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Third Wave on Track for HPV MDx Filing This Year; Q1 Revenues Drop 15 Percent

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
Amid an ongoing patent dispute with Digene, Third Wave Technologies officials said last week that the firm is on track to submit its human papillomavirus diagnostic to the US Food and Drug Administration this year and expects to receive US clearance of its cystic fibrosis test in the third quarter.
Third Wave also reported that its first-quarter revenues declined 15 percent as sales of its research products, particularly in Japan, slumped. However, during the firm’s conference call last week, company executives said that one of Third Wave’s large agricultural-biotechnology customers will place the bulk of a large order in the second half of the year, which should help research revenue.
Third Wave’s focus, though, has moved primarily to the molecular diagnostics market. The firm is developing a variety of tests based on its Invader chemistry. Among these is an HPV test that is at the center of a patent dispute with Digene.
Digene, which sells an FDA-cleared diagnostic test for HPV, sued Third Wave in January, claiming that it has infringed one or more claims of US Patent No. 5,643,715, entitled “Human Papillomavirus Type 52 DNA Sequences and Methods for Employing the Same.” The patent is assigned to Georgetown University and has been exclusively licensed to Digene.
In March, Third Wave filed a countersuit against Digene alleging that the firm had “abused its monopoly power to thwart competition” in the HPV diagnostics market (see BioCommerce Week 3/7/2007).
Amid this legal wrangling, Third Wave is proceeding with its plans to finish clinical trials and submit its HPV test to the FDA for clearance later this year, according to President and CEO Kevin Conroy.
“We remain on track to submit two HPV products to the FDA in [the fourth quarter of] 2007,” Conroy said during the conference call. “We believe we will bring a differentiated product to market with the combination of our HPV high-risk test and our 1618 genotyping test,” said Conroy, and “we believe that HPV genotyping will become standard of care.”
He estimated the HPV market at roughly $250 million this year, and said there is a significant clinical need for a molecular test for HPV. Conroy added that the firm intends to show through its clinical studies that its assay is particularly suited for detecting HPV.
“Our competitor’s product has known deficiencies that negatively affect patient care and efficiency within the clinical lab,” said Conroy. “The literature shows that our competitor’s test cross-reacts with low-risk HPV types, causing approximately 10 percent false-positive results.”
Meanwhile, there is a Markman hearing in the Digene dispute scheduled for June 22, and that will be “a major milestone in the progress of the litigation,” said Conroy.
Third Wave officials also noted that there will be summary judgment motions filed in September and the trial is set to begin Feb. 19, 2008.
“There’s no doubt from our perspective that we’re a threat to Digene, and that’s why they sued Third Wave,” he said. “We believe that our antitrust suit has merits and will ultimately be the bigger story at trial.”
In addition to the HPV test, Third Wave hopes to receive clearance of its InPlex cystic fibrosis test in the third quarter of this year. The firm filed in January for clearance of the test, which is designed to detect variants in the cystic fibrosis transmembrane conductance regulator gene.
Third Wave officials also said that they expect to provide a product-pipeline update this summer.
One application the firm may target is hospital-acquired infections, a market that several BCW Index firms are targeting (see related article).

“We believe that our antitrust suit has merits and will ultimately be the bigger story at trial.”

“You can bet that we’ve looked at that area very closely,” said Conroy. “We have a very significant number of hospital customers.” 
Conroy said during the call that there are three essential drivers for the firm’s molecular diagnostics business: volume growth with current customers, expanding the base of clinical customers, and expanding the menu of assays the firm provides.
He did not say what role, if any, acquisitions and alliances would have in helping these growth drivers.
Revenues Fall, but Molecular Dx Sales Rise
Third Wave’s first-quarter revenues decreased to $6.7 million from $7.9 million year over year.
Revenue from the firm’s clinical molecular diagnostics products rose 27 percent to $6 million from $4.7 million, but receipts from research products declined 81 percent to $569,000 from $3 million.
The firm posted a first-quarter profit of $4.8 million, or $.11 per share, compared with a net loss in the comparable period last year of $4.7 million, or $.11 per share. This year’s results include a $10.75 million payment from Stratagene to resolve litigation between the firms (see BioCommerce Week 1/31/2007).
Excluding the Stratagene payment, as well as interest income and expense, Third Wave’s loss from operations was $6.3 million, compared with $4.7 million in last year’s first quarter.
Third Wave’s R&D expenses nearly doubled to $5.1 million from $2.3 million the previous year.
“We continue to make a significant investment in the clinical trials for our HPV products,” Conroy said in a statement, explaining the cause of the ballooning R&D costs. 
Third Wave had around $47.1 million in cash, cash equivalents, and short-term investments as of March 31.

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