Digene buyer gains edge in a hot area of biotech

Its test for HPV gives Qiagen a lead in molecular diagnostics

Analysis

June 05, 2007|By Tricia Bishop | Tricia Bishop,sun reporter

Dutch company Qiagen NV likely agreed to buy Gaithersburg's Digene Corp. over the weekend in a $1.6 billion deal for one main reason: to get its hands on the local company's HPV Test, which detects a cancer-causing virus.

The acquisition puts Qiagen at the forefront of what analysts are calling one of the hottest areas in biotechnology. Known as molecular diagnostics, it is a relatively new discipline that uses genetic and protein information to better diagnose infectious diseases and cancer or predispositions toward them.

The hope is that such diagnostic tests will provide earlier and more accurate disease detection and therefore save lives.

Some say the field is the first to show therapeutic promise for the much-hyped mapping of the human genetic code, drafts of which were first produced in 2000. Many thought the DNA data would rapidly lead to personalized medical cures but they have not produced much.

Few drugs developed using genetic information have made it into late-stage clinical testing. Among them is LymphoStat-B, a lupus treatment produced by Rockville's Human Genome Sciences Inc.

"It's been harder to do scientifically than people anticipated," said Michael J. Werner, a biotechnology business consultant based in Washington.

Part of the problem is that researchers were suddenly faced with huge amounts of data but weren't sure how to interpret them. Among the first strides they are making is learning to link particular traits and biological markers with diseases, opening up a market for tests to diagnose such conditions.

Bruce Cranna, an analyst with Leerink Swann in Boston, estimates that the molecular diagnostics market is worth at least $2 billion and is likely to reach $4 billion to $5 billion by 2011.

"It's certainly a hot button area," Cranna said. "Molecular diagnostics in general is the wave of the future in diagnostics and, I think, as well in management of cancer in general."

Before the development of molecular tests, most cancers were diagnosed by clinicians peering at cells through a microscope. Molecular tests look at how genes and proteins are functioning within a cell and search for patterns - or "molecular signatures" - that could mean cancer.

`Expression patterns'

"These expression patterns are improving clinicians' ability to diagnose cancer," the National Cancer Institute concluded in an "Understanding Cancer" series it created. "Soon all cancers may be diagnosed this way."

Digene's HPV Test uses molecular technology to find DNA associated with one of 13 high-risk types of the human papillomavirus, or HPV. There are more than 100 strains of the virus, and about a third of them are sexually transmitted. Half of those are linked to cervical cancer and to some oral and rectal cancers.

Rival versions

The Gaithersburg company's test is the only one with Food and Drug Administration approval, specifically for use in women older than 30 as part of routine gynecological screening and for younger women as a follow-up to Pap tests showing abnormal cell activity.

But Digene's exclusivity in the market could change. In March, a diagnostics division of Swiss pharmaceutical giant Roche Holdings Ltd. said the FDA was reviewing its version of an HPV diagnostic test. California's Gen-Probe Inc. and Wisconsin's Third Wave Technologies Inc. also are developing HPV-related screening mechanisms.

"They're all vying for the same thing; they want a piece of the market. Companies are working on this because it's a very large potential market opportunity," said Amit Hazan, a biotechnology analyst with CIBC World Markets in New York. That's why Qiagen arranged to acquire Digene, he said.

Qiagen, which makes products that extract genetic and molecular materials to help diagnose possible disease, gets about half of its revenue from molecular diagnostic products.

In a conference call yesterday to discuss the acquisition of Digene, Chief Executive Officer Peer M. Schatz said molecular diagnostic testing for cancer is "the future."

Global sales staff

He said he expects the HPV diagnostic market to top $1 billion mark someday although there is still a long way to go. Digene had HPV Test sales of about $134.4 million in fiscal 2006.

Digene CEO Daryl J. Faulkner said combining with Qiagen should boost the company's global reach - and its sales - by giving the HPV Test access to a large international sales staff. He said he also expects the merger to "shave two or three years off" a plan to expand the business for the long term.

The combination will speed up investments in new technology, Faulkner said, "that we believe will shake the future of our industry."

Digene's stock shot up 27 percent yesterday on news of the company's sale. Shares closed up $12.05 to $56.82 on the Nasdaq. Qiegen shares closed down $1.70 to $15.58.

tricia.bishop@baltsun.com

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