Panic, then glee, at maker of test for cancer virus

Digene expects rival's vaccine and ads to raise women's awareness of HPV

June 08, 2006|By TRICIA BISHOP | TRICIA BISHOP,SUN REPORTER

When it first appeared that a vaccine under development by New Jersey's Merck & Co. could one day wipe out the two virus strains that cause 70 percent of cervical cancer -- a vaccine that the Food and Drug Administration is expected to approve today -- many in the medical world rejoiced.

But the initial reaction from one Maryland company about the first-ever cancer immunization was a little different.

Digene Corp. panicked.

The Gaithersburg business had spent more than a dozen years developing a screening test that looked for dangerous versions of the same sexually transmitted virus, known as the human papilloma virus or HPV, with the intent of identifying infection so women could get early preventive treatment.

The FDA approved the test in 2000. Last year, Digene launched a multimillion-dollar advertising campaign urging women to "ask your doctor, tell your friends" about its screening tool. The company's stock and test sales have been steadily climbing ever since.

But Merck's developing vaccine seemed to promise it could get rid of the problem altogether, making Digene's diagnostic obsolete. That is what executives thought before they took a step back.

"When you get off your panic hat ... it's great, the stars are aligning," Digene's president and chief operating and financial officer, Charles M. Fleischman, said in a telephone interview yesterday.

Neither Merck's vaccine, nor a similar version being developed by GlaxoSmithKline PLC, protect against the HPV strains that cause the other 30 percent of cervical cancer, which Digene's test can detect.

Even if they did, it typically takes decades for vaccines to eradicate a disease, leaving plenty of time and reasons for continued screening, executives and company analysts said.

The vaccine candidates have drawn controversy as well from conservative groups who question the suitability of vaccinating children against sexually transmitted diseases, preferring instead to advocate abstinence.

Fleischman said the company is actually relieved to let the much bigger Merck take over the costs of HPV advertising and education. Analysts expect the drug giant to spend between $100 million and $150 million marketing its vaccine this year. By comparison, Digene's ad campaign, thus far in 10 cities including Baltimore and Washington, costs between $6 million and $10 million a year.

The Centers for Disease Control estimates that 80 percent of Americans will contract at least one of the 100 strains of HPV during their lifetimes. Most versions of the virus clear on their own within two years of contraction, having never shown any symptoms. Others result in genital warts or precancerous cellular changes of the cervix, which a Pap test checks for.

About a dozen strains, all of which Digene's test screen for, can cause cervical cancer. The disease is expected to kill 3,700 American women this year, making it the second leading cause of cancer death in women, after breast cancer.

Merck's Gardasil "would definitely prevent cancer deaths in this country," said Dr. Lindsay S. Alger, a professor of obstetrics and gynecology and director of the labor and delivery center at the University of Maryland Medical School. But it "doesn't eliminate the need for screening."

Alger uses Digene's test per FDA guidelines: as a follow-up screen for women younger than 30 whose Pap smears show abnormal cervical cell changes, or for regular screening of women 30 and older. Still, she and her colleagues have been following Gardasil's development, eagerly awaiting its approval.

"If the vaccine is approved, it, in our opinion, can only be seen as a positive for Digene," said Bruce Cranna, who follows the medical supply and device industries for Boston investment firm Leerink Swann & Co. Neither he nor his company have a relationship with Digene.

"Any advance in cervical cancer screening that gets more women thinking about HPV is probably good for Digene," Cranna said.

Of the 11 investment analysts Bloomberg News lists as following Digene, eight of them recommend buying the company's stock or label it as outperforming its peers. Shares rose 64 cents yesterday to close on the Nasdaq at $37.85.

"Merck is already doing ads on TV encouraging women to go in and get [tested]. They're building awareness. ... This is all good for Digene," said Caroline Corner, an analyst with Montgomery & Co. in San Francisco. She does not own shares of Digene, nor does her firm have an investment relationship with the company.

Today, about two dozen businesses are developing HPV-targeted products, including vaccines, diagnostics and treatments. Analysts have predicted the vaccine market could be worth about $4 billion per year and expect Merck's Gardasil to generate revenue of $2 billion by 2010. The screening market, which Digene falls into, has been estimated at about $1 billion annually.

Fleischman said there's a potential for about 35 million annual HPV tests. Last year, clinicians administered 5 million of them.

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