Digene's stock tumbles 19% as revenue forecast is reduced

Sales of diagnostic test fell short of hopes, says Gaithersburg company

July 11, 2002|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Shares of Digene Corp. fell 19 percent yesterday after the Gaithersburg company announced that this year's revenue will fall below expectations because its agreement with the world's biggest maker of diagnostic tests failed to produce the expected sales for its human papillomavirus test.

The company's revenue for the fiscal year that ended June 30 will be $48.5 million to $49 million, according to preliminary figures. Digene had expected revenue of $51 million for the year. Digene will report final results next month.

Yesterday's announcement was the second blow to the company in two weeks. On June 30, Digene terminated its agreement to be acquired by Cytyc Corp. in the face of opposition from the Federal Trade Commission, which said the deal would impede competition.

That sent Digene stock down 21 percent to $9.26, then a 52- week low. Its price has continued to erode, and yesterday it lost $1.73 to close at $7.20. Digene hit a high of $39 last July.

Chief Financial Officer Charles Fleischman said during a conference call yesterday that Digene does not expect to renew its distribution agreement with Roche after the Swiss company announced June 5 that it would enter the market to sell a test for HPV, the leading cause of cervical cancer. Roche could have its own HPV test on the market by next year, Digene officials said.

"After the announcement from Roche, it became apparent that Roche did not have Digene's best interest in mind," Fleischman said.

Fleischman said during that call that Digene did not get about $2.2 million it had expected from its agreement with Roche last year to distribute its HPV test.

Digene said its net loss for fiscal 2002 would be $9.5 to $10 million, or between 55 cents to 58 cents a share. That includes a $2.5 million repurchase of distribution rights from Abbott Laboratories and $3 million to $5 million in expenses and legal fees associated with its failed merger with Cytyc.

Digene said it expects revenue for fiscal 2003 to be $60 million to $65 million, with HPV test revenue of $43 million to $48 million. A net loss of $3 million to $6 million is expected for the same period.

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