Adoption Of 3D Mammography Appears To Be On The Cusp Of An Inflection

Jefferies’ Raj Denhoy believes the adoption of 3D mammography is on the verge of an inflection, stating that in the conversion from analog to 2D digital, “growth accelerated dramatically in year 7—exactly where we are in the 3D cycle.”

The analyst maintained a Buy rating on Hologic, Inc. HOLX, while raising the price target from $46 to $49.

Almost At An Inflection

Denhoy mentioned Jefferies’ survey of 25 hospitals indicated that 3D penetration would continue, with Hologic being the main beneficiary.

The analyst also pointed out that the conversion of 2D digital to 3D was already tracking ahead of the 2D cycle and was just entering year 7.

“With clinical data and insurance coverage continuing to build, the case for 3D adoption is hard to ignore,” Denhoy said.

The adoption of 3D was at about 24 percent at the end of 2016, and the analyst noted that the 3D adoption curve is continuing at a trend similar to that of the 2D cycle.

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Estimates Raised

Denhoy expects 33 percent penetration of 3D in 2017, with 45 percent in 2018 and 71 percent by 2020, after which the curve is expected to level off.

“Beyond the historical precedent, our survey of 25 hospitals suggests that demand for mammography and 3D remains robust: 68 percent of respondents expect to upgrade or add 3D capacity over the next three years and 3D penetration is expected to hit 66 percent,” the analyst reported.

Given the expectations of 3D adoption potentially accelerating, Denhoy raised the Best Imaging estimate for Hologic by $37 million to $89 million, with $112 million for F2017-2019.