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HOLX Provides Gen-Probe Deal Update

Zacks Equity Research

Hologic (HOLX), a prominent player in the field of women’s health, provided an update on the pending acquisition of Gen-Probe (:GPRO), which is expected to close in August. The company announced that Carl Hull, Chairman and CEO of Gen-Probe, will continue as the Senior Vice President and General Manager of the combined company's Diagnostics business for a minimum time frame of 15 months.

Also, the integration process is currently making progress as per the companies. Hologic has also issued $750 million of senior notes due 2020, which will be used to finance the Gen-Probe acquisition. The company currently has $3.05 billion of credit facility in place, including $2.75 billion term loan facility and a $300 million revolving credit facility.

It is expected that the proposed acquisition of Gen-Probe will prove to be valuable for Hologic over the long-term. With 61% of revenues from molecular diagnostics and 35% from blood testing, Gen-Probe is a prominent player in molecular diagnostics products and services that are used primarily to diagnose human diseases, screen donated human blood, and helps ensure transplant compatibility.

Hologic will also have access to Gen-Probe's molecular diagnostic platforms of Tigris and Panther. Gen-Probe has a wide portfolio of tests, including the Aptima franchise used to detect common sexually transmitted diseases, certain high-risk strains of the HPV, and trichomonas products.

We believe the combined company will be well placed to augment in the molecular diagnostics space with special focus on the women’s health segment based on an attractive portfolio, wide marketing and distribution network, and continued investment in R&D.

Preliminary Third Quarter Fiscal 2012 Results

Along with the update on the Gen-Probe deal, the company also announced its preliminary results for the third quarter of fiscal 2012.

Hologic will report revenues of approximately $470 million in the third quarter, up 4.2% year over year but lower than the current Zacks Consensus Estimate of $477 million. Adjusted net income should be in the range of $90−$93 million ($85.7 million in the prior-year quarter) resulting in adjusted EPS of 34−35 cents (32 cents in the year-ago quarter), almost in line with the Zacks Consensus Estimate.

Hologic also reaffirmed the low-end of its 2012 revenue guidance of $1.9 billion and adjusted EPS range of $1.36−$1.38.

The company recorded robust growth in shift of orders from 2D digital mammography systems to its new Dimensions 3D breast tomosynthesis systems. In addition, Hologic has reached over 45% of its goal of placing 500−700 3D systems in US within two years of launch and is on track to achieve the 60% level by the end of the current fiscal.

We have a Neutral recommendation on Hologic. The stock retains a Zacks #3 Rank (Hold) in the short-term.

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