Good News for HOLX after Weak 2Q13


Leading player in the women’s health market Hologic Inc. (HOLX) recently disclosed that it won the regulatory approval from the U.S. Food and Drug Administration (:FDA) for the use of its C-View 2D imaging software. The software is also available across Europe, few nations in Latin America and Asia that recognize the European CE Mark approval.

Following the approval, clinicians can resort to images from the company’s new C-View 2D imaging software instead of the regular 2D exposure required for Hologic’s 3D mammography (breast tomosynthesis) screening exam. Findings from large-scale study also support the efficacy of C-View imaging results.

In a parallel development, Hologic also revealed the clinical results from its first large-scale observational study in a U.S. clinical practice published in the American Journal of Roentgenology (:AJR) in June. The conclusion from the ‘Rose study’ is the same as that of the breakthrough Oslo Tomosynthesis Screening Trial.

The study examines the performance of Hologic’s 3D mammography technology (breast tomosynthesis) in contrast with the conventional 2D mammography. The findings demonstrate a lower recall rate and a considerably higher cancer detection rate, across all breast tissue densities in affected patients, even for invasive cancer.  

The study enrolled 13,856 women who had taken the conventional 2D mammography screening exams. It also included a sample population of 9,499 women who were willing to receive Hologic 3D mammography screening exam. The findings suggest a 38% drop in recall rates and 11% decline in biopsy rates. On the other hand, cancer detection rates improved a massive 35% while the same for invasive cancer improved 53%.

Hologic’s breast tomosynthesis technology gained the regulatory approval in Europe in 2008. In 2011, the company won the FDA approval for breast screening and diagnosis.

We believe that publication of the peer-reviewed study should ramp up adoption rates and support Hologic’s efforts to gain reimbursement for its tomosynthesis technology. Notably, company expectations from the tomosynthesis technology are very high. Hologic’s consistent efforts to promote the technology are likely to yield positive results.

However, weak quarterly results and a guidance cut are looming concerns for investors. If the downward revision of fiscal 2013 guidance is any indication, the ongoing concerns are likely to persist for the rest of the fiscal.

Estimate revision trend for the ongoing fiscal also reflect bearish sentiment surrounding the stock. Further, downward revision of estimate for the next fiscal suggests that there is more downturn ahead for Hologic. Accordingly, the stock carries a Zacks Rank #4 (Sell).

While Hologic is presently out of favor, other medical sector stocks carrying a favorable Zacks Rank are Conceptus Inc. (CPTS), Cyberonics Inc. (CYBX) and Natus Medical Inc. (BABY). These stocks carry a Zacks Rank #1 (Strong Buy).

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