Hologic (HOLX)

Hologic (HOLX – NASDAQ) is a developer, manufacturer and supplier of diagnostic and medical imaging systems that primarily serve women’s healthcare needs through three segments: mammography and breast care (75 percent of fiscal 2006 revenues), osteoporosis assessment (15 percent of revenues), and other (10 percent of revenues). The company recently acquired Cytyc, which dominates the cervical cancer testing market.
Hologic holds a leading market position in breast cancer and osteoporosis detection in the US and stands to benefit from the acquisition of Cytyc, which has 70 percent share of the cervical cancer testing market. This deal will grant Hologic leadership in the women’s health care segment and add revenue stability and predictability.
Sales of the company’s Selenia digital mammography system units grew 154 percent last year, reflecting an industry trend of conversion from analog to digital systems. Over the past year, industry-wide digital mammography unit sales have grown 91 percent, yet only 21 percent of analog systems have been converted. To further capitalize on this shift, Hologic’s pipeline tomosynthesis product will provide 3-D mammography capabilities and represents a significant opportunity for long-run market expansion.
Hologic’s revenue growth will be enhanced further by cross-selling initiatives through Cytyc’s sales channels, which will greatly expand the company’s international presence. Margin expansion is also expected as Hologic’s 43 percent gross margins are boosted by Cytyc’s 78 percent margins. The consensus long-term earnings growth rate projection is 35 percent.
Breast cancer is the second leading cause of cancer-related death in women in the US. Death rates have declined since 1990 due to earlier detection and treatment. Hologic’s digital mammography products provide more accurate detection for some women.
www.hologic.com