NEW YORK (GenomeWeb News) – Investment bank Cowen and Co. has downgraded Hologic's stock from Outperform to Market Perform and lowered its price target on the shares.
The bank cited growth headwinds for Hologic's NovaSure, ThinPrep, and legacy 2D mammography sales, as well as Gen-Probe pricing pressures. It said that, overall, the positives for the firm are not occurring quickly enough to offset these headwinds.
"While adoption of 3D tomosynthesis appears to be moving in the right direction it does not appear poised for rapid near-term acceleration," Cowen analyst Doug Schenkel wrote in a research note published today. He added that while adoption of Gen-Probe's Panther platform "appears to be tracking well, pricing pressure is a key concern."
The Panther system, a fully automated and integrated molecular testing platform, was cleared for marketing by the US Food and Drug Administration in May 2012. Recently, Hologic announced that the FDA had cleared Gen-Probe's Aptima HPV 16 18/45 genotype assay for use on the system.
"We remain positive at the start of an important new product cycle for the Gen-Probe franchise, anchored by the Panther system, but are less optimistic about potential upside related to the Gen-Probe franchise in the context of [Fiscal Year 2014] guidance and are increasingly concerned about pricing pressures due to market conditions and pricing concessions to win large deals such as the Quest Diagnostics one," Schenkel wrote.
Hologic and Quest in June announced a five-year strategic alliance aimed at women's health testing.
The following month Hologic replaced President and CEO Rob Cascella with Jack Cumming, a previous CEO of the firm, who immediately began a strategic business review. In the midst of this review, Hologic adopted a stockholder rights plan just two weeks ago in response to notification by a hedge fund headed by Carl Icahn of its intentions to acquire a stake in the firm.
"Our analysis suggests it is not obvious how strategic alternatives could create material additional shareholder value in the near term," Schenkel wrote in his note. "Our leveraged buy-out, sum-of-the-parts, break-up, and merger analyses do not reveal a clear path towards meaningful upside, at least in the near term."
Among potential acquirers cited by Schenkel were General Electric, Johnson & Johnson, Abbott, Danaher, and Siemens — though he cited obstacles to each of these in doing such a deal. For example, he said it would be unlikely GE or Siemens would clear antitrust hurdles since Hologic's mammography instruments represent roughly 60 percent of the installed base in the US.
In addition to downgrading the stock, Schenkel lowered his price target to $24 from $25.50.
In early Monday afternoon trading on the Nasdaq, shares of Hologic were up a fraction of 1 percent at $22.49.