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Awaiting Court Date, Third Wave Slams Digene's HPV Test at Investor Conference

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In the midst of an ongoing legal battle with Digene, Third Wave Technologies openly slammed its competitor’s human papillomavirus diagnostic as “inferior technology,” during a presentation last week at the Robert W. Baird & Co. Growth Stock Conference.
 
“Digene’s strategy, because they are a one-product company with what I believe to be inferior technology, is that they need to litigate,” Third Wave CEO Kevin Conroy said. “They need to do whatever they can to keep people away from their market while they figure out how they are going to evolve and be successful as a company.”
 
Digene did not respond to requests for comment before deadline.
 
Digene, which markets an FDA-cleared HPV diagnostic test, 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 belongs to Georgetown University, but Digene holds exclusive licensing rights.
 
In March, as reported in Pharmacogenomics Reporter sister publication BioCommerce Week, Third Wave filed a countersuit against Digene alleging that the firm had “abused its monopoly power to thwart competition” in the HPV diagnostics market.
 
“We have a very, very strong case on non-infringement. We also instigated antitrust litigation against Digene,” Conroy said. “Since they decided to sue us in Madison, [Wisconsin,] we decided that we would try to rectify some of the issues that they have created with some of the tactics they have taken as a 99 percent market share owner.”
 
There is a Markman hearing in the Digene dispute scheduled for June 22 and the trial is set to begin Feb. 19, 2008.
 
Awaiting its day in court, it appears Third Wave is trying to prevail in the court of public opinion and bolster investor confidence by openly discussing the weaknesses of its competitor Digene’s HPV test. Digene, however, remained tightlipped about the court case during an earnings call, saying that it would be inappropriate to comment on the litigation.
 
The court challenge against Third Wave “is an issue that we would not and cannot comment on during this call,” a Digene official said during it’s third quarter earnings call last week.
 
Third Wave Rant Against Digene
 
According to Conroy, the technology behind Digene’s HPV test has a 10 percent to 15 percent false-positive rate and does not yield a result in 5 percent to 10 percent of the cases if there is less than 4 mL of solution.
 
In comparison, he said, Third Wave’s test running on its Invader technology can yield accurate results with 0.5 mL of solution.
 
Furthermore, Digene’s test doesn’t employ true nucleic acid testing technology, Conroy said. “It’s a hybrid between immunoassay technology and nucleic acid testing technology,” which makes “the work load cumbersome.”
 
Third Wave’s product differentiates between the types of HPV viruses, which are associated with varying degrees of risk for developing cervical cancer. Digene’s product does not differentiate between virus types, Conroy claimed.
 
There are 40 different types of HPV that infect the cervix, of which only 14 cause cancer. Two of these, HPV type 16 and 18, are of particular concern. A woman who is infected with HPV type 16 is 40 percent to 50 percent more likely to progress to cervical cancer. A woman with type 18 is 20 percent more likely to progress to cervical disease, but within a decade that risk can increase to 50 percent.
 
“Thought leaders are moving toward a standard of care that says when a woman is HPV positive you need to know whether she has type 16 or 18,” Conroy said. “Unfortunately, Digene’s technology is not able to do that. They pool their genotyping to 16/18 and 45 and they can’t distinguish among those.”
 
Despite the ongoing legal battles, Third Wave officials assured analysts that they are on track to finish clinical trials and submit two HPV products – the HPV High-Risk Molecular Assay and HPV 16/18 Molecular Assay – to the FDA for clearance in the fourth quarter of this year.
 

“I’ve been involved in dozens of patent suits and I’d rather be on this side of this suit than any other. It’s a very narrow patent claim. Our technology was very easily able to respect that intellectual property.”

Conroy noted that although Digene controls 99 percent of the current HPV diagnostic market, valued at between $230 million and $250 million, only 20 percent of the market is actually penetrated. “We believe this is growing rapidly and, as that happens, the market size will grow. There is significant opportunity here for Third Wave to participate in this fast-growing market,” he said.
 
Conroy, who prior to becoming CEO was general counsel for Third Wave, remained confident that his company would prevail in court against Digene.
 
“I’ve been involved in dozens of patent suits and I’d rather be on this side of this suit than any other,” he said. “It’s a very narrow patent claim. Our technology was very easily able to respect that intellectual property.”
 
In addition to the HPV tests, in January Third Wave filed for FDA clearance of its InPlex cystic fibrosis test to detect variants in the cystic fibrosis transmembrane conductance regulator gene. The company hopes to receive an FDA decision in the third quarter of this year.
 
The company also plans to submit a sensitivity test for the anticoagulant warfarin this year once the agency updates the label for the drug to include genetic testing information. “Right now we are monitoring the FDA’s decision to update the label to suggest to doctors that they do a genotyping test before they prescribe this blood thinner,” Conroy said.
 
Third Wave Revenues Fall, Dx Sales Rise
 
Third Wave’s first-quarter revenues decreased 15 percent to $6.7 million from $7.9 million in the previous year.
 
Revenue from 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.
 
Meanwhile, the company’s R&D expenses nearly doubled to $5.1 million from $2.3 million the previous year. Conroy said it has committed $15 million over the next three years to studying its HPV tests in clinical trials.
 
Third Wave had around $47.1 million in cash, cash equivalents, and short-term investments as of March 31.
 
Digene Total Revenues, HPV Test Sales Up
 
Digene’s total revenues for the third quarter increased 34 percent to $52.5 million from $39.1 million in the third quarter of 2006.
 
Worldwide sales for its HPV test grew 41 percent to $48.3 million from $34.2 million in the third quarter last year. The company’s net income grew to $5.3 million in the third quarter, compared to $1.1 million in the same quarter in 2006.
 
Digene’s R&D spending grew to $7.1 million in the past quarter from $5.4 million in the third quarter last year.

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