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UPDATE: Hologic Q1 Revenues Increase 34 Percent on Gen-Probe Acquisition

The story has been updated to include comments from Hologic's earnings conference call.

NEW YORK (GenomeWeb News) – Hologic reported after the close of the market on Monday that fiscal first-quarter revenues jumped 34 percent year over year, aided by its Gen-Probe acquisition completed during the summer.

For the three months ended Dec. 29, 2012, Hologic reeled in a total of $631.4 million in revenues, compared to $472.7 million a year ago. It missed the consensus Wall Street estimate of $645.9 million.

Product sales of $535.2 million were up 36 percent from $392.1 million a year ago, while service and other revenues increased 19 percent to $96.2 million from $80.6 million, the Bedford, Mass.-based firm said.

Revenue growth, it said, was driven by its diagnostics business, which brought in $305.9 million in revenues, compared to $154.1 million a year ago. Diagnostics represented about 49 percent of Hologic's total business in the quarter, CFO Glenn Muir said on a conference call following the release of the firm's earnings results.

On a pro forma basis as if Gen-Probe was part of Hologic in the year-ago period, diagnostics was up in the low-singe digits, Muir said.

Hologic added that the diagnostics revenue jump resulted from the Gen-Probe operations as well as from an uptick in Hologic's legacy diagnostic business, as molecular diagnostic product revenues grew as did international ThinPrep sales.

Hologic did not break out figures for the Gen-Probe business in whole, but Muir said that Gen-Probe's clinical diagnostics operations, which make up two-thirds of that business' total revenues, were up 9 percent year over year, while blood screening was down "slightly" as the result of the timing of instrument sales to Novartis, Gen-Probe's commercial partner in that space.

Gen-Probe launched the Panther system in Europe in late 2010 and last May the FDA cleared the system for marketing in the US. Hologic President and CEO Cascella said on the call that the launch of the instrument "continues to proceed quite well." The initial focus has been on upgrading existing customers using other systems to the Panther platform, but moving ahead the focus will shift to new Panther placements.

Cascella reiterated the company's expectations that 1,000 Panther systems will be placed by the end of Fiscal Year 2015, and said that assays for HPV and HPV genotyping is anticipated to become available for Panther by the end of calendar year 2013.

Meanwhile, Hologic's legacy diagnostic business rose double-digits, driven by HPV sales, Muir said, and ThinPrep revenues rose in the high-single digits.

Women's health molecular diagnostics grew 12 percent year over year in the quarter as Aptima Combo 2 assay sales grew mid- to high-single digits after adjusting for the impact from Hurricane Sandy,Cascella said.

The firm's HPV franchise grew 27 percent year over year as Cervista and Aptima sales improved in the double-digits, he added, and HPV sales remain on track for greater than 20 percent growth for fiscal 2013.

For the quarter, Hologic's R&D expenses increased 82 percent year over year to $51.5 million from $28.3 million, while SG&A costs were up 20 percent to $148.8 million from $124.0 million.

Net income slid to $3.1 million, or $.01 per share, compared to a profit of $20.8 million, or $.08 per share, a year ago. On a non-GAAP basis, EPS was $.38, just beating analyst estimates of $.37.

The firm's bottom line was hit by a variety of charges, including a $3.9 million restructuring charge in the quarter. It also reported a contingent consideration expense of $39.5 million compared to $15.6 million for such expense in Q1 2012, as well as a charge of $28.5 million for amortization of intangible assets compared to a $14.8 million amortization charge the previous year.

Hologic ended its fiscal first quarter with $720.6 million in cash and cash equivalents.

Cascella provided an update on its integration of Gen-Probe on the call and said that Hologic is on track to exceed its target of $40 million in cost synergies in the first year following the acquisition and $75 million within three years.

As a result of the continued successful integration of Gen-Probe, Hologic moved up the timing of a number of planned organizational changes, and in January, it announced Carl Hull is retiring as senior vice president and general manager of diagnostics for Hologic effective Feb. 15.

Hologic originally said that Hull, who had been chairman and CEO of Gen-Probe, would stay on for at least 15 months at Hologic to help steer the diagnostics business.

The acceleration of Hull's departure, Cascella said, "are all related to positive factors in the achievement of internal integration milestones, including a complete sales force training and integration program, our facility relocation plans progressing superbly at this point, the completion of organizational restructuring and customer handoffs, and finally the approval of HPV Genotyping and [Trichomonas] coming sooner than expected."

The US Food and Drug Administration cleared the Aptima HPV 16 18/45 Genotype Assay for use on the Tigris instrument in the fall and the Aprima Trichomonas vaginalis assay for the Panther platform last month.

The company expects to report second-quarter adjusted revenues of between $635 million and $640 million, with the Gen-Probe acquisition and new products driving overall growth. Adjusted EPS is expected to be in the range of $.33 to $.34, the company said.

Hologic also reaffirmed prior guidance for full-year 2013 of adjusted revenues between $2.61 billion and $2.64 billion, but raised adjusted EPS guidance to a new range of $1.58 to $1.60 from an earlier guidance of $1.56 to $1.58, resulting from the recently reinstated federal research tax credit, offset by a "slight increase" in operating expenses.

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