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Hologic Q4 Revenues Rise 11 Percent

NEW YORK (GenomeWeb) – Hologic reported after the close of the market on Wednesday that its fourth quarter revenues rose 11 percent, driven in part by double-digit growth in its molecular diagnostics business.

For the three months ended Sept. 30, the firm reported revenues of $802.9 million up from $726.8 million a year ago, beating the average consensus Wall Street estimate of $792.5 million. On a constant-currency basis, revenues rose 10 percent year over year.

Excluding the net impact of its acquisition of Cynosure — a medical aesthetics systems and technologies company that Hologic purchased in Q1 — and divestiture of its blood screening business, Q4 revenues increased 5 percent, the company said.

On a conference call with analysts to discuss the financial results, Hologic Chairman, President, and CEO Steve MacMillan said that in the past fiscal year, the firm took three important steps to solidify its growth profile for the long term. "First, we laid the foundations for sustainable growth internationally. Second, we shifted our business portfolio toward higher-growth segments with the divestiture of blood screening and the acquisition of Cynosure. And third, we began to launch new products that reflect increasing innovation from our revitalized research and development pipeline," MacMillan said.

He added that growth accelerated in Hologic's two largest businesses — breast health and diagnostics — compared to the third quarter, and that revenues from the Cynosure business "bottomed out and should start to grow on a sequential basis from here."

Diagnostics, he said, has emerged as a "sustainable growth driver for the company," specifically fueled by growth in molecular diagnostics.

Revenues from Hologic's overall diagnostics business fell 7 percent year over year to $291.7 million from $311.9 million. Within that segment, molecular diagnostics sales grew 14 percent to $153.5 million from $134.3 million in Q4 2016. Molecular diagnostics sales growth was driven primarily by continued strength across the firm's Aptima women's health products globally, Hologic said.

MacMillan noted that molecular diagnostics sales had the benefit of $9.5 million in non-recurring royalty revenue in the quarter, compared to $5 million in the prior-year period. Backing out royalty revenues, "underlying molecular sales still increased 10.9 percent globally," he said, adding, "The [molecular diagnostics] business results were very strong internationally, posting growth of 10.3 percent against a very tough prior-year comparable of roughly 15 percent."

Also within the overall diagnostics business, cytology and perinatal segment sales were down less than 1 percent to $120.2 million from $121.0 million, due primarily to lower sales of perinatal products, and the firm's blood screening revenues dropped 68 percent to $18.0 million from $56.6 million.

Removing the effect of blood screening product sales, total diagnostics revenues rose 7 percent year over year to $273.7 million from $255.3 million.

Sales for the firm's breast health products grew 3 percent to $300.9 million from $292.3 million, while sales for its skeletal health products were up 14 percent to $24.2 million from $21.1 million. The gynecology surgical business grew 3 percent to $104.7 million from $101.5 million in the prior-year quarter. Hologic also booked $81.4 million in medical aesthetics product sales in the quarter.

The firm's US sales rose more than 6 percent in the quarter to $613.0 million. Its international revenues grew 28 percent to $189.9 million.

The company reported Q4 net income fell to $82.7 million, or $.29 per share, from $92.2 million, or $.33 per share in Q4 2016. On an adjusted basis, Hologic reported earnings per share of $.50, beating the average analysts' estimate of $.49.

The firm’s R&D costs fell 3 percent to $60.5 million from $62.5 million in Q4 2016, and its SG&A costs rose 35 percent to $230.3 million from $171.2 million.

For full-year 2017, Hologic's revenues rose 8 percent to $3.06 billion from $2.83 billion in 2016, beating the average analyst estimate for yearly revenues of $3.05 billion. Product revenues rose to $2.54 billion from $2.38 billion, while service and other revenues rose to $520.8 million from $453.7 million.

The firm's net income for the year rose to $755.5 million, or $2.64 per share, from $330.8 million, or $1.16 per share, in 2016. On an adjusted basis, the firm reported 2017 EPS of $2.03, beating the average analyst estimate for EPS of $2.01.

The firm’s R&D costs for the year stayed fairly flat at $232.8 million, and its SG&A costs rose 23 percent to $841.9 million from $682.4 million.

Hologic ended the year with $540.6 million in cash and cash equivalents.

In Q1 2018, the firm expects revenues in the range of $775 million to $790 million, EPS in the range of $.25 to $.27, and adjusted EPS of $.48 to $.50. Analysts are expecting Q1 revenues of $813.1 million, and EPS of $.52.

In full-year 2018, the company expects revenues of $3.20 billion to $3.28 billion, EPS of $1.22 to $1.27, and adjusted EPS of $2.10 to $2.15. Analysts are expecting revenues of $3.3 billion and EPS of $2.15 for 2018.

MacMillan said that in 2018, the company expects mid-single-digit growth in diagnostics, excluding blood screening. He added that molecular product revenues "should continue to lead the charge behind Panther and an extended menu, including the full suite of virology assays which we expect to have in the US with [clearance] of the HCV test around the middle of the fiscal year. We anticipate continued strong international growth in diagnostics as well."

Hologic CFO Bob McMahon noted on the conference call that the firm continued to optimize its debt structure in Q4, and allocate capital in accordance with its stated priorities. "We took advantage of weakness in our share price to opportunistically reduce our convertible debt and repurchase our common stock," he said.  "Specifically, we retired $86 million in principal of our convertible notes for a total purchase price of $106 million. In addition, we repurchased 5.3 million of our outstanding shares for a total of $200 million."

He also noted that in early October, the firm issued $350 million in senior notes maturing in 2025 at an interest rate of 4.375%. It also entered into an amended and restated credit agreement consisting of a new, five-year $1.5 billion senior term loan and $1.5 billion revolving credit facility.

In a note to investors on Thursday, Piper Jaffray analyst William Quirk said that Cynosure "remains weak, with the personnel transitions still affecting the business." On the positive side, Quirk added, diagnostics and breast health revenues outside the US "are growing double digits, and we believe that can continue augmented by new products."

Hologic's shares declined less than 1 percent to $39.43 in Thursday morning trading on the Nasdaq.