Hologic Earnings Call Insights: Backlog and Pricing Trends

On Monday, Hologic Inc (NASDAQ:HOLX) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Backlog

Vijay Kumar – ISI: This is Vijay in for Ross. So, the first question for Rob. Could you just give a little bit color on the backlog, it was really strong up 17% and put that in context given that you expect the reimbursement code to be now pushed out sort of what gives you the confidence I guess despite the delay in the push out of this reimbursement code, given the microenvironment to see the strong growth in backlog and your interest in tomo?

Robert A. Cascella – President and CEO: The backlog increases in the reality. We did see that as a result of strong order activity in Q4. I think the real question about reimbursement and what impact that will have on our product is one of really timing. What I mean by that is, I still believe we are at the very early phase of market adoption, and as a result of that the buyers that are interested in tomo today are buying it because they believe in the technology, they believe that there is a competitive advantage within their local community and as a result, they are almost being forced to buy the product. I think for much broader adoption, when we talk about 10,000 digital units, eventually converting to 3D mammography that will require reimbursement in order for that level of adoption. So, yes it is certainly a complication that reimbursement is delayed. We don’t think that that materially impacts what happens this year. If the U.S. economy changes dramatically because of either healthcare reform or otherwise it’s not going to be because of reimbursement that there’ll be headwinds on that product. It will be much more that those general capital equipment frees.

Vijay Kumar – ISI: So maybe switching gears to the Diagnostic portion maybe Carl you could answer this one on. The color on PANTHER, the thought the 200 system placements that came in really strong, better versus I think what most had expected, could you just give some color on when you talk little bit 50% new placements were they competitive displacements, what are you seeing on pull-through on the box and kind of tests are being run as HPV, as a trichomonas, as a CT/G, maybe some comment on the mix.

Carl W. Hull – Senior Vice President and General Manager, Diagnostics: We’re very, very pleased with how PANTHER is going so far. Have been on the market for about a year a half in Europe and that’s continue to look good for us from a placement point of view, but the introduction here in the U.S. earlier this year has really accelerated, placement rate, the systems and our funnel is full. So as we look at future placements we also feel optimistic based on the performance today. Most importantly, I think Rob touched on this, is the continued extremely positive customer reactions to the system that are driving placements and we feel that trend is going to continue in the near term. Right now, as you may recall the focus of our sales efforts is on the APTIMA Combo 2 Assay, the first assay was proved here in the United States and we expect future assay menu expansion along with incremental revenues as we add Trich and HPV to it over the course of really the next 14 to 16 months. So, all in all we’re very happy.

Pricing Trends

Isaac Ro – Goldman Sachs: Could you guys maybe speak generally on what you’re seeing in pricing trends for Diagnostics and the reason I asked you is we’re obviously looking at a pretty stagnant volume environment and as we think about capital spending from a lot of your customers in that market. Wondering what you’re seeing is pushback both in your new products as well as your mature products?

Robert A. Cascella – President and CEO: You asked Isaac about Diagnostic specifically?

Isaac Ro – Goldman Sachs: Yes. Thank you.

Robert A. Cascella – President and CEO: Look the market that seems to be under a lot of pressure relative to pricing is HPV and that shouldn’t be a surprise to anyone. There is a lot of new competition and we’re seeing that on a global basis. We have not seen that relative to our CT/GC franchise and we believe that obviously there is a decision path that’s being made relative to automation workload and the workflow and the quality of our assay and we have not seen the treat in that business as of yet, so if I were to categorize where we see the greatest decline and its new business for us, so it’s not in my erosion and our AUPs or otherwise is in the HPV market.

Isaac Ro – Goldman Sachs: Then maybe second question on cost synergies, Glenn. In the past you guys have done a very good job on delivering there, could you maybe comment on any incremental opportunities that you found as the deal closed, and maybe give us some color on what the battle plan looks like over the next three to six months?

Robert A. Cascella – President and CEO: Well, I think we’re pretty happy with what we found. We went into the day one with a pretty good tried our game plan on what we were trying to achieve with the sales force and how we were going to align all the facilities. So, we’re right on track to where we wanted to be. We talked about the $40 million in year one, but clearly we’ll do much better than that for this first year in fiscal 2013 and we’ll get up to that 475 million in annual synergies as quick as we can.