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Digene Corp. said Monday that it had exercised its right to cancel its merger agreement with its rival Cytyc Corp. The medical diagnostics company said that it had delivered formal notice of its termination of the merger agreement to Cytyc on Sunday. Boxborough, Mass.-based Cytyc agreed Feb. 19 to acquire Gaithersburg, Md.-based Digene for $554 million in cash and stock. But since the deal was struck, Cytyc’s stock has plummeted. As of Friday’s close, the transaction was valued at about $229 million. The deal has encountered stiff antitrust objections. The Federal Trade Commission voted June 24 to authorize a lawsuit challenging the merger on concerns that it might reduce competition in the market for cervical cancer tests. The FTC put the litigation on hold June 25 after Cytyc and Digene agreed not to consummate the deal without giving the agency 10 days’ notice. A source said last week that Cytyc could resolve competition-related concerns by licensing Digene’s testing system to F. Hoffmann-La Roche Ltd. The Nutley, N.J.-based unit of Switzerland’s Roche Group recently acquired the intellectual property from France’s Institut Pasteur needed to create a cervical cancer test. Cytyc, however, appeared unwilling to buy Digene if it meant creating a strong competitor in F. Hoffmann-La Roche. Digene’s cervical cancer test may win Food and Drug Administration approval to be a primary cervical cancer test instead of a back-up procedure. With this approval, it would compete directly with Cytyc’s cervical cancer test. One option for Digene is to try to merge with La Roche, but it was unclear whether regulators would accept such a deal. Much depends on how quickly La Roche develops its own cervical cancer test. Dennis Fitzgerald contributed to this report. Copyright �2002 TDD, LLC. All rights reserved.

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