Digene sued over cancer product

Infringement claim not seen as threat to acquisition by Cytyc

March 22, 2002|By Julie Bell | Julie Bell,SUN STAFF

A New York company said yesterday that it has sued Digene Corp., claiming that the Gaithersburg company's increasingly popular cervical cancer test and other products infringe one of its patents.

Enzo Diagnostics Inc., a unit of Farmingdale, N.Y.-based Enzo Biochem Inc., said it is seeking treble damages in the suit filed in U.S. District Court in Wilmington, Del.

The lawsuit is the latest salvo in a dispute over rights to technology used in Digene's best-selling products. It comes as Digene pursues an acquisition by Massachusetts-based Cytyc Corp.

Analyst Al Kildani of Pacific Growth Equities has said he doesn't expect the dispute to derail the cash-and-stock deal, valued at $693.5 million based on yesterday's closing price for Cytyc's shares. Cytyc Chief Executive Officer Patrick J. Sullivan has said that this company continues to support the acquisition.

Cytyc is offering $4 a share in cash - a total of $76.9 million - and 1.1969 shares of Cytyc common stock for every share of Digene common stock. Cytyc would issue 23 million shares of common stock for the deal, which is expected to close next quarter.

Digene Chief Executive Officer Evan Jones declined yesterday to comment on Enzo's suit. Officials of Cytyc and Enzo declined to comment or could not be reached.

The suit comes on the heels of Digene's action against Enzo last week in U.S. District Court in Delaware. Digene was seeking a declaratory judgment that its Hybrid Capture products, including the cervical cancer test, do not infringe on Enzo's patent.

Cytyc said at the time that it had been apprised by Digene of the dispute with Enzo. Cytyc, based in Boxborough, Mass., said information it has received from Digene indicates that Digene's products don't infringe on Enzo's patents.

"We continue to believe that the Cytyc-Digene merger represents an excellent strategic fit for the two companies, which are leaders in their respective fields," Sullivan said in a statement then.

"We still believe the deal is likely to go through," Kildani said in a meeting at Pacific Equities, according to comments transcribed by the company. "However, we cannot ignore the reality that there is some uncertainty near-term created by this litigation."

Digene, which has about 230 employees in Gaithersburg and about 250 overall, projects $50 million in revenue and profitability this fiscal year. Its shares gained 87 cents yesterday to close at $36.12. Shares of Cytyc gained 61 cents to close at $26.81. Both trade on the Nasdaq stock market.

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