Macroeconomic and political challenges in Latin America dragged on Hologic’s breast health unit in the third quarter, resulting in sales outside the U.S. falling by 1.5%.
Hologic expects the problems, which halved its breast health sales in the region, to continue in the fourth quarter.
Those disappointing results were offset by performance in other parts of the business, enabling Hologic to post another quarter of above-guidance results.
"This was a solid performance, but growth was a little slower than the recent quarters mainly due to macroeconomic and political challenges in our small Latin American business which is mostly Breast Health," CEO Steve MacMillan said on the third quarter results conference call.
Hologic didn't give further detail on the nature of the challenges its breast health unit faces in Latin America, but was more forthcoming about the impact of the problems, both in the third quarter and beyond.
That decline more than wiped out growth in breast health sales in other regions outside of the U.S. and dragged on worldwide performance. Total breast health sales were up 6.7% on a constant currency basis, compared to 8.4% in the previous quarter.
CFO Karleen Oberton said the new fourth quarter guidance "assumes a little bit of improvement" in the Latin American breast health business. But any gains won't likely be able to return the unit to growth after a quarter in which sales fell almost 50%.
Despite those geographic challenges, the overall breast health performance impressed analysts. Evercore’s Vijay Kumar said breast health “was strong” in the quarter, which Hologic attributed in part to the impact of an FDA proposed rule that would require breast density reporting.
"We are the only 3D [mammography company] that has an FDA indication approved for dense breasts. And as there's more and more legislation driving towards disclosing ... breast density, it clearly plays to our advantage," Hologic CEO Steve MacMillan told investors.
The regulatory changes could be a much-neede boost for Hologic, given ongoing difficulties in other parts of the company. Medical aesthetics sales fell 5.5% in the third quarter, continuing the prevailing trend since Hologic moved into the field through its 2017 acquisition of Cynosure. MacMillan highlighted the stabilization of the U.S. sales force and sequential revenue improvement as signs that the group is “beginning to find [its] footing."
Cowen analysts wrote in a note to investors "there is little reason to believe that Cynosure won't be a drag on growth again" in fiscal year 2020. "[Hologic] looks positioned for another year of below peer group growth," the analysts said.
But there was some good news, too. The company's global molecular diagnostics revenue of $170.9 million increased 10.6%, or 11.7% in constant currency, representing the third consecutive quarter of double-digit constant currency growth, the company said. And global gynecological surgical revenue of $112.2 million increased 4.2%, or 5.2% in constant currency, the division’s highest growth rate in eight quarters.