Cytyc versus TriPath: Pap Wars Will Intensify

Both companies are positioning themselves to compete more aggressively for market share

CEO SUMMARY: Earlier this month, Cytyc Corporation announced that it had filed Pre-Market Applications (PMA) for two new product lines to complement its ThinPrep® liquid preparation kit. This is a sign that competition between the two major vendors is about to heat up. If so, it will help lab customers negotiate better terms when they buy these products.

DURING THE NEXT 12 TO 24 MONTHS, clinical laboratories will have more choices for performing technology-enhanced Pap testing.

Armed with FDA approval for its integrated PREP® and AutoPap® System, Tripath Imaging, Inc. is building momentum in the Pap testing marketplace. On January 17, Dynacare, Inc. announced that it would implement the PREP/AutoPap solution for automating liquid preparation and computer screening of Pap smears.

Dynacare handles more than 1 million Pap smears annually in the United States and Canada, making this an important account for TriPath. It is a sign that TriPath is ready to be a credible competitor against Cytyc Corporation, with its ThinPrep® liquid preparation product. To date, Cytyc’s dominance of liquid preparation Pap testing has been virtually unchallenged.

By Cytyc’s calculation, it has now captured more than 50% of the 55 million Pap tests performed annually in the United States. In 2001, its revenues topped $153.2 million.

But Cytyc recognizes the need to move beyond its dependence on a single product, which is its liquid preparation Pap test. To diversify, it has launched three product initiatives.

Cytyc’s FDA Filings

First, it acquired Pro-Duct Health, Inc. last fall in a $167.5 million transaction. Pro-Duct has an FDA-approved ductal lavage device used in breast cancer detection. Second, Cytyc has filed with the FDA for two products related to its ThinPrep liquid preparation test.

On January 7, 2002, Cytyc announced the filing of a Pre-Market Application (PMA) with the FDA for its new product, the ThinPrep Imaging System® . This is an interactive computer system linked to a microscope designed to “assist cytotechnologists in the primary screening and diagnosis of ThinPrep Pap Test slides.” It also announced the filing of a PMA supplement to allow chlamydia and gonorrhea testing directly from the liquid prep collection vial, using Roche Diagnostics’s COBAS AMPLICOR system.

New Product Entry

Cytyc’s interactive computer system to help with cytotech screening is aimed at countering TriPath’s Automated AutoPap Screening system, which currently is the only device approved by the FDA to screen Pap slides and categorize a percentage of the reviewed slides as normal without human review (but with QA/QC).

According to Cytyc, its ThinPrep Imaging System “combines imaging technology to identify diagnostic fields of interest with automated microscope stage movements to facilitate screening these fields.” However, the company has not commented on what type of sophisticated visual imaging capability may be part of this system. Since the cytology market has already rejected a microscope station with a computer-guided stage to insure the cytotech reviews the complete Pap slide, it will need to have some type of “diagnostic assist” capability to attract the interest of cytology laboratories.

Potential Patent Conflict

There is another other interesting aspect of the coming market battle between Cytyc and TriPath Imaging over “smart software” which captures a digital image of cells on a Pap slide and uses an algorithm to make a diagnosis. Because TriPath holds an extensive portfolio of patents developed by AutoCyte, Neo-Path, and Neuromedical Systems in earlier years, some expert observers believe it would be difficult for any company to develop competing technology that would not infringe TriPath’s patent estate.

THE DARK REPORT predicts that this will be a bitter fight between these two companies. Clinical labs considering one company over the other will find themselves under intense sales pressure by both companies. That competition may turn nasty in certain selling situations.

There is a precedent for this type of rancorous situation. The two companies have already sued each other in recent years over claims of patent infringement and the like. The suits were settled out of court, but there is no evidence that amicable relations exist between these two competitors.

More Choices

What will make this market cycle particularly interesting is that clinical laboratories will increasingly have choices about what “flavor” of liquid prep products and screening products they prefer. That’s a sign of how the market for enhanced Pap technology is maturing.

Guided-Stage Products Were Offered to Labs

DURING THE SECOND HALF of the 1990s, two companies offered products designed to help cytotechnologists screen Pap slides.

These products used a software program to help the cytotech scan the entire Pap slide and mark specific areas of the slide. The microscope stages were motorized and the software was designed to insure that the cytotech would review the entire slide.

One product line was offered by Accumed and was called Accel. The other was manufactured by NeoPath under the brand name of Pathfinder. Despite several years of sustained marketing to clinical labs, sales of “computer-guided” screening products were negligible. Both companies pulled the products from the market due to customers’ lack of interest.

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