Hologic posted a dismal fourth-quarter fiscal 2013 with adjusted
EPS of $0.35, $0.02 below the Zacks Consensus Estimate. It also
failed to meet the company's expectation. Revenues of $622.1
million also missed the mark. Amid looming headwinds such as lower
sales of legacy products, European uncertainty and increasing
pricing pressure, Hologic posted a disappointing guidance for
fiscal 2014. If the dull fiscal 2014 guidance is any indication,
the ongoing concerns are likely to persist in the coming fiscal. We
also fail to believe that several recent upsides in the breast
health such as higher uptake of tomosynthesis, acquisition
synergies and competitive wins in key markets will have any
immediate positive impact on the company's performance. In absence
of any near-term catalyst to pull the shares up, we downgrade the
stocks to Underperform.
Headquartered in Bedford, Mass., 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 became the largest
segment at Hologic (representing 47% of the total sales in the
fourth quarter of 2013). Hologic operates through the following
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
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.
In Nov 2013, the U.S. Food and Drug Administration (FDA)
approved the Aptima HPV 16 18/45 genotype assay for use on the
company's fully automated Panther system.
In Jul 2013, the U.S. FDA approved Hologic's Aptima HPV assay
for use on the Company's fully-automated Panther system.
In Mar 2013, Hologic completed the divestment of its Lifecodes
business unit to Immucor Inc. Earlier, on Jan 3, the company had
announced its definitive agreement to sell its Lifecodes business
in order to focus on its core business activities. The Lifecodes
business of Hologic comprises of transplant diagnostics division.
Per the agreement, Hologic received cash payment of $85 million
(adjusted for working capital items). The company might also
receive a contingent payment of $10 million from Immucor depending
on the fulfillment of certain financial goals for the ongoing
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 received approval from the FDA to enable the 3D
tomosynthesis capability of the Dimensions system.
In Jul 2013, Hologic launched the world's first 3D breast biopsy
option. This technology was developed for the Company's Affirm
upright breast biopsy guidance system, which is used in conjunction
with the Selenia Dimensions 2D and 3D mammography systems.
In Jan 2013, the company disclosed results from the crucial Oslo
clinical study which advocates the use of Hologic's 3D breast
tomosynthesis screening technology in addition to the 2D breast
screening exam. Management considers this to be a landmark
revelation as the Oslo trial is the first large-scale prospective
study to support its 3D tomosynthesis technology platform.
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 manufacturing, marketing
and selling the Adiana system as it was found to be financially
unviable and was seen as remaining so in the foreseeable
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.
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