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Hologic Reports 3 Percent Drop in Q1 Revenues

NEW YORK (GenomeWeb News) —Hologic reported after the close of the market on Monday that fiscal first-quarter revenues declined 3 percent year over year, although its molecular diagnostic product sales helped mitigate this decline.

For the three months ended Dec. 28, 2013, Hologic's revenues totaled $612.4 million compared to $631.4 million a year ago, but besting the consensus Wall Street estimate of $609.7 million.

Product sales of $512.4 million declined 4 percent from $533.3 million a year ago, while service and other revenues edged up slightly to $100 million from $98.1 million, the Bedford, Mass.-based firm said.

Diagnostics revenues declined nearly 7 percent to $285.8 million from $305.9 million in the prior year. On an adjusted basis, which includes a $13.3 million prior-year addition primarily related to contingent revenues earned and received under its eliminated blood screening collaboration with Novartis, Diagnostics sales declined almost 11 percent.

Hologic attributed the decline in Diagnostics revenues primarily to three items: the divestiture of its Lifecodes business in March 2013, which generated revenues of $12.6 million in fiscal Q1 2013; decreases in ThinPrep pap test sales in the US, as well as lower sales prices internationally; and a decrease in blood screening revenues from lower West Nile virus assay sales.

Hologic said that increases in molecular product sales from its Aptima product line partially offset these declines, although it did not disclose specific sales figures for its molecular business.

Meantime, Breast Health revenues grew nearly 3 percent to $226.5 million compared to $220.8 million a year ago; GYN Surgical revenues fell 3 percent to $78.9 million from $80.9 million; and Skeletal Health revenues decreased 10 percent to $21.3 million from $23.7 million.

For the quarter, Hologic's R&D expenses dropped 5 percent year over year to $48.7 million from $51.5 million, while SG&A costs were up about 2 percent to $151.1 million from $148.8 million.

Hologic took a net loss of $5.4 million, or $.02 per share, compared to a profit of $3.1 million, or $.01 per share, a year ago. On a non-GAAP basis, EPS was $.34, ahead of analyst estimates of $.31.

Hologic ended its fiscal first quarter with $448.6 million in cash and cash equivalents.

In December Hologic named former Stryker executive Stephen MacMillan as president and CEO, replacing Jack Cumming less than five months after Cumming returned for a second stint as head of the company.

The company in December also added Jonathan Christodoro and Samuel Merksamer, managing directors at Icahn Capital, to its board, pursuant to a settlement agreement with Icahn Capital, which had indicated a month earlier that it intended to purchase more than 12 percent of Hologic's outstanding shares, prompting Hologic to implement a poison pill provision.

Hologic had also initiated a strategic review of the company under Cumming's brief tenure, and MacMillan noted today that the review is drawing to an end.

"Prior to my joining the company, a strategic review process was already underway," MacMillan said during a conference call today recapping the company's earnings. "I have become involved in that process, building on a lot of the work that has been done. We expect to wrap up that process during the current quarter, and although not entirely complete, our expectation at this time is that there will be no major changes to our corporate structure, though we may pursue some select, smaller divestitures."

MacMIllan noted that Hologic's two clearly defined near-term goals are to return the company to "sustainable top- and bottom-line organic growth" and to pay down debt. He briefly outlined a three-pronged plan to achieve these goals.

"First, accelerate growth of the core drivers in each of our key franchises. Second, slow the declines of the businesses facing headwinds. And third, expand our key franchises [of diagnostics, breast health, and surgical] outside of the US," MacMillan said. "We have key platforms in each of these businesses that are in the early stages of a sustainable growth period that we can build on."

Further detailing Hologic's goal of increasing its business overseas, MacMillan noted that the company has "significant untapped opportunities abroad. Currently our international business represents only a quarter of our total sales. We will be dialing up the focus outside the US to expand our breakthrough technologies around the world."

During the quarter Hologic submitted voluntary prepayment of an additional $100 million on a Term Loan B facility and redeemed in full $405 million of principal of the 2 percent Convertible Senior Notes issued in 2007.

Hologic's biggest product-related highlight of the quarter was US Food and Drug Administration approval in November of the company's Aptima HPV 18/45 genotype assay for use on the Panther molecular diagnostics system.

The company expects to report fiscal second-quarter revenues of between $605 million and $615 million, which would be a year-over-year decrease of 1 percent to 2 percent from fiscal 2013 Q2 adjusted revenues of $619.1 million, with the prior year reflecting the addition of $6.4 million primarily related to a purchase accounting adjustment in the second quarter.

Adjusted EPS is expected to be in the range of $.32 to $.34 in fiscal Q2, the company said.

Hologic also reaffirmed prior guidance for full-year 2014 of adjusted revenues between $2.43 billion and $2.48 billion, representing a decrease of 1 percent to 3 percent from FY2013 revenues. The company also said it expects adjusted EPS of $1.34 to $1.38 as compared to the guidance of $1.32 to $1.38 it provided on Nov. 12. This includes an incremental reduction in EPS from the prior year of $0.02 from the impact of the medical device excise tax and $.05 from an increase in the expected annual effective tax rate, Hologic said.