Roche's End Run Into the Cervical Cancer Screening Market
Executive Summary
The announcement of a merger between Digene, the maker of the only FDA-approved test for HPV, and Cytyc disappointed diagnostics giant Roche, Digene's European distributor. Roche had also contemplated a more strategic relationship with Digene. But it had a back-up plan. In June, it bought Institut Pasteur's HPV IP portfolio, which includes rights to some of Digene's markers. Now, Roche will go head to head with Digene in what may be one of the first significant battles between two molecular diagnostics platforms.
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A Vial Decision
We have heard of current cases in the drug industry in which the Federal Trade Commission is trying to predict the regulatory future. If the FTC is using its predictive powers as the basis for anti-trust decisions going forward, as appears at least in part to have been the case when it announced its intention to block the proposed merger between cervical cancer screening companies Cytyc and Digene, we find the reasoning problematic, and philosophically troubling.
A Vial Decision
We have heard of current cases in the drug industry in which the Federal Trade Commission is trying to predict the regulatory future. If the FTC is using its predictive powers as the basis for anti-trust decisions going forward, as appears at least in part to have been the case when it announced its intention to block the proposed merger between cervical cancer screening companies Cytyc and Digene, we find the reasoning problematic, and philosophically troubling.
Unsurprisingly, Cytyc Buys Digene
As a small company with a strong presence in its niche, Cytyc receives a high multiple for its revenues, which gives it the equity for M&A. And both it and Digene, another player in cervical cancer screening, knew they could realize strategic synergies by combining and leveraging product offerings and marketing and distribution channels. But whether or not Cytyc succeeds in driving the growth of Digene's test for HPV, the cause of cervical cancer, and uses Digene's Hybrid Capture platform technology to enable a broader play in women's health, Cytyc is demonstrating an ability to craft potentially transforming deals-the kind a larger diagnostics or medical device company can't easily make by acquiring line extensions in niche markets.