- The Washington Times - Monday, May 26, 2003

Shares of Digene Corp. surged last week after a German study supported the use of the Gaithersburg biotechnology company’s screening test for cervical cancer.

Digene stock closed at $23.60 Friday on Nasdaq, climbing 9 percent from a week earlier at $21.72. The study was published in the British Journal of Cancer on Tuesday. The markets were closed yesterday in observance of Memorial Day.

The study of 8,101 women 30 or older found that Digene’s diagnostic test for human papillomavirus (HPV), which is considered the main cause of cervical cancer, was 100 percent effective in detecting cervical cancer when applied with a Pap smear.

The confirmation of the HPV test’s success opens up a huge market, with millions of annual checkups by American women.

Digene President Charles Fleischman said the study was “one more brick in the wall” of building the HPV test, which is the only one of its kind approved by the Food and Drug Administration.

“Each piece of information that comes out confirming our product’s value propels us further in the market,” Mr. Fleischman said.

Sales of the HPV test rose 45 percent in Digene’s third fiscal quarter ended March 31 to $16.9 million from $11.6 million a year earlier, narrowing the company’s losses to $619,381 (3 cents per share) from $3.3 million (19 cents) a year ago.

Mr. Fleischman projected revenue at the end of fiscal 2003, which ends June 30, to hit $62 million, with losses at $4.6 million. The company is forecasting revenue of $85 million and first-ever profits of $6.5 million (35 cents) in fiscal 2004.

While Digene focuses primarily on marketing the HPV test, the company plans to further develop tests for gonorrhea, chlamydia and Hepatitis B, Mr. Fleischman said.

Several biotech analysts said Digene’s virtual monopolization in the HPV-screening market would last for at least the next three years until competitors such as Roche Diagnostics and Cytyc Corp. receive regulatory clearance for their screening products.

Little competition and the FDA approval last month to use the HPV test as a primary screener for cervical cancer have increased the company’s worldwide market to $500 million, said Ryan Rauch, a senior medical-device analyst at Adams, Harkness & Hill, a Boston brokerage firm. The firm and Mr. Rauch do not own any Digene stock.

“Digene is quickly taking 55 percent of the domestic market and probably won’t see real product competition until 2005 or 2006,” said Mr. Rauch, rating the company a “buy.”

Bruce Cranna, a senior analyst with Leerink Swann & Co., a Boston investment-banking firm, argued that real competition would come as late as 2009 or 2012.

“By then, Digene’s product will have a firm establishment in the medical field,” said Mr. Cranna, who rates Digene as outperforming the market.

Digene owns exclusive rights of three subtypes ofits HPV test, solidifying the company’s patent position, Mr. Cranna added. Neither Mr. Cranna nor Leerink owns any Digene stock.

Mr. Rauch noted that the biggest challenge for the company is marketing the screening test to OB-GYNs. “Digene now has the heavy lifting of marketing their product, but it shouldn’t be a hard feat,” he said.

Ronald Opel, analyst with H.C. Wainwright & Co. Inc., said he expected Digene stock to reach $30 by the end of next year.

“Digene is in a highly enviable position for any company right now,” said Mr. Opel, who rated the stock as outperforming the market.

Mr. Opel owns 1,000 shares of Digene stock, while Wainwright, a Boston investment firm, owns none.


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