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The Federal Trade Commission on Monday authorized a lawsuit in the U.S. District Court for the District of Columbia to block Digene Corp.’s $420 million merger with Cytyc Corp., because of competition and bundling concerns. The agency commissioners voted 5-0 to seek a preliminary injunction. The agency is expected to file the lawsuit no later than Thursday. Both Cytyc, of Boxborough, Mass., and Digene, of Gaithersburg, Md., make diagnostic tests that screen for cervical cancer. Digene’s test is a secondary test but is likely to get approval from the Food and Drug Administration to be used as a primary test. Once that happens, the tests could compete against each other. By purchasing Digene, Cytyc would be in a position to eliminate its only existing competitor, TriPath Imaging, by limiting access to Digene’s HPV test, the FTC argued. Further, it also could impede other firms’ plans to sell liquid Pap tests in the United States. “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, in a press release late Monday. “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.” Ronald Opel, a biotechnology analyst at the research firm H.C. Wainwright & Co. Inc. in Boston, said the combined company would control about 75 percent of the U.S. market for cervical cancer screening products. Opel said Cytyc already controls 64 percent of the market for diagnostic tests that screen for cervical cancer. But Scott Keller, founder of merger research firm Dealanalystics.com in New York, said the two companies make different cervical cancer testing products. He said that Cytec’s test is still the most important because it identifies cancer cells. Digene’s test will always be a good secondary test if Cytec’s cancer cell test does not provide conclusive information. Jeffrey Hoffman, an analyst at Buckingham Research Group in New York, said both companies already have co-promotion agreements to sell each other’s products. “This is going to stay regardless of whether the deal goes through,” Hoffman said. He added that the FTC’s rejection of the merger does not bode well for Digene. Even though Digene already has had talks with other prospective acquirers such as French medical products firm Roche Holdings SA, the agency’s decision is a precedent that will discourage other buyers, he said. Copyright (c)2002 TDD, LLC. All rights reserved.

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