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There has been concern in the industry about Hologic (HOLX) and the Gen-Probe (GPRO) deal for some time now.  Mainly, there is concern about the level of dilution from the debt HOLX would have to raise in order to complete the acquisition, with the emphasis on the coupon rate.  We see the line in the sand at 8% on $3 billion raise, which seems completely feasible.

Regarding the core HOLX business, the 3D tomography technology may take some time to penetrate the existing 2D customer base, but management has set low expectations for its adoption, and we see upside into 2013.  Further, HOLX’s diagnostic segment should benefit with increasing physician utilization into the second half of the year. While others are cautious about the HOLX, we are comfortable being long.

HOLX: Great expectations - hospital lobbying