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Hologic Q3 Revenues Bounce 33 Percent; New CEO Conducting Strategic Review

NEW YORK (GenomeWeb News) – Hologic reported after the close of the market on Monday that revenues for its fiscal third quarter rose 33 percent year over, helped by the inclusion of revenues from its Gen-Probe acquisition.

The Bedford, Mass.-based firm said that for the three months ended June 29, revenues increased to $626.1 million, up from $470.2 a year ago, but narrowly missed the average Wall Street estimate of $626.8 million.

The company preannounced third-quarter revenues last month of $626 million.

Product sales increased to $530.0 million from $384.6 million, while service and other revenues improved to $96.2 million from $85.6 million.

The firm said that the overall revenue increase resulted, in part, from the acquisition of Gen-Probe, completed in July 2012, which contributed $146.9 million in revenues during the recently completed quarter.

Also driving the increase were record placements of its 3D Dimensions tomosynthesis systems, Hologic said, as well as increased service revenues from its installed base of digital mammography systems, and higher sales of MyoSure hysteroscopic tissue removal systems and breast biopsy products.

By segment, Diagnostic revenues rose 87 percent to $297.4 million from $158.7 million, resulting from the Gen-Probe acquisition. Gen-Probe was up 2 percent year over year on a pro forma basis, and the legacy Diagnostics business was up also 2 percent, CFO Glenn Muir said on the company's conference call after the release of Hologic's financial results.

In Q3 2012, he added, Gen-Probe received a one-time $5 million milestone payment from Novartis. Excluding that payment, Gen-Probe grew 6 percent year over year.

Clinical diagnostic product sales grew 9 percent year over year driven by a low single-digit uptick in chlamydia/gonorrhea sales, high double-digit growth in trichomonas, and triple-digit growth in Aptima HPV.

The results, Muir said, do not yet reflect incremental sales from Hologic's recent deal with Quest Diagnostics to more broadly offer testing based on Hologic's Aptima products.

Installations of the Panther instrument remain on track to reach 1,000 by the end of Fiscal Year 2015, he said.

Breast Health revenues grew 9 percent to $230.0 million from $211.5 million a year ago, and GYN Surgical revenues dipped 2 percent to $75.8 million from $77.7 million. Skeletal Health revenues inched up 2 percent to $22.9 million from $22.4 million.

The firm's net loss for the third quarter was $11.0 million, or $.04 per share, compared to a profit of $23.6 million, or $.09 per share, a year ago. On an adjusted basis, EPS was $.38, beating the average Wall Street estimate of $.37 per share.

Its R&D spending grew 82 percent year over year to $47.8 million from $26.2 million, while SG&A costs grew 20 percent to $143.4 million from $119.8 million a year ago.

Hologic said that in the recently completed quarter, it took restructuring and divestiture charges of $571.7 million, compared to $389.8 during the third quarter of 2012.

The company exited the quarter with $964.4 million in cash and cash equivalents.

Hologic recently named Jack Cumming as its president and CEO, replacing Rob Cascella, and on the call, Cumming discussed his objectives in his second go-round as head of the firm. Cumming was also CEO of Hologic between 2001 and 2009.

"Although our third quarter results were in line with our guidance, right now Hologic is not where we want it to be," Cumming said. "It is my overarching objective to restore investor confidence, first, by setting up appropriate realistic expectations for financial and operating performance, and second, by focusing the organization on the high level execution required to achieve these expectations consistently."

Along those lines, Hologic lowered its full-year 2013 guidance. Revenue is now expected in the range of $2.51 billion and $2.52 billion and adjusted EPS is anticipated in the $1.46 to $1.47 range.

During its fiscal second quarter release in May, Hologic had lowered its full-year 2013 guidance range to between $2.53 billion and $2.55 billion and its adjusted EPS to a range of $1.54 to $1.56.

The new range, Cumming said, is more achievable "based on current domestic and international market dynamics.

"We appreciate the investor frustration that comes with lowering guidance. However, based on what I have learned through my review of the businesses to date, our new guidance represents a realistic range for our fourth quarter," he said.

For the fourth quarter, Hologic guided to revenues in the range of $615 million to $625 million and adjusted EPS of $.36 to $.37.

He also laid out three short-term goals for the company. First, he is in the midst of a strategic business review aimed at ensuring "our resources are aligned with the best opportunity for the company's long-term success."

A second goal is to add to Hologic's management team to develop strategies to enhance the firm's revenue and accelerate product development, and on the call, he announced new roles for two existing Hologic executives. Rohan Hastie has been named Group VP of Diagnostics at Hologic, and David Harding was appointed Group VP of Women's Health.

Hastie has been at Hologic for several years in various capacities and was formerly GM of the company's diagnostics franchise. Harding was leader of the company's international team.

Lastly, Cumming said that he is reviewing Hologic's current capital allocation strategy, which he said "will be among my top priorities as CEO." More specifically, the goal is to return cash to shareholders while repaying its debt.

The board, he added, has signaled it plans to implement new executive compensation plans "to ensure that management's financial incentives are closely aligned with an efficient and optimal distribution of capital going forward."

In Tuesday morning trade on the Nasdaq, shares of Hologic were up around 1 percent at $22.75.