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Hologic Q2 Revenues Up 6 Percent

NEW YORK (GenomeWeb) – Hologic reported after the close of the market on Wednesday that its second quarter revenues rose nearly 6 percent thanks in large part to a double-digit growth in its US business.

For the three months ended March 26, the diagnostics firm reported revenues of $693.3 million, up from $655.5 million a year ago, and beating the consensus Wall Street estimate of $687.3 million.

On a conference call with analysts, CEO Stephen MacMillan said he is happy with the quarter's overall results, adding that the numbers show the strength of the company's business model. He highlighted the growth in US sales, Hologic's ability to improve operating and gross margins while making new investments in its business, and a new phase of the firm's capital allocation strategy that includes repurchasing its own common stock while paying down debt.

Its US sales rose nearly 11 percent in the quarter to $547.9 million, offsetting a 9 percent drop in international sales to $145.4 million, the company said. In the US, the gynecology surgical business had the biggest overall gain with sales increasing 14 percent year over year. International sales were lower because of an expected drop in blood screening and discontinuation of certain products, MacMillan said.

In a bid to improve the European business, COO Eric Compton has made several important organizational changes internationally in recent months, MacMillan added. The firm has moved a key US breast health manager to Europe and has signed new performance-based contracts with top dealers in Europe. Hologic has also hired a new European head of service, as well as new leaders for the marketing, diagnostics, surgical, and regulatory departments.

Revenues from Hologic's global diagnostics business were up almost 3 percent year over year. Within that segment, molecular diagnostics sales grew 5 percent to $126.1 million from $119.7 million in Q2 2015, while cytology and perinatal sales were up nearly 3 percent at $116.1 million versus $113.3 million. The firm's blood screening revenues dropped around 2 percent to $62.2 million from $63.7 million.

Sales for its breast health products jumped 8 percent to $275.8 million from $255.5 million, while revenues for its GYN surgical business increased 15 percent year over year to $90.9 million from $79.1 million, and sales for its skeletal health products were down almost 9 percent to $22.2 million from $24.2 million.

The growth in the domestic breast health business was based on continued adoption of the firm's Genius 3D mammography systems, MacMillan told analysts. The company believes it can continue to gain market share while maintaining stable prices in this area. The Genius system is only a third penetrated into the company's installed base and only 20 penetrated in the market as a whole, leaving room for many more systems to be placed, MacMillan added. He also highlighted recent studies that have shown that the system's benefits, such as improved cancer detection, can be sustained and improved over time with consecutive use.

The company reported net income of $68.9 million, or $.24 per share, up from from $47.8 million, or $.17 per share. On an adjusted basis, Hologic reported EPS of $.47, beating analyst estimates for EPS of $.46.

Its R&D costs rose 11 percent to $59.1 million from $53.3 million in Q2 2015, and its SG&A costs rose 14 percent to $163.2 million from $143.3 million.

The firm plans to make R&D a sustainable driver of growth in the next few quarters, MacMillan said. In the diagnostics business, the firm has a robust menu of assays spanning women's health and virology. It has just received CE marks for its HIV, hepatitis C, hepatitis B, and Mycoplasma genitalium assays in Europe. He added that Hologic has filed for premarket approval with the US Food and Drug Administration for its HIV viral load assay, and plans to file a PMA for its hepatitis C assay later this year. The firm also expects to launch a new biopsy tool called Brevera in 2017, which allows for real-time analysis of biopsy samples.Hologic ended the quarter with $316.3 million in cash and cash equivalents.

For the third quarter, the company expects revenues of $695 million to $705 million and earnings per share of $.47 to $.48. Analysts have estimated revenues of $717.0 million and EPS of $.48 for Q3. The company also updated its guidance for 2016 to revenues of $2.81 billion to $2.83 billion and EPS of $1.89 to $1.91. Analysts, on average, expect revenues of $2.83 billion and EPS of $1.89.

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