Hologic, Inc.

HOLX Details

Hologic, Inc. (NASDAQ: HOLX) is engaged in developing, manufacturing, and distributing diagnostics products, medical imaging systems, and surgical products with an emphasis on women's health. Its operating segments are 1) Diagnostics, which comprises of Aptima family of assays and assays for HIV, Hepatitis B, and Hepatitis C Virus, 2) Breast Health segment, which includes imaging and breast biopsy guidance systems, 3) GYN Surgical, which provides NovaSure Endometrial Ablation System and MyoSure Hysteroscopic Tissue Removal System, and 4) Skeletal Health, which offers discovery and horizon X-ray bone densitometers and mini-C-arm imaging systems. As of October 08, 2021, the company's market capitalization stood at USD 18.18 billion.

Geographical Expansion: On October 05, 2021, HOLX launched the Novodiag system, a completely automated molecular diagnostic solution for on-demand testing of infectious illnesses and antibiotic resistance, in Europe. This launch enables HOLX to cater to a wider variety of European customers and expands its scalable molecular solutions portfolio.

Previously, on September 30, 2021, HOLX launched Omni suite, a comprehensive gynecological surgical product designed to maximize diagnostic and operative hysteroscopy in Europe, Africa, and the Middle East. The offering now includes Omni 30° hysteroscope, the Omni Lok cervical seal, and the Omni 5 French seal extend its existing line of GYN surgical solutions, expanding clinicians' options.

Q3FY21 Results: The company reported YoY growth of 41.97% in revenues to USD 1.17 billion in Q3FY21 (ended June 26, 2021) compared to USD 822.9 million in Q3FY20 (ended June 27, 2021). The Product segment, which accounted for 85.18% of the total revenue in Q3FY21, reported YoY growth of 41.85%. Net income for Q3FY21 increased to USD 268.4 million from USD 137.9 million in Q3FY20. As of June 26, 2021, the company had cash & cash equivalents of USD 827.6 million and total debt of USD 3.14 billion.

Key Risks: In FY20 (ended September 26, 2020), HOLX generated 12.5% and 10.9% of its Diagnostic segment revenues from its top two customers. As a result, the loss of any of these key customers could harm its financial performance. Furthermore, HOLX relies on single third-party manufacturers for each of its key diagnostics instruments and a small number of suppliers for its key components or subassembly needs. Therefore, any failure on the contractual obligation by vendors could harm its operations.

Outlook: In Q4FY21, HOLX expects to clock revenue in the range of USD 1.0 – 1.04 billion (down 25.8% – 22.8% YoY). It also predicts its GAAP EPS to range between USD 0.63 – 0.71, along with non-GAAP EPS of USD 0.92 – 1.00.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

HOLX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HOLX's share price has increased 2.97% in the past three months and is currently trading close to the mid-point of its 52-week range of USD 60.10 to USD 85.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 33.67. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 78.34.  Considering the slight uptick in the stock price, a surge in top and bottom-line, geographical expansion, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 71.37, down 0.49% as of October 08, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV. 

Blueprint Medicines Corporation

BPMC Details

Blueprint Medicines Corporation (NASDAQ: BPMC) operates as a global precision therapy company that develops life-changing therapies for people with cancer and hematologic disorders. Its lead medicines are AYVAKIT/AYVAKYT (avapritinib) for treating patients with PDGFRA exon 18 mutant gastrointestinal stromal tumors (GIST) and GAVRETO (pralsetinib) for the treatment of metastatic RET fusion-positive non-small cell lung cancer (NSCLC), advanced or metastatic RET-mutant medullary thyroid cancer (MTC), and advanced or metastatic RET fusion-positive thyroid cancer.

Accelerating BLU-222 Development: On July 28, 2021, BPMC signed a strategic collaboration agreement with The University of Texas MD Anderson Cancer Center, engaged in prevention, education, research, and patient care, to advance the development of BLU-222, an experimental precision treatment targeting cyclin-dependent kinase 2 (CDK2).  The research team aims to characterize the types of cancers that could be treated with a selective CDK2 inhibitor, develop BLU-222 mono and combination therapy strategies to maximize patient benefit and discover new biomarkers that could help predict treatment response and optimize patient selection.

Q2FY21 Results: The company reported a YoY surge of 227.16% in total revenues to USD 27.30 million in Q2FY21 (ended June 30, 2021) compared to USD 8.34 million in Q2FY20. The Collaboration revenue, which accounted for 58.11% of the total revenues in Q2FY21, reported a sharp uptick of 4.96x, whereas the Product revenue expanded by 101.29% YoY. Net loss for Q2FY21 reduced to USD 108.44 million from USD 123.47 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents (including marketable securities) of USD 628.35 million and no outstanding debt.

Key Risks: BPMC currently has two approved precision therapies (AYVAKIT/AYVAKYT and GAVRETO), both of which are commercialized in the US and AYVAKYT in Europe. However, it has limited experience as a commercial company. Therefore, if it fails to monetize its existing or future approved therapies, it could harm its financials. Furthermore, BPMC operates in the biotechnology industry and faces direct competition from more significant players. In addition, the pharmaceutical, biotechnology and diagnostic industries have witnessed a lot of merger and acquisition activity. Should this industry consolidate further, it could adversely affect BPMC's financial and operational performance.

Outlook: In H2FY21, BPMC plans to present preclinical results on the combination of BLU-945 and BLU-701 in treatment-naive EGFR-driven NSCLC and commence the Phase 1 trial of BLU-701 in patients with EGFR-driven NSCLC who are resistant to other treatments. In H1FY22, BPMC expects to start Phase 1 trial of BLU-222, a CDK2 inhibitor targeting cyclin-E aberrant cancers and release topline findings from the PIONEER trial of AYVAKIT in non-advanced systemic mastocytosis that will enable registration.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BPMC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BPMC's share price has fallen 4.98% in the past month and is currently trading close to the mid-point of its 52-week range of USD 79.08 to USD 125.61. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 49.89. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 112.16. Considering the slight correction in the stock price, a surge in topline, strategic collaboration, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 100.05, up 1.56% as of October 08, 2021, 12:02 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

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