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Hologic's Focal Therapeutics Buyout to Boost Breast Health Arm

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Hologic, Inc. (HOLX - Free Report) signed a definitive agreement to acquire Focal Therapeutics. The deal, valued $125 million, will widen the Breast Health product suite. Also, the buyout will strengthen the company’s position in the breast conserving surgery market.

However, the acquisition, slated to close in early October, is expected to be immaterial to Hologic’s adjusted earnings per share in fiscal 2019 but accretive thereafter.

Post-acquisition, Focal’s BioZorb marker will be added to the company’s Breast Health product portfolio. Notably, BioZorb is an implantable three-dimensional marker, which enables clinicians to mark tumor excision for monitoring and future treatments, thereby simplifying the breast conserving surgery process. The marker also allows for tissue in-growth during the healing process.

Market Trends Buoy Optimism

Also, per a report by GBI Research, the global breast cancer treatment market will reach $17.2 billion by 2021, at a CAGR of 7.3%.

Per a report by DPI Research on Medium, the breast cancer screening market in the United States is expected to reach roughly $5.8 billion by 2022.

Thus, the company has solid prospects in this market.

Breast Health Unit in Focus

Hologic is optimistic about sustaining the solid earnings trend in 2018, courtesy of gains from the Breast Health segment.  The company witnessed a consistent rise in market share within Breast Health on the back of direct-to-consumer initiatives and insurance coverage.

Moreover, Hologic recently announced the completion of the buyout of Faxitron Bioptics, a privately-held leader in digital specimen radiography. The acquisition was aimed to broaden the Breast Health portfolio. 

Additionally, the company’s adoption of new mammography systems, 3Dimensions and 3D Performance is encouraging. These products have already started to leverage the  Genius brand and propelled customers to upgrade their existing 2D systems.

In this regard, the receipt of PMA from the FDA for Clarity HD high-resolution 3D imaging and Intelligent 2D imaging technology in March is noteworthy. These products are now available in the 3Dimensions breast tomosynthesis system.

Also, the global sales of interventional breast products — mainly biopsy systems and disposables — have been rising consistently. Increase in Affirm prone table sales buoyed optimism in the stock. The company projects that the Brevera, a revolutionary new real-time biopsy system, will continue to drive growth in FY18.

Furthermore, in January 2018, Hologic obtained CE Mark for the Brevera breast biopsy system with CorLumina imaging technology, a real-time breast biopsy and verification system.

Price Performance

In the past year, Hologic’s shares have declined 10.5%, against the industry’s rally of 30.2%. We believe that the latest development will help the stock rebound.

Zacks Rank & Key Picks

Hologic currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Intuitive Surgical (ISRG - Free Report) , Amedisys, Inc. (AMED - Free Report) and Masimo Corporation (MASI - Free Report) .

Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock currently carries a Zacks Rank of 2 (Buy).

Amedisys’ long-term expected earnings growth rate is 19.4%. The stock sports a Zacks Rank #1 (Strong Buy) at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo’s long-term expected earnings growth rate is 14.8%. The stock currently has a Zacks Rank #2.

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