Digene settles patent lawsuit

Dispute with Enzo over test for cervical cancer

October 15, 2004|By William Patalon III | William Patalon III,SUN STAFF

Digene Corp. said yesterday that it will pay Enzo Biochem Inc. at least $30.5 million to settle a long-standing patent dispute involving technology used in its premier product, a test for human papillomavirus, or HPV.

The virus is the primary cause of cervical cancer. Digene's HPV test is winning widespread acceptance as a screening tool in conjunction with the traditional Pap smear. The company reported HPV test sales grew 46 percent last year to $74.5 million.

Gaithersburg-based Digene said settlement of the lawsuit, which had been pending in U.S. District Court in Delaware, will allow the company to focus on its future.

"We have been in litigation with Enzo Biochem, and its affiliates, since March 2002," Charles Fleischman, Digene's chief financial officer, said yesterday. "We have been in discussions, negotiations or litigation with Enzo for the last 12 years. We strongly believe we've taken the right step by eliminating the uncertainty of [unresolved] litigation."

Under terms of the settlement, Digene made an initial payment of $16 million to Enzo, of which $2 million can be offset against future royalty payments, the company said. Digene will also pay the Farmingdale, N.Y.-based Enzo royalties based on future net sales of products covered by the agreement. Those payments will be at least $2.5 million in the first year of the agreement, and at least $3.5 million for each of the next four years.

Digene's royalty obligation ends April 24, 2018, the company said.

Although it's taking a pre-tax charge of $14 million in its just-concluded fiscal first quarter, Digene has not changed its earnings guidance for its first quarter or 2005 fiscal year, Fleischman said.

Enzo Chairman Elazar Rabbani said that his company "is pleased that this [Enzo technology] has contributed to the success of Digene's product and that it has made an important contribution to health care worldwide. ... We are pleased that this issue with Digene has been resolved."

For the fiscal year that ended in June, Digene reported net income of $21.5 million on revenue of $90.2 million. Its shares closed yesterday at $24.88, down 30 cents. The shares have declined about 38 percent this year.

The settlement was announced after the stock market closed.

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