NEW YORK (GenomeWeb) – Hologic reported after the close of the market on Wednesday that its fiscal fourth quarter revenues rose 1 percent, driven in part by growth in its breast health and molecular diagnostics businesses.
For the three months ended Sept. 30, the firm reported revenues of $813.5 million up from $802.9 million a year ago, beating the average consensus Wall Street estimate of $806.6 million.
Hologic Chairman, President, and CEO Steve MacMillan said in a statement that the firm's strong position at the end of the year compared to the beginning of fiscal 2018 was driven by improvements in underlying growth in its largest businesses — breast health and molecular diagnostics.
The firm noted that in the quarter it launched the Group B Streptococcus (GBS) assay on the Panther Fusion system. In August, Hologic received clearance from the US Food and Drug Administration for the assay running on the Panther Fusion system.
Q4 revenues from Hologic's overall diagnostics business fell 1 percent year over year to $288.9 million from $291.7 million. Within that segment, molecular diagnostics revenues grew 3 percent to $158.0 million from $153.5 million in Q4 2017.
Also within diagnostics, cytology and perinatal revenues fell 2 percent year over year to $118.0 million from $120.2 million, and the firm's blood screening revenues dropped 28 percent to $12.9 million from $18.0 million.
Removing the effect of blood screening product sales, total diagnostics revenues rose 1 percent year over year to $276.0 million from $273.7 million.
Q4 revenues for the firm's breast imaging products grew 7 percent year over year to $322.2 million from $300.9 million, while revenues for its skeletal health products were up 1 percent to $24.4 million from $24.2 million. The gynecology surgical business revenues grew 3 percent to $107.4 million from $104.7 million in the prior-year quarter. Hologic's medical aesthetics product revenues fell 13 percent to $70.6 million from $81.4 million.
On a conference call to discuss the firm's financial results, MacMillan said Hologic "had some unusual items affecting diagnostics growth this quarter, so the headline number does not represent what's actually a very healthy business."
Reported year-over-year MDx revenue growth in Q4 was not an accurate representation of the ongoing strength of the business, he said, because the firm had reported roughly $9.5 million of non-recurring royalty revenue in the prior-year period.
On an adjusted basis, its molecular diagnostics revenues grew about 10 percent, MacMillan said.
Hologic's fully automated Panther platform remains the primary growth driver in the molecular diagnostics segment, he noted. In 2018, the firm shipped more than 200 Panthers to lab customers and reached 1,500 placements with more than 40 percent being outside the US.
Average revenue per Panther system now exceeds $225,000 a year and grew at a low-double-digit rate in fiscal 2018, MacMillan said.
Despite high growth for MDx in fiscal 2018, the firm anticipates that molecular product revenues will grow at just over 5 percent in fiscal 2019, he said, adding that it could be difficult to sustain this year's high rate.
MacMillan said that Hologic has signed a multiyear deal to continue providing cytology and molecular tests and instrumentation to one of its customers. Further, it agreed on terms for a multiyear extension of its supply contract with another customer and expects to finalize the contract soon, he said.
Hologic did not name its customers on the conference call, but JP Morgan analyst Tycho Peterson wrote in a research note on Wednesday that Hologic's management has been negotiating with both Quest and LabCorp to extend their existing supplier relationships.
Hologic management's fiscal 2019 outlook "should also come as a relief to investors worried about the impact of pricing concessions as part of the diagnostics contract renewals," and about the impact of some product recalls within its Cynosure business initiated in response to an FDA warning letter about vaginal rejuvenation products, Peterson said.
During the fourth quarter, the United States Preventive Services Task Force issued its final cervical cancer testing guidelines and retained an A grade for Pap and HPV testing, or cotesting, in women between the ages of 30 and 65, MacMillan said. The final guidelines, consisting of changes to a draft version, "remove a near-term concern" for Hologic investors, he said.
Hologic's ThinPrep PreservCyt Solution is a two-liquid media used to collect samples for the vast majority of Pap or HPV tests in the US.
The company reported Q4 net income of $50.5 million, or $.18 per share, compared to $82.7 million, or $.29 per share in Q4 2017. On an adjusted basis, Hologic reported EPS of $.58, in line with analysts' average estimate.
In Q4, the firm’s R&D costs fell 13 percent to $52.7 million from $60.5 million in Q4 2017, and its SG&A costs rose 9 percent to $251.6 million from $230.3 million.
For full fiscal year 2018, Hologic's revenues rose 5 percent year over year to $3.22 billion from $3.06 billion, beating the average analyst estimate for yearly revenues of $3.21 billion. Product revenues rose 4 percent to $2.64 billion from $2.54 billion, while service and other revenues rose 10 percent to $574 million from $520.8 million.
The firm's net loss for the year was $111.3 million, or a loss of $.40 per share, compared to a profit of $755.5 million, or $2.64 per share, in 2017. On an adjusted basis, the firm reported 2018 EPS of $2.23, short of the average analyst estimate for EPS of $2.24.
In Q2 the firm had reported a net loss, primarily because of non-cash impairment charges for goodwill and in-process research and development expenses related to its Cynosure business. Further, in Q2 of the prior-year, Hologic had recorded an $899.7 million gain related to the divestiture of its blood screening business.
The firm's R&D costs for the year fell 6 percent to $218.7 million from $232.8 million, and its SG&A costs rose 8 percent to $910.7 million from $841.9 million.
Hologic ended the year with $666.7 million in cash and cash equivalents.
In fiscal Q1 2019, the firm expects revenues in the range of $800 million to $815 million; EPS in the range of $.28 to $.30; and adjusted EPS of $.55 to $.57. Prior to the release of the financial results, analysts on average were expecting $817.5 million in Q1 2019 revenues, and EPS of $.58.
In full fiscal year 2019, the company expects revenues of $3.29 billion to $3.34 billion; EPS of $1.33 to $1.37; and adjusted EPS of $2.38 to $2.42. For fiscal 2019, analysts on average are expecting revenues of $3.31 billion and EPS of $2.42.
In morning trading on the Nasdaq, Hologic's shares were up more than 4 percent to $43.30.