HOLX / GPRO Deal Could Be Good for CUR
Brian Marckx, CFA
The news yesterday that Hologic Inc (HOLX) is acquiring Gen-Probe (:GPRO) could have positive implications for DiagnoCure (T.CUR, CUR.TO) and their Progensa PCA3 prostate cancer test.
In 2003 DiagnoCure licensed development and commercialization rights of their PCA3 marker to Gen-Probe in return for royalties on sales. Gen-Probe had been selling the test in the U.S. only as an analyte specific reagent (ASR) until the assay received FDA approval in February of this year. Gen-Probe also sells the test in Europe.
As we noted in our initiation report on DiagnoCure (3/20/2012), "Gen-Probe has not had much success in moving the needle on Progensa sales in Europe but FDA approval of the test offers a new opportunity to spark revenue growth. The rate of ramp in sales of the test may be determined by a number of things, many of which are out of DiagnoCure's control including coverage decisions by private payers and the utility of the test in clinical practice. Perhaps the most influential factor that may shape the near and intermediate term success of PCA3, however, will be the level of effort and resources that Gen-Probe dedicates to marketing and sales of the test."
Hologic's motivation for acquiring GPRO is to bolt on a major diagnostics business and they didn't shy away from paying a hefty premium (20%) to do so. While HOLX clearly believes there's synergies with their women's health products and GPRO's sexually transmitted disease tests, Progensa PCA3 could also be a natural fit with Hologic's major presence in cancer diagnostics and treatment. Hologic's sales force will also have a substantially larger presence than did Gen-Probe's.
We cover DiagnoCure with an Outperform rating and $2.25 price target.
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