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Hologic Expands Into Medical Aesthetics With $1.4B Cynosure Deal

Xconomy Boston — 

[Updated 2/14/17, 1:07 pm. See below.] Women’s health company Hologic has been looking for ways to enter the fast-growing medical aesthetics market, and the company has now found a way in with a deal to acquire Cynosure for $1.44 billion. It’s the second billion-dollar acquisition to be announced this week in the medical aesthetics industry.

Marlborough, MA-based Hologic (NASDAQ: HOLX) will pay $66 per share in cash to acquire all of the outstanding shares in Cynosure (NASDAQ: CYNO), which is based in nearby Westford, MA. Shares of Cynosure leaped 28 percent to $65.92 on the news Tuesday morning. Hologic’s stock price dipped 3.7 percent to $38.53 as of midday.

In a research note, RBC Capital Markets analyst Glenn Novarro acknowledged that Cynosure brings Hologic a new line of business. But he added that company’s shares are trading lower because Cynosure was not the deal observers were expecting. “We did not expect a deal of this size to occur so quickly, and we had expected smaller tuck-in deals” in Hologic’s gynecology surgical business unit, he wrote. [Paragraph added with analyst comment.]

Cynosure’s portfolio of more than 20 products spans body contouring, hair removal, and skin revitalization, as well as women’s health. Those products are sold in more than 130 countries, according to the company. In 2015, Cynosure received FDA clearance for SculpSure, a medical device that uses lasers to eliminate fat in body-contouring procedures. Cynosure reported $433.5 million in 2016 revenue, up more than 27 percent from 2015.

Hologic is the much larger company, reporting $2.3 billion in total revenue for fiscal 2016. Of the company’s four business segments—diagnostics, breast health, gynecology surgical, and skeletal health—diagnostics is the largest, accounting for more than $1.2 billion in revenue in fiscal 2016, which was up 10 percent year over year. In a prepared statement, Hologic CEO Steve MacMillan said the company had been looking for ways to grow even more and had identified medical aesthetics as “an attractive and complementary growth opportunity.” Hologic points to two factors driving the growth of this market: increasing interest in aesthetics from an aging population, as well as physicians’ desire to add more procedures that patients pay for in cash.

Hologic is not the only company that has scoped out medical aesthetics acquisitions as part of a growth strategy. On Monday, Allergan (NYSE: AGN) announced a $2.4 billion deal to acquire Zeltiq Aesthetics, (NASDAQ: ZLTQ), the Pleasanton, CA-based maker of the CoolSculpting medical device for eliminating fat.

The boards of directors of both Hologic and Cynosure have approved the transaction. The deal still needs approval from Cynosure shareholders.