Hologic, Inc. (HOLX): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Hologic posted an improved second-quarter fiscal 2014 with adjusted EPS of $0.37, up 7.9% year over year, which surpassed the Zacks Consensus Estimate by $0.04. Revenues of $625 million were up 2% and exceeded the Zacks Consensus Estimate of $610 million. It also edged past the company's guidance range. Amid looming headwinds such as lower sales of legacy products, a challenging capital spending environment, European uncertainty and increasing pricing pressure, Hologic's topline was boosted by strong performance in the 3D tomosynthesis and MyoSure product lines. Currently, the major goal of management is to sustain top- and bottom-line organic growth going ahead. Besides, it is also working on the divesture of some of its smaller businesses to focus on the more profitable ones. Accordingly, we reiterate the stock at Neutral.

Overview:

Headquartered in Bedford, MA, Hologic Inc. develops, manufactures, and supplies diagnostics, medical imaging systems and surgical products which cater to the healthcare needs of women. The company is focused on mammography systems for breast examination and osteoporosis assessment. The company also provides a comprehensive suite of technologies with products for mammography and breast biopsy, radiation treatment for early-stage breast cancer, cervical cancer screening, and treatment for menorrhagia, osteoporosis assessment, preterm birth risk assessment, and mini C-arm for extremity imaging.

In Aug 2012, Hologic acquired Gen-Probe. Gen-Probe based in San Diego, California, is a leader in molecular diagnostics products and services that are used primarily to diagnose human diseases and screen donated human blood. Gen-Probe's results of operations are reported within Hologic s Diagnostics segment from the date of acquisition. The acquisition has helped Hologic derive the lion s share of its revenues from the diagnostics business and gain access to Gen-Probe's molecular diagnostic platforms of TIGRIS and PANTHER systems. Gen-Probe has a wide portfolio of tests, including the APTIMA franchise used to detect common sexually transmitted diseases (STDs) such as chlamydia and gonorrhea, certain high-risk strains of HPV, and trichomonas products. In addition, Gen-Probe has PROCLEIX line of HIV, HCV, HBV and West Nile Virus (WNV) blood screening products and a partnership with Novartis.

Subsequent to the Gen-Probe deal, Diagnostics went on to become the largest segment at Hologic (representing 45% of the total sales in the second quarter of 2014). Hologic operates through the following four segments:

Diagnostics: With the Gen-Probe acquisition, Hologic currently offers APTIMA family of assays that includes the APTIMA Combo 2 assay, which feature the APTIMA CT and APTIMA GC assays for the detection of Chlamydia and gonorrhea, respectively, the APTIMA HPV assay for the detection of 14 sub-types of high-risk HPV associated with cervical cancer, and the APTIMA Trichomonas assay for the detection of Trichomonas vaginalis, the parasite that causes trichomoniasis.

The company also develops instrumentation and software designed specifically for performing certain diagnostic assays, including the APTIMA family of assays and the PROCLEIX family of assays in the blood screening market. The instrumentation includes the TIGRIS system (an integrated, fully-automated testing instrument for high-volume laboratories which is approved for use with a number of APTIMA and PROCLEIX assays), the PANTHER instrument system (an integrated, fully automated testing instrument for low- to mid-volume laboratories, and semi-automated direct tube sampling (DTS) instruments used to run a number of infectious disease and blood screening assays.

Other products include the ThinPrep system, primarily used in cytology applications such as cervical cancer screening and the Rapid Fetal Fibronectin Test, for pre-term birth risk assessment. Moreover, the molecular diagnostic reagents are used for various DNA and RNA analysis applications. The current molecular diagnostic offerings include Cervista HPV high risk (HR) and Cervista HPV 16/18 products to assist in the diagnosis of human papillomavirus (HPV), as well as other products to diagnose cystic fibrosis, cardiovascular risk and other diseases.

Breast Health: Products include a broad portfolio of breast imaging and related products and accessories, including digital and film-based mammography systems, computer-aided detection (CAD), breast biopsy guidance systems, minimally invasive breast biopsy and tissue extraction devices and breast brachytherapy products. The advanced breast imaging platform Dimensions, utilizes tomosynthesis technology to produce both three-dimensional (3D) and two dimensional (2D) full field digital mammography images. In Feb 2011, Hologic had received approval from the U.S. Food and Drug Administration (FDA) to enable the 3D tomosynthesis capability of the Dimensions system.

GYN Surgical: Products include the NovaSure endometrial ablation system and the MyoSure hysteroscopic tissue removal system. NovaSure system is a minimally invasive procedure for the treatment of heavy menstrual bleeding while MyoSure is a tissue removal device to provide incision less removal of fibroids and polyps within the uterus. Following the acquisition of Interlace Medical in 2011, the MyoSure system was added to the GYN Surgical product portfolio. Subsequent to the receipt of 510k clearance for the pre-market application for the Aquilex fluid control system in Feb 2012, the company has started to commercialize the system. The Aquilex system is for hysteroscopic procedures and is designed to reduce procedure and anesthesia time while providing high quality visualization to the surgeon.

In 2012, management decided to cease the manufacturing, marketing and selling of the Adiana system as it was found to be financially unviable and was expected to remain so in the foreseeable future.

Skeletal Health: This segment includes dual-energy X-ray bone densitometry systems, an ultrasound-based osteoporosis assessment product, and Fluoroscan mini C-arm imaging products.

Revenue breakup


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CAD , HOLX , HR

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