Recently, we upgraded Hologic, Inc. (HOLX) to Neutral from Underperform with a price target of $16.00.
Even though we are concerned about the strong competition and declining revenues which are largely attributable to the tough economic and capital spending environment, the company’s broad product portfolio pleases us. The growth-by-acquisition strategy adopted by the company has significantly expanded its product portfolio. Hologic is on the lookout for more such opportunities, which should contribute to growth.
In 2009, the U.S. Food and Drug Administration (FDA) approved a more flexible design of Hologic’s MammoSite system, which provides radiation seeds to prevent recurrences of breast cancer. The MammoSite ML (multi-lumen) radiation therapy system allows physicians to target radiation at areas which are most likely to be affected by cancer and shift the dose away from areas that are not so affected. The U.S. agency approved the MammoSite therapy system, as a single-lumen device in 2002.
We believe that the new device will not only increase patient comfort but will also provide greater flexibility to radiation oncologists in delivering radiation treatment directly to areas which are most likely to witness breast cancer recurrence. In July 2009, the FDA approved Hologic’s Adiana Permanent Contraception System. The Adiana permanent contraception procedure is minimally invasive, requiring no incisions and can be performed in the doctor’s chamber using local anesthesia. The U.S. approval should boost the company’s GYN surgical products business.
Hologic focuses on growth by acquisition. It has completed multiple acquisitions since inception. We believe that the merger with Cytyc in 2007 and the acquisition of Third Wave Technologies in 2008 have created an industry giant in the field of women’s health products.
The acquisition of Third Wave enabled Hologic to further expand its offerings into the clinical molecular diagnostics market utilizing Third Wave’s Invader chemistry technology. The Invader chemistry technology gives Hologic the opportunity to explore new diagnostics for women’s health. The expansion into the molecular diagnostic market has allowed the company to accelerate growth in cervical cancer screening.
Our Neutral recommendation on the stock, which implies that the company will perform in line with the broader U.S. equity market over the next six to twelve months, further augments the Zacks Rank #3 on the stock (Hold), also implying that the stock is expected to perform in line with the overall U.S. equity market over the next one to three months.
Hologic — a leading developer, manufacturer and supplier of premium diagnostics, medical imaging systems and surgical products dedicated to serving the healthcare needs of women — intends to release first quarter fiscal 2010 operating results on February 1, 2010 after the close of market. Earnings estimates for the about to be reported quarter have not witnessed any significant movement over the last 30 days.
Only one of the twenty analysts following the stock has raised his estimate over the last 30 days. There has been no downward revision over the time period. The Zacks Consensus Estimate for the first quarter of fiscal 2010 is 26 cents.
Read the full analyst report on “HOLX”
Zacks Investment Research
