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Gen-Probe to Become Hologic's Diagnostics 'Hub,' Official Says at Investor Conference

NEW YORK (GenomeWeb News) – Once the $3.7 billion Hologic acquisition of Gen-Probe is completed, Gen-Probe will become the "hub" of Hologic's diagnostics business, and in addition to selling the San Diego company's test to labs, Hologic will also target obstetricians and gynecologists, a company official said on Wednesday.

Hologic has started planning for the integration of Gen-Probe into its operations and formed integration teams, and once the deal passes regulatory and shareholder approval, the additional molecular diagnostics capabilities that Gen-Probe brings to Hologic will drive its diagnostics business, Hologic CFO Glenn Muir told investors at the William Blair & Co.'s 32nd Annual Growth Stock Conference in Chicago.

"So all of our diagnostics will now come out of San Diego," he said.

During his presentation, Muir said the deal, which is expected to close during the summer, will increase Hologic's revenue and earnings potential. In particular, he noted Gen-Probe's strength in the gonorrhea/chlamydia arena, where it has 60 percent of market in the US.

In the cervical cancer space, Gen-Probe "allows us a large breadth of the market to go after, so there's a number of different products that we can now use," such as Gen-Probe's Aptima products and Hologic's Cervista portfolio, and the combined business means Hologic will be able to target every laboratory size, from the high-volume lab to the low-volume lab, Muir said.

In addition to its lab sales force which sells directly to laboratories, Hologic has a physician sales force, and it intends to use that part of its operations to promote Gen-Probe's tests directly to obstetricians and gynecologists to prescribe the tests.

"So we believe that we could use that hundred person sales force to drive greater compliance for things like in the CT/NG area, where a recent CDC study showed that guidelines are only being followed 38 percent of the time, so there's a large area of improvement here to meet current guidelines," Muir said during his presentation, which was webcast. He also noted similar opportunities in trichomonas and HPV, disease areas in which Hologic would employ a similar strategy.

And outside of the US, Hologic has a distribution network almost three times the size of Gen-Probe's in Europe, Muir said, while in China, Hologic has more than 700 people, with about 500 associated with its diagnostics business.

In terms of cost synergies, Hologic believes it will achieve $75 million in savings in three years, and Muir said on Wednesday that about half of that will come from research and development. In a research note yesterday, William Blair analyst Brian Weinstein added that the R&D savings will come from redundant Third Wave efforts.

About 40 percent of cost synergies is expected to result from "rationalizing the overlapping functions between the two companies and consolidating overhead," Weinstein said, and the remaining 10 percent will come from "leveraging cost of goods sold by consolidating some manufacturing and rationalizing field service and support," Weinstein said.

Gen-Probe CEO Carl Hull has agreed to stay on at Hologic to run the combined diagnostics business, Muir said. According to Weinstein, Hull will stay at Hologic for at least 15 months after the close of the deal, and the two sides are currently negotiating a formal contract.