FTC Seeks to Block Cytyc Corp.'s Acquisition of Digene Corp.

The Federal Trade Commission today authorized staff to seek a preliminary injunction to block Cytyc Corporation's (Cytyc) proposed $420 million acquisition of Digene Corporation (Digene). According to the FTC, the combination of these companies would lead to reduced competition and increased consumer prices within the highly concentrated market for primary cervical cancer screening tests, both now and in the future.

"This merger as proposed raises serious competitive concerns within the highly concentrated market for this important diagnostic tool," said Joe Simons, Director of the FTC's Bureau of Competition. "As a result of the proposed acquisition, it is likely that prices would increase, product innovation would suffer, and ultimately, patient care would be compromised."

Market Background

Both Cytyc and Digene manufacture and sell products used to screen women for cervical cancer. Cytyc's product accounts for 93 percent of U.S. liquid-based Pap tests. Liquid Pap tests are the most widely used sensitive primary screening tool available for the detection of cervical cancer. The only other company currently producing and selling an FDA-approved liquid Pap test in the United States is TriPath Imaging (TriPath). While three other companies have developed such tests, they have not yet begun clinical trials, and are at least two years away from entering the U.S. market.

Digene is the only company in the U.S. selling a DNA-based test for the human papillomavirus (HPV), and it appears likely that Digene will continue in the position for the foreseeable future. HPV viruses are believed to cause nearly all cervical cancer cases. Digene's HPV test is most commonly and efficiently conducted using a residual sample obtained from a liquid Pap test, but doing the test this way requires FDA approval. Thus, it is important that a company manufacturing liquid Pap tests have FDA approval to run the Digene HPV test off its sample medium. It is similarly important that a liquid Pap test supplier's customers have viable access to Digene's HPV test. By purchasing Digene, Cytyc would be in a position to eliminate its only existing competitor (TriPath) by limiting access to Digene's HPV test, and, in a similar manner, could also thwart the entry of other firms that have planned to begin selling liquid Pap tests in the United States in the near future.

The proposed acquisition also would eliminate future competition from Digene's HPV test itself, both in conjunction with Pap testing and later on a stand-alone basis to test for cervical cancer. Digene's HPV test is not currently used for primary cervical cancer screening in the United States, but rather as a follow-up test when Pap test results are unclear. However, it is anticipated that in the near future Digene's HPV test is likely to compete more directly with liquid Pap tests in the primary screening market. Digene has already applied for FDA approval for the use of the HPV test in conjunction with Pap testing as a primary cervical cancer screen, with final approval expected before the end of 2002. In addition, in the next four to five years, the FDA is expected to approve HPV testing as a stand-alone primary cervical cancer screening tool that could be used in lieu of Pap testing, particularly for women over the age of 30.

The Commission's Competitive Concerns

According to the FTC, Cytyc's proposed acquisition of Digene raises significant antitrust concerns. The market for sensitive cervical cancer screening tools is extremely concentrated, and in order to compete effectively, TriPath and its customers must have viable commercial access to Digene's HPV test. In addition, TriPath must have continued assistance from Digene in obtaining necessary FDA approvals to be used with Digene's current and next-generation HPV tests.

The Commission's complaint will alllege that Cytyc's acquisition of Digene would eliminate or substantially reduce its only existing competition in liquid Pap testing, as well as the only competition it likely would face for many years. Several other firms have developed liquid Pap tests and plan to enter the market in the near future. If the proposed acquisition takes place, the complaint will contend, these firms are unlikely to receive cooperation from Cytyc/Digene in obtaining needed FDA approvals, and even if they do, they and their customers would be unlikely to have competitive access to the Digene HPV test.

Additionally, the complaint will allege that, absent the acquisition, Cytyc faces future competition from the Digene HPV test in its own right. While Digene's HPV test is currently FDA-approved for use only as a follow-up test to equivocal Pap test results, the role of HPV testing is rapidly expanding into the much larger arena of primary screening - where Cytyc and its liquid Pap test lead the market. According to the FTC, HPV testing is the most likely technology to compete against liquid Pap testing as a primary cervical cancer screening tool in the future.

Today's Commission Action

Today's action authorizes staff to seek a federal district court order to prevent Digene's proposed acquisition by Cytyc. The Commission has authorized staff to file a motion for preliminary injunction on the grounds that the transaction, as currently proposed, would violate federal antitrust laws. If the court grants the FTC's motion, the Commission will have 20 days to determine whether to issue an administrative complaint.

The Commission vote authorizing staff to seek a preliminary injunction was 5-0. The FTC anticipates that it will file its motion for a preliminary injunction in the U.S. District Court for the District of Columbia no later than Thursday, June 27, 2002.

Copies of the complaint will be available upon filing in federal court from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 021-0098)