HOLX Hologic Inc

Gen-Probe Inc. (GPRO), a leading diagnostic devices company, reported its first quarter fiscal 2012 adjusted (excluding one-time expenses) earnings of 55 cents a share, beating both the Zacks Consensus Estimate and the year-ego earnings of 51 cents and 54 cents, respectively. In the reported quarter, profit slipped 3.5% to $22.5 million (or 49 cents per share).

Gen-Probe recently announced that women’s healthcare major, Hologic Inc. (HOLX) will takeover the company for $3,700 million (or $82.75 a share).

Revenue

Revenues rose 7% year over year to $153.4 million beating the Zacks Consensus Estimate of $151 million. Product sales increased 9% to $150.1 million as healthy sales across Blood Screening and Clinical Diagnostics franchises was partially offset by lower revenues from the Research Products and Services and Collaborative Research businesses.

Revenues from Clinical Diagnostics segment grew 7% (up 8% in constant currency) year over year to $94.9 million, led by strong sales of APTIMA Combo 2, APTIMA HPV and APTIMA Trichomonas assays. Foreign exchange swings negated revenues by approximately $0.5 million.

Blood Screening sales rose 12% (up 13% in constant currency) to $52.5 million, driven by higher shipping of TIGRIS devices to its partner Novartis (NVS). Foreign exchange swings reduced sales by roughly $0.1 million.

Research Products and Services sales dropped 13% to $2.7 million in the quarter. Revenues from Collaborative Research plunged 61% to $1.4 million, hurt by lower funding from Novartis for the development of the PANTHER system for blood screening.

Gen-Probe expects to launch the PANTHER system in international blood screening markets in 2012. Royalty and license revenues increased 36% to $1.9 million.

Margins

Product sales gross margin was 65.1% versus 69.6% in the year-ago quarter, resulting from unfavorable product mix. Operating margin decreased to 20.6% from 24.2% due to higher sales and marketing expenses along with poor product mix.

Marketing and sales expenses climbed 15% to $19 million due to expansion in the operations of women’s healthcare. General and administrative expenses rose 4% to $19 million as a result of continuing litigation.Research and development expenses dipped 1% year over year to $28.6 million.

Balance Sheet

Gen-Probe exited first quarter 2012 with cash and cash equivalents and marketable securities of $401.3 million (down 18.3%) and short-term debt of $248 million, flat year over year. The company produced $31.7 million in cash flows from operations during the quarter and invested $9.3 million in capital expenditure, resulting in a free cash flow of $22.4 million.

Guidance

Gen-Probe expects somewhat higher sequential revenue for the second quarter 2012 and adjusted earnings in the band of 55 cents and 58 cents a share. On a reported basis, the company forecasts earnings to remain in the range of 51 cents to 54 cents per share. Fiscal earnings and revenues forecast remain unchanged.

Currently, we have a long-term Neutral recommendation on Gen-Probe, which is in tandem with a short-term Zacks #3 Rank (Hold).

 
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