Life Technologies Inc., a large Gaithersburg-based biotechnology company, is dropping out of a medical-testing business it once identified as a key vehicle for future growth.
The firm said it probably would seek a buyer for its molecular diagnostics division, which makes a test used to detect a virus that has been linked to cervical cancer.
Industry observers said that while the molecular diagnostics division held significant promise, it was a major strain on the company's finances and more speculative than its core businesses, which include cell growth media and enzymes and other biotech products.
"The market opportunity is tremendous, but it's a long-term evolution," said Steve Turner, a co-founder of Life Technologies who now is president of Oncor Inc., a small Gaithersburg-based biotech company. "It's a long, hard pull. It requires a really dedicated company."
"It's a minor part of the company that has been very expensive for them and time-consuming," said George F. Shipp, an analyst who follows Life Technologies for Scott & Stringfellow, a Richmond brokerage. "I think it's one of those things where they're returning to their core business."
The molecular products division, touted for several years in the company's annual reports as an area of potential major growth, made diagnostic tests under the ViraPap and Viratype names that were used to detect the human papilloma virus (HPV), a sexually transmitted disease that often occurs in cases of cervical cancer. The tests use a radioactive genetic probe to look for evidence of HPV.
When it received Food and Drug Administration approval to market the tests in January 1989, Life Technologies predicted that it would be a $50 million business within five years. As recently as its 1989 annual report, issued a few weeks ago, the firm said it was "pursuing growth in this market."
A key to that growth was clinical testing that might have proved conclusively that HPV is a cause of cervical cancer. That would have made Life Technologies' HPV products an important tool, in conjunction with pap smear tests, in early detection of the cancer that kills thousands of American women annually.
But the results of those tests still are a fewyears away, said Joseph C. Stokes Jr., the company's vice president for finance, and Life Technologies decided it couldn't afford to wait -- even though its HPV test is the only one that has been approved by the FDA.
"This is really just a strategic decision," Stokes said. "We took a look at our basic assumptions over the past six weeks or so and decided that the business wouldn't develop as quickly as we had hoped."
Stokes said the molecular diagnostics division had accounted for $3.6 million of Life Technologies' $134.2 million sales in 1989, but analyst Shipp estimated that the division was running up $4 million a year in losses -- a significant percentage of the company's $13.2 million in profit last year.
"There was just always a question mark: Why are you spending $3 million to $5 million a year to do this?" Shipp said.
He noted that Wall Street apparently endorsed the company's decision to cut its losses: Life Technologies's stock, which trades over the counter, rose 75 cents to $15.75 on Thursday, the day after the decision was announced. It closed Friday at $16.25, up 50 cents.
Stokes said the company would continue to serve existing customers of ViraPap and Viratype, and likely would look for a buyer for the operation.
He said the company's decision to drop the division was unlikely to result in any one-time charge against earnings.
Shipp said Life Technologies should have little trouble finding a buyer for the business.
"I definitely assume they can get some money out of it," said Shipp, who estimated the price tag for the division would be several million dollars. "Somebody, I would think, would want this."