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Hologic Q2 Revenues Rise 10 Percent Despite Diagnostics Decline, Cynosure Headwinds

NEW YORK (GenomeWeb) – Hologic reported after the close of the market on Wednesday that its fiscal second quarter revenues rose 10 percent year over year, driven by breast health and international revenues.

For the three months ended March 31, the firm reported revenues of $789.3 million, up from $715.4 million a year ago, and beating the consensus Wall Street estimate of $781.8 million.

"We posted solid financial results in the second quarter, as our breast health and international businesses performed well and drove total revenue above our guidance," Hologic CEO Stephen MacMillan said in a statement. However, he noted that the company is disappointed with a write-down in its Cynosure business, but it remains confident that the many changes it has made in that business are leading to "a much stronger future."

Hologic acquired Cynosure, a medical aesthetics systems and technologies company, in the first quarter of 2017.

Canaccord Genuity on Thursday downgraded its rating on Hologic to Hold from Buy. The investment bank's analyst Mark Massaro said in a research note that he thinks the firm "may figure it out, but we now believe the turnaround of Cynosure will take longer than we expected."

MacMillan said on a conference call that diagnostics sales in its second fiscal quarter were soft because fewer women had regular checkups in January and February due to bad weather and the severe flu season.

The firm's CFO Robert McMahon added that diagnostic sales per day declined in January and February compared to the prior year but rebounded in March.

Revenues from Hologic's global diagnostics business were $279.7 million, down 6 percent year over year from $296 million in Q2 2017. Within diagnostics, molecular revenues were $150.7 million, up 6 percent from $142.1 million in Q2 2017, while cytology and perinatal sales were $117.7 million, up 2 percent from $115.6 million. The firm's blood screening revenues were down 71 percent to $11.3 million from $38.3 million.

Hologic divested its stake in blood screening firm Grifols for $1.85 billion in early 2017.

Removing the impact of its divested blood screening business, diagnostics sales grew almost 2 percent year over year against the toughest comp of the year for its core business, McMahon said.

He noted that molecular revenues led diagnostics growth. In the US, where the company has "very high market shares in our key assay categories," molecular sales grew more than 2 percent, and international MDx revenues grew 15 percent based on strength across its line of Aptima women's health tests, McMahon said.

McMahon noted that the firm has placed more than 650 million pap tests and has gained "significant market share" in the cytology and perinatal market segment in the past several years. However, the firm continues to "face headwinds from longer cervical cancer screening intervals in the United States."  

Revenues for Hologic's breast health products were $300.1 million, up 7 percent from $280.5 million. Total medical aesthetics revenues shot up to $85.5 million from $16.0 million a year ago. Revenues for its GYN surgical business were $99.4 million, down 2 percent from $101.1 million, and revenues for its skeletal health products business were $24.6 million, up 13 percent from $21.8 million.

Hologic reported a net loss of $681.4 million, or a loss of $2.46 per share, compared to a profit of $526.8 million, or $1.84 per share in Q2 2017. The company said that it's non-GAAP diluted EPS was $.53, matching the analysts' estimates.

GAAP diluted earnings per share decreased compared to the prior-year period, primarily because of non-cash impairment charges for goodwill and in-process research and development expenses related to its Cynosure business. In the prior-year period, Hologic recorded an $899.7 million gain related to the divestiture of its blood screening business. 

Its R&D costs rose 3 percent to $56.8 million from $55.4 million in Q2 2017, and its SG&A costs fell 3 percent to $214.3 million from $220.8 million.

Hologic ended the quarter with $614.2 million in cash and cash equivalents.

For the third quarter, the company expects revenues of $795 million to $810 million and EPS of between $.29 and $.31. Non-GAAP EPS is anticipated to be in the range of $.55 to $.57. Analysts expect revenues of $830.8 million and EPS of $.58 for Q3.

The company lowered its revenue guidance for 2018 to between $3.18 billion and $3.21 billion from between $3.20 billion and $3.28 billion. Its non-GAAP EPS guidance remained at $2.22 to $2.27. Analysts, on average, expect revenues of $3.25 billion and non-GAAP EPS of $2.26.

On the conference call, MacMillan said that the firm was lowering its annual revenue guidance based mainly on a reset of expectations for Cynosure. 

In early morning trading on the Nasdaq, Hologic's shares were down more than 8 percent at $36.30.