AmeriPath, Cytyc, NeoPath, Morphometrix, AutoCyte

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MIXED SIGNALS RECENTLY EMERGED from AmeriPath, Inc., the country’s largest pathology PPM. It finished the year with strong financials and lost its chairman.

On one hand, it finished its first full year as a public company with strong revenue growth and adequate profits. As CEO James New commented, “We consistently met or exceeded both Wall Street’s financial expectations and our internal budgets.”

AmeriPath reported 1998 revenues of $177.3 million, a 64% increase over the $108.4 million generated in 1997. Net income jumped 154%, from $7.3 million in 1997 to $18.7 million in 1998.

On the other hand, AmeriPath reported the departure of its Chairman, Thomas S. Roberts. President James New was appointed as Chairman in his place. Roberts is a General Partner at Summit Partners, the Boston-based venture capital firm that helped to launch AmeriPath.

Usually venture capitalists do not relinquish active control of their most promising or most successful investments. AmeriPath did not disclose the reason why Roberts was leaving its Board of Directors.

One Wall Street analyst familiar with the PPM (physician practice management) industry, told THE DARK REPORT “there is recognition that the acquisition model for PPMs has not fared well in today’s healthcare marketplace. Robert’s departure from the board is probably a sign that he feels his time is better used in other ventures where Summit has investments.”

AmeriPath did report strong growth in same practice revenues. Observers familiar with the anatomic pathology marketplace have questioned the ability of any pathology PPM to deliver sustained “same store growth” of 5% to 15% per year for its member practices. AmeriPath reported 10% growth in same practice revenue, of which 2% resulted from Medicare increases which took effect on January 1, 1998.

Finally, AmeriPath announced the appointment of a new medical director. Dennis M. Smith, Jr., M.D. is now Senior Vice President and Medical Director for AmeriPath. He is also managing director of AmeriPath’s Florida Region.


Cytyc Corporation proudly disclosed its first quarterly profit. For fourth quarter 1998, it had net income of $3.7 million on revenues of $14.7 million.

For all of 1998, Cytyc’s revenues totaled $44.3 million, with a net loss for the year of $11.7 million. This is a significant improvement over 1997, when the new company lost $22.1 million.

Cytyc developed a Pap smear monolayer preparation system known as ThinPrep®. During the last few years, it has worked hard to expand ThinPrep’s use in the preparation of Pap smears. In its year-end financial release, it states that ThinPrep is “currently used in 500 laboratories in the United States…At year’s end, 125 insurance companies, representing more than 100 million insured lives, cover the ThinPrep Pap Test…”

Cytyc announced that it would expand its sales force. The company intends to put another 75 sales people into the field during 1999. This move, and Cytyc’s fourth quarter performance, excited many investment analysts. Several upgraded their ratings of the company.


NeoPath, Inc. got a boost when Canada granted it a license to market its AutoPap® Screening System at “up to 50% no further review screen rate combined with location guided screening.”

It means that Canadian laboratories may allow a maximum of 50% of the slides to receive AutoPap review only. These slides would be reported and archived as normal. The remaining 50% of the slides would undergo manual screening, supplemented by location guided screening.

AutoPap can generate reports containing full-sized images of each slide processed. This report, called PapMap, can identify up to 15 specific cellular areas of the slide that are most likely to contain abnormality. These reports can cue cytotechs to give those areas of a slide increased scrutiny and attention. According to NeoPath, location guided screening is already available for use in Japan and parts of Western Europe.


AUTOMATED CYTOLOGY TECHNOLOGY will play a key role in a forthcoming research project soon to take place in Canada.

MorphoMetrix Technologies Inc. will participate with the University of Toronto and the Sunnybrook & Women’s College Health Sciences in a collaborative research project.

The goal of the research project is to see if breast cancer cells can be
diagnosed in the blood of patients with clinically-diagnosed disease. The researchers want to determine if MorphoMetrix’s cytology technology can be used to detect circulating tumor cells within the standard microscope slide format.

Currently reverse-transcriptase PCR is the most sensitive technique available. Researchers believe that MorphoMetrix’s technology can lead to pathologist confirmation of disease and quantification of the tumor cell number.

THE DARK REPORT has repeatedly pointed out that automated cytology technology will evolve beyond its current use in Pap smear screening. As such technology develops in sophistication, it will be applied to more areas of cellular diagnosis. In the process, it will increase the value of pathologists and cytotechnologists to both clinicians and patients.

The involvement of MorphoMetrix, one of the companies working to develop automated cytology technology, demonstrates that research into such applications will be on the increase.


EXPECT TO HEAR MORE from Autocyte, Inc. during 1999. The company is progressing on several fronts as it awaits FDA action on its applications for Pap smear prep and screening technology.

Since the first of the year, four separate papers were published on clinical research involving AutoCyte’s PREP® and SCREEN® technology. All four studies concluded that this technology offered improvements over manual screening methods.

For 1998, AutoCyte reported revenues of $4.8 million and a net loss of $9.1 million. Its products are still in the development stage, so these numbers were expected by analysts.


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