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Tickers in this Article: HOLX, QGEN, ABT
In a major achievement, Hologic (HOLX), a prominent player in the field of women's health, has won an award for its Selenia Dimensions (3D/2D) mammography systems in the digital mammography category in the KLAS annual survey. KLAS, a research firm tracking the performance of healthcare vendors, is committed to improving healthcare delivery. Hologic's Selenia Dimensions (3D) digital tomosynthesis system has been getting positive feedback supported by gradual uptake subsequent to approval from the US Food and Drug Administration (FDA) in February 2011. Selenia has been developed on the Dimensions platform utilizing tomosynthesis technology to produce both 3D and the conventional 2D full field digital mammography ("FFDM") images. The images can be used to screen and diagnose breast cancer. Although increasing the patient's radiation exposure, a combination of both 2-D and 3-D images enhances the accuracy of detection of the disease.

Sales of Dimensions continued to gain traction and represented 67% of digital mammography revenue and 57% of units in the most recent quarter (ahead of 62% of revenues and 50% of units in the first quarter of 2012). Besides, Tomosynthesis upgrades represented approximately 20% of total tomosynthesis unit sales. Given the current status (35% accomplished till date and targeting 60% at the end of the current fiscal), the company is confident of placing the targeted 500-700 3D systems in the US within the first two years of approval. Going forward, we believe that the Dimensions portfolio would be an important growth driver at the Breast Health segment.

With a wide range of products, Hologic has become an industry giant in the field of women's health. The company is also undertaking several steps, including acquisitions, international expansion and product development, to bolster its top line. Moreover, the proposed acquisition of Gen-Probe (GPRO) will propel the company to a prominent position in the molecular diagnostics segment.

We were disappointed with the second quarter revenue number that missed the consensus estimate and was on the lower end of the company's guidance. We are nonetheless reassured by the company's reaffirmation of its fiscal 2012 guidance despite the discontinuation of Adiana.  

However, procedure volumes are feeling the brunt of a weak economy and persistent unemployment, which adversely affect sales. Moreover, we remain concerned about the high leverage of the company owing to the Gen-Probe deal. The company also faces stiff competition from players such as Qiagen (QGEN) and Abbott Laboratories (ABT), among others.

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

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