2010.06.16 - HOLX - Initiation at Neutral Gleacher
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Transcript of 2010.06.16 - HOLX - Initiation at Neutral Gleacher
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Healthcare: Medical Devices and Diagnostics
Hologic, Inc. ($14.80, Neutral)HOLX: In Search of the Elusive Growth; Initiating with a Neutral
Investment Opinion: Initiating coverage of HOLX with a Neutral rating.
Fiscal Year Sep Fi scal Year Calendar Year Last Qtr. Cur r. Qtr. N ext Qtr.
Revenue (Net) (Current)
Revenue (Net)(Previous)
F0 9A F 10E F1 1E
1.6B 1.7B 1.8B
— — —
C09A C10E C11E
1.6B 1.7B 1.8B
— — —
2Q10A
418.1
—
3Q10E
417.5
—
4Q10E
419.3
—
EPS (Current)
EPS (Previous)
1.17 1.17 1.30
— — —
1.15 1.20 1.33
— — —
0.29
—
0.29
—
0.30
—
P/S
P/E
2.3 2.3 2.1
12.6 12.6 11.4
2.3 2.2 2.1
12.9 12.3 11.1
—
—
—
—
—
—
SUMMARY: On the company side, 1) HOLX offers an attractive FCF yield (11%)2) a digital mammography replacement cycle and new products (HPV, Adianamay eventually help stabilize current sales declines, and 3) new opportunities (3Dtomo) are nearing. From a macro perspective, we do not favor a cap equipbusiness model in this environment, but the majority of sales today (~70%) arerecurring and non-capex, while HOLX has very little exposure O-US (20%). Whilethere are real issues – foremost being lack of growth – the current FCF yield andrecurring nature of sales in this economic environment may keep some floor undeshares at these levels; however, there is still very little reason to own.
• FCF Declining. While FY10 FCF guidance of “roughly $500M” is alreadbelow the prior year of $515M, our analysis yields FCF even lower at $414Mas last year’s working capital and capex reductions prove difficult to repeat
However, even our lower estimate translates to an 11% yield – attractiverelative to peers (slightly offset by a 2.4x debt/EBITDA).
• Mammography Troubles. In terms of digital mammo, the market (as seenvia MQSA data) has been consistently deteriorating. Monthly declines havepretty much continued since August, and the market is now annualizing aroughly 1,200 units. At ~60-65% share, that’s sub-800 units for HOLX thisyear, a y/y decline again despite an abysmal 2009. We model anothedouble-digit decline for mammo in FY10.
• Replacement Cycle Soon. A digital replacement cycle will eventually helpbut these systems are now replaced just every 8-10 years. Only 451 digitasystems were installed from 2000 and 2003, limiting contribution until ~2012The new 3D tomo may also help long-term – PMA filing in early 2011 – buthere is high risk the study design isn't enough and the eventual marke
opportunity ends up significantly smaller (more below).• Macro Perspective. Just 20% of sales are O-US (most from Europe), bu
HOLX does not hedge and thus is slightly exposed. A bigger issue may beEuropean government austerity measures and healthcare budget pressureslimiting mammo system sales in the last remaining growth region.
• Why Own? Lastly, newer products (HPV and Adiana) will not materiallycontribute to sales, so the end result is a struggle to keep sales flat (let alonegrow) for the next 12-24 months. FCF yield saves the day on the downsidebut it is hard to be supportive of the name in light of current growth issues.
June 16, 2010
Initiation of Coverage
Amit Hazan212-273-7272
Jeremy Feffer 212- [email protected]
Ticker: HOLX
Rating Neutral
Price $14.80
Price Target: NA
52-wk High/Low: $19.72–$12.52
Shares Out.(mil): 256.5
Market Cap (M): 3,796.9Enterprise Val.(M):
$4,862.0
Company Description:Hologic, Inc.develops, manufactures, anddistributes medical imaging systems,and diagnostic and surgical productsfor serving the healthcare needs of women. The company operates infour segments: Breast Health,Diagnostics, GYN Surgical, andSkeletal Health.
Q1 Q2 Q3 Q1 Q21012
14161820
2010
1 Year Price History for HOLX
Created by BlueMatrix
Please see important disclosure information on pages 19 - 20 of this report.
Gleacher & Company Securities, Inc.
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KEY INVESTMENT HIGHLIGHTS
We are initiating coverage of Hologic, Inc. (HOLX) with a Neutral rating. On the company
side, the stock offers an attractive FCF yield (11%), a digital mammography replacemen
cycle and new products (HPV, Adiana) may eventually help stabilize current sales
declines, and new opportunities (3D Tomo) may support valuation. From a macroperspective, we do not favor a capital equipment business model in this environment, bu
the majority of sales today (approximately 70%) are actually recurring and non-capex
while HOLX has very little exposure O-US (20%). So there are real issues, foremost being
lack of growth, but the current FCF yield and recurring nature of sales in this economic
environment should keep some floor under shares at these levels, but there is very little
reason to own.
The Macro: Currency Exposure Relatively Limited
HOLX has relatively limited exposure to foreign currency volatility, as roughly 80% of 2009
revenue was generated in the U.S. and only 12% of sales came from Europe. A significan
portion of European revenue does come from sales of Selenia digital mammography
systems, so they are capital equipment in nature. We address the currency risks and
economic risks below.
On Currency Risk Because of the small O-US exposure, HOLX does not hedge any of its foreign currency
risk, and the company actually has some natural hedges in place through its
manufacturing operation in Germany and international offices that are denominated in
local currencies. Another limiting factor for HOLX is that the bulk of European sales come
from Germany, the United Kingdom, and the Netherlands, meaning that some of the
company’s European sales are denominated in the British pound, which has been slightly
more stable than the euro.
On Economic Risk However, while HOLX is somewhat insulated from the weakening euro, this crisis
threatens to pose an entirely separate set of risks, namely the tightening of fiscal budgets
throughout Europe. While the debt crisis has had the greatest impact on the so-called
PIIGS (Portugal, Ireland, Italy, Greece, Spain) countries, it is likely that most European
governments will adopt some austerity measures that will involve healthcare spending
cutbacks. In this case, capital equipment sales would seem to be at risk as hospitals eithe
delay purchases of large ticket items or push back on price. We do not view this as an
immediate risk, but it is something we will watch more closely in the second half of 2010
and early next year as European governments set fiscal 2011 budgets. For HOLX, this
trend bears monitoring, but we note again the company’s limited exposure relative to othe
capital equipment names.
Guidance Guarded…Growth Elusive
On their most recent fiscal 2Q10 earnings release, HOLX reiterated sales and EPS
guidance of $1.640-$1.665 million / $1.16-$1.20 as well as operating expense guidance o
$490-$500 million. Roughly speaking, the guidance looks achievable to us, which is both
positive and negative, one could say. Positive in that estimates for this year are no longe
ahead of reality, yet negative in that growth rates this year (a recovery year from almost al
other stocks in our space) remain very sluggish at 2% for sales and 1% for EPS.
Pag
Gleacher & Company Securities, I
June 16, 20Hologic, Inc. : In Search of the Elusive Growth; Initiating with a Neu
Gleacher & Company
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Thus, one has to expect a rebound to occur in 2011 in order to believe stock appreciation
can happen from current levels (there is no dividend here). Street estimates do call fo
accelerating growth for sales (+5%) and EPS (+11%) next year, and this essentially
highlights our less than positive thesis on shares, as we simply cannot see where
the growth will come from.
Figure 1: FY10 Guidance Vs. Street Estimates
FY2010
Old Guidance New Guidance StreetTotal Sales ($ in millions) $1,640-$1,665 $1,640-$1,665 $1,670
Gross Margin1 62-63% 61-62%
Operating Expense1 $490-$500 $490-$500
Interest Expense $125 $125
EPS2 $1.16-$1.20 $1.16-$1.20 $1.18
Source: Company reports, Street estimates.
Free cash flow is another issue, a key metric for all bulls on this name. We think
sustainability even at historical levels (let alone growth) may be difficult for the foreseeable
future. FCF was $515 million in FY09 and is guided to roughly $500 million in FY10
(currently a 13% yield), a slightly more conservatively worded guidance than the “ove
$500 million” given earlier in the year. However, even the new mark seems unlikely to be
achieved. Investors should recall that FY09 FCF was aided by $53 million in working
capital improvements and a decline in capex from $53 million in FY08 to $31 million in
FY09. We think guidance will be missed here, as we do not foresee similar benefits this
year. The company has guided capex to $60 million for FY10. Our FCF, therefore, is
modeled at $414 million in FY10 (approximately 10.5% yield), which is a noticeable
decline y/y. What is also notable in this free cash flow discussion is that HOLX’s
debt/EBITDA levels of 2.5x remain well above peers.
To summarize, it is partly free cash flow and it is partly our concern with the lack of long-term visible growth in the overall business that causes us to remain neutral on HOLX. The
Street, on the other hand, seems to be more comfortable with the potential return to
growth that would be fueled by a digital mammography replacement cycle, new products
(HPV, Adiana), or future opportunities (3D Tomo). But, in our opinion, a closer review
indicates the market is expecting too much and each of these items may disappoint. We
therefore initiate at Neutral for these reasons.
Breast Health Remains the Segment in Focus – and isStill Struggling
The Breast Health segment represents 45% of total HOLX sales, and includes the Selenia
full-field digital mammography (FFDM) system, computer-aided detection (CAD)MammoSite targeted radiation therapy, Suros breast biopsy systems, the SecurView DX
breast imaging workstation, and the MammoPad breast cushion in addition to service
sales.
The key product in this segment is Hologic’s Selenia digital mammography system
However, sales have seen significant declines stemming from the U.S. hospital spending
crisis and the penetration of digital systems in the field. We take a look at each below, as
Pag
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June 16, 20Hologic, Inc. : In Search of the Elusive Growth; Initiating with a Neu
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well as the possibility that a replacement cycle could re-fuel sales, although, we think it’s
too early.
The Hospital Spending Crisis The hospital spending crisis had a big impact on this business, and cost pressures faced
by hospitals contributed to a 26% decline in Selenia orders in the U.S. in FY09 and a 15%
decline worldwide.
HOLX has also been hurt by a product mix shift, as a higher percent of Selenias sold were
low end de-featured units or international units (sold at a approximate 20% discount to
U.S. ASPs), a trend that has continued through 2Q10 as higher units sales were offset by
lower ASPs y/y. Management expects product mix and ASPs to improve as the
replacement market picks up over the next 12-18 months, but for now, we estimate the
replacement market for 2D digital is roughly 5% versus a normalized 10-15% as hospitals
continue to extend the life of capital equipment by delaying new purchases/upgrades.
Indeed, our spring 2010 survey of hospital CFOs (n=30) indicated that the average
replacement cycle for mammography equipment has increased from under seven years
(three years ago), to almost eight years currently. For hospitals in a position to increase
capex spending, many are catching up on purchases and projects delayed during the
worst of the crisis, and even those reinvesting in capital equipment, mammography is
typically a relatively low priority (it consistently places below MRI, CT, and Radiation
Therapy Machines in our quarterly surveys). Therefore even a stronger rebound in
hospital capital spending does not necessarily point to a sharp rebound in digita
mammography orders.
On the Tail End of a Product Cycle The FDA’s well kept monthly published MQSA data continues to be a close indicator of
digital mammography installations, and it carries a worrying sign. MQSA data released on
June 1st by the FDA indicated May 2010 rose sequentially for just the second month ou
of the last 10, as FFDM unit installations came in at 119 for the month, still near a multi-
year low (see chart below). The market is annualizing at roughly 1,200 units for 2010. Atapproximately 60-65% share, that is sub-800 units for HOLX this year, a y/y decline again
despite an abysmal 2009. In addition, the increase in the number of facilities with at leas
one FFDM unit (74) also posted a multi-year low. Both of these data points indicate that
the market still has not yet reached bottom. We expect another 21% worldwide sales
decline for mammography in FY10.
Pag
Gleacher & Company Securities, I
June 16, 20Hologic, Inc. : In Search of the Elusive Growth; Initiating with a Neu
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Figure 2: Monthly Increase in FFDM Unit Installations
80
100
120
140
160
180
200
220
240
Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May- 09 Jul-09 Sep-09 Nov-09 Jan- 10 Mar-10 May-10
Source: FDA
Replacement Market Remains a Few Years Out Those more positive on HOLX will tend to believe that MQSA data is becoming
increasingly inaccurate in predicting digital mammography sales, as it will not capture the
digital replacement cycle to come (i.e., digital replacement of digital, as MQSA only tracks
new digital units installed). We provide some context herein to refute the idea that a digita
mammography replacement cycle could help fuel growth any time in the near future.
First, note that digital mammography systems are generally replaced every 8-10 years
and today that replacement cycle is clearly weighted toward the longer end. A total of 451
systems were installed from 2000-2003, a vast majority of which were GE units. Marke
share for digital mammo tends to be sticky, as GE has had better success retaining digita
customers than it did with analog (these are the customers that remained with GE early
on, their best customers). As a result, we believe HOLX will be challenged to exceed 20-
30 replacement units annually any time soon.
Furthermore, a more significant ramp in unit installations occurred in 2004 and 2005, with
an enormous jump in 2006 (see chart below). This tells us that the real pickup in
replacement demand is still 3-5 years away.
Pag
Gleacher & Company Securities, I
June 16, 20Hologic, Inc. : In Search of the Elusive Growth; Initiating with a Neu
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Figure 3: US FFDM System Installations 2000-2006
100 145 171
327382
35
930
0
100
200
300
400
500
600
700
800
900
1000
2000 2001 2002 2003 2004 2005 2006
Source: FDA, AuntMinnie.com, Gleacher & Co. Estimates Installation estimates include all competitors in the U.S. market (GE, Fisher Imaging, and Hologic
3D Tomosynthesis (Tomo) Remains the Missing Great Hope HOLX has long been developing a new digital mammography product platform known as
tomosynthesis, which is a 3D breast screening/imaging tool that is expected to
significantly improve breast screening technology. Tomosynthesis images take the 11
angles used by x-ray and reconstruct them into layered, 3D image slices. Not only can
tomosynthesis capture better, more defined images, but it can also do this using less
radiation and in the same compression time. Since the image has reduced tissue overlap
and structure noise and can be viewed in a ciné loop, it is likely that radiological readings
will get faster after the learning curve is reached.
Gaining FDA approval for this technology, however, has been an insurmountable obstacle
thus far. It was only one year ago (May 2009) that HOLX announced critical doubts over
whether the FDA, as presently constituted, would grant 3D Tomo approval given existing
data and clinical studies. This was due to two key criticisms from the FDA:
1. Reducing recall rate alone isn’t enough, and clear improvement in sensitivity is
paramount. The FDA apparently had a problem using ROC as the way o
assessing performance, calling into question whether a reduction in recall rate
alone is enough to gain approval. The oddity here is that this was the FDA’s
request when the study was originally designed. The focus thus shifts to
sensitivity and the ability to better detect cancers than 2D alone.
2. 3D Tomo stand-alone data (not 2D+3D) is what is needed. Again, this was a
turnaround of sorts for the FDA and seems to us like an illogical request
considering the practical necessity for a radiologist to view both the 2D and the
new 3D image. Comparison of historical images also demands a new 2D image
to be available, so we are unsure why the FDA would now seek this route. But
apparently the FDA saw this as an issue, at least to some extent, because
radiologists in the study looked at an enriched set of data (with 2D as well).
Pag
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Despite delays, 3D Tomo is still the absolute key opportunity for HOLX, but the
environment remains unfortunate. At the Radiological Society of North America (RSNA)
conference last December, the number of presentations and workshops for 3D Tomo was
higher than in prior years, and we perceived that physician confidence actually remained
strong for the product despite the regulatory setbacks. Yet the FDA today still seems as
timid and confused as ever on all things related to mammography.
HOLX is taking three different approaches in its current study (full-dose 3D+2D, half-dose
3D+2D, 3D alone) in the hope that one of them is acceptable. There seems to be
realization at HOLX that this new approximately 2,000 patients study (at ten locations) is
probably not enough to satisfy the FDA, but management is calculatingly taking its
chances that an FDA panel will be called and common sense will prevail. This appears to
be a risky approach to use, especially considering the recent radiation concerns at FDA
regarding other imaging modalities (radiation was a major concern for FDA in these
tomosynthesis studies).
But the show moves on. We expect enrollment to last most of 2010, with a PMA filed by
late 2010 / early 2011. An FDA panel would most likely take place sometime in 2011. Of
course, there remains significant risk that HOLX’ study design will not be enough, bu
even if it is, the most likely approval in 2011 would be for “diagnostic” (not screening)which would be a much smaller market opportunity, at least that is what the FDA and
management have voiced.
To complicate matter further, the FDA has transitioned its Radiological Devices Branch
from the Office of Device Evaluation (ODE) to the Office of In Vitro Diagnostic Device
Evaluation and Safety (OIVD). The move is aimed at easing tensions between the two
departments over how in vitro and in vivo diagnostics have been handled at the FDA. The
practical impact to HOLX should be neutral to slightly negative, however, as mos
personnel have moved over to OIVD, and are the same people who handled the 3D Tomo
process last year.
Theoretical Market is Large, But Would Take Time. When and if approved, it is
important to note that the main driver for tomosynthesis adoption will still be robust clinica
data and reimbursement. In the conversion from analog to digital earlier in the decade, fo
example, a significant clinical study (DMIST, September 2005) including nearly 50,000
women was the catalyst needed to get penetration off the ground. The Tomo trial is
significantly smaller, but the market opportunity is smaller than the analog to digital switch
Our best estimation for addressable U.S. facilities who might acquire 3D Tomo in the early
years is about 900, which includes leading teaching institutions (about 400) and “early
adopter” high volume facilities (urban-based hospitals with 400+ beds). At about 1.5 units
per average MQSA facility, this is an addressable “early adopter” opportunity of roughly
1,500 units.
We also note that the Tomo component is mainly software and carries gross margins in
the 90% range. At roughly $100-$150k ASP, and considering the estimated unit ordersthis could be a meaningful opportunity to both top and bottom line, assuming HOLX wins
full diagnostic and screening approval.
MammoSite Losing Steam MammoSite, a balloon catheter used in radiation therapy for breast cancer treatment, has
seen sales growth steadily fall over the last several quarters, culminating in a 7% decline
over the last twelve months by our estimation. HOLX has been losing share to SenoRx
which makes the EnCor breast biopsy system, the Gel Mark line of breast tissue markers,
Pag
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and the Contura balloon catheter (MammoSite’s largest competitor). SenoRx was recently
acquired by C.R. Bard, putting a larger sales and marketing effort behind the product. We
expect MammoSite to continue to lose share.
Added through the 2007 acquisition of Cytyc, MammoSite is a targeted radiation therapy
for breast cancer treatment. After the cancer tumor is removed via lumpectomy, the
MammoSite balloon is attached to a catheter and inserted into the lumpectomy cavity. Theballoon is inflated with a saline solution to fit in the cavity, and following treatment planning
with the radiation oncologist, the radiation seed is inserted through the catheter. The seed
is removed once the therapy is complete, and this process is repeated over a five-day
period. Following the fifth treatment, the balloon and catheter are removed.
Suros Stable The newest product in the breast biopsy segment is Eviva (launched in 2008), which is the
first completely integrated biopsy solution that offers features not available in legacy
stereotactic biopsy devices. While Eviva has increased market share, management noted
on the 2Q10 earnings call that a reduction in mammography volumes has led to a
reduction in breast biopsy procedures, due mainly to continued high unemployment and a
resetting of deductibles and co-pays. Growth in this product segment will depend on
improvements in macroeconomic trends, so this will bear watching going forward.
HOLX launched its breast biopsy business with the 2006 acquisition of Suros, a
manufacturer of minimally invasive interventional products for breast biopsy, tissue
removal, and biopsy site marking. Its technology, which includes a patented fluid
management system, allows the removal of tissue or biopsy samples in a fast, safe, and
simple manner using stereotactic x-ray, ultrasound, and MRI systems. Suros designs
manufactures, and markets patient-focused and physician-inspired “Compassionate
Technologies” through its Automated Tissue Excision and Collection (ATEC) product line
including percutaneous, automatic vacuum-assisted breast biopsy collection systems, a
disposable handpiece used to collect samples, and biopsy sit markets. The ATEC line
offers three units, each providing fast and easy biopsy capabilities: the Sapphire (all-in
one biopsy system), the Emerald (MRI-only system), and the Pearl (mainly stereotactic x-
ray and ultrasound).
Service is a Rare (and Solid) Positive The sole source of growth in the Breast Health segment over the last several quarters has
been service revenue, which has grown as the installed base has increased and as
hospitals delay purchasing new systems. One of the consequences of the hospita
spending crisis has been that average replacement cycles for many large capita
equipment items have lengthened, especially digital mammography. While capita
spending budgets have begun to recover somewhat, many hospitals are still faced with
the challenge of prioritizing spending and catching up on projects put on hold as spending
was frozen. Hospitals therefore continue to delay purchasing replacement units, investing
instead on service and maintenance of existing units. This helped mitigate order
weakness for HOLX over the last several quarters and is expected to continue to do soover the rest of 2010. Service, however, carries lower a gross margin (approximately 38%
in the March 2010 quarter), which, while significantly improved over the last several years
is still lower than product gross margin.
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Diagnostics Division – Can Expectations Be Met?
The diagnostics division represents 34% of total company sales. The bread and butter o
this division remains liquid-based Pap (LBP) testing, an approximately $250 million annua
U.S. business for Hologic (which has about 70% of the market). This business is mature
and no longer grows, but has been a steady cash flow generator for the company. Growth
if any, for the division will have to come from either the new Cervista HPV testing platformor the automated imager (related to Pap). Our view is that Cervista HPV will struggle to
convert large accounts due to platform limitations in automation, and that imager growth
has now reached an end. At best, we see growth in this division being in the mid to single
range, and believe secular changes in Pap testing may put a great deal of pressure on
growth in the long term.
HPV Platform Needs to Start Contributing HOLX’ acquisition of Third Wave in 2008 brought with it the Cervista HPV and Invade
chemistry technology. HOLX received FDA approval for all three HPV markets (primary
secondary, and genotyping) for Cervista in March 2009, making it the second entrant in
the U.S. market after Qiagen’s Hybrid Capture 2 (HC2) – who continues to have a near
monopoly over the U.S. market. The QGEN test is supported by a significant amount ofclinical data, which is viewed as a positive, but there is plenty of data to suggest that
Cervista is at least equivalent. Cervista was officially launched toward the end of FY2009
and management estimates that market share is approaching 10% in the U.S.
Advantages of Invader Platform Outweighted by Lack of Automation. One of the
advantages of Cervista HPV on the Invader platform is its claim that less volume of pap
sample is required for performing its HPV test (versus Qiagen's), which reduces the
percentage of "quantity not sufficient" (QNS) samples that need to be re-done; these are
time consuming and more expensive for the lab. To be specific, both Qiagen’s HC2 and
Hologic’s Invader require a minimum amount of the liquid cytology following the liquid-
based Pap. Hologic's advantage is that Invader requires half that amount (2mm versus
4mm for HC2). Our discussions with industry contacts over the past few years support this
claim, and show that QNS for Qiagen can be as high as 5% of samples. This issue has adirect relationship with the possible occurrence of false negative readings that could be a
direct result of insufficient sample cellularity.
Cervista also has an internal control mechanism that minimizes the insufficient sample
issue before it is read as an actual result. This is a feature unique to Invader. The interna
control enables the lab to differentiate between a negative test and a negative reading due
to insufficient amount of cervical cells.
The problem, as we see it, is that the Invader platform is currently only approved as a
manual process (versus semi-automatic for QGEN), so high-volume labs would have to
buy other automation equipment to competitively run the Invader platform. Both
companies have been working on fully automated platforms that should be out in the nex
1-2 years. To first consider the Qiagen assay, the reason it is not capable of fulautomation today is sample processing, or the upfront naturation step, which is stil
manual. This alone can be an incredibly time-consuming process step. Alternatively, righ
now the Invader assay is sold totally manual. Therefore, what a lab could do is automate
the process via third-party equipment. The first part of this would be to use an automated
extraction system, such as EasyMAG from BioMerieux, among others, and then the
pipetting can be automated via Hamilton equipment or the like. One problem is that once
the lab automates with third-party equipment, it is going outside of the FDA-cleared
protocols, which means the lab has to do extensive validations for the procedure. HOLX
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says a more automated system is forthcoming later in the year, but we continue to see this
issue as a significant limitation on share gains.
Genotyping May Become a Key Advantage. There were no FDA products approved in
the U.S. for genotyping prior to Hologic, making this a key differentiator. In general, HPV
genotyping will enable physicians to diagnose specific HPV types and to better assess the
risks associated with the specific HPV types (i.e., high vs. low-risk). Specifically, types 16and 18 are believed to occur in nearly 70% of all cervical cancer cases. In thinking about
this opportunity, we divide the genotyping market into three servable sub-markets: 1) Pap
negative/ HPV positive supplemental testing; 2) women under the age of 30; and 3)
testing to determine whether one of the HPV vaccines (which are specifically agains
subtypes 16 and 18) is appropriate. We are not sure yet how the reimbursement for the
labs would work, but it seems intuitive to us that genotyping would potentially garne
additional testing reimbursement in time.
In the first segment, we think genotyping would be performed on all samples that yield
negative Pap results and positive HPV results, so that a determination can be made as to
whether further diagnosis is necessary. We estimate this result comes up only about 3%
of the time for all combination Pap/HPV tests, or about 300-400k tests annually in the U.S
right now (and a one million test addressable market). Assuming the ASP is the same asthe screening test ($19), that translates to an annual U.S. potential market size of $20
million.
Second, the specific information in genotyping may open up the opportunity for HPV
testing of cancer-causing types (16 and 18 most likely) in women under 30. Currently
ACOG guidelines recommend HPV testing for women over 30, as many benign strains o
HPV common in younger women resolve on their own before this age. Lowering the
recommended age by two years could increase the screening volume by nearly 2.5 million
tests, as the compliance with screening guidelines increases with younger age. This
change in recommended age guidelines could add over $50 million in annual market size
for each two years the screening age is lowered.
Third, with such a high prevalence of HPV in the young population, it may be of value to
test for type 16 and 18 prior to or after the administration of the HPV vaccine; Merck’s
Gardasil vaccinates against type 16 and 18. This may not become standard practice, bu
could add incremetal volume. Both Qiagen and Roche are working on an HPV genotyping
capability, but neither product will likely make it to market until late 2010/2011.
U.S. Secondary Screening Market. We estimate that of the roughly 60 million Pap
smears performed annually in the U.S., about 6% result in atypical squamous cells o
undetermined significance (ASCUS) classification and are candidates for an HPV test
This is what we define as the "secondary" HPV opportunity. At an estimated ASP of $19
we peg the current U.S. market opportunity for equivocal Paps at $60 million (we assume
a maximum of 90% penetration). Currently, we believe about 82% of this market is already
penetrated by existing HPV tests. Importantly, the Hologic PMA approval should allow itsnew HPV test to be used with any liquid-based pap smear test, including Hologic's
ThinPrep and Becton Dickinson’s SurePath, an advantage over QGEN's offering, which is
only approved from Cytyc's sample vial.
U.S. Primary Screening Market. The U.S. primary screening market opportunity is much
larger at approximately $645 million, derived as follows: of the 60 million Pap
examinations performed each year in the U.S., there are approximately 33 million exams
associated with women over the age of 30 (for whom the HPV test is indicated), and we
estimate an ASP of roughly $19 (the same as QGEN's product today). This market wil
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possibly be further decreased by two occurrences. First, ASPs will eventually decline due
to competitive dynamics entering the market, and $15 may be a more accurate long-term
price to use. This would have the effect of reducing the long-term addressable U.S
primary market to $500 million. We feel this is an accurate long-term market number.
Second, ACOG guidelines suggest HPV tests be administered once every three years (if
the test results are negative). In theory, some will argue that the 30 million annual Papexams performed are only one-third of that size (10 million annual exams for three years)
We do not take that view. We do not believe that testing intervals will change very much
during the next several years, and we highlight the following observations as to why: 1)
Women today in the U.S. are on average getting their annual check-ups (and annual Pap
exams) every 19 months, so the testing interval is already well beyond one year. 2)
Current reimbursement for HPV testing does not carry any limitation of insuring only one
exam every three years when results are negative. As long as the insurance companies
are paying, we feel doctors will prescribe the test. 3) Physicians could face significant
liability for not examining a patient on an annual visit. 4) Patients change jobs, move
geographically, or switch insurance carriers, and holding someone to testing once every
three years would be very difficult. For these reasons, we do not decrease our estimate o
the primary market opportunity for a widening of testing intervals.
ThinPrep Pap Testing in a Secular Decline ThinPrep is HOLX’ liquid-based Pap test for cervical cancer screening that is also
approved for HPV, gonorrhea, and Chlamydia. The ThinPrep Imager provides a screening
review of the ThinPrep test vial, highlighting cells of interest for the cytotechnologist to
examine upon second review.
Last November (2009), the American College of Obstetricians and Gynecologists (ACOG)
released new screening guidelines for Pap testing with three key recommendations: 1)
Women should have their Pap screening beginning at age 21 2) Women age 21-30 should
be screened biannually rather than annually and 3) Women age 30 and over should have
a Pap or cytology screening every 2-3 years if they have three consecutive negative Pap
tests. Results from our recent women’s health survey indicated that fewer OB/Gyn’s
reported recommending Pap tests for low risk patients on a regular basis. In our spring
survey, 41% of respondents said testing intervals depend on age or other risk factors, up
from 26% last quarter. The figure was 23% for high risk patients, versus 13% in Decembe
2009.
Going forward, we expect Pap volumes to decline as HPV testing continues to gain share
as a primary screening tool. This is a negative for the ThinPrep Pap Test but theoretically
a positive for Cervista HPV if it were to grab market share. However, we remain less
optimistic that market share can be won easily (even with the more automated platform
tentative mid-2010 release), but do believe small lab contracts are out there to be won. In
addition, Imager, which is already more than 70% penetrated in the U.S., is not expected
to grow significantly going forward.
Gyn Surgical Growth Remains Positive
The Gyn Surgical (16% of total revenue) consists primarily of two products: NovaSure, the
endometrial ablation device used to treat excessive menstrual bleeding, and Adiana, the
permanent contraception device that competes directly with CPTS’ Essure. While Adiana
is still in the early stages of it full launch, NovaSure has been a steady grower for HOLX,
and the next generation product has been fully rolled out.
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NovaSure Stable HOLX added its Gyn Surgical segment through the 2007 acquisition of Cytyc. Cytyc’s
flagship product is NovaSure, which serves as a minimally invasive alternative to a
hysterectomy. Excessive menstrual bleeding affects an estimated seven million women
and the company believes that endometrial ablation could be a $1.5 billion opportunity in
the U.S.; NovaSure generated revenue of approximately $250 million in the U.S. in
FY2009. The advantage of endometrial ablation is that it serves as a permanent cure andcan be performed in a doctor’s office in 5-10 minutes with a relatively short recovery time.
HOLX sees two drivers of growth for NovaSure in the U.S., making it easier to perform the
procedure in the doctor’s office and increasing awareness of the procedures among
women. On the physician side, HOLX is working with doctors on such issues as
reimbursement, process flow, and anesthesia to make the in-office procedure more
efficient and effective. As for patient awareness, the company is set to launch a campaign
aimed at educating women on the existence of endometrial ablation as a lower-cost, less-
invasive alternative to hysterectomy. This is important, as there are a number of
competitive products on the market, including Bayer’s Mirena for menorrhagia, Ferring’s
Lysteda, and Boston Scientific’s Genesys HTA endometrial ablation system.
In our recent gynecologist survey, 67% (n=111) indicated that they perform endometria
ablation procedures. Among their patients, 46% of excessive menstrual bleeding patients
are candidates for endometrial ablation and of those candidates, 33% currently receive
this procedure. Somewhat positively, our doctors believe that 35% of these candidates wi
receive endometrial ablations, a good sign for future growth/penetration.
Figure 4: % of Candidates Received Endometrial Ablation
Today In One Year
Average 33.2% 35.4%
Median 25.0% 30.0%
High 90.0% 90.0%
Low0.0% 0.0%
Source: Gleacher & Co. Survey Results
Among doctors who expect volume to change over the next year, 38% attribute the
change to increased patient awareness, while 33% said an improvement in the economy
increase in the number of insured and 21% cited easier access to the procedure (i.e.
more in-office procedures).
Figure 5: Reasons for Change in EA Patients
Responses % of Total
Patient Awareness 16 38%
Easier Access 9 21%
Number of Insured 8 19%
Economy 6 14%
Physician Experience 3 7% Source: Gleacher & Co. Survey Results
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U.S. growth has been driven by increased adoption of NovaSure as an office-based
procedure, increasing patient awareness, and on a large portion of the business from
standing monthly order agreements. NovaSure is key for HOLX because Adiana’s (see
below) launch is targeting physicians who already perform the NovaSure procedure. We
model 3.5% sales growth and 3.5% unit growth for NovaSure in CY2010, which may be
conservative.
Adiana – Small Share Gains Near Since the limited launch of Adiana in July of last year, very few Adiana procedures have
been performed. But the scope of the launch increased through the March 2010 quarter
and we believe that HOLX reached full launch by late February / early March. Indeed
management indicated on the 2Q10 earnings call that the full sales team is focused on
training doctors and selling the device.
The overall strategy is to partner with gynecologists to advance in-office utilization of both
NovaSure and Adiana and to drive patient awareness of both procedures as compelling
alternatives to existing options. The U.S. market opportunity for permanent sterilization is
frequently sized at the roughly 700,000 tubal ligations performed annually (based on data
from 2004), but we are more cautious regarding the actual addressable market. We
consider a few mitigating factors:
• To begin with, about 100,000 of the tubal ligations performed each year are done
in conjunction with a caesarian birth, as the procedure can be performed through
the incision already made; these procedures should be excluded from the
opportunity. A large increase in the number of C-sections in the U.S. has been
increasingly highlighted in publications and news reports recently, and it is likely
that the number is much higher today.
• Additionally, ACOG statistics indicate that nearly half of all tubal ligations are
performed postpartum (1-2 days after birth) when the still-enlarged uterus
presses the fallopian tubes up, just under the abdominal wall. A small 1/2- to 1-
inch incision through the relaxed abdominal wall is all that is required for a docto
to complete a tubal in this state, and the procedure takes only around 30 minutes
and generally does not lengthen the mother’s hospital stay.
• Lastly, intra-uterine devices like Mirena and Paragard have seen resurgence in
growth in recent years, and the addressable patient population for these devices
has a large overlap with Essure and Adiana.
If we solely consider caesarian and postpartum tubal ligations in our market calculation, it
leaves a more realistic annual addressable procedure market of roughly 300,000
Essure’s current ASP is just over $1,350, but we expect that to drop to just over $1,000-
$1,100 in the longer term (due to competitive pressures), suggesting that the rea
addressable market at full penetration is around $300-$350 million.
As for Adiana’s opportunity, there are roughly 89,000 Essure procedures performed each
year, but HOLX believes it can pick up some share by touting Adiana’s compatibility with
NovaSure. While the product is still very much in its early ramp, management believes
that it achieved high-single digit market share in the March 2010 quarter.
Early marketing efforts appear to have taken hold, as 55% of respondents to our spring
Women’s Health Survey said they were familiar with Adiana, including 75% of Essure
users. Across the entire survey population, gynecologists are forecasting 5% Adiana
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market share in six months and 7% share in 12 months. Note below that both Essure and
Adiana are seen to be taking share away from tubal ligation, albeit at a rather slow rate
compared to historical gains.
Figure 6: Permanent Contraception Procedure Share – Among All Respondents
Survey Date Sep 09 Dec 09 Mar 10
Current 6 Months 12 Months Current 6 Months 12 Months Current 6 Months 12 Months
Tubal ligation 68.5% 62.5% 58.9% 75.1% 69.2% 67.0% 65.5% 61.6% 58.6%
Essure 31.1% 34.2% 36.8% 23.7% 26.8% 27.0% 20.9% 24.3% 25.0%
Adiana 0.4% 3.3% 4.3% 1.2% 4.0% 6.1% 3.4% 5.1% 7.1%
Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 10.2% 9.1% 9.3%
Source: Gleacher & Co. Survey Results
Inside these numbers, however, if we focus only on those doctors who currently perform
Essure procedures, then Adiana’s market share looks better - with 6% share in six months
and 9% in 12 months (again, still including tubal ligations).
Figure 7: Permanent Contraception Procedure Share – Among Current Essure Users
Survey Date Sep 09 Dec 09 Mar 10
Current 6 Months 12 Months Current 6 Months 12 Months Current 6 Months 12 Months
Tubal ligation 43.3% 38.9% 36.2% 54.7% 49.0% 45.7% 53.9% 50.9% 48.9%
Essure 56.0% 56.4% 58.1% 43.1% 44.8% 44.6% 40.0% 41.0% 39.9%
Adiana 0.8% 4.7% 5.7% 2.2% 6.2% 9.7% 3.7% 5.9% 8.7%
Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.4% 2.2% 2.6%
Source: Gleacher & Co. Survey Results
If we focus solely on the two permanent sterilization devices, we see Adiana taking more
meaningful share away from Essure, going from 8% of procedures currently to 13% in sixmonths and 18% in 12 months.
Figure 8: Permanent Sterilization Procedure Share – Essure/Adiana Market Segment Only
Survey Date Sep 09 Dec 09 Mar 10
Current 6 Months 12 Months Current 6 Months 12 Months Current 6 Months 12 Months
Essure 98.7% 92.3% 91.0% 95.2% 87.8% 82.2% 91.6% 87.3% 82.1%
Adiana 1.3% 7.7% 9.0% 4.8% 12.2% 17.8% 8.4% 12.7% 17.9%
Source: Gleacher & Co. Survey Results
So while the total permanent sterilization pie should grow as share is taken away from
tubal ligation, Adiana is expected to grab a bigger piece of that pie as more physicians are
trained and more units are placed. HOLX currently estimates that Adiana has already
achieved market share in the high single digits. For now, we model this opportunity
conservatively, as it will take a lot of training and marketing efforts to drive meaningfu
sales.
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Skeletal Health
The smallest of the four product segments at just 5% of total revenue, the Skeletal Health
business includes products for the screening and diagnosis of osteoporosis. Products in
this segment include the Discovery and Explorer bone densitometers, Mini C-arm low
intensity x-ray imaging system, an Extremity MRI system, and General Radiography
Skeletal Health sales totaled $95.5 million (-11% y/y) in FY2009 and $21.5 million in 2Q10(-6.7%). The declines have been attributed to generally weaker osteoporosis assessmen
and mini c-arm sales as hospital capex budgets and reimbursement challenges still make
this a difficult segment. Decreased demand has shifted the market toward the lower-end
bone densitometry systems that carry low ASPs. Management noted on the last earnings
call, however, that recent reimbursement changes for abundance cytometry systems are
more benign than expectations, which the company hopes should help drive some growth
We model another y/y decline in sales for FY2010 with limited growth thereafter.
VALUATION
HOLX trades at 11.0x CY11E EPS and 7.3x CY11E EV/EBITDA, both of which are below
the peer group market cap weighted averages of 13.0x and 7.9x. However, HOLX’ fla
sales and EPS growth justify the slight discount.
Where HOLX is most compelling is on a FCF basis, with a CY10E FCF yield of 10.5%
versus the peer group’s market cap weighted average of 7.5%. Mitigating FCF yield
somewhat is HOLX’ debt/EBITDA of 2.4x, which is also higher than the group, but is still a
an attractive level, especially in the current environment.
Figure 9: HOLX Valuation Comps
6/14/2010 Mkt Earnings P/E EV EV/Rev EV/EBITDA Debt to EBITDA FCF Yield Cash /
Company Name Ticker Rating PRICE Cap 10E 11E 10E 11E NTM 10E 11E NTM 10E 11E 10E 11E 10E 11E ShareHOLOGIC INC HOLX Neutral 14 .67 3 ,836 1.20 1.33 12.2x 11.0x 4 ,863 2.8x 2.9x 2 .7x 7.2x 7 .8x 7.3x 2.4x 2.2x 10.5% 12.4% $1.65
AMERICAN MEDICAL SYSTMS HLDS AMMD NR 23.02 1,735 1.25 1.41 18.5x 1 6.4x 1,989 3.5x 3.6x 3.4x 10.4x 1 0.7x 10.1x 1.6x 1.5x 6.7% 7.3% $0.67
BARD (C.R.) INC BCR NR 79.80 7,589 5.57 6.16 14.3x 13.0x 7,064 2.5x 2.6x 2.4x 7.9x 8.2x 7.6x 0.2x 0.2x 7.6% 8.0% $7.09
BECKMAN COULTER INC BEC Buy 59.29 4,156 4.36 4.82 13.6x 12.3x 5,199 1.4x 1.4x 1.3x 5.8x 6.0x 5.6x 1.6x 1.4x 6.5% 8.0% $4.23
CAREFUSION CORP CFN NR 25.55 5,680 1.54 1.76 16.6x 14.5x 5,897 1.4x 1.5x 1.4x 7.5x 7.9x 7.2x 1.9x 1.7x 13.6% 6.1% $5.29COOPER COMPANIES INC COO NR 36.92 1,719 2.63 3.03 14.0x 12.2x 2,418 2.0x 2.1x 2.0x 8.5x 9.1x 7.9x 2.7x 2.3x 9.0% 9.5% $0.30
COVIDIEN PLC COV NR 41.58 20,843 3.40 3.75 12.2x 11.1x 22,338 2.0x 2.1x 1.9x 7.6x 7.9x 7.3x 1.0x 1.0x 8.4% 9.1% $2.93
DENTSPLY INTERNATL INC XRAY NR 31.27 4,576 1.93 2.11 16.2x 14.8x 4,603 2.1x 2.1x 2.0x 9.5x 9.8x 9.2x 1.0x 0.9x 5.8% 6.3% $3.08
ELEKTA KTA.B-S NR 199.40 2,630 1 0.55 11.96 18.9x 1 6.7x 1 9,211 2.3x 2.4x 2.2x 11 .6x 1 2.3x 10.9x 1.0 x 0.9x 5.0% 5.7% $8.97
HILL-ROM HOLDINGS INC HRC NR 29.53 1,864 1 .45 1.66 20.4x 17.8x 1 ,823 1.2x 1.2x 1.2x 6.7x 7.0x n/a 0.6x nmf 5.2% 6.2% $3.12
HOSPIRA INC HSP NR 53.91 8,943 3.48 4.02 15.5x 13.4x 9,733 2.4x 2.4x 2.3x 8.7x 9.1x 8.2x 1.6x 1.5x 7.0% 7.6% $5.70INTEGRA LIFESCIENCES HLDGS IART Neut ral 38.8 0 1,125 2.69 2.99 14.4x 13.0x 1,426 1.9x 2.0x 1.8x 8.8x 9.3x 8.2x 2.4 x 2.1x 5.2% 5.9% $2.48
INVERNESS MEDICAL INNOVATNS IMA NR 27.91 2,346 2 .70 3.12 10.3x 8 .9x 3,997 1.9x 1.9x 1.7x 7.0x 7.2x 6.8x 3.8x 3.6x nmf nmf $5.90
KINETIC CONCEPTS INC KCI NR 39.97 2,866 4 .06 4.55 9.9x 8.8x 3,839 1.8x 1.9x 1.8x 5.8x 6.0x 5.6x 1.9x 1.8x 9.8% 14.3% $3.67
LABORATORY CP OF AMER HLDGS LH NR 78.81 8,196 5.45 6.04 14.5x 13.0x 9,376 1.9x 1.9x 1.8x 7.5x 7.7x 7.2x 1.1x 1.0x 9.1% 8.9% $1.43
LIFE TECHNOLOGIES CORP LIFE NR 50.02 9,134 3.45 3.86 14.5x 13.0x 11,121 3.0x 3.1x 2.9x 8.2x 8.4x 8.1x 2.0x 1.9x 6.1% 8.3% $3.55
MYRIAD GENETICS INC MYGN Sell 18.04 1,764 1.23 1.23 14.7x 14.6x 1,447 3.7x 3.7x 3.3x 8.8x 9.4x 8.0x nmf 0.0x 5.3% 5.9% $3.24
QUEST DIAGNOSTICS INC DGX NR 52.91 9,520 4.18 4.59 12.6x 11.5x 12,101 1.6x 1.6x 1.5x 7.2x 7.3x 6.9x 1.9x 1.8x 9.9% 9.7% $2.97
STERIS CORP STE NR 32.15 1,905 2.17 2.37 14.8x 13.6x 1,900 1.4x 1.5x 1.4x 6.8x 7.0x 6.3x 0.8x 0.7x 7.2% 7.9% $3.63
THERMO FISHER SCIENTIFIC INC TMO NR 52.1 6 21,358 3.48 3.91 15.0x 13.3x 21,865 2.0x 2.0x 1.9x 9.6x 10.0x 9.2x 0.9 x 0.9x 6.9% 7.4% $3.84
VARIAN MEDICAL SYSTEMS INC VAR Neutral 50.31 6,215 2.97 3.34 16.9x 15.1x 5,691 2.3x 2.4x 2.2x 9.0x 9.5x 8.5x 0.0x 0.0x 5.8% nmf $4.48
WATERS CORP WAT NR 68.86 6,400 3.94 4.44 17.5x 1 5.5x 6,482 4.0x 4.0x 3.8x 11.8x 1 2.3x 11.2x 1.3x 1.2x 6.1% 6.9% $6.78
Mean 15.0x 13.4x 2.2x 2.2x 2.1x 8.3x 8.7x 8.0x 1.5x 1.3x 7.3% 7.8%
Median 14.7x 13.3x 2.0x 2.1x 1.9x 8.2x 8.4x 8.0x 1.4x 1.3x 6.8% 7.6%
Market Cap Weighted Mean 14.6x 13.0x 2.2x 2.2x 2.1x 8.4x 8.7x 7.9x 1.3x 1.2x 7.5% 7.5%
Source: FactSet and Gleacher & Co. Estimates
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COMPANY DESCRIPTION
Founded in 1985, Hologic, Inc. has grown to become a leading developer, manufacturer
and supplier of premium diagnostic products, medical imaging systems, and surgica
products created specifically to address the healthcare needs of women throughout the
world.
HOLX’ comprehensive suite of products spans nine key areas: mammography and breas
biopsy; radiation treatment for early-stage breast cancer; cervical cancer screening
treatment for menorrhagia; permanent contraception; osteoporosis assessment; preterm
birth risk assessment; mini C-arms for extremity imaging; as well as molecular diagnostic
products, including human papillomavirus (HPV) testing and reagents for a variety of DNA
analysis applications. The company’s core business units are focused on breast health
diagnostics, GYN surgical, and skeletal health.
Bull Case
• Despite limited sales and EPS growth in the near term, HOLX still generates
significant free cash flow, with a yield (10% for CY10) above its peers.
• A budding digital mammography replacement cycle could help stabilize sales
over the next 12-18 months, and a 3D Tomo approval could drive growth beyond
• Products such as NovaSure, Adiana and Cervista HPV are growing modestly
taking share in their respective markets (albeit slowly), and helping to stabilize
sales.
Bear Case
• FFDM (full-field digital mammography) market penetration may not continue
growing as it has in the past. The adoption of digital mammography from analog
has been robust in the past two years, driven in large part by the positive
outcomes of the DMIST study. We believe that over time, digital mammographysystems will be the standard of care for breast cancer screening, but continued
new unit growth may be encumbered by the significantly higher upfront cos
differential in comparison to conventional film-based mammography products.
• Competition should continue to be intense in the breast imaging market. There
are already several companies that compete or will compete with HOLX's
products. Several competitors have considerably larger operations with greate
financial resources and an even broader range of product offerings. Increasing
competition may not only hinder new unit sales but also reduce system pricing. In
comparison to other manufacturers, Selenia ASPs have remained relatively
stable so far, but competitive pressures may lead to higher than expected ASP
erosion.
• Reimbursement levels for digital mammography have been favorable to date
and we believe this trend will continue in the longer term. However, this does notmean that future cuts are impossible. Further, the company's other products are
also subject to varying reimbursement levels, including breast biopsy, CAD and
bone density assessment. Future reimbursement cuts or other adverse changes
in reimbursement policies for the use of these could prove to be detrimental to
future sales growth.
• We believe that there are substantial expectations for the sales and earnings
power of a combined HOLX/CYTC. Aside from the growing pains associated with
the integration of the two companies, we believe there are several Cytyc-specific
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risks to be mindful of, including increasing competition for ThinPrep and
NovaSure, slowing growth of the Imager product, and a Pap market that is close
to full penetration levels.
Public Companies Mentioned:
Becton Dickinson (BDX, $70.19, NR)Boston Scientific (BSX, $5.82, NR)
Conceptus (CPTS, $17.12, Neutral)
CR Bard (BCR, $79.80, NR)
General Electric (GE, $15.39, NR)
Merck (MRK, 35.02, NR)
Qiagen (QGEN, $20.82, NR)
SenoRx (SENO, $10.92, NR)
Bayer (BAYZF, $58.60, NR)
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Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q20
8
16
24
32
40
2008 2009 2010
Rating and Price Target History for: Hologic, Inc. (HOLX) as of 06-15-2010
Created by BlueMatrix
Distribution of Ratings/IB Services
Gleacher & Company Securities, Inc.
IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY [BUY] 101 71.10 1 0.99
HOLD [NEUTRAL] 39 27.50 0 0.00
SELL [SELL] 2 1.40 0 0 .00
Broadpoint AmTech, Inc merged with and into Gleacher & Company Securities, Inc. on June 15, 2010.
Gleacher & Company Securities, Inc. employs the following rating system:
Buy: At the time that this rating is instituted, the total return of this stock is anticipated to be + 15% or more over theensuing 6-12 months.
Neutral: At the time that this rating is instituted, the total return of this stock is anticipated to be flattish, or approximately0% and within a narrow trading range with no obvious positive or negative catalysts over the ensuing 6-12 months.
Sell: At the time that this rating is instituted, the total return of this stock is anticipated to be - 15% or more over theensuing 6-12 months.
Price charts with ratings changes and price target changes for companies we have covered for more than year can befound at https://amtech.bluematrix.com/sellside/Disclosures.action
Price Targets and Investment Risk: Risks that may impede achieving the stated price target, if any, include but are notlimited to, overall broad market and macroeconomic fluctuations and unpredictable changes in the subject company'sfundamentals and/or industry trends.
The author(s) of this report (or household member) does not maintain a position in the securities mentioned in this report.The firm has not provided any investment banking services for the companies in this report within the past 12 months. Theresearch analyst and/or research associate have or will receive compensation based on various factors including quality ofresearch, investor client feedback, and the Firm's overall revenues, and does not include compensation on a specific
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June 16, 20Hologic, Inc. : In Search of the Elusive Growth; Initiating with a Neu
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investment banking services transaction.
Information in this report is intended for use only by professional or institutional investors. Any opinion expressed in thisreport is subject to change and Gleacher & Company Securities, Inc. is under no obligation to update or keep current theinformation contained herein. Gleacher & Company Securities, Inc. accepts no liability whatsoever for any loss or damageof any kind arising from use of this report.
Gleacher & Company Securities, Inc is a member of the FINRA and a member of SIPC. Gleacher & Company Securities,Inc. has prepared this document. Information contained herein has been obtained from sources believed to be reliable, butthe accuracy and completeness of the information, and that of the opinions based thereon, are not guaranteed. This reportis not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned or related securities.Gleacher & Company Securities, Inc. is a registered broker-dealer. Gleacher & Company Securities, Inc., and its entitiesand persons associated with it, may have long or short positions in or effect transactions in the securities of companiesmentioned in this report. Do not change or reproduce any of this report without the express written consent of Gleacher &Company Securities, Inc. Additional information on recommended securities is available on request.
Gleacher & Company Securities, Inc.
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©2010 Gleacher & Company Securities, Inc. All rights reserved.
I, Amit Hazan, as the analyst responsible for this report, certify that:1) All Views expressed in this research Reportaccurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of mycompensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me inthis research report.
I, Jeremy Feffer, as the analyst responsible for this report, certify that:1) All Views expressed in this research Reportaccurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of mycompensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me inthis research report.
June 16, 20Hologic, Inc. : In Search of the Elusive Growth; Initiating with a Neu
Gleacher & Company