Demand Analysis

KEY DEMAND FACTORS

• Price and Volume – Strong as they have increased together for about two years
• Institutions and Mutual Funds – OK as 62% ownership leaves some room for growth
• Inside Ownership – Neutral since there are a lot of options issued and no purchases

Ratio Comparison

		ACTUALS				5 Year Averages
	2003	2004	2005	2006	2007	Actual	Projection
Valuation
P/E Ratio	10.8	17.0	29.5	32.0	49.2	27.70	30.05
Price to Sales	1.7	2.3	5.3	5.0	5.0	3.85	4.34
Price to EBITDA	5.9	8.7	17.1	17.3	21.5	14.10	16.25
Management Effectiveness
Return on Investment	15.60	9.19	12.07	9.42	7.19	10.69	14.50
Return on Equity	15.78	13.12	16.75	12.23	9.24	13.42	16.03
Financial Condition
Total Debt to Equity	0.00	0.38	0.30	0.23	0.20	0.22	0.11
Interest Coverage	291.44	26.71	30.14	31.78	20.07	80.03	33.39
Profitability
Gross Profit Margin	65.76	66.61	67.45	65.40	63.89	65.82	64.74
EBITDA Margin	28.38	26.98	30.71	28.89	23.22	27.63	27.02
Net Profit Margin	15.64	13.78	17.81	15.59	10.15	14.59	14.65
Dividend
Dividend Yield	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Payout Ratio	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Growth
P/E/G						2.21	1.54

COMPARISONS

• Valuation –projected ratios are in line with past three years
• Management Effectiveness – these ratios will need to improve slightly
• Financial Condition – projected debt will stay at low level
• Profitability – projections are nearly the same as historical ratios
• Dividend – no dividends for the foreseeable future
• Growth – lower projected P/E/G indicates a conservative price estimate

Earnings Projections

Hologic & CYTYC (HOLX)
Earnings Model ($MM)
	2007	2008E	2009E	2010E	2011E	2012E	Forecast
Revenue
CYTYC	715	894	1,118	1,397	1,747	2,183	25.0%
Hologic	738	923	1,154	1,442	1,803	2,253	25.0%
Total Revenues	1,454	1,817	2,272	2,839	3,549	4,437	25.0%
- COGS	525	651	807	1,001	1,241	1,539	24.0%
Gross Profit	929	1,166	1,464	1,838	2,308	2,897	25.6%
Less Expenses & Items
Sales and Marketing	264	329	412	515	643	804	25.0%
General and Administrative	157	196	245	307	383	479	25.0%
Depreciation	49	63	82	107	139	180	30.0%
Research and Development	87	104	125	150	180	216	20.0%
Other	95	95	95	95	95	95	0.0%
Total Expenses & Items	651	788	959	1,173	1,440	1,774	22.2%
Other Income	11	12	13	14	15	16	8.0%
EBIT	289	378	505	666	868	1,123	31.2%
- Interest Expenses	14	16	18	20	23	25	12.0%
Pretax Income	275	362	487	645	845	1,098	31.9%
- Income Taxes	127	127	171	226	296	384
Net Income	148	235	317	420	549	714	37.0%
Tax Rate	35.0%	35.0%	35%	35%	35%	35%
Dividends Paid	-	-	-	-	-	-
EBITDA	338	441	587	772	1,007	1,303	31.0%
Shares outstanding (000's)	113	122	126	130	134	138	3.0%
Diluted Shares outstanding	115	123	127	130	134	138	3.0%
Earnings Per Share
Basic	$1.30	$1.92	$2.51	$3.23	$4.11	$5.18	31.8%
Diluted	$1.29	$1.91	$2.50	$3.21	$4.09	$5.15	32.0%
Source: estimates

ASSUMPTIONS

• All segments will continue to experience strong growth
• Expense growth will slow as a result of merger
• Debt will stay low

Earnings History

Hologic & CYTYC (HOLX)
Annual Income Statements ($MM)
	2007	2006	2005	2004	2003	2002	I Yr.	5 Yr.
Revenue
CYTYC	715	608	508	394	303	236	17.6%	24.8%
Hologic	738	463	288	229	204	190	59.6%	31.2%
Total Revenues	1,454	1,071	796	622	507	427	35.8%	27.8%
- COGS	525	371	259	208	174	154	41.7%	27.8%
Gross Profit	929	700	537	415	333	273	32.6%	27.8%
Less Expenses & Items
Sales and Marketing	264	218	166	134	110	98	21.0%	21.8%
General and Administrative	157	106	72	59	50	42	48.1%	30.2%
Depreciation	49	33	24	19	14	13	48.1%	29.9%
Research and Development	87	72	51	37	33	35	19.6%	19.9%
Other	95	24	10	20	-	9	289.4%	61.8%
Total Expenses & Items	651	453	322	269	207	197	43.5%	27.0%
Other Income	11	30	5	3	3	4	-62.9%	22.0%
EBIT	289	277	221	149	130	80	4.5%	29.3%
- Interest Expenses	14	9	7	6	0	3	65.4%	37.0%
Pretax Income	275	268	213	143	129	77	2.5%	29.0%
- Income Taxes	127	101	72	58	50	29	25.8%	34.4%
Net Income	148	167	142	86	79	48	-11.6%	25.1%
Tax Rate	46.3%	37.7%	33.6%	40.2%	38.6%	37.6%	22.8%	4.2%
Dividends Paid	-	-	-	-	-	-
EBITDA	338	309	244	168	144	93	9.1%	29.4%
Shares outstanding (000,000's)	113	106	102	98	97	99	7.1%	2.7%
Diluted Shares outstanding	115	113	110	106	99	102	1.6%	2.3%
Earnings Per Share
Basic	$1.30	$1.58	$1.39	$0.87	$0.82	$0.48	-17.5%	21.9%
Diluted	$1.29	$1.48	$1.28	$0.81	$0.80	$0.47	-13.0%	22.3%
Source: Hologic & CYTYC Annual Reports & SEC Filings

NOTES

• Both CYTYC and Hologic had strong five year growth
• Expenses have increased at same pace as revenues
• Debt has been very low

Investor Summary

HOLOGIC	Nasdaq:	HOLX
Medical Appliances & Equipment	TARGET:	$85.14

Stock Data			Sales & Earnings	2007A	2008E	2009E
Price 11/27/2007	$63.35		Revenue (MM)	$1,454	$1,817	$2,272
52-Week Range	45.88 - 69.23		EBITDA (MM)	$338	$441	$587
Dividend Yield	0.0%		EPS (diluted)	$1.29	$1.91	$2.50
Capitalization			Value Measures
Shares Outstanding (MM)	122.35		Price/Earnings	49.25	38.36	34.06
Market Capitalization (MM)	$7,750.9		Price/Sales	5.00	4.97	4.35
Debt/Equity	0.20		Price/Book	4.55
Projections			Growth (5 Yr.)	Historical	Projected
12-Month Price Target	$73.44		Earnings	22.3%	32.0%
24-Month Price Target	$85.14		P/E/G	2.21	1.54
Annual Total Return	15.9%

KEY AREAS FOR GROWTH

• Medical Testing Equipment – focused on women’s health care needs
  

MAJOR RISK
Management may not be able to keep up with growth and recent CYTYC merger.