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Hologic Q1 Diagnostic Revenues Grow 6 Percent

NEW YORK (GenomeWeb) – Hologic reported after the close of the market Thursday that revenues for its first quarter of fiscal year 2018 were up 8 percent year over year, driven by strength in breast health, molecular diagnostics, and its international businesses.

For the three months ended Dec. 31, 2017, the firm reported revenues of $791.1 million, up from $734.4 million in the prior year, above the consensus Wall Street estimate of $785.9 million and in line with its preliminary projections.

In diagnostics, Hologic reported fiscal Q1 revenues of $284.6 million, down 13 percent from $325.4 million in the prior-year period. Excluding Hologic's divested blood business, diagnostics products revenues rose 5 percent year over year to $272.0 million from $260.2 million.

Within diagnostics, the firm posted molecular diagnostics revenues of $148.6 million, up 6 percent from $139.9 million in fiscal Q1 2017. Hologic reported blood screening revenues of $12.6 million, down 81 percent from $65.2 million in the prior-year period. The firm's cytology and perinatal business posted revenues of $123.4 million, up 3 percent from $120.3 million in the prior-year quarter.

In the diagnostics business segment, molecular products sales were driven primarily by continued strength across Aptima women's health products globally, Hologic said. The increase in cytology and perinatal sales was due primarily to an increase in perinatal sales, and the decrease in blood screening sales was due to the divestiture of the business in the second quarter of fiscal 2017.

In other business segments, revenues from Hologic's breast health business rose 5 percent to $288 million from $273.3 million in the prior-year period. Its medical aesthetics business, acquired with Cynosure in March 2017, posted $91.3 million in revenues in fiscal Q1 2018. The firm's gynecologic surgical business revenues dropped 6 percent to $107.5 million in Q1 from $114.8 million in the prior-year quarter, and its skeletal health business revenues dropped 6 percent to $19.7 million from $20.9 million in the prior-year quarter.

Hologic noted that it had four fewer selling days in the Q1 of fiscal 2018 than in the prior-year period.

On a conference call following the release of earnings, Steve MacMillan, Hologic's chairman, president, and CEO, said that core international revenue, excluding the acquired Cynosure and divested blood-screening franchises, delivered double-digit growth in the first quarter.

"A research and development pipeline that was barren four years ago has now generated new products that are contributing more than 10 percent of quarterly sales," he said. 

He noted that global growth in the diagnostics business segment was driven by revenues for the Panther system, its fully automated molecular diagnostics instrument, and increasing utilization of its Aptima women's health assays used to test for chlamydia, gonorrhea, HPV, and trichomonas.

"We continue to work with our customers to expand the market for sexually transmitted disease testing, providing better healthcare through earlier detection," he said. "At the same time, sales of our new molecular diagnostics tests are steadily increasing. Although their overall impact remains small … over the past six quarters, our diagnostics business has earned regulatory clearance for seven new products in the United States."

The firm posted a net income of $406.7 million, or $1.45 per share, compared to $86.5 million, or $0.30 per share, in the prior-year quarter. It said that the increase in net income was due primarily to the effects of the new US tax legislation. Based on a preliminary calculation, Hologic estimated a $329.2 million discrete net tax benefit for the recently completed quarter.

On a non-GAAP basis, its EPS was $.55, beating analysts' consensus estimate of $.50.

Hologic spent $54.8 million on R&D in fiscal Q1 2017, up almost 1 percent from $54.4 million in Q1 2017. Its SG&A expenses were $217.4 million, up 21 percent from $179.8 million in fiscal Q1 2017.

The firm reported cash and cash equivalents of $664.4 million as of Dec. 31, 2017.

Hologic reiterated its previous revenue guidance of between $3.20 billion and $3.28 billion for full-year fiscal 2018, which would represent an increase of 4.6 percent to 7.2 percent year over year. The firm said that it expects EPS to be in the range of $2.36 to $2.41, up from a previous guidance of $1.22 to $1.27 per share.

On a non-GAAP basis, EPS is expected to be in the range of $2.22 to $2.27. Prior guidance was for a range of between $2.10 and $2.15.

The firm also guided to revenues of $770 million to $785 million, and EPS of between $.27 and $.28 for fiscal Q2 2017. Non-GAAP EPS is projected to be in the range of $.53 to $.54.

The firm said that primarily as a result of the recent passage of comprehensive US tax reform legislation, it expects its non-GAAP effective tax rate to be approximately 23 percent to 24 percent in fiscal 2018, lower than its prior guidance of about 31 percent. 

In a research note Thursday, Piper Jaffray analyst William Quirk said that similar to several other companies in the diagnostics space, Hologic is letting about 50 percent of the benefit from changes to US tax legislation drop to the bottom line, and it is investing the balance across various R&D projects and marketing support for the CynoSure and surgical businesses.

In early morning trading on the Nasdaq, Hologic's shares were down more than 4 percent to $37.24.