Medical Device Link.

Originally Published IVD Technology July/August 2002

EDITOR'S PAGE

Even in the best of economic times, small medical device and diagnostic companies that are seeking investment capital can face a pretty rough road. But when both private and public-market investors are jittery—as they have been for the past year—the road ahead for such companies can easily begin to look more like a jungle trail.

Responding to such circumstances, many small companies are actively seeking to take advantage of synergies that can be developed with those of their own kind. The resulting array of cross-licensing agreements among development-stage diagnostic companies runs the gamut from simple codistribution agreements to full-blown strategic partnerships—but not, apparently, to mergers.

That was part of the message delivered by the Federal Trade Commission (FTC) in June, when it voted unanimously to block the acquisition of Digene Corp. (Gaithersburg, MD) by Cytyc Corp. (Boxborough, MA). Announced in February, the proposed merger would have linked Cytyc's market leadership in liquid-based Pap testing (a 93% market share) to Digene's DNA test for human papillomavirus (HPV), currently the only such test with FDA approval. The merger would have given the newly combined company a strong market lead in both current and future technologies for cervical cancer testing.

So much so, according to Joe Simons, director of FTC's bureau of competition, that "it is likely that prices would increase, product innovation would suffer, and ultimately, patient care would be compromised."

Meanwhile, as if to underscore the limits of FTC's ability to control market competition and demonstrate how easily a company might get around such a merger, megacompany Roche Diagnostics (Basel) simply went out and bought all of the HPV patents and sublicensing agreements belonging to the Institut Pasteur (Paris), including one license that had been granted to Digene.

It's difficult to ensure a competitive landscape when the field includes such a mix of small entrepreneurial companies and wealthy international powerhouses as the diagnostics sector does. But when established multinational firms have passed on a market opportunity, FTC owes emerging companies—and their shareholders—a better shot at developing the technologies and markets they have created.

Steve Halasey