Washington Editor

The diagnostic firm Digene Corp. is raising $56 million in gross proceeds by way of a public offering announced after Wednesday's market close.

Management at the Gaithersburg, Md.-based company declined to comment on the placement, but a previously filed prospectus outlined general plans for using the new money for working capital and other general corporate purposes, including research and development, sales and marketing, capital expenditures and potential acquisitions of new businesses, technologies or products that could complement or expand the business.

In the placement, Digene is offering 2 million newly issued common shares at $28 apiece. That per-share price reflects the stock's recent value, and Thursday, the shares (NASDAQ:DIGE) rose 28 cents, to close at $28.06.

The profitable company recently posted net earnings of $1.3 million at the close of its most recent fiscal quarter, supported by a 27 percent increase in total revenues to $33.4 million. Much of that revenue comes from its human papillomavirus test, the hc2 High-Risk HPV DNA Test, which generated worldwide sales of $28.4 million in that three-month period. Digene had about 20 million shares outstanding as of Sept. 30, at which time its monetary reserves totaled about $47.7 million in cash, cash equivalents and short-term investments.

As part of the same public offering, the company's largest stockholder, Armonk Partners, is offering a million of its shares at the same price. Of course, Digene won't receive any proceeds from that sale. Armonk is managed by Digene's top two executives: Chairman and CEO Evan Jones and Charles Fleischman, its president, chief financial officer, chief operating officer and a member of its board.

Both Digene and Armonk granted the underwriters a 30-day overallotment option to purchase an aggregate of 450,000 additional shares, which if fully exercised would bump Digene's gross haul to $64.4 million for its two-thirds of that aggregate.

The stock was sold pursuant to a year-old shelf registration statement, and the offering is expected to close Nov. 21.

J.P. Morgan Securities Inc. is acting as the deal's sole book-running manager, with Thomas Weisel Partners LLC its joint lead manager. The transaction's co-managers include Goldman, Sachs & Co. and SG Cowen & Co. LLC. All the underwriters are based in New York.

Digene's diagnostic franchise, anchored by the aforementioned human papillomavirus test (the only such test approved by the FDA), is focused on women's cancers and infectious diseases. The hc2 High-Risk HPV DNA Test is approved for both follow-up evaluation in women with inconclusive Pap results and for primary adjunctive screening with the Pap test in those 30 and older. Its product portfolio also includes DNA tests for the detection of other sexually transmitted infections, including chlamydia and gonorrhea, as well as tests for blood viruses.