so much, Vijay.