Medical Device Daily

Hologic (Bedford, Massachusetts) a provider of diagnostic and digital imaging systems for women's health, is expanding its offerings in the digital sector with its late Monday report that it will acquire R2 Technology (Sunnyvale, California), a major player in the field of computer-aided detection (CAD).

The price for the transaction will be $220 million, 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.

Jack Cumming, CEO and chairman, in a Tuesday morning conference call, termed the purchase “a significant transaction“ and “one I am personally excited about.“ He said it fulfilled “a major strategic goal of the company, building upon our established technology roadmap.“

Hologic said that the transaction is expected to close in the next two to three months, after completion of a fairness hearing before the commissioner of the California Department of Corporations, and will be subject to customary closing conditions.

Cumming said that R2 will be operated as a wholly owned subsidiary of Hologic, with its headquarters remaining in Sunnyvale. “R2 management, and all of its associates, will become part of the Hologic team,“ Cumming said. “Our belief is that this combination creates a win for both companies, for the team members of R2 and Hologic, and most importantly, our customers and their patients. There are many similarities between our companies: a passion for our mission, complementary product development and a common distribution channel.“

He added: “As a combined force, we emerge stronger, better positioned to respond to the rapidly changing dynamics in this industry.“

These changing dynamics involve a slow, but steady, move to computerization in imaging, most often highlighted in mammography.

R2 Technology banners itself as pioneering the development and commercialization of CAD that assists radiologists in the early detection of breast cancer. R2 Technology developed 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 was also the first system approved for use with digital mammography, R2 said.

Cumming said that R2 has more than 2,500 mammography CAD installations worldwide, including more than 1,000 digital CAD systems. “We believe the mammography CAD industry was 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.“

He added: “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 reported 2005 revenue of about $45 million, essentially the same as the previous year.

Hologic said it expects the market to shift from analog or film based systems to CAD sold with digital mammography systems, a transition, it said, “expected to help improve margins overall as such margins are comprised primarily of software sales.“

Hologic expects the transaction to be accretive to earnings in fiscal 2007, excluding the amortization of intangibles related to this transaction.

John Pavlidis, president and CEO of R2 Technology, said, “We believe that this merger will help ensure that our CAD technology enjoys an even broader distribution to patients and physicians worldwide.“

Hologic's core business units are focused on mammography and breast biopsy, osteoporosis assessment and mini C-arm and extremity MRI imaging for orthopedic applications.