Thanks for the reference to the Fortune Article. It is an interesting article although I found the Oct 27 date a bit disquieting.
October 27, 1997
pathfinder.com@@841sTAUAmyDigU7d/fortune/1997/971027/fir5.html
A Free-for-All Over Pap Smears
Medical Advances
Bethany McLean
"The pap smear test--a woman's primary means of detecting cervical
cancer--celebrated its 50th birthday recently, and the years show.
The false negative rate for the aging procedure is an unacceptable
20%. So doctors and patients alike were excited last November
when the FDA approved a new pap test, calling it "significantly more
effective." The stock of Cytyc, the test's inventor, soared 71% over
the next three days. The future looked bright.
And yet now, almost a year later, the pap smear industry is at war.
other companies, including startups like Neuromedical and
AutoCyte (both of which are using computer-based technology),
have joined in the struggle for part of the almost $1 billion market,
making competition fierce. "It's ugly," says Eva Snitkin, an analyst Montgomery.
No war is as nasty as the one raging between Cytyc and
Neuromedical. One of Neuromedical's distributors has filed a petition
with the FDA, criticizing Cytyc's clinical methodology and asking the
FDA to reconsider its approval of Cytyc's product as a replacement
to the conventional pap smear. Cytyc is suing Neuromedical for,
among other things, defamation.
The furor is a real waste of energy, because the two companies'
technologies are complementary, not competitive. Cytyc's product,
called ThinPrep, refines how a cell sample is prepared: Instead of a
difficult-to-read glob of cells, you get one (thin) layer, making it
easier for lab technicians to spot abnormalities. Neuromedical, on the
other hand, has developed a computerized screening process called
Papnet that supplements the diagnostic abilities of a lab technician
with a microscope. Theoretically, the products would work well
together--Cytyc's method of preparing the slide with Neuromedical's
method of reading it.
There is a practical reason for the bitter battle. Labs already lose
money on pap smear tests, so reimbursement is critical. Persuading
most managed-care organizations to ante up for a more expensive,
albeit better, product is not easy; imagine trying to get them to agree to two. So if one company wins anything, the others worry that they will in turn lose their chance at a piece of the market.
The struggle has created some high-stakes dynamics on Wall Street.
This became apparent when, following the FDA's blessing of
ThinPrep in early November, a major HMO, United HealthCare,
agreed to reimburse for it. During that month Neuromedical's stock
sank 19%.
Over the next few months, however, rumors began to circulate that
ThinPrep didn't live up to Cytyc's FDA-backed claims--for one
thing, that it could actually increase the chance that cancer escapes
undetected because an abnormal cell may get tossed out in the
preparation, thereby heightening the risk of costly malpractice suits.
Cytyc points to Neuromedical as the source of what it says is false
information. Neuromedical denies this. But it as well as others,
including an Ohio medical insurer, say there are legitimate concerns
about ThinPrep. The battle is just getting under way: The FDA
petition was filed in late July; the lawsuit is in its earliest stages.
Neuromedical has other fights ahead: The company is also embroiled
in a two-way patent infringement case with another industry player,
Neopath. Neuromedical's stock has dwindled from $19 last October
to $5 today; in June, CEO Mark Rutenberg resigned. Some
observers view the FDA filing as a desperation gambit.
Neuromedical denies involvement. But the company that filed the
petition is a Neuromedical distributor, and its president, one Carl
Genberg, owns Neuromedical stock, sits on the board, and happens
to be former CEO Rutenberg's first cousin. And Cytyc is winning
where it matters most. Cytyc's sales in the second quarter were more
than twice those of Neuromedical.
Don't toss Neuromedical out yet, though. The outcomes of the
lawsuits (and the FDA petition) are up in the air, and the company
has its ardent defenders. Among them: investment bank Goldman
Sachs, which owns more than 20% of the stock.
While these players duke it out in the courts, a new entrant may
come along and steal the show. Though AutoCyte has yet to receive
FDA approval, the company completed its IPO in September. And
AutoCyte, unlike the others, can concentrate on business." |
