Hologic Earnings Call NUGGETS: Pricing Environment, Tomo Units

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

Pricing Environment

Isaac Ro – Goldman Sachs: Just maybe first off, Robert, if you could comment by sort of business units and your thoughts regarding the pricing environment, not only for capital equipment but as well as consumables? Secondly, just want to clarify on the mechanics for the Gen-Probe this quarter. When will we be getting a look to second quarter? It sounded like they might not come until November and I wanted to clear that out?

Robert A. Cascella – President and CEO: Isaac, let me start with the Gen-Probe question. That is correct. We do not have June results available for us to disclose today, and those results will be disclosed as part of future SEC filings. The first one, you are correct, it’s the November timeframe in a footnote with our 10-K.

Glenn P. Muir – EVP, Finance and Administration and CFO: As far as pricing, Isaac, what we are seeing is just really, I think, the results of a weakening economy in Europe that is certainly putting a lot of pressure on downward pricing competitions, pricing and so on and so forth. Not a total surprise the persistence as I commented in my script is one that I think we just have to accept as reality. I don’t believe that we’re seeing that same kind of downward pricing here in the states although it is really the results are quite simply that the tomo product is so new in terms of adoption and there is not that same kind of pricing as a result of more mature technologies.

Isaac Ro – Goldman Sachs: And elsewhere in the business, you could maybe clarify what you saw on pricing regarding surgical and diagnostics? That’ll be great. Thank you.

Robert A. Cascella – President and CEO: Sure, on diagnostics the international business it’s doing quite well and although we’re certainly being aggressive on some competitive takeaways for both Cervista and on in the case of ThinPrep these are typically in countries that either we have had little penetration or in fact no volume. So it may be at a lower AUP then what some of our historic pricing might be but it is business that otherwise we have not had. Domestically with surgical which is primarily the market that we focus on there is some price erosion as we went back after market share and just to put it in perspective we’re talking about something much less than 5%, but we are we are vying for share at a very aggressive rate in order to grow that business.

Tomo Units

Tycho Peterson – JPMorgan: May be just a follow-up on that last question on pricing as you go to negotiate HPV contracts are you able to talk at all about pricing for the Gen-Probe products yet or do you have wait until the deal closes?

Robert A. Cascella – President and CEO: We have certainly not talked about Gen-Probe products at all and that wouldn’t happen Tycho and so we were closed with the transaction.

Tycho Peterson – JPMorgan: Then to clarify your comments on pricing in Europe does that creep over to tomo as well I mean of Siemens got more aggressive on pricing, they have been for a while I guess?

Robert A. Cascella – President and CEO: I think that’s a correct statement. Siemens has been heavily discounting their tomo unit I think what we are seeing is lot of the earlier sites have now bought tomo. So we are into sites that are on the edge of whether they want to invest and consequently they are negotiating much more aggressively as a result of that. So clearly it is impacting tomo. but Because the European market is representing a much smaller percentage of total tomo sales it is having a lesser impact on the business.

Tycho Peterson – JPMorgan: Then you had a sequential increase in NovaSure can you talk about your thought on that product line, you’ve backed off the DTC rates. So can you talk a little bit about what’s driving that?

Robert A. Cascella – President and CEO: I think its couple of things. We shifted the focus of the DTC to really on a follow-up on those women that had responded to our awareness campaign. So it’s really conversion that we are focusing on and having a very routine exchanges with women that were asking for additional information. The other element that has created a positive moved in, in the product line is simply, the comment that I made earlier we had 38 incremental people that were brought on at the beginning of the year. Those people are now fully trained, they are not being burdened by all of the confusion over the discontinuance of Adiana and as result of that we’re seeing a bit of an uptick in terms of market share gains in the states.

Tycho Peterson – JPMorgan: Then last one and then I’ll hope back in queue could you talk about the sustainability of growth for the service business for breast health for breast health is that really a function of flowing out tomo there is more service upfront or just top of the dynamic there?

Robert A. Cascella – President and CEO: Realistically if the service will continue to grow and until there is an influx in where tomo units really take off, because as we have talked about in the past, as we sell more tomo units and trade out Selenia’s the tomo unit is under warranty and the Selenia would have been under our service contract. So, there will be a gap in service revenue when there is a much sharper uptick in the number of tomo units that are being sold. The good news would be is that we’re replacing a $40,000 or $50,000 service contract with the sale of our $400,000 tomo unit, following that one year warranty we would back to a service contract revenue as well.