Hologic, Inc. (Hologic or the Company) (Nasdaq: HOLX), a leading developer, manufacturer and supplier of premium diagnostics products, medical imaging systems and surgical products dedicated to serving the healthcare needs of women, today announced its results for the second fiscal quarter ended March 24, 2012.
- Revenues of $471.2 million resulting from year-over-year growth in all four operating segments.
- Net loss of $40.3 million, or $0.15 per diluted share, calculated in accordance with U.S. generally accepted accounting principles (GAAP).
- Non-GAAP adjusted net income of $86.8 million, or $0.33 per diluted share, and adjusted EBITDA (non-GAAP adjusted earnings before interest, taxes, depreciation and amortization) of $157.4 million. A reconciliation of GAAP to non-GAAP results is included as an attachment to this press release.
- Exchange transaction to retire $500 million, 2.00% Convertible Senior Notes due 2037, extending the earliest put date for the exchanged notes by approximately four years to March 2018.
- Several new product clearances, launches and milestones achieved in the U.S. and internationally.
- Decision to discontinue sales of the Adiana permanent contraception system.
- Hologic to acquire Gen-Probe for $82.75 per share in cash.
Second quarter fiscal 2012 operating results overview:
Second quarter fiscal 2012 revenues totaled $471.2 million, an increase of 7.4% compared to revenues of $438.7 million in the second quarter of fiscal 2011. This increase resulted from growth in revenues in all four of our operating segments, primarily from: (i) growth in Breast Health revenues of $12.8 million, or 6.2%, driven by a $7.9 million, or 5.7%, increase in product revenues and a $4.9 million, or 7.1%, increase in service revenues; (ii) an increase in Diagnostics revenues of $13.6 million, or 9.8%, primarily due to growth in ThinPrep revenues from the acquisition of TCT International Co., Ltd. (TCT) in Beijing, China on June 1, 2011 and growth in sales of our molecular diagnostics product lines; (iii) an increase in GYN Surgical revenues of $5.7 million, or 8.0%, related to contributions from the MyoSure hysteroscopic tissue removal (MyoSure) system, partially offset by decreases in NovaSure endometrial ablation (NovaSure) and Adiana permanent contraception (Adiana) system sales; and (iv) an increase in Skeletal Health revenues of $0.5 million, or 2.0%, due to an increase in bone densitometry product sales, partially offset by a decline in Mini C-Arm product sales.
For the second quarter of fiscal 2012, Hologic reported a net loss of $40.3 million, or $0.15 per diluted share, compared with net income of $82.4 million, or $0.31 per diluted share, in the second quarter of fiscal 2011.
The Company's non-GAAP adjusted net income increased 10.1% to $86.8 million, or $0.33 per diluted share, in the second quarter of fiscal 2012 compared to $78.9 million, or $0.30 per diluted share, in the prior year. The Company's fiscal 2012 and 2011 second quarter non-GAAP adjusted net income primarily excludes: (i) a non-cash charge of $61.0 million and $59.0 million, respectively, attributable to the amortization of intangible assets; (ii) a non-cash interest expense charge of $17.9 million and $17.8 million, respectively, related to the Convertible Notes; (iii) a net charge of $61.3 million and credit of $4.2 million, respectively, for contingent consideration related to recent acquisitions; and (iv) $1.7 million and $2.6 million, respectively, of acquisition-related costs and other charges. The Company's fiscal 2012 second quarter non-GAAP adjusted net income also excludes: (i) a $42.3 million non-cash loss on the exchange of Convertible Notes; (ii) an $18.3 million charge related to the write off of certain assets and charges as a result of the Company's decision to cease commercialization of the Adiana product; and (iii) a gain of $12.4 million resulting from a scheduled milestone payment received from KV Pharmaceuticals (KV). The Company's fiscal 2011 second quarter non-GAAP adjusted net income also excludes a net gain of $84.5 million from the sale of intellectual property to KV.
For the six months ended March 24, 2012, revenues totaled $943.9 million, an increase of 8.3% compared to revenues of $871.2 million in the six months ended March 26, 2011. The increase was primarily attributable to: (i) growth in Breast Health revenues of $32.8 million, or 8.2%, driven by a $22.0 million, or 8.2%, increase in product revenues and a $10.8 million, or 8.0%, increase in service revenues; (ii) an increase in Diagnostics revenues of $28.6 million, or 10.3%, primarily due to growth in ThinPrep revenues from the acquisition of TCT and, to a lesser extent, the growth in sales of our molecular diagnostics product lines; (iii) an increase in GYN Surgical revenues of $8.6 million, or 5.8%, related to contributions from the MyoSure system, partially offset by a decrease in NovaSure and Adiana system sales; and (iv) an increase in Skeletal Health revenues of $2.8 million, or 6.1%, primarily due to an increase in bone densitometry sales.
For the six months ended March 24, 2012, Hologic reported a net loss of $19.5 million, or $0.07 per diluted share, compared with net income of $93.4 million, or $0.35 per diluted share, in the six months ended March 26, 2011. The Company's non-GAAP adjusted net income increased 11.4% to $176.9 million, or $0.67 per diluted share, in the six months ended March 24, 2012 compared to $158.7 million, or $0.60 per diluted share, for the same period in the prior year. The Company's non-GAAP adjusted net income for the first six months of fiscal 2012 and 2011 primarily excludes: (i) a non-cash charge of $122.0 million and $115.6 million, respectively, attributable to the amortization of intangible assets; (ii) a non-cash interest expense charge of $36.9 million and $36.2 million, respectively, related to the Convertible Notes; (iii) a net charge of $76.9 million and credit of $3.1 million, respectively, for contingent consideration related to recent acquisitions; (iv) a $42.3 million and $29.9 million, respectively, non-cash loss on the exchange of Convertible Notes; and (v) $2.7 million and $5.0 million, respectively, of acquisition-related costs and other charges. The Company's fiscal 2012 second quarter non-GAAP adjusted net income also excludes an $18.3 million charge related to the write off of certain assets and charges as a result of the Company's decision to cease commercialization of the Adiana product and a gain of $12.4 million related to the scheduled milestone payment received from KV. The Company's non-GAAP adjusted net income for the first six months of fiscal 2011 also primarily excludes a net gain on sale of intellectual property of $84.5 million.
Non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share (non-GAAP adjusted EPS), and adjusted EBITDA are non-GAAP financial measures. The Company's definitions of these non-GAAP financial measures, and the reconciliations of these measures to the Company's comparable GAAP financial measures for the periods presented, are set forth in the supplemental information attached to this press release. When analyzing the Company's operating performance, investors should not consider these non-GAAP measures as a substitute for the comparable financial measures prepared in accordance with GAAP.
"We are once again very pleased we experienced year-over-year revenue growth in all four of our business segments and our operating results were in-line with expectations, given the second quarter is historically our slowest as a result of resetting deductibles and the timing of orders for capital equipment," said Rob Cascella, President and Chief Executive Officer. "We continue to be extremely excited about the increasing adoption of our 3D breast tomosynthesis as the standard of care in breast imaging. Our breast biopsy line of products continues to grow and take market share, as does our MyoSure product, which is exceeding our expectations. Although a typically difficult quarter for Diagnostics, we continue to be very pleased with growth internationally in this segment. We also continue to execute on our strategy to deliver new, innovative best-in-class technologies to both new and emerging markets and a number of product approvals and clearances are marking the way for our global expansion. Through our recent acquisitions, core product growth and ongoing product development, we remain well-positioned to demonstrate solid global growth."
Second quarter fiscal 2012 revenue overview by segment (as compared to second quarter fiscal 2011):
- Breast Health revenues, which include the Company's mammography, breast biopsy, Magnetic Resonance Imaging (MRI) coils and MammoSite product lines, increased to $218.6 million in the current quarter compared to $205.9 million in the prior year, an increase of 6.2%. Product revenue growth was driven primarily by a combination of: (i) the continued shift in sales from Selenia to Dimensions systems and, to a lesser extent, an increase in the total number of digital mammography systems sold; and (ii) growth in sales of the Company's breast biopsy products, led by the Eviva biopsy system. The Company also realized a $4.9 million, or 7.1%, increase in service revenue related to its increased installed base of digital mammography systems.
- Diagnostics revenues, which include the Company's ThinPrep products, Rapid Fetal Fibronectin test, Cervista HPV tests, and other molecular diagnostics products, totaled $151.8 million in the current quarter compared to $138.2 million in the prior year, an increase of 9.8%. Sales growth was driven primarily by a combination of higher ThinPrep revenues (from both the addition of TCT and other international sales) and growth in sales of molecular diagnostics products. Incremental ThinPrep revenues from the TCT acquisition were approximately $8.2 million during the current period, as compared to $7.3 million and $7.9 million in the first fiscal quarter of 2012 and the fourth quarter of fiscal 2011, respectively (incremental revenues represent the total third party price less the original price previously charged to TCT).
- GYN Surgical revenues, which include the Company's NovaSure, MyoSure and Adiana systems, totaled $77.2 million in the current quarter compared to $71.5 million in the prior year, an increase of 8.0%. Sales growth was driven by an increase in sales of the MyoSure system, partially offset by lower NovaSure system sales and, to a lesser extent, Adiana system sales.
- Skeletal Health revenues, which mainly include the Company's osteoporosis assessment and Mini C-Arm product lines, totaled $23.5 million in the current quarter compared to $23.1 million in the prior year, an increase of 2.0%. This increase was the result of an increase in bone densitometry sales, partially offset by a decline in Mini C-Arm product sales.
Hologic to Acquire Gen-Probe:
Today, Hologic and Gen-Probe (NASDAQ: GPRO) announced that they have entered into a definitive agreement pursuant to which Hologic will acquire Gen-Probe for $82.75 per share in cash, or a total of approximately $3.7 billion. Please refer to a joint press release issued by the parties today for additional details regarding the transaction.
Exchange of Convertible Senior Notes:
On February 29, 2012, the Company entered into separate, privately-negotiated exchange agreements under which it retired $500 million in aggregate principal of the Company's outstanding 2.00% Convertible Senior Notes due 2037 ("2007 Notes") in exchange for the issuance of $500 million in aggregate principal of new 2.00% Convertible Senior Notes due 2042 ("2012 Notes"). In doing so, the first date on which holders of the 2012 Notes may require the Company to purchase the notes outstanding was extended approximately four years from December 2013 to March 2018 in order to provide the Company with additional flexibility relative to its future liquidity needs. In return, the holders of the 2012 Notes received a lower conversion price. Following these transactions, approximately $775 million in aggregate principal amount of the 2007 Notes remains outstanding, with an aggregate principal balance of total Company convertible senior notes outstanding remaining at $1.725 billion.
510k clearance of the premarket application for the Aquilex Fluid Control (Aquilex) system
On February 6, 2012, the Company received 510k clearance for its premarket application for the Aquilex fluid control system and has subsequently started to commercialize Aquilex in the U.S through its GYN Surgical sales force. The Company's Aquilex system for hysteroscopy is designed to reduce procedure and anesthesia time while providing high quality visualization to the surgeon.
The Company began to commercialize its C-View synthesized 2D image reconstruction algorithm (C-View) in Europe during the second quarter of fiscal 2012 following the product's CE Marking in November 2011. C-View software provides an alternative by eliminating the need for a conventional 2D mammogram as a component of a 3D mammography exam. For users of Hologic's 2D plus 3D tomosynthesis breast cancer screening system, C-View software creates a 2D image from a single tomosynthesis scan and is approved for sale throughout the European Economic Area and in other countries recognizing the CE Mark.
The Company began to commercialize its Serenity digital mammography system during the second quarter of fiscal 2012 following the product's SFDA approval by China's regulatory body in December 2011. The Serenity system is a lower cost digital mammography system better suited for certain segments of the Chinese market. This new system incorporates Hologic's selenium detector into the updated platform of the Healthcome analog system.
The Company began full commercial launch in China of its Cervista HPV HR test during the second quarter of fiscal 2012 following the product's SFDA approval in September 2011. Hologic's HPV HR test utilizes Hologic's proprietary Invader technology to detect 14 high risk types of HPV that are associated with cervical cancer and precancerous lesions.
Multiple International Product Approvals
During the second quarter of fiscal 2012, the Company received international approvals for several of its Diagnostics and GYN Surgical products. Such product approvals include: various ThinPrep instrumentation in China and Russia and the ThinPrep pap test in Russia; the Cervista HPV HR test in Japan; the Aquilex fluid management system in the European Union; and the MyoSure and Aquilex systems in Australia and New Zealand.
Honors and Milestones:
Hologic's Dimensions 3D tomosynthesis system was ranked #1 and its Dimensions 2D system was ranked #2 in overall performance in the new KLAS Women's Imaging 2012: "Tomosynthesis Makes a Splash" report. The Dimensions tomosynthesis system scored highest or tied for highest in 24 of 25 performance measures evaluated. The report is based on in-depth interviews with users of the major systems in use in the U.S. mammography market.
During the second quarter of fiscal 2012, the Company shipped its 500 millionth ThinPrep pap test since its launch in 1996. Hologic was the first to develop a liquid-based pap test, which replaced the traditional pap smear, and has since enjoyed majority share in the U.S. market. The Company's success in the U.S. has allowed it to quickly expand globally in areas such as Canada, Europe, Australia, Asia, Latin America, the Middle East and Africa.
Decision to Discontinue Sales of the Adiana System:
In March, after determining the product was not financially viable and would not become so in the foreseeable future, the Company decided to discontinue the manufacturing, sales and marketing of its Adiana system and to focus its resources on the continued growth and success of its core products. Hologic has resolved ongoing litigation with Conceptus concerning patent infringement claims. In conjunction with this settlement, the parties have agreed that in exchange for Conceptus agreeing to forgo the $18.8 millon jury award, Hologic would agree to a permanent injunction against the manufacture, sale and distribution of the Adiana product. Hologic has also granted Conceptus a license to Hologic's intellectual property related to its Adiana product. Hologic expects to complete the wind down of its Adiana business over the next six weeks. The parties have also agreed to dismiss the false patent marking case between them.
The Company's guidance reflects its current core products, including revenues from its approved/cleared products and its recently acquired businesses, but does not reflect any revenue or earnings from pending or future acquisitions.
Third Quarter Fiscal 2012 (Quarter ending June 23, 2012):
- The Company expects third quarter fiscal 2012 revenues of $475 million to $480 million. This primarily reflects an increase in revenues related to its fiscal 2011 acquisitions, the ramp-up of new products including the Dimensions and MyoSure systems, and an overall strengthening in each of the Company's operating segments, partially offset by a reduction in revenues related to the Adiana product. Year-over-year, this represents an expected increase in revenues of 5% to 6% over third quarter fiscal 2011 revenues of $451.1 million.
- The Company expects non-GAAP adjusted EPS to be approximately $0.34.
Fiscal 2012 (Year ending September 29, 2012):
- The Company is reaffirming fiscal 2012 revenue guidance of $1.9 billion to $1.925 billion. Year-over-year, this represents an expected increase in revenues of 6% to 8% over fiscal 2011 revenues of $1.79 billion. This primarily reflects an increase in revenues related to the Company's fiscal 2011 acquisitions and, to a lesser extent, increases in the Breast Health, GYN Surgical and Diagnostics segments and also takes into account a reduction in revenues related to the Adiana product.
- The Company is reaffirming non-GAAP adjusted EPS guidance of approximately $1.36 to $1.38.
Estimates of certain non-GAAP adjustments the Company anticipates will be reflected in its non-GAAP fiscal 2012 third quarter and fiscal 2012 year financial performance are included as an attachment to this press release.
Hologic may not generate expected revenues and may incur expenses or charges or realize income or gains in fiscal 2012 that could cause actual results to vary from the guidance above. In addition, the Company is continuing to monitor the effects of the U.S., European and general worldwide economic and regulatory conditions and related uncertainties, including the implementation of healthcare cost containment measures and healthcare reform legislation, as well as foreign currency fluctuations, which, along with other uncertainties facing the Company's business including those referenced elsewhere herein and its filings with the Securities and Exchange Commission, could adversely affect anticipated results.