Medical Device Daily
Cytyc (Marlborough, Massachusetts), until recently, a company known primarily for cervical cancer diagnostics, has added therapeutic oncology to its offerings with the planned purchase of Proxima Therapeutics (Alpharetta, Georgia), a developer of delivery systems for cancer treatment. The deal indicates that the company is continuing to position itself as a major power in women's health offerings.
Cytyc will pay $160 million to acquire Proxima. And a two-year earnout, based on incremental sales growth in breast-related products, will be paid out of existing cash, the company said.
In a Thursday morning conference call, Patrick Sullivan, chairman, president and CEO of Cytyc, characterized Proxima as "an exciting company that continues our expansion into a diversified women's health company."
Sullivan compared Cytyc's purchase of Proxima to its addition of the NovaSure Impedance Controlled Endometrial Ablation System, via the acquisition of Novacept (Palo Alto, California) last year (Medical Device Daily, March 2, 2004/ March 29, 2004). That acquisition, valued at $325 million, then led to the development of Cytyc Surgical Products as a wholly owned Cytyc subsidiary.
Sullivan said that Proxima's technologies serve key unmet medical needs and that its products "continue our relationships with breast surgeons and breast centers."
Those relationships were established largely with development of the FirstCyte Breast Test for breast cancer risk assessment, with Cytyc's purchase of Pro-Duct Health (Menlo Park, California) in 2001 (MDD, Oct. 19, 2001).
Proxima's lead product, the MammoSite Radiation Therapy System (RTS), is a single-use brachytherapy technology for treating breast cancer.
The system positions radiation sources directly into the post-lumpectomy site to optimize radiation treatment delivery while minimizing damage to healthy tissue. The MammoSite RTS is designed to reduce treatment time to five days compared to 30 to 35 days for traditional whole-breast external beam radiation therapy, according to Proxima.
Proxima also markets the GliaSite RTS system, a site-specific radiation treatment for brain tumors that received FDA clearance in April 2001.
The GliaSite system is made up of a balloon catheter that is inserted into the cavity created by the surgical removal of a malignant brain tumor, then filled with Iotrex, a proprietary liquid radiation source. Over three to seven days, GliaSite delivers radiation directly to the tissue surrounding the cavity, where tumors are most likely to recur, while reducing radiation exposure to healthy brain tissue.
Sullivan said that the addition of Proxima's products "enables us to expand our product offerings into cancer treatment while leveraging our existing infrastructure and expertise in women's health and oncology. In addition, we will be further strengthening our formidable sales force with the addition of Proxima's oncology-focused sales team."
Proxima launched the MammoSite RTS following FDA clearance in May 2002. The company reports, to date, more than 7,000 breast cancer patients treated with the system. While there are no specific FDA patient restrictions on the use of MammoSite, current medical society guidelines recommend use with patients at least 45 years old with tumors less than 3 cm with negative lymph nodes.
The Centers for Medicare & Medicaid Services (CMS; Baltimore) last year approved new reimbursement codes for the Mammosite treatment (MDD, April 13, 2004).
At last October's annual meeting of the American Society for Therapeutic Radiology and Oncology (ASTRO; Fairfax, Virginia), about 20 papers concerning the therapy were delivered, compared to seven the year before. And a large 1,700 patient registry is now tracing results of system use (MDD, Oct. 5, 2004).
At the ASTRO meeting, a technical consultant for Proxima said that Mammosite treatment could reach "standard of care" status in the field in another 10 years.
MammoSite revenue in 2004 was about $12.6 million, representing 50% growth over the previous year. Cytyc said it believes the overall annual market opportunity is in the $300 million range.
Cytyc expects sales related to the Proxima acquisition in the last three quarters of 2005 to be from $15 million to $17 million, and for the transaction to be 1 cent to 2 cents dilutive to earnings in 2005, break-even to earnings in 4Q05 and accretive in 2006.
Cytyc refers to its ThinPrep System as "the most widely used method" for cervical cancer screening in the U.S. The ThinPrep System consists of the ThinPrep 2000 Processor, ThinPrep 3000 Processor, ThinPrep Imaging System, and related reagents, filters, and other supplies.
ThinPrep also provides the platform for the launch into breast cancer risk assessment with the FirstCyte Breast Test.
The purchase of Proxima is expected to close by the end of the current quarter, subject to customary closing conditions and clearance under the Hart-Scott Rodino rules.
Besides discussing the benefits of the Proxima purchase, Cytyc executives outlined the company's record quarterly and year-end financials and its healthy prospects for 2005.
They reported 4Q04 revenue of $110.6 million, an increase of 41% compared to the year-ago quarter, and total 2004 revenue of $393.6 million, compared to $303.1 million for 2003. Net income for the year was $73.6 million, compared to $76.2 million in 2003.
Excluding a one-time charge of $19.1 million related to the acquisition of Novacept, Cytyc's net income for fiscal 2004 was $92.7 million.
Sullivan said that the company's new Surgical Products division "outperformed our initial expectations, exiting the year with an annual revenue run rate of approximately $100 million." Revenue from the date of acquisition to the end of December was $63.6 million.
He also reported strong growth for the ThinPrep Pap Test system and ThinPrep Imaging System. "We shipped a total of 158 imaging systems to U.S. customers since the launch of the Imager program, and 144 of these units were revenue-generating at Dec. 31, 2004. Additionally, we continued to see international market penetration primarily driven by the ThinPrep Pap Test."