Welcome to the Hologic, Inc. Q1 fiscal year 2008 earnings results call. Today's conference is being recorded. Before we begin, management of Hologic, Inc. has asked that the following statements be read. Certain statements made by management of Hologic, Inc., during the course of this conference may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements of Hologic to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, amongst others, those detailed from time to time in the company's filings with the Securities and Exchange Commission. We expressly disclaim any obligation or undertaking to release publicly, any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based. At this time for opening remarks and introductions, I'd like to turn the call to Mr. Jack Cumming, please go ahead sir.

Thank you very much. Good morning everyone and thank you for attending our first quarter fiscal 2008 conference call. Joining me on the call this morning is Pat Sullivan our Executive Chairman; Dr. Jay Stein, our Co-Founder and Chief Technology Officer; Rob Cascella, our President and COO; and Glenn Muir, our Executive VP and CFO. Before proceeding, I remind you that the Safe Harbor statement accompanying our press release, applies to comments made during this call. We're very pleased to share with you our fiscal first quarter results for the period ended December 29, 2007. I'll briefly touch upon the highlights, while Glenn will provide further details on our operational progress, as well as guidance for fiscal '08. We will then open up the call for your questions. First, let me start off by offering a very sincere thank you to all Hologic associates worldwide for their outstanding efforts to provide more health, more life, and more hope for more women everywhere. It is their effort and passion that makes Hologic what it is today, which is the women health leader. Before I discuss first quarter performance, I would like to briefly touch on alignment efforts to date. A little more than three months ago, we completed the acquisition of Cytyc. The past 90 days has been extremely busy in terms of establishing the framework to maximize resources. I have personally traveled to Europe and Asia to meet with sales and support teams, attended customer meetings in the UK and I am scheduled for additional ones in Europe later this month. I have also visited the Adeza and Adiana, Costa Rican facilities. Integration efforts are progressing extremely well. In addition to infrastructure and back office program alignment, we have focused heavily on distribution and product development strategies. We are also…

Thanks, John. I will now expand on the financial results for the quarter. My comments are also summarized in a PowerPoint accessed on the IR page of our corporate website at hologic.com. My presentation today includes certain non-GAAP financial measures and a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP counterpart is set forth in the same PowerPoint presentation at hologic.com. This marked another quarter of recorded revenues, adjusted earnings in backlogs, when viewed either on the new Hologic bases together with Cytyc or on a standalone basis of the historical Hologic businesses. In either case, their momentum is continuing and we are seeing growth across all of our major product groups. A couple of things to keep in mind, first our merger with Cytyc occurred on October 22nd, resulting in only 10 weeks of their operations being included in our reported result. And second, there are number of Cytyc merger related adjustments that are of a non-recurring nature and distort operational earnings of our combined results. Looking at the former Cytyc businesses for a full 13 week quarter, their revenues would have been [$191 million] a 20% growth over their comparable December quarter from one year ago revenues, which were $163 million and 4% revenue growth over their September quarter's revenues, which were $187 million. Included in our GAAP results are three Cytyc merger related charges that totaled $414 million and are non-recurring. These are for the write-off of in-process R&D, the inventory write-up to fair market value and the intangible asset impairment charge. This quarter the amortization of intangible assets, related to our acquisitions increased to $26.2 million. Absent these four acquisitions related charges, our pre-tax earnings this quarter would have been $88.4 million, and using our effective tax rate of 36% net income…

Thank you, Glenn. During the first quarter, the FDA Obstetrics and Gynecology Devices Advisory Panel recommended the pre-market application for adding on a permanent contraception of female sterilization be approvable. The panel reached this decision by a vote of ten to three. The panel requested that several conditions be included as part of the approvable filing. These conditions request additional post-market studies, which we are currently discussing with the FDA. In the letter received in January, the FDA requested three-year follow-up data on patients who are participating in the pivotal clinical trial of Adiana. We expect to provide the requested data to the FDA later in '08 in order for their review to be completed. We don't believe this delay in Adiana's review represents any long-term impact on its potential contribution to our GYN Surgical group. And on an additional note we are making solid progress on an enhanced version of the current Adiana design which will provide additional benefits to patients and clinicians which we will be readying for market submission. On January 22nd, we announced the definitive agreement to sell the full worldwide rights of Gestiva, upon approval of the pending NDA by the FDA to KV Pharmaceutical. The purchase price to be received is $82 million in cash. $7.5 million payable at the closing of the transaction expected later this month and $74.5 million payable upon approval by the FDA and a production of an initial quantity of Gestiva expected later this calendar year. And we are pleased with this divestiture because it monetizes significant value that maybe better realized by a dedicated pharmaceutical company and allows us to focus more heavily in our primary product fields. As discussed earlier, the FDA has changed it requirements for the approval of Tomosynthesis from a PMA supplement to a…

(Operator Instructions). We will take our first question from Eric Lo from Merrill Lynch.

Good morning, guys. Just hoping to get additional clarification in terms of your fiscal '08 revenue guidance. I think compared to what you provided previously, you guys are going to, if I heard correctly, $935 million to $950 million for Breast Health and Skeletal Health, but then 730 to 750 for Diagnostics and Surgical. Can you apply a little in terms of where the changes are coming from, compared to your previous guidance?

Eric, let me help a little bit on that. In the previous guidance, we tried to simplify things; the reporting segments hadn’t fully embedded. So when we gave the guidance as $900 million for the historical Hologic business and $800 million for historical Cytyc, it included, obviously their historical products. We've made some changes internally, such as the MammoSite has now moved on to under the Breast Health. So there has been some realignment of products within these segments to better align the resources that we were using. So I appreciate the four segments changed somewhat and we tried to reflect that new reporting in this mornings comments between the Breast Health, Diagnostics, GYN Surgical and Skeletal Health. There has been no change other than we really increased our guidance for revenues more than that per year, bringing them up slightly, due in great part to the continued success we are seeing in Selenia.

Can you talk about the increased in terms of Selenia backlog going up a 130 units. Where is that coming from? Is it coming primarily from the US or coming from the international markets?

It continues to be combination of the two and I'll let Rob chime in, in a moment. But if we look at this quarters' order rate, this was a significant increase internationally for Hologic having sold 91. So, our booking internationally was even higher for the quarter. So, we're beginning to see a nice trend internationally as well as domestically. I would say, it is coming from both pieces at this point and we're at a new level now for international bookings and order. Bob do you?

Nothing to add other than that, core [investibles] will be right on if the US market continues to grow at a steady pace, but there is just accelerated growth over what our trend has been internationally. So, you are seeing more international units than what we would have seen last year.

Okay, that’s great. Last question has to do with sort of the credit crunch which some other capital equipment providers have commented on their earnings call. So, I was hoping to get a little color in terms of what percentage of your customers actually finance the systems, and who did they work with to get the financing, and have you guys actually seen any impact as a result of the credit crunch?

Well, this is Jack, and we really haven’t seen any impact. Our customers primarily pay cash for the Selenia's. Rob, you may want to add a little more granularity to that, but it really hasn’t changed for us over the last couple of years.

I think we’re running at probably 10% to 15% of our domestic business at this point it’s being finance through third parties, our own programs or customers program. Balance of it is being purchased with cash [payments].

Great, thank you.

Our next question comes from Amit Hazan from Oppenheimer.

Hi, Good Morning guys. Just a quick follow-up on the last question. First of all, just to make sure we are clear, on the sales guidance, was there any product in particular that you have reduced guidance for, as it relates to your prior guidance on the last call?

Amit, if we look at the four segments no, but if you looked individually, because we have a lift, we got a troupe of about 20 different product lines now. Individually, there are some areas being cut back, and let me just give you one example, and that is, when we think about our ray detectors that come out of DRC, we expect by the end of the year to be increasing our supply of those detectors that Siemens . As we talked about for some time, we are phasing out of that agreement, of supplying them with our detectors, so we can go direct to the customers on a full scale basis, so, in the current estimates, [at least], not by a small amount of that product line. There are a couple of others that I would only call tweaks, but they fit into reporting segments that are all showing growth.

Okay, that’s great and then, another follow-up on the Selenia, I’m just wondering on unit orders, if we look back now at 2007 at lest according to NQSA. And we see there has been about 1850 or so units installed. How do we think about, generally, the market developing here over the next year or two? I mean is it your expectation that there are more than 1800 or 1900 units ordered in the coming year, or are units going to start falling off at some point. How do you guys think about the next year or two in terms of the order rate in the U.S. market?

Rob?

Yeah, our estimate of the US market for this coming year is about 2000 units. And we certainly don't see that decelerating for the following year. At that point we are still at a reasonable penetration rate with the expectation that by 2009, 2010 the introduction of new technology re-stimulates the market and that being Tomosynthesis or 3D mammography.

I would answer, Rob, that in 2010 you have a market where we are going to have a lot of systems coming off of lease or just because of the usage they have been out there seven years. So, I think we are going see a replacement market in and by itself just as existing digital systems.

That's right.

And then just on the Cytyc side, it sounds like you are actually even more encouraged with some of their products, in particular international ThinPrep and the imager, so I am wondering on both on international, which countries is it that you are seeing the upside from? And then on the imager if you could just give us an update on what's going at the Quest and if they have started to adopt more aggressively?

Well on the Quest side, that has gone along very well and we are expecting a majority of their ThinPrep volume to go through our imager by the end of Q2 of '08. So, that is going extremely well. And as anybody would tell you, it is always a market-by-market basis overseas, with the UK certainly leading on the ThinPrep side, but making head ways in the other countries there. It’s the large industrial countries that are always the ones that, I don't think there's any [surprises]. We are doing well in Australia, but we are also waiting, we are waiting on some countries where reimbursement is been evaluated now, which I think will help us long-term. And yes, you are correct, and that is, we are excited about the international opportunity. We are seeing what we think is pretty great progress there, but it’s a building process; it’s a matter of time and our teams our working well together and we are all going to be together in Barcelona in February, working on more alignment and growth strategies.

Great. And just one final question for me, which is on Tomosynthesis. Can you give us a sense of when it was that you had all the information submitted to the FDA and maybe I know you can't predict when approval is coming, but relative to that, when you might think either a panel or some development might happen on that front?

The submissions were completed in January, and you are absolutely right, it's difficult to predict when there will be a panel, our estimation is that there is 180 day clock that will result from the resubmission, they having an acknowledgement period then they add 30 days to that. So, we are probably looking at that June-July time period.

Great, very helpful. Thanks guys.

Our next question will come from Paul Nouri from Noble Equity Funds

Hi, good morning.

Good morning.

I was just wondering if the considerable cash fund that you'll have next year or in 2008, are you actively looking at any acquisition?

Well, obviously we always are looking, we are being opportunistic. That certainly hasn’t changed. The cash flow, certainly is going to help the situation, gives us more flexibility, I think we have pretty good capital in our stock by itself. But the ones that we have been looking at and continue are still are of small in nature that we can kind of put the products to our existing channel, but we are being very careful and we are certainly weighing any impact that we would have on the alignment progress that we have made between the Cytyc and Hologic.

And internationally, do you have your own sales people? Or is it through a distributor?

It works, it is a hybrid. We have over 200 people internationally, we sell primarily in Europe on a direct basis, and the diagnostic and surgical products for the imaging side, for the mammography, Bone Densitometry, that is sold exclusively through distributors as had been the company's history. And that hybrid system will continue. There are certainly markets that are better served being in Asia and Latin America on the imaging side as far as the using distributors. And on the ThinPrep side, and NovaSure side, it is a combination of being direct and through dealers in some selected Asian, Australia, we are direct and in Latin America we use distributors.

Is there a significant opportunity in Asia, in other words, is it under-penetrated in terms of enough women getting those tests on a regular basis as many do it in America?

I would say, could be fair without a broad generalization. In Mainland, China women don’t get a screening test. I mean to any degree whatsoever. In places like Thailand, where they are much more progressive women, have access to mammography more. But overall, the Chinese market is unpenetrated, if you will. Slowly building as the government deals with other capital requirements in building the infrastructure because the growth in Mainland China is growing geometrically. But they are trying to build cities much more than women's health. In Korea, in Japan, that’s a much different story where women's health is much more in the forefront as it is in Australia. So consequently, we have a long, long run way to go in Asia. We see good opportunity there; we're certainly selling there in the ThinPrep side, and that continues to grow. Mammography, we are making strides but a long, long way to go there.

Okay. And last question concerning the Skeletal Health business. Aside from getting better reimbursement, is there any other dynamics to turn that business around?

I'll let Rob answer that, and maybe I can opine after that.

We are very encouraged about the cross selling opportunities with the Cytyc diagnostic sales force. At this recent national sales meeting that Jack referred to, there is great enthusiasm with that team having access to the product. Their principal market is primary care, and we have had very little penetration in that market thus far. So, that's an opportunity for this upcoming year.

Okay. Well, thanks a lot.

Next question will come from Amit Bhalla from Citi.

Hi, thanks for taking the question. I wanted to start with the comment Glenn made about the drivers on ASP. Rob, can you comment on configurations and repeat orders. Give us a little color on how that has changed over the last quarter or two?

Sure. As we've always said, if you look at a cross-section of our customers, those that are repeat orders, and let's take for instance 15% to 20% recurrence of ordering on the parts of the existing customers. Typically, they are buying just the gentry, and maybe the gentry with CAD, but they are not buying a workstation, which is another $65,000 to $70,000. So when you look at the mix of product, that has a significant impact on what the mathematical ASP would be. In addition to that, they're typically not buying things like printers and either the Tek workstations or Tek made configurations and things like that. So that becomes a factor. I think it becomes a factor relative to whether or not there is a -- even on a new customer, the math model of a customer buying workstation and gentries is not a one-for-one as we have indicated. So if there is a larger order, and let's say that it might be something like 5 to 7 or 8 units, it might only have two reading or three reading radiologist, although by three workstations. So again, the mathematical mix stating on units will look unfavorable relative to the ASP for that particular account.

So Amit, if I can just continue, because one point to make is, when we look at the Selenia ASPs, we've always focused on gross margins, and I just wanted to point out that in the mammography division, though a part of breadth tells that mammography only the gross margins for December remained a constant at 48% with the immediately preceding quarter. In that, I just want to point that take -- after taking into account that a larger percent went international, they have a much lower stock price. So we're able to hold our gross margin even with the shift to international and then not the way we look at what's happening on the ASP side is to strip out all the differences in configuration and product mix.

So, Glenn, just following on that line of question here, overseas operating margins for Selenia, are they still stable?

They are. Now, the overseas gross margin would be lower than what we achieve here in the United States because of the lower selling price to our distributor who resells it. However, we incurred fewer operating expenses on the sales and marketing side. So at the bottom line, they domestically are still slightly more profitable. But the international is pretty close.

All right. Just two follow-up questions. One on backlog. Can you talk about what you're doing to continue to drive the backlog down and to get products to customers faster? And also, on the Cytyc products, can you give us a little bit more color on how they performed in the quarter particularly NovaSure and ThinPrep revenues would be helpful. Thank you.

Relative to the backlog, I am not sure where we are as concerned about the backlog as perhaps their question may indicate and that is because as we ship more the aging of our backlog gets more and more compressed. So even though there are absolute dollars and units may not go down as significantly as one might think, the fact that we're shipping nearly 400 units of order causes the backlog aging to be quite less than what it might have been six months ago, in terms of what our lead times are. In addition to that, we are shipping to a customer expectation. So if a customer wants a unit in 30 days, we have availability to do that. And typically, on these large orders, as we have said in past that if that customer take delivery over anywhere from a 30 to 120 day period, so you have a natural aging as a result of demand and requirement.

You asked the question relative to the ThinPrep and NovaSure business. Well ThinPrep was up 22% over last year and the GYN Surgical, which obviously is only the number you are at this point in time until Adiana comes on, that was up over approximately 16% plus. The growth is been stimulated, certainly by continued migration to the private office. But on a broader sense, what we are looking at is more use within each of the offices that we have product to day and the more utilization by the existing OB/GYN will obviously drive long-term growth. And we're trying to focus on better education and working peers to work with the new doctors that are getting into the procedures. So we still think we have long way to go there. Pat, do you want to add anything?

No, I think, you covered it pretty well. We were pretty comfortable and I'm very pleased with the continued success of both NovaSure and ThinPrep and feel very good about the integration and the combination of the company.

Can I actually sneak one quick question in for Glenn? That interest expense guidance for the second quarter, you said it's 18 million to 19 million. Glenn, I'm coming up with a number a little bit lower. Can you just walk us though what the convertible amount is that you are using for that calculation and the term loan again? Thanks.

Sure. With the convertible, at the balance of 1.725 billion would be as a 2%. We've a current term loan of 295 million that is at LIBOR Plus there is two trenches part of that is 225 and the other part is LIBOR Plus 250. And then there is a third piece of the debt that we don't talk a lot about as a revolver we have in Germany to find the AEG operation between 12 million and 13 million. So, maybe that’s the piece we are missing and that's a LIBOR Plus rate as well.

LIBOR Plus what?

Its like 250 to 300, I don't know the exact LIBOR Plus on that.

Okay, thank you.

The next question will come from Josh Jennings from Jefferies & Company. Josh Jennings - Jefferies & Company: Good morning. Something in for Mark Richter this morning. My first question, can you just let me say, I missed this on the call. But can you verify my calculations for new orders in the quarter and a sequential comparison to the fourth quarter in '07? My understanding is that 4Q07 orders were 363 new Selenia orders, excluding the onetime order for the units compared to 373 new Selenia orders in the first quarter of '08. So, excluding that onetime order in 4Q, orders actually increased sequentially and the first quarter orders were up about 26% year-over-year? Am I thinking about that right way?

Yeah. You are. The new orders in Q1, I believe that 371 is correct. It is up over the September quarter. And Josh, you are right, that excludes that 40 that came in the last week of the quarter which was a fall quarter. That's an unusual one for us. Josh Jennings - Jefferies & Company: All right, thanks. And I know it's difficult to do, but in terms of the final FDA approval for the Adiana product, any update or sort of guidance on estimates of when that they could actually make that announcement, have you gotten any feedback from the FDA?

Well, we expect it by the end of year, the end of calendar '08. They are looking to see long-term effectiveness data. And while the number one, year one and year two pregnancy rates, prevention rates are within the expected range. They want to look at year three. We believe that the three year rate will continue to support the timing. So, we expect it by the end of '08. Josh Jennings - Jefferies & Company: And then can you comment on your plans for launching that product and potential for bundling that with NovaSure and possibly combining a radiofrequency power console for both of those disposables?

Sure. I think, I'll defer to Pat on this, but tell you that believe me, when we had the approval, we will be ready to go with the product. Actually, this has given us a little bit of time. And so, product will be ready sales people trained ready for an international -- for a worldwide launch. If in fact, we do not launch, internationally first, which is a possibility. So Pat, would you like to add more.

I think when you look at NovaSure and the Adiana product. I mean, as we talked about, when we made the acquisition about a year ago. It's a very complementary fit between those two products and I don't think a more logical product to put in the sales bag of the NovaSure reps, it just terrific. Josh Jennings - Jefferies & Company: Okay, thanks. Are you still playing on moving manufacturing to Costa Rica for your breast biopsy products and if you do timelines for that and what can we expect in terms of cost savings?

We're setting all our opportunities at this point, the priorities for Costa Rica will be, getting the factory tools up and moving the NovaSure line, the [breaky] balloon line, MammoSite product and then eventually Adiana as well. That is the priority at this point. Josh Jennings - Jefferies & Company: Okay. And my last question. In terms of the fulfilled in the mammography market, and there’re been 13,000 plus mammography systems in the United States. How far do you think digital mammography system can penetrate? Do you guys model 70% penetration, 80% plus penetration? How do you think about that?

Our view might be a little bit different, we think what happens, we stated this the past that there will be fewer sites practicing mammography, but the equivalent amount of equipment. And that is because the demand continues to increase compliance or just the aging population will cause demand to increase, but there will be fewer practitioners, because the economics for a small site will work favorably. So, does it get to 80% or 90%? We think yes. But in addition to that there will another round of technological obsolescence as new 3D technology enters the market. So there will be resurgence again of the demand long before we hit market saturation. Josh Jennings - Jefferies & Company: Alright, thanks a lot for taking my questions.

Thanks, Jeff.

Next question will come from Ed Shanken from Needham & Company. Ed Shanken - Needham & Company: Thanks Jack. I wanted to ask you about NovaSure. We recently did a survey of 70 docks and concluded that about 20% of current utilization is for lifestyle. Could you talk about future marketing message for lifestyle and what you'll be doing in that area in the future?

What I could turn over to our strategist for lifestyle marketing which is Pat Sullivan.

I think the principle focus for the NovaSure is currently the women who suffer from menorrhagia. I mean there's 7 million women affected by this disorder in United States, 2.5 million of them seeking treatment, and we all know that 50% of the time when they put the woman on oral contraceptives, they are not very effective. So NovaSure message this year is really to move what we call up the treatment pathway. There is use for the product we believe on a lifestyle basis, but I think that the near-term focus of the sales force is clearly going to be on changing the treatment pathway.

And let me add to that. I mean the one thing that we look at is that if you look at the women that are on just hormonal therapy, it is 1.4 million women. That is clearly the target and we think the new growth is going to come from taking share from this hormone market, which is probably estimated at about 4X, as large as the endometrial oblation market. So the lifestyle market, certainly an opportunity for us, but right in front of us are these 1.4 million women that are taking hormones and it is not effectively helping them. So consequently, we think we have a long runway just in that area alone Ed. Ed Shanken - Needham & Company: And you did give us some breakout to the traditional Cytyc business, but it gets a little confusing because if there are not full quarters, could you just give revenues on a decent MammoSite, if you can, and then how many imagers you placed in the quarter?

Well in the imagers, I am not going to give the number because I don't think it is relevant anymore. I will tell you why. It is it is a matter of usage, what our goals certainly is, is to drive whether it be 60% or 70% or 80% use of ThinPrep with the imagers themselves. These are we are projecting in the $16 million plus category this year, so you are going to be at the $15 million per quarter plus each quarter. And you had asked, what was the other one that you wanted it on? Ed Shanken - Needham & Company: MammoSite.

On the MammoSite is part of -- I'll let Rob address it, because that's now folded into the number in the Breast Health solutions area.

We were seeing strong adoption on MammoSite. We are approaching 40,000 cases in total. Our target was somewhere in the area on the 13 week basis to be about $9 million, and we are on track for that or have been on track for that. So, I think all the news is very positive on MammoSite at this point. Ed Shanken - Needham & Company: And Jack, for future divestitures, GliaSite is the next one I think that we were expecting are any other pieces of the business that we should be thinking about?

No, there are no other pieces under consideration, in GliaSite we are trying to find a good home for the product as everybody knows had limited sales, but there is certainly a very needy portion of the populations, struck with cancer that it helps. So, we want to put it in the right hands to help people and we are trying to do that. But that is the only other product that we are considering. Ed Shanken - Needham & Company: Okay, no other questions. Thanks.

Thank you.

Our next question will come from Thomas Khan from Khan Brother LLC.

Hi Jack. Could you give us a little more color on the alpha/beta positioning of these new Tomosynthesis machines? And secondly do you have any insights as to what some of the competition might be doing in Tomosynthesis? Thank you.

Well thank you Tom, Best to your dad.

Thank you.

Rob is going to interrupt me if I start anyway. So Rob, you might as well talk about the alpha/beta units.

Sure. With the intent of the alpha, are really two-fold. It was to be certain that the commercial version of the product functions like the research unit, and then two, it was to gather a very valuable user interface kind of data and just systems performance data. The beta are really a continuation of that, but they are more directed towards clinical trials that will reinforce our ability to get reimbursement, clinical trials that may assist us on other FDA filings, all of those sorts of things. So, we are really trying to take our time to not just get the immediate approval, but also look for the future in terms of other versions of approvals and also reimbursement. As far as the competition, based on what we saw in RSNA, I would have imagined that we think we are ahead, but that’s something that we certainly never want to take our eye of the ball or lessen our urgency about it. So we are moving forward in this, but it’s a race to the finish line. We do believe that if there was a second player that might be in the Tomo market over the next 12 to 18 months, it is most likely GE, and then we think Siemens will follow that as typical for them.

Well, Rob, you know it's interesting I went over the GE at the RSNA, and then essentially had nothing. I mean they had a machine sitting in the corner and a salesman who couldn’t demonstrate anything. And I asked him what's going on, he said, we are testing in the US and Europe or something. It seemed like they were not pushing it. They had no interest in doing the great work that you folks have done over the past few years in prepping the medical community to what's going on.

Thank you for saying that. I think that maybe the case again. We don't want to be reckless about it and our goal is to focus on our technology, commercialization of CAD. And whether we're first or not, we believe we will be, we know we will be the best relative to technology. And as a result of that, we stay focused in our own business.

Well, I guess I would add, we would absolutely never underestimate General Electric and its scale and its ability to market products. They are formidable company. Clearly, after RSNA with the innovations made by Siemens in their MRI area and CT area, and what Philips came out with and Toshiba, clearly, I think that their focus should be in those areas as the other companies have made incredible strides and are taking market share. But we can't tell them their business and they don't tell us ours, we wish them well.

Thank you very much.

Thank you, Tom.

Our next question will come from Isaac Ro from Leerink Swann.

Hey guys, thanks for taking the question. First up on the Skeletal Health, you mentioned a bit of an earnings rebound this year. Should we think of that as, sort of, a low-single digits margin that they are about this year?

I don't think. I think what we are most focused on is rebuilding our topline at that and there will be an earnings improvement as a result of something smaller amount of incremental volume. We view this year as a rebuilding year for that and retrenching with new distribution.

Okay. And then on Selenia, looks like your market share in the US, obviously continues to be very strong. How do you characterize market share trends outside the US, particularly in Europe, where your guys like Spectra and what not starting to show up?

You know, it's interesting. You can't look at Europe as one market. I would not put Spectra in that mix as a threat. But you can't look at Europe as one market. It is really country-by-country. We have a very strong presence in certain markets, 40%, 45%. Germany, the Netherlands, UK, and Latin America, Brazil or Mexico, places like that. And then in other markets we might be close to 25%. On average, we are looking for third of the international share in terms of what we predict to be units that will be placed of this nature, meaning a [DRA nature] around the world.

Okay. And then, as usually, talk about some of these countries-by-countries being more competitive than others. Have you considered, is price competition more of an issue in some of those markets and places where you don't feel like you want to cut price to get share, is that part of the issue?

Yeah. Absolutely. I think it's a lot of it, well, particularly in Asia, we choose a very and may we expect not to get into a price war, because we really don't want to discount our product to that level. We're not the rack, we're dealer base. So it is a bit more difficult for us to get as low as, let's a GE might selling China or even in some cases it's Japan. So, we are picking our fight pretty strategically, where we think there is a significant market opportunity because of public sector, acknowledgment and reimbursement for digital. We're investing more heavily in marketing dollars to support our dealers, and hence we're seeing positive movement on the international front.

Okay. And then last question on Tomo. I think you mentioned 15 data systems are, I think maybe next month or something like that. Where would you see that number going towards the end of the year, and then are you still comfortable with getting CPT codes in place for fiscal 2010?

Well, yeah, its 15 units, and they are mixture of alpha and betas. And they start to be installed in February. And that installation of data will continue on for probably through June. I mean, it is conceivable within the process of a [beta] that we may receive FDA approval on that and at that point it will be a commercial unit that we'll just sell to a customer. So, I don't, that period of beta or the beta trail will go on for quite sometime. Relative to the PTT, we are doing all that we can at this point to aggregate the data that is going to be necessary to work with a proper regulatory and governing bodies as precursors to TPT one code like the American College of Radiology all with preparations to move forward in that direction. But year 2010 was probably the best guess.

Okay, great. Thanks very much.

Sure.

Our next question will come from Tycho Peterson with J.P. Morgan.

Thanks for taking the call. Rob, just actually following up on that last question, as we kind of think about potentially the upgrade cycle and having to do some forklift upgrades for some of Selenia's that are on the field. How do you plan to kind of manage through that transition once you got approval for Tomo?

We are actually viewing it Tycho as a real opportunity. As we've said part of our strategy is to take back used Selenia's. We've a tremendous unmet demand for refurbished Selenia. So, your goal is that we'll have an amortization table that which suggested a 25% per year amortization against a used Selenia, which then results in a trade-in credit or trade-up credit for that particular customer. And there will be a premium in pricing that has not been set for the new product. But based on that trade-up credit the customer will pay the net of that. We'll then turn around a Selenia on our refurbished plan and introduce that either internationally or into the lower end or lower volume segment in the domestic market.

Okay.

Yep.

On NovaSure there has been. I'm just wondering, what the competitive landscape is like these days in a sense that you've heard from American Med and some others that there is kind of more noise around biolytic and some these are competitors that have emerged. Can you just give us a sense I mean, it sounds like your numbers are obviously very good, so it sounds like we not really see an impact. But was their more noise out there in the market then it's been historically?

I don't know if there is more noise historically. I think Pat can talk on the historical part. I think today, we are continuing to make great strides, I don't see that, Pat?

Yeah I don't think that we've seen a lot of competitive change. I was little confused on your question on the NovaSure side is they are just local competitors then you mentioned I think one of the Mammo side competitors.

Yeah. I mentioned biolytic, which is going after the in office market.

No, I don't see any change. I mean we do more in office NovaSure then any other competitor probably all of them combined. So, I don't see any change in competitive landscape.

Okay. On the Selenia pricing Glenn its sounds like there has been some stabilization here in the near term, is it still fair to assume kind of a 5% price decline for the base units going forward?

Well, we've talked about that in the past that our expectation overtime would be to see something like that year-over-year. We haven't really seen that yet, Tycho. So, I guess we would still maintain that is probably is going to come at some point, but it's being offset by other savings that we’re seeing even on the clock side improvements that we've been making in the product line. So, even with that mind I'd expect the gross margin within that division to continue to go up.

Okay. And then just finally on the sales force, it's been a while I guess since we've got kind of a total headcount number. Can you give us a sense of how the integration is going, where you are in headcount and to the extent if that turnover or maybe adding?

Rob, do you want to do that, do one of it.

Sure. The combined force, if we look at our marketplace, say in the US, we are really north of 400 people, and we realigned the Cytyc sales force to be much more focused on the diagnostic market, and calling on OB/GYN, but from the perspective of selling ThinPrep and FullTerm, we realigned the surgical sales team or the GYN surgical sales team to really promote NovaSure and (inaudible) for Adiana with the idea that we want to drive more business to the office because we think that will be even more complementary when the Adiana product is released. On the realignment of our interventional breast solutions, as Jack indicated earlier, we have now added MammoSite product into that team, and that team is comprised of account managers to call on breast surgeons, as well as the account managers to call on radiology. So we have a great play in terms of the synergies that are now taking our interventional products, our Solero, our Atec driving nose through the breast surgery market. And we also have the ability to then introduce the products that are treatment and therapy related, namely, obviously the first thing MammoSite. In addition to that, we indicated some cross-selling that would take place between our osteo specialists and the folks that are on the OB/GYN diagnostic sales time. So overall, we have a very strong team and we have realigned to focus on the areas that we want to build and added, driving more GYN surgical products to the office, promoting the full term product in much more aggressive way, and then clearly aligning our interventional team to promote not just diagnosis, but treatment and therapy devices to both rad and the breast surgeons.

Okay. Thank you very much.

Thank you, Tycho.

Our next question will come from Jayson Bedford from Raymond James.

Good morning. Just a couple of quick ones here. The 91 international Selenia units, I am just wondering, is that level that you expect to build on going forward?

Yes, our intent is to continue to build our international business.

Okay. So, I am assuming there weren’t any type of one-time orders or anything like that assumed in that number?

There weren’t, but let me just be a little careful about that. So Jayson, the 91 was a barely steep jump for us from the September quarter, and if we just go back to our guidance for a moment, about the 1580 Selenia's for the year, we would still be thinking on terms that 80% of those would be in the US and 20% would be overseas. So, that would imply in a quarterly average, I guess in the low 80 kind of range. So, that is what we're expecting during the year, to be at that slightly lower level for an average. So this was good quarter internationally, it signaled growth overseas. I just want to be, on how it fits into the guidance of 1580.

That’s a good point Glenn, because we're not dealing with homogeneous market. So, consequently as one market comes on, others sit and then others get more active, while others pull back a little bit.

Okay. That’s very helpful, and then on NovaSure, I guess I look at it a little differently and wonder, what can you guys do as a company to reaccelerate growth in that NovaSure business?

Well, I think that as we talked about earlier. The fact is, is that it's an educational process clearly. You have the 1.4 million women that are taking hormones and I think that, that is a market that we are going to put much more emphasis against. Also there was a publication earlier in the year for new practice guidelines from ACOG, American College of Obstetricians and Gynecology, which helped expand the use of oblation as a first line therapy for women with excessive bleeding. And what is basically said in the bulletin was, Endometrial ablation is indicated for the treatment of menorrhagia or patient proceed which are critical words, heavy menstrual bleeding. So, what in essence we are saying is now, that it is appropriate as a first line treatment, Endometrial ablation and we have to continue to go out, to tell the story to doctors, continue to make available to them their peers for training, and just continue to hammer home the message. I think that’s what we have to do.

Okay, that’s helpful. And then lastly, it looked like your OpEx guidance didn’t really change. I’m wondering for the year, I’m wondering if there's any new initiatives plan that could yield some cost synergies.

Yes, the operating expense guidance was exactly the same as it was last quarter. Now, just to keep in mind for Q2 the operating expenses are higher than Q1, but that simply reflects the three week we had missed in the beginning of the quarter. But the full year operating expense is the same guidance that we were anticipating.

Right and I guess I’m just wondering now, that Cytyc's in the fold for 10 weeks. Have you identified any type of synergies redundancies that could help you go forward?

I think when we think about, that likelihood exists, Jason, I don’t think we’re ready to commit, but I would expect you would be more likely to see a positive outcome on that, than a negative.

Jason, I think that you are going to see more synergies clearly on the sales side. And the OpEx is just going to happen as a function of these teams that we have put together on both sides, whether it be logistics or IT or whatever that they are hammering out new contracts with the suppliers of these products. On the sales side, if you look at this first quarter ending in December, we are readying for the RSNA, we were readying for a national sales meeting with the diagnostic surgical and the interventional breast solutions group. We are cross training on Solero. We have done cross training on the bone densitometry. We have got another sales meeting coming up in February in Europe and in May in the United States on the domestic side. So, we are looking at top line and while at the same time letting the committees do their work, in working with providers or suppliers on getting costs down there. Are there synergies, are there going to be additional ones? The answer is yes. But we are trying to do as much as we can without screwing up a wonderful company, and so we are just being judicious about it. But the answer is yes. It is going to happen.

I appreciate it. Thanks, guys. I will get back in queue.

You are welcome.

Next question will come from Bruce Jackson, RBC Capital Markets.

Hi, a few quick ThinPrep questions. Can you give us the percentage of units that were imaged in the quarter?

Well we will play stump the stars right now, and try to get that. Ask another one while I take a breath.

Sure. Sure and then another just quick ThinPrep question. Can you split out the ThinPrep revenue from the Adeza revenue? You said Adeza is about $15 million in the quarter. What was the ThinPrep revenue in the US?

Where we have a 10-week and we have 13-week.

I'll take the 13 week.

It was in the -- probably the $60 million range, $55 million to $60 million range.

Okay.

And that obviously excludes the FullTerm.

Okay. And then moving over to NovaSure, do we have the disposable units that were sold in the quarter?

Yeah. Bruce, let me jump in. I mean I think what we want to do is to focus on the 4 or 14 segments and the hesitation is to make sure that we're on in the same page. We're not going to split out the individual MammoSite and NovaSure revenues on a standalone basis going forward. I think what we want to talk about is, if we're seeing growth and progress in those areas and for instance, in MammoSite this was a record quarter for MammoSite, but it is part of the Breast Health Group. It is part of the group that we're expecting to grow 25% this year over last year. For NovaSure, we were up this quarter. If you look at the immediately preceding quarter and we were up this quarter as it relates to the prior year. So there continues to be positive trends in NovaSure. The NovaSure is the only product currently in surgically until Adiana comes on line. And what we've said about that reporting segment is we're expecting 15% growth year-over-year. That implies pretty steady sequential growth but its not phenomenal growth. So I don't think we want to talk about incremental growth on a quarterly basis. We just want to take about the reporting segment in general and probably won't disclose the number of controllers for NovaSure. That's probably something we want to get away from and just focus on the overall growth. NovaSure growth came from both domestic and international. It wasn't one or the other came in both areas.

Okay. I'll ask my next question.

I think we want to leave the impression on the trends that we're seeing as opposed to the exact small dollar increase in the domestic versus an international market.

Okay. Moving…

And also, by the way, the number is about in the mid-50s for the amount of ThinPrep that we just mentioned.

Okay. And then one Selenia question. With the increase in the placements that you're assuming, is there a kind of an implicit backlog reduction assumption in there?

I am sorry, could you repeat that?

With the new Selenia guidance, for enough placements, are you making any kind of assumption for reducing the backlog of units?

As commented earlier, Bruce, our goal is to ship on our customer demand as our units go up each quarter; backlog aging is more and more compressed. So we are not lengthening our turnover of backlog, we are accelerating it. So let's say, if -- for instance, if we were shipping 500 units a quarter and we had a backlog of 500, it would be a 90-day turning backlog. So, we certainly wouldn't want to reduce it from that level. So our goal is to try to keep backlog in line with our customer demand.

Okay. So we might see a slight reduction in backlog going forward but nothing dramatic?

That's exactly right.

Okay. Great. That's it from me. Thank you.

Thank you, Bruce.

Next question Mike Baron with Silverback. Mr. Baron, your line is open.

Mike was probably running out to make a bid on the patriots.

Due to no response, we'll take our next question Junaid Husain from Soleil Securities.

Hey, good morning, guys.

Hi.

Pat, if I could push you a bit on the ThinPrep Image system. I appreciate that you don't give up the imager number anymore. But could you remind us, how many imagers you have in the LabCorp network?

Sorry, how many imagers?

How many imagers in the LabCorp network?

There is probably in access of 60.

And then would you expect this level at Quest as well when they start rolling out?

No, I wouldn't. We've made several improvements for the imagers since we started shipping it, which allow the unit to do about 25% more slides. So, the installed base really isn't a relevant measure. We'll have probably less units at Quest but we potentially would be able to do more volume with fewer units. And again, the Quest program is going very well as Jack mentioned. We expect it to be pretty much fully implemented this year.

Okay. And then last question Pat or Jack, with regards to Adiana that's female sterilization market in general. The folks are [contemptuous] they've been saying they are inferred with what sounds like an active DTC campaign in '08. It sounds like they might have procured head start on this DTC campaign before you launched Adiana. So, what do you guys think from a sales and marketing strategy perspective in the face of maybe a more bit of contemptuous? Thanks.

Pat, do you want to try then I'll do it after that.

Yeah, I think when you look at DTC as we all know, DTC can be very expensive. As you know we tried DTC with NovaSure and had limited success. So, I think you have to be very, very careful on DTC campaigns just because of their enormous cost. I think if they decide to do as they are DTC campaign, it would only help Adiana in the future because obviously, the market would be much more aware if it and I think we would benefit from that investments that they will be making.

Well, piggyback what -- on what Pat said and I talked about this at a -- I think at the JP Morgan conference. And that was that, we're thrilled that they are going to do this DTC campaign. We encourage them to spend lots of money on it, and we think we'll certainly be a direct beneficiary of that. And also as Pat said it's kind of a tricky path that you walk, when you do the DTC. You are spending a lot of money and hoping for the return, sometimes it comes and sometimes it doesn't. If it comes, the entire industry is going to benefit from it as it does in a lot of other product categories. Thank you.

Next question, Valerie Brown from AllianceBernstein.

Hello, can you hear me?

Yes. Valerie.

Okay. I actually have three questions. The first one is on Tomo. I recall that you've mentioned something but a large scale screening trial, and my understanding there from your comments today was that the FDA has not asked for additional clinical data. Could you just provide some more color on the enrollment status of that trial, and whether it will look at Tomo by itself or Tomo in combination with 2D digital Mammo for screening?

There is no government funded at this point for large scale screening trial for Tomo. We maybe be doing, I'm not certain, if large scale, but a high risk women trial for screening. But I don't know if that's -- again that's really a specialty study. So, I may not be completely, understanding you but there is not a large scale screening trial is underway.

And would that be Tomo in combination with 2D Mammo or just Tomo alone?

I honestly don't think that if there is a specification, it's been to find that nor is there a protocol.

Valerie, I think but you are going to see continuing clinical work, and with Tomosynthesis and in contrast media, as it would compare to MRI and you'll see co-registration of Tomosynthesis with possibly patter ultrasound. So, over the course of the next several years you will see Tomo in concert with other modalities.

Okay, thank you. And then secondly, is it possible for you to break out your product sales versus service revenue and what your margin is on each?

Glenn?

The service revenue was about $36 million in the quarter of the total revenue that’s included in the 371, and we're getting about a 22% gross margin on that service business itself. And that margin has inched up overtime for the service group in a big part of it, and most of our services generated in the Breast Health category, and then secondarily in Skeletal Health. And a big part of it is from the annual maintenance contracts that we sell after we install the equipment. For every Selenia we were getting very good placement of that follow on the order of 90% plus follow on for those annual contracts. And that generates that on going annuity that we see in service.

Okay. And then my last question relates to our refurbished units, and if you have any information on the refurbished units as a percentage of the total, and how those are priced?

We don’t really have refurbished units at any significant extent today. That’s really fundamental to the trade up program that we talked about earlier on the call. Selected units that might be show units that after six months we bring back into the factory, but we do not have a lot of units that have come back from the fields just because our obviously customers are happy with that and we continue to update them in the field when necessary

You won't see that for at least another year.

Okay.

And in 2010, clearly you will see much more because they will be -- have been out there for five to seven years and we will be using those and selling those more in the international markets.

Thank you.

Okay.

Our next question will come from Matthew Scalo from Canaccord Adams.

Hi, guys. Thanks for taking the questions. Just two real quick ones here. Have you seen acceleration in the penetration of lower volume centers by Selenia, and maybe that's what impacting system configurations or is it just geography? And then number two is, are you guys are aware, is the FDA going to set a panel to discuss kind of the CAD situation here as far as potential falls positive rates? I've heard kind of a March, April kind of timeframe.

With respect to the lower end users, I mean actually what you would see with that is almost a higher ASP in general, because it would be a single modality with a workstation. So, it probably would be fully configured. It would also work in the opposite of what we were suggesting earlier. I do see that there are penetrations deeper into that market, but what's happening is a lot of those smaller practices are now being consolidated under single buying groups. So they're benefiting by the purchasing power of either a consolidating entity or a group purchasing organization. With respect to CAD, I think other than the one study that was done and commented on repeatedly, there has been a lot of favorable news on CAD, I mean, maybe just had a very favorable reported that came out of our HDA, I believe, that spoke very highly of the CAD finding more cancers, not increasing the recall rate. So I think that the FDA will certainly be viewing CAD as it has in the past with certainly a lot of concern relative to its performance, but I don’t see that as being anything other than perhaps creating a more stringent regulatory environment for us. It is not a matter of CAD not the reimbursed; it is not a matter of CAD nothing accepted clinically. I think as we talked about 80%, over 80% of our domestic Selenias was shipped with CAD. So we don’t see a downturn in that respect.

Okay. Terrific, guys. Thanks for the insight.

Thank you.

And Mr. Mike Baron from Silverback

I just want to confirm, I thought I heard you say that you would pay the remaining term loan balance that $295 million by the end of fiscal year ’08?

It was calendar ’08.

Calendar '08? Okay, great. Thank you.

You are welcome.

And at this point, we have no further questions.

Okay. Well, thank you very much everybody for taking time. I just wanted to say that we are very excited with the new Hologic, the combination of the two companies is going well, the people, the energy, the passion, the commitment from the senior team at Cytyc, and the continuing in Hologic is meshing, is a really wonderful working organization. So, we are thrilled with where we are, and we have a long way to go. And with that, I wish everybody well, and good health, and we will see you after our next conference call, and we have a shareholders meeting on March 11th. That's it. Thank you again so much. Bye.

And this concludes today’s teleconference. We thank you for your participation. Have a wonderful day.