NEW YORK – Hologic officials said on Wednesday that M&A will be crucial to growing its business while expressing confidence that it has bolstered its skills at acquiring and integrating new assets.
Hologic CEO Steve MacMillan said during a conference call to review its fiscal first quarter financial results that Hologic is confident that it can grow earnings at a double-digit rate over the long term through mid-single-digit revenue growth, modest operating margin expansion, and a "healthy mix" of acquisitions and share buybacks. He noted during the call that the company has recently bolstered its talent and processes for conducting due diligence on acquisition targets and is integrating assets more effectively than in the past.
"This internal maturation has been reflected in the solid performance of some of our more recent acquisitions," he said, noting that the purchases of Biotheranostics, Endomagnetics, and Gynesonics "should all boost our revenue growth rate."
Hologic Chief Operating Officer Essex Mitchell added that those recent acquisitions have given the company confidence in its ability to identify and integrate additional deals. He noted that strengthening Hologic's business development capabilities has been a key focus in recent years.
"Accessing high-growth adjacent markets through successful M&A will be key to our growth strategy," he said.
Biotheranostics was one of three molecular diagnostics acquisitions that Hologic made in rapid succession during the first half of 2021. The company secured Biotheranostics in a $230 million deal, Mobidiag for $795 million, and Diagenode for $159 million.
At the time, Hologic was flush with cash from COVID-19 assay revenues, and company officials said that they expected synergies with Hologic's existing molecular testing businesses, adding the assets would help the company further boost its post-pandemic revenue growth.
MacMillan said last month during the JP Morgan Healthcare Conference that the firm is interested in tuck-in acquisitions that make use of the company's cash stockpile, and he said that an ideal M&A pattern would provide one midsize deal per year for each of its three business segments.
Mitchell said that Hologic is allocating capital to M&A first, and the acquisitions of Endomagnetics, a UK-based developer of breast cancer surgical technologies, and Gynesonics, a New York-based women's health-focused medical device firm, are "right in the wheelhouse of what we would like to continue to do" by acquiring on-market products that Hologic can use to increase revenues that are accretive to its core growth rate.
Hologic also said after the close of the market on Wednesday that during the fiscal first quarter its Diagnostics revenues jumped 5 percent year over year, driven by growth in the company's molecular diagnostics business, partially offset by falling COVID-19 testing revenues.
The Marlborough, Massachusetts-based firm said that its overall revenues rose 1 percent to $1.02 billion during the quarter ended Dec. 28, 2024, from $1.01 billion a year earlier, matching Wall Street's consensus estimate of $1.02 billion. Hologic had announced in January preliminary revenues of $1.02 billion.
However, Hologic trimmed its full-year 2025 revenue guidance and lowered the top and bottom ends of its earnings guidance, citing the effects of foreign currency and weakness in its Breast Health division.
Hologic's Diagnostics revenues rose to $470.6 million in the recently completed quarter from $447.8 million in Q1 2024. Most of that growth came from the company's molecular diagnostics business where revenues jumped 7 percent to $341.1 million from $319.8 million a year ago, driven by an uptick in its bacterial vaginosis, Candida vaginitis, and Trichomonas vaginalis assay sales. The company's Biotheranostics division also helped drive up revenues year over year though Hologic did not provide further details.
Meanwhile, the company's cytology and perinatal testing revenues also rose 5 percent to $125.4 million from $120.0 million, while its blood screening revenues fell 49 percent to $4.1 million from $8.0 million.
Diagnostics revenues were up 9 percent year over year organically, excluding COVID-19 testing, divested businesses, and recent acquisitions, while its molecular diagnostics revenues increased 11 percent.
MacMillan said that Hologic has collaborated with customers to create a high-throughput vaginitis testing market that has fueled demand for tests on the Panther system. Mitchell added that the company has just begun using its physician sales force to expand vaginitis testing in the US, and the company is following the playbook that it used to grow its legacy women's health tests.
Mitchell also said that Hologic has seen growing adoption of its Panther Fusion modules in recent quarters and nearly 40 percent of US Panther customers also have adopted the Fusion system. That system provides PCR testing capabilities in addition to the base model Panther's transcription-mediated amplification testing system, and company officials said a year ago that they were focusing on the development of new PCR tests that run on the Fusion modules.
"Having a Panther Fusion is the key to unlocking our full menu," Mitchell said. MacMillan said that Hologic has opportunities to grow its diagnostics revenues through the Panther Fusion's expanding menu of PCR-based tests that are cheaper and faster to bring to market.
Among Hologic's other divisions, the firm's Breast Health revenues fell 2 percent to $369.1 million from $377.7 million from a year earlier as rising interventional breast solutions revenues were offset by falling breast imaging revenues. Mitchell said that the disappointing results in Breast Health were mostly due to lower capital equipment sales, and he added that 2025 is now expected to be a softer than expected year for Breast Health equipment replacement.
The company's GYN Surgical revenues were up 3 percent to $166.3 million from $162.2 million. That business was bolstered by nearly 20 percent growth in revenues from outside the US, Mitchell said.
Skeletal Health revenues, though, fell 38 percent to $15.8 million from $25.4 million. Hologic had resumed shipment of some Horizon DXA systems during the quarter following a temporary halt of shipments. Mitchell said that the company expects to ramp up to normal capacity by Q3.
On the call, Hologic CFO Karleen Oberton noted that Hologic is seeing an immediate impact of policy changes from the Trump administration, including a freeze on foreign aid that has disrupted HIV testing under the President's Emergency Plan for AIDS Relief. While the freeze has been lifted, she said that it could reduce revenues by upward of $30 million during the fiscal year.
She said that Hologic's Skeletal Health and Gynesonics products are also made by contract manufacturers in Mexico, and those products would be subject to any tariffs imposed by the US administration on that country. She noted, however, that the affected products comprise a small part of Hologic's business, and the planned tariffs have been delayed.
Hologic posted net income of $201.0 million, or $.87 per share, compared to $246.5 million, or $1.03 per share, a year ago. The firm reported adjusted EPS of $1.03, beating analysts' estimate of $1.02.
Hologic cut its R&D spending by 10 percent year over year to $60.3 million from $66.8 million, while it increased its SG&A spending by 8 percent to $281.8 million from $260.7 million.
Hologic ended the quarter with $1.78 billion in cash and cash equivalents and $190.6 million in short-term investments.
The firm lowered its full fiscal year 2025 guidance on revenues and GAAP earnings per share. It now expects fiscal year 2025 revenues in the range of $4.05 billion to $4.10 billion compared to a prediction in November of revenues in the range of $4.15 billion to $4.20 billion.
The company also said it expects EPS in the range of $3.51 to $3.61 compared to its previous range of $3.53 to $3.63 per share. The firm maintained its earlier guidance for non-GAAP EPS of $4.25 to $4.35.
"We are reducing our full-year revenue guidance based mainly on currency headwinds and weakness in breast health capital sales, which are outweighing strength in our US diagnostics business," Oberton said in a statement. "At the same time, we are maintaining our full-year guidance for non-GAAP EPS based on strong profitability and execution of our capital allocation strategy."
In morning trading Thursday on the Nasdaq, Hologic's stock was down 8 percent at $66.92.