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Gen-Probe Acquisition Drives up Hologic's Q2 Revenues 30 Percent

NEW YORK (GenomeWeb News) – Hologic reported after the close of the market on Monday that its fiscal second-quarter revenues increased 30 percent year over year, driven by the inclusion of sales from its Gen-Probe business, which Hologic acquired at the end of July.

The Bedford, Mass.-based company brought in revenues of $612.7 million for the three months ended March 31, compared to $471.2 million a year ago, but it missed the average Wall Street estimate of $639.4 million.

The $612.7 million figure is net of a $6.4 million adjustment related to contingent revenue earned and received under a collaboration between Gen-Probe and Novartis. On a non-GAAP adjusted basis, Hologic had revenues of $619.1 million for the quarter.

On a pro forma basis, revenues were flat year over year, Hologic President and CEO Rob Cascella said on a conference call following the release of the earnings results.

Currency effects reduced revenues by about $400,000, the company said.

Product sales were up 33 percent to $518.0 million from $388.1 million, while service and other revenues increased 14 percent to $94.6 million from $83.1 million.

By segment, the Diagnostics business had $296.5 million in revenues for the quarter, net of the $6.4 million adjustment related to the Novartis collaboration. That represents a 95 percent increase from $151.8 in revenues recorded by the segment during the fiscal second quarter of 2012. Including the $6.4 million, non-GAAP revenues were $302.9 million during the recently completed quarter.

On a pro forma basis, Diagnostic revenues were flat year over year.

Gen-Probe contributed $160.4 million in revenues in the quarter, partially offsetting softness in the ThinPrep business in the Diagnostics segment. On a pro forma basis, Gen-Probe was up 6 percent year over year, CFO Glenn Muir said on the call.

Cascella added that synergies from the Gen-Probe acquisition continue to track ahead of plan and are expected to exceed $60 million in the first year of the deal, compared to an initial target of $40 million.

Overall, the Diagnostics business was challenged, in particular the cytology business, though Hologic's molecular business saw "solid growth and market share gains" during the quarter, Cascella said.

Placements of the Panther system that was acquired with Gen-Probe continue to exceed expectations, he said.

"We are finding interest in Panther is driven not only by its superior automation capabilities but also a significant interest among lab customers for consolidating test menus onto a single platform," Cascella said.

The Aptima assays for chlamydia and gonorrhea and for Trichomonas continue to show broad appeal, he added, and adoption of the assays are expected to ramp up when Hologic receives approval from regulators for its Aptima HPV assay on the Panther system. He said approval is expected by the end of its Fiscal Year 2013 at the end of September.

He said that the HPV franchise "continues to demonstrate impressive growth, increasing more than 45 percent on a year over year basis." Hologic's market share of the HPV space is about 20 percent and is anticipated to be firmly in the mid-20's by year-end, Cascella said.

The Aptima assay for Trichomonas grew 57 percent over a year ago and the company anticipates further growth to be driven by the recent US Food and Drug approval of the assay for the Panther system. Meanwhile, the Aptima Combo 2 assay was up 7 percent year over year, with international revenues up 15 percent and US revenues rising 6 percent.

Hologic's Breast Health segment saw revenues increase a fraction of 1 percent to $220.1 million from $218.6 million, while GYN Surgical revenues narrowed almost 5 percent to $73.7 million from $77.2 million a year ago. Skeletal Health revenues also were down almost 5 percent to $22.4 million from $23.5 million.

Hologic's net loss for the period increased to $51.1 million, or $.19 per share, from a net loss of $40.3 million, or $.15 per share, a year ago. On a non-GAAP basis, EPS was $.35 per share, inching past the consensus Wall Street estimate of $.34.

The firm's R&D costs rose 69 percent to $49.6 million from $29.3 million a year ago, while SG&A costs increased 27 percent to $152.8 million from $120.4 million.

Hologic recorded a gain of $12.5 million on the sale of IP during the quarter compared to a gain of $783,000 a year ago. It posted restructuring and divestiture charges of $607.1 million in the recently completed quarter, up from $461.0 million in the year-ago period.

During the quarter it sold its LifeCodes business to Immucor for up to $95 million.

Hologic finished the quarter with $752.2 million in cash and cash equivalents.

"The fundamental long-term revenue growth drivers of our business remain strong," Cascella said in a statement. "The Gen-Probe acquisition has greatly strengthened our Diagnostics business, and we are seeing increasing numbers of Diagnostics account conversions and competitive wins.

"We will continue to aggressively execute our long-term strategy. Despite some short-term revenue volatility, our overall business is quite healthy with strong profitability and outstanding cash flows," he added.

Hologic gave revenue guidance for its fiscal third quarter of between $625 million and $630 million. During the third quarter of 2012, the company recorded revenues of $470.2 million.

The Gen-probe acquisition is anticipated to drive revenue growth in the quarter and continued ramp-up of new products including Panther, tomosynthesis, and MyoSure tissue removal systems are also expected to contribute to revenue growth, Hologic said.

Non-GAAP adjusted EPS for the third quarter is expected to be between $.36 and $.37.

For full-year fiscal 2013, Hologic lowered its non-GAAP adjusted revenues guidance to a range of $2.53 billion to $2.55 billion. It had previously guided to a range of $2.61 billion to $2.64 billion. The company had non-GAAP adjusted revenues of $2.01 billion in Fiscal Year 2012.

Non-GAAP adjusted EPS was lowered to a $1.54 to $1.56 range. During the fiscal first quarter, the company guided to a range of $1.58 to $1.60.

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