Hologic makes $732M write-down as recent $1.6B Cynosure deal hits turbulence

With the margin of error already fine, Hologic ran into unforeseen difficulties, derailing its near-term plans for the business. (Dr. Dennis Dass)

Hologic’s move into medical aesthetics isn’t going according to plan. The diagnostics player bought its way into the sector with the $1.6 billion takeover of Cynosure in March 2016 but was forced to write down the value of the acquired business by $732 million this week.

Marlborough, Massachusetts-based Hologic shocked—and in some cases worried—analysts last year by making the big bet on medical aesthetics, a field outside its traditional areas of focus. The risks inherent in all acquisitions were ramped up by the size of the deal—which was struck while Cynosure was riding high—and the need for Hologic to smoothly navigate a new market.    

With the margin of error already fine, Hologic ran into unforeseen difficulties, derailing its near-term plans for the business. 

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“Given the almost complete rebuild we've had to do with the U.S. sales force, we will not meet our original expectations for the business,” Hologic CEO Stephen MacMillan told investors on a quarterly results conference call. “Roughly two-thirds of the domestic salesforce is new in the last year, with many having been hired just in the last 60 to 90 days.”  

The salesforce is bigger—and MacMillan thinks better—than the one Hologic acquired but the churn has set back its plans for the business. Hologic still needs to hire some sales staff and train the new arrivals. The result is the revenue ramp Hologic predicted for the second half of the year is unlikely to materialize. In fact, MacMillan thinks the previously forecast ramp is “way, way beyond what we're going to get to.”

Hologic now expects full-year sales at the unit to be “down materially” on the $390 million it posted in the four quarters starting October 2016. 

Shares in Hologic, which has a market cap north of $10 billion, fell 7% following the news.

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