Earlier this year, the FDA approved Roche’s (RHHBY) HPV test as the first of its kind for primary cervical cancer screening. HPV testing has been used mainly as a follow-up to the conventional Pap screening in results that are ambiguous. This move by the FDA indicates that cervical cancer prevention may be moving away from the traditional method and towards a modern standard. In such a case, Roche would be the primary beneficiary surpassing competitors Qiagen (QGEN) and Hologic (HOLX) who will be facing headwinds.
HPV Diagnostics Market
Cervical cancer is the second most common type of cancer in women (first being breast cancer) with estimated 12,000+ new cases and more than 4,000 deaths in the US. There are 14 high-risk HPV types, however the two most common, HPV types 16 and 18, cause approximately 70% of cervical cancer. The HPV screening market size, as Roche Diagnostics COO guided, was roughly $250M in 2010 and growing at an annual rate of 20%.
FDA Approval Signaling Roche Advantage
The approval of Roche’s cobas HPV test expands the use to include as either a co-test or as a primary cervical cancer screening test. Though the medical guidelines do not change, meaning doctors can decide what’s best for each patient, Roche’s HPV test has gained access to a primary market that its competitors are not able to penetrate. In a year, there are roughly 30M visits during which Pap tests are ordered or provided. The HPV test market exclusivity will allow Roche to compete with Hologic’s ThinPrep System, currently the most widely used method for cervical cancer screening in the US, and take a piece of that 30M figure. Considering patients will not be faced with the discomfort of a Pap smear, Roche’s test could see quicker than expected traction as the alternative primary screener.
Women 25 and older can be diagnosed with the HPV DNA test, which detects 14 high-risk HPV types. If women test positive for HPV 16 or 18, a colposcopy is recommended. If one of the other 12 is present, a Pap test will be used to determine the need for a colposcopy. So, although traditional methods are still practiced, the approval allows for the DNA test to be used at the forefront.
Impact on Diagnostic Operations of Competition
Taking a look at the recent quarterly release of the three discussed companies, the shift in HPV screening can be seen with Roche already edging out Qiagen and Hologic in the US. During the first quarter, Qiagen’s US sales of HPV testing products declined about 27% due to the impact of pricing pressures and transition to competitor tests. For Hologic, ThinPrep revenues declined nearly $7M due to lower sales volume in the US. In comparison, Roche saw HPV diagnostics sales grow 56%.
The above outcomes are not a result of Roche’s FDA approved HPV test, however looking forward, the increased competition should only validate Roche’s position as the leader in the field. In the US, Roche currently has the upper hand over competitors. This is expected to continue. With increased competition on the primary screening front, Hologic is expected to see further challenges to ThinPrep sales. The company may mitigate such risks by following in Roche’s footsteps and attempt to make their own HPV test, Aptima, a candidate for primary screening.
Internationally, the competitive landscape is different as all three countries are experiencing growth in their respective HPV diagnostic segments. Also, Roche’s approved HPV test will not have as much of an impact in developing countries due to the high cost. Compared to a traditional Pap test, the HPV test has double the price tag. Scarce funding and a lack of laboratory infrastructure will minimize the adoption of a modern, but costly, primary screening alternative. As a result, the most lucrative strategy for Hologic and Qiagen would be to focus on the international HPV market and part with the US market.
Guided Therapeutics: A 2 for 1 Solution?
Guided’s (GTHP) technology, called LuViva, uses light to noninvasively identify abnormal cells and thus detect early cervical cancer or false positive cases. Around 40% of Pap smears that emerge as positively tested are actually “false positive” errors. These “false positive” women do not need to undergo additional testing (such as colposcopy or biopsy) because they have been diagnosed incorrectly. In the developed countries (ex. US market), LuViva is attempting to be utilized as a triage that detects false positives more effectively and as a result, eliminates unnecessary colposopies and the costs that follow.
HPV tests, such as Roche’s, are more sensitive than Pap smears meaning that they will pick up more samples that may otherwise be missed by Pap tests. Therefore, HPV tests have higher rates of detection while also having higher rates of false positives. This means that there is a need for a secondary screening because primary techniques (Pap tests & HPV tests) are imperfect. Studies have shown LuViva to be this secondary testing that reduces false positives by more than 40%. Guided Therapeutics expects an FDA decision on LuViva by the end of 2014.
Internationally, Guided has distribution agreements covering 26 countries and has already launched LuViva in many countries including France, UK, Turkey, Canada and Nigeria. Due to the immediate results and low-cost economics, developing nations are evaluating LuViva as a primary screening device.
Guided Therapeutics offers a way to penetrate the US market while also providing international growth through primary screening in developing nations. If Hologic and Qiagen are looking to recapture some of the lost US market, one way of doing so would be to target secondary screening. Guided could be the solution that keeps these fading competitors relevant in the largest market while also fuels their international expansion.
The FDA approval of Roche’s HPV test has changed the competitive landscape in primary HPV screening. As the adoption of Roche’s HPV spreads in the US, exiting competitors will continue to see the decline in diagnostic sales that they have thus far in 2014. Qiagen and Hologic will have to either concede the US HPV market to Roche or settle for the secondary screening market. If choosing the latter, Guided Therapeutics would make for a fitting target that satisfies the secondary screening market with their triage approach while also remaining active internationally.