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Hologic Women's Health Deal with Quest Viewed as Loss for Qiagen, Particularly on HPV Front

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Hologic last week scored a major win for its molecular diagnostics business as it announced it was entering into a strategic alliance with Quest Diagnostics to more broadly offer testing based on Hologic's Aptima family of products — a portfolio that Hologic garnered last year as part of its acquisition of Gen-Probe.

Although the agreement covers women's health in general, it centers on molecular testing for human papillomavirus. And, according to industry analysts, Hologic's win comes primarily at the expense of Qiagen, which has long maintained leadership in the HPV molecular testing realm with its Digene Hybrid Capture 2, or HC2, test, and which counted Quest among its biggest customers for the assay.

Nevertheless, Qiagen said that Quest will continue to offer the Digene HC2 test, and also noted that the increased competition will not cause it to revise its financial guidance for the year.

Under the terms of the five-year, non-exclusive agreement between Hologic and Quest, the companies will "more broadly offer testing based on Hologic's Aptima family of products" and "co-develop and promote advanced diagnostic solutions to improve women's health," they said in a statement.

More specifically, Quest will transition to a broader offering of services based on the Aptima products, which include US Food and Drug Administration-approved assays for HPV, HPV genotyping, chlamydia, gonorrhea, and Trichomonas vaginalis.

In addition, Quest will continue to use Hologic's ThinPrep liquid-based cytology products, and the companies will "explore opportunities to develop and expand access to new diagnostic solutions for women's health" by implementing joint programs to advance women's health issues with medical associations and patient advocacy groups, and sponsoring research.

Financial terms of the collaboration were not disclosed.

Quest underscored the fact that it will also continue to offer Hologic's Aptima HPV mRNA-based assay nationally. This test, which runs on the Tigris molecular diagnostics platform from Hologic's Gen-Probe business, uses transcription-mediated amplification to detect mRNA from two viral oncogenes, E6 and E7, in 14 of the highest-risk HPV types associated with cervical cancer and precancerous lesions.

In a joint statement, and what appears to be a direct reference to Qiagen's HC2 product, Quest and Hologic noted that "unlike other FDA-approved, DNA-based HPV tests, the Aptima HPV assay detects messenger RNA overexpressed from two viral oncogenes that are integral to the development of cervical cancer."

Qiagen's Digene HC2 HPV DNA test is based on hybrid capture 2 signal-amplification technology. For its part, Qiagen maintains that its test is superior to PCR-based methods primarily because it better detects HPV that correlates to disease and not to the sheer presence of the virus.

Prior to its acquisition by Hologic, Gen-Probe received FDA approval for its Aptima assay in November 2011, and claimed at the time that the test's high degree of specificity would help differentiate it from competing products (PCR Insider, 11/3/2011).

Gen-Probe made these claims based on the Clinical Evaluation of Aptima HPV RNA, or CLEAR, trial, which involved approximately 11,000 women undergoing routine Pap testing at 18 US clinics (PCR Insider, 12/2/2010). The study compared the Aptima assay with the Digene HC2 test and found that Aptima HPV had comparable sensitivity for the detection of cervical disease, but a higher degree of specificity.

Since then, other peer-reviewed studies have upheld these specificity claims.

"Most HPV infections clear up on their own, so it's important to identify those persistent, high-risk infections that are most likely to lead to cervical cancer," Tom Wright, professor of pathology and cell biology at the Columbia University Medical Center, said this week in a statement. "In numerous clinical studies involving approximately 45,000 women, the Aptima HPV mRNA assay has consistently shown similar sensitivity and better specificity than the most frequently used DNA-based test. This means the Aptima HPV assay is highly accurate in detecting cervical disease, but is less likely to raise false alarms that can result in unnecessary medical procedures."

Nevertheless, as recently as 2010, Qiagen asserted that its HC2 test was the market leader in molecular HPV testing, citing a number of factors including its steady sales of the test, the company's belief that only around 40 percent of the HPV screening market had been penetrated to that point, and Qiagen's claims that its test is superior to PCR-based methods primarily because it better detects HPV that correlates to disease and not to the sheer presence of the virus (PCR Insider, 8/12/2010).

However, that perceived market leadership position may now be slipping. In January, as part of its fourth-quarter and full-year 2012 financial results, Qiagen disclosed that although molecular diagnostics sales in 2012 climbed 15 percent, HPV testing, which represents about 16 percent of companywide sales, slipped 8 percent year over year.

Qiagen painted a similar picture in April when, as part of its Q1 2013 earnings report, it disclosed that HPV testing product sales slipped year over year at a mid-single digit clip in the US due to "pricing pressure." However, it did note that HPV testing showed growth in other regions.

In a statement this week, Qiagen said that it has been informed that its HPV-related products will continue to be offered by Quest, and that it "looks forward to working with [Quest] to continue the strong growth pace of its sales of other products from its portfolio."

Qiagen also asserted that the Digene HC2 Test is the "gold standard" FDA-approved molecular test for HPV screening based on annual sales and testing volumes, with more than 90 million tests delivered worldwide since its market introduction. The test is supported by clinical data from more than 300 clinical studies in independent, peer-reviewed publications involving more than one million women, and is the only test proven to support implementation of new five-year interval US screening guidelines, Qiagen said.

The company also stressed that it sees "no need at this time to revise its guidance for 2013," and expects that "sales related to this development represent less than 2 percent of its anticipated total net sales for 2014." The company also said that it expects sales related to products used in HPV screening in the US to represent less than 10 percent of total net sales in 2014.

Analysts' take on impact

According to at least one industry analyst, there may be more to the story than Hologic's HPV test. In a research note issued last week, Brian Weinstein of William Blair wrote that "no other company[y] can offer the broad women's health molecular testing menu that Hologic can," and that the equity research firm believes that this, "along with strong clinical performance and … to a much lesser extent pricing, is what won the day for Hologic at this strategic account."

Weinstein also wrote that although the deal is not exclusive, "it makes Aptima assays the preferred choice for Quest — meaning they will be the default tests used when a Quest physician customer sends in an order." He also noted that Quest's endorsement of the Aptima assay is a "stamp of approval" for the test.

Weinstein estimated that the win for Hologic could amount to $70 million to $85 million in incremental revenues, which would translate to a 2 percent to 3 percent boost to revenues down the road. About $20 million to $25 million of that opportunity will come from Quest converting from the Digene HC2 test to the Aptima HCV tests, Weinstein added.

"Even if this business goes away entirely for [Qiagen] … it represents less than 2 percent of Qiagen's total sales in 2014, and domestic HPV revenues in aggregate are expected to represent less than 10 percent of the company's revenue in 2014. Still, when agreements like this happen, there are winners and losers, and this certainly is a loss for [Qiagen]."

Taking a similar tack, Doug Schenkel of Cowen and Company wrote in a note that the partnership between Hologic and Quest "is likely to catalyze share loss for Qiagen's HPV franchise." As such, Cowen downgraded Qiagen's stock to "underperform."

"One of the pillars of our underperform thesis on Qiagen has been that even though it has been discussed for several quarters, the magnitude of potential remaining share loss in HPV continues to be underappreciated," Schenkel wrote. "While the company has downplayed this, our consultants characterize Qiagen's share loss in HPV as 'in the early innings' because of existing contracts that need to be worked through and because of very complicated evaluation and validation cycles for changing HPV tests. This is part of the reason why we believe Qiagen's organic revenue growth will remain sluggish."

It is worth noting that William Blair's Weinstein also foresees the Hologic-Quest partnership impacting Becton Dickinson, from whom approximately $50 million to $60 million of the $70 million to $85 million opportunity could come – "although this is less certain than the Qiagen impact," he wrote. This dollar amount, he noted, is made up of CT/GC tests as well as liquid-based cytology tests that will now see Hologic as the primary vendor.

Interestingly, Hologic also offers the Cervista HPV test, which uses Invader signal amplification chemistry to detect DNA from 14 high-risk HPV types. However, the company has presumably been phasing this assay out since its acquisition of Gen-Probe and its Aptima assay portfolio. Another competing FDA-approved HPV product is Roche's Cobas 4800 HPV test, which uses PCR amplification of target DNA and nucleic acid hybridization to also detect 14 high-risk HPV types.

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