Hologic
(NYSE: HOLX)
is set to acquire breast surgical guidance company Endomagnetics for $310 million.
Endomag develops and sells breast surgery localization and lymphatic tracing technology. It makes products like the Magseed marker for magnetic tissue localization before surgery. It also develops the Magtrace lymphatic tracing injectable for breast cancer staging and the Sentimag platform that supports localization and lymphatic tracing.
“Endomag’s suite of solutions complements our existing breast surgery portfolio and will provide surgeons and radiologists with an expanded range of options to meet the individual needs of more patients undergoing critical breast cancer procedures,” Hologic President of Breast and Skeletal Health Solutions Erik Anderson said in a news release. “With a global footprint and a similar commitment to women’s health, we are excited about the potential of welcoming the Endomag team and our future opportunities together to increase access to these technologies and better serve patients across the breast health continuum of care.”
Hologic will acquire Endomag for $310 million, subject to working capital and other customary closing adjustments. The acquisition is subject to customary closing conditions, including regulatory approvals.
Endomag generated approximately $35 million in revenue for the calendar year 2023. The acquisition is expected to be slightly dilutive to Hologic’s non-GAAP earnings per share in fiscal 2024, break even in 2025 and accretive thereafter.
The analyst’s view
William Blair analysts said the acquisition aligns well with Hologic’s interventional breast portfolio. The devices Endomag brings to the company complement Hologic’s Tuloc/Tuflex, LOCalizer and TruNode.
Analysts Andrew Brackmann, Dustin Scaringe and Maggie Boeye said that the acquisition reflects Hologic’s strong balance sheet, with over $2 billion in cash as of the quarter ending in March. They anticipate Hologic to be active on deals such as this with the company’s strong balance sheet.
“Hologic’s base business, in addition to help from acquisitions such as this, should be able to drive durable midsingle-digit-plus growth moving forward, with the potential for further margin expansion as the team drives efficiencies and leverages its footprint; the model is set up well from here,” William Blair analysts said.
The William Blair analysts maintain an outperform rating on Hologic shares, expecting further clarity on the acquisition and outlook during the discal second-quarter earnings update on May 2. Key risks include challenges in capitalizing on the Panther installed base for molecular diagnostics growth, margin improvement timelines, potential regulatory changes, integration of acquisitions and hospital budget constraints.
