Hologic to acquire R2 Technology, posts strong Q2 gains

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Hologic, Inc. this week announced it will add computer-assisted detection (CAD) technology to its portfolio with the signing of a definitive agreement to acquire CAD leader R2 Technology, Inc. This is Hologic's second acquisition announcement in a week — at that time the company announced it would acquire Suros Surgical. 
 
The R2 transaction is valued at $220 million (subject to adjustment) payable in shares of Hologic Common Stock.  The price per share will be equal to the 10-trading day average of the closing price per share of Hologic Common Stock for the period ending two trading days prior to the closing date. The transaction is expected to close in the next two to three months.  
 
R2 Technology, based in Sunnyvale, Calif., pioneered the use of CAD for mammography in 1998 when the ImageChecker system became the first CAD system approved by the FDA for screening mammography.  The ImageChecker CAD system also was the first system approved for use with digital mammography. The company now also offers the ImageChecker CT Lung system for detecting solid lung nodules in multidetector CT studies.
 
“We are pleased to announce our intention to acquire R2 Technology,” said Hologic Chairman and CEO Jack Cumming. “R2 has over 2,500 mammography CAD installations worldwide, including over 1,000 digital CAD systems. We believe the mammography CAD industry was [valued at] approximately $100 million in 2005 and that adoption of CAD will increase as a result of its clinical advantages and the increased adoption of digital mammography systems. We are confident the integration of R2’s CAD systems with Hologic’s mammography product portfolio will build a solid platform for future long-term growth.”
 
R2’s revenue in calendar 2005 was approximately $45 million, essentially unchanged from the previous year, Hologic said in a release.  Hologic expects the market will shift away from analog or film-based systems to CAD sold with digital mammography systems. This shift to digital CAD is expected to help improve margins overall as such margins are comprised primarily of software sales, Hologic said.  The company expects this transaction to be accretive to earnings in fiscal 2007, excluding the amortization of intangibles related to this transaction.
 
“Our technology is a powerful instrument in the early detection of those afflicted with cancer and other diseases,” said John Pavlidis, president and CEO of R2 Technology, Inc. “We welcome our new partnership with Hologic and believe that this merger will help ensure that our CAD technology enjoys an even broader distribution to patients and physicians worldwide.”

As for Hologic the company has seen strong financial results of late, and has reported Q2 fiscal 2006 revenues of $100,985,000, a 46 percent increase which compares positively to revenues of $69,237,000 in the Q2 fiscal 2005. Also for the quarter, Hologic reported net income of $11,164,000, or $0.24 per diluted share, compared with net income of $6,048,000, or $0.13 per diluted share, in the second quarter of fiscal 2005.
 
According to the company, the improvement in quarterly earnings largely reflects the increase in product sales of Selenia digital mammography systems in the current quarter as compared to the same period in fiscal 2005. During the second quarter, Hologic recognized as revenue the sale of 111 Selenia full-field digital mammography systems. As of late March, the company’s backlog for orders of Selenia was 285 systems, and total backlog for all products increased to over $153 million, the highest quarterly backlog in the company’s history and a 10 percent increase over the backlog at December 24, 2005.